<PAGE>

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

                                  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 SEPTEMBER 30, 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 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.

                  CLASS                         NUMBER OF SHARES OUTSTANDING AT
                                                       OCTOBER 31, 2002

 COMMON STOCK, PAR VALUE $0.01 PER SHARE                  58,367,282


<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                    PAGE
                                                                                                                    ----
<S>                                                                                                                 <C>
PART I.   FINANCIAL INFORMATION
    Item 1.  Financial Statements...................................................................................
              Condensed Consolidated Unaudited Balance Sheets as of September 30, 2002 and December 31, 2001........  4
              Condensed Consolidated Unaudited Statements of Operations for the three and nine months ended
                September 30, 2002 and 2001.........................................................................  5
              Condensed Consolidated Unaudited Statements of Cash Flows for the nine months ended
                September 30, 2002 and 2001.........................................................................  6
              Notes to Condensed Consolidated Unaudited Financial Statements........................................  7
    Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations..................  13
    Item 3.  Quantitative and Qualitative Disclosures About Market Risk.............................................  26
    Item 4.  Controls and Procedures................................................................................  27

PART II.  OTHER INFORMATION
    Item 1.  Legal Proceedings......................................................................................  27
    Item 2.  Changes in Securities and Use of Proceeds..............................................................  27
    Item 3.  Defaults Upon Senior Securities........................................................................  27
    Item 4.  Submission of Matters to a Vote of Security Holders....................................................  27
    Item 5.  Other Information......................................................................................  27
    Item 6.  Exhibits and Reports on Form 8-K.......................................................................  27
</TABLE>





                                       2
<PAGE>


    This Report contains forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995. 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 the words "believes," "anticipates,"
"expects," "estimates," "projects," "will," "may," "might" and words of a
similar nature. The forward-looking statements contained in this Report reflect
the Company'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 in Part I, Item
2 of this Report and in the Company's 2001 Annual Report on Form 10-K. The
Company disclaims any obligation to publicly announce any revisions to these
forward-looking statements to reflect facts or circumstances of which the
Company becomes aware after the date hereof.

    Unless otherwise specified, all references in this Report to the "Company",
"we", "us", "our", and "ourselves" refer to Genencor International, Inc. and its
subsidiaries collectively, as appropriate in the context of the disclosure.














                                       3
<PAGE>

PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS


                  GENENCOR INTERNATIONAL, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
                  (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                                                                   SEPTEMBER 30,      DECEMBER 31,
                                                                                       2002              2001
                                                                                       ----              ----
<S>                                                                                <C>                <C>
ASSETS
Current assets:
  Cash and cash equivalents .................................................        $ 171,302         $ 215,023
  Trade accounts receivable, net ............................................           51,766            47,577
  Inventories ...............................................................           53,963            48,382
  Other current assets ......................................................           27,723            23,491
                                                                                     ---------         ---------
       Total current assets .................................................          304,754           334,473
Property, plant and equipment, net ..........................................          211,966           207,199
Goodwill ....................................................................           31,022            19,313
Intangible assets, net ......................................................           36,021            37,832
Other assets ................................................................           53,356            50,181
                                                                                     ---------         ---------
       Total assets .........................................................        $ 637,119         $ 648,998
                                                                                     =========         =========

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable .............................................................        $   8,426         $   8,512
  Current maturities of long-term debt ......................................           28,291            28,000
  Accounts payable and accrued expenses .....................................           40,096            47,908
  Other current liabilities .................................................           14,460            16,542
                                                                                     ---------         ---------
       Total current liabilities ............................................           91,273           100,962
Long-term debt ..............................................................           85,005           112,419
Other long-term liabilities .................................................           34,256            27,386
                                                                                     ---------         ---------
       Total liabilities ....................................................          210,534           240,767
                                                                                     ---------         ---------
Redeemable preferred stock:
  7 1/2% cumulative series A preferred stock, without par value, authorized
     1 shares, 1 shares issued and outstanding ..............................          167,932           162,475
                                                                                     ---------         ---------
Stockholders' equity:
  Common stock, par value $0.01 per share, 200,000 shares authorized, 60,147
     and 59,941 shares issued at September 30, 2002 and
     December 31, 2001, respectively ........................................              601               599
  Additional paid-in capital ................................................          348,457           345,655
  Treasury stock, 1,780 and 350 shares at cost,
     at September 30, 2002 and December 31, 2001, respectively ..............          (21,030)           (5,630)
  Deferred stock-based compensation .........................................             (721)           (3,517)
  Notes receivable for common stock .........................................             --             (14,647)
  Accumulated deficit .......................................................          (12,246)          (13,466)
  Accumulated other comprehensive loss ......................................          (56,408)          (63,238)
                                                                                     ---------         ---------
       Total stockholders' equity ...........................................          258,653           245,756
                                                                                     ---------         ---------
       Total liabilities, redeemable preferred stock and stockholders' equity        $ 637,119         $ 648,998
                                                                                     =========         =========
</TABLE>

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



                                       4
<PAGE>

                  GENENCOR INTERNATIONAL, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
                  (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>


                                                        THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                           SEPTEMBER 30,                     SEPTEMBER 30,
                                                           -------------                     -------------
                                                        2002             2001             2002              2001
                                                        ----             ----             ----              ----
<S>                                                 <C>               <C>               <C>               <C>
Revenues:
  Product revenue ..........................        $  85,931         $  77,847         $ 246,949         $ 231,629
  Fees and royalty revenues ................            4,566             2,942            14,990             8,232
                                                    ---------         ---------         ---------         ---------
       Total revenues ......................           90,497            80,789           261,939           239,861
Operating expenses:
  Cost of products sold ....................           50,270            44,132           138,484           128,557
  Research and development .................           17,360            14,811            50,302            42,810
  Sales, marketing and business development             8,293             7,124            24,001            20,813
  General and administrative ...............            8,790             7,847            25,086            21,669
  Amortization of intangible assets ........            1,355             2,616             3,989             7,306
  Restructuring and related charges ........               43                --            16,422                --
  Other expense/(income) ...................              161              (704)           (3,296)               (8)
                                                    ---------         ---------         ---------         ---------

       Total operating expenses ............           86,272            75,826           254,988           221,147
                                                    ---------         ---------         ---------         ---------
Operating income ...........................            4,225             4,963             6,951            18,714
Non operating expenses/(income):
  Interest expense .........................            1,995             2,612             6,559             7,830
  Interest income ..........................           (1,347)           (2,264)           (4,059)           (7,959)
                                                    ---------         ---------         ---------         ---------
       Total non operating expenses/(income)              648               348             2,500              (129)
                                                    ---------         ---------         ---------         ---------
Income before income taxes .................            3,577             4,615             4,451            18,843
Provision for/(benefit from) income taxes ..              625             1,245            (2,225)            5,087
                                                    ---------         ---------         ---------         ---------
Net income .................................        $   2,952         $   3,370         $   6,676         $  13,756
                                                    =========         =========         =========         =========
Net income available to holders of common
 stock .....................................        $   1,134         $   1,552         $   1,220         $   8,300
                                                    =========         =========         =========         =========
  Earnings per common share:
       Basic ...............................        $    0.02         $    0.03         $    0.02         $    0.14
                                                    =========         =========         =========         =========
       Diluted .............................        $    0.02         $    0.03         $    0.02         $    0.14
                                                    =========         =========         =========         =========
  Weighted average common shares:
       Basic ...............................           59,311            59,922            59,549            59,914
                                                    =========         =========         =========         =========
       Diluted .............................           59,312            60,748            59,859            61,080
                                                    =========         =========         =========         =========
</TABLE>

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



                                       5
<PAGE>

                  GENENCOR INTERNATIONAL, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,
                                                            ---------------------------
                                                              2002               2001
                                                             ----               ----
<S>                                                         <C>               <C>
Cash flows from operating activities:
  Net income .......................................        $   6,676         $  13,756
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and amortization ................           24,418            26,693
      Amortization of deferred stock-based
       compensation ................................            3,557             2,020
      Loss on disposition of property, plant
       and equipment ...............................              331                --
      Non-cash portion of restructuring and related
       charges .....................................            9,495                --
      (Increase) decrease in operating assets:
         Trade accounts receivable .................           (1,339)           (1,968)
         Inventories ...............................             (384)           (3,446)
         Other assets ..............................           (4,991)            1,530
      (Decrease) increase in operating liabilities:
         Accounts payable and accrued expenses .....          (13,231)          (15,307)
         Other liabilities .........................            2,577             2,004
                                                            ---------         ---------
         Net cash provided by operating activities .           27,109            25,282
                                                            ---------         ---------
Cash flows from investing activities:
  Purchases of property, plant and equipment .......          (11,872)          (14,880)
  Purchase of intangible assets ....................             (100)           (4,098)
  Payment to acquire equity securities .............           (3,000)           (4,630)
  Proceeds from the sale of property, plant and
     equipment .....................................              191                --
  Acquisition of business, net of cash acquired ....          (35,809)               --
                                                            ---------         ---------
         Net cash used in investing activities .....          (50,590)          (23,608)
                                                            ---------         ---------
Cash flows from financing activities:
  Proceeds from exercise of stock options ..........              500               164
  Proceeds from employee stock purchase plan .......            1,137                --
  Purchase of treasury shares ......................             (198)               --
  Net payments on notes payable of foreign
   affiliate........................................              (82)              (31)
  Payments of long-term debt .......................          (28,143)               --
                                                            ---------         ---------
         Net cash (used in) provided by financing
           activities ..............................          (26,786)              133
                                                            ---------         ---------
Effect of exchange rate changes on cash ............            6,546            (1,069)
                                                            ---------         ---------
Net (decrease) increase in cash and cash
  equivalents ......................................          (43,721)              738
Cash and cash equivalents -- beginning of period ...          215,023           200,591
                                                            ---------         ---------
Cash and cash equivalents -- end of period .........        $ 171,302         $ 201,329
                                                            =========         =========
</TABLE>

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



                                       6
<PAGE>

                  GENENCOR INTERNATIONAL, INC. AND SUBSIDIARIES

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


1 -- BASIS OF PRESENTATION

     The condensed consolidated unaudited financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
related footnotes for the year ended December 31, 2001, as included in the
Company's Annual 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 conformity with accounting principles generally
accepted in the United States of America 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 -- NEW ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets." The Company adopted this statement as of January 1, 2002. 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.

     With the adoption of SFAS No. 142, the Company reassessed the useful lives
and residual values of all acquired intangible assets to make any necessary
amortization period adjustments. Based on that assessment, goodwill and certain
previously acquired technology were determined to have indefinite useful lives.
There were no adjustments made to the amortization periods or residual values of
other intangible assets. Accordingly, certain reclassifications were made to
previously issued financial statements to conform to the presentation required
by SFAS No. 142. The Company completed the first step of the transitional
goodwill and indefinite-lived intangible impairment tests and has determined
that no potential impairment exists. As a result, the Company has recognized no
transitional impairment loss to date in fiscal 2002 in connection with the
adoption of SFAS No. 142.

     In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No.
144 supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." SFAS No. 144 addresses the
accounting for long-lived assets to be disposed of by sale and resulting
implementation issues. This statement requires the measurement of long-lived
assets at the lower of carrying amount or fair value less cost to sell, whether
reported in continuing operations or in discontinued operations. This statement
is effective for financial statements issued for fiscal years beginning after
December 15, 2001. The Company adopted SFAS No. 144 as of January 1, 2002. There
was no financial statement impact as a result of the adoption. The Company will
apply its provisions to future impairments or disposals of long-lived assets as
they occur.

     In April 2002, the Financial Accounting Standards Board issued SFAS No.
145, which rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment
of Debt," SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers" and
SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements"
and amends SFAS No. 13, "Accounting for Leases." This statement updates,
clarifies and simplifies existing accounting pronouncements. As a result of
rescinding SFAS No. 4 and SFAS No. 64, the criteria in Accounting Principles
Board Opinion No. 30 will be used to classify gains and losses from
extinguishment of debt. This statement is effective for financial statements
issued for fiscal years beginning after May 15, 2002. The Company does not
expect the adoption of SFAS No. 145 to have a material impact on the Company's
financial position or its results of operations.

     In June 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Exit or Disposal Activities." SFAS No. 146 addresses significant
issues regarding the recognition, measurement, and reporting of costs that are
associated with exit


                                       7
<PAGE>

and disposal activities, including restructuring activities that are currently
accounted for pursuant to the guidance that the Emerging Issues Task Force
(EITF) has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." The scope of SFAS No. 146 also
includes costs related to terminating a contract that is not a capital lease and
certain termination benefits provided to employees under the terms of one-time
benefit arrangements. SFAS No. 146 will be effective for exit or disposal
activities that are initiated after December 31, 2002.

3 -- EARNINGS PER SHARE

     SFAS 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 stockholders, undeclared and unpaid
dividends on redeemable preferred stock of $1,818 and $5,456 were deducted from
net income for each quarter presented and for each nine-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 stockholders of the Company.
As a result of stock options outstanding under the Company's 2002 Omnibus
Incentive Plan, successor to the Company's Stock Option and Appreciation Right
Plan, there were dilutive securities for the three and nine months ended
September 30, 2002 and 2001. 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>
                                            FOR THE THREE MONTHS             FOR THE NINE MONTHS
                                             ENDED SEPTEMBER 30,              ENDED SEPTEMBER 30,
                                          ------------------------         -------------------------
                                           2002             2001             2002            2001
                                           ----             ----             ----            ----
<S>                                       <C>             <C>              <C>              <C>
Net income .......................        $  2,952        $  3,370         $  6,676         $ 13,756
  Less: Accrued dividends on
   preferred stock ...............          (1,818)         (1,818)          (5,456)          (5,456)
                                          --------        --------         --------         --------
Net income available to holders of
   common stock ..................        $  1,134        $  1,552         $  1,220         $  8,300
                                          ========        ========         ========         ========
Weighted average common shares:
  Basic ..........................          59,311          59,922           59,549           59,914
  Effect of stock options ........               1             826              310            1,166
                                          --------        --------         --------         --------
  Diluted ........................          59,312          60,748           59,859           61,080
                                          ========        ========         ========         ========
Earnings per common share:
  Basic ..........................        $   0.02        $   0.03         $   0.02         $   0.14
                                          ========        ========         ========         ========
  Diluted ........................        $   0.02        $   0.03         $   0.02         $   0.14
                                          ========        ========         ========         ========
</TABLE>

4 -- FEES AND ROYALTY REVENUES

     During October 2001, the Company entered into a strategic alliance with Dow
Corning Corporation to create a new, proprietary technology platform for the
development of new biomaterials. During the first nine months of 2002, the
Company recorded $7,866 in research funding revenues from this collaboration.



                                       8
<PAGE>


5 -- INVENTORIES

     Inventories consist of the following:
<TABLE>
<CAPTION>
                                                                           SEPTEMBER 30,      DECEMBER 31,
                                                                               2002               2001
                                                                               -----              ----
<S>                                                                         <C>               <C>
                  Raw materials..........................................   $   8,326          $   7,526
                  Work-in-progress.......................................       9,467              7,454
                  Finished goods.........................................      36,170             33,402
                                                                            ---------          ---------
                    Inventories..........................................   $  53,963          $  48,382
                                                                            =========          =========
</TABLE>

6 -- GOODWILL AND OTHER INTANGIBLE ASSETS

     As discussed in Note 2 above, the Company adopted the provisions of SFAS
No. 142 effective as of January 1, 2002. Accordingly, the Company no longer
amortizes goodwill or other intangible assets with indefinite useful lives. The
Company has identified such other indefinite-lived intangible assets to include
certain previously acquired technology. The Company will periodically evaluate
its indefinite-lived intangible assets for impairment in accordance with the
provisions of SFAS No. 142. The Company also has other intangible assets, such
as patents, licenses, and customer lists, which will continue to be amortized
using the straight-line method.

     The following table summarizes the changes in each major class of
intangible assets from January 1, 2002 through September 30, 2002:
<TABLE>
<CAPTION>

                                                               INTANGIBLE ASSETS                 GOODWILL
                                                   ----------------------------------------      ---------
                                                                       OTHER
                                                                    AMORTIZABLE
                                                     TECHNOLOGY       ASSETS        TOTAL
                                                     ----------     ------------   --------
<S>                                                   <C>            <C>            <C>            <C>
                Balances, January 1, 2002 ......      $15,617        $51,890        $67,507        $19,313
                  Acquired intangible assets ...            -              -              -         11,536
                  Foreign currency translation
                    and other adjustments ......            -          2,339          2,339            173
                                                      -------        -------        -------        -------
                Balances: September 30, 2002 ...       15,617         54,229         69,846        $31,022
                                                                                                   =======
                Less: Accumulated
                    amortization ...............            -         33,825         33,825
                                                      -------        -------        -------
                  Intangible assets, net .......      $15,617        $20,404        $36,021
                                                      =======        =======        =======
</TABLE>

     In conjunction with the acquisition discussed in Note 10, the Company
acquired certain intangible assets during the nine months ended September 30,
2002. The Company is currently in the process of segregating these intangible
assets among the major classes. As such, the estimated value of these intangible
assets has been included in goodwill as of September 30, 2002 and will be
reclassified among the major classes once the Company completes its allocation
of the purchase price.



                                       9
<PAGE>

     The following table reflects the comparative net income and earnings per
common share as though the provisions of SFAS No. 142 were in effect for the
three and nine months ended September 30, 2002 and 2001:
<TABLE>
<CAPTION>

                                                          FOR THE THREE MONTHS              FOR THE NINE MONTHS
                                                          ENDED SEPTEMBER 30,               ENDED SEPTEMBER 30,
                                                          -------------------               -------------------
                                                           2002            2001              2002            2001
                                                        --------         ---------        ---------       ---------
<S>                                                     <C>              <C>              <C>              <C>
        Net income as reported .................        $   1,134        $   1,552        $   1,220        $  8,300
        Add back amortization:
          Goodwill ($103 and $812 pre-tax) .....                -               64                -             503
          Technology ($1,195 and $2,614
          pre-tax)..............................                -              741                -           1,621
                                                        ---------        ---------        ---------        --------
        Net income as adjusted .................        $   1,134        $   2,357        $   1,220        $ 10,424
                                                        =========        =========        =========        ========
        Basic earnings per share:
           As reported .........................        $    0.02        $    0.03        $    0.02        $   0.14
           Amortization ........................                -             0.01             -               0.04
                                                        ---------        ---------        ---------        --------
           As adjusted .........................        $    0.02        $    0.04        $    0.02        $   0.18
                                                        =========        =========        =========        ========
        Diluted earnings per share:
           As reported .........................        $    0.02        $    0.03        $    0.02        $   0.14
           Amortization ........................                -             0.01             -               0.03
                                                        ---------        ---------        ---------        --------
           As adjusted .........................        $    0.02        $    0.04        $    0.02        $   0.17
                                                        =========        =========        =========        ========
 </TABLE>


     Estimated fiscal year amortization expense is as follows:

                       2002..........................................  $ 5,400
                       2003..........................................    4,400
                       2004..........................................    2,800
                       2005..........................................    2,300
                       2006..........................................    2,300


7 -- STOCKHOLDERS' 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>
              Balances, December 31, 2001...............   $  (62,599)     $     (639)     $  (63,238)
                Current period change...................        9,068          (2,238)          6,830
                                                           ----------      -----------     ----------
              Balances, September 30, 2002..............   $  (53,531)     $   (2,877)     $  (56,408)
                                                           ==========      ==========      ==========
</TABLE>

     The change in the marketable securities valuation adjustment for the nine
months ended September 30, 2002 of $2,238 ($3,548 pre-tax) relates to unrealized
holding losses on the Company's available-for-sale securities.


8 -- INCOME TAXES

     The effective income tax rate for the nine months ended September 30, 2002
was a 50% tax benefit, compared to a 27% tax expense for the nine months ended
September 30, 2001. The effective rate for the nine months ended September 30,
2002 was driven by anticipated annual tax benefits from operating losses in high
tax jurisdictions, partially offset by taxes on operating income generated in
low tax jurisdictions. Factors that affect the Company's estimated annual
effective income tax rate include increased


                                       10
<PAGE>

research and development expenditures in the United States, the statutory income
tax rates in foreign jurisdictions, amortization of certain intangible assets,
other operating expense increases and other items which are not deductible for
tax purposes, and research and experimentation tax credits. The rate also
included the effect of the one-time restructuring and related charges. The tax
benefit related to these restructuring and related charges is approximately
$6,100 for the nine months ended September 30, 2002. During the nine months
ended September 30, 2002 and 2001, the Company was 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 in 2005.


9 -- COLLABORATIVE AGREEMENTS

     During January 2002, the Company entered into a two-year extendable
collaboration agreement with The Johns Hopkins University for the research of
therapeutic vaccines and other immunotherapies targeting cancers and oncogenic
viruses. Under the agreement, the Company received worldwide licenses to certain
proprietary technologies as well as exclusive commercialization rights to any
products developed through the agreement. This collaboration requires the
Company to pay an up front license fee as well as annual royalties. The
agreement also requires certain research and development funding and has
potential for additional milestone payments and royalties on future product
sales.

     Also during January 2002, the Company formed a strategic alliance with
Seattle Genetics, Inc., to jointly discover and develop a class of cancer
therapeutics. Under terms of the alliance, the companies will share preclinical
and clinical development costs and have the right to jointly commercialize any
resulting products. The Company has made an equity investment in Seattle
Genetics of $3,000 and agreed to pay certain fees and milestone payments.
Seattle Genetics has also agreed to make certain milestone payments to the
Company.


10 -- ACQUISITION

     During February 2002, the Company acquired Enzyme Bio-Systems Ltd. (EBS),
now known as Genencor International Wisconsin, Inc., from Corn Products
International, Inc. for a total cash purchase price of $35,809 and the
assumption of $974 in debt. As part of this transaction, the Company entered
into a seven-year supply agreement for a majority of Corn Products
International, Inc.'s North American enzyme requirements. The acquisition has
been accounted for under the purchase method in accordance with SFAS No. 141,
"Business Combinations." The acquired entity's results of operations have been
consolidated with the Company's results of operations since the acquisition
date. The Company is continuing to evaluate the allocation of the purchase price
for the acquisition, including the segregation of separately identifiable
intangible assets. The Company anticipates that this process will be completed
during the quarter ended December 31, 2002. According to the Company's
preliminary allocation of the purchase price, the net assets acquired consist of
the following as of September 2002:

            Working capital..................................$   3,879
            Property, plant and equipment....................   21,085
            Intangible assets................................   11,536
            Long-term liabilities............................     (691)
                                                             ---------
                                                             $  35,809
                                                             =========
    Included in working capital acquired is a provision to restructure the
entity of approximately $1,000, which primarily consists of the employee-related
costs to eliminate 22 positions. All affected employees were notified
immediately of the restructuring plan. As of September 30, 2002, costs totaling
approximately $1,000 had been charged to this restructuring provision and all 22
employees had terminated their employment with the Company.


11 -- RESTRUCTURING AND RELATED CHARGES

    During February 2002, as a result of the acquisition of EBS and general
economic conditions in Latin America, including the devaluation of the Argentine
peso, the Company engaged in a plan to restructure its overall supply
infrastructure by ceasing operations at its Elkhart, Indiana plant and
downsizing its Argentine facilities. Approximately 119 positions will be
eliminated as a result of this restructuring. All affected employees were
notified immediately of the restructuring plan. As of September 30, 2002, 111
employees had terminated their employment with the Company.



                                       11
<PAGE>

    As a result of the plan, restructuring and related charges of $16,422 were
recorded in the Company's operating earnings in the nine months ended September
30, 2002. These charges were primarily driven by employee severance and related
costs of approximately $3,762, costs to dismantle portions of the restructured
facilities of $1,000, costs to terminate long-term utility agreements of $319,
other costs totaling $239, and $9,495 for property, plant and equipment that was
deemed impaired as it would no longer be utilized by the Company after the
restructuring. The impairment charge was determined based on remaining book
value, as the Company believes there is no active market in which to sell the
specific assets. The Company expects full implementation to be completed in the
fourth quarter of 2002. In addition, the Company recorded costs related to the
restructuring, such as those related to the transition of activities between
Elkhart and EBS, of $1,607 as incurred during the nine months ended September
30, 2002. At September 30, 2002, the Company had a remaining liability of $2,835
related to this restructuring.


12 -- RELATED PARTY TRANSACTIONS

     On August 21, 2002, in order to eliminate all stock-related loans, the
Company's executive officers surrendered approximately 1,430 restricted shares
at a value of $10.77 per share, to make full payment of the outstanding
principal of $14,647 and accrued interest of $555 on their obligations under
notes issued in connection with their purchase of restricted common stock at
$9.70 per share in April 2000. Also included in the value of the surrendered
shares was a cash payment to cover an estimated $198 of net capital gain tax
incurred by the officers. The Company is holding the surrendered shares as
treasury shares.

     In connection with this transaction, the Company accelerated the vesting of
620 restricted shares. Accordingly, the Company incurred incremental
compensation expense of $503 in the third quarter of 2002. In addition, the
Company accelerated the recognition of $778 in previously deferred compensation
charges, of which $362 and $416 would otherwise have been recognized in the
fourth quarter of 2002 and the first half of 2003, respectively.

     The Company also granted the executive officers 1,779 stock options at
$10.77 per share under the Company's 2002 Omnibus Incentive Plan approved by
stockholders on May 30, 2002, of which 593 were fully vested upon issuance. The
remaining stock options vest ratably over a two-year period. All of the stock
options expire 10 years from their grant date.


13 -- SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
                                                          FOR THE NINE MONTHS
                                                           ENDED SEPTEMBER 30,
                                                          --------------------
                                                           2002          2001
                                                           ----          ----
<S>                                                       <C>            <C>
   Schedule of non-cash investing and
     financing activity:
       Acquisition of Treasury Stock in Exchange
         for Notes and Interest Receivable............    $ 15,202       $   --
                                                          ========       ======
</TABLE>

14 -- SUBSEQUENT EVENTS

     The Company and the University of Leicester announced on October 8, 2002
that they would participate in a collaboration for microbial biotechnology
between the European Union (EU) and the People's Republic of China. The
three-year project funded by the European Commission Fifth Framework Program
strives to identify metabolic and genetic diversity as a source of new and
valuable products.

     During August 2002, the Company announced that, at a regularly scheduled
meeting of its board of directors, W. Thomas Mitchell, age 56, formally
announced his intention to step down as Chief Executive Officer and President.
Mr. Mitchell will remain chairman of the Company's board. In October 2002, the
Company announced the hiring of Jean-Jacques Bienaime to succeed Mr. Mitchell as
Chief Executive Officer and President in November 2002. Mr. Bienaime will also
serve as a director.



                                       12
<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 should be read in conjunction with the consolidated financial
statements and the notes to those statements included in our 2001 Annual Report
on Form 10-K, as well as the condensed consolidated unaudited financial
statements and related notes included elsewhere in this report.


OVERVIEW

     We are a diversified biotechnology company that develops and delivers
products and/or services to the industrial, consumer, agri-processing 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,
agri-processing, 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, China and Argentina. For the
nine months ended September 30, 2002, as well as the year ended December 31,
2001, we derived approximately 50% of our revenues from our foreign operations.


NEW ACCOUNTING PRONOUNCEMENTS

    In June 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets." We adopted this statement as of January
1, 2002. 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.

    With the adoption of SFAS No. 142, we reassessed the useful lives and
residual values of all acquired intangible assets to make any necessary
amortization period adjustments. Based on that assessment, goodwill and certain
previously acquired technology were determined to have indefinite useful lives.
Also, there were no adjustments made to the amortization periods or residual
values of other intangible assets. Accordingly, certain reclassifications were
made to previously issued financial statements to conform to the presentation
required by SFAS No. 142. We completed the first step of the transitional
goodwill and indefinite-lived intangible impairment tests and have determined
that no potential impairment exists. As a result, we recognized no transitional
impairment loss to date in fiscal 2002 in connection with the adoption of SFAS
No. 142.

      In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No.
144 supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." SFAS No. 144 addresses the
accounting for long-lived assets to be disposed of by sale and resulting
implementation issues. This statement requires the measurement of long-lived
assets at the lower of carrying amount or fair value less cost to sell, whether
reported in continuing operations or in discontinued operations. This statement
is effective for financial statements issued for fiscal years beginning after
December 15, 2001. We adopted SFAS No. 144 as of January 1, 2002. There was no
financial statement impact as a result of the adoption. We will apply its
provisions to future impairments or disposals of long-lived assets as they
occur.

     In April 2002, the Financial Accounting Standards Board issued SFAS No.
145, which rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment
of Debt," SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers" and
SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements"
and amends SFAS No. 13, "Accounting for Leases." This statement updates,
clarifies and simplifies existing accounting pronouncements. As a result of
rescinding SFAS No. 4 and SFAS No. 64, the criteria in Accounting Principles
Board Opinion No. 30 will be used to classify gains and losses from
extinguishment of debt.


                                       13
<PAGE>

This statement is effective for financial statements issued for fiscal years
beginning after May 15, 2002. The Company does not expect the adoption of SFAS
No. 145 to have a material impact on our financial position or our results of
operations.

     In June 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Exit or Disposal Activities." SFAS No. 146 addresses significant
issues regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring activities
that are currently accounted for pursuant to the guidance that the Emerging
Issues Task Force (EITF) has set forth in EITF Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The scope of
SFAS No. 146 also includes costs related to terminating a contract that is not a
capital lease and certain termination benefits provided to employees under the
terms of one-time benefit arrangements. SFAS No. 146 will be effective for exit
or disposal activities that are initiated after December 31, 2002.


SUMMARY OF RESULTS

    For the three months ended September 30, 2002, net income available for
common stockholders decreased to $1.1 million, or $0.02 per diluted share, from
$1.6 million, or $0.03 per diluted share, for the three months ended September
30, 2001. For the nine months ended September 30, 2002, net income available for
common stockholders decreased to $1.2 million, or $0.02 per diluted share, from
$8.3 million, or $0.14 per diluted share, for the nine months ended September
30, 2001. During the nine months ended September 30, 2002, we recorded
restructuring and related charges of $16.4 million, or $10.4 million on an
after-tax basis. Before these charges, we would have reported net income
available to common stockholders of $11.6 million, or $0.19 per diluted share
for the nine months ended September 30, 2002.


RECENT DEVELOPMENTS

     During August 2002, we announced that, at a regularly scheduled meeting of
our board of directors, W. Thomas Mitchell, age 56, formally announced his
intention to step down as Chief Executive Officer and President. Mr. Mitchell
will remain chairman of our board. In October 2002, we announced the hiring of
Jean-Jacques Bienaime to succeed Mr. Mitchell as Chief Executive Officer and
President in November 2002. Mr. Bienaime will also serve as a director.

    During September 2002, we received the 2002 World Technology Award in the
biotechnology category from the World Technology Network (WTN). The awards were
given to 10 companies across different disciplines deemed by the WTN to have the
greatest likely future significance and impact on their industry and society.
Some of the recipients of the award in the other categories include Apple, IBM
and Toyota.

    During October 2002, we along with the University of Leicester announced
participation in a collaboration for microbial biotechnology between the
European Union (EU) and the People's Republic of China. The three-year project
funded by the European Commission Fifth Framework Program strives to identify
metabolic and genetic diversity as a source of new and valuable products.

    Also during October 2002, we along with DuPont Bio-Based Materials announced
the achievement of major technical milestones in the development of a microbe
which produces the key ingredient in a new corn-based DuPont polymer. Through a
fermentation process, the microbe converts sugar (glucose) into a monomer, 1,3
propanediol, or PDO. The monomer is then used to make DuPont(TM) Sorona(R) 3GT
polymer.


RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, 2002 and 2001

    Revenues. Total revenues for the three months ended September 30, 2002
increased $9.7 million, or 12%, to $90.5 million from the three months ended
September 30, 2001, due to increases in both product revenues and fees and
royalty revenues.

    Product Revenues. Product revenues for the three months ended September 30,
2002 increased $8.1 million, or 10%, to $85.9 million from the three months
ended September 30, 2001. For the three months ended September 30, 2002, the
unit volume/mix



                                       14
<PAGE>

increased 13% and the impact of foreign currency increased 1% while average
prices fell 4%. Volume increased primarily due to increased sales volume with
our grain milling, fuel ethanol and textile customers.

    Regionally, North American product revenues for the three months ended
September 30, 2002 increased $2.4 million, or 6%, to $40.0 million from the
three months ended September 30, 2001, driven primarily by increased sales to
our grain milling, fuel ethanol and cleaning customers, partially offset by
decreased sales to a major customer. Product revenues in Europe, Africa and the
Middle East for the three months ended September 30, 2002 increased $4.7
million, or 18%, to $31.5 million from the three months ended September 30,
2001, driven primarily by increased sales to grain processing customers and
sales to a major customer, partially offset by decreased sales to our cleaning
customers. Our product revenues in Latin America for the three months ended
September 30, 2002 decreased $0.8 million, or 20%, to $3.3 million from the
three months ended September 30, 2001 due primarily to decreased sales to our
cleaning customers. Product revenues in the Asia Pacific region increased $1.8
million, or 19%, to $11.1 million for the three months ended September 30, 2002
from the three months ended September 30, 2001 due mainly to increased sales to
our grain processing and textile customers.

    Fees and Royalty Revenues. Fees and royalty revenues increased $1.7 million,
or 55%, to $4.6 million for the three months ended September 30, 2002 from the
three months ended September 30, 2001, due primarily to an increase in customer
funded research revenues.

    Funded research revenues increased $1.7 million, or 63%, to $4.4 million for
the three months ended September 30, 2002, from the three months ended September
30, 2001. 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 11%, to $0.8
million for the three months ended September 30, 2002 from the three months
ended September 30, 2001 primarily due to timing of funding provided by the
National Renewable Energy Laboratory to develop an enzymatic process to convert
biomass into ethanol. Funded research revenues provided by customers increased
$1.8 million, to $3.6 million for the three months ended September 30, 2002 from
the three months ended September 30, 2001, primarily driven by funding from a
strategic alliance we entered into with the Dow Corning Corporation during the
fourth quarter of 2001.

    Royalties remained consistent for the three months ended September 30, 2002
with the three months ended September 30, 2001 at $0.2 million.


Operating Expenses

    Cost of Products Sold. Cost of products sold increased $6.2 million, or 14%,
to $50.3 million for the three months ended September 30, 2002, from the three
months ended September 30, 2001. Our expanded sales volume/mix increased costs
$3.8 million along with the sale of higher cost inventories of $3.9 million,
primarily driven by operating both Elkhart, Indiana and Beloit, Wisconsin
facilities since the acquisition. Production ceased at our Elkhart, Indiana
facility in September 2002. These increases were partially offset by reductions
due to the impact of the stronger U.S. dollar against foreign currencies of $1.5
million.

    Gross Profit and Margins from Products Sold. Gross profit from products sold
increased $1.9 million, or 6%, to $35.6 million for the three months ended
September 30, 2002 from the three months ended September 30, 2001. This overall
increase was caused by significant product revenue related factors including a
13% increase in volume/mix processed through our plants, partially offset by an
average price decline of 4%. This net increase in gross profit was also driven
by a $2.5 million increase due to the impact of the stronger U.S. dollar against
foreign currencies. As a result of these factors however, gross margin on
product revenue decreased to 41.5% for the three months ended September 30, 2002
from 43.3% for the three months ended September 30, 2001, primarily driven by
operating both Elkhart, Indiana and Beloit, Wisconsin facilities since the
acquisition. Production ceased at our Elkhart, Indiana facility in September
2002.

    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 $2.6 million, or 17%, to $17.4
million for the three months ended September 30, 2002 from the three months
ended September 30, 2001, 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,



                                       15
<PAGE>

estimated expenses related to research collaborations partially funded by
customers increased $0.9 million, or 29%, to $4.0 million for the three months
ended September 30, 2002 from the three months ended September 30, 2001.

    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 $1.2 million,
or 17%, to $8.3 million for the three months ended September 30, 2002 from the
three months ended September 30, 2001, due primarily to increased stock-based
compensation of $1.1 million and personnel-related costs, including salaries,
benefits, commissions and travel expenses of $0.4 million, partially offset by
decreases in outside services of $0.3 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 $1.0
million, or 13%, to $8.8 million for the three months ended September 30, 2002
from the three months ended September 30, 2001, due primarily to increased
stock-based compensation of $0.7 million, personnel-related costs, including
salaries, benefits and travel expenses of $0.2 million, and employee programs of
$0.1 million.

    Amortization of Intangible Assets. We amortize our definite-lived intangible
assets, consisting of patents, licenses and other contractual agreements, on a
straight-line basis over their estimated useful lives. Amortization expense
decreased $1.2 million, or 46%, to $1.4 million for the three months ended
September 30, 2002 from the three months ended September 30, 2001 due primarily
to the implementation of SFAS No. 142, "Goodwill and Other Intangible Assets."

    Other Expense and Income. Other expense and income relates primarily to
foreign currency exchange gains and losses on transactions denominated in other
than the functional currency of the entity in which the transaction occurred.
Other expense for the three months ended September 30, 2002 increased $0.9
million to $0.2 million from the three months ended September 30, 2001. This
increase was due primarily to losses associated with foreign currency
transactions.

    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. In connection with
the grant of stock options to employees during 2000, amortization of deferred
compensation expense for the three months ended September 30, 2002 was $1.8
million, which included the acceleration of certain amortization as discussed
under the heading " Related Party Transactions," and for the three months ended
September 30, 2001 was $0.6 million.

     During the fourth quarter of 2001, we converted previously issued Stock
Appreciation Rights (SARs) to stock options. As a result, the SARs were
canceled and new stock options were granted at the exercise price and with
vesting beginning as of the grant date of the previously issued SARs. For the
new stock options, deferred stock-based compensation was then calculated as the
difference between the exercise price and the estimated fair value of the new
stock options on the conversion date.

    In total, amortization of this deferred stock-based compensation expense was
$2.0 million and $0.6 million for the three months ended September 30, 2002 and
2001, respectively, and was reported in our Consolidated Statement of Operations
as follows (in millions):

                                                            2002        2001
                                                            ----        ----
Cost of products sold..................................    $  0.2      $    -
Research and development...............................       0.3         0.2
Sales, marketing and business development..............       0.7         0.2
General and administrative.............................       0.8         0.2
                                                           ------      ------
Total amortization of deferred compensation expense....    $  2.0      $  0.6
                                                           ======      ======


Non Operating Expense and Income

    Interest Income. Interest income decreased $1.0 million, or 43%, to $1.3
million for the three months ended September 30, 2002 from the three months
ended September 30, 2001 due mainly to the reduction of our cash balances,
discussed below under the heading " Liquidity and Capital Resources."



                                       16
<PAGE>

    Income Taxes. The effective income tax rate for the three months ended
September 30, 2002 was 17%, compared to 27% for the three months ended September
30, 2001. The effective rate for the three months ended September 30, 2002 is
representative of our most recent assessment of our annual effective income tax
rate. Factors that affect our estimated annual effective income tax rate include
increased research and development expenditures in the United States, the
statutory income tax rates in foreign jurisdictions, amortization of certain
intangible assets, other operating expense increases and other items which are
not deductible for tax purposes, and research and experimentation tax credits.
The rate also included the effect of the one-time restructuring and related
charges. During the three months ended September 30, 2002 and 2001, 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 in 2005.


Comparison of the Nine Months Ended September 30, 2002 and 2001

    Revenues. Total revenues for the nine months ended September 30, 2002
increased $22.0 million, or 9%, to $261.9 million from the nine months ended
September 30, 2001, due to increases in both product revenues and fees and
royalty revenues.

    Product Revenues. Product revenues in the nine months ended September 30,
2002 increased $15.3 million, or 7%, to $246.9 million from the nine months
ended September 30, 2001. Excluding the impact of the stronger U.S. dollar
against foreign currencies, product revenues for the nine months ended September
30, 2002 would have increased by approximately 8% to $249.2 million. For the
nine months ended September 30, 2002, unit volume/mix grew 11% while average
prices fell 3%. Volume increased primarily due to increased sales to a major
customer and increased sales to our grain milling, fuel ethanol and textiles
customers, partially offset by decreased sales to our cleaning customers.

    Regionally, North American product revenues for the nine months ended
September 30, 2002 increased $6.4 million, or 6%, to $118.0 million from the
nine months ended September 30, 2001, driven primarily by sales to our grain
milling and fuel ethanol customers, partially offset by decreased sales to a
major customer and decreased sales to our cleaning and fabric care customers.
Product revenues in Europe, Africa and the Middle East for the nine months ended
September 30, 2002 increased $7.6 million, or 9%, to $87.6 million from the nine
months ended September 30, 2001, driven primarily by increased sales to a major
customer, and sales to our grain processing and textiles customers, partially
offset by decreased sales to our cleaning customers. Our product revenues in
Latin America for the nine months ended September 30, 2002 decreased $3.8
million, or 28%, to $9.8 million from the nine months ended September 30, 2001
due primarily to decreased sales to our cleaning and fabric care customers,
partially offset by increased sales to a major customer. Product revenues in the
Asia Pacific region increased $5.0 million, or 19%, to $31.5 million for the
nine months ended September 30, 2002 from the nine months ended September 30,
2001, due mainly to increased sales to a major customer and increased sales to
our grain processing and textiles customers, partially offset by a decrease in
sales to our cleaning customers.

    Fees and Royalty Revenues. Fees and royalty revenues increased $6.8 million,
or 83%, to $15.0 million for the nine months ended September 30, 2002 from the
nine months ended September 30, 2001, due primarily to an increase in customer
funded research revenues.

     Funded research revenues increased $6.7 million, or 91%, to $14.1 million
for the nine months ended September 30, 2002 from the nine months ended
September 30, 2001. 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 4%, to $2.6 million for the nine months ended September 30, 2002
from the nine months ended September 30, 2001 primarily due to timing of funding
provided by the National Renewable Energy Laboratory to develop an enzymatic
process to convert biomass into ethanol. Funded research revenues provided by
customers increased $6.8 million to $11.5 million for the nine months ended
September 30, 2002 from the nine months ended September 30, 2001, primarily
driven by funding from a strategic alliance we entered into with the Dow Corning
Corporation during the fourth quarter of 2001.

    Royalties remained consistent for the nine months ended September 30, 2002
with the nine months ended September 30, 2001 at $0.8 million.



                                       17
<PAGE>
Operating Expenses

    Cost of Products Sold. Cost of products sold increased $9.9 million, or 8%,
to $138.5 million for the nine months ended September 30, 2002 from the nine
months ended September 30, 2001. Our expanded sales volume/mix increased costs
$8.9 million along with the sale of higher cost inventories of $5.7 million,
primarily driven by operating both Elkhart, Indiana and Beloit, Wisconsin
facilities since the acquisition. Production ceased at our Elkhart, Indiana
facility in September 2002. These increases were partially offset by reductions
due to the impact of the stronger U.S. dollar against foreign currencies of $4.7
million.

    Gross Profit and Margins from Products Sold. Gross profit from products sold
increased $5.4 million, or 5%, to $108.4 million for the nine months ended
September 30, 2002 from the nine months ended September 30, 2001. This overall
increase was caused by significant product revenue related factors including an
11% increase in volume/mix processed through our plants, partially offset by an
average price decline of 3%. This net increase in gross profit was also driven
by a $2.4 million increase due to the impact of the stronger U.S. dollar against
foreign currencies. As a result of these factors however, gross margin on
product revenue decreased to 43.9% for the nine months ended September 30, 2002
from 44.5% for the nine months ended September 30, 2001, primarily driven by
operating both Elkhart, Indiana and Beloit, Wisconsin facilities since the
acquisition. Production ceased at our Elkhart, Indiana facility in September
2002.

    Research and Development. Research and development expenses increased $7.5
million, or 18%, to $50.3 million for the nine months ended September 30, 2002
from the nine months ended September 30, 2001 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 increased $4.3 million, or 59%, to
$11.6 million for the nine months ended September 30, 2002 from the nine months
ended September 30, 2001.

    Sales, Marketing and Business Development. Sales, marketing and business
development expenses increased $3.2 million, or 15%, to $24.0 million for the
nine months ended September 30, 2002 from the nine months ended September 30,
2001, primarily due to increased stock-based compensation of $1.2 million,
personnel-related costs, including salaries, benefits, commissions and travel
expenses of $1.2 million, employee programs of $0.5 million, and outside service
costs of $0.1 million.

    General and Administrative. General and administrative expenses increased
$3.4 million, or 16%, to $25.1 million for the nine months ended September 30,
2002 from the nine months ended September 30, 2001, due primarily to increased
outside service costs of $2.1 million, stock-based compensation of $0.7 million,
personnel-related costs, including salaries, benefits, and travel expenses of
$0.5 million and employee programs of $0.3 million.

    Amortization of Intangible Assets. Amortization expense decreased $3.3
million, or 45%, to $4.0 million for the nine months ended September 30, 2002
from the nine months ended September 30, 2001 due primarily to the
implementation of SFAS No. 142, "Goodwill and Other Intangible Assets."

    Other Expense and Income. Other income for the nine months ended September
30, 2002 was $3.3 million as compared to less than $0.1 million of income for
the nine months ended September 30, 2001. This difference in income of $3.3
million was primarily due to an increase in Argentine peso- and Euro-driven
foreign currency transaction gains during the nine months ended September 30,
2002.

    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. In connection with
the grant of stock options to employees during 2000, amortization of deferred
compensation expense for the nine months ended September 30, 2002 was $3.2
million, which included the acceleration of certain amortization as discussed
under the heading " Related Party Transactions," and for the nine months ended
September 30, 2001 was $2.0 million.

     During the fourth quarter of 2001, we converted previously issued SARs to
stock options. As a result, the SARs were canceled and new stock options were
granted at the exercise price and with vesting beginning as of the grant date of
the previously issued SARs. For the new stock options, deferred stock-based
compensation was then calculated as the difference between the exercise price
and the estimated fair value of the new stock options on the conversion date.



                                       18
<PAGE>

    In total, amortization of this deferred stock-based compensation expense was
$3.6 million and $2.0 million for the nine months ended September 30, 2002 and
2001, respectively, and was reported in our Consolidated Statement of Operations
as follows (in millions):

                                                           2002        2001
                                                           ----        ----
Cost of products sold..................................   $  0.3      $  0.1
Research and development...............................      0.7         0.7
Sales, marketing and business development..............      1.4         0.6
General and administrative.............................      1.2         0.6
                                                          ------      ------
Total amortization of deferred compensation expense....   $  3.6      $  2.0
                                                          ======      ======


Non Operating Expense and Income

    Interest Income. Interest income decreased $3.9 million, or 49%, to $4.1
million for the nine months ended September 30, 2002 from the nine months ended
September 30, 2001 due mainly to the reduction of our cash balances, discussed
below under the heading " Liquidity and Capital Resources."

    Income Taxes. The effective income tax rate for the nine months ended
September 30, 2002 was a 50% tax benefit, compared to a 27% tax expense for the
nine months ended September 30, 2001. The effective rate for the nine months
ended September 30, 2002 was driven by anticipated annual tax benefits from
operating losses in high tax jurisdictions, partially offset by taxes on
operating income generated in low tax jurisdictions. Factors that affect our
estimated annual effective income tax rate include increased research and
development expenditures in the United States, the statutory income tax rates in
foreign jurisdictions, amortization of certain intangible assets, other
operating expense increases and other items which are not deductible for tax
purposes, and research and experimentation tax credits. The rate also included
the effect of the one-time restructuring and related charges. The tax benefit
related to these restructuring and related charges is approximately $6.1 million
for the nine months ended September 30, 2002. During the nine months ended
September 30, 2002 and 2001, 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 in 2005.


ACQUISITION

     During February 2002, we acquired EBS from Corn Products International,
Inc. for a total cash purchase price of $35.8 million and the assumption of $1.0
million in debt. As part of this transaction, we entered into a seven-year
supply agreement for a majority of Corn Products International, Inc.'s North
American enzyme requirements. The acquisition has been accounted for under the
purchase method in accordance with SFAS No. 141, "Business Combinations." The
acquired entity's results of operations have been consolidated with our results
of operations since the acquisition date. We are continuing to evaluate the
allocation of the purchase price for the acquisition, including the segregation
of separately identifiable intangible assets. We anticipate that this process
will be completed during the quarter ended December 31, 2002. According to our
preliminary allocation of the purchase price, the net assets acquired consist of
the following as of September 2002 (in millions):


                  Working capital.....................................  $  3.9
                  Property, plant and equipment.......................    21.1
                  Intangible assets...................................    11.5
                  Long-term liabilities...............................    (0.7)
                                                                        -------
                                                                        $ 35.8
                                                                        ======


    Included in working capital acquired is a provision to restructure the
entity of approximately $1.0 million, which primarily consists of the
employee-related costs to eliminate 22 positions. All affected employees were
notified immediately of the restructuring plan. As of September 30, 2002, costs
totaling approximately $1.0 million had been charged to this restructuring
provision and all 22 employees had terminated their employment with us.


                                       19
<PAGE>

RESTRUCTURING AND RELATED CHARGES

    During February 2002, as a result of the acquisition of EBS and general
economic conditions in Latin America, including the devaluation of the Argentine
peso, we engaged in a plan to restructure our overall supply infrastructure by
ceasing operations at our Elkhart, Indiana plant and downsizing our Argentine
facilities. Approximately 119 positions will be eliminated as a result of this
restructuring. All affected employees were notified immediately of the
restructuring plan. As of September 30, 2002, 111 employees had terminated their
employment with us.

    As a result of the plan, restructuring and related charges of $16.4 million
were recorded in our operating earnings in the nine months ended September 30,
2002. These charges were primarily driven by employee severance and related
costs of approximately $3.8 million, costs to dismantle portions of the
restructured facilities of $1.0 million, costs to terminate long-term utility
agreements of $0.3 million, other costs totaling $0.2 million, and $9.5 million
for property, plant and equipment that was deemed impaired as it would no longer
be utilized by us after the restructuring. The impairment charge was determined
based on remaining book value, as we believe there is no active market in which
to sell the specific assets. We expect full implementation to be completed in
the fourth quarter of 2002. In addition, we recorded costs related to the
restructuring, such as those related to the transition of activities between the
Elkhart and EBS facilities, of $1.6 million as incurred during the nine months
ended September 30, 2002. At September 30, 2002, we had a remaining liability of
$2.8 million related to this restructuring.


RELATED PARTY TRANSACTIONS

     On August 21, 2002, in order to eliminate all stock-related loans, certain
executive officers surrendered approximately 1.4 million restricted shares to us
at a value of $10.77 per share, to make full payment of the outstanding
principal of $14.6 million and accrued interest of $0.6 million on their
obligations under notes issued in connection with their purchase of restricted
common stock at $9.70 per share in April 2000. Also included in the value of the
surrendered shares was a cash payment to cover an estimated $0.2 million of net
capital gain tax incurred by the officers. We are holding the surrendered shares
as treasury shares.

     In connection with this transaction, we accelerated the vesting of
approximately 0.6 million restricted shares. Accordingly, we incurred
incremental compensation expense of $0.5 million in the third quarter of 2002.
In addition, we accelerated the recognition of $0.8 million in previously
deferred compensation charges, of which $0.4 million would otherwise have been
recognized in each of the fourth quarter of 2002 and the first half of 2003,
respectively.

     We also granted the executive officers 1.8 million stock options at $10.77
per share under our 2002 Omnibus Incentive Plan approved by stockholders on May
30, 2002, of which 0.6 million were fully vested upon issuance.


 LIQUIDITY AND CAPITAL RESOURCES

    Our funding needs consist primarily of capital expenditures, research and
development activities, sales and marketing expenses, and expenses for 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 September 30, 2002, cash and cash equivalents totaled $171.3 million.
The funds were invested primarily in short-term instruments, including A1-P1
rated commercial paper, institutional money market funds, auction rate preferred
securities and bank deposits.

    Cash provided by operations was $27.1 million and $25.3 million for the nine
months ended September 30, 2002 and 2001, respectively. The increase of $1.8
million in 2002 from 2001 was generated principally by operating income, net of
non-cash items such as depreciation and amortization, and changes in operating
assets and liabilities.



                                       20
<PAGE>

    Cash used by investing activities was $50.6 million and $23.6 million for
the nine months ended September 30, 2002 and 2001, respectively. This increase
of $27.0 million was driven primarily by the EBS acquisition of $35.8 million
and the equity investment in Seattle Genetics, Inc. of $3.0 million during the
nine months ended September 30, 2002. Capital expenditures for the nine months
ended September 30, were $11.9 million in 2002 compared with $14.9 million in
2001. A significant portion of the capital spending included process improvement
projects at our manufacturing and research and development facilities and
information technology enhancements.

    Cash used by financing activities was $26.8 million for the nine months
ended September 30, 2002. For the nine months ended September 30, 2001 cash
provided by financing activities was $0.1 million. This difference of
approximately $27.0 million was primarily driven by the 2002 payment on our
long-term debt of $28.0 million. No dividends were paid to common stockholders
during the nine months ended September 30, 2002 and 2001. We currently intend to
retain future earnings to finance the expansion of our business. Any future
determination to pay cash dividends to our common stockholders 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
earnings before interest, taxes, depreciation and amortization (EBITDA) of
3.5:1.

    As of September 30, 2002, we had a $60.0 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 $40.0 million of committed borrowings pursuant to a credit agreement that
expires on January 31, 2004, and $20.0 million of committed borrowings pursuant
to a 364-day credit agreement that expires on January 30, 2003. The combined
facility carries facility fees of 0.35% on the amount of unborrowed principal
under the $40.0 million agreement and 0.30% under the $20.0 million agreement.
As of October 31, 2002, there were no borrowings under either facility.

    Our long-term debt consists primarily of the 6.82% senior notes issued in
1996 to certain institutional investors. The remaining principal amount of these
notes is $112.0 million. Annual installment payments of $28.0 million commenced
on March 30, 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 2002 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.

     As of September 30, 2002, cash and cash equivalents totaled $171.3 million.
Of this amount, $84.4 million was denominated in Euros. The remainder, or $86.9
million, was primarily denominated in U.S. dollars. Other than the second
installment of $28.0 million due on March 30, 2003 under our 6.82% senior notes
discussed under the heading "Liquidity and Capital Resources" in this Report,
short-term debt outstanding at September 30, 2002 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 the impact on the translation of these cash
investments into U.S. dollars.


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. Our interest expense is generated primarily from fixed rate debt,
which consists of $112.0 million 6.82% senior notes outstanding at September 30,
2002, maturing in four annual installments of $28.0 million, from March 30, 2003
through March 30, 2006.



                                       21
<PAGE>

     On January 31, 2002, we entered into an interest rate swap contract to pay
a variable rate of interest based on the six month London Interbank Offered Rate
(LIBOR) and receive fixed rates of interest at 6.82% on a $28.0 million notional
amount of our long-term indebtedness. On May 14, 2002, we entered into another
interest rate swap contract to pay a variable rate of interest based on the six
month LIBOR and receive fixed rates of interest at 6.82% on an additional $28.0
million notional amount of our long-term indebtedness. On July 31, 2002 we sold
both swap contracts for approximately $1.0 million in cash. The gain on the sale
will be amortized against interest expense over the original maturity date of
the swaps. In accordance with SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities", these interest rate swap contracts that hedged the
senior notes had an immaterial effect on the statement of operations and were
not material to the balance sheet as of the date of their sale.


Foreign Currency Exposure

       We conduct business throughout the world. To date, we have derived
approximately 50% of our 2002 revenues and approximately all of our 2002
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. We recorded a $0.6 million gain from U.S. dollar/Euro
transactions through the nine months ended September 30, 2002 due to the
strengthening of the Euro.

    Our manufacturing and administrative operations for Latin America are
located in Argentina. Severe economic conditions, resulted in a 2001 year-end
devaluation of the Argentine Peso. As a result, our subsidiary, which has an
Argentine Peso functional currency, reported lower U.S. dollar net assets due to
the translation impact resulting from the devaluation. Due to the fact that a
significant part of our Latin American revenues were denominated in U.S.
dollars, our statement of operations reflected a $2.4 million foreign currency
gain from the remeasurement of related accounts receivable through the nine
months ended September 30, 2002.

           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 recorded a gain of $0.2 million in the
statement of operations for the nine months ended September 30, 2002 from
foreign currency contracts. We do not hedge the translation of financial
statements of consolidated subsidiaries that maintain their local books and
records in foreign currencies.




                                       22
<PAGE>


RISK FACTORS

     If any of the following risks actually occur, they could harm our business,
financial condition, and/or results of operations.

IF WE FAIL TO DEVELOP PRODUCTS FOR THE HEALTH CARE AND AGRI-PROCESSING 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 new
segments of the agri-processing market. 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
new agri-processing 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, additional expertise and new 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 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.



                                       23
<PAGE>

IF THE DEMAND FOR PROTEIN DEGRADING ENZYMES DECREASES OR IF MAJOR CUSTOMERS
REDUCE OR TERMINATE BUSINESS WITH US, OUR REVENUES COULD SIGNIFICANTLY DECLINE.

     Our largest selling family of products, protein degrading enzymes, or
proteases, accounted for approximately 57% of our 2001 revenues. If the demand
for proteases decreases or alternative proteases render our products
noncompetitive, our revenues could significantly decline.

     In addition, our five largest customers collectively accounted for over 57%
of our 2001 product revenues with our largest customer, The Procter & Gamble
Company, accounting for over 35% of such revenues. Our five largest customers in
2001 were Benckiser N.V., Cargill, Incorporated, the FinnFeeds Division of
Danisco A/S, The Procter & Gamble Company, and Unilever N.V. Any one of these
customers may reduce its level of business with us. Should any of our largest
customers decide to reduce or terminate business with us, our revenues and
profitability could decline significantly.

     We have arrangements of various durations with our major customers and are
routinely involved in discussions regarding the status of these relationships.
These discussions may lead to extensions or new commercial arrangements or may
be unsuccessful. Our customer relationships involve uncertainty by virtue of
economic conditions, customer needs, competitive pressures, our production
capabilities and other factors. Consequently, our customer base will change over
time as will the nature of our relationships with individual customers,
including major customers.

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 HAVE A SIGNIFICANT NEGATIVE IMPACT ON OUR PROFITABILITY.

     In the future, we may acquire other 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, including our recent acquisition of EBS. Future acquisitions could
dilute our stockholders' interest in us and could cause us to incur substantial
debt, expose us to contingent liabilities and could negatively impact our
profitability.

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.

     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, is difficult to assess. In the event of an
intellectual property dispute, we may become involved in litigation.
Intellectual property litigation can be 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 can be costly
in terms of dollars spent and the diversion of management time.



                                       24
<PAGE>

     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.

     Those companies with which we have entered or may enter into strategic
alliances encounter similar risks and uncertainties with respect to their
intellectual property. To the extent that any such alliance companies suffer a
loss or impairment of their respective technologies, we may suffer a
corresponding loss or impairment that may materially and adversely affect our
investments.

IF WE FAIL TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, WE MAY NOT BE ABLE TO
ACHIEVE OUR STATED CORPORATE 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 may not be able to achieve our stated corporate
objectives.

FOREIGN CURRENCY FLUCTUATIONS AND ECONOMIC AND POLITICAL CONDITIONS IN FOREIGN
COUNTRIES COULD CAUSE OUR REVENUES AND PROFITS TO DECLINE.

     In 2001, we derived approximately 50% of our revenues from our foreign
operations. Our foreign operations generate sales and incur expenses in local
currency. As a result, we are exposed to a market risk related to unpredictable
interest rates and foreign currency exchange rate fluctuations. We recognize
foreign currency gains or losses arising from our operations in the period
incurred. As a result, currency fluctuations between the U.S. dollar and the
currencies in which we do business could cause our revenues and profits to
decline.

     Product revenues denominated in Euros accounted for approximately 21% of
total product revenues for 2001, and the fluctuations in the currency exchange
rate against the U.S. dollar can have a significant impact on our reported
product revenues.

     We expect to continue to operate in foreign countries and that our
international sales will continue to account for a significant percentage of our
revenues. As such, we are subject to certain risks arising from our
international business operations that could be costly in terms of dollars
spent, the diversion of management's time, and revenues and profits, including:

     -    Difficulties and costs associated with staffing and managing foreign
          operations;

     -    Unexpected changes in regulatory requirements;

     -    Difficulties of compliance with a wide variety of foreign laws and
          regulations;

     -    Changes in our international distribution network and direct sales
          forces;

     -    Political trade restrictions and exchange controls;

     -    Political, social, or economic unrest;

     -    Labor disputes including work stoppages, strikes and embargoes;

     -    Inadequate and unreliable services and infrastructure;

     -    Import or export licensing or permit requirements; and

     -    Greater risk on credit terms and long accounts receivable collection
          cycles in some foreign countries.


                                       25
<PAGE>

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;

     -    Fluctuations in consumer demand for products containing our
          technologies or products, such as back to school sales of blue jeans
          and other denim products, resulting in an increase in textile
          processing enzymes, and fluctuations in laundry detergent use due to
          promotional campaigns run by consumer products companies; and

     -    Fluctuations in geographic conditions including currency and other
          economic conditions such as economic crises in Latin America 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 ARE SUBJECT TO A COSTLY PRODUCT LIABILITY DAMAGE CLAIM OR AWARD, OUR
PROFITS COULD DECLINE.

     We may be held liable if any product we develop, or any product that a
third party makes with the use or incorporation of any of our products, causes
injury or is found otherwise unsuitable during product testing, manufacturing,
marketing or sale. Our current product liability insurance may not cover our
potential liabilities. Inability to obtain sufficient insurance coverage in the
future at an acceptable cost or otherwise to protect against potential liability
claims could prevent or inhibit the commercialization of products developed by
us or our strategic partners. If a third party sues us for any injury caused by
our products, our liability could exceed our insurance coverage amounts and
total assets and our profits could decline.

IF WE ARE SUBJECT TO COSTLY ENVIRONMENTAL LIABILITY DUE TO THE USE OF HAZARDOUS
MATERIALS IN OUR BUSINESS, OUR PROFITS COULD DECLINE.

     Our research and development processes involve the controlled use of
hazardous materials, including chemical, radioactive and biological materials.
Our operations also generate hazardous waste. We cannot eliminate entirely the
risk of contamination or the discharge of hazardous materials and any resultant
injury from these materials. Federal, state, local and foreign laws and
regulations govern the use, manufacture, storage, handling and disposal of these
materials. Third parties may sue us for any injury or contamination that results
from our use or the third party's use of these materials. Any accident could
partially or completely shut down our research and manufacturing facilities and
operations. In addition, if we are required to comply with any additional
applicable environmental laws and regulations, we may incur additional costs,
and any such current or future environmental regulations may impair our
research, development or production efforts.


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.



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<PAGE>


ITEM 4. CONTROLS AND PROCEDURES

     Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including W. Thomas Mitchell, the Company's Chairman and
Chief Executive Officer, and Raymond J. Land, the Company's Senior Vice
President and Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, Mr. Mitchell and Mr. Land
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company required to
be included in the Company's periodic SEC filings. There were no significant
changes in the Company's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation.



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

     None

ITEM 5. OTHER INFORMATION

     During August 2002, the Company announced that, at a regularly scheduled
meeting of its board of directors, W. Thomas Mitchell, age 56, formally
announced his intention to step down as Chief Executive Officer and President.
Mr. Mitchell will remain Chairman of the Company's board. In October 2002, the
Company announced the hiring of Jean-Jacques Bienaime to succeed Mr. Mitchell as
Chief Executive Officer and President in November 2002. Mr. Bienaime will also
serve as a director.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     A.   EXHIBITS

           See Index to Exhibits

     B.   REPORTS ON FORM 8-K

           On August 23, 2002, the Company filed a Form 8-K (under Item 5)
     regarding (i) the intention of W. Thomas Mitchell to step down as Chief
     Executive Officer and President upon the naming of a successor and to
     retire in 2003 and (ii) the tender by the Company's executive officers of
     approximately 1,400,000 shares of restricted stock in full payment of the
     outstanding balances of principal and accrued interest in obligations under
     notes issued in connection with the purchase of restricted stock by the
     executive officers in April 2000. The report did not include any financial
     statements.




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<PAGE>

                                   SIGNATURES



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



                                         GENENCOR INTERNATIONAL, INC.



NOVEMBER 14, 2002                        By: /s/  RAYMOND J. LAND
---------------------------                  -----------------------------------
Date                                     Raymond J. Land
                                         Senior Vice President and
                                         Chief Financial Officer




NOVEMBER 14, 2002                        By: /s/  DARRYL L. CANFIELD
---------------------------                  -----------------------------------
Date                                     Darryl L. Canfield
                                         Vice President and Corporate Controller
                                         (Chief Accounting Officer)





                                       28
<PAGE>


CERTIFICATIONS


I, W. Thomas Mitchell, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Genencor
      International, Inc.

2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)   designed such disclosure controls and procedures to ensure that
           material information relating to the registrant, including its
           consolidated subsidiaries, is made known to us by others within those
           entities, particularly during the period in which this quarterly
           report is being prepared;

      b)   evaluated the effectiveness of the registrant's disclosure controls
           and procedures as of a date within 90 days prior to the filing date
           of this quarterly report (the "Evaluation Date"); and

      c)   presented in this quarterly report our conclusions about the
           effectiveness of the disclosure controls and procedures based on our
           evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)   all significant deficiencies in the design or operation of internal
           controls which could adversely affect the registrant's ability to
           record, process, summarize and report financial data and have
           identified for the registrant's auditors any material weaknesses in
           internal controls; and

      b)   any fraud, whether or not material, that involves management or other
           employees who have a significant role in the registrant's internal
           controls; and

6.     The registrant's other certifying officers and I have indicated in this
       quarterly report whether or not there were significant changes in
       internal controls or in other factors that could significantly affect
       internal controls subsequent to the date of our most recent evaluation,
       including any corrective actions with regard to significant deficiencies
       and material weaknesses.



Date:  November 14, 2002                   By: /s/ W. THOMAS MITCHELL
                                               --------------------------------
                                           W. Thomas Mitchell,
                                           Chairman and Chief Executive Officer





                                       29
<PAGE>

I, Raymond J. Land, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Genencor
      International, Inc.

2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)   designed such disclosure controls and procedures to ensure that
           material information relating to the registrant, including its
           consolidated subsidiaries, is made known to us by others within those
           entities, particularly during the period in which this quarterly
           report is being prepared;

      b)   evaluated the effectiveness of the registrant's disclosure controls
           and procedures as of a date within 90 days prior to the filing date
           of this quarterly report (the "Evaluation Date"); and

      c)   presented in this quarterly report our conclusions about the
           effectiveness of the disclosure controls and procedures based on our
           evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)   all significant deficiencies in the design or operation of internal
           controls which could adversely affect the registrant's ability to
           record, process, summarize and report financial data and have
           identified for the registrant's auditors any material weaknesses in
           internal controls; and

      b)   any fraud, whether or not material, that involves management or other
           employees who have a significant role in the registrant's internal
           controls; and

6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.




Date:  November 14, 2002                           By: /s/ RAYMOND J. LAND
                                                       ------------------------
                                                   Raymond J. Land,
                                                   Senior Vice President and
                                                   Chief Financial Officer





                                       30
<PAGE>

                                INDEX TO EXHIBITS

(2)            PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
               SUCCESSION
                        Not applicable.
(3)            ARTICLES OF INCORPORATION AND BY-LAWS
               3.1      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.
               3.2      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
               4.1      Exhibit 3.1 to this Report is incorporated herein by
                        reference.
               4.2      Exhibit 3.2 to this Report is incorporated herein by
                        reference.
               4.3      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.
               4.4      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 reference 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.
               4.5      $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.
               4.6      $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.
               4.7      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.
               4.8      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.
               4.9      Amendment No. 2 dated as of January 31, 2002 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 4.9 to
                        the Company's Annual Report on Form 10-K for the year
                        ended December 31, 2001.
               4.10     Letter Agreement dated as of January 31, 2002 among JP
                        Morgan Chase Bank, ABN AMRO Bank, NV, the Bank of New
                        York, Credit Suisse First Boston and the Company
                        regarding Credit Agreements dated as of January 31, 2001
                        and Acquisition of Enzyme Bio-Systems is incorporated
                        herein by reference to Exhibit 4.10 to the Company's
                        Annual Report on Form 10-K for the year ended December
                        31, 2001.
(10)           MATERIAL CONTRACTS
               *#10.1   Retirement and Consulting Agreement dated as of August
                        21, 2002 between W. Thomas Mitchell and the Company.



                                       31
<PAGE>

(11)           STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
                        Not included as a separate exhibit as computation can be
                        determined from Note 3 to the financial statements
                        included in this Report 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.
(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
               *99.1    Certifications Pursuant to 18 U.S.C. Section 1350 As
                        Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                        Act of 2002.

-----------
*      Exhibits filed with this Report.
#      Management contract or compensatory plan.





                                       32