SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-K
(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934
         For the fiscal year ended December 31, 2000 or

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the transition period from            to
                                        -----------  ------------

COMMISSION FILE NUMBER 0-19732

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

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

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

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

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

 Securities registered pursuant to Section 12(g) of the Act: Common Stock,
                                $.001 Par Value

         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 and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                                          Yes  X  No
                                              ---    ---

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

         The approximate aggregate market value of the Common Stock held by
non-affiliates of the Registrant, based upon the last sale price of the Common
Stock reported on the Nasdaq National Market was $223,014,800 as of March 15,
2001.*

         The number of shares of Common Stock outstanding as of March 15, 2001
was 27,364,171.

                       DOCUMENTS INCORPORATED BY REFERENCE
                        (To the extent indicated herein)

The Registrant's definitive proxy statement to be filed in connection with
solicitation of proxies for its Annual Meeting of Stockholders to be held on May
22, 2001 is incorporated by reference into Part III of this Form 10-K.

* Excludes 20,526 shares of common stock held by directors and officers and
stockholders whose beneficial ownership exceeds 10% of the shares outstanding at
March 15, 2001. Exclusion of shares held by any person should not be construed
to indicate that such person possesses the power, direct or indirect, to direct
or cause the direction of the management or policies of the Registrant, or that
such person is controlled by or under common control with the Registrant.

                                      -1-
<PAGE>

                                     PART I

         EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED IN THIS REPORT, THE
FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT,
INCLUDING, IN PARTICULAR, STATEMENTS IN THIS REPORT ABOUT OUR PLANS, STRATEGIES
AND PROSPECTS. THESE STATEMENTS, WHICH MAY INCLUDE WORDS SUCH AS "MAY," "WILL,"
"EXPECT," "BELIEVE," "INTEND," "PLAN," "ANTICIPATE," "ESTIMATE," OR SIMILAR
WORDS, ARE BASED ON OUR CURRENT BELIEFS, EXPECTATIONS AND ASSUMPTIONS AND ARE
SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES. ALTHOUGH WE BELIEVE THAT OUR
BELIEFS, EXPECTATIONS AND ASSUMPTIONS AS REFLECTED IN THESE STATEMENTS ARE
REASONABLE, OUR ACTUAL RESULTS AND FINANCIAL PERFORMANCE MAY PROVE TO BE VERY
DIFFERENT FROM WHAT WE PREDICTED ON THE DATE OF THIS REPORT. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN "RISK FACTORS," AS WELL AS IN THE SECTIONS ENTITLED "OUR PRODUCT
DEVELOPMENT PROGRAMS," "OUR STRATEGY," "PATENTS AND PROPRIETARY RIGHTS," AND
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."

         IN THIS FORM 10-K, "CORVAS," "WE," "US" AND "OUR" REFER TO CORVAS
INTERNATIONAL, INC.

ITEM 1.  BUSINESS

OVERVIEW

         We are a biopharmaceutical company engaged in the discovery,
development and commercialization of novel therapeutics that address large
markets, including cardiovascular disease, stroke and cancer. We currently have
two product candidates in Phase II clinical trials. Our lead product candidate,
partnered with Pfizer, is UK-279,276, formerly rNIF, a recombinant protein in
Phase IIb clinical trials for the treatment of reperfusion injury associated
with ischemic stroke. Our second product candidate, known as rNAPc2, is a
recombinant protein that we are developing for the prevention of deep vein
thrombosis and pulmonary embolism, and for the treatment of unstable angina. We
have completed a successful Phase II clinical trial for the prevention of deep
vein thrombosis and pulmonary embolism and, subject to government regulations,
plan to initiate a Phase III clinical trial for this indication in the second
half of 2001. We also have a number of research programs aimed at developing
novel drugs to modulate proteases involved in cancer and other diseases.

         Proteases are proteins that act as molecular scissors that cleave other
proteins, and are responsible for regulating normal cellular function. The
maintenance of normal health requires that the activity of proteases be tightly
controlled. Excessive or deficient protease activity underlies many serious
diseases in humans, including cardiovascular disease, cancer, inflammation and
many infectious diseases. We focus our research efforts on correcting these
imbalances through drugs that are designed to modulate protease activity. Our
approach to protease modulation was developed through many years of discovering
and developing inhibitors of key proteases responsible for the formation of
blood clots. The anticoagulant rNAPc2 is a direct result of this effort. We are
now working to develop drugs outside the cardiovascular arena using our
expertise in medicinal chemistry and protease inhibitor combinatorial library
design and synthesis.

         Our internal protease modulation efforts are currently in the area of
cancer. We are using functional genomics to discover novel proteases that may
play an important role in the growth and metastasis of solid tumors. Using this
approach, we have identified several novel protease targets and are already
evaluating new drug candidates addressing these targets.

                                      -2-
<PAGE>

OTHER INFORMATION

         We originally incorporated in California in 1987 and reincorporated in
Delaware in 1993. Our executive offices are located at 3030 Science Park Road,
San Diego, California 92121, and our telephone number is (858) 455-9800.
CORVAS(R) is a registered trademark and the Corvas logo is our trademark. All
other trademarks, trade names and product names referred to herein are the
property of their respective owners.

OUR PRODUCT DEVELOPMENT PROGRAMS

         The following is a summary of our principal product development
programs:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
PRODUCT CANDIDATE          INDICATION                       STATUS                         COLLABORATORS
-----------------          ----------                       ------                         -------------
   <S>                     <C>                              <C>                            <C>
   UK-279,276              Reperfusion injury associated    Phase IIb                      Pfizer
                           with ischemic stroke

   rNAPc2-injectable       Prevention of deep vein          Phase II completed             ---
                           thrombosis and pulmonary
                           embolism

                           Unstable angina                  Phase IIa                      ---

   Protease Modulators     Cancer                           Preclinical (one compound)     ---

                                                            Target discovery and lead
                                                            identification (multiple)

                           Malaria                          Lead identification            ---
--------------------------------------------------------------------------------------------------------
</TABLE>

     In the table above, the terms we use under the column titled "Status" have
     the following meanings:

     TARGET DISCOVERY is the identification of a protein implicated in the
     progression of the disease of interest that may represent a target for new
     drug development.

     LEAD IDENTIFICATION is the identification of compounds that modulate the
     activity of the target.

UK-279,276

         UK-279,276, formerly known as recombinant neutrophil inhibitory factor,
is a recombinant protein in development for use as a treatment for reperfusion
injury associated with ischemic stroke. We originally derived UK-279,276 from
blood-feeding hookworms as part of a program designed to identify natural
compounds with anticoagulant activity and anti-inflammatory activity. In April
1997, we licensed UK-279,276 to Pfizer, who recently advanced UK-279,276 into a
Phase IIb clinical trial.

         An ischemic stroke occurs when a blood clot blocks blood flow to an
area of the brain. The resulting oxygen deprivation, or ischemia, leads to cell
death. Blood flow to the affected area of the brain can be restored naturally or
by dissolving the clot through treatment with a thrombolytic drug. The return of
blood flow to the affected area of the brain is referred to as reperfusion.
Reperfusion often triggers an acute inflammatory response believed to lead to a
significant portion of stroke-related brain damage. This damage, called
reperfusion injury, is primarily caused by neutrophils, a type of white blood

                                      -3-
<PAGE>

cell that plays a key role in the normal immune system. Following reperfusion,
neutrophils are attracted to the ischemic area of the brain and become activated
in an exaggerated protective response causing cell damage and death from the
release of toxic substances.

         UK-279,276 is a potent anti-inflammatory recombinant protein that
inhibits a specific receptor on neutrophils. We believe UK-279,276 may protect
brain tissue from reperfusion injury by preventing the migration of neutrophils
to ischemic areas of the brain and the subsequent release of toxic substances.

         Although the need for an anti-inflammatory drug to prevent reperfusion
injury is widely recognized, previous approaches using antibodies have failed.
We believe that these programs failed because the antibodies did not selectively
block a single neutrophil receptor and instead blocked multiple neutrophil
receptors whose activities were needed for normal anti-inflammatory functions.
In contrast, we believe that UK-279,276 blocks the activity of only a single
member of this receptor family and therefore may have a more favorable clinical
profile in terms of efficacy and safety.

         MARKET OPPORTUNITY. Approximately 720,000 individuals suffer strokes
each year in the United States, of which more than 600,000 are ischemic strokes.
The annual direct and indirect healthcare costs in the United States associated
with strokes are estimated to be $30 billion. There are currently no approved
products for the prevention of reperfusion injury. Activase, a thrombolytic
drug, is used to restore blood flow by dissolving the initial clot. However,
this treatment does not prevent, and may initiate, the damage that occurs from
reperfusion.

         DEVELOPMENT STATUS. UK-279,276 is currently in Phase IIb clinical
trials. The primary objective of this Phase IIb trial is to determine the
effectiveness of UK-279,276 using standard clinical neurological endpoints for
the evaluation of therapeutic agents in stroke patients. Pfizer has completed
several Phase I clinical studies and one Phase IIa dose-ranging safety trial for
UK-279,276. In November 2000, Pfizer presented data from the Phase I and Phase
IIa trials indicating that UK-279,276 was well tolerated in normal volunteers
and stroke patients at the doses given.

         PFIZER COLLABORATION. In April 1997, we entered into an exclusive,
worldwide license and development agreement with Pfizer to develop UK-279,276
for all indications, including use for the prevention of reperfusion injury.
Under our agreement, Pfizer is responsible for the performance of, and all
expenses associated with, the clinical development, manufacturing and
commercialization of UK-279,276. If products are successfully commercialized
from this agreement, we may receive up to an additional $27.0 million in
milestone payments plus royalties on product sales.

         Pfizer has the right to terminate the agreement at any time upon 60
days' written notice. Upon the termination of the agreement, other than due to
our material breach of the agreement or upon the expiration of the term of the
agreement, the rights to UK-279,276 revert to us and we may be granted a license
to any jointly developed patents. In the event that we obtain a license to
jointly developed patents, our obligation to pay royalties to Pfizer will depend
upon the timing of the termination of the agreement.

                                      -4-
<PAGE>

rNAPc2

         Recombinant NAPc2 is a recombinant protein for the prevention of deep
vein thrombosis and pulmonary embolism, as well as the treatment of unstable
angina. We originally discovered NAPc2, a natural form of the protein, in
blood-feeding hookworms. In September 2000, we announced positive results of our
Phase II clinical trial for the prevention of deep vein thrombosis and pulmonary
embolism in patients undergoing total knee replacement surgery. Pending
appropriate regulatory approvals, we plan to initiate a Phase III clinical trial
in the second half of 2001. We also are conducting a Phase IIa clinical trial in
patients undergoing elective percutaneous transluminal coronary angioplasty
(PTCA), to establish safety prior to conducting additional clinical trials in
patients suffering from unstable angina.

         Blood clot formation is a normal repair mechanism that the body uses to
recover from damage to blood vessels resulting from cuts, bruises or disease.
The formation of a blood clot results from a complex cascade of biochemical
events involving proteases, cellular fragments called platelets and other
proteins in blood. The formation of a blood clot is most often triggered when
there is damage or disruption to the lining of the blood vessel wall, or
endothelium. This damage or disruption exposes the protein Tissue Factor to
blood, allowing protease Factor VIIa that circulates freely in the blood to bind
to Tissue Factor. The resulting complex Factor VIIa/Tissue Factor is the initial
step in a biochemical cascade of events that leads to the development of a blood
clot. The Factor VIIa/Tissue Factor complex causes the formation of another key
protease, Factor Xa, that carries out the next step in this cascade, which is
the formation of the protease thrombin. Thrombin causes the formation of a blood
clot in the damaged blood vessel wall by cleaving the protein fibrinogen into
fibrin and activating platelets that stick to each other and to the fibrin
matrix to form the blood clot.

         The blood coagulation cascade is characterized by the exponential
amplification of a small number of Factor VIIa/Tissue Factor molecules into
millions of thrombin molecules. rNAPc2 inhibits Factor VIIa/Tissue Factor,
thereby preventing the formation of Factor Xa and thrombin. We believe that
inhibiting the relatively few Factor VIIa/Tissue Factor molecules early in the
cascade may have significant safety and efficacy advantages over unfractionated
heparins and low molecular weight heparins, as well as direct thrombin
inhibitors, that focus on inhibiting thrombin late in the cascade after
amplification has occurred.

         Thrombosis, the formation of blood clots inside blood vessels, can
diminish or block the flow of blood and oxygen supply to other critical blood
vessels in vital organs, which can lead to serious clinical conditions. Patients
undergoing major orthopedic, abdominal and oncology surgery, as well as
neurosurgery, frequently develop blood clots that can be fatal. For example,
deep vein thrombosis occurs when a blood clot forms in a vein in the leg. Deep
vein thrombosis can lead to the unpredictable development of pulmonary embolism
when a clot formed in the legs dislodges and travels to the lungs where it can
block blood flow. Pulmonary embolism can result in serious clinical
consequences, including death in approximately 10% of the cases. The formation
of blood clots in one or more coronary arteries of the heart may result in
unstable angina, and progress to myocardial infarction, or heart attack.

                                      -5-
<PAGE>

MARKET OPPORTUNITY

         DEEP VEIN THROMBOSIS. Deep vein thrombosis occurs in patients
undergoing major orthopedic, abdominal and cancer surgery. The risk of deep vein
thrombosis is highest in major orthopedic surgery, such as total knee
replacements, hip fractures and hip replacements. We estimate that the incidence
of deep vein thrombosis in these patients not treated with an anticoagulant drug
ranges from about 40% to 80% for knee replacement surgery, 40% to 60% for hip
replacement surgery and 35% to 60% for hip fracture surgery. We believe that in
the United States approximately one million individuals undergo major orthopedic
surgery each year. We believe that all of these patients could be candidates for
prophylactic treatment with rNAPc2.

         Currently, patients who are undergoing major orthopedic surgery are
treated prophylactically with heparin, including low molecular weight heparins.
Use of low molecular weight heparins for acute prophylactic use requires one or
two daily doses by subcutaneous injection usually for a seven to ten day period.
Most clinical trials indicate that deep vein thrombosis still occurs in 25% to
30% of knee replacement patients treated with low molecular weight heparins.

         UNSTABLE ANGINA. There are approximately 700,000 unstable angina
patients diagnosed each year in the United States. Unstable angina attacks are
currently treated with aspirin, low molecular weight heparins or unfractionated
heparins. In addition, patients suffering from unstable angina may receive
antiplatelet drugs such as glycoprotein IIb/IIIa antagonists like ReoPro,
Integrelin or Aggrastat and/or adenosine receptor antagonists such as Ticlid or
Plavix. In high risk patients with severe coronary artery disease, unstable
angina may be treated with interventions such as angioplasty, stent placement or
bypass surgery. We believe the role Factor VIIa/Tissue Factor plays in
initiating the blood coagulation response in unstable angina makes rNAPc2 a
potential therapy in the treatment of all unstable angina patients in
combination with heparins, aspirin and antiplatelet drugs.

         OVERALL MARKET OPPORTUNITY. We estimate that the annual worldwide
market for injectable heparins currently exceeds $2.5 billion.

DEVELOPMENT STATUS AND CLINICAL DATA

         DEEP VEIN THROMBOSIS. In December 2000, we announced positive results
of an open-label dose-ranging Phase II clinical trial of rNAPc2 for the
prevention of deep vein thrombosis and pulmonary embolism in 292 patients
undergoing knee replacement surgery at clinical sites in the United States,
Canada, The Netherlands and Italy. The patients received subcutaneous injections
of rNAPc2 following surgery and then once every other day for a total of three
or four injections. The primary efficacy endpoint was the incidence of total
deep vein thrombosis as measured by unilateral venography, and safety was
determined by the incidence of bleeding based on standards established in
clinical trials of low molecular weight heparins in this patient population. The
efficacy and safety endpoints of rNAPc2 were compared to contemporary historical
data with low molecular weight heparins in the patient population. In the
largest patient treatment group, rNAPc2 was shown to reduce the risk of
developing deep vein thrombosis by greater than 50% as compared to results from
use of low molecular weight heparins. Based on this favorable data, and pending
appropriate regulatory approvals, we are preparing to advance rNAPc2 into a
Phase III clinical trial for the prevention of deep vein thrombosis and
pulmonary embolism, which we expect will begin in the second half of 2001. We
also have completed a Phase I clinical trial in normal volunteers that
demonstrated NovoSeven appears to reverse the anticoagulant effects of rNAPc2.

                                      -6-
<PAGE>

Reversibility is important in case of accidental overdose or if additional
emergency surgery is required following rNAPc2 administration.

         UNSTABLE ANGINA. We are currently conducting a randomized,
double-blind, placebo-controlled Phase IIa dose-escalation trial of rNAPc2 that
we expect will include 150 patients undergoing elective angioplasty to establish
safety prior to initiating clinical trials for patients with unstable angina. In
this trial, patients are randomized to receive either rNAPc2 with unfractionated
heparin and aspirin, or saline with unfractionated heparin and aspirin. Patients
receiving coronary stents and associated antiplatelet therapy can be included.
The primary endpoint of the study is to assess safety as measured by groin
compression time, which is a measure of the extent of bleeding at the surgical
site used for placement of the coronary catheter. Many unstable angina patients
undergo coronary intervention such as angioplasty and stent placement. The
purpose of this trial is to demonstrate that rNAPc2 does not exacerbate bleeding
in coronary intervention patients. We expect to complete this trial in the first
half of 2001 and intend to use the safety data to design clinical trials of
rNAPc2 for the treatment of unstable angina.

PROTEASE MODULATION DISCOVERY AND DEVELOPMENT PROGRAMS

         Our approach to protease modulation was developed from many years of
experience in discovering and developing inhibitors of key proteases responsible
for the formation of blood clots. rNAPc2 is a protease inhibitor that resulted
from our efforts in this area. In addition to protein drugs like rNAPc2, we have
considerable expertise in medicinal chemistry, including the design and
synthesis of small molecule protease inhibitors. The lead candidates in our
hepatitis C program, that are licensed to Schering-Plough, as well as the lead
candidates in our cancer program, were developed using this technology. We are
focusing our protease modulation programs on discovering and developing drugs
for treating solid tumors.

CANCER PROGRAMS

         In the cancer arena, we are focused on discovering the role that known
and novel proteases may play in the growth and metastasis of solid tumors using
gene expression analysis and validating these proteases as targets for drug
development. We believe that by combining our expertise in medicinal chemistry
with new target discovery, we have created a platform for new product
development in cancer.

         NOVEL CANCER PROTEASE PROGRAM. As part of our development approach, we
are rapidly identifying new protease targets using targeted gene cloning
technology to explore the biological role of these proteases in solid tumor
growth, angiogenesis and metastasis. Over the past year, we have identified over
50 protease genes expressed in tissues and cell lines derived from solid tumors,
and have filed patent applications claiming the complete gene sequence of
several novel proteases. The sequence of these cloned protease genes has
facilitated us in performing gene expression studies using DNA and tissue
arrays. This approach allows us to quantify how much of the candidate gene is
found in diseased versus normal tissue. Many of the novel protease gene
sequences identified belong to a growing family of membrane-bound proteases that
are found on the surface of tumor cells that may be important new targets for
drug development.

                                      -7-
<PAGE>

         Once we identify and obtain a nucleic acid clone for a promising
protease target, the corresponding recombinant protease is produced to
facilitate the development of a high throughput screening assay. This assay is
used to rapidly identify lead compounds from our proprietary combinatorial
libraries that are designed to identify small molecule synthetic compounds that
specifically modulate the activity of proteases. We believe our strong expertise
in medicinal chemistry is crucial to rapidly optimize lead candidates by
improving potency and selectivity. Additionally, we believe our ability to
develop selective compounds is essential as many of the protease targets are
members of a large family and modulation of non-targeted proteases may cause
unintended side effects. We intend to enter into a collaborative partnership
with one or more companies related to the development of therapeutic product
candidates for various cancer protease targets.

         We have selected a small molecule lead candidate protease inhibitor
from this program for, and have demonstrated efficacy in, animal models of
prostate tumors. Assuming continued positive results, we plan to advance this
lead compound into clinical trials in 2002.

         UROKINASE PLASMINOGEN ACTIVATOR PROGRAM. We selected urokinase
plasminogen activator, or uPA, as a protease target for drug development because
of its scientifically established role in the growth and metastasis of solid
tumors in the breast, ovary, colon and prostate. uPA facilitates the
establishment and growth of new blood vessels (angiogenesis) that provide oxygen
and nutrients required for the growth of the primary tumor mass and the survival
of metastatic tumors in organs and tissues distant from the primary tumor. A
selective small molecule lead compound is currently undergoing testing in
several animal models of prostate tumor development.

OTHER PROTEASE MODULATION PROGRAMS

         MALARIA PROGRAM. We have a grant from the National Institute of Allergy
and Infectious Diseases, that expires in August 2001, to research proteases as
targets for drug development for malaria. We have identified several lead
compounds that are now being evaluated in animal models of malaria.

         HEPATITIS C LICENSE. We have collaborated with Schering-Plough to
identify and optimize lead synthetic compounds for the inhibition of the key
serine protease involved in the replication of the hepatitis C virus. We
exclusively licensed to Schering-Plough rights to develop and commercialize
products resulting from our earlier collaboration with Schering-Plough in this
area. We have no further responsibility for this program and would receive
royalties on any product that is commercialized by Schering-Plough under the
license. For an additional description of this collaborative agreement, see the
discussion presented in "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."

         ORAL ANTICOAGULANT PROGRAM. We have a collaboration with
Schering-Plough to identify new orally administered anticoagulants.
Schering-Plough has exclusive worldwide marketing rights for any resulting
compounds. We have no further responsibility for this program but may receive
milestone payments and royalties on product sales if products are commercialized
by Schering-Plough under this agreement. For an additional description of this
collaborative agreement, see the discussion presented in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."

                                      -8-
<PAGE>

OUR STRATEGY

         Our objective is to build a profitable, fully integrated
biopharmaceutical company by developing drugs for the treatment of
cardiovascular disease, stroke and cancer. The key elements of our strategy to
accomplish this objective are to:

         o        COMPLETE THE DEVELOPMENT OF rNAPC2. We intend to complete the
                  development of rNAPc2 both for the prevention of deep vein
                  thrombosis and pulmonary embolism, and for the treatment of
                  unstable angina. We intend to continue our ongoing clinical
                  trials for these indications and currently plan, subject to
                  government regulation, to commence Phase III clinical trials
                  of rNAPc2 for the prevention of deep vein thrombosis and
                  pulmonary embolism in the second half of 2001. In order to
                  accelerate the commercialization and maximize the value of our
                  rNAPc2 program, we may enter into a collaborative partnership
                  with a pharmaceutical company.

         o        DEVELOP NOVEL THERAPEUTICS BASED ON OUR EXPERTISE ON
                  MODULATING PROTEASE FUNCTION IN DISEASE. We plan to use our
                  expertise in modulating protease activity to develop product
                  candidates outside the cardiovascular area. We believe that
                  the combination of our demonstrated expertise in protease
                  modulation and our strong medicinal chemistry capabilities
                  provides us with a platform for continued new product
                  candidate development.

         o        FOCUS INTERNAL DEVELOPMENT EFFORTS ON CANCER. We are focusing
                  our internal protease modulation programs primarily on
                  discovering and developing drugs for treating solid tumors. We
                  selected this therapeutic area due to its large market size
                  and unmet medical need, the potential for expedited review by
                  the Food and Drug Administration, or the FDA, and the smaller
                  and, oftentimes, less expensive clinical trials required for
                  the commercialization of cancer drugs. We also believe it is
                  more feasible for us to develop an internal sales force to
                  commercialize cancer products we may develop because of the
                  relatively small number of treating physicians.

         o        FORM CORPORATE COLLABORATIONS TO SUPPORT DEVELOPMENT AND
                  COMMERCIALIZATION OF OUR PRODUCTS. We intend to continue to
                  pursue collaborations to expand our product development
                  capabilities. We believe that collaborations will be
                  particularly useful for the development of products with a
                  large target market where clinical development and
                  commercialization efforts will require a very substantial
                  investment of financial and human resources. For example, we
                  believe that our collaboration with Pfizer for UK-279,276
                  allows us to share in the potential financial benefits from
                  the commercialization of products derived from our research
                  programs while avoiding the need to internally manage large
                  clinical trials and develop a large sales force. We believe
                  that by entering into collaborations with respect to selected
                  programs, we also create the potential for multiple sources of
                  revenue and diversify our scientific and financial risk.

         o        IN-LICENSE OR ACQUIRE COMPLEMENTARY PRODUCTS, TECHNOLOGIES OR
                  COMPANIES. In addition to our internal development efforts, we
                  plan to expand our product portfolio by identifying and
                  evaluating potential products and technologies developed by
                  third parties that we believe fit within our overall portfolio
                  strategy. Where appropriate, we may augment our internal
                  discovery and development efforts by obtaining licenses to
                  promising technology or clinical candidates that are
                  complementary to our business. Alternatively, we may elect to
                  acquire complementary technologies or businesses.

                                      -9-
<PAGE>

PATENTS AND PROPRIETARY RIGHTS

         Our intellectual property portfolio includes patents, patent
applications, trade secrets, know-how and trademarks. Our success will depend in
part on our ability to obtain additional patents, maintain trade secrets and
operate without infringing the proprietary rights of others, both in the United
States and other countries. We periodically file patent applications to protect
the technology, inventions and improvements that may be important to the
development of our business. We rely on trade secrets, know-how, continuing
technological innovations and licensing opportunities to develop and maintain
our competitive position.

         Our strategy is to file applications as appropriate for patents
covering both our products and processes. As of March 15, 2001, we have 59
issued U.S. patents and have received Notices of Allowance for at least three
U.S. patent applications that have not yet issued as patents. Our issued patents
and patent applications include claims directed to potential pharmaceutical
compounds, such as UK-279,276 and rNAPc2, to methods of making the compounds and
for treating specific diseases using the product candidates. We have filed
approximately 50 additional patent applications that currently are pending in
the U.S. Patent and Trademark Office. Several of these patent applications are
directed to novel protease targets, novel pharmaceutical compounds which
modulate these protease targets, methods of identifying such pharmaceutical
compounds and methods of treating specific diseases by modulating these protease
targets with novel or known pharmaceutical compounds. We have filed foreign
counterparts to some of our issued patents and patent applications in many
countries. Generally, it is our policy to file foreign counterparts in countries
with significant pharmaceutical markets. Some of these foreign counterparts have
issued as patents or have been allowed. We continue to actively seek patent
protection for these related technologies in the United States and foreign
countries.

         Under the terms of our collaborations, third parties may have rights to
patents owned by us as specified under applicable agreements. It is possible
that a patent will not issue from any of our owned or patent applications, and
the breadth or scope of protection allowed under any issued patents may not
provide adequate protection to protect our products. In addition, any patents
that we own may be challenged and invalidated by a third party or circumvented,
and any rights granted to us may not provide adequate protection.

         We also rely on trade secrets and contractual arrangements to protect
our trade secrets. Much of the know-how important to our technology and many of
its processes are dependent upon the knowledge, experience and skills of our key
scientific and technical personnel and are not the subject of pending patent
applications or issued patents. To protect our rights to know-how and
technology, we require all of our employees, consultants, advisors and
collaborators to enter into confidentiality agreements with us that prohibit the
unauthorized use of, and restrict the disclosure of, confidential information,
and require disclosure and assignment to us during the term of their employment
of their ideas, developments, discoveries and inventions.

                                      -10-
<PAGE>

         Some of our research, including our malaria program, has been funded in
part by a grant from the U.S. government. As a result of this funding, the
government has rights to any technology, including inventions, developed with
the funding. These rights include the grant of a non-exclusive, paid-up,
worldwide license to related inventions for any governmental purpose. In
addition, the government has the right to require us to grant an exclusive
license to any of these inventions to a third party if the government determines
that:

         o        adequate steps have not been taken to commercialize those
                  inventions

         o        the license is necessary to meet public health or safety needs

         o        the license is necessary to meet requirements for public use
                  under federal regulations

         Federal law requires any licensor of an invention that was partially
funded by federal grants to obtain a covenant from its exclusive licensee to
manufacture any products using the invention in the United States. In addition,
our licenses may also relate to technology developed with federal funding and,
therefore, may also be subject to rights held by the government.

GOVERNMENT REGULATION

         Research, preclinical development, clinical trials, manufacturing and
marketing activities are subject to regulation for safety, efficacy and quality
by numerous governmental authorities in the United States and other countries.
In the United States, drugs are subject to rigorous FDA regulation. The Federal
Food, Drug and Cosmetic Act and other federal and state statutes and regulations
govern, among other things, the testing, manufacture, safety, efficacy,
labeling, storage, record keeping, approval, advertising and promotion of our
products. Product development and approval within this regulatory framework take
a number of years and involve the expenditure of substantial resources.

         The steps required before a pharmaceutical agent may be marketed in the
United States include:

         o        preclinical laboratory tests, animal pharmacology and
                  toxicology studies and formulation studies

         o        the submission of an investigational new drug application to
                  the FDA for human clinical testing, which must be accepted by
                  the FDA before human clinical trials may commence

         o        the carrying out of adequate and well-controlled human
                  clinical trials must be conducted by us or our collaborator to
                  establish the safety and efficacy of the drug candidate

         o        the submission of a new drug application to the FDA

         o        FDA approval of the new drug application to allow us to
                  conduct any commercial sale or shipment of the drug

                                      -11-
<PAGE>

         In addition to obtaining FDA approval for each product, each domestic
drug manufacturing establishment must be registered with the FDA. Domestic drug
manufacturing establishments are subject to regular inspections by the FDA and
must comply with FDA regulations. To supply products for use in the United
States, foreign manufacturing establishments must also comply with FDA
regulations and are subject to periodic inspection by the FDA, or by
corresponding regulatory agencies in their home countries under reciprocal
agreements with the FDA.

         Preclinical studies include the laboratory evaluation of in vitro
pharmacology, product chemistry and formulation, as well as animal studies to
assess the potential safety and efficacy of a product. Compounds must be
formulated according to the FDA's regulations on Good Manufacturing Practices
and preclinical safety tests must be conducted by laboratories that comply with
FDA regulations regarding good laboratory practices. The results of the
preclinical tests are submitted to the FDA as part of an investigational new
drug application and are reviewed by the FDA before human clinical trials may
begin. The investigational drug application must also contain protocols for any
clinical trials that will be carried out. If the FDA does not object to an
investigational new drug application, the investigational new drug application
becomes effective 30 days following its receipt by the FDA. At any time during
this 30 day waiting period or at any time thereafter, the FDA may halt proposed
or ongoing clinical trials until the agency authorizes trials under specified
terms. Such a halt, called a clinical hold, continues in effect until and unless
the FDA's concerns are adequately addressed. In some cases, clinical holds are
never lifted. Imposition by the FDA of a clinical hold can delay or preclude
further product development. The investigational new drug application process
may be extremely costly and may substantially delay product development.

         Clinical trials must be sponsored and conducted in accordance with good
clinical practice under protocols and methodologies that:

         o        ensure receipt of signed consents from participants that
                  inform them of risks

         o        detail the protocol and objectives of the study

         o        detail the parameters to be used to monitor safety

         o        detail the efficacy criteria to be evaluated

         Furthermore, each clinical study must be conducted under the
supervision of a principal investigator operating under the auspices of an
Institutional Review Board, or IRB, at the institution where the study is
conducted. The IRB will consider, among other things, ethical factors, the
safety of human subjects and the possible liability of the institution.
Sponsors, investigators and IRB members are obligated to avoid conflicts of
interests and ensure compliance with all legal requirements.

         Clinical trials typically are conducted in three sequential phases. In
Phase I, the initial introduction of the drug into a small number of healthy
volunteers is undertaken. The drug is evaluated for safety by assessing the
adverse effects, dosage tolerance, metabolism, distribution, excretion and
clinical pharmacology. The Phase I trial must provide pharmacological data that
is sufficient to devise the Phase II trials.

                                      -12-
<PAGE>

         Phase II trials involve studies in a limited patient population in
order to:

         o        obtain initial indications of the efficacy of the drug for
                  specific, targeted indications

         o        determine dosage tolerance and optimal dosage

         o        identify possible adverse affects and safety risks

         When a compound is determined preliminarily to be effective and to have
an acceptable safety profile in Phase Il evaluation, Phase III trials can be
undertaken to evaluate safety and efficacy endpoints further in expanded patient
populations at geographically diverse clinical trial sites. Positive results in
Phase II are no guarantee of positive results in Phase III.

         The results of the pharmaceutical development, preclinical studies and
clinical trials are submitted to the FDA in the form of a new drug application,
which must be complete, accurate and in compliance with FDA regulations. The
approval of a new drug application permits commercial-scale manufacturing,
marketing, distribution, exporting from the United States and sale of the drug
in the United States. The testing and approval process typically requires
substantial time, effort and expense. The FDA may deny a new drug application
filed by us or our collaborators if the applicable scientific and regulatory
criteria are not satisfied and thus, we may not be able to manufacture and sell
the product in the United States. Moreover, the FDA may require additional
testing or information, or may require post-approval testing, surveillance and
reporting to monitor the products. Notwithstanding any of the foregoing, the FDA
may ultimately decide that a new drug application filed by us or our
collaborators does not meet the applicable agency standards, and even if
approval is granted, it can be limited or revoked if evidence subsequently
emerges casting doubt on the safety or efficacy of a product or if the
manufacturing facility, processes or controls do not comply with regulatory
standards. Finally, an approval may entail limitations on the uses, labeling,
dosage forms, distribution and packaging of the product.

         Among the conditions for new drug approval is the requirement that the
prospective manufacturer's quality control, record keeping, notifications and
reporting and manufacturing systems conform to the FDA's regulations on current
Good Manufacturing Practices. In complying with the standards contained in these
regulations, manufacturers must continue to expend time, money, resources and
effort in order to ensure compliance.

         Outside the United States, our ability to market a product is
contingent upon receiving a marketing authorization from the appropriate
regulatory authority. This foreign regulatory approval process includes many of
the same steps associated with FDA approval described above.

         In addition to regulations enforced by the FDA, we are subject to
regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other present and future federal, state or local regulations.
Our research and development activities involve the controlled use of hazardous
materials, chemicals and various radioactive compounds. Although we believe that
our safety procedures for handling and disposing of these materials comply with
the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of an accident, we could be liable for any damages that
result.

                                      -13-
<PAGE>

COMPETITION

         Due to the high incidence of cardiovascular disease, cancer, viral
infections such as hepatitis C, and parasitic diseases such as malaria, most, if
not all, of the major pharmaceutical companies have significant research and
product development programs in these areas. We expect to encounter significant
competition both in the United States and in foreign markets for each of the
drugs we seek to develop. Several existing products have well-established market
positions and there are a number of new products in advanced clinical
development. In particular, rNAPc2 will compete against unfractionated heparins,
low molecular weight heparins and potentially pentasaccharide, a synthetic
version of low molecular weight heparin. Furthermore, Sanofi-Synthelabo/Akzo
Nobel recently completed four active controlled Phase III clinical trials of
pentasaccharide for the prevention of deep vein thrombosis following hip and
knee surgery, and has filed for regulatory marketing approval with U. S. and
European regulatory authorities.

         Our competitors include fully-integrated pharmaceutical and
biotechnology companies both in the United States and in foreign markets which
have expertise in research and development, manufacturing processes, testing,
obtaining regulatory clearances and marketing, and may have financial and other
resources that are significantly greater than we do. Smaller companies may also
prove to be significant competitors. Academic institutions, U.S. and foreign
government agencies and other public and private research organizations conduct
research relating to diseases we target, and may develop products for the
treatment of these diseases that may compete directly with any we develop. Our
competitors may compete with us for collaborations. These companies and
institutions also compete with us in recruiting and retaining highly qualified
scientific personnel.

         Our competition will be partially determined by the potential
indications that are ultimately cleared for marketing by regulatory authorities,
by the timing of any clearances and market introductions and by whether any
currently available drugs, or drugs under development by others, are effective
in the same indications. Accordingly, the relative speed with which we can
develop product candidates, complete the clinical trials, receive regulatory
approval and supply commercial quantities of the products to the market is
expected to be an important competitive factor. We expect that competition among
products approved for sale will be based, among other things, on product
efficacy, safety, reliability, availability, price and patent position.

RISK FACTORS

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

         We have experienced significant operating losses since our inception in
1987. At December 31, 2000, we had an accumulated deficit of approximately
$101.6 million. We have not earned any revenues from commercial sales of any
therapeutic products. We have funded our operations principally from sales of
our equity and debt securities, research funding, license fees and milestone
payments. We expect to continue to incur substantial additional operating losses
for the next several years as we pursue our clinical trials and research and
development efforts. To become profitable, we, either alone or with our
collaborators, must successfully develop, manufacture and market our current
product candidates, particularly UK-279,276 and rNAPc2, as well as continue to
identify, develop, manufacture and market new product candidates. It is possible
that we will never have significant product sales revenue or receive significant
royalties on our licensed product candidates.

WE ARE AT AN EARLY STAGE OF DEVELOPMENT AND WE DO NOT HAVE, AND MAY NEVER
DEVELOP, ANY COMMERCIAL DRUGS OR OTHER PRODUCTS THAT GENERATE REVENUES.

                                      -14-
<PAGE>

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

WE ARE DEPENDENT ON THE SUCCESSFUL OUTCOME OF THE CLINICAL TRIALS FOR OUR TWO
MOST ADVANCED PRODUCT CANDIDATES, UK-279,276 AND rNAPC2.

         UK-279,276 and rNAPc2 are our lead product candidates. Our success will
depend, to a great degree, on the success of these product candidates. Pfizer,
our collaborator on UK-279,276, is currently conducting a Phase IIb efficacy
trial of UK-279,276 for the prevention of reperfusion injury associated with
ischemic stroke. We have completed a Phase II clinical trial of rNAPc2 for the
prevention of deep vein thrombosis and pulmonary embolism. We are currently
conducting a Phase IIa clinical trial of rNAPc2 in patients undergoing elective
angioplasty to establish safety prior to conducting additional clinical trials
in patients with unstable angina. Subject to government regulations, we intend
to enter rNAPc2 into Phase III clinical trials for the prevention of deep vein
thrombosis and pulmonary embolism in the second half of 2001.

         Our business prospects will depend on our ability and the ability of
our collaborators to complete patient enrollment in clinical trials, the ability
to obtain satisfactory results, the ability to obtain required regulatory
approvals and the ability to successfully commercialize these products. Many
factors affect patient enrollment, including the size of the patient population,
the proximity of patients to clinical sites and the eligibility criteria for the
trial. Delays in patient enrollment in the trials may result in increased costs,
program delays, or both, which could slow down our product development and
approval process. In addition, we may not be able to commence the planned Phase
III clinical trials for rNAPc2 for the prevention of deep vein thrombosis and
pulmonary embolism when anticipated in the second half of 2001 due to
regulatory, clinical supply, manufacturing or other reasons. If clinical trials
for these product candidates are not completed or conducted as planned, or if
either or both of these products do not prove to be safe and effective or
receive required regulatory approvals, the commercialization of our product
candidates would be delayed or prevented, our business would be materially
harmed and our stock price would decline.

THE FDA HAS NOT APPROVED ANY OF OUR PRODUCT CANDIDATES AND WE MAY NEVER BE
PERMITTED TO COMMERCIALIZE ANY PRODUCT WE DEVELOP.

         Our product candidates are in the early stages of development and have
not received required regulatory clearance from the FDA or any other regulatory
body to be commercially marketed and sold. While our goal is to commence
commercial sales of both UK-279,276 and rNAPc2, we may not achieve this goal for
either product candidate in the stated timeframe or at all. The regulatory
clearance process typically takes many years and is extremely expensive and
regulatory clearance is never guaranteed. If we fail to obtain regulatory

                                      -15-
<PAGE>

clearance for our current or future product candidates, we will be unable to
market and sell any products and therefore may never be profitable.

         As part of the regulatory clearance process, we must conduct, at our
own expense or our collaborators' expense, preclinical research and clinical
trials for each product candidate to demonstrate safety and efficacy. The number
of preclinical studies and clinical trials that will be required varies
depending on the product, the disease or condition that the product is in
development for, and regulations applicable to any particular product.

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

         o        a product candidate may not be safe or effective

         o        FDA officials may interpret data from preclinical testing and
                  clinical trials in different ways than we interpret it

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

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

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

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

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

         The results of preclinical studies and initial clinical trials of our
product candidates do not necessarily predict the results from later-stage
clinical trials. Product candidates in later stages of clinical trials may fail
to show the desired safety and efficacy traits despite having progressed through
initial clinical testing. The data collected from clinical trials of our product
candidates may not be sufficient to support FDA or other regulatory approval.

         Administering any product candidates we develop to humans may produce
undesirable side effects. These side effects could interrupt, delay or halt
clinical trials of our product candidates and could result in the FDA or other
regulatory authorities denying approval of our product candidates for any or all
targeted indications. The FDA, other regulatory authorities or we may suspend or

                                      -16-
<PAGE>

terminate clinical trials at any time. Our product candidates may not be safe
for human use.

IF WE FAIL TO OBTAIN ADDITIONAL FINANCING, WE MAY BE UNABLE TO COMPLETE THE
DEVELOPMENT AND COMMERCIALIZATION OF rNAPc2 AND OTHER PRODUCT CANDIDATES OR
CONTINUE OUR RESEARCH AND DEVELOPMENT PROGRAMS.

         Our operations have consumed substantial amounts of cash since
inception. Our sources of revenue have been primarily limited to research
funding, license fees and milestone payments from our corporate collaborators.
During 2000, we had a net loss of approximately $10.7 million. We expect that we
will continue to spend substantial amounts on research and development,
including amounts spent for manufacturing clinical supplies, conducting clinical
trials for our product candidates and expanding our drug development programs.
Based on our projected burn rate, we currently believe that our existing capital
resources and projected interest income should be sufficient to fund our
operations for at least the next two years. However, our future burn rate and
capital needs will depend on many factors, including our ability to enter into a
collaborative agreement for rNAPc2, the receipt of milestone payments from our
collaboration with Pfizer, and progress in our cancer and other research and
development programs.

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

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

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

IF WE FAIL TO MAINTAIN OUR EXISTING COLLABORATIVE RELATIONSHIPS, OR IF OUR
COLLABORATORS DO NOT DEVOTE ADEQUATE RESOURCES TO THE DEVELOPMENT AND
COMMERCIALIZATION OF OUR LICENSED PRODUCT CANDIDATES, WE MAY NOT BE ABLE TO
ACHIEVE PROFITABILITY.

         We have granted exclusive development, commercialization and marketing
rights to Pfizer for the development of UK-279,276 and to Schering-Plough for
orally administered inhibitors of thrombosis and inhibitors of a key protease
associated with hepatitis C virus replication that have resulted from these
collaborations. These collaborators are responsible for all aspects of these
programs, including the conduct of research and development that the
collaborator chooses to conduct, clinical trials and the regulatory approval
process. We have no control over the amount and timing of resources that our
collaborators dedicate to the development of our licensed product candidates.
Our ability to generate royalties from our collaborators depends on our
collaborators' abilities to establish the safety and efficacy of our product
candidates, obtain regulatory approvals and achieve market acceptance of our
products. If Pfizer or Schering-Plough do not perform under our collaborative
agreements, our potential for revenue from the related product candidates will
be dramatically reduced. Pfizer and Schering-Plough may terminate our
collaborative agreements on short notice.

                                      -17-
<PAGE>

         Collaborative agreements generally pose the following risks:

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

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

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

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

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

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

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

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

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

         Our strategy for developing, manufacturing and commercializing our
products includes entering into various relationships with pharmaceutical
companies to advance our programs and reduce our expenditures on each program.
We may not be able to negotiate additional collaborations on acceptable terms or
at all. If we are not able to establish additional collaborative arrangements,
we may have to reduce or delay further development of some of our programs
and/or increase our expenditures and undertake the development activities at our
own expense. If we elect to increase our capital expenditures to fund our
development programs, we will need to obtain additional capital, which may not
be available on acceptable terms or at all.

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

         The biopharmaceutical market is highly competitive. Almost all of the
larger biopharmaceutical companies have developed, or are attempting to develop,
products that will compete with products we may develop, including some that are
in late stage clinical trials. It is possible that our competitors will develop

                                      -18-
<PAGE>

and market products that are less expensive and more effective than our future
products or that will render our products obsolete. It is also possible that our
competitors will commercialize competing products before any of our products are
marketed. We expect that the competition from other biopharmaceutical companies,
pharmaceutical companies, universities and public and private research
institutions will increase. Many of these competitors have substantially greater
financial, technical, research and other resources than we do. We may not have
the financial resources, technical expertise or marketing, distribution or
support capabilities to compete successfully.

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

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

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

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

         Also, our third-party manufacturers may be unable to manufacture any
product candidate we develop in commercial quantities on a cost-effective basis.
Covance Inc. is our sole supplier of our rNAPc2 product candidate. In September
2000, Covance announced that it has engaged investment bankers to explore the
possible divestiture of its pharmaceutical packaging and biomanufacturing
business. If for any reason Covance delays the supply of our rNAPc2 product
candidate, we may have to delay our clinical trials.

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

                                      -19-
<PAGE>

licenses and approvals to manufacture our product candidates. Any such failure
could delay or preclude receiving regulatory approvals to sell our product
candidates.

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

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

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

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

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

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

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

         We also rely on trade secrets and proprietary know-how to develop and
maintain our competitive position. While we believe that we have protected our

                                      -20-
<PAGE>

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

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

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

         Since we conduct clinical trials on humans, we face the risk that the
use of our product candidates will result in adverse effects. These risks will
exist even for products that may be cleared for commercial sale. We have
obtained liability insurance of $10.0 million for our product candidates in
clinical trials. We cannot predict all of the possible harms or side effects
that may result and, therefore, the amount of insurance coverage we currently
hold may not be adequate to protect us from any liabilities. We may not have
sufficient resources to pay for any liabilities resulting from a claim beyond
the limit of our insurance coverage.

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

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

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

         Because we do not have any marketed products, we have limited
experience in sales, marketing and distribution. To directly market and
distribute any products we may develop, we must build a substantial marketing
and sales force with appropriate technical expertise and supporting distribution
capabilities. Alternatively, we may obtain the assistance of a pharmaceutical
company or other entity with a large distribution system and a large direct
sales force. We may not be able to establish sales, marketing and distribution
capabilities of our own or enter into such arrangements with third parties in a
timely manner or on acceptable terms. To the extent that we enter into
co-promotion or other licensing arrangements, our product revenues are likely to
be lower than if we directly marketed and sold our products, and any revenues we
receive will depend upon the efforts of third parties, which efforts may not be
successful.

                                      -21-
<PAGE>

THE GOVERNMENT HAS RIGHTS TO SOME OF OUR TECHNOLOGY.

         In September 1999, we were awarded a government grant from the National
Institute for Allergy and Infectious Diseases to support our research related to
the treatment of malaria. As a result of the grant, the government has rights in
the technology, including inventions, developed with their funding. In addition,
the government may require us to grant to a third party an exclusive license to
any inventions resulting from the grant if the government determines that we
have not taken adequate steps to commercialize inventions or for public health
or safety needs.

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

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

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

         The market price of our common stock has been, and likely will continue
to be, extremely volatile. Our stock price could be subject to wide fluctuations
in response to a variety of factors, including the following:

         o        changes in the market valuations of biotechnology companies

         o        results of the government approval process for our products
                  and competing products

         o        announcements and results of our clinical trials and the
                  clinical trials of our competitors

         o        developments in our relationships with our existing or future
                  collaborators

         o        fluctuations in our operating results

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

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

         o        comments by securities analysts

                                      -22-
<PAGE>

         o        actions by governmental regulatory agencies

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

         o        developments in domestic and international governmental policy
                  or regulation

         o        additions or departures of our key personnel

         o        sales of our common stock in the open market

         o        other events or factors beyond our control

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

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

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

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

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

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

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

                                      -23-
<PAGE>

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

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

EMPLOYEES

         As of March 15, 2001, we employed 81 individuals on a full-time basis,
of which 23 hold Ph.D. degrees. A significant number of our management and
professional employees have had prior experience with pharmaceutical,
biotechnology or medical product companies. None of our employees is covered by
a collective bargaining agreement. All of our employees are covered by
confidentiality agreements, and two of our officers have employment contracts.
We believe that our relationship with employees is good.


ITEM 2.  PROPERTIES

         We currently lease approximately 42,300 square feet of laboratory and
office space in San Diego, California. Our lease expires September 2006.


ITEM 3.  LEGAL PROCEEDINGS

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


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

         None

                                      -24-
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

          Since 1992, our common stock has traded on the Nasdaq National Market
under the symbol "CVAS." The following table sets forth, for the periods
indicated, the high and low sales prices of our common stock, as reported on the
Nasdaq National Market.

                                                            HIGH          LOW
                                                           --------     --------
1999
   First Quarter.......................................... $  3.28      $ 2.00
   Second Quarter.........................................    3.19        1.88
   Third Quarter..........................................    3.63        2.31
   Fourth Quarter.........................................    5.00        2.00

2000
   First Quarter.......................................... $ 18.06      $ 4.00
   Second Quarter.........................................   12.13        5.38
   Third Quarter..........................................   23.38        9.75
   Fourth Quarter.........................................   27.88        9.75

         On March 15, 2001, the closing price of our common stock was $8.16 per
share, and there were approximately 600 holders of record of our common stock.

         We have never declared or paid dividends on our capital stock. We
anticipate that we will retain our earnings, if any, to support our operations
and to finance the growth and development of our business. Therefore, we do not
expect to pay cash dividends in the foreseeable future.

                                      -25-
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         This section presents our historical financial data. You should
carefully read the financial statements included elsewhere in this report,
including the notes to the financial statements and the Management's Discussion
and Analysis of Financial Condition and Results of Operations included herein.
We do not intend the selected data in this section to replace the financial
statements. We derived the statement of operations data for the years ended
December 31, 1998, 1999 and 2000, and the balance sheet data as of December 31,
1999 and 2000 from the audited financial statements included in this report.
KPMG LLP, independent certified public accountants, audited the financial
statements. We derived the statement of operations data for the years ended
December 31, 1996 and 1997 and the balance sheet data as of December 31, 1996,
1997, and 1998 from our audited financial statements that are not included
elsewhere in this report. Historical results are not necessarily indicative of
the results that we may expect in the future.

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                            --------------------------------------------------------------
                                                        (In thousands, except per share data)
 STATEMENTS OF OPERATIONS DATA:                2000         1999         1998         1997         1996
                                            ----------   ----------   ----------   ----------   ----------
 <S>                                        <C>          <C>          <C>          <C>          <C>
 REVENUES:
 Revenue from collaborative agreements      $   3,263    $   6,088    $   6,985    $   5,811    $   5,480
 License fees and milestones                    2,500           --        2,795        4,100          400
 Net product sales                                 --           --           44          374          224
 Royalties                                        167          190          145          120          161
 Research grants                                  198           14           --           --           --
                                            ----------   ----------   ----------   ----------   ----------
    Total revenues                              6,128        6,292        9,969       10,405        6,265
                                            ----------   ----------   ----------   ----------   ----------

 COSTS AND EXPENSES:
 Research and development                      14,928       14,669       15,800        9,705       10,901
 General and administrative                     4,068        5,320        3,670        4,469        3,181
 Cost of products sold                             --           --           18          194          134
                                            ----------   ----------   ----------   ----------   ----------
    Total costs and expenses                   18,996       19,989       19,488       14,368       14,216
                                            ----------   ----------   ----------   ----------   ----------
    Loss from operations                      (12,868)     (13,697)      (9,519)      (3,963)      (7,951)

 OTHER INCOME (EXPENSE):
 Interest income                                2,941          901        1,201        1,510        1,248
 Interest expense                                (762)        (221)          --           --           (6)
 Other income                                      --           --          214            1           --
                                            ----------   ----------   ----------   ----------   ----------
    Net other income                            2,179          680        1,415        1,511        1,242
                                            ----------   ----------   ----------   ----------   ----------
 Net loss and other comprehensive loss      $ (10,689)   $ (13,017)   $  (8,104)   $  (2,452)   $  (6,709)
                                            ==========   ==========   ==========   ==========   ==========
 Basic and diluted net loss per share (1)   $   (0.49)   $   (0.82)   $   (0.56)   $   (0.18)   $   (0.52)
                                            ==========   ==========   ==========   ==========   ==========
 Shares used in calculation of basic
    and diluted net loss per share (1)         21,801       15,842       14,460       13,873       12,882
                                            ==========   ==========   ==========   ==========   ==========


                                                                     DECEMBER 31,
                                            --------------------------------------------------------------
 BALANCE SHEETS DATA:                         2000         1999         1998         1997         1996
                                            ----------   ----------   ----------   ----------   ----------
                                                                    (in thousands)

Cash, cash equivalents and  investments     $ 135,585    $  21,511    $  17,613    $  26,120    $  28,596
Working capital                               122,547       20,278       16,902       21,133       24,254
Total assets                                  139,022       23,889       19,912       28,214       30,639
Long term debt                                 10,958       10,215           --           --           --
Accumulated deficit                          (101,559)     (90,870)     (77,853)     (69,749)     (67,297)
Total stockholders' equity                    124,933       11,275       18,386       22,445       24,347
</TABLE>

--------------
 (1) See Note 2 of the Notes to Financial Statements.

                                      -26-
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

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

OVERVIEW

         We are a biopharmaceutical company engaged in the discovery,
development and commercialization of novel therapeutics that address large
markets, including cardiovascular disease, stroke and cancer. We currently have
two product candidates in Phase II clinical trials. One of our lead product
candidates, partnered with Pfizer, is UK-279,276, formerly rNIF, a recombinant
protein in Phase IIb clinical trials for the treatment of reperfusion injury
associated with ischemic stroke. Our other lead product candidate, known as
rNAPc2, is a recombinant protein that we are developing for the prevention of
deep vein thrombosis and pulmonary embolism, and for the treatment of unstable
angina. We have completed a successful Phase II clinical trial for the
prevention of deep vein thrombosis and pulmonary embolism and, subject to
government regulations, plan to initiate a Phase III clinical trial for this
indication in the second half of 2001. We also have a number of research
programs aimed at discovering novel drugs to modulate proteases involved in
cancer and other diseases.

         We currently have no products for sale and are focused on research and
development and clinical trial activities. We have not been profitable on an
annual basis since inception and we anticipate that we will incur substantial
additional operating losses over the next several years as we progress in our
research and development programs. To date, we have funded our operations
primarily through the sale of equity and debt securities, payments received from
collaborators and interest income. At December 31, 2000, we had an accumulated
deficit of $101.6 million. We expect that our sources of revenue, if any, for
the next several years will continue to primarily consist of payments under
collaborative agreements and interest income. However, we do not expect to
record any revenue under any of our existing collaborative agreements in 2001.
The process of developing our product candidates will require significant
additional research and development, preclinical testing and clinical trials, as
well as regulatory approval activities. In particular, if we initiate Phase III
clinical trials for rNAPc2, either independently or with a collaborator, we
expect that our research and development expenses will increase significantly.
These activities, together with our general and administrative expenses, are
expected to result in substantial operating losses for the foreseeable future.

RESULTS OF OPERATIONS

         REVENUES. Our total operating revenues in 2000 decreased to $6.1
million from $6.3 million in 1999 and $10.0 million in 1998. Revenues from
collaborative agreements in 2000, which decreased by $2.8 million from the 1999
amount, included $3.0 million related to our agreement with Schering-Plough for
the discovery and commercialization of an oral anticoagulant for chronic
thrombosis and $263,000 related to our agreement with Schering-Plough for the
design and development of an oral inhibitor of a key protease associated with
hepatitis C virus replication. A $2.5 million license fee received from
Schering-Plough for the hepatitis C inhibitor program was also recognized in
2000. Research grant revenues of $198,000 were recognized in 2000 in connection
with our research and development activities for our malaria research program.

                                      -27-
<PAGE>

         Revenues from collaborative agreements in 1999, which decreased by
$897,000 from 1998, included (i) $4.0 million related to our oral anticoagulant
agreement with Schering-Plough, (ii) $1.6 million related to our hepatitis C
agreement with Schering-Plough, (iii) $400,000 related to the now-terminated
research and development agreement with Vascular Genomics Inc., or VGI, and (iv)
$113,000 related to our license and development agreement with Pfizer to
collaborate on the development of UK-279,276. We did not recognize any license
fees or milestone payments in 1999, compared to $2.8 million in 1998.
Furthermore, because we discontinued tissue factor manufacturing in 1998, we had
no product sales in 1999, compared to $44,000 in 1998. We were awarded a
government grant in September 1999 to fund our malaria research program, which
resulted in 1999 revenues of $14,000.

         In the year 2001, we do not expect to receive any research and
development funding or other revenues under our agreements with Schering-Plough.
In the event that we enter into new collaborative agreements, we may recognize
related revenue; however, we cannot predict whether we will enter into new
collaborative agreements during 2001. Even if we do enter into new collaborative
agreements, we may not recognize revenue under these agreements in 2001.

         RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses,
which accounted for 79% of our total costs and expenses in 2000, 73% in 1999 and
81% in 1998, increased to $14.9 million in 2000 from $14.7 million in 1999. This
$259,000 increase was primarily attributable to increased clinical development
costs for rNAPc2. Research and development expenses decreased to $14.7 million
in 1999 from $15.8 million in 1998. This $1.1 million decrease was due to a
lower headcount in 1999 compared to 1998, and the termination of the option and
related research and development agreements with VGI.

         We are in the process of expanding our cancer research programs and
intend to hire additional employees to perform research on these programs. We
also plan to hire additional employees to support our rNAPc2 development
activities. In addition, we expect our expenses will increase due to the
manufacturing of clinical supplies of rNAPc2 in anticipation of a Phase III
clinical trial planned to begin in the second half of 2001. Therefore, we
anticipate that our research and development expenses in 2001 will be
substantially higher than our expenses in 2000.

         GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased to $4.1 million in 2000 from $5.3 million in 1999. This $1.2
million decrease was due to settlement costs associated with the termination of
the VGI program in 1999, a portion of which was offset by increased business
development expenses in 2000. General and administrative expenses increased to
$5.3 million in 1999 from $3.7 million in 1998, primarily due to settlement
costs associated with VGI. We recently hired a Vice President, Corporate
Development and expect our general and administrative expenses in 2001 to
increase over the amounts spent in 2000.

         NET OTHER INCOME. Net other income was $2.2 million in 2000, $680,000
in 1999 and $1.4 million in 1998. The largest component each year has been
interest income, which has fluctuated based on varying cash balances available
for investment. In 2000, we had interest income of $2.9 million and interest
expense of $762,000, compared to interest income of $901,000 and interest
expense of $221,000 in 1999. The increase in interest income in 2000 was due, in
part, to the cash we received in connection with our public offering of common
stock completed in November 2000. Interest expense was attributable to the 5.5%
convertible senior subordinated notes, in an aggregate principal amount of $10.0
million, that were issued in 1999 and are due in August 2006. In addition to
interest income of $1.2 million, the 1998 amount also included $214,000 from the
sale of some equipment and materials to a Johnson & Johnson subsidiary in
connection with the transfer of tissue factor manufacturing.

                                      -28-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         Since inception, our operations have been financed primarily through
public offerings and private placements of our debt and equity securities,
payments received through our collaborative agreements, and interest income
earned on cash and investment balances. Our principal sources of liquidity are
cash and cash equivalents, time deposits and debt securities, which, net of a
$303,000 restricted time deposit, totaled $135.3 million as of December 31,
2000. Working capital was $122.5 million at December 31, 2000. In November 2000,
we completed a public offering of our common stock, resulting in net proceeds of
$107.4 million. We invest available cash in accordance with an investment policy
set by our board of directors, which has established objectives to preserve
principal, maintain adequate liquidity and maximize income. Our policy provides
guidelines concerning the quality, term and liquidity of investments. We
presently invest our excess cash primarily in debt instruments of corporations
with strong credit ratings and government-backed debt obligations.

         During the year ended December 31, 2000, net cash of $9.8 million was
used in operating activities and net cash of $101.2 million was used in
investing activities. Net cash of $124.3 million was provided by financing
activities, most of which was attributable to the completion of our public
offering of 5,750,000 shares of common stock. Other cash provided by financing
activities included aggregate net proceeds of $11.9 million from the exercise of
outstanding warrants and $2.4 million from stock option exercises.

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

         In April 1997, we entered into an exclusive license and development
agreement with Pfizer to collaborate on the development of UK-279,276, an
anti-inflammatory agent with therapeutic potential for stroke and other
indications. Pfizer received an exclusive worldwide license to further develop,
commercialize and market UK-279,276 as a therapeutic agent, and funded our
internal research and development over a two-year period that ended March 31,
1999. Pfizer is responsible for funding all further development of UK-279,276.
To date, we have received $4.4 million from Pfizer under this agreement, and we
may receive up to an additional $27.0 million under this agreement if all future
milestones are achieved. However, we do not anticipate receiving any payments
under this agreement in 2001 and we cannot assure you that any future milestones
will be reached or that we will ever receive any additional payments under this
agreement. We are entitled to receive milestone payments based on clinical trial
progress, submissions for specified regulatory approvals and commercialization
events. If Pfizer commercializes a product candidate covered by this agreement,
we will also be entitled to receive royalties on product sales.

                                      -29-
<PAGE>

         We also have two independent collaborations with Schering-Plough, one
for the design and development of an oral inhibitor of a key protease associated
with hepatitis C virus replication and the other for the discovery and
commercialization of an oral anticoagulant for chronic thrombosis. Our
collaboration with Schering-Plough for the development of treatments for
hepatitis C commenced in June 1997. In May 2000, we amended our original
agreement and licensed selected patents and other intellectual property relating
to a key protease associated with hepatitis C virus replication to
Schering-Plough in consideration for a lump-sum payment of $2.5 million and the
right to receive royalties on product sales, if any. Schering-Plough is now
responsible for conducting all further research and development, if any. We are
entitled to royalties based on products developed by Schering-Plough for the
treatment of hepatitis C, whether or not such a product incorporates technology
licensed from us. However, our royalties will be lower if any product that is
developed is not based on our technology. We have no further responsibility
under this agreement and we are not entitled to any milestone payments.

         Our second collaboration with Schering-Plough is to identify an
anticoagulant that can be taken in pill form. Under this collaboration, which
commenced in December 1994, Schering-Plough funded our internal research and
development through December 31, 2000. Schering-Plough is now responsible for
conducting all further research and development, if any. Unless Schering-Plough
selects a clinical candidate, we will not receive any additional revenues under
this collaboration. We are entitled to receive milestone payments based on
clinical trial progress, specified regulatory submissions and approvals and
commercialization events; however, these will only be received in the event
Schering-Plough selects a clinical candidate. If Schering-Plough commercializes
a product candidate covered by this agreement, we will also be entitled to
receive royalties on product sales, if any. We cannot assure you that existing
collaborations will be successful, that we will receive any future milestones or
other payments related to our agreements, or that our collaborations will
continue.

         We will continue to incur substantial additional costs in the
foreseeable future due to, among other factors, costs related to ongoing and
planned clinical trial activities and other research and development activities.
Specifically, in the first half of 2001 we expect research and development
expenses to increase over historical amounts due to the scheduled manufacturing
of clinical supplies for rNAPc2 in anticipation of a Phase III clinical trial
planned to begin in the second half of 2001. In addition, we expect research and
development expenses related to our cancer programs to increase throughout 2001.
Over the next several years, we expect our costs will result in additional
operating losses and negative cash flows from operations. Based on our
currently-expected burn rate for 2001, which is estimated to be between $15
million and $20 million, we believe that our existing capital resources should
be sufficient to satisfy our anticipated funding requirements for at least the
next two years. However, this is just an estimate and this estimate assumes that
we are successful in consummating a collaborative agreement for rNAPc2. Our
future burn rate and capital requirements will also be impacted by many other
factors, including:

         o        the progress on and scope of our cancer programs and other
                  internally-funded research and development
         o        the timing and magnitude of expenses incurred to further
                  develop rNAPc2
         o        the success of our collaborators in developing and marketing
                  products under their respective collaborations with us
         o        competing technological and market developments

                                      -30-
<PAGE>

         o        the costs we incur in obtaining and enforcing patent and other
                  proprietary rights or gaining the freedom to operate under the
                  patents of others
         o        our success in acquiring and integrating complementary
                  products, technologies or companies

         In the future, we may also receive additional funds from milestone
payments and royalties on sales of products in connection with our agreements.
However, we may not receive any additional amounts under our existing or any
future agreements, and we may not be successful in raising additional capital
through strategic or other financings or through collaborative relationships.
Additionally, our expected cash requirements may vary materially from those now
anticipated.

         Our net operating loss carryforwards available to offset future taxable
income at December 31, 2000 were approximately $96.5 million for federal income
tax reporting purposes, and begin to expire in 2002. The net operating loss
carryforwards for state purposes, which expire five to ten years after
generation, are approximately $56.1 million. We also had unused research and
development tax credits for federal income tax reporting purposes of $4.6
million at December 31, 2000. In accordance with Internal Revenue Code Section
382, the annual utilization of net operating loss carryforwards and credits
existing prior to a change in control may be limited.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS Nos. 137
and 138, addresses the accounting for derivative instruments and hedging
activities, and is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. We believe that the adoption of SFAS No. 133, as
amended, will not have an impact on our financial condition or results of
operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         In accordance with our investment policy, we do not invest in
derivative financial instruments or any other market risk sensitive instruments.
Our available cash is invested in short-term, high quality fixed income
investments that are held to maturity. See Note 2 of the Notes to Financial
Statements for information about these financial instruments. We believe that
our interest rate market risk is limited, and that we are not exposed to
significant changes in fair value because our investments are held to maturity.
The fair value of each investment approximates its amortized cost due to the
recent purchases of these instruments.

         For purposes of measuring interest rate sensitivity, we have assumed
that the similar nature of our investments warrants aggregation. The carrying
amount of all held to maturity investments as of December 31, 2000 is $121.1
million; they have a weighted-average interest rate of 6.7%.

         Considering our investment balances as of December 31, 2000, rates of
return and the fixed rate nature of the convertible notes payable that were
issued in the second half of 1999, an immediate 10% change in interest rates
would not have a material impact on our financial condition or results of
operations.

                                      -31-
<PAGE>

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


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                  Page
                                                                                  ----
<S>                                                                                <C>
Independent Auditors' Report ......................................................F-1
Balance Sheets as of December 31, 2000 and 1999....................................F-2
Statements of Operations for the three years ended December 31, 2000...............F-3
Statements of Stockholders' Equity for the three years ended December 31, 2000.....F-4
Statements of Cash Flows for the three years ended December 31, 2000...............F-5
Notes to Financial Statements......................................................F-6
</TABLE>

                                      -32-
<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



The Board of Directors
Corvas International, Inc.:


We have audited the accompanying balance sheets of Corvas International, Inc. as
of December 31, 2000 and 1999, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Corvas International, Inc. as
of December 31, 2000 and 1999, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America.



                                                   /s/ KPMG LLP

San Diego, California
February  9, 2001


                                       F-1
<PAGE>

                                     CORVAS INTERNATIONAL, INC.
                                           BALANCE SHEETS
                           (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                   -----------------------
                                                                                      2000        1999
                                                                                   ----------   ----------
<S>                                                                                <C>          <C>
ASSETS
------

Current assets:
     Cash and cash equivalents                                                     $  14,153    $     881
     Short-term debt securities held to maturity and time deposits,
         partially restricted (notes 2 and 7)                                        109,089       20,630
     Receivables                                                                       1,526          316
     Note receivable from related party (note 10)                                        278          278
     Other current assets                                                                502          547
                                                                                   ----------   ----------

                  Total current assets                                               125,548       22,652
                                                                                   ----------   ----------

Debt issuance costs                                                                      108          127
Long-term debt securities held to maturity                                            12,343           --
Property and equipment, net (note 3)                                                   1,023        1,110
                                                                                   ----------   ----------

                                                                                   $ 139,022    $  23,889
                                                                                   ==========   ==========

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

Current liabilities:
     Accounts payable                                                              $   1,082    $     993
     Accrued liabilities                                                               1,663        1,167
     Accrued vacation                                                                    256          214
                                                                                   ----------   ----------

                  Total current liabilities                                            3,001        2,374
                                                                                   ----------   ----------

Convertible notes payable (note 4)                                                    10,958       10,215
Deferred rent                                                                            130           25

Stockholders' equity (notes 5 and 8):
     Preferred stock, $0.001 par value, 10,000,000 shares
         authorized; issued and outstanding:
              Series A Convertible: no shares in 2000 and 1,000,000
                shares in 1999 (liquidating preference $5 per share)                      --            1
              Series B Convertible: no shares in 2000 and 250,000
                shares in 1999 (liquidating preference $8 per share)                      --           --
     Common stock, $0.001 par value, 50,000,000 shares
         authorized; issued and outstanding 27,352,000
         shares in 2000 and 17,503,000 shares in 1999                                     27           17
     Additional paid-in capital                                                      226,465      102,127
     Accumulated deficit                                                            (101,559)     (90,870)
                                                                                   ----------   ----------

                  Total stockholders' equity                                         124,933       11,275

Commitments and contingencies (note 7)
                                                                                   ----------   ----------
                                                                                   $ 139,022    $  23,889
                                                                                   ==========   ==========
</TABLE>

See accompanying notes to financial statements.

                                                 F-2
<PAGE>

                           CORVAS INTERNATIONAL, INC.
                            STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)


<TABLE>
<CAPTION>
                                                      Years Ended December 31,
                                                 ---------------------------------
                                                   2000         1999        1998
                                                 ---------   ---------   ---------
<S>                                              <C>         <C>         <C>
REVENUES:
   Revenue from collaborative agreements
     (note 8)                                    $  3,263    $  6,088    $  6,985
   License fees and milestones (note 8)             2,500          --       2,795
   Net product sales (note 8)                          --          --          44
   Royalties (note 8)                                 167         190         145
   Research grants (note 11)                          198          14          --
                                                 ---------   ---------   ---------

       Total revenues                               6,128       6,292       9,969
                                                 ---------   ---------   ---------

COSTS AND EXPENSES:
   Research and development (notes 8 and 11)       14,928      14,669      15,800
   General and administrative (note 8)              4,068       5,320       3,670
   Cost of products sold (note 8)                      --          --          18
                                                 ---------   ---------   ---------

       Total costs and expenses                    18,996      19,989      19,488
                                                 ---------   ---------   ---------


       Loss from operations                       (12,868)    (13,697)     (9,519)
                                                 ---------   ---------   ---------

OTHER INCOME (EXPENSE):
   Interest income                                  2,941         901       1,201
   Interest expense (note 4)                         (762)       (221)         --
   Other income                                        --          --         214
                                                 ---------   ---------   ---------

                                                    2,179         680       1,415
                                                 ---------   ---------   ---------

       Net loss and other comprehensive loss     $(10,689)   $(13,017)   $ (8,104)
                                                 =========   =========   =========

       Basic and diluted net loss per share      $  (0.49)   $  (0.82)   $  (0.56)
                                                 =========   =========   =========

       Shares used in calculation of basic
            and diluted net loss per share         21,801      15,842      14,460
                                                 =========   =========   =========
</TABLE>

See accompanying notes to financial statements.

                                       F-3
<PAGE>

<TABLE>
<CAPTION>
                                          CORVAS INTERNATIONAL, INC.
                                      Statements of Stockholders' Equity
                                  For the Three Years Ended December 31, 2000
                                                (In thousands)

                                                            Series A          Series B
                                                           Convertible      Convertible
                                                         Preferred Stock   Preferred Stock     Common Stock
                                                         ----------------  ----------------  ----------------
                                                         Shares   Amount   Shares   Amount   Shares   Amount
                                                         -------  -------  -------  -------  -------  -------

<S>                                                      <C>      <C>        <C>    <C>      <C>      <C>
     Balance as of December 31, 1997                      1,000   $    1      250   $   --   13,950   $   14

Common stock issued upon exercise of stock options           --       --       --       --       95       --
Compensation expense recognized pursuant to
  issuance of stock options for services                     --       --       --       --       --       --
Common stock issued pursuant to employee stock
   purchase plan                                             --       --       --       --       28       --
Common stock issued pursuant to exercise of
  warrants, net of issuance costs                            --       --       --       --    1,025        1
Net loss and other comprehensive loss                        --       --       --       --       --       --
                                                         -------  -------  -------  -------  -------  -------

     Balance as of December 31, 1998                      1,000        1      250       --   15,098       15
                                                         -------  -------  -------  -------  -------  -------

Common stock issued for cash, net of issuance costs          --       --       --       --    2,000        2
Common stock issued upon exercise of
  stock options, net                                         --       --       --       --      135       --
Common stock issued pursuant to employee stock
   purchase plan                                             --       --       --       --       20       --
Common stock issued pursuant to settlement of
  contractual option agreement                               --       --       --       --      250       --
Compensation expense recognized pursuant to
  issuance of stock options for services                     --       --       --       --       --       --
Net loss and other comprehensive loss                        --       --       --       --       --       --
                                                         -------  -------  -------  -------  -------  -------

     Balance as of December 31, 1999                      1,000        1      250       --   17,503       17
                                                         -------  -------  -------  -------  -------  -------

Common stock issued for cash, net of issuance costs          --       --       --       --    5,750        6
Common stock issued upon exercise of stock options           --       --       --       --      604        1
Common stock issued pursuant to employee stock
   purchase plan                                             --       --       --       --       41       --
Conversion of preferred stock to common stock            (1,000)      (1)    (250)      --    1,250        1
Common stock issued pursuant to exercise of
  warrants, net of issuance costs                            --       --       --       --    2,204        2
Compensation expense recognized pursuant to
  issuance of stock options for services                     --       --       --       --       --       --
Capital contribution                                         --       --       --       --       --       --
Net loss and other comprehensive loss                        --       --       --       --       --       --
                                                         -------  -------  -------  -------  -------  -------

     Balance as of December 31, 2000                         --   $   --       --   $   --   27,352   $   27
                                                         =======  =======  =======  =======  =======  =======
</TABLE>

(CONTINUED)
<PAGE>


<TABLE>
<CAPTION>
                                                          Additional                     Total
                                                           Paid-in       Accumulated   Stockholders'
                                                           Capital         Deficit         Equity
                                                         -------------  -------------  -------------

<S>                                                      <C>            <C>            <C>
     Balance as of December 31, 1997                     $     92,179   $    (69,749)  $     22,445

Common stock issued upon exercise of stock options                190             --            190
Compensation expense recognized pursuant to
  issuance of stock options for services                          109             --            109
Common stock issued pursuant to employee stock
   purchase plan                                                   99             --             99
Common stock issued pursuant to exercise of
  warrants, net of issuance costs                               3,646             --          3,647
Net loss and other comprehensive loss                              --         (8,104)        (8,104)
                                                         -------------  -------------  -------------

     Balance as of December 31, 1998                           96,223        (77,853)        18,386
                                                         -------------  -------------  -------------

Common stock issued for cash, net of issuance costs             4,865             --          4,867
Common stock issued upon exercise of
  stock options, net                                              231             --            231
Common stock issued pursuant to employee stock
   purchase plan                                                   72             --             72
Common stock issued pursuant to settlement of
  contractual option agreement                                    703             --            703
Compensation expense recognized pursuant to
  issuance of stock options for services                           33             --             33
Net loss and other comprehensive loss                              --        (13,017)       (13,017)
                                                         -------------  -------------  -------------

     Balance as of December 31, 1999                          102,127        (90,870)        11,275
                                                         -------------  -------------  -------------

Common stock issued for cash, net of issuance costs           107,356             --        107,362
Common stock issued upon exercise of stock options              2,392             --          2,393
Common stock issued pursuant to employee stock
   purchase plan                                                  119             --            119
Conversion of preferred stock to common stock                      --             --             --
Common stock issued pursuant to exercise of
  warrants, net of issuance costs                              11,851             --         11,853
Compensation expense recognized pursuant to
  issuance of stock options for services                           59             --             59
Capital contribution                                            2,561             --          2,561
Net loss and other comprehensive loss                              --        (10,689)       (10,689)
                                                         -------------  -------------  -------------

     Balance as of December 31, 2000                     $    226,465   $   (101,559)  $    124,933
                                                         =============  =============  =============
</TABLE>

See accompanying notes to financial statements.

                                                     F-4
<PAGE>

                                     CORVAS INTERNATIONAL, INC.
                                      STATEMENTS OF CASH FLOWS
                                           (in thousands)

<TABLE>
<CAPTION>
                                                                                       Years ended December 31,
                                                                                 ------------------------------------
                                                                                    2000         1999         1998
                                                                                 ----------   ----------   ----------
    <S>                                                                          <C>          <C>          <C>
    CASH FLOWS FROM OPERATING ACTIVITIES:
       Net loss                                                                  $ (10,689)   $ (13,017)   $  (8,104)
       Adjustments to reconcile net loss to
           net cash used in operating activities:
              Depreciation and amortization                                            486          546          604
              Amortization of premiums and discounts on investments                    (15)        (725)        (819)
              Amortization of debt issuance costs                                       19           --           --
              Non-cash interest expense on convertible notes payable                   743          221           --
              Stock compensation expense                                                59          760          124
              (Gain)/loss on disposal of property and equipment                         --           74         (128)
              Changes in assets and liabilities:
                       (Increase) decrease in receivables                           (1,210)         (65)          38
                       (Increase) decrease in other current assets                      45         (136)         (71)
                       Increase in accounts payable, accrued
                          liabilities and accrued vacation                             627          848          413
                       Increase in deferred rent                                       105           25           --
                       Decrease in deferred revenue                                     --           --       (4,656)
                                                                                 ----------   ----------   ----------

                           Net cash used in operating activities                    (9,830)     (11,469)     (12,599)
                                                                                 ----------   ----------   ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of investments held to maturity and time deposits                (238,848)     (30,812)     (39,462)
       Proceeds from maturity of investments held to maturity                      127,852       27,903       47,355
       Proceeds from sale of investments held to maturity                           10,209           --           --
       Purchases of property and equipment                                            (399)        (246)        (857)
       Proceeds from sale of property and equipment                                     --           --          209
       Loan to related party                                                            --         (125)          --
                                                                                 ----------   ----------   ----------

                           Net cash provided by (used in) investing activities    (101,186)      (3,280)       7,245
                                                                                 ----------   ----------   ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
       Net proceeds from issuance of common stock                                  121,727        5,146        3,921
       Net proceeds from issuance of convertible notes payable                          --        9,873           --
       Capital contribution                                                          2,561           --           --
                                                                                 ----------   ----------   ----------

                           Net cash provided by financing activities               124,288       15,019        3,921
                                                                                 ----------   ----------   ----------

Net increase (decrease) in cash and cash equivalents                                13,272          270       (1,433)

Cash and cash equivalents at beginning of period                                       881          611        2,044
                                                                                 ----------   ----------   ----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                       $  14,153    $     881    $     611
                                                                                 ==========   ==========   ==========

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITY -
              Conversion of preferred stock to common stock                      $       1    $      --    $      --
</TABLE>

See accompanying notes to financial statements.

                                                 F-5
<PAGE>

                           CORVAS INTERNATIONAL, INC.

                          Notes to Financial Statements
                           December 31, 2000 and 1999

(l)    The Company
       -----------

       Corvas International, Inc. (the "Company") was incorporated on March 27,
       1987 under the laws of the State of California. In July 1993, the Company
       reincorporated in the State of Delaware. The Company is engaged in the
       discovery, development and commercialization of novel therapeutics that
       address large markets, including cardiovascular disease, stroke and
       cancer.

(2)    Summary of Significant Accounting Policies
       ------------------------------------------

       (a)    Cash Equivalents:
              ----------------

              Cash equivalents consist of investments in short-term government
              funds with original maturities of three months or less and a
              high-quality money market fund. Cash equivalents are stated at
              cost, which approximates market value.

       (b)    Debt Securities Held to Maturity and Time Deposits:
              --------------------------------------------------

              Short-term debt securities consist of highly liquid debt
              instruments of corporations with strong credit ratings and U.S.
              government obligations. The Company has the ability and intent to
              hold its investments until their maturity and, therefore, records
              its investments at amortized cost, which approximates market
              value. Short-term debt securities mature at various dates through
              December 31, 2001.

              Long-term debt securities have a maturity of more than twelve
              months as of December 31, 2000, and consist of highly liquid debt
              instruments of corporations with strong credit ratings. Long-term
              debt securities, all of which are held to maturity, are stated at
              amortized cost, which approximates market value. Long-term debt
              securities mature at various dates through July 15, 2002. The
              Company did not hold any long-term securities as of December 31,
              1999.

              At December 31, 2000 and 1999, time deposits of $303,000 and
              $221,000, respectively, were restricted related to the facility
              lease. See Note 7.

       (c)    Concentration of Credit Risk:
              ----------------------------

              Cash, cash equivalents and debt securities are financial
              instruments that potentially subject the Company to concentration
              of credit risk. The Company's investment policy establishes
              guidelines relative to diversification, maturities and minimum
              acceptable credit ratings to maintain safety and liquidity. The
              Company has not experienced any losses on its investments. Certain
              securities inadvertently purchased by outside money managers that
              were not in compliance with the Company's investment policy were
              sold prior to maturity during the year ended December 31, 2000.

       (d)    Depreciation and Amortization:
              -----------------------------

              Depreciation is provided using the straight-line method over
              estimated useful lives of three to five years. Leasehold
              improvements are amortized on a straight-line basis over the
              shorter of the lease term or estimated useful life of the asset.

       (e)    Research and Development Costs:
              ------------------------------

              Research and development costs are expensed in the period
              incurred.

                                     F-6
<PAGE>

                           CORVAS INTERNATIONAL, INC.

                    Notes to Financial Statements, Continued

       (f)    Patents:
              -------

              Costs to obtain and maintain patents are expensed as incurred.

       (g)    Net Loss per Share:
              ------------------

              Under Statement of Financial Accounting Standards No. 128,
              "Earnings per Share" ("SFAS 128"), basic and diluted net loss per
              share are required to be presented. Basic net loss per share is
              calculated using the weighted-average number of common shares
              outstanding during the period, while diluted net loss per share
              also includes potential dilutive common shares outstanding.
              Potential common equivalent shares from convertible securities,
              stock options and warrants are excluded from the calculation of
              diluted loss per share since the effect of their inclusion would
              be anti-dilutive.

              As of December 31, 2000, 2,248,000 options were excluded from the
              calculation of dilutive net loss per share. As of December 31,
              1999 and 1998, options, warrants and convertible preferred stock
              totaling 5,695,000 and 5,176,000 shares, respectively, were
              excluded from the calculation of dilutive net loss per share. In
              addition, 3,303,000 and 3,129,000 shares from the assumed
              conversion of the 5.5% convertible senior subordinated notes
              issued in 1999 (see Note 4) were also excluded from this
              calculation as of December 31, 2000 and 1999, respectively.

        (h)   Accounting for Stock-Based Compensation:
              ---------------------------------------

              As permitted by Statement of Financial Accounting Standards No.
              123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the
              Company has elected to use the intrinsic value-based method as
              prescribed in Accounting Principles Board ("APB") Opinion No. 25,
              "Accounting for Stock Issued to Employees" and related
              interpretations. The Company discloses the pro forma effects of
              using the fair value-based method to account for its stock-based
              compensation. See Note 5.

        (i)   Revenue Recognition:
              -------------------

              Revenue from collaborative agreements consists of non-refundable
              research and development funding under collaborative agreements
              with our strategic partners. Revenue from collaborative agreements
              is recognized as the research and development activities are
              performed under the terms of the agreements; any advance payments
              received in excess of amounts earned are classified as deferred
              revenue. License fees consist of non-refundable fees from the sale
              of rights under collaborative development and/or license
              agreements with our strategic partners. Non-refundable license
              fees are recognized upon receipt absent any continuing
              involvement. Product development milestone payments are specified
              in our various collaborative agreements. Milestone payments are
              recognized as revenue upon achievement of the milestones
              stipulated in the agreement. Research grant revenue is recognized
              as research is performed under the terms of the grant.

              Effective October 1, 2000, the Company adopted Staff Accounting
              Bulletin No. 101, "Revenue Recognition in Financial Statements"
              ("SAB 101"), which reflects the SEC's views on revenue
              recognition. The adoption of SAB 101 did not have an impact on the
              Company's results of operations.

        (j)   Income Taxes:
              ------------

              Income taxes are accounted for under the asset and liability
              method. Deferred tax assets and liabilities are recognized for the
              estimated future tax consequences attributable to differences
              between the financial statement carrying amounts of existing
              assets and liabilities and their respective tax bases and net
              operating loss and tax credit carryforwards. Deferred tax assets
              and liabilities are measured using enacted tax rates expected to
              apply to taxable income in the years in which those temporary
              differences are expected to be recovered or settled. The effect on
              deferred tax assets and liabilities of a change in tax rates is
              recognized in income in the period that includes the enactment
              date.

                                       F-7

<PAGE>

                           CORVAS INTERNATIONAL, INC.

                    Notes to Financial Statements, Continued

        (k)   Use of Estimates:
              ----------------

              The preparation of financial statements in conformity with
              generally accepted accounting principles requires management of
              the Company to make a number of estimates and assumptions that
              affect the amounts reported in the financial statements and
              accompanying notes to financial statements. Actual results could
              differ from those estimates.

       (l)    Fair Value of Financial Instruments:
              -----------------------------------

              Statement of Financial Accounting Standards No. 107, "Disclosures
              about Fair Value of Financial Instruments" ("SFAS 107"), defines
              the fair value of a financial instrument as the amount at which
              the instrument could be exchanged in a current transaction between
              willing parties. The carrying value of cash and cash equivalents,
              short-term debt securities held to maturity, time deposits,
              receivables, other current assets, accounts payable, accrued
              liabilities and accrued vacation, included in the accompanying
              balance sheets, approximate the estimated fair value of those
              instruments because of their short-term nature. The carrying
              values of the long-term debt securities held to maturity
              approximate fair value due to the recent purchases of these
              financial instruments. The fair value of the convertible notes
              payable cannot be determined due to the nature of that specific
              financing. The fair value of the note receivable from related
              party cannot be determined due to the uncertainty as to the timing
              of repayment.

        (m)   Impairment of Long-Lived Assets:
              -------------------------------

              Statement of Financial Accounting Standards No. 121, "Accounting
              for the Impairment of Long-Lived Assets and for Long-Lived Assets
              to be Disposed Of" ("SFAS 121") requires losses from impairment of
              long-lived assets used in operations to be recorded when
              indicators of impairment are present and the undiscounted cash
              flows estimated to be generated by those assets before interest
              are less than the assets' carrying amount. The Company
              periodically evaluates the carrying value of long-lived assets to
              be held and used when events and circumstances indicate that the
              carrying amount of an asset may not be recovered.

       (n)    Segment Reporting:
              -----------------

              Statement of Financial Accounting Standards No. 131, "Disclosures
              About Segments of an Enterprise and Related Information" ("SFAS
              131"), establishes reporting standards for a Company's operating
              segments and related disclosures about its products, services,
              geographic areas and major customers. An operating segment is
              defined as a component of an enterprise that engages in business
              activities from which it may earn revenues and incur expenses, and
              about which separate financial information is regularly evaluated
              by management in deciding how to allocate resources. The Company
              believes that it operates in a single segment, biopharmaceuticals.

 (3)   Property and Equipment
       ----------------------

       Property and equipment are recorded at cost and are summarized as follows
       (in thousands).

                                                    December 31,
                                                 -------------------
                                                   2000       1999
                                                 --------   --------

           Machinery and equipment               $ 4,373    $ 4,321
           Furniture and fixtures                    147        143
           Leasehold improvements                    895        866
                                                 --------   --------

                  Total property and equipment     5,415      5,330

           Less accumulated depreciation          (4,392)    (4,220)
                                                 --------   --------

                                                 $ 1,023    $ 1,110
                                                 ========   ========

                                       F-8
<PAGE>

                           CORVAS INTERNATIONAL, INC.

                    Notes to Financial Statements, Continued

(4)    Convertible Notes Payable
       -------------------------

       In August and October of 1999, the Company issued and sold, in two
       private financings, a total of 2,000,000 shares of its common stock for
       $2.50 per share (see Note 5) and 5.5% convertible senior subordinated
       notes due in August 2006, in an original principal amount of $10.0
       million. Net proceeds of $14.8 million were raised in these financings.
       At the option of the note holder, the principal balance of both notes is
       convertible into shares of common stock at $3.25 per share, subject to
       certain adjustments. Interest on the outstanding principal amounts of
       these notes accretes at 5.5% per annum, compounded semi-annually, with
       interest payable upon redemption or conversion. Upon maturity, these
       notes will have an accreted value of $14.6 million. At the Company's
       option, the accreted interest portion of both notes may be paid in cash
       or in common stock priced at the then-current market price. The Company
       has agreed to pay any applicable withholding taxes on behalf of the note
       holder that may be incurred in connection with the accreted interest,
       which are estimated and accrued at 30% of the annual accretion. The
       Company may redeem the notes any time after August 18, 2002 upon payment
       of the outstanding principal and accreted interest. 4,484,000 shares of
       common stock have been reserved for the potential conversion of these
       notes.

       Interest expense of $762,000 and $221,000 was recorded for the years
       ended December 31, 2000 and 1999, respectively, related to both of the
       convertible notes.

 (5)   Stockholders' Equity
       --------------------

       (a)    Preferred Stock:
              ---------------

              In December 1996, in conjunction with a strategic alliance with
              Schering-Plough Corporation ("Schering-Plough") (see Note 8), the
              Company issued 250,000 shares of Series B Convertible Preferred
              Stock, which resulted in net proceeds of $2.0 million. In February
              2000, these 250,000 shares of Series B Preferred Stock
              automatically converted into 250,000 shares of common stock, as
              the market price of the Company's common stock exceeded $12.00 per
              share for 10 consecutive trading days.

              Also in conjunction with its strategic alliance with
              Schering-Plough (see Note 8), the Company issued 1,000,000 shares
              of Series A Convertible Preferred Stock in December 1994, which
              resulted in net proceeds of $4.9 million. In February 2000, these
              1,000,000 shares of Series A Preferred Stock automatically
              converted into 1,000,000 shares of common stock, as the market
              price of the Company's common stock exceeded $7.50 per share for
              10 consecutive trading days.

       (b)    Common Stock:
              ------------

              In November 2000, the Company issued and sold 5,750,000 shares of
              common stock in a public offering, which resulted in net proceeds
              of $107.4 million.

              During the year ended December 31, 2000, the Company issued a
              total of 2,204,000 shares of common stock pursuant to the exercise
              of outstanding warrants, which resulted in aggregate net proceeds
              of $11.9 million.

              In August and October of 1999, the Company issued a total of
              2,000,000 shares of common stock as part of two private financings
              (see Note 4) consisting of common stock and two convertible senior
              subordinated notes in an aggregate principal amount of $10.0
              million. Net proceeds of $4.8 million were raised from the sale of
              this common stock.

              In August 1999, the Company issued a total of 250,000 shares of
              common stock to the stockholders of Vascular Genomics Inc. ("VGI")
              upon termination of an option held by the Company to acquire all
              of the stock of VGI. See Note 8.

                                       F-9
<PAGE>

                           CORVAS INTERNATIONAL, INC.

                    Notes to Financial Statements, Continued

        (c)   Stock Option Plans:
              ------------------

              The Company has several plans and agreements under which incentive
              stock options, non-statutory stock options, restricted stock
              awards and stock bonus awards can be granted to key personnel,
              including officers, directors and outside consultants. The grants
              are authorized by the Human Resources Committee of the Board of
              Directors. A total of 4,923,000 options to purchase shares of
              common stock are authorized for issuance as of December 31, 2000,
              and 1,948,000 shares of common stock are reserved for future
              grant.

              Stock options generally have a term of 10 years and a price per
              share equal to the fair market value on the date of grant, except
              for annual grants to outside directors which have an exercise
              price equal to 85% of the fair market value on the date of grant.
              Most options, except for certain grants to outside consultants,
              become exercisable over a four-year period beginning one year from
              the date of grant, vesting 25% at the end of the first year and
              6.25% each quarter thereafter. Activity under these plans is as
              follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                  Number of Shares          Weighted-Average
                                                    Under Option       Exercise Price per Share
                                                  ----------------     ------------------------

            <S>                                        <C>                   <C>
            Outstanding, December 31, 1997             2,065                 $   4.01
                  Granted                                178                 $   4.10
                  Exercised                              (95)                $   1.99
                  Cancelled                             (205)                $   4.73
                                                      -------

            Outstanding, December 31, 1998             1,943                 $   4.04
                  Granted                                811                 $   2.84
                  Exercised                             (180)                $   1.99
                  Cancelled                             (340)                $   3.92
                                                      -------

            Outstanding, December 31, 1999             2,234                 $   3.79
                  Granted                                739                 $  15.19
                  Exercised                             (604)                $   3.96
                  Cancelled                             (121)                $   4.37
                                                      -------

            Outstanding, December 31, 2000             2,248                 $   7.46
                                                      =======
</TABLE>

              A summary of stock options outstanding as of December 31, 2000
              follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                               Options Outstanding                     Options Exercisable
                                 -----------------------------------------------   ---------------------------
                                                    Weighted-        Weighted-                      Weighted-
                                                     Average         Average                        Average
            Range of Exercise       Number          Remaining        Exercise          Number       Exercise
                  Prices          Outstanding   Contractual Life      Price         Exercisable      Price
            -------------------  -------------- ------------------ -------------   -------------  ------------
             <S>                         <C>        <C>              <C>                    <C>      <C>
              $0.88 -  $3.99               813      8.2 years        $  2.89                284      $2.83
              $4.00 - $12.99               846      6.3 years        $  5.41                623      $4.79
             $13.00 - $19.91               589      9.9 years        $ 16.72                 --      $  --
                                 --------------                                    -------------

                                         2,248      7.9 years        $  7.46                907      $4.18
                                 ==============                                    =============
</TABLE>

                                      F-10
<PAGE>

                           CORVAS INTERNATIONAL, INC.

                    Notes to Financial Statements, Continued

        (d)   Stock-Based Compensation:
              ------------------------

              The Company accounts for its stock-based plans in accordance with
              the recognition provisions of APB 25 and related interpretations.
              Accordingly, stock compensation expense is recorded on the date of
              grant only when options are granted to consultants.

              The Company has adopted the disclosure-only provisions of SFAS
              123. If the Company had determined compensation cost based on the
              fair value at the grant date for its stock-based plans under SFAS
              123, the Company's net loss and net loss per share would have been
              increased to the pro forma amounts indicated below (in thousands,
              except per share data).

<TABLE>
<CAPTION>
                                                                    2000            1999             1998
                                                                    ----            ----             ----
              <S>                                                 <C>            <C>              <C>
              Net loss - As reported                              $ (10,689)     $ (13,017)       $  (8,104)

              Net loss - Pro forma                                $ (12,330)     $ (13,975)       $  (9,832)

              Basic and diluted net loss per share - As reported  $   (0.49)     $   (0.82)       $   (0.56)

              Basic and diluted net loss per share - Pro forma    $   (0.57)     $   (0.88)       $   (0.68)
</TABLE>

              The per share weighted-average fair market value of stock options
              granted during 2000, 1999 and 1998 at an exercise price equal to
              the fair market value on the date of grant was $15.85, $2.85 and
              $4.24, respectively, using the Black-Scholes option-pricing model.
              The per share weighted-average fair market value of stock options
              granted during 2000, 1999 and 1998 at an exercise price less than
              the fair market value on the date of grant was $8.86, $2.39 and
              $3.61, respectively, on the date of grant.

              The following weighted-average assumptions were used in
              calculating compensation cost for stock-based plans under SFAS
              123:

<TABLE>
<CAPTION>
                                                                     2000             1999             1998
                                                                     ----             ----             ----
              <S>                                                   <C>             <C>             <C>
              Expected dividend yield                                  0%              0%              0%

              Risk-free interest rate                                 5.57%           5.16%           5.55%

              Expected life                                         7.31 years      7.59 years      8.29 years

              Expected volatility                                    81.69%          74.95%          75.07%
</TABLE>


       (e)    Employee Stock Purchase Plan:
              ----------------------------

              In December 1991, the Company adopted an employee stock purchase
              plan (the "Plan") that provided for the issuance of up to 150,000
              shares of common stock. In April 2000, the Plan was amended to
              provide for the issuance of up to 350,000 shares of Common Stock.
              The Plan is intended to qualify under Section 423 of the Internal
              Revenue Code and is for the benefit of qualifying employees, as
              designated by the Human Resources Committee of the Board of
              Directors. Under the terms of the Plan, participating employees
              are eligible to have a maximum of 10% of their compensation
              withheld through payroll deductions to purchase shares of common
              stock at the lower of 85% of (i) the fair market value at the
              beginning of each offering period or (ii) the fair market value on
              predetermined dates. As of December 31, 2000, 162,000 shares of
              common stock have been issued pursuant to the Plan.

                                      F-11
<PAGE>

                           CORVAS INTERNATIONAL, INC.

                    Notes to Financial Statements, Continued

       (f)    Warrants:
              --------

              During the year ended December 31, 2000, warrants were exercised
              to purchase a total of 2,204,000 shares of common stock at a
              weighted-average exercise price of $5.38 per share. As of December
              31, 2000, no warrants remain outstanding.

       (g)    Stockholder Rights Plan:
              -----------------------

              In September 1997, the Company adopted a stockholder rights plan
              and declared a dividend distribution of one preferred share
              purchase right (a "Right") for each outstanding share of common
              stock ("Common Shares"), effective for stockholders of record as
              of October 15, 1997 ("Record Date"). The Rights also attach to new
              Common Shares issued after the Record Date. Each Right entitles
              the registered holder to purchase from the Company one
              one-hundredth of a share of Series C Junior Participating
              Preferred Stock, par value $0.001, at an exercise price of $50
              (the "Purchase Price"). The Rights will become exercisable only if
              a person or group acquires 20% or more of the common stock or
              announces a tender offer for 20% or more of the common stock. If
              the Rights become exercisable, all holders of Rights, except the
              acquirer, will be entitled to acquire for the Purchase Price that
              number of Common Shares having a market value of two times the
              Purchase Price of the Right, in lieu of purchasing Series C Junior
              Participating Preferred Stock. This Right will commence on the
              date of public announcement that a person has become an Acquiring
              Person (as defined in the Rights Agreement) or the effective date
              of a registration statement relating to distribution of the
              Rights, if later, and terminate 60 days later (subject to certain
              provisions in the Rights Agreement).

              The Rights will expire on September 18, 2007, unless exchanged or
              redeemed prior to that date. Until a Right is exercised, the
              holder will have no rights as a stockholder of the Company,
              including, without limitation, the right to vote or to receive
              dividends.


(6)    Income Taxes
       ------------

       The Company has no net, taxable temporary differences that would require
       recognition of deferred tax liabilities and, due to the uncertainty of
       future realizability, has recorded a valuation allowance against any net
       deferred tax assets for deductible temporary differences, tax operating
       loss carryforwards and tax credits. The Company increased its valuation
       allowance by approximately $7.7 million, $6.0 million and $4.2 million
       for the years ended December 31, 2000, 1999 and 1998, respectively,
       primarily as a result of the increase in tax operating loss
       carryforwards.

       At December 31, 2000, the Company had available net operating loss
       carryforwards of approximately $96.5 million for federal income tax
       reporting purposes that begin to expire in 2002. The net operating loss
       carryforwards for state purposes, which expire five to ten years after
       generation, are approximately $56.1 million. The Company has unused
       research and development tax credits for federal income tax purposes of
       $4.6 million at December 31, 2000.

       In accordance with Internal Revenue Code Section 382, the annual
       utilization of net operating loss carryforwards and credits existing
       prior to a change in control may be limited.

                                      F-12
<PAGE>

                           CORVAS INTERNATIONAL, INC.

                    Notes to Financial Statements, Continued


 (7)   Commitments
       -----------

       (a)    Lease Commitments:
              -----------------

              The Company currently leases its principal facility under a
              noncancellable operating lease that expires in September 2006. The
              lease provides for escalating rent payments over the term of the
              lease. For financial reporting purposes, rent expense is
              recognized on a straight-line basis over the lease term.
              Accordingly, rent expense recognized in excess of cash rent paid
              is reflected as deferred rent. Total rent expense recognized under
              this lease for the years ended December 31, 2000, 1999 and 1998
              was $1.2 million, $1.0 million and $970,000, respectively.

              The annual future minimum commitments under the facility lease for
              years ending December 31 are as follows (in thousands).

                  2001                                                  $1,256
                  2002                                                   1,299
                  2003                                                   1,345
                  2004                                                   1,392
                  2005                                                   1,441
                  Thereafter                                             1,142
                                                                        -------

                  Total minimum lease payments                          $7,875
                                                                        =======

        (b)   Letter of Credit:
              ----------------

              The Company has an unused standby letter of credit in the amount
              of $303,000 that expires on September 30, 2001, with provisions
              for annual renewal. This letter of credit, collateralized by a
              $303,000 time deposit, is pledged in lieu of a security deposit
              against the principal facility lease.

(8)    Collaborative Agreements
       ------------------------

       In May 2000, the Company and Schering-Plough amended the license and
       collaboration agreement originally entered into in June 1997 that covers
       the design and development of an oral inhibitor of a key protease
       associated with hepatitis C virus replication, resulting in the
       recognition of a $2.5 million license fee. Under the terms of the amended
       agreement, Schering-Plough has an exclusive worldwide license to selected
       patents and other intellectual property related to hepatitis C virus
       replication, and is responsible for all development, manufacturing and
       marketing of any resultant products. The Company recognized $263,000 of
       revenue from collaborative agreements attributable to this collaboration
       in 2000 and $1.6 million in each of 1999 and 1998. We have no continuing
       involvement with respect to the research and development of inhibitors of
       the hepatitis C virus; however, we may receive royalty payments on
       product sales if products are successfully commercialized from this
       agreement.

       In July 1999, the Company, VGI and the stockholders of VGI entered into a
       Settlement Agreement and Mutual General Release ("Settlement Agreement")
       that terminated the Company's option to acquire all of the stock of VGI
       in exchange for the Company's common stock or, in certain circumstances,
       a combination of cash and common stock. The option agreement and a
       related research and development agreement were originally entered into
       in June 1997. Upon expiration or cancellation of the three-year option,
       VGI had the right to put 19.9% of its outstanding stock to the Company
       for $4.0 million in the Company's common stock. In addition, during the
       option period, the Company funded research and other related costs
       involved in further developing the technology. Pursuant to the Settlement
       Agreement, the Company agreed to pay VGI the sum of $1.2 million and to
       deliver to VGI's stockholders 250,000 shares of the Company's common
       stock. Also pursuant to the Settlement Agreement, VGI agreed to deliver
       to the Company shares of VGI stock equal to 6.5% of VGI's outstanding
       shares. The accompanying statements of operations include $400,000 and
       $1.0 million of revenue from collaborative agreements in 1999 and 1998,
       respectively, attributable to VGI. In addition, included in general and
       administrative expenses on the accompanying statements of operations in
       1999 is the $1.2 million cash payment, as well as $703,000 for the fair
       value of the common stock issued.

                                      F-13
<PAGE>

                           CORVAS INTERNATIONAL, INC.

                    Notes to Financial Statements, Continued

       In April 1997, the Company entered into an exclusive license and
       development agreement with Pfizer Inc. ("Pfizer") to collaborate on the
       development of UK-279,276, formerly rNIF, an anti-inflammatory agent with
       therapeutic potential for stroke and other indications. Pfizer received
       an exclusive, worldwide license to further develop, commercialize and
       market UK-279,276 as a therapeutic agent, and funded internal research
       and development over a two-year period that ended March 31, 1999. The
       accompanying statements of operations reflect revenue from collaborative
       agreements pursuant to this collaboration of $113,000 and $450,000 in
       1999 and 1998, respectively, as well as a $1.0 million milestone earned
       in 1998 upon commencement of a Phase I trial for UK-279,276. Pfizer is
       responsible for funding all further development of UK-279,276. The
       Company may also receive additional milestone payments as well as royalty
       payments on product sales if products are successfully commercialized
       from this agreement.

       In December 1994, the Company entered into a strategic alliance agreement
       with Schering-Plough to collaborate on the discovery and
       commercialization of an oral anticoagulant for chronic thrombosis.
       Schering-Plough is responsible for preclinical development, all clinical
       trials and regulatory activities, and received exclusive worldwide
       marketing rights for any resulting inhibitors of thrombosis. The Company
       retained certain manufacturing rights. Under the terms of the agreement,
       Schering-Plough funded the Company's research and development through
       December 31, 2000. The accompanying statements of operations reflect
       revenue from collaborative agreements pursuant to this collaboration of
       $3.0 million in 2000 and $4.0 million in each of 1999 and 1998. In 1998,
       the Company also recognized a $1.0 million milestone payment from
       Schering-Plough upon commencement of a Phase I trial for an oral thrombin
       inhibitor. We have no continuing involvement with respect to the further
       research and development of oral anticoagulants; however, we may receive
       milestone payments as well as royalty payments on product sales if
       products are successfully commercialized from this agreement.

       In conjunction with this agreement, Schering-Plough purchased 1,000,000
       shares of Series A Convertible Preferred Stock of the Company in December
       1994, which resulted in net proceeds of $4.9 million and 250,000 shares
       of Series B Convertible Preferred Stock in December 1996, which yielded
       net proceeds of $2.0 million. Both series of Preferred Stock converted to
       common stock in February 2000.

       In November 1998, the Company entered into license agreements with two
       affiliates of Johnson & Johnson related to recombinant tissue factor,
       superceding earlier agreements entered in June 1992. In addition to
       transferring the Company's manufacturing activities to these affiliates
       of Johnson & Johnson, certain specialized equipment was also sold. The
       accompanying statements of operations reflect 1998 license fee revenue of
       $795,000 and other income of $209,000 pursuant to these agreements. Net
       product sales attributable to affiliates of Johnson & Johnson for the
       year ended December 31, 1998 were $26,000. The agreements continue to
       provide for royalties to be paid based on unit sales of tissue factor.
       For the years ended December 31, 2000, 1999 and 1998, these royalties
       amounted to $167,000, $190,000 and $145,000, respectively.

       The Company has also entered into research and licensing agreements with
       universities and other research institutions which required the Company
       to make royalty payments of $11,000 in the year ended December 31, 1998.

 (9)   Employee Benefits Plan
       ----------------------

       Effective January 1, 1988, the Board of Directors approved the Corvas
       International, Inc. 401(k) Compensation Deferral Savings Plan (the
       "401(k) Plan"), adopting provisions of the Internal Revenue Code Section
       401(k). The 401(k) Plan was approved by the IRS in 1989, and was amended
       and restated in 1995. The 401(k) Plan is for the benefit of all
       qualifying employees, and permits employee voluntary contributions,
       qualified nonelective contributions and company profit-sharing
       contributions. No employer contributions have been approved by the Board
       of Directors through December 31, 2000.

                                      F-14
<PAGE>

                           CORVAS INTERNATIONAL, INC.

                    Notes to Financial Statements, Continued

 (10)  Related Party Transaction
       -------------------------

       The note receivable from related party of $278,000 as of December 31,
       2000 and 1999 consists of a loan, evidenced by a promissory note, granted
       to an executive officer of the Company in connection with the officer's
       relocation to San Diego. This note bears no interest and is due and
       payable in full on the earliest of (i) August 31, 2001 or (ii) within 90
       days of the executive officer's termination of employment with the
       Company.

(11)   Research Grant
       --------------

       Pursuant to a Small Business Innovation Research (SBIR) grant from the
       National Institute for Allergy and Infectious Disease, research grant
       revenue of $198,000 and $14,000 was recognized in 2000 and 1999,
       respectively. The related expenses, which equal research grant revenues,
       are recorded as research and development expenses in the accompanying
       statements of operations.

                                      F-15
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information regarding the Directors and Executive Officers of the
Company as of March 15, 2001 is set forth below. Information regarding the
compliance with Section 16 filing requirements will be set forth under the
caption "Compliance with Section 16(a) of the Securities and Exchange Act of
1934" in our 2001 proxy statement and is incorporated by reference into this
report.

EXECUTIVE OFFICERS AND DIRECTORS

         Our executive officers and directors, their ages, and certain other
information about them as of March 15, 2001 is set forth below:


<TABLE>
<CAPTION>
                             NAME                            AGE                         POSITION
                             ----                            ---                         --------
<S>                                                          <C>    <C>
Randall E. Woods (1) .....................................   49     President, Chief Executive Officer and Director
George P. Vlasuk, Ph.D. ..................................   45     Chief Scientific Officer and Executive Vice
                                                                    President, Research and Development, Director
Carolyn M. Felzer ........................................   44     Vice President and Controller and Assistant
                                                                    Corporate Secretary
M. Blake Ingle, Ph.D. (1) (2) (3).........................   58     Chairman of the Board
Susan B. Bayh ............................................   41     Director
J. Stuart Mackintosh (2)..................................   45     Director
Burton E. Sobel, M.D. (3).................................   63     Director
Michael Sorell, M.D. (2) .................................   53     Director
Nicole Vitullo (1) (3) ...................................   43     Director
</TABLE>

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

(1)   Member of Executive Committee
(2)   Member of Audit Committee
(3)   Member of Human Resources Committee

         RANDALL E. WOODS has served as our President and Chief Executive
Officer and as a director of Corvas since May 1996. Prior to joining Corvas, he
served as the President of the U.S. Operations, Boehringer Mannheim
Pharmaceuticals Corporation, or Boehringer, from February 1994 to March 1996,
and was Vice President of Marketing and Sales from December 1993 to March 1994.
Prior to that, he served in various capacities at Eli Lilly and Company from
1973 to December 1993. Mr. Woods received his M.B.A. from Western Michigan
University.

         GEORGE P. VLASUK, PH.D. has served as one of our directors since June
1999 and as our Chief Scientific Officer since December 2000. He joined Corvas
in 1991 and has been our Executive Vice President, Research and Development
since September 1996. Prior to joining Corvas, he was an Associate Director of
Hematology Research at Merck Research Laboratories where he contributed to a
broad range of cardiovascular drug programs. He is well known for his innovative
work in the discovery and development of novel anticoagulant drug candidates.
Dr. Vlasuk received his Ph.D. in biochemistry from Kent State University.

                                      -33-
<PAGE>

         CAROLYN M. FELZER has served as our Vice President and Controller since
December 2000. Previously, she served as our Senior Director of Finance and
Assistant Corporate Secretary from December 1997 to December 2000, as Controller
from January 1993 through December 1997 and as our Accounting Manager from July
1991 through January 1993. Prior to joining Corvas, she held various financial
positions with private companies since beginning her career at KPMG LLP. Ms.
Felzer received her B.S. in accounting from The Pennsylvania State University
and is a Certified Public Accountant.

         M. BLAKE INGLE, PH.D. was elected Chairman in June 1999, and has served
as one of our directors since January 1994. Since 1998, Dr. Ingle has been a
general partner of Inglewood Ventures, a venture capital firm. From March 1993
to February 1996 when it was acquired by Schering-Plough, he was the President
and Chief Executive Officer of Canji, Inc., a biopharmaceutical company. Prior
to that, he was employed in a variety of capacities with the IMCERA Group, Inc.,
a healthcare company consisting of Mallinckrodt Medical, Mallinckrodt Specialty
Chemicals and Pitman Moore, from 1980 to 1993, most recently serving as
President and Chief Executive Officer. Dr. Ingle currently serves on the Boards
of Directors of Vical, Inc., Inex Pharmaceuticals Corp., NewBiotics, Inc. and
GeneFormatics Inc., and is the Chairman of the Board of Trustees at The Burnham
Institute.

         SUSAN B. BAYH has served as one of our directors since June 2000. Since
1994, she has been a Distinguished Visiting Professor at the College of Business
Administration at Butler University in Indianapolis, Indiana. From 1994 to 2000,
she was a Commissioner for the International Joint Commission of the Water
Treaty Act between the United States and Canada. From 1989 to 1994, Ms. Bayh
served as an attorney in the Pharmaceutical Division of Eli Lilly and Company.
She currently serves on the Boards of Directors of Anthem Inc. (a Blue
Cross/Blue Shield company), Cubist Pharmaceuticals, Inc., Curis, Inc., Emmis
Communications and Golden State Foods.

         J. STUART MACKINTOSH has served as one of our directors since February
2000. Since 1985, Mr. Mackintosh has served in various capacities with European
Investors Incorporated, an investment management firm, and is currently Managing
Director and Principal. Before joining European Investors Incorporated, he was
an Assistant Vice President with Bank of Boston.

         BURTON E. SOBEL, M.D. has served as one of our directors since February
2000. He is Physician-in-Chief at Fletcher Allen Health Care and E.L. Amidon
Professor and Chair of the Department of Medicine at The University of Vermont
College of Medicine. Dr. Sobel currently serves on the Board of Directors of
Scios Inc. and has been a consultant to and served on scientific advisory boards
of several pharmaceutical and biotechnology companies.

         MICHAEL SORELL, M.D. has served as one of our directors since April
1996. Since March 1996, he has been the Managing Partner of MS Capital, LLC, a
consulting firm based in New York. From July 1986 to February 1992, he was
associated with Morgan Stanley & Co., an investment banking firm, in various
capacities, the last being Principal. From March 1992 to July 1994, he was a
partner in a joint venture with Essex Investment Management of Boston, an
investment management firm. In August 1994, he rejoined Morgan Stanley as the
emerging growth strategist where he served until February 1996. Prior to that,
he was on the staff of Memorial Sloan-Kettering Cancer Center and worked in
clinical development at Schering-Plough.

                                      -34-
<PAGE>

         NICOLE VITULLO has served as one of our directors since April 1996. She
has been Managing Director at Domain Associates, L.L.C., a venture capital
management company focused on life sciences, since April 1999. From November
1996 to April 1999, Ms. Vitullo was a Senior Vice President, and from November
1992 to November 1996 was a Vice President, of Rothschild Asset Management Inc.,
which manages International Biotechnology Trust plc and has advised
Biotechnology Investments, Limited. She served as Director of Corporate
Communications at Cephalon, Inc., a neuropharmaceutical company, from July 1991
to November 1992. Prior to that, she was Manager, Healthcare Investments at
Eastman Kodak Company. She also serves on the Board of Directors of Onyx
Pharmaceuticals Inc.

ITEM 11.  EXECUTIVE COMPENSATION

         The information required by this item is incorporated by reference into
this report from the information set forth under the caption "Executive
Compensation" in the 2001 proxy statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this item is incorporated by reference into
this report from the information set forth under the caption "Security Ownership
of Certain Beneficial Owners and Management" in the 2001 proxy statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this item is incorporated by reference into
this report from the information set forth under the caption "Certain
Transactions" in the 2001 proxy statement.

                                      -35-
<PAGE>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  1.  Financial Statements:

         See Index to Financial Statements under Item 8 of this Form 10-K.

     2.  Financial Statement Schedules:

         Schedules are omitted because they are not required or are inapplicable
         or because the information called for is included in the financial
         statements or the notes thereto.

     3.  Exhibits -- See (c) below

(b)      Reports on Form 8-K:

         On October 25, 2000, the Company filed a Current Report on Form 8-K.

(c)      Exhibits

         The following documents are exhibits to this Form 10-K:

<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                        DESCRIPTION OF DOCUMENT
 ------                        -----------------------
 <S>          <C>
 3.1          Amended and Restated Certificate of Incorporation.(5)
 3.2          Bylaws.(5)
 3.3          Certificate of Designation of the Series A Convertible Preferred
              Stock, dated as of December 14, 1994 (Filed as part of Exhibit
              10.16).
 3.4          Certificate of Designation of the Series B Convertible Preferred
              Stock, dated as of December 20, 1996. (13)
 3.5          Certificate of Designation of the Series C Junior Participating
              Preferred Stock, dated as of October 6, 1997. (16)
 4.1          Reference is made to exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 4.3, 4.4,
              4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 10.6, 10.8, 10.9, 10.18, 10.20 and
              10.35.
 4.2          Specimen stock certificate.(1)
 4.3          Common Stock Purchase Agreement between the Company and
              International Biotechnology Trust plc ("IBT") and Societe
              Financiere D'Innovation Inc. ("Sofinov"), dated as of August 18,
              1999.(28)
 4.4          Registration Rights Agreement between the Company and IBT and
              Sofinov, dated as of August 18, 1999.(28)
 4.5          Note Purchase Agreement between the Company and Artisan Equity
              Limited ("Artisan"), dated as of August 18, 1999.(26)

                                      -36-
<PAGE>

 EXHIBIT
 NUMBER                        DESCRIPTION OF DOCUMENT
 ------                        -----------------------

 4.6          5.5% Convertible Senior Subordinated Note Due 2006, in the
              principal amount of $6,500,000, issued to Artisan, dated as of
              August 18, 1999.(26)
 4.7          Registration Rights Agreement between the Company and Artisan,
              dated as of August 18, 1999.(26)
 4.8          Common Stock Purchase Agreement between the Company and Sofinov
              and Finsbury Technology Trust ("Finsbury") and Westcoast and
              Company ("Westcoast"), dated as of October 20, 1999.(30)
 4.9          Registration Rights Agreement between the Company and Sofinov and
              Finsbury and Westcoast, dated as of October 20, 1999.(30)
 4.10         5.5% Convertible Senior Subordinated Note Due 2006, in the
              principal amount of $3,500,000, issued to Artisan, dated as of
              October 20, 1999.(29)
 10.1*        Form of Indemnification Agreement between the Company and each
              director and executive officer.(1)
 10.2*        Form of Employee Stock Purchase Plan.(1) (32)
 10.3*        1991 Incentive and Compensation Plan of the Company, as amended
              (see Exhibit 10.51).(1) (12)
 10.4*        Form of Incentive Stock Option Agreement under the 1991 Incentive
              and Compensation Plan of the Company.(2)
 10.5*        Form of Non-Qualified Stock Option Agreement under the 1991
              Incentive and Compensation Plan of the Company.(2)
 10.6         Second Amended and Restated Stock Registration Rights Agreement
              between the Company and certain investors and warrantholders named
              therein, dated as of February 14, 1991, as amended on March 19,
              1991, November 13, 1991 and December 4, 1991, and supplemental
              letter agreement dated December 12, 1991.(1)
 10.7         Antibody Option Agreement between the Company and Centocor, Inc.,
              dated as of November 7, 1991, with exhibit (see Exhibit 10.51).(1)
              (3)
 10.8         Warrant to purchase Series B Preferred Stock of the Company
              (subsequently converted to Common Stock) issued to Comdisco, Inc.
              on June 19, 1990, as amended on January 2, 1992.(1)
 10.9         Warrant to purchase Series B Preferred Stock of the Company
              (subsequently converted to Common Stock) issued to Praktikerfinans
              AB on November 30, 1990, as amended on January 15, 1992.(1)
 10.10        Lease Agreement for 3030 Science Park Road, San Diego, California
              between the Company and Hartford Accident and Indemnity Company,
              dated as of March 28, 1989, as amended on March 23, 1990, May 18,
              1990 and May 16, 1991.(1)
 10.11        Fourth Lease Amendment to Lease Agreement for 3030 Science Park
              Road, San Diego, California between the Company and Hartford
              Accident and Indemnity Company, dated as of January 21, 1992.(1)

                                      -37-
<PAGE>

 EXHIBIT
 NUMBER                        DESCRIPTION OF DOCUMENT
 ------                        -----------------------

 10.12        Fifth Lease Amendment to Lease Agreement for 3030 Science Park
              Road, San Diego, California between the Company and Hartford
              Accident and Indemnity Company, dated as of April 15, 1992, Sixth
              Lease Amendment dated as of July 16, 1992, Seventh Lease Amendment
              dated as of January 18, 1993.(4)
 10.13        Assignment of Lease Agreement for 3030 Science Park Road, San
              Diego, California from Corvas International, Inc., a California
              corporation, to Corvas International, Inc., a Delaware
              corporation, dated September 14, 1993.(5)
 10.14*       Corvas International, Inc. 401(k) Compensation Deferral Savings
              Plan and Trust Agreement (Amended and Restated as of January 1,
              1989) (Revised to incorporate amendments to plan).(6)
 10.15        Research and License Agreement for Oral Thrombin Inhibitor Drugs
              between the Company and Schering Corporation and Schering-Plough
              Ltd., dated as of December 14, 1994 (see Exhibits 10.36, 10.38,
              10.39, 10.43, 10.44, 10.46 and 10.47).(6) (7)
 10.16        Series A Preferred Stock Purchase Agreement between the Company
              and Schering Corporation, dated as of December 14, 1994 (Covers
              the issuance of Series A and Series B).(6) (7)
 10.17        Eighth Lease Amendment to Lease Agreement for 3030 Science Park
              Road, San Diego, California between the Company and Hartford
              Accident and Indemnity Company, dated as of July 7, 1995.(8)
 10.18        Form of Warrant Agreement to purchase Common Stock of the Company
              issued to certain individuals affiliated with Ventana Leasing,
              Inc. on June 16, 1995.(9)
 10.19        Collaborative Research and Option Agreement between the Company
              and Pfizer Inc. and Pfizer Limited, dated as of October 14,
              1995.(9) (11)
 10.20        Common Stock and Warrant Purchase Agreement between the Company
              and certain purchasers, dated as of February 2, 1996, with
              exhibits.(9)
 10.21        Ninth Lease Amendment to Lease Agreement for 3030 Science Park
              Road, San Diego, California between the Company and Hartford
              Accident and Indemnity Company, dated as of March 15, 1996.(10)
 10.22*       Employment Agreement by and between the Company and George P.
              Vlasuk, dated as of March 18, 1997. (12)
 10.23*       Employment Agreement by and between the Company and Randall E.
              Woods, dated as of March 18, 1997. (12)
 10.24        Tenth Lease Amendment to Lease Agreement for 3030 Science Park
              Road, San Diego, California between the Company and Hub Properties
              Trust, dated as of May 12, 1997.(13)
 10.25        License and Collaboration Agreement between the Company and
              Schering Corporation, dated as of June 11, 1997 (see Exhibits
              10.26, 10.29, 10.41, 10.48 and 10.52). (14) (17)
 10.26        License and Collaboration Agreement between the Company and
              Schering-Plough Ltd., dated as of June 11, 1997 (see Exhibits
              10.25, 10.29, 10.41, 10.48 and 10.52). (14) (17)

                                      -38-
<PAGE>

 EXHIBIT
 NUMBER                        DESCRIPTION OF DOCUMENT
 ------                        -----------------------

 10.27*       Amended and Restated Secured Promissory Note between the Company
              and Randall E. Woods, dated as of August 28, 1997 (see Exhibits
              10.37, 10.45 and 10.55). (16)
 10.28        Rights Agreement between the Company and American Stock Transfer
              and Trust Company, dated as of September 18, 1997. (15)
 10.29        Letter of Agreement between the Company and Schering Corporation
              and Schering-Plough Ltd., dated as of April 16, 1998 (see Exhibits
              10.25, 10.26, 10.41, 10.48 and 10.52). (18) (19)
 10.30        Eleventh Amendment to Lease Agreement for 3030 Science Park Road,
              San Diego, California between the Company and Hub Properties
              Trust, dated as of April 23, 1998. (18)
 10.31        Offer to Amend Warrants to Purchase Shares of Common Stock of the
              Company, dated as of June 5, 1998, with certain exhibits thereto.
              (20)
 10.32        License Agreement between the Company and OCD, dated as of July
              22, 1998. (21) (37)
 10.33        License Agreement between the Company and LifeScan, Inc., dated as
              of July 22, 1998. (21) (37)
 10.34        Agreement for Corvas to Maintain Antibody Agreements, dated as of
              July 22, 1998. (21)
 10.35        Form of Warrant to Purchase Common Stock of the Company issued to
              Biotechnology Value Fund, L.P. and affiliates, dated as of August
              3, 1998. (21)
 10.36        Termination of Research and License Agreement for Thrombin
              Research Program between the Company and Schering Corporation and
              Schering-Plough, Ltd., effective August 14, 1998 (see Exhibits
              10.15 and 10.39). (21)
 10.37*       First Amendment to Amended and Restated Secured Promissory Note
              between the Company and Randall E. Woods and Nancy Saint Woods,
              dated as of September 17, 1998 (see Exhibits 10.27, 10.45 and
              10.55). (21)
 10.38        Letter of Agreement between the Company and Schering Corporation
              and Schering-Plough Ltd., dated as of December 15, 1998 (see
              Exhibits 10.15, 10.39, 10.43, 10.44, 10.46 and 10.47). (22) (24)
 10.39        Amendment Agreement between the Company and Schering Corporation
              and Schering-Plough Ltd., effective as of February 18, 1999 (see
              Exhibits 10.15 and 10.36). (22) (24)
 10.40        Twelfth Amendment to Lease Agreement for 3030 Science Park Road,
              San Diego, California between the Company and Hub Properties
              Trust, dated as of March 9, 1999. (22)
 10.41        Letter of Agreement between the Company and Schering Corporation
              and Schering-Plough Ltd., dated as of April 29, 1999 (see Exhibits
              10.25, 10.26, 10.29, 10.48 and 10.52). (23) (37)
 10.42        Thirteenth Amendment to Lease Agreement for 3030 Science Park
              Road, San Diego, California between the Company and Hub Properties
              Trust, dated as of June 15, 1999. (25)

                                      -39-
<PAGE>

 EXHIBIT
 NUMBER                        DESCRIPTION OF DOCUMENT
 ------                        -----------------------

 10.43        Letter of Agreement between the Company and Schering Corporation
              and Schering-Plough Ltd., dated as of June 23, 1999 (see Exhibits
              10.15, 10.38, 10.39, 10.44, 10.46 and 10.47). (25)
 10.44        Second Amendment Agreement between the Company and Schering
              Corporation and Schering-Plough Ltd., effective as of June 29,
              1999 (see Exhibits 10.15, 10.38, 10.39, 10.43, 10.46 and 10.47).
              (25) (27)
 10.45*       Second Amendment to Amended and Restated Secured Promissory Note
              between the Company and Randall E. Woods and Nancy Saint Woods,
              dated as of July 7, 1999 (see Exhibits 10.27, 10.37 and 10.55).
              (25)
 10.46        Letter of Agreement between the Company and Schering Corporation
              and Schering-Plough Ltd., effective as of September 8, 1999 (see
              Exhibits 10.15, 10.38, 10.39, 10.43, 10.44 and 10.47). (30)
 10.47        Third Amendment Agreement between the Company and Schering
              Corporation and Schering-Plough Ltd., effective as of December 7,
              1999 (see Exhibits 10.15, 10.38, 10.39, 10.43, 10.44 and 10.46).
              (32)
 10.48        Letter of Agreement between the Company and Schering Corporation
              and Schering-Plough Ltd., dated as of March 30, 2000 (see Exhibits
              10.25, 10.26, 10.29, 10.41 and 10.52). (31)
 10.49*       2000 Equity Incentive Plan of the Company. (33)
 10.50*       Form of Stock Option Agreement under the 2000 Equity Incentive
              Plan of the Company, with certain exhibits.
 10.51*       Amendment to 1991 Incentive and Compensation Plan of the Company.
 10.52        Amendment Agreement between the Company and Schering Corporation
              and Schering-Plough Ltd., effective as of May 18, 2000 (see
              Exhibits 10.25, 10.26, 10.29, 10.41 and 10.48). (34) (35)
 10.53        Fourteenth Amendment to Lease Agreement for 3030 Science Park
              Road, San Diego, California between the Company and Hub Properties
              Trust, dated as of June 20, 2000. (34)
 10.54        Agreement between the Company and Centocor, Inc., dated as of July
              14, 2000 (see Exhibit 10.7). (34) (35)
 10.55*       Third Amendment to Amended and Restated Secured Promissory Note
              between the Company and Randall E. Woods and Nancy Saint Woods,
              dated as of August 31, 2000 (see Exhibits 10.27, 10.37 and 10.45).
              (36)
 21.1         Subsidiary of the Company.(1)
 23.1         Independent Auditors' Consent.
 24.1         Power of Attorney. Reference is made to page 42.
</TABLE>

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

                                      -40-
<PAGE>

  (1) Incorporated by reference to Registration Statement on Form S-1 (No.
      33-44555), as amended, filed December 13, 1991.
  (2) Incorporated by reference to Registration Statement on Form S-8 (No.
      33-45607), as amended, filed February 10, 1992.
  (3) Portions of this exhibit have been granted confidential treatment pursuant
      to an order granted by the Securities and Exchange Commission on January
      30, 1992.
  (4) Incorporated by reference to Annual Report on Form 10-K, filed March 30,
      1993.
  (5) Incorporated by reference to Annual Report on Form 10-K, filed February
      23, 1994.
  (6) Incorporated by reference to Annual Report on Form 10-K, filed March 30,
      1995.
  (7) Portions of this exhibit have been granted confidential treatment pursuant
      to an order granted by the Securities and Exchange Commission on May 11,
      1995.
  (8) Incorporated by reference to Quarterly Report on Form 10-Q, filed November
      13, 1995.
  (9) Incorporated by reference to Annual Report on Form 10-K, filed February
      28, 1996.
  (10)Incorporated by reference to Registration Statement on Form S-1 (No.
      333-2644), filed March 25, 1996.
  (11)Portions of this exhibit have been granted confidential treatment pursuant
      to an order granted by the Securities and Exchange Commission on April 26,
      1996.
  (12)Incorporated by reference to Annual Report on Form 10-K, filed March 28,
      1997.
  (13)Incorporated by reference to Quarterly Report on Form 10-Q, filed May 14,
      1997.
  (14)Incorporated by reference to Quarterly Report on Form 10-Q, filed August
      13, 1997.
  (15)Incorporated by reference to Current Report on Form 8-K, filed October 8,
      1997.
  (16)Incorporated by reference to Quarterly Report on Form 10-Q, filed November
      12, 1997.
  (17)Portions of this exhibit have been granted confidential treatment pursuant
      to an order granted by the Securities and Exchange Commission on August
      26, 1997.
  (18)Incorporated by reference to Quarterly Report on Form 10-Q, filed May 14,
      1998.
  (19)Portions of this exhibit have been granted confidential treatment pursuant
      to an order granted by the Securities and Exchange Commission on July 10,
      1998.
  (20)Incorporated by reference to Quarterly Report on Form 10-Q, filed August
      12, 1998.
  (21)Incorporated by reference to Quarterly Report on Form 10-Q, filed November
      13, 1998.
  (22)Incorporated by reference to Annual Report on Form 10-K, filed March 30,
      1999.
  (23)Incorporated by reference to Quarterly Report on Form 10-Q, filed May 17,
      1999.
  (24)Portions of this exhibit have been granted confidential treatment pursuant
      to an order granted by the Securities and Exchange Commission on May 28,
      1999.
  (25)Incorporated by reference to Quarterly Report on Form 10-Q, filed August
      13, 1999.
  (26)Incorporated by reference to Schedule 13D, filed by Artisan Equity Limited
      on August 27, 1999.
  (27)Portions of this exhibit have been granted confidential treatment pursuant
      to an order granted by the Securities and Exchange Commission on September
      22, 1999.
  (28)Incorporated by reference to Registration Statement on Form S-3 (No.
      333-87339), filed September 27, 1999.
  (29)Incorporated by reference to Schedule 13D, filed by Artisan Equity Limited
      on November 5, 1999.
  (30)Incorporated by reference to Quarterly Report on Form 10-Q, filed November
      12, 1999.
  (31)Incorporated by reference to Quarterly Report on Form 10-Q, filed May 12,
      2000.
  (32)Portions of this exhibit have been granted confidential treatment pursuant
      to an order granted by the Securities and Exchange Commission on June 2,
      2000.
  (33)Incorporated by reference to Registration Statement on Form S-8 (No.
      333-41784), filed July 19, 2000.
  (34)Incorporated by reference to Quarterly Report on Form 10-Q, filed August
      11, 2000.
  (35)Portions of this exhibit have been granted confidential treatment pursuant
      to an order granted by the Securities and Exchange Commission on October
      6, 2000.
  (36)Incorporated by reference to Quarterly Report on Form 10-Q, filed November
      14, 2000.
  (37)Confidential treatment has been requested from the Securities and Exchange
      Commission for portions of this exhibit.

* Indicates executive compensation plan or arrangement.

                                      -41-
<PAGE>

                                   SIGNATURES

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

                                CORVAS INTERNATIONAL, INC.

Date: March 29, 2001            By:  /s/ RANDALL E. WOODS
                                     -------------------------------------------
                                         Randall E. Woods
                                         President and Chief Executive Officer

                                POWER OF ATTORNEY

         KNOWN TO ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Randall E. Woods and Carolyn M.
Felzer, or either of them, his attorney-in-fact, with the full power of
substitution for him in any and all capacities, to sign any amendments to this
Report, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
         Signatures                                  Titles                            Date
         ----------                                  ------                            ----

     <S>                                       <C>                                 <C>
     /s/ RANDALL E. WOODS                      President, Chief Executive          March 29, 2001
     -------------------------------------     Officer and Director
            Randall E. Woods                   (Principal Executive Officer)

     /s/ CAROLYN M. FELZER                     Vice President and Controller       March 29, 2001
     -------------------------------------     (Principal Financial and
            Carolyn M. Felzer                  Accounting Officer)

     /s/ M. BLAKE INGLE, PH.D.                 Chairman of the Board of            March 29, 2001
     -------------------------------------     Directors
            M. Blake Ingle, Ph.D.

     /s/ SUSAN B. BAYH                         Director                            March 29, 2001
     -------------------------------------
            Susan B. Bayh

     /s/ J. STUART MACKINTOSH                  Director                            March 29, 2001
     -------------------------------------
            J. Stuart Mackintosh

     /s/ BURTON E. SOBEL, M.D.                 Director                            March 29, 2001
     -------------------------------------
            Burton E. Sobel, M.D.

     /s/ MICHAEL SORELL, M.D.                  Director                            March 29, 2001
     -------------------------------------
            Michael Sorell, M.D.

                                      -42-
<PAGE>

     /s/ NICOLE VITULLO                        Director                            March 29, 2001
     -------------------------------------
            Nicole Vitullo

     /s/ GEORGE P. VLASUK, PH.D.               Director                            March 29, 2001
     -------------------------------------
            George P. Vlasuk, Ph.D.
</TABLE>


                                      -43-