<PAGE>   1

================================================================================

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                ----------------


                                   FORM 10-Q


(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

                                       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 000-31167

                          GENENCOR INTERNATIONAL, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                ----------------

                  DELAWARE                                 16-1362385
       (STATE OR OTHER JURISDICTION OF                  (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                IDENTIFICATION NUMBER)


                               925 PAGE MILL ROAD
                           PALO ALTO, CALIFORNIA 94304
                                 (650) 846-7500

    (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                  OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

                                  ------------

    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 REPORT(S), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS
                                YES [ X ] NO [ ]

                                  ------------

    INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

<TABLE>
                    CLASS                                  NUMBER OF SHARES OUTSTANDING AT JULY 31, 2001

<S>                                                                          <C>
    COMMON STOCK, PAR VALUE $0.01 PER SHARE                                  59,920,376
</TABLE>


<PAGE>   2


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                              PAGE
                                                                                                                              ----
<S>         <C>                                                                                                                <C>
PART I.   FINANCIAL INFORMATION
    Item 1. Financial Statements.........................................................................................
            Condensed Consolidated Unaudited Balance Sheets as of June 30, 2001 and December 31, 2000....................       3
            Condensed Consolidated Unaudited Statements of Operations for the three and six months ended June 30, 2001 and
            2000.........................................................................................................       4
            Condensed Consolidated Unaudited Statements of Cash Flows for the six months ended
            June 30, 2001 and 2000.......................................................................................       5
            Notes to Condensed Consolidated Unaudited Financial Statements...............................................       6
    Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.......................       9
    Item 3.  Quantitative and Qualitative Disclosures About Market Risk..................................................      18

PART II.  OTHER INFORMATION
    Item 1.  Legal Proceedings...........................................................................................      18
    Item 2.  Changes in Securities and Use of Proceeds...................................................................      18
    Item 3.  Defaults Upon Senior Securities.............................................................................      18
    Item 4.  Submission of Matters to a Vote of Security Holders.........................................................      18
    Item 5.  Other Information...........................................................................................      19
    Item 6.  Exhibits and Reports on Form 8-K............................................................................      19
</TABLE>




                                       2
<PAGE>   3



PART I.  FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS


                  GENENCOR INTERNATIONAL, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



<TABLE>
<CAPTION>
                                                                                           JUNE 30,        DECEMBER 31,
                                                                                             2001              2000
                                                                                             ----              ----

<S>                                                                                       <C>               <C>
ASSETS
Current assets:
  Cash and cash equivalents ......................................................        $ 200,955         $ 200,591
  Trade accounts receivable, net .................................................           47,933            46,913
  Inventories ....................................................................           49,426            46,938
  Other current assets ...........................................................           15,397            17,843
                                                                                          ---------         ---------
       Total current assets ......................................................          313,711           312,285
Property, plant and equipment, net ...............................................          206,551           216,983
Intangible assets, net ...........................................................           57,585            64,049
Other assets .....................................................................           47,724            49,615
                                                                                          ---------         ---------
       Total assets ..............................................................        $ 625,571         $ 642,932
                                                                                          =========         =========

LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Current liabilities:
  Notes payable ..................................................................        $   6,381         $   4,689
  Current maturities of long-term debt ...........................................           28,000                --
  Accounts payable and accrued expenses ..........................................           32,784            47,217
  Other current liabilities ......................................................           12,041            12,143
                                                                                          ---------         ---------
       Total current liabilities .................................................           79,206            64,049
Long-term debt ...................................................................          114,499           144,360
Other long-term liabilities ......................................................           29,175            30,297
                                                                                          ---------         ---------
       Total liabilities .........................................................          222,880           238,706
                                                                                          ---------         ---------
Redeemable preferred stock:
  7 1/2% cumulative series A preferred stock, without par value, authorized
     1,000 shares, 970 shares issued and outstanding .............................          158,838           155,200
                                                                                          ---------         ---------
Shareholders' equity:
  Common stock, par value $0.01 per share, 200,000,000
     shares authorized, 59,920,376 and 59,906,500 shares issued and outstanding at
     June 30, 2001 and December 31, 2000, respectively............................              599               599
  Additional paid-in capital .....................................................          344,466           344,092
  Deferred stock-based compensation ..............................................           (4,374)           (5,560)
  Notes receivable for common stock ..............................................          (18,008)          (18,008)
  Accumulated deficit ............................................................          (17,214)          (23,965)
  Accumulated other comprehensive loss ...........................................          (61,616)          (48,132)
                                                                                          ---------         ---------
       Total shareholders' equity ................................................          243,853           249,026
                                                                                          ---------         ---------
       Total liabilities, redeemable preferred stock and shareholders' equity ....        $ 625,571         $ 642,932
                                                                                          =========         =========
</TABLE>

    The accompanying notes are an integral part of the condensed consolidated
                        unaudited financial statements.


                                       3
<PAGE>   4


                  GENENCOR INTERNATIONAL, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                        SIX MONTHS ENDED
                                                                    JUNE 30,                                 JUNE 30,
                                                                    --------                             ----------------
                                                           2001                 2000                 2001                  2000
                                                           ----                 ----                 ----                  ----
<S>                                                    <C>                  <C>                  <C>                  <C>
Revenues:
  Product revenue .............................        $     78,514         $     76,626         $    153,782         $    150,266
  Fees and royalty revenues ...................               2,835                3,065                5,290                9,124
                                                       ------------         ------------         ------------         ------------
       Total revenues .........................              81,349               79,691              159,072              159,390
Operating expenses:
  Cost of products sold .......................              43,527               43,263               84,425               85,261
  Research and development ....................              15,075               12,761               27,999               24,585
  Sales, marketing and business development ...               7,832                7,181               13,689               12,846
  General and administrative ..................               7,340                6,846               13,822               12,388
  Amortization of intangible assets ...........               2,293                2,613                4,690                5,285
  Other (income)/expense ......................                (152)                 318                  696                   19
                                                       ------------         ------------         ------------         ------------
       Total operating expenses ...............              75,915               72,982              145,321              140,384
                                                       ------------         ------------         ------------         ------------
Operating income ..............................               5,434                6,709               13,751               19,006
Non operating expenses/(income):
  Investment income ...........................                  --               (1,531)                  --              (16,577)
  Interest expense ............................               2,611                2,610                5,218                5,270
  Interest income .............................              (2,578)                (784)              (5,695)              (1,344)
                                                       ------------         ------------         ------------         ------------
       Total non operating expenses/(income) ..                  33                  295                 (477)             (12,651)
                                                       ------------         ------------         ------------         ------------
Income before provision for income taxes ......               5,401                6,414               14,228               31,657
Provision for income taxes ....................               1,292                1,726                3,842               10,426
                                                       ------------         ------------         ------------         ------------
Net income ....................................        $      4,109         $      4,688         $     10,386         $     21,231
                                                       ============         ============         ============         ============
Net income available to holders of common stock        $      2,290         $      2,869         $      6,748         $     17,593
                                                       ============         ============         ============         ============
  Earnings per common share:
       Basic ..................................        $       0.04         $       0.06         $       0.11         $       0.35
                                                       ============         ============         ============         ============
       Diluted ................................        $       0.04         $       0.05         $       0.11         $       0.33
                                                       ============         ============         ============         ============
  Weighted average common shares:
       Basic ..................................          59,912,847           51,237,667           59,913,004           50,618,833
                                                       ============         ============         ============         ============
       Diluted ................................          60,937,944           53,574,886           61,248,361           52,695,810
                                                       ============         ============         ============         ============
</TABLE>


    The accompanying notes are an integral part of the condensed consolidated
                        unaudited financial statements.


                                       4
<PAGE>   5

                  GENENCOR INTERNATIONAL, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED
                                                                     JUNE 30,
                                                              2001               2000
                                                              ----               ----


<S>                                                         <C>               <C>
Cash flows from operating activities:
  Net income .......................................        $  10,386         $  21,231
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and amortization ................           17,541            17,972
      Amortization of deferred stock-based
      compensation .................................            1,425                --
      Gain on sale of marketable securities ........               --           (16,577)
     (Increase) decrease in operating assets:
         Trade accounts receivable .................           (3,163)             (358)
         Inventories ...............................           (4,676)             (905)
         Other assets ..............................            2,194            (3,001)
      (Decrease) increase in operating liabilities:
         Accounts payable and accrued expenses .....          (11,458)               19
         Other liabilities .........................            1,299              (886)
                                                            ---------         ---------
         Net cash provided by operating activities .           13,548            17,495
                                                            ---------         ---------
Cash flows from investing activities:
  Purchases of property, plant and equipment .......           (8,672)          (11,115)
  Proceeds from the sale of marketable securities ..               --            17,568
                                                            ---------         ---------
         Net cash (used in) provided by investing
         activities ................................           (8,672)            6,453
                                                            ---------         ---------
Cash flows from financing activities:
  Proceeds from exercise of stock options ..........              135                --
  Net payments on notes payable of foreign affiliate             (121)               --
  Payment of long-term debt ........................               --           (10,000)
                                                            ---------         ---------
         Net cash provided by (used in) financing
         activities ................................               14           (10,000)
                                                            ---------         ---------
Effect of exchange rate changes on cash ............           (4,526)           (1,076)
                                                            ---------         ---------
Net increase in cash and cash equivalents ..........              364            12,872
Cash and cash equivalents-- beginning of period ....          200,591            39,331
                                                            ---------         ---------
Cash and cash equivalents-- end of period ..........        $ 200,955         $  52,203
                                                            =========         =========
</TABLE>

    The accompanying notes are an integral part of the condensed consolidated
                        unaudited financial statements.



                                       5
<PAGE>   6



                  GENENCOR INTERNATIONAL, INC. AND SUBSIDIARIES

         NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



1 -- BASIS OF PRESENTATION

         The condensed consolidated unaudited financial statements should be
read in conjunction with the audited consolidated financial statements and
related footnotes of Genencor International, Inc. and subsidiaries (the Company)
for the year ended December 31, 2000, as included in the Company's Report on
Form 10-K. These interim financial statements have been prepared in conformity
with the rules and regulations of the U.S. Securities and Exchange Commission.
Certain disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations pertaining to interim financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for fair presentation of the interim financial
statements have been included therein. The results of operations of any interim
period are not necessarily indicative of the results of operations for the full
year.


2 -- EARNINGS PER SHARE

         Statement of Financial Accounting Standards No. 128, "Earnings per
Share," requires the disclosure of basic and diluted earnings per share. Basic
earnings per share is computed based on the weighted average number of common
shares outstanding during the period. In arriving at net income available to
common shareholders, undeclared and unpaid dividends on redeemable preferred
stock of $1,819 and $3,638 were deducted from net income for each quarter
presented and for each six month period presented, respectively.

         Diluted earnings per share reflects the potential dilution that could
occur if dilutive securities and other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the net income available to common shareholders of the
Company. As a result of stock options outstanding under the Company's Stock
Option and Stock Appreciation Right Plan, there were dilutive securities for the
three and six months ended June 30, 2001 and 2000. The weighted-average impact
of these has been reflected in the calculation of diluted earnings per share for
the respective periods presented.

         The following table reflects the calculation of basic and diluted
earnings per common share:

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED                     SIX MONTHS ENDED
                                                                JUNE 30,                               JUNE 30,
                                                         2001               2000               2001               2000
                                                         ----               ----               ----               ----

<S>                                                  <C>                <C>                <C>                <C>
Net income ....................................      $      4,109       $      4,688       $     10,386       $     21,231
  Less: Accrued dividends on preferred stock ..            (1,819)            (1,819)            (3,638)            (3,638)
                                                     ------------       ------------       ------------       ------------
Net income available to holders of common stock      $      2,290       $      2,869       $      6,748       $     17,593
                                                     ============       ============       ============       ============

Weighted average common shares:
  Basic .......................................        59,912,847         51,237,667         59,913,004         50,618,833
  Effect of stock options .....................         1,025,097          2,337,219          1,335,357          2,076,977
                                                     ------------       ------------       ------------       ------------
  Diluted .....................................        60,937,944         53,574,886         61,248,361         52,695,810
                                                     ============       ============       ============       ============
Earnings per common share:
  Basic .......................................      $       0.04       $       0.06       $       0.11       $       0.35
                                                     ============       ============       ============       ============
  Diluted .....................................      $       0.04       $       0.05       $       0.11       $       0.33
                                                     ============       ============       ============       ============
</TABLE>


3 -- INVENTORIES



                                       6
<PAGE>   7


         Inventories consist of the following:

<TABLE>
<CAPTION>
                                                          JUNE 30,     DECEMBER 31,
                                                            2001           2000
                                                            ----           ----
<S>                                                     <C>             <C>
                  Raw materials.....................    $   7,829       $   7,699
                  Work-in-progress..................        8,410           7,874
                  Finished goods....................       33,187          31,365
                                                        ---------       ---------
                    Inventories.....................    $  49,426       $  46,938
                                                        =========       =========
</TABLE>


4 -- SHAREHOLDERS' EQUITY

         Accumulated other comprehensive loss consists of the following:

<TABLE>
<CAPTION>
                                                                      FOREIGN       MARKETABLE    ACCUMULATED
                                                                     CURRENCY       SECURITIES       OTHER
                                                                    TRANSLATION      VALUATION   COMPREHENSIVE
                                                                    ADJUSTMENT      ADJUSTMENT       LOSS
                                                                   ----------      ----------   -----------
<S>                                      <C> <C>                   <C>             <C>          <C>
                      Balances, December 31, 2000...............   $  (48,360)     $      228   $   (48,132)
                        Current period change...................      (13,615)            131       (13,484)
                                                                   ----------      ----------   -----------
                      Balances, June 30, 2001...................   $  (61,975)     $      359   $   (61,616)
                                                                   ==========      ==========   ===========
</TABLE>

         The change in the marketable securities valuation adjustment for the
six months ended June 30, 2001 of $131 ($171 pre-tax) relates to unrealized
holding gains on the Company's available-for-sale securities.

5 -- LONG-TERM DEBT

         Effective May 1, 2001, the Company's existing $48,000 revolving credit
facility with a syndicate of banks was amended and the committed amounts
available to the Company increased to $60,000. The amended facility, which
consists of two separate credit agreements, makes available to the Company
$40,000 of committed borrowings pursuant to a three-year credit agreement and
$20,000 of committed borrowings pursuant to a 364-day credit agreement. As of
June 30, 2001 there were no borrowings under the facility.

6 -- INVESTMENT INCOME

         There was no investment income during the three or six months ended
June 30, 2001. During the three and six months ended June 30, 2000, the Company
realized gains from the sales of marketable securities in the amounts of $1,531
and $16,577, respectively. These amounts are included in investment income as
part of total non operating income for the periods.

7 -- SUBSEQUENT EVENTS

         During July 2001, the Company acquired a 10% ownership interest in
Epimmune Inc. The Company also entered into a license agreement and a research
collaboration agreement with Epimmune Inc. The Company's investment in Epimmune
Inc. will be accounted for under the cost method.


8 -- NEW ACCOUNTING STANDARDS

         In June 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations." The Statement requires the use of the purchase
method of accounting for all business combinations. The Statement also requires
the recognition of certain intangible assets acquired in a business combination
apart from goodwill. SFAS No. 141 applies to all business combinations initiated
after June 30, 2001. Management is currently assessing the impact of this new
standard on the Company's financial statements.


                                       7
<PAGE>   8


         In June 2001, the Financial Accounting Standards Board also issued SFAS
No. 142, "Goodwill and Other Intangible Assets." This statement requires the
recognition of separately identifiable intangible assets. Furthermore, it
establishes amortization requirements based upon the ability of the intangible
assets to provide cash flows. For those intangible assets with readily
identifiable useful lives, amortization will be recorded in the statement of
operations over such lives. Intangible assets, such as goodwill, which have
indefinite lives, will not result in periodic amortization, but must be tested
at least annually for impairment. This statement may result in reclassifications
in the Company's financial statements of pre-existing intangible assets. The
provisions of SFAS No. 142 will be effective for the Company starting the first
quarter 2002. Management is currently assessing the impact of this new standard
on the Company's financial statements.


                                       8
<PAGE>   9



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 should be read in conjunction with the consolidated financial
statements and the notes to those statements included in our 2000 Annual Report
on Form 10-K, and the condensed consolidated unaudited financial statements and
related notes included elsewhere in this report. This Report contains
forward-looking statements. These include statements concerning plans,
objectives, goals, strategies, future events or performance and all other
statements which are other than statements of historical fact, including without
limitation, statements containing words such as "believes," "anticipates,"
"expects," "estimates," "projects," "will," "may," "might" and words of a
similar nature. The forward-looking statements contained in this Report reflect
management's current beliefs and expectations on the date of this Report. Actual
results, performance or outcomes may differ materially from those expressed in
the forward-looking statements. Some of the important factors, which, in the
view of the Company, could cause actual results to differ from those expressed
in the forward-looking statements, are discussed below and in our 2000 Annual
Report on Form 10-K. The Company undertakes no obligation to publicly announce
any revisions to these forward-looking statements to reflect facts or
circumstances of which management becomes aware after the date hereof.

OVERVIEW

    We are a diversified biotechnology company that develops and delivers
products and/or services to the industrial and consumer, agriculture and health
care markets. Our current revenues result primarily from the sale of enzyme
products to the cleaning, grain processing and textile industries, with the
remainder from research funding, fees and royalties. We intend to apply our
proven and proprietary technologies and manufacturing capabilities to expand
sales in our existing markets and address new opportunities in the health care,
agriculture, industrial and consumer markets. We have formed, and plan to
continue to form, strategic alliances with market leaders to collaborate with us
to develop and launch products.

    We manufacture our products through our eight manufacturing facilities
located in the United States, Finland, Belgium, China and Argentina. We conduct
our sales and marketing activities through our direct sales organizations in the
United States, the Netherlands, Singapore, Japan and Argentina. For the six
months ended June 30, 2001 and 2000, we derived approximately 50% of our
revenues from our foreign operations.

SUMMARY OF RESULTS

    For the three months ended June 30, 2001, net income available for common
shareholders decreased to $2.3 million, or $0.04 per diluted share, from $2.9
million, or $0.05 per diluted share, for the three months ended June 30, 2000.
For the six months ended June 30, 2001, net income available for common
shareholders decreased to $6.7 million, or $0.11 per diluted share, from $17.6
million, or $0.33 per diluted share, for the six months ended June 30, 2000. Net
income for both periods in 2000 was favorably impacted by gains from sales of
marketable equity securities. The after-tax impact to net income for these
non-recurring gains was $0.9 million and $10.2 million for the three and six
month periods ended June 30, 2000, respectively.

RECENT DEVELOPMENTS

    During the second quarter, we expanded our business capabilities in Latin
America with the installation of a new coater for the manufacture of granulated
enzymes at our Arroyito, Argentina facility. This increased capacity will allow
us to extend our full-service support of the cleaning, textile, grain and
specialties markets to customers throughout the region.

    In April 2001, we announced the identification of a novel fungal cellulase
that will enable us to develop new enzymes designed to enhance the efficiency of
industrial processes including the production of detergents, textiles, food,
paper and fuel alternatives.

    In May 2001, we announced an agreement with Gyros AB to apply Gyros'
microfluidics technology to our screening capabilities. This technology
collaboration could accelerate our discovery and development programs.

    In June 2001, we acquired an exclusive license to Ecolab Inc.'s Stone-Eze(R)
patents for use throughout Europe. The patents cover processes for producing a
stone-washed effect in denim or other cellulosic fabrics using cellulase. This
patent exclusivity means that our cellulase enzymes are the only products
licensed for use throughout Europe in the stonewashing process for denim and
other cellulosic fabrics.



                                       9
<PAGE>   10


    During July 2001, we acquired a 10% equity stake in Epimmune Inc. We also
entered into a 30-month collaboration with Epimmune focused on the development
of therapeutic vaccines for three oncogenic viruses. Additionally, we
exclusively licensed certain Epimmune technologies and related intellectual
property rights on a worldwide basis for the development of vaccines to treat or
prevent hepatitis C (HCV), hepatitis B (HBV) and human papilloma virus (HPV).


RESULTS OF OPERATIONS

Comparison of the Three Months Ended June 30, 2001 and 2000

    Revenues. Total revenues for the three months ended June 30, 2001 increased
$1.6 million, or 2%, to $81.3 million from the three months ended June 30, 2000,
due mainly to an increase in product revenues.

    Product Revenues. Product revenues for the three months ended June 30, 2001
increased $1.9 million, or 2%, to $78.5 million from the three months ended June
30, 2000. Excluding the impact of the stronger U.S. dollar against foreign
currencies, primarily the Euro, product revenues for the three months ended June
30, 2001 would have increased by approximately 5%, to $80.4 million. For the
three months ended June 30, 2001, unit volume/mix grew 6%, while average prices
fell 1%. Volume increased primarily due to increased protease enzyme sales to a
major customer and increased sales volume with our textile customers.

    Regionally, North American product revenues for the three months ended June
30, 2001 were consistent with the three months ended June 30, 2000. European
product revenues for the three months ended June 30, 2001 increased $2.7
million, or 11%, to $26.7 million from the three months ended June 30, 2000, due
primarily to increased sales to a major customer. Our product revenues in Latin
America for the three months ended June 30, 2001 decreased $0.5 million, or 9%,
to $5.1 million from the three months ended June 30, 2000 due primarily to
decreased sales to our cleaning and fabric care customers. Product revenues in
Asia decreased $0.6 million, or 6%, to $8.7 million for the three months ended
June 30, 2001 from the three months ended June 30, 2000 due mainly to a decrease
in sales to our grain processing customers.

    Fees and Royalty Revenues. Fees and royalty revenues decreased $0.3 million,
or 10%, to $2.8 million for the three months ended June 30, 2001 from the three
months ended June 30, 2000, due primarily to a decrease in funded research
revenues.

    Funded research revenues decreased $0.3 million, or 10%, to $2.6 million for
the three months ended June 30, 2001, from the three months ended June 30, 2000.
Revenues generated by research funding result from collaborative agreements with
various parties, including the U.S. Government, whereby we perform research
activities and receive revenues that partially reimburse us for expenses
incurred. Under such agreements, we retain a proprietary interest in the
products and technology developed. Our funded research revenue as it relates to
U.S. Government collaborations decreased $0.1 million, or 9%, to $1.0 million
for the three months ended June 30, 2001 from the three months ended June 30,
2000. Funded research revenues provided by customers decreased $0.2 million, or
11%, to $1.6 million for the three months ended June 30, 2001 from the three
months ended June 30, 2000.

Operating Expenses

    Cost of Products Sold. Cost of products sold for the three months ended June
30, 2001, at approximately $43.5 million, was consistent with the three months
ended June 30, 2000. Cost of products sold reflects the increase in sales
volume/mix partially offset by the impact of the stronger U.S. dollar against
foreign currencies of $1.1 million.

    Gross Profit and Margins from Product Sold. Gross profit from product sold
increased $1.6 million, or 5%, to $35.0 million for the three months ended June
30, 2001 from the three months ended June 30, 2000. This overall increase was
caused by significant product revenue related factors including a 6% increase in
volume/mix processed through our plants, partially offset by an average price
decline of 1%. This net increase in gross profit was partially offset by a $0.8
million decrease due to the impact of the stronger U.S. dollar against foreign
currencies, primarily the Euro. As a result of these factors, gross margin on
product revenue increased to 44.6% for the three months ended June 30, 2001 from
43.5% for the three months ended June 30, 2000.

    Research and Development. Research and development expenses primarily
consist of the personnel-related, consulting, and facilities costs incurred in
connection with our research activities conducted in Palo Alto, California and
Leiden, the Netherlands. These expenses increased $2.3 million, or 18%, to $15.1
million for the three months ended June 30, 2001 from the three months ended
June 30, 2000 as we increased our investment in technology and product
development for new markets and hired additional


                                       10
<PAGE>   11


internal staff to support our health care and other initiatives. As a part of
total research and development expenses, estimated expenses related to research
collaborations partially funded by customers decreased $0.6 million, or 21%, to
$2.4 million for the three months ended June 30, 2001 from the three months
ended June 30, 2000.

    Sales, Marketing and Business Development. Sales, marketing and business
development expenses primarily consist of the personnel-related and marketing
costs incurred by our global sales force. These expenses increased $0.6 million,
or 8%, to $7.8 million for the three months ended June 30, 2001 from the three
months ended June 30, 2000 due primarily to increases in salaries and benefits
of $0.2 million and incentive compensation of $0.5 million.

    General and Administrative. General and administrative expenses include the
costs of our corporate executive, finance, information technology, legal, human
resources, and communications functions. In total, these expenses increased $0.5
million, or 7%, to $7.3 million for the three months ended June 30, 2001 from
the three months ended June 30, 2000 due primarily to increased salaries and
benefits of $0.6 million and increased public relations costs of approximately
$0.2 million, partially offset by a decrease in outside services of
approximately $0.3 million.

    Amortization of Intangible Assets. We amortize our intangible assets,
consisting of patents, licenses, technology and goodwill, on a straight-line
basis over their estimated useful lives. Amortization expense decreased $0.3
million, or 12%, to $2.3 million for the three months ended June 30, 2001 from
the three months ended June 30, 2000 due primarily to the 2000 release of an
income tax valuation allowance that was reallocated to goodwill.

    Other Expense and Income. Other income for the three months ended June 30,
2001 was $0.2 million, as compared with other expense of $0.3 million for the
three months ended June 30, 2000. This $0.5 million increase in other income was
due mainly to a reduction in joint venture losses attributable to minority
interest.

    Deferred Compensation. We measure deferred compensation for options granted
to employees as the difference between the grant price and the estimated fair
value of our common stock on the date we granted the options. This amount is
recorded as a separate component of shareholders' equity and amortized as a
charge to operations over the vesting period of the options. Amortization of
this deferred compensation expense for the three months ended June 30, 2001 was
$0.8 million, which was reported in our statement of operations as follows (in
millions):

<TABLE>
<CAPTION>
<S>                                                        <C>
Research and development...............................    $        0.4
Sales, marketing and business development..............             0.2
General and administrative.............................             0.2
                                                           ------------
Total amortization of deferred compensation expense        $        0.8
                                                           ============
</TABLE>

Non Operating Expense and Income

    Investment Income. There was no investment income for the three months ended
June 30, 2001. Investment income of $1.5 million for the three months ended June
30, 2000 represents gains from the sale of marketable equity securities.

    Interest Income. Interest income increased $1.8 million to $2.6 million for
the three months ended June 30, 2001 from the three months ended June 30, 2000
due mainly to earnings on proceeds from our initial public offering, partially
offset by lower interest rates.

    Income Taxes. Several factors affected our effective income tax rate for the
three months ended June 30, 2001, including the statutory income tax rate in
foreign jurisdictions, amortization of intangible assets and other items which
are not deductible for tax purposes, and research and experimentation tax
credits. The effective income tax rate for the three months ended June 30, 2001
was 24% compared with 27% for the three months ended June 30, 2000. During both
periods we were subject to a tax ruling in the Netherlands that reduces the
local effective income tax rate from 35.0% to 17.5%. This ruling will expire at
the end of 2005.



Comparison of the Six Months Ended June 30, 2001 and 2000

    Revenues. Total revenues for the six months ended June 30, 2001 decreased
$0.3 million to $159.1 million from the six months ended June 30, 2000,
primarily due to a decrease in fees and royalty revenues partially offset by an
increase in product revenues.


                                       11
<PAGE>   12


    Product Revenues. Product revenues in the six months ended June 30, 2001
increased $3.5 million, or 2%, to $153.8 million from the six months ended June
30, 2000. Without the impact of the stronger U.S. dollar against the Euro in
2001 versus 2000, product revenues in the six months ended June 30, 2001 would
have increased by 5%. In the six months ended June 30, 2001, unit volume/mix
grew 7%, while average prices fell 2%. Volume increased primarily due to
increased protease enzyme sales to a major customer.

    Regionally, North American product revenues increased $1.8 million, or 2%,
to $74.0 million and European product revenues increased $2.1 million, or 4%, to
$53.2 million for the six months ended June 30, 2001 from the six months ended
June 30, 2000, each of which were driven primarily by protease enzyme sales. In
the six months ended June 30, 2001, our product revenues in Latin America
decreased $0.5 million, or 5%, to $9.4 million from the six months ended June
30, 2000 due primarily to decreases in cleaning and fabric care sales. Product
revenues in Asia for the six months ended June 30, 2001 were consistent with the
six months ended June 30, 2000.

    Fees and Royalty Revenues. Fees and royalty revenues decreased $3.8 million,
or 42%, to $5.3 million for the six months ended June 30, 2001 from the six
months ended June 30, 2000.

     Funded research revenues for the six months ended June 30, 2001 were $4.7
million compared to $5.3 million for the six months ended June 30, 2000.
Revenues generated by research funding result from collaborative agreements with
various parties, including the U.S. Government, whereby we perform research
activities and receive revenues that partially reimburse us for expenses
incurred. Under such agreements, we retain a proprietary interest in the
products and technology developed. Our funded research revenues as they relate
to U.S. Government collaborations for the six months ended June 30, 2001 were
consistent with the six months ended June 30, 2000. Funded research revenues
provided by customers decreased $0.6 million, or 17%, to $2.9 million for the
six months ended June 30, 2001 from the six months ended June 30, 2000.

    Royalties decreased $3.2 million for the six months ended June 30, 2001 from
the six months ended June 30, 2000 due primarily to the successful resolution of
a patent infringement issue with a customer, for which royalties of $3.5 million
were received during the first quarter of 2000. These royalties pertained to
previous sales, using patented technology, made by the customer to third
parties.

Operating Expenses

    Cost of Products Sold. Cost of products sold decreased $0.9 million, or 1%,
to $84.4 million for the six months ended June 30, 2001 from the six months
ended June 30, 2000 even though our expanded sales volume/mix increased costs
$2.1 million. This decrease in cost of product sold was driven primarily by
reductions due to the impact of the stronger U.S. dollar against foreign
currencies of $2.3 million and the sale of lower cost inventories of
approximately $0.7 million.

    Gross Profit and Margins from Product Sold. Gross profit from product sold
increased $4.4 million, or 7%, to $69.4 million for the six months ended June
30, 2001 from the six months ended June 30, 2000. This overall increase was
caused by significant product revenue related factors including a 7% increase in
volume/mix processed through our plants, partially offset by an average price
decline of 2%. This net increase in gross profit was partially offset by a $1.5
million decrease due to the impact of the stronger U.S. dollar against foreign
currencies, primarily the Euro. As a result of these factors, gross margin on
product revenue increased to 45.1% for the six months ended June 30, 2001 from
43.3% for the six months ended June 30, 2000.

    Research and Development. Research and development expenses increased $3.4
million, or 14%, to $28.0 million for the six months ended June 30, 2001 from
the six months ended June 30, 2000 as we increased our investment in technology
and product development for new markets and hired additional internal staff to
support our health care and other initiatives. As a part of total research and
development expenses, estimated expenses related to research collaborations
partially funded by customers decreased $2.4 million, or 36%, to $4.2 million
for the six months ended June 30, 2001 from the six months ended June 30, 2000.

    Sales, Marketing and Business Development. These expenses increased $0.9
million, or 7%, to $13.7 million for the six months ended June 30, 2001 from the
six months ended June 30, 2000, primarily due to an increase of $0.7 million in
personnel-related costs, including salaries, benefits, commissions and travel
expenses.

    General and Administrative. These expenses increased $1.4 million, or 11%,
to $13.8 million for the six months ended June 30, 2001 from the six months
ended June 30, 2000, due primarily to increased salaries and benefits of $1.2
million, incentive compensation of $0.2 million, and public relations costs of
$0.4 million.



                                       12
<PAGE>   13


    Amortization of Intangible Assets. Amortization expense decreased $0.6
million, or 11%, to $4.7 million for the six months ended June 30, 2001 from the
six months ended June 30, 2000 due primarily to the 2000 release of an income
tax valuation allowance that was reallocated to goodwill.

    Other Expense and Income. Other expense for the six months ended June 30,
2001 was $0.7 million which was due primarily to losses from foreign currency
exchange transactions.

    Deferred Compensation. Amortization of deferred compensation expense for the
six months ended June 30, 2001 was $1.4 million, which was reported in our
statement of operations as follows (in millions):

<TABLE>
<S>                                                        <C>
Cost of products sold..................................    $        0.1
Research and development...............................             0.5
Sales, marketing and business development..............             0.4
General and administrative.............................             0.4
                                                           ------------
Total amortization of deferred compensation expense        $        1.4
                                                           ============
</TABLE>

Non Operating Expense and Income

    Investment Income. There was no investment income for the six months ended
June 30, 2001. Investment income of $16.6 million for the six months ended June
30, 2000 represents gains from the sale of marketable equity securities.

    Interest Income. Interest income increased $4.4 million to $5.7 million for
the six months ended June 30, 2001 from the six months ended June 30, 2000 due
mainly to earnings on proceeds from our initial public offering, partially
offset by lower interest rates.

    Income Taxes. Several factors affected our effective income tax rate for the
six months ended June 30, 2001, including the statutory income tax rate in
foreign jurisdictions, amortization of intangible assets and other items which
are not deductible for tax purposes, and research and experimentation tax
credits. The effective income tax rate for the six months ended June 30, 2001
was 27% compared with 33% for the six months ended June 30, 2000. The effective
rate for the six months ended June 30, 2000 included the effect of two one-time
events. During the six months ended June 30, 2000, we realized $16.6 million of
pre-tax gains from the sale of marketable equity securities and a $3.5 million
pre-tax gain from the settlement of certain patent infringement issues, both in
the United States and tax effected at a marginal rate of 38.6%. During both
periods we were subject to a tax ruling in the Netherlands that reduces the
local effective income tax rate from 35.0% to 17.5%. This ruling will expire at
the end of 2005.

 LIQUIDITY AND CAPITAL RESOURCES

    Our funding needs consist primarily of capital expenditures, research and
development activities, sales and marketing expenses, and general corporate
purposes. We have financed our operations primarily through cash from the sale
of products, the sale of common stock, research and development funding from
partners, government grants, and short-term and long-term borrowings.

    We believe that our current cash and cash equivalent balances plus funds to
be provided from our current year operating activities, together with those
available under our lines of credit, will satisfy our funding needs for at least
the next twelve months. Factors that could negatively impact our cash position
include, but are not limited to, future levels of product, fees and royalty
revenues, expense levels, capital expenditures, acquisitions, and foreign
currency exchange rate fluctuations.

    As of June 30, 2001, cash and cash equivalents totaled $201.0 million,
including $132.7 million of net proceeds from our initial public offering, which
we invested in short-term instruments including commercial paper, U.S. treasury
bills, institutional money market funds and bank deposits.

    Cash provided by operations was $13.5 million and $17.5 million for the six
months ended June 30, 2001 and 2000, respectively. The decrease of $4.0 million
in 2001 from 2000 was generated principally by operating earnings, net of
non-cash items such as depreciation and amortization, and changes in operating
assets and liabilities.

    Cash used by investing activities was $8.7 million for the six months ended
June 30, 2001. Cash provided by investing activities was $6.5 million for the
six months ended June 30, 2000. This difference of $15.2 million was driven
primarily by proceeds of $17.6



                                       13
<PAGE>   14


million received from the sale of marketable equity securities during the six
months ended June 30, 2000. Capital expenditures totaled $8.7 million for the
six months ended June 30, 2001 compared with $11.1 million for the six months
ended June 30, 2000. In each of these periods, this spending was driven by
process improvement projects at our manufacturing and research and development
facilities and information technology enhancements.

    Cash provided by financing activities was less than $0.1 million during the
six months ended June 30, 2001, compared to the use of $10.0 million for the six
months ended June 30, 2000. The cash used by financing activities for the six
months ended June 30, 2000 resulted from a June 2000 payment of a long-term note
to Gist-Brocades (G-b) related to the 1995 acquisition of the G-b industrial
enzyme business. There were no dividends paid to our common shareholders for the
six months ended June 30, 2001 and 2000. We currently intend to retain future
earnings to finance the expansion of our business. Any future determination to
pay cash dividends will be at the discretion of our board of directors and will
depend upon our financial condition, results of operations, capital
requirements, general business conditions and other factors that the board of
directors may deem relevant, including covenants in our debt instruments that
may limit our ability to declare and pay cash dividends on our capital stock.
Covenants in our senior note agreement restrict the payment of dividends or
other distributions in cash or other property to the extent the payment puts us
in default of these covenants. Such covenants include, but are not limited to,
maintaining a debt to total capitalization of no greater than 55% and a maximum
ratio of debt to EBITDA of 3.5:1.

    As of June 30, 2001 we had a $60 million revolving credit facility with a
syndicate of banks, which is available for general corporate purposes. The
facility, which consists of two separate credit agreements, makes available to
us $40 million of committed borrowings pursuant to a three-year credit agreement
and $20 million of committed borrowings pursuant to a 364-day credit agreement.
The combined facility carries facility fees of 0.35% on the amount of unborrowed
principal under the three-year agreement and 0.30% under the 364-day agreement.
As of June 30, 2001 there were no borrowings under this facility.

    Our long-term debt consists primarily of the 6.82% senior notes issued in
1996 to certain institutional investors. The total principal amount of these
notes is $140 million with annual installment payments of $28 million to
commence in March 2002. We are currently in compliance with all of the financial
covenants included in the senior note agreement.

MARKET RISK

         Foreign currency risk and interest rate risk are the primary sources of
our market risk. To date, foreign operations, mainly denominated in Euros,
account for approximately 50% of our 2001 revenues. We believe that we mitigate
this risk by locating our manufacturing facilities so that the costs are
denominated in the same currency as our product revenues. We manage the foreign
currency exposures that remain through the use of foreign currency forward
contracts, currency options and off-setting currency loans where deemed
appropriate. We do not use these instruments for speculative purposes. At June
30, 2001, there were no material forward contracts or option contracts
outstanding.

       As of June 30, 2001, cash and cash equivalents totaled $201.0 million. Of
this amount, $36.3 million was denominated in Euros. The remainder or $164.7
million was primarily denominated in U.S. dollars. Other than the first
installment due in March 2002 under our 6.82% senior notes discussed under the
heading "Liquidity and Capital Resources," short-term debt outstanding at June
30, 2001 was not significant. To the extent U.S. dollar and Euro interest rates
fluctuate either up or down, the return on the cash investments will also
fluctuate. To the extent such Euro cash investments remain outstanding, we will
be subject to the risks of future foreign exchange fluctuations and its impact
on the translation of these cash investments into U.S. dollars.

       Our subsidiary based in the Netherlands, which adopted the Euro as its
functional currency, has U.S. dollar and Japanese Yen denominated revenues. We
use forward currency contracts and option contracts from time to time as deemed
appropriate to hedge these anticipated revenues.

Interest Rates

      Our interest income is sensitive to changes in the general level of
short-term interest rates primarily in the United States and Europe. In this
regard, changes in the U.S. dollar and Euro currency rates affect the interest
earned on our cash equivalents, short-term investments, and long-term
investments.

Foreign Currency Exposure



                                       14
<PAGE>   15


       We conduct business throughout the world. To date, we have derived
approximately 50% of our 2001 revenues and approximately 93% of our 2001
operating income from foreign operations. Economic conditions in countries where
we conduct business and changing foreign currency exchange rates affect our
financial position and results of operations. We are exposed to changes in
exchange rates in Europe, Latin America, and Asia. The Euro presents our most
significant foreign currency exposure risk. Changes in foreign currency exchange
rates, especially the strengthening of the U.S. dollar, may have an adverse
effect on our financial position and results of operations as they are expressed
in U.S. dollars.

      Management monitors foreign currency exposures and may in the ordinary
course of business enter into foreign currency forward contracts or options
contracts related to specific foreign currency transactions or anticipated cash
flows. These contracts generally cover periods of nine months or less and are
not material. We do not hedge the translation of financial statements of
consolidated subsidiaries that maintain their local books and records in foreign
currencies.


NEW ACCOUNTING STANDARDS

    In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations." The Statement requires the use of the purchase method
of accounting for all business combinations. The Statement also requires the
recognition of certain intangible assets acquired in a business combination
apart from goodwill. SFAS No. 141 applies to all business combinations initiated
after June 30, 2001. We are currently assessing the impact of this new standard
on our financial statements.

    In June 2001, the Financial Accounting Standards Board also issued SFAS No.
142, "Goodwill and Other Intangible Assets." This statement requires the
recognition of separately identifiable intangible assets. Furthermore, it
establishes amortization requirements based upon the ability of the intangible
assets to provide cash flows. For those intangible assets with readily
identifiable useful lives, amortization will be recorded in the statement of
operations over such lives. Intangible assets, such as goodwill, which have
indefinite lives, will not result in periodic amortization, but must be tested
at least annually for impairment. This statement may result in reclassifications
in our financial statements of pre-existing intangible assets. The provisions of
SFAS No. 142 will be effective for us starting the first quarter 2002. We are
currently assessing the impact of this new standard on our financial statements.


                                       15
<PAGE>   16


Risk Factors

IF WE FAIL TO DEVELOP PRODUCTS FOR THE HEALTH CARE AND AGRICULTURE MARKETS, THEN
WE MAY NEVER ACHIEVE A RETURN ON OUR RESEARCH AND DEVELOPMENT EXPENDITURES OR
REALIZE PRODUCT REVENUES FROM THESE MARKETS.

    A key element of our business strategy is to utilize our technologies for
the development and delivery of products to the health care market and segments
of the agriculture market in which we do not currently compete. We have not
produced any products for these markets. We intend to significantly increase our
investment in research and development to develop products for these markets.
The successful development of products is highly uncertain and is dependent on
numerous factors, many of which are beyond our control, and may include the
following:

    -    The product may be ineffective or have undesirable side effects in
         preliminary and commercial testing or, specifically in the health care
         area, in preclinical and clinical trials;

    -    The product may fail to receive necessary governmental and regulatory
         approvals, or the government may delay regulatory approvals
         significantly;

    -    The product may not be economically viable because of manufacturing
         costs or other factors;

    -    The product may not gain acceptance in the marketplace; or

    -    The proprietary rights of others or competing products or technologies
         for the same application may preclude us from commercializing the
         product.

    Due to these factors we may never achieve a return on our research and
development expenditures or realize product revenues from the health care and
agriculture markets that we are targeting.

IF WE FAIL TO ENTER INTO STRATEGIC ALLIANCES WITH PARTNERS IN OUR TARGET MARKETS
OR INDEPENDENTLY RAISE ADDITIONAL CAPITAL, WE WILL NOT HAVE THE RESOURCES
NECESSARY TO CAPITALIZE ON ALL OF THE MARKET OPPORTUNITIES AVAILABLE TO US.

    We do not currently possess the resources necessary to independently develop
and commercialize products for all of the market opportunities that may result
from our technologies. We intend to form strategic alliances with industry
leaders in our target markets to gain access to funding for research and
development, expertise in areas we lack and distribution channels. We may fail
to enter into the necessary strategic alliances or fail to commercialize the
products anticipated from the alliances. Our alliances could be harmed if:

    -    We fail to meet our agreed upon research and development objectives;

    -    We disagree with our strategic partners over material terms of the
         alliances, such as intellectual property or manufacturing rights; or

    -    Our strategic partners become competitors of ours or enter into
         agreements with our competitors.

    New strategic alliances that we enter into, if any, may conflict with the
business objectives of our current strategic partners and negatively impact
existing relationships. In addition, to capitalize on the market opportunities
we have identified, we may need to seek additional capital, either through
private or public offerings of debt or equity securities. Due to market and
other conditions beyond our control, we may not be able to raise additional
capital on acceptable terms or conditions, if at all.

WE INTEND TO ACQUIRE BUSINESSES, TECHNOLOGIES AND PRODUCTS, BUT WE MAY FAIL TO
REALIZE THE ANTICIPATED BENEFITS OF SUCH ACQUISITIONS AND WE MAY INCUR COSTS
THAT COULD SIGNIFICANTLY NEGATIVELY IMPACT OUR PROFITABILITY.

    We intend to acquire businesses, technologies and products that we believe
are a strategic fit with our business. If we undertake any transaction of this
sort, we may not be able to successfully integrate any businesses, products,
technologies or personnel that we might acquire without a significant
expenditure of operating, financial and management resources, if at all.
Further, we may fail to realize the anticipated benefits of any acquisition.
Future acquisitions could dilute our stockholders' interest in us and could
cause us to incur



                                       16
<PAGE>   17


substantial debt, expose us to contingent liabilities and result in amortization
expenses related to goodwill and other intangible assets and could negatively
impact our profitability.

IF THE DEMAND FOR PROTEIN DEGRADING ENZYMES DECREASES, OUR REVENUES COULD
SIGNIFICANTLY DECLINE.

    Our largest selling family of products, protein degrading enzymes, or
proteases, accounted for approximately 55% of our 2000 revenue. If the demand
for proteases decreases or alternative proteases render our products
noncompetitive, our revenues could significantly decline.

IF WE FAIL TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, WE MAY NOT BE ABLE TO
ACHIEVE OUR EXPANSION OBJECTIVES.

    Our ability to manage our anticipated growth, if realized, effectively
depends on our ability to attract and retain highly qualified executive officers
and technology and business personnel. In particular, our product development
programs depend on our ability to attract and retain highly skilled researchers.
Competition for such individuals is intense. If we fail to attract and retain
qualified individuals, we will not be able to achieve our expansion objectives.

WE EXPECT THAT OUR QUARTERLY RESULTS OF OPERATIONS WILL FLUCTUATE, AND THIS
FLUCTUATION COULD CAUSE OUR STOCK PRICE TO DECLINE, CAUSING INVESTOR LOSSES.

    A large portion of our expenses, including expenses for facilities,
equipment and personnel, are relatively fixed. Accordingly, if product revenue
declines or does not grow as we anticipate or non-product revenue declines due
to the expiration or termination of strategic alliance agreements or the failure
to obtain new agreements or grants, we may not be able to correspondingly reduce
our operating expenses in any particular quarter. Our quarterly revenue and
operating results have fluctuated in the past and are likely to do so in the
future. If our operating results in some quarters fail to meet the expectations
of stock market analysts and investors, our stock price would likely decline.
Some of the factors that could cause our revenue and operating results to
fluctuate include:

    -    The ability and willingness of strategic partners to commercialize
         products derived from our technology or containing our products on
         expected timelines;

    -    Our ability to successfully commercialize products developed
         independently and the rate of adoption of such products; or

    -    Fluctuations in geographic conditions including currency and other
         economic conditions such as economic crises in Brazil or Asia.

    We also have incurred significant one-time charges within given quarters,
such as those incurred in conjunction with restructuring activities, and
recognized investment income from sales of available-for-sale marketable
securities.

IF WE FAIL TO SECURE ADEQUATE INTELLECTUAL PROPERTY PROTECTION OR BECOME
INVOLVED IN AN INTELLECTUAL PROPERTY DISPUTE, IT COULD SIGNIFICANTLY HARM OUR
FINANCIAL RESULTS AND ABILITY TO COMPETE.

    The patent positions of biotechnology companies, including our patent
positions, can be highly uncertain and involve complex legal and factual
questions and, therefore, enforceability is uncertain. We will be able to
protect our proprietary rights from unauthorized use by third parties only to
the extent that we protect our technologies with valid and enforceable patents
or as trade secrets. We rely in part on trade secret protection for our
confidential and proprietary information by entering into confidentiality
agreements and non-disclosure policies with our employees and consultants.
Nonetheless, confidential and proprietary information may be disclosed and
others may independently develop substantially equivalent information and
techniques or otherwise gain access to our trade secrets.

    We file patent applications in the United States and in foreign countries as
part of our strategy to protect our proprietary products and technologies. The
loss of significant patents or the failure of patents to issue from pending
patent applications that we consider significant could impair our operations. In
addition, third parties could successfully challenge, invalidate or circumvent
our issued patents or patents licensed to us so that our patent rights would not
create an effective competitive barrier. Further, we may not obtain the patents
or licenses to technologies that we will need to develop products for our target
markets. The laws of some foreign countries may also not protect our
intellectual property rights to the same extent as United States law.


                                       17
<PAGE>   18


    Extensive litigation regarding patents and other intellectual property
rights is common in the biotechnology industry. In the ordinary course of
business, we periodically receive notices of potential infringement of patents
held by others and patent applications that may mature to patents held by
others. The impact of such claims of potential infringement, as may from time to
time become known to the Company, are difficult to assess. In the event of an
intellectual property dispute, we may become involved in litigation.
Intellectual property litigation is expensive and may divert management's time
and resources away from our operations. The outcome of any such litigation is
inherently uncertain. Even if we are successful, the litigation would be costly
in terms of dollars spent and diversion of management time.

    If a third party successfully claims an intellectual property right to
technology we use, it may force us to discontinue an important product or
product line, alter our products and processes, pay license fees, pay damages
for past infringement or cease certain activities. Under these circumstances, we
may attempt to obtain a license to this intellectual property; however, we may
not be able to do so on commercially reasonable terms, or at all. In addition,
regardless of the validity of such a claim, its mere existence may affect the
willingness of one or more customers to use or continue to use our products and,
thereby, materially impact us.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The information presented in Item 2 of Part I of this Report on Form 10-Q
under the heading "Market Risk" is hereby incorporated by reference.


PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

           None

ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS

           The information presented in Item 2 of Part I of this Report on Form
10-Q under the heading "Liquidity and Capital Resources" is hereby incorporated
by reference. The Company's Registration Statement on Form S-1 (Registration No.
333-36452) was effective as of July 27, 2000.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

           None

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

           The Annual Meeting of Stockholders of the Company was held on May 3,
2001. At that meeting, the stockholders elected directors, approved the Genencor
International, Inc. Employee Stock Purchase Plan, and approved the selection of
PricewaterhouseCoopers LLP as independent auditors for the fiscal year ended
December 31, 2001. The total votes cast on each proposal at the meeting were as
follows:

(i)      To elect directors to serve a three-year term.

<TABLE>
<CAPTION>
                                                            Votes
                                                ------------------------------
                           Nominee                  For               Withheld
                  ---------------------         ------------------------------
<S>                                             <C>                    <C>
                  Juha Kurkinen                 57,834,364             30,106

                  Robert H. Mayer               57,835,582             28,888

                  David M. Pond                 57,834,782             29,688
</TABLE>


                                       18
<PAGE>   19


                  There were no broker non-votes.

                  Directors whose term in office continued after the meeting:

                  Term expiring in 2002: James L. Chitwood, Joseph A. Mollica,
                  Soren Bjerre-Nielsen, James P. Rogers

                  Term expiring in 2003: Bruce C. Cozadd, W. Thomas Mitchell,
                  Norbert G. Reidel

(ii)              To approve the Genencor International, Inc. Employee Stock
                  Purchase Plan.

                                            Votes
                       -------------------------------------------------
                           For              Against           Abstain
                       -------------------------------------------------

                       57,654,994           200,091           9,385


                  There were no broker non-votes.

(iii)             To approve the selection of PricewaterhouseCoopers LLP as
                  independent auditors for the fiscal year ending December 31,
                  2001.

                                            Votes
                       -------------------------------------------------
                           For              Against           Abstain
                       -------------------------------------------------


                       57,847,723           11,077            5,670


                  There were no broker non-votes

ITEM 5. OTHER INFORMATION

         None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a.       Exhibits
         See Index to Exhibits

b.       Reports on Form 8-K
         None


                                       19
<PAGE>   20



                                   SIGNATURES






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



                                     GENENCOR INTERNATIONAL, INC.



August 14, 2001                      By: /s/  Raymond J. Land
------------------------                ----------------------------------------
Date                                 Raymond J. Land
                                     Senior Vice President and Chief Financial
                                     Officer





August 14, 2001                      By: /s/  Darryl L. Canfield
------------------------                ----------------------------------------
Date                                 Darryl L. Canfield
                                     Vice President and Corporate Controller
                                     (Chief Accounting Officer)



                                       20
<PAGE>   21



                                INDEX TO EXHIBITS

     (2)       Plan of acquisition, reorganization, arrangement, liquidation or
               succession

                   Not applicable.

     (3)       (i)  Form of Restated Certificate of Incorporation is
                    incorporated herein by reference to Exhibit 3.3 to Amendment
                    No. 3 to the Company's Registration Statement on Form S-1
                    (Registration No. 333-36452) filed on July 24, 2000.

               (ii) Form of Amended and Restated Bylaws is incorporated herein
                    by reference to Exhibit 3.4 to Amendment No. 3 to the
                    Company's Registration Statement on Form S-1 (Registration
                    No. 333-36452) filed on July 24, 2000.

     (4)       Instruments defining the rights of securities holders, including
               indentures

               (a)  The documents listed under (3) are incorporated herein by
                    reference.

               (b)  Form of Specimen Common Stock Certificate is incorporated
                    herein by reference to Exhibit 4.1 to Amendment No. 3 to the
                    Company's Registration Statement on Form S-1 (Registration
                    No. 333-36452) filed on July 24, 2000.

               (c)  Note Agreement for the $140,000,000 6.82% Senior Notes due
                    2006 between the Company and the purchasers identified
                    therein, dated March 28, 1996 is incorporated herein by
                    refrence to Exhibit 4.2 to Amendment No. 1 to the Company's
                    Registration Statement on Form S-1 (Registration No.
                    333-36452) filed on June 26, 2000.

               (d)  $32,000,000 Three Year Credit Agreement dated as of January
                    31, 2001 among the Company, the Lenders party thereto and
                    The Chase Manhattan Bank, as Administrative Agent is
                    incorporated herein by reference to Exhibit 4.1 to the
                    Company's Registration Statement on Form S-8 (Registration
                    No. 333-61450) filed on May 23, 2001.

               (e)  $16,000,000 364-Day Credit Agreement dated as of January 31,
                    2001 among the Company, the Lenders party thereto and The
                    Chase Manhattan Bank, as Administrative Agent is
                    incorporated herein by reference to Exhibit 4.2 to the
                    Company's Registration Statement on Form S-8 (Registration
                    No. 333-61450) filed on May 23, 2001.

               (f)  Amendment No. 1 dated as of April 20, 2001 to the
                    $32,000,000 Three Year Credit Agreement dated as of January
                    31, 2001 among the Company, the Lenders party thereto and
                    The Chase Manhattan Bank, as Administrative Agent is
                    incorporated herein by reference to Exhibit 4.3 to the
                    Company's Registration Statement on Form S-8 (Registration
                    No. 333-61450) filed on May 23, 2001.

               (g)  Amendment No. 1 dated as of April 20, 2001 to the
                    $16,000,000 364-Day Credit Agreement dated as of January 31,
                    2001 among the Company, the Lenders party thereto and The
                    Chase Manhattan Bank, as Administrative Agent is
                    incorporated herein by reference to Exhibit 4.4 to the
                    Company's Registration Statement on Form S-8 (Registration
                    No. 333-61450) filed on May 23, 2001.

    (10)       Material Contracts

                   Genencor International, Inc. Employee Stock Purchase Plan is
                   incorporated herein by reference to Exhibit 99.1 to the
                   Company's Registration Statement on Form S-8 (Registration
                   No. 333-61450) filed on May 23, 2001.

    (11)       Statement re computation of per share earnings

                   Computation can be clearly determined from Note 2 to the
                   financial statements included herein under Item 1.

    (15)       Letter re unaudited interim financial information

                   Not applicable.

    (18)       Letter re change in accounting principles

                   Not applicable.

    (19)       Report furnished to security holders

                   Not applicable.


                                       21
<PAGE>   22


    (22)       Published report regarding matters submitted to a vote of
               security holders

                   Not applicable.

    (23)       Consents of experts and counsel

                   Not applicable.

    (24)       Power of Attorney

                   Not applicable.

    (99)       Additional Exhibits

                   Not applicable




                                       22