<PAGE>


                         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, 1997 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)

                                   (619) 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 $49,902,700 as of
March 18, 1998.*

     The number of shares of Common Stock outstanding as of March 18, 1998 was
14,013,447.

                        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 28, 1998 is incorporated by reference into Part III of this Form 10-K.

* Calculated on the basis of 12,475,684  shares held by nonaffiliates (less than
10% shareholders on as-converted basis) and assumes, solely for this purpose,
that  the executive officers and directors of the Registrant are affiliates as
defined in Rule 405 under the Securities Act of 1933, as amended.

<PAGE>

                                       PART I

     EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. CORVAS INTERNATIONAL, INC.'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN.  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 "BUSINESS
STRATEGY," "PRODUCT DEVELOPMENT PROGRAMS," "INTEGRATED TECHNOLOGY PLATFORMS,"
"STRATEGIC ALLIANCES," "PATENTS AND PROPRIETARY RIGHTS," AND "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."


ITEM 1.  BUSINESS

OVERVIEW

     Corvas International, Inc. ("Corvas" or the "Company") is a
biopharmaceutical firm engaged in the design and development of a new
generation of therapeutic agents for the treatment of blood clot formation
(thrombosis), inflammation, cancer and other diseases.  In 1998, Corvas and
its strategic partners expect to conduct five clinical trials on four Corvas
developed drug candidates that target major cardiovascular diseases, such as
heart attack, deep vein thrombosis ("DVT") and pulmonary embolism, as well as
acute inflammation associated with reperfusion injury in ischemic stroke.
Corvas has developed its portfolio of drug candidates by integrating its
in-depth knowledge of the biology of thrombosis and, more generally, vascular
biology, with advanced and proprietary drug discovery and design technology.

     The Company's planned 1998 clinical trials for four of its drug
candidates include: (i) a Phase I trial currently being conducted by Corvas,
and a Phase II trial to be conducted by Corvas which it anticipates will
start in the second half of 1998, for Corvas' proprietary drug (NAPc2) for
the prevention of DVT; (ii) a Phase I trial, currently being conducted by
Pfizer Inc. ("Pfizer"), for an anti-inflammatory drug (NIF); (iii) a Phase I
trial for an orally active thrombin inhibitor, which Schering Corporation
("Schering-Plough") is scheduled to commence in 1998; and (iv) a Phase I
trial to be conducted by Corvas for NAP5, a subcutaneously-available drug for
acute cardiovascular indications, which Corvas anticipates will start in the
second half of 1998.

     Corvas' programs are based on three technology platforms: medicinal
chemistry, novel biologics discovery and vascular proteomics.  Corvas'
medicinal chemistry programs, which have produced drug candidates
demonstrating oral activity, are the source of the Company's synthetic drug
molecules.  Corvas' platform of novel biologics discovery, including gene
discovery, cloning, expression and mutagenesis, enable Corvas to identify and
improve upon naturally occurring novel proteins as drug candidates.  The
Company believes its newest technology platform, vascular proteomics, may
enable it to identify unique markers on the endothelium, the layer of cells
that line blood vessels and serve as gatekeepers, regulating the exposure of
the underlying tissue to oxygen, nutrients and drugs, which will allow it to
selectively target therapeutic treatments.

     ANTITHROMBOTIC PROGRAMS.  Corvas has focused its antithrombotic programs
on the development of both synthetic drug molecules and drugs based on
naturally-occurring small molecule proteins that inhibit blood clot
formation.  Serine proteases are key enzymes in the blood coagulation cascade
and the Company's programs are directed at inhibiting the activity of such
proteases.  The Company is developing drug candidates that are each designed
to inhibit one of these key proteases in the coagulation cascade:  thrombin,
Factor Xa or Factor VIIa.  The Company, with Schering-Plough, has been
developing orally active thrombin inhibitors since late 1994.  In 1995,
Corvas conducted an initial human safety study of an early generation orally
active thrombin inhibitor.  In this Phase I study, the compound demonstrated
oral activity and was well tolerated in normal male volunteers.
Schering-Plough expects to begin a Phase I trial in 1998 on an advanced
generation orally active thrombin inhibitor.

     The primary goal of the Factor Xa program is to develop safe and effective
orally active drugs to be used in clinical indications, such as chronic arterial
thrombosis.  These indications may not be readily addressed by other protease
inhibitor drugs.  The Company is developing these Factor Xa inhibitors in
collaboration with Schering-Plough.

                                       -2-

<PAGE>

     The Company's scientists have discovered a class of naturally-occurring
small protein anticoagulants which inhibit either Factor Xa or Factor VIIa
complexed with its non-enzymatic co-factor, Tissue Factor ("Factor VIIa/TF").
In 1997, Corvas completed a Phase I clinical trial on healthy male volunteers
on NAPc2, a member of the NAP family that inhibits Factor VIIa/TF.  Corvas is
currently conducting a second Phase I trial in which NAPc2 is being
administered subcutaneously to patients with disseminated intravascular
coagulation ("DIC") in order to examine the safety, tolerability and
pharmacokinetics in patients with an active coagulation disorder.  The
initial clinical use for NAPc2 is anticipated to be the prevention of DVT,
the formation of blood clots in the veins of the legs following orthopedic
surgery.  Corvas plans to file an Investigational New Drug Application
("IND") in the first quarter of 1998, and conduct a multi-centered Phase II
trial of NAPc2 directed at DVT beginning in the second half of 1998.  To
date, Corvas has not partnered with any collaborators on this program and has
retained all rights to this compound. However, if the Phase II trial is
successful, the Company may attempt to enter into a collaborative agreement
in connection with this program.

     Corvas has developed another NAP drug, NAP5, which is a
subcutaneously-available Factor Xa inhibitor.  In the second half of 1998,
Corvas plans to conduct a Phase I clinical trial to target NAP5 to treat
acute cardiovascular indications such as DVT, pulmonary embolism, myocardial
infarction (heart attack) or unstable angina.  Schering-Plough has the option
at the end of the Phase I trial to elect to assume development of NAP5,
subject to milestones and certain other payments to Corvas.  See "- Product
Development Programs" and "-Strategic Alliances."

     ANTI-INFLAMMATORY PROGRAM.  Corvas' anti-inflammatory program is
directed at the development of drugs that prevent the acute inflammatory
response that often occurs after a stroke and can exacerbate damage to
affected areas of the brain.  The Company's anti-inflammatory program has led
to the discovery of NIF, a promising novel neutrophil inhibitory factor.
This protein blocks certain white blood cell (neutrophil) functions
associated with inflammation.  In 1995, Corvas entered into an option
agreement with Pfizer to collaborate on the development of NIF.  In February
1997, Pfizer exercised its option to enter into a license and development
agreement in connection with the NIF program.  Pfizer initiated clinical
trials on NIF in February 1998.  See "- Strategic Alliances."

     NEW DRUG PROGRAMS.  The Company believes that it can leverage its
proprietary combinatorial chemistry approach developed in connection with its
antithrombotic program to develop therapeutics outside the antithrombotic
field. This technology allows the Company to develop synthetic libraries
dedicated to mechanism-based inhibitors specifically targeted at cysteine and
serine proteases.  The Company is currently using this new technology to
develop new programs.  This combinatorial approach is being applied in a
proprietary program focused on the identification of inhibitors of urokinase
plasminogen activator ("uPA").  This protease has been associated with tumor
metastasis and the generation of new blood vessels (angiogenesis) in certain
solid tumors.  The second of the new development programs in collaboration
with Schering-Plough is directed at a serine protease thought to be
responsible for replication of the hepatitis C virus.  See "- Strategic
Alliances."

     NEW TECHNOLOGY PLATFORM.  Corvas' newest, and emerging, technology
platform is in the area of vascular proteomics.  In mid-1997, Corvas entered
into an option agreement with Vascular Genomics Inc. ("VGI") pursuant to
which Corvas has the right through June 2000 to acquire VGI, and the
exclusive right to conduct research and development using the VGI-developed
technology during the option period. VGI has a portfolio of technology,
patents and patent applications which the Company believes to be important to
identifying unique sites on the endothelium.  Protein markers, unique to the
cell surfaces of the endothelium in specific organs and that distinguish
tumors from healthy tissue, are known to exist.  Corvas' program objectives
include (i) identifying markers for solid tumor cancers and using these
markers for selective targeting of therapeutics and (ii) understanding and
exploiting the mechanism by which molecules are transported across the
endothelium to enhance delivery of therapeutic drugs to organs and tissues.
See "- Product Development Programs."


     CORVAS-Registered Trademark- is a registered trademark, and the Corvas
logo, CORTHROMBIN-TM-, CORDECIN -TM- and CORSEVIN M-TM- are trademarks of the
Company.  REOPRO-Registered Trademark- is a registered trademark of Eli Lilly
and Company.  TICLID-Registered Trademark- and PLAVIX- Registered Trademark-
are registered trademarks of Sanofi.  VIRAZOLE-Registered Trademark- is a
registered trademark of ICN Pharmaceuticals, Inc.  LOVENOX-Registered
Trademark- is a registered trademark of Rhone-Poulenc-Rorer SA. INTEGRELIN-TM-
is a trademark of Cor Therapeutics, Inc.

                                       -3-

<PAGE>


BUSINESS STRATEGY

     The Company believes that its expertise will allow it to continue to
efficiently develop new compounds and advance them to the clinic.
Additionally, the Company plans to leverage its drug development skills to
further develop and advance existing and future drug candidates on its own or
through existing or future collaborations.  Corvas also plans to continue to
leverage its existing technology platforms in chemistry and biology as well
as its new technology, such as vascular proteomics, to expand and develop its
drug discovery techniques.

     Key elements of Corvas' strategy include:

     ADVANCE COMPOUNDS TO THE CLINIC.  Corvas is focusing on advancing its
drug candidates from the development stage into the clinic in an efficient
and practical manner.  The Company, along with its strategic alliance
partners, is positioned to conduct five clinical trials on four drug
candidates in 1998.  The Company believes its research and development
program will continue to provide it with new drug candidates which it can
advance to the clinic in the future.

     DEVELOP PORTFOLIO OF ANTITHROMBOTIC DRUG CANDIDATES.  Corvas continues
to develop antithrombotic drug candidates for the cardiovascular market.  The
Company believes that its program to develop inhibitors of blood coagulation
proteases will enable it to target multi-clinical indications with drugs that
can be orally administered or administered through subcutaneous injection.

     EXPAND THE PRODUCT PORTFOLIO BY APPLICATION OF TECHNOLOGY TO ADDITIONAL
TARGETS.  The Company intends to expand on its success in developing
clinically proven orally active serine protease inhibitors and believes it
can leverage its existing knowledge base to discover and develop new
inhibitors of related serine and cysteine proteases.  For example, the
Company has commenced identification of lead inhibitors of hepatitis C and
uPA.  The Company plans to utilize its proprietary chemical methodologies to
increase the speed and economy of new lead discovery in the area of protease
inhibition and expand the number of target proteases in its portfolio.
Additionally, Corvas believes its newly acquired vascular proteomics
technology will also allow it to leverage its existing knowledge base into
additional drug candidates and new drug delivery techniques.

     INTEGRATE DRUG DISCOVERY METHODOLOGIES.  The Company intends to continue
to integrate a wide range of disciplines to develop new drug candidates
through a systematic process.  The Company's drug development disciplines
include medicinal chemistry, peptide and peptidomimetic chemistry,
computer-aided drug design, structural biology, molecular biology,
biochemistry, as well as pharmacology competencies. The Company is currently
integrating its newest platform, vascular proteomics, to further enhance its
drug discovery capabilities.

     ESTABLISH A STRONG PORTFOLIO OF PATENTS AND PROPRIETARY TECHNOLOGIES.
Corvas plans to continue its proactive policy of filing and prosecuting
patent applications claiming a range of inventions, including a number of new
chemical classes of compounds, uses and methods of synthesis of new
molecules, discovery methods, novel genes and gene products and novel
analytical reagents.  Corvas has entered into selected agreements to license
enabling technology from third parties and intends to seek rights to
additional external technology on an ongoing basis to complement internal
discovery efforts.  See "- Patents and Proprietary Rights" and "- Strategic
Alliances."

     UTILIZE STRATEGIC ALLIANCES AS A MEANS TO ENHANCE DEVELOPMENT AND
COMMERCIALIZATION OF PRODUCTS.  Corvas intends to continue to establish
strategic alliances, such as those already established with Schering-Plough
and Pfizer, to access the resources required to support the development and
commercialization of other technologies and drug candidates.  In certain
situations, Corvas may retain certain exclusive, joint commercialization or
co-promotion rights to selected acute care products for the U.S. market or
other selected markets.

BACKGROUND

THROMBOSIS

     The formation of a blood clot, or thrombus, results from a complex
cascade of biochemical events involving blood coagulation proteases and
cellular fragments called platelets.  Although blood clot formation is a
normal vascular repair mechanism, it can also result in occlusion of one or
more critical blood vessels (thrombosis) in a vital organ, such as the heart,
lungs or brain.

                                       -4-

<PAGE>

     Thrombosis causes several significant clinical conditions characterized
by the location of the blood vessel where the clot is lodged.  For example,
acute myocardial infarction ("MI") results from thrombosis in a major
coronary artery which supplies blood to the heart muscle; stroke or transient
ischemic attacks, known also as "TIA's," may result from thrombosis in an
artery which supplies blood to a part of the brain.  Similarly, thrombosis in
the major veins of the legs, called DVT, causes local inflammation, pain and
other complications, including the potential for dislodgment of part of the
blood clot which can travel to the lungs and may result in life-threatening
pulmonary embolism ("PE").  DVT and PE can be unpredictable complications of
surgery indirectly involving the vasculature such as major orthopedic and
abdominal surgery. Thrombosis can also be generalized, with microclot
formation occurring throughout the vascular system.  This condition, known as
DIC, can be a consequence of certain cancers and sepsis, and may result in
multiple organ failure, hemorrhage and death.  Transient thrombosis in one or
more of the coronary arteries of the heart may result in unstable angina
("UA") leading to serious chest pain and is a significant risk factor in the
development of MI.

     Two classes of antithrombotic drugs are presently in clinical use:
anticoagulants and antiplatelet agents.  In the U.S., heparins and warfarin
(COUMADIN-Registered Trademark-) are the only drugs currently approved for
use as acute and chronic anticoagulants, respectively. Although these drugs
are widely prescribed, they have significant limitations.  Unfractionated
heparins, which act by an indirect inhibition of one or more coagulation
proteases (primarily thrombin), can cause excessive bleeding and decreased
platelet count (thrombocytopenia) and are administered primarily by injection
in a hospital setting where monitoring is available.  Low molecular weight
heparins, which may be injected subcutaneously and do not require monitoring
of coagulation function, are the anticoagulants of choice today for acute
therapy. Although these drugs have been adopted for selected indications and
have the advantage of subcutaneous injection and have the advantage of
subcutaneous injection, low molecular weight heparins still suffer from many
of the limitations of standard, unfractionated heparins and have shown
limited efficacy in several clinical indications of thrombosis.  Warfarin,
which is orally administered, lacks specificity of action, may cause
bleeding, must be carefully monitored and, due to its slow onset of action,
is unsuitable for use as an acute antithrombotic drug.  Additionally, there
are many adverse drug and dietary interactions that impact the effectiveness
of warfarin due to the difficulties in maintaining effective blood levels of
the drug which in turn narrows the margin of safety for effective use.

     Aspirin, the most commonly used antiplatelet agent for chronic therapy,
has a relatively slow onset of action and its effect is reversed by the
natural production of new blood platelets, a process that takes approximately
ten days. In addition, chronic administration of aspirin carries the risk of
gastrointestinal bleeding (ulceration) and possibly hemorrhagic stroke.  Two
other antiplatelet agents are currently marketed for chronic therapy, but
offer only a marginal benefit over aspirin. Clopidogrel (TICLID- Registered
Trademark) and Ticlopidine (PLAVIX- Registered Trademark) are
chemically-related drugs that act to reduce the activity of platelets.
INTEGRELIN-TM- and REOPRO- Registered Trademark- are two products in a new
class of antiplatelet agents, GPIIb/IIIa antagonists, which have been
introduced to the market for acute thrombotic indications.  The more advanced
GPIIb/IIIa antagonists are administered acutely by intravenous routes and
should be used with an anticoagulant such as heparin.

     Large numbers of patients are affected by thrombotic and associated
vascular diseases.  Existing products are burdened by limited efficacy,
adverse side effects and invasive methods of administration, providing
significant market opportunities for new drugs.  The growth in sales in the
antithrombotic drug category supports the view that physicians are adopting
new agents in search of better therapeutic outcomes and economics.  Corvas is
building on recent scientific advances in the understanding of the mechanisms
of blood clot formation and is developing new therapeutics designed to
intervene more specifically in the disease process that may result in drugs
which Corvas believes will offer important economic and therapeutic
advantages over existing therapies.

INFLAMMATION

     Inflammation is the body's response to injury and infection.  The
inflammatory response is mediated by a series of biochemical events by which
the body attempts to limit or destroy the injurious agents, heal wounds and
maintain health.  However, the body's inflammatory response can result in
significant additional tissue injury.  An initiating event in an inflammatory
response is the adhesion of neutrophils, a specific type of white blood cell,
to the endothelium, which lines the blood vessel walls.  Adhesion is caused
by the interaction of specific receptors on the neutrophils with adhesion
molecules on the endothelium.  After adhesion occurs, the neutrophils migrate
across the lining of the blood vessel and into the underlying tissue where
they release toxic substances which can exacerbate tissue damage.  These
events can occur in both acute and chronic inflammatory conditions.  Acute
disorders which are often accompanied by this inflammatory response include
ischemic stroke and the traumatic shock which can

                                       -5-

<PAGE>

occur following certain surgical procedures such as aortic aneurysm repair,
artery bypass grafting and major abdominal surgery.

     Currently marketed anti-inflammatory drugs seek to alleviate symptoms
rather than intervene in the underlying disease processes.  Blocking the
activation and adhesion of neutrophils to the endothelium, and thereby
preventing their accumulation in tissue, is an alternate approach which could
more effectively inhibit the inflammatory response.  Corvas is developing
drugs that are intended to block the activation and adhesion of neutrophils
in response to an ischemic stroke thereby inhibiting inflammation that may
cause additional damage to the affected portion of the brain.

VASCULAR PROTEOMICS

     All of the blood vessels in the body are lined with a continuous, single
layer of cells which form a highly specialized organ called the endothelium.
This is the only organ in the body that is directly exposed to the blood and,
as a result, the endothelial cells serve as the primary gatekeepers that
regulate the exposure of the underlying tissues of the organs in the body to
oxygen, nutrients and drugs.  The intimate relationship between the blood,
the endothelium, and underlying tissue make the endothelium a responsive
organ to its local environment both in normal and diseased states.  This
responsiveness is reflected in the appearance of unique marker proteins on
the endothelial cell surface exposed to the blood that are specific for the
vascular system of a particular tissue.  For example, it has been suggested
that the newly-developed vascular system (angiogenesis) of certain solid
tumors which involves the formation and growth of endothelium has unique,
surface-exposed marker proteins that could be used for selective targeting of
therapeutic agents to the tumor, and not to other organs of the body.

     The endothelium differs throughout the body.  Scientists at Corvas are
developing methodologies for isolating endothelial protein sites thought to
be crucial for transport of blood-borne agents from the blood to the
underlying tissue, and thought to uniquely characterize the vascular systems
of organs and tissues throughout the body.  Once identified, a unique
endothelial protein becomes a possible target for selective delivery of
drugs, genes or other biological modifiers.  As gatekeepers, endothelial
cells have evolved specialized mechanisms to facilitate the transport of
blood-borne components to the underlying tissues.  For example, the
blood-brain barrier defines the vascular endothelial lining of the brain
which is exquisitely selective with regard to the exposure of the brain to
many substances that would normally be transported to other tissues in the
body.  Characterization and subsequent exploitation of these transport
mechanisms coupled with selective vascular targeting strategies could provide
unique opportunities for efficient organ and tissue-specific delivery of a
wide range of therapeutic agents with reduced side effects.

INHIBITORS OF TUMOR METASTASIS AND GROWTH

     In certain solid tumor cancers, cancerous cells can migrate from the
primary tumor mass and spread, or metastasize, throughout the body to distant
organs, carried via the blood and lymphatic circulatory systems.  The process
of metastatic migration of tumor cells is not presently well understood.
However, it has been demonstrated that several proteases play an important
role in this process.  uPA is a serine protease similar to thrombin, Factor
Xa and Factor VIIa that has been shown to play an important role in the
metastasis of certain solid tumor cells. In addition, uPA has been implicated
in the establishment and growth of the new blood vessels (angiogenesis)
required for the survival of metastatic tumors in organs and tissues distant
from the primary tumor.  The pleiotropic, or multiple, effects of uPA in the
metastasis and growth of certain solid tumors, as well as its similarities to
other serine proteases, make it an ideal target for the development of
selective inhibitors to use in conjunction with first-line therapies for the
treatment of patients with life-threatening malignancies.

HEPATITIS C

     Chronic hepatitis C infection is a substantial public health problem
affecting a significant percentage of the world's population.  Infection with
hepatitis C may lead to an increased probability of developing serious
chronic liver disease. The primary treatment for hepatitis C infections today
is a regimen of alpha interferon, a recombinant anti-viral protein, and other
anti-viral drugs such as ribavirin (VIRAZOLE-Registeed Trademark). The
leading alpha interferon-ribavirin combination is marketed by
Schering-Plough, Corvas' strategic partner on its hepatitis C program.  The
marketed products demonstrate efficacy in only a minority segment of
patients, are expensive and must be administered by subcutaneous injection
several times weekly.  Development efforts by other biotechnology and
pharmaceutical companies include attempts to develop vaccines, broad spectrum
anti-viral agents, and other small molecule, orally available agents targeted
at the hepatitis C protease.  Corvas, in partnership with Schering-Plough, is
working on the development of an orally administered, relatively affordable
drug for the treatment of chronic hnepatitis C infection.  Corvas believes
that such a drug would address a large, unmet medical need.

                                       -6-

<PAGE>

PRODUCT DEVELOPMENT PROGRAMS

     The following table describes Corvas' primary drug development programs,
their potential therapeutic indications and their development status.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
 PROGRAM                            POTENTIAL INDICATION(1)           STATUS(2)                         PARTNER
----------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                           <C>                                   <C>
 ANTITHROMBOTICS:

 FACTOR VIIA INHIBITORS

 NAPc2-subcutaneous injection       DVT, PE, UA, MI               Phase I; Phase II slated for H2 1998  Corvas proprietary

 Corsevin M antibody                MI, UA                        Phase I completed in 1993; Centocor   Centocor, Inc.
                                                                  responsible for further development

 FACTOR XA INHIBITORS

 Cordecin AS series- oral           MI, UA, PE, DVT               Lead evaluation/optimization          Schering-Plough

 NAP5-subcutaneous injection        DVT, MI, UA, PE               Phase I planned for H2 1998           Option to acquire held by
                                                                                                        Schering-Plough

 THROMBIN INHIBITORS

 Corthrombin- oral                  DVT, orthopedic surgery,      Phase I for earlier compound          Schering-Plough
                                    arterial indications, AF      completed in 1995; additional Phase I
                                                                  slated for 1998

 ANTI-INFLAMMATORY:

 NIF                                Stroke                        Phase I                               Pfizer

 OTHER:

 Urokinase inhibitor                Tumor metastasis, tumor       Lead evaluation/optimization          Corvas proprietary
                                    angiogenesis

 Hepatitis C NS3 protease           Chronic hepatitis C           Lead discovery                        Schering-Plough
 inhibitor                          infections
</TABLE>
_____________________

 (1) The following abbreviations are used in the above table: AF=atrial
     fibrillation; DVT=deep vein thrombosis; MI=myocardial infarction;
     PE=pulmonary embolism; UA=unstable angina.

(2)  The following definitions apply to the above table: "Lead
     discovery"=Identification of lead compounds with activity in appropriate IN
     VITRO assay systems.  These lead compounds may require additional chemical
     manipulation and more extensive evaluation prior to selection of
     candidates, if any, for preclinical development.  "Lead
     evaluation/optimization"= Extensive evaluation of lead compounds in
     multiple IN VITRO assay systems and preliminary animal pharmacology
     studies. See "Business - Government Regulation" for a description of the
     clinical trial process.

ANTITHROMBOTIC PROGRAMS

     Corvas is developing a new generation of drug candidates for the prevention
and treatment of a broad range of acute and chronic thrombotic indications.
Corvas has adopted a comprehensive approach in its antithrombotic program,
strategically targeting inhibition of each of three key proteases in the
coagulation cascade - Factor VIIa, Factor Xa and thrombin.  Corvas is developing
compounds, each of which inhibits one of these proteases and believes that these
drug candidates have advantages over currently available antithrombotic drugs
with respect to efficacy, patient safety and convenience.  Corvas believes that
its program targeting the inhibition of the key coagulation proteases is among
the most

                                      -7-
<PAGE>

comprehensive in the industry and that it has achieved a leading position in
the design and development of injectable and orally active antithrombotic
agents.

     NAP ANTICOAGULANTS. Corvas scientists have discovered a unique family of
small protein inhibitors of Factors Xa and VIIa/TF.  These NAP proteins were
discovered by Corvas scientists in blood-feeding hookworm parasites that have
evolved efficient anticoagulation mechanisms. Based on comparative data
developed both in the Company's laboratories and with collaborators, Corvas
believes that these agents exhibit significant antithrombotic potency.  A
recombinant version of NAPc2, a novel Factor VIIa/TF inhibitor, was evaluated in
a Phase I clinical trial completed in 1997 to assess safety, tolerability and
pharmacokinetics.  The inhibitor was administered by subcutaneous injection,
similar to LOVENOX-Registered Trademark-,  a low molecular weight heparin which
is the current leading clinical anticoagulant for acute therapy.  The
administration of NAPc2 in this double-blinded, placebo-controlled study using
30 normal healthy male volunteers resulted in a dose-dependent systemic
anticoagulant effect with a prolonged duration.  There were no safety or
tolerability concerns associated with the administration of NAPc2 at any of
several doses tested.  A second Phase I trial is in progress in patients
presenting to the clinic with DIC in order to examine safety, tolerability and
pharmacokinetics in patients with an active coagulation disorder.  Corvas
anticipates that it will file an IND in the first quarter of 1998 and, later in
1998, initiate a Phase II study directed at DVT in the U.S. and Canada for
NAPc2.  The initiation of the Phase II study is not dependent on the completion
of the second Phase I trial.

     NAP5, another member of the NAP family of anticoagulants, is scheduled to
enter Phase I trials in 1998.  This anticoagulant protein is a direct inhibitor
of Factor Xa, in contrast to NAPc2, which principally inhibits Factor VIIa/TF.
Following completion of a Phase I trial to be conducted by the Company,
Schering-Plough will have an opportunity to evaluate NAP5 as an additional
product and license rights to it or, alternatively, allow Corvas to retain these
rights. Schering-Plough opted not to conduct this trial itself.  Corvas believes
that NAP5 will complement its current activities with NAPc2 in addressing
specific needs in the treatment of acute thrombotic disorders.

     CORDECIN COMPOUNDS. Corvas is also developing synthetic inhibitors of
Factor Xa. Scientists at Corvas have identified specific Factor Xa inhibitors in
IN VITRO assay systems and in IN VIVO animal models, including compounds that
exhibited oral activity in rodent models of thrombosis and oral bioavailability
in other animal models, including non-human primates.  Corvas research
activities are focused on continued refinement of these molecules for selection
of preclinical candidate(s) by Schering-Plough.  As part of the Company's
strategic alliances with Schering-Plough, Schering-Plough exercised its
exclusive option for CORDECIN compounds in December 1996.  See "- Strategic
Alliances."

     CORTHROMBIN COMPOUNDS. Corvas has developed selective synthetic inhibitors
of thrombin, a key blood coagulation protease that produces fibrin and initiates
platelet aggregation, which are the two major components of a blood clot.  In
December 1994, Corvas entered into a strategic alliance with Schering-Plough to
develop and commercialize orally active thrombin inhibitor drugs for the
prevention and treatment of chronic cardiovascular disorders.  See "- Strategic
Alliances." In 1995, Corvas conducted a Phase I clinical trial of a first
generation orally active thrombin inhibitor.  In this exploratory Phase I study,
the compound demonstrated oral activity, safety and tolerability.  In January
1997, Schering-Plough selected a more potent and selective advanced-generation
compound as a clinical development candidate.  Phase I clinical trials on this
drug candidate, under the direction of Schering-Plough, are expected to begin in
1998.

     CORSEVIN M. Corvas' CORSEVIN M, a specific mouse-derived monoclonal
antibody fragment, acts at the initial step of the coagulation cascade by
binding to Factor VIIa and neutralizing its clot-forming activity.  In 1993,
Corvas completed a Phase I clinical trial of CORSEVIN M which it believes is the
first specific inhibitor of the initiation of the coagulation cascade to have
been tested in humans.  In the Phase I clinical trial, this compound showed
potential as a safe, fast-acting and reversible anticoagulant.  Because Corvas
has been focusing its resources on non-antibody based pharmaceuticals, it had
licensed this product to Centocor in 1991. Upon completion of the Phase I
clinical trial, Centocor assumed the development responsibilities for CORSEVIN
M.  While Centocor has performed limited development to date, Centocor has
advised Corvas that Centocor intends to continue the development of CORSEVIN M.
See "- Strategic Alliances."


                                      -8-
<PAGE>

ANTI-INFLAMMATORY PROGRAM

     NIF.  Corvas is developing NIF, a protein that is a highly specific
antagonist of neutrophil activation, adhesion and transmigration into tissue.
NIF, like the NAP protein, was originally discovered by Company scientists from
blood-feeding hookworms.  NIF interacts specifically with a key cellular
adhesion receptor (integrin) on the surface of neutrophils known as CD11b/CD18
(Mac-1) which blocks the adhesion of neutrophils to the endothelium and thereby
inhibits the first step in the inflammatory response.  Corvas has produced
multiple recombinant forms of NIF, selected one form for preclinical
development, and has demonstrated activity of the molecule in several animal
pharmacology models of acute inflammation.  Corvas believes that NIF is the
first identified, naturally-occurring non-antibody antagonist of CD11b/CD18, and
that this novel molecule may have application as an acute anti-inflammatory drug
with safety and efficacy advantages over current clinical therapies and other
investigational agents.  In February 1997, following extensive preclinical
evaluation, Pfizer entered into an exclusive license and development agreement
with the Company to develop NIF as a therapy for stroke.  Pfizer initiated
clinical trials on NIF in February 1998.  See "- Strategic Alliances."

     The competitive environment in the treatment of stroke is presently
favorable for new product entry.  Physicians have few drugs at their disposal
for treating the stroke patient.  In the acute phase of ischemic stroke, a
thrombolytic agent may be given to attempt to dissolve the blood clot which is
blocking blood flow and causing the ischemia, but this does not ameliorate the
secondary, and often serious, damage that occurs when blood flow is restored
(reperfusion injury).  Development programs at other companies have also
addressed leukocyte receptor inhibition with mainly antibody-based agents but,
in some instances, have been discontinued because of limited efficacy or
unfavorable side-effect profiles.

NEW DRUG PROGRAMS

     UROKINASE PLASMINOGEN ACTIVATOR.  Corvas is targeting its combinational
chemistry technology at the serine protease uPA, which shares important
properties with the serine proteases involved in the blood coagulation
cascade, to develop an orally available inhibitor drug.  Studies have shown
that uPA participates in the metastatic migration of tumor cells from certain
solid tumors.  Additionally, uPA has been shown to be integral to the growth
of new blood vessels (angiogenesis) that is required by many solid tumors to
continue their rapid and uncontrolled growth.  Corvas has used its
proprietary combinatorial protease inhibitor technology to identify lead
compounds with selectivity against related proteases, including tissue
plasminogen activator ("tPA"), as well as significant oral bioavailability in
two animal models.  Lead discovery and optimization of this early-stage
program are expected to continue through the testing of selected inhibitors
in relevant animal models of solid tumor growth and metastasis.

     The competition in cancer products is diverse but is generally
characterized by limited efficacy.  In solid tumor cancers, malignant tumors
invade and disrupt nearby tissues and can also metastasize or spread.  The
impact of these tumors on vital organs such as the lungs and the liver
frequently leads to death.  Surgery is used to remove solid tumors that are
accessible to the surgeon and can be effective if the cancer has not
metastasized.  Radiation therapy also can be employed to irradiate a solid tumor
and surrounding tissues and is a first-line therapy for inoperable tumors, but
side effects are a limiting factor in treatment.  Radiation therapy is used
frequently in conjunction with surgery either to reduce the tumor mass prior to
surgery or to destroy tumor cells that may remain at the tumor site after
surgery.  However, radiation therapy cannot assure that all tumor cells will be
destroyed and has only limited utility for treating widespread metastases.
While surgery and radiation therapy are the primary treatments for solid tumors,
chemotherapy and hormonal treatments often are used as adjunctive therapies and
also are used as primary therapies for inoperable or metastatic cancers.  There
are many, well established marketers of products for radiation, chemotherapy and
hormonal treatments.  However, the side effects of these therapies can often
limit their effectiveness due to patient tolerance and compliance. Corvas is
focusing on the development of drugs that may prevent the growth of solid
tumors.

     HEPATITIS C REPLICATION INHIBITORS.  The Company is also using its
combinatorial chemistry technology to target the enzymatic function of a
viral protease, NS3, thought to be responsible for replication of the
hepatitis C virus.  Current treatment of hepatitis C is limited to expensive
anti-viral regimens administered by injection which do not inhibit NS3.
Inhibition of this protease is expected to halt reproduction of the virus,
potentially leading to a reduction in viral load and possibly elimination of
the virus from the patient. The NS3 protease is in the same family of
proteases (serine proteases) as the coagulation proteases thrombin, Factor Xa
and Factor VIIa.  This program is still in the lead discovery stage and will
require extensive additional testing prior to selection of candidates, if
any, for preclinical development.  In pursuing this program, Corvas is
attempting to establish expertise in the area of novel protease inhibitor
development, which may also be applied to other viral proteases.  In June
1997, Corvas entered into a strategic alliance with Schering-Plough to
collaborate on development of this program to treat chronic hepatitis C
infections.  See "- Strategic Alliances."

                                 -9-
<PAGE>

INTEGRATED TECHNOLOGY PLATFORMS

     MEDICINAL CHEMISTRY.  Corvas scientists have extensive knowledge and
practical experience in computer-aided drug design and have developed novel,
proprietary software to expedite the design of synthetic drug candidates.  Using
computer-aided molecular modeling techniques, along with X-ray crystal
structures of native proteases as well as protease inhibitor complexes, Corvas
scientists have gained valuable insights regarding the unique features of each
of its specific protease targets.  Corvas scientists have used this information
to both design novel inhibitors and to optimize lead compounds. By systematic
iterative synthesis, biological evaluation and modeling, Corvas scientists have
developed a comprehensive database correlating biological activity of candidate
drugs with their structures.

     Corvas' medicinal chemistry expertise is essential to the development of
synthetic pharmaceuticals and is supported and complemented by capabilities in
protein engineering, biochemistry, immunology, monoclonal antibody technology,
analytical chemistry, molecular modeling and IN VITRO and IN VIVO biological
testing.  Corvas has built a team of experienced medicinal chemists who have a
broad range of experience in critical areas of pharmaceutical chemistry.
Specific areas of expertise within this group include synthetic, peptide,
peptidomimetic, combinatorial and diversity, analytical and process chemistry.
Novel and proprietary technologies developed by Corvas, such as the development
of proprietary combinatorial chemistry approaches, may help to speed the process
of drug discovery.

     Corvas developed this unique combinatorial approach using several
proprietary chemical strategies for inhibiting serine proteases using a concept
known as "transition state analog inhibition."  In this approach, an inhibitor
is synthesized with a chemical group which mimics the "transition state"
structure that is a stable intermediate between that of the protease's substrate
and its product.  Corvas scientists have exploited this principle to produce
inhibitors of three proteases in the coagulation cascade, as well as several
other proteases not related to thrombosis.  The resulting inhibitors bind in a
reversible and stable manner to the target protease and have been shown to
exhibit desirable pharmacologic properties, including oral bioavailability in
humans.

     Corvas scientists are currently combining Corvas proprietary chemistry with
combinatorial chemistry to create novel methods of producing large synthetic
libraries of protease inhibitors.  The Company expects that such methods, if
successfully developed, will improve the speed of lead identification and
optimization efforts and enable Corvas to rapidly expand its drug candidate
portfolio to include new target proteases.

     NOVEL BIOLOGICS DISCOVERY.  Natural products have been a source of new
drugs for many years.  Advances in molecular biology permit the search for,
and identification of, new biological entities in a variety of sources when
appropriate analytical assays exist.  Corvas scientists have examined
blood-feeding parasites as a source of biologically-active agents which can
serve as mechanistic probes and potential drug candidates.  Using specialized
assays of coagulation proteases and white blood cells, Corvas scientists have
discovered natural protein molecules that inhibit certain blood coagulation
proteases and certain white blood cell functions (from the NAP and NIF
families).  Techniques used to discover these proteins include classical
molecular  fractionation and purification, as well as gene cloning, including
specialized expression cloning methods developed by Corvas scientists.  The
study of the structure and function of molecules evolved by nature to perform
specialized biochemical functions often yields novel insights into molecular
mechanisms.  Such studies have provided competitive advantages to Corvas
scientists which are being applied in its synthetic molecule drug discovery
programs.  Corvas anticipates using its biological discovery expertise to
identify molecules that act on new drug discovery targets and to identify
novel targets for future discovery programs as well.

                                      -10-
<PAGE>

     VASCULAR PROTEOMICS.  In connection with its June 1997 option agreement to
acquire VGI, Corvas has implemented a broad-based technology platform focused on
the proteomic characterization and exploitation of the vascular endothelial
surface, based on three issued U.S. patents.  This proprietary technology
portfolio is positioned to facilitate the discovery, design and eventual
development of a new class of drugs targeted to, and to be retained in, select
tissues that require local therapy.  The blood vessel system is a particularly
advantageous target for a vector-mediated drug delivery system since: (i) the
endothelial cells are easily accessible to injectable agents through the blood
circulation and (ii) the endothelial cell surface expresses different molecules
depending upon its tissue environment and disease pathology.  Such targeting of
tissues through the endothelial cells of the blood vessel system has numerous
advantages including:  (i) high concentrations of drugs would be localized to
select tissues; (ii) drugs, such as growth factors, chemotoxins and gene
vectors, would be targeted to specific tissue sites reducing side effects and
complications while enhancing efficacy; (iii) select tissues would be destroyed,
modified or treated; and (iv) the natural transport or "gatekeeper" function of
the endothelium would be exploited to deliver targeted therapeutics or genes
across the blood vessel wall to the underlying tissue.  Corvas' vector-mediated
drug delivery system potentially has widespread applications in treating cancer,
cardiovascular diseases (including coronary artery disease, myocardial ischemia,
strokes, reperfusion injury, hypertension and atherosclerosis), neurological and
immunological disorders, diabetes, vasculitis, tissue growth and repair, asthma,
osteoporosis and inflammation associated with many disease processes.

     The initial focus will be on vascular targeting as a means to treat
several diseases, including cancer, where Corvas is hoping to develop more
effective drugs for the treatment of solid malignant tumors.  Corvas is using
its vascular proteomics technology platform to target therapeutic agents to
select tissues based upon its ability: (i) to identify and isolate
molecules such as proteins, that are unique and exposed on the surface of
blood vessels serving that tissue and (ii) to assemble targeting vectors
recognizing these unique molecules for facilitating drug delivery through the
circulating blood to the desired tissue site.  Corvas  believes these
proprietary technologies may allow rapid, high purity isolation of the
endothelial surface (cell membrane) exposed to the circulating blood and
critical to defining unique molecular targets of any normal or diseased
tissue.  Prior to this technical development, isolation of this important
interface in its native state, especially from tumors, was not successful.
Proteins that are potential molecular targets for drug delivery on the
surface of the endothelial cells represent a very small fraction of the total
proteins in tissues, so isolating them from homogenized tissue samples offers
a very low likelihood of success.  To address this challenge, Corvas'
scientists have taken advantage of several novel techniques developed by VGI.
These techniques permit Corvas to selectively change the physical properties
of the surface of the endothelial cells exposed to the blood.  Based upon
these changes, the endothelial cell surface membrane can be readily isolated
and purified from the rest of the tissue, then further characterized to
identify unique molecular targets.

     To date, Corvas' scientists have identified several endothelial cell
surface proteins in normal and diseased tissue using VGI's proprietary high
resolution isolation and proteomic analysis that includes two-dimensional gel
electrophoresis and mass spectrometry.  Corvas may be able to use these
unique surface protein molecules to target therapeutic and diagnostic probes
by utilizing monoclonal antibodies and other binding molecules such as cyclic
peptides.

STRATEGIC ALLIANCES

     As part of Corvas' strategy for the research, development and
commercialization of its products, the Company has entered into various
arrangements with corporate partners, licensors, licensees and others, and may
enter into additional alliances in the future.

     RELATIONSHIPS WITH SCHERING-PLOUGH.  In December 1994, Corvas entered
into a strategic alliance agreement with Schering-Plough to collaborate on
the discovery and commercialization of orally active thrombin inhibitor drugs
for the prevention and treatment of chronic cardiovascular disorders.  Under
the terms of the initial agreement, Schering-Plough compensated Corvas for
certain costs of research and preclinical development of thrombin inhibitors
over a two-year period which ended December 31, 1996.  Schering-Plough, which
is responsible for certain preclinical development, all future clinical
trials and regulatory activities, received exclusive worldwide manufacturing
and marketing rights for any resulting thrombin inhibitors. In January 1997,
Schering-Plough selected a clinical development candidate in the thrombin
program and paid Corvas a $3,000,000 milestone payment. Schering-Plough is
expected to begin Phase I clinical trials on this candidate in 1998.  Corvas
may also receive additional milestone payments and royalties on sales of
therapeutics resulting from this alliance.

                                      -11-
<PAGE>

     In conjunction with the December 1994 agreement, Schering-Plough acquired
an exclusive option to expand its alliance with the Company to include Factor Xa
inhibitors.  In December 1996, Schering-Plough exercised this option and agreed
to compensate Corvas for certain costs of research and preclinical development
of Factor Xa inhibitors over a two-year period ending December 31, 1998.
Schering-Plough, which is responsible for preclinical development, all clinical
trials and regulatory activities, received exclusive worldwide marketing rights
for any resulting Factor Xa inhibitors.  Corvas retained certain manufacturing
rights and may in the future receive milestone payments and royalties on sales
of therapeutics resulting from this alliance.

     Upon execution of the initial agreement in 1994, Schering-Plough purchased
1,000,000 shares of Series A Convertible Preferred Stock of the Company,
resulting in net proceeds of $4,864,000. Upon exercise of the Factor Xa option
in 1996, Schering-Plough purchased 250,000 shares of Series B Convertible
Preferred Stock of the Company, resulting in net proceeds of $2,000,000.
Schering-Plough beneficially owns approximately 8.2% of the outstanding
securities of the Company on an as-converted basis.  Revenue of $4,000,000,
$5,000,000 and $7,000,000 were recognized under these agreements in each of
1995, 1996 and 1997, respectively, and $5,000,000 is anticipated to be
recognized in 1998.  Through the end of 1997, Corvas has received a total of
$27,000,000 from Schering-Plough, of which $4,000,000 is recorded as deferred
revenue at December 31, 1997.  If all milestones on these programs are met,
Corvas would receive an additional $54,000,000 in milestone payments, plus
royalties on any sales of commercialized products.

     In June 1997, Corvas entered into an additional agreement with
Schering-Plough which covers the design and development of
orally-bioavailable inhibitors of a key protease believed to be necessary for
hepatitis C virus replication. Under the terms of this agreement,
Schering-Plough received an exclusive worldwide license for products
developed from these inhibitors and is responsible for all development,
manufacturing and marketing of these products. Corvas received a license fee
of $250,000 and prepaid research funding for a one-year period.
Schering-Plough may extend the program beyond the initial term of one year
for up to two additional one-year periods.  The funding for each extension
year will be dependent on the manpower applied to the program, within an
established minimum and maximum.

RELATIONSHIP WITH PFIZER

     In October 1995, Corvas and Pfizer entered into a research and option
agreement of up to eighteen months to collaborate on the development of NIF.  In
February 1997, Pfizer elected to exercise its option to enter into a two-year
exclusive license and development agreement.  Pfizer holds an exclusive,
worldwide license to further develop, manufacture and market NIF as a
therapeutic agent and has the right to terminate the agreement at any time upon
30 days written notice to the Company.  Pfizer will also be responsible for
funding all further development of NIF, including costs associated with clinical
trials and certain limited activities performed by Corvas. Pfizer is
compensating Corvas for certain costs of research and preclinical development of
NIF over a two-year period which ends March 31, 1999.  If products are
successfully commercialized from this agreement, Corvas will also receive
milestone payments and royalties on product sales.  Through the end of 1997,
Pfizer has paid Corvas $2,797,000 under this alliance. If all milestones on this
program are met, Corvas would receive an additional $24,500,000 in payments plus
royalties on any sales of commercialized products.

     In the first quarter of 1998, Pfizer notified Corvas of a milestone
achieved upon Pfizer's commencement of a clinical trial for NIF, which will
result in a payment to Corvas of $1,000,000.

RELATIONSHIP WITH CENTOCOR

     In November 1991, Corvas entered into an agreement with Centocor
pursuant to which Corvas granted rights to Centocor to license and
commercialize certain monoclonal antibody products developed by Corvas.  For
one such monoclonal antibody product, CORSEVIN M, Corvas completed a Phase I
clinical trial in 1993. Centocor has informed Corvas that it intends to
continue the development of CORSEVIN M.  Corvas will depend on Centocor for
the continued development of CORSEVIN M as well as for product sales and,
while Centocor has performed limited development to date, Centocor has
advised Corvas that Centocor intends to continue the development program.  In
1994, Centocor terminated its option rights to future monoclonal antibody
products discovered or acquired by Corvas. The Company may receive a future
milestone payment upon receipt of certain regulatory approvals and royalties
on any product sales of CORSEVIN M.

                                      -12-
<PAGE>

RELATIONSHIP WITH VASCULAR GENOMICS INC.

     In June 1997, Corvas entered into both an option agreement to acquire all
of the outstanding stock of VGI, as well as a research and development
agreement.  The three-year option agreement requires the Company to make monthly
option payments of $83,000, of which $80,000 is paid back to Corvas monthly to
sponsor its research and development expenses related to VGI technology.  If
this option is exercised prior to its termination on June 30, 2000, the
acquisition will be made with newly-issued Corvas Common Stock or, in certain
circumstances at the option of the Company, a combination of cash and 633,600
shares of Common Stock.  As of December 31, 1997, the aggregate acquisition
price for VGI was $13,866,000, subject to increases the later Corvas exercises
the option up to a maximum of $19,960,000 in June 2000.  Exercise of the option
will be automatically triggered if the Company enters into a partnering
agreement which has an aggregate value equal to the dollar value of the
acquisition price applicable at that date and covers any portion of the VGI
technology.  If Corvas elects not to exercise its option, VGI may require Corvas
to purchase 19.9% of its outstanding stock for $3,960,000 in Corvas Common
Stock.

RELATIONSHIP WITH ORTHO-CLINICAL DIAGNOSTICS INC.

     In June 1992, the Company entered into two agreements with
Ortho-Clinical Diagnostics Inc. ("Ortho"), a Johnson and Johnson company, for
manufacturing and worldwide marketing by Ortho of diagnostic tests containing
recombinant human tissue factor produced by Corvas.  These tests are used to
determine the blood clotting ability of patients.  European sales of this
product commenced in 1992 and sales in the U.S. commenced in 1993. A
milestone payment of $250,000 was received in 1996.

     The Company has reached an understanding with Ortho, subject to final
documentation, for the transfer of the Company's manufacturing activities
related to recombinant tissue factor.  This understanding involves the transfer
to Ortho of all rights under a license agreement related to recombinant tissue
factor pursuant to which the Company is currently a licensee, the modification
of a license to Corvas-developed technology from non-exclusive to worldwide
exclusive, the sale of equipment used in the manufacturing process of such
product and the transfer of certain production methodologies.  Ortho has assumed
responsibility for the manufacturing of such product and accordingly, the
Company has discontinued its manufacturing operations.  Upon completion of this
transaction, the Company expects to record as revenue in 1998 a license payment
as well as other income related to the sale of equipment, and will no longer
record product sales from this product.  The carrying amount of the equipment to
be sold in conjunction with this transfer was not material as of December 31,
1997.  There is no assurance that the Company will be able to complete this
transaction or, if completed, what will be the final terms of such transaction.

RESEARCH COLLABORATIONS AND LICENSES

     Corvas has also established collaborations with scientists at a number of
leading U.S. and European academic and clinical research centers to further its
technology and product development objectives.  These collaborations are
generally conducted pursuant to agreements which give Corvas a license, or the
option to license, certain technology, patent rights or materials.  These
agreements may require Corvas to fund research or to pay license fees or
milestone payments and, upon commercial sale of certain products, royalties.
Corvas also has several contractual arrangements with scientific advisors and
collaborators for which Corvas compensates these individuals or an affiliated
entity.

PATENTS AND PROPRIETARY RIGHTS

     Corvas' success will depend in part on its ability to obtain patent
protection for its products, both in the U.S. and other countries.  The
patent position of biotechnology and pharmaceutical companies is highly
uncertain and involves complex legal and factual questions.  There is also
uncertainty as to the breadth of claims that will be allowed in biotechnology
patents.  Corvas intends to file applications as appropriate for patents
covering both its products and processes.  At present, Corvas owns or holds
exclusive rights in 30 U.S. patents and has been notified of 12 allowed
patent applications in the U.S. Of the issued patents, 24 are owned by Corvas
and six are licensed by the Company. Corvas has filed or holds licenses to 31
additional patent applications that currently are pending in the U.S. Patent
and Trademark Office ("USPTO"). Foreign counterparts of certain of the U.S.
applications have been filed in many countries.  In addition, Corvas holds
rights in ten foreign-issued patents; Corvas owns seven such patents and is
the exclusive licensee, in a defined field of use, of the remaining three
foreign patents.  There is no assurance that patents will issue from any of
the Company's owned or licensed patent applications or as to the breadth or
scope of protection that claims allowed under any issued patents will provide
to protect the Company.  In addition, there is no assurance that any patents
issued or licensed to the Company will

                                      -13-
<PAGE>

not be challenged, invalidated or circumvented, or that the rights granted
thereunder will provide proprietary protection to the Company.

     In 1993, the USPTO declared an interference to determine the priority of
invention between a patent for which some rights are licensed to the Company
(the "Licensed Patent") and a patent application for which rights are held by
other parties (the "First Patent Application").  In 1996, the USPTO added a
second patent application to the proceeding (the "Second Patent Application")
and redeclared the interference.  Rights to the Second Patent Application are
held by other parties, at least some of which also hold rights in the First
Patent Application.  The subject matter of the patent and these applications is
recombinant tissue factor, which is used by Ortho to determine the blood
clotting abilities of patients.  The Company is contesting the other parties'
claims of prior invention; however, there is no assurance that the Licensed
Patent will be upheld.  The Company believes that the ultimate resolution of the
above matter will not have a material adverse impact on the Company's business,
financial condition, prospects or results of operation.  See "- Legal
Proceedings" and "Risk Factors - Patents and Proprietary Rights."

     In addition to patents, the Company relies on trade secrets and proprietary
know-how, which it seeks to protect, in part, through appropriate
confidentiality and proprietary information and inventions agreements with its
current and prospective collaborative partners, employees, scientific advisors
and consultants  There is no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors.

     Certain of the Company's research has been funded in part by the U.S.
Government's Small Business Innovation Research ("SBIR") program or by other
government funding.  As a result of such funding, Government Rights will exist
in any technology, including inventions, developed with the funding.  These
rights include the grant of a non-exclusive, paid-up, worldwide license to such
inventions for any governmental purpose.  In addition, the government has the
right to require the Company to grant an exclusive license to any of these
inventions to a third party if the government determines that (i) adequate
steps have not been taken to commercialize such inventions, (ii) such action is
necessary to meet public health or safety needs or (iii) such action 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 substantially
manufacture products using the invention in the U.S.  In addition, the Company's
licenses may also relate to technology developed with federal funding and,
therefore, may also be subject to Government Rights.

                                      -14-
<PAGE>

GOVERNMENT REGULATION

     The Company, alone or through its collaborators, intends to market its
product candidates in all jurisdictions where it receives the required
regulatory approvals and where such marketing would likely be commercially
successful.  The production and marketing of the Company's products and its
ongoing research and development activities are subject to regulation by
numerous governmental authorities in the U.S. and other countries.  Any drug
developed by the Company must undergo rigorous preclinical and clinical testing
and an extensive regulatory approval process mandated by the U.S. Food and Drug
Administration ("FDA") and/or applicable foreign authorities before it can be
marketed.  Various federal and, in some cases, state statutes and regulations
also govern or influence the manufacturing, safety, labeling, storage,
recordkeeping and marketing of such products.  These processes can take a number
of years and require the expenditure of substantial resources.  Any failure by
the Company or its collaborators or licensees to obtain, or any delay in
obtaining, regulatory approvals could adversely affect the marketing of any
products developed by the Company and its ability to receive product or royalty
revenue.

     The activities required before a pharmaceutical agent may be marketed in
the U.S. begin with preclinical testing.  Preclinical tests include laboratory
evaluation of product chemistry and animal studies to assess the potential
safety and efficacy of the product and its formulations.  The results of these
studies must be submitted to the FDA as part of an IND, which must be reviewed
and become effective pursuant to FDA regulations before proposed clinical
testing can begin.  Typically, clinical testing involves a three-phase process.
In Phase I, clinical trials are conducted with a small number of subjects to
determine the early safety profile and the pattern of drug distribution and
metabolism. In Phase II, clinical trials are conducted with groups of patients
afflicted with a specified disease in order to determine preliminary efficacy,
optimal dosages and expanded evidence of safety.  In Phase III, large scale,
multi-center, comparative clinical trials are conducted with patients afflicted
with a target disease in order to provide enough data for the statistical proof
of efficacy and safety required by the FDA and others.  The results of the
preclinical and clinical testing are then submitted to the FDA, for a
pharmaceutical product in the form of a New Drug Application ("NDA"), or for a
biological product in the form of a Biology License Application ("BLA"), for
approval to commence commercial sales.  In responding to an NDA or BLA, the FDA
may grant marketing approval, request additional information or deny the
application if it determines that the application does not demonstrate, to the
satisfaction of the FDA, that the product is safe and effective for its labeled
indications. For approved products, the FDA requires that adverse effects be
reported to the FDA and may also require post-marketing testing to monitor for
adverse effects, which can involve significant expense.

     Among the conditions for NDA or BLA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
on an ongoing basis with Good Manufacturing Practices (''GMPs").  In complying
with GMPs, manufacturers must continue to expend time, money and effort in the
area of production and quality control to ensure full technical compliance.
Manufacturing facilities are subject to periodic inspections by the FDA, and
noncompliance may result in the withdrawal of previously granted approvals
and/or the imposition of other regulatory enforcement sanctions, including civil
penalties, recall, injunction or seizure of products, refusal to grant marketing
approval or to allow the Company to enter into government contracts, and
criminal prosecution.

     The Company is also subject to regulation by the Food and Drug branch of
the California Department of Health Services (''FDB") and, prior to the
marketing of any of its products manufactured in California, the Company will be
required to secure a drug manufacturing license from the FDB.  Such licenses are
issued after an FDB inspection of manufacturing facilities, and are reissued on
an annual basis after re-inspection by the FDB.

     The Company is also subject to various federal, state and local laws,
regulations and recommendations relating to safe working conditions,
laboratory and manufacturing practices, the experimental use of animals and
the use, storage, discharge and disposal of hazardous or potentially
hazardous substances and radioactive compounds and infectious disease agents,
used in connection with the Company's research.  The extent of government
regulation which might result from any legislation or administrative action
cannot be accurately predicted.

                                      -15-
<PAGE>

COMPETITION

     Due to the high incidence of cardiovascular and inflammatory diseases,
as well as cancer and viral infections, such as hepatitis C, most, if not
all, of the major pharmaceutical companies have significant research and
product development programs in these areas.  The Company expects to
encounter significant competition both in the U.S. and in foreign markets for
each of the products it seeks to develop.  Several existing products have
well-established market positions and there are a number of new products in
advanced clinical development.  The Company's competitors include
fully-integrated pharmaceutical and biotechnology companies both in the U.S.
and in foreign markets which have expertise in research and development,
manufacturing processes, testing, obtaining regulatory approvals and
marketing, and may have financial and other resources significantly greater
than those of the Company.  Smaller companies also may prove to be
significant competitors. Furthermore, academic institutions, U.S. and foreign
government agencies and other public and private research organizations
conduct research relating to diseases targeted by the Company, and may seek
patent protection for, and establish collaborative arrangements for the
development and marketing of, products for the treatment of these diseases.
Products developed by these and other entities may compete directly with
those being developed by the Company. These companies and institutions may
also compete with the Company in recruiting and retaining highly qualified
scientific personnel.

     The Company's competition will be determined in part by the potential
indications for which the Company's products are developed and ultimately
approved by regulatory authorities, by the timing of such approvals 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 the Company can develop products, complete the
clinical trials and approval processes, and supply commercial quantities of the
products to the market is expected to be an important competitive factor.  The
Company expects 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

EARLY STAGE OF DEVELOPMENT

     The Company is at an early stage of development and its primary sources of
revenue are from research funding, license fees and milestone payments from its
collaborations.  To date, Corvas has completed early stage Phase I clinical
trials for only three product candidates, NAPc2, CVS-1123 and CORSEVIN M.  The
Company's product candidates will require significant additional development,
clinical trials, regulatory approval and additional investment prior to their
commercialization, if any.  The Company and its strategic alliance partners do
not expect to be able to market any of these product candidates for a number of
years, if at all.  There is no assurance that the Company's and its strategic
alliance partners' product development efforts will progress any further or be
successfully completed.  In addition, there is no assurance that the Company's
and its strategic alliance partners' potential products will be capable of being
produced in commercial quantities at reasonable costs, that required regulatory
approvals can be obtained or that any potential products, if introduced, will be
successfully marketed or will be profitable to the Company.

CONTINUING OPERATING LOSSES; ACCUMULATED DEFICIT

     The Company has experienced significant operating losses since its
inception in 1987.  At December 31, 1997, the Company had an accumulated
deficit of approximately $69,749,000.  The Company expects to incur
substantial additional operating losses over the next several years as the
Company attempts to expand its clinical trial and research and development
efforts. Substantially all of the Company's revenues to date have consisted
of revenues from research funding and milestones from collaborative
agreements, license fees and interest income.  To achieve profitable
operations, the Company, alone or with others, must successfully develop,
manufacture and market its current product candidates and identify, develop,
manufacture and market additional future products, all of which will require
regulatory approval.  See "-Uncertainties of Regulatory Approval; Government
Regulation" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

                                      -16-
<PAGE>


FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING

     The Company's operations to date have consumed substantial amounts of
cash. Negative cash flow from operations is expected to continue in the
foreseeable future.  The Company will require substantial funds to conduct
research and development on, and preclinical and clinical testing of, its
product candidates and any future products, to market and sell such products
and, if necessary, to establish commercial scale manufacturing facilities.
The Company's future capital requirements will depend on many factors,
including, but not limited to, the following: the continued scientific
progress in its drug discovery programs; the magnitude of such programs; the
progress and results of preclinical testing and clinical trials; the costs
involved in complying with the regulatory process; the costs involved in
filing, prosecuting, maintaining and enforcing patent claims; the competing
technological and market developments; the changes in its existing research
relationships; the ability of the Company to establish and maintain
collaborative or licensing arrangements; the cost of manufacturing scale-up;
and the effectiveness of activities and arrangements of the Company or its
collaborative partners to commercialize the Company's products.  The Company
intends to seek such additional funding either through collaborative
arrangements or through public or private financings.  There is no assurance
that additional financing will be available, or, if available, that it will
be available on a timely basis or on acceptable terms.  If additional funds
are raised by issuing securities, further dilution, possibly substantial, to
existing stockholders will likely result.  If adequate funds are not
available, the Company may be required to delay, scale back or discontinue
one or more of its drug discovery programs or other aspects of its operations
or obtain funds through arrangements with collaborative partners or others
that may require the Company to relinquish rights to certain of its
technologies, product candidates or products that the Company would not
otherwise relinquish or at prices below that at which the Company would
otherwise choose to relinquish such rights.

RELIANCE ON COLLABORATIVE PARTNERS AND LICENSORS

     Corvas has relied, and will continue to rely, on certain established
pharmaceutical companies interested in its technology to fund a portion of its
research and development expenses.  The Company has entered into collaborative
research agreements with collaborative partners whereby such partners provide
capital in exchange for certain technology, product, manufacturing and marketing
rights related to the collaborative research.

     To date, Corvas has entered into collaborative agreements with Pfizer for
the development of NIF, with Schering-Plough for (i)  the discovery and
commercialization of orally active thrombin inhibitor drugs for the prevention
and treatment of chronic cardiovascular disorders, (ii) orally active Factor Xa
inhibitor drugs for the prevention and treatment of chronic cardiovascular
disorders, and (iii) the discovery and commercialization of an orally active
inhibitor of a hepatitis C protease for the prevention and treatment of
hepatitis C infections.  The Company's licensees include a relationship with
Ortho for the exclusive manufacture and worldwide sales and marketing by Ortho
of diagnostic tests containing recombinant human tissue factor (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Subsequent Events") and with Centocor pursuant to which Corvas
granted to Centocor an exclusive right to license and commercialize certain
monoclonal antibody products developed by Corvas.  As a result, the Company is
dependent on Pfizer, Schering-Plough and Centocor with respect to the regulatory
filings relating to, and the clinical testing of, the Company's product
candidates and future product candidates developed under these collaborations
and license arrangements.  At any time Pfizer, Schering-Plough or Centocor may,
based on data obtained in these clinical trials or otherwise, elect to halt or
repeat these trials or conduct clinical trials using different formulations of
these product candidates.  Any of these actions could result in delays or the
discontinuation of the clinical development of compounds covered by these
collaborations.  Furthermore, the Company can not control the amount and timing
of resources dedicated by these collaborators.  There is no assurance that
(i) the interests of the Company will continue to coincide with those of its
collaborators, or (ii) that the collaborators will continue the development of
any of the Company's product candidates, or (iii) that the collaborators will
not develop independently, or with third parties, products that could compete
with the Company's future products or (iv) that disagreements between the
Company and its collaborators over rights, technology, other proprietary
interests or otherwise will not occur.  Further, there is no assurance that the
collaborative agreements will be extended at the end of their respective terms.
If any of the Company's collaborators breaches or terminates its agreement with
the Company, or fails to conduct its collaborative activities in a timely
manner, the research program under the applicable collaborative agreement, or
the development and commercialization of product candidates subject to such
collaboration, may be adversely affected as well as the Company's immediate
liquidity and capital resources.  There is no assurance that the Company's
existing collaborations will be successful, that the Company will receive any
further milestones or other payments pursuant to the collaborative agreements,
that the collaborations will continue since these collaborative agreements are
terminable at the option of the collaborator upon certain events, that the

                                      -17-
<PAGE>

collaborations will be commercially successful or that any product derived
therefrom will be profitable for the Company.  If the strategic alliances are
not continued or successful, the Company's business, financial condition,
prospects and results of operations could be materially and adversely affected.

     Corvas has also established collaborations with scientists at a number of
leading U.S. and European academic and clinical research centers to further its
technology and product development objectives.  These collaborations are
generally conducted pursuant to agreements which give the Company a license, or
the option to license, certain technology, patent rights or materials which may
be valuable to the Company.  These agreements may require the Company to fund
research or to pay license fees or milestone payments and, upon commercial sale
of certain products, royalties.

     Corvas also expects to rely on additional collaborative arrangements to
develop and commercialize some of its product candidates in the future.  There
is no assurance that the Company will be able in the future to negotiate
acceptable collaborative or license arrangements or that such collaborative and
license arrangements or its existing collaborative and license arrangement will
be successful.  In addition, collaborative partners may pursue alternative
technologies or develop alternative compounds either on their own or in
collaboration with others, including the Company's competitors, as a means of
developing treatments for the diseases targeted by any collaborative programs.
See "Business - Strategic Alliances."

UNPREDICTABILITY OF CONDUCTING PRECLINICAL AND CLINICAL TRIALS

     Before obtaining required regulatory approvals for the commercial sale of
any of the Company's product candidates, the Company must demonstrate through
preclinical testing and clinical trials to the FDA or any applicable foreign or
state regulatory agency's satisfaction, that each product candidate is safe and
effective for use in indications for which approval is requested.  The results
from preclinical testing and early clinical trials may not be predictive of
results obtained in large clinical trials.  Companies in the pharmaceutical and
biotechnology industries have suffered significant setbacks in various stages of
clinical trials, even in advanced clinical trials after promising results had
been obtained in earlier trials.

     The development of safe and effective products is highly uncertain and
subject to numerous risks.  Product candidates that may appear to be promising
in development may not reach the market for a number of reasons.  Product
candidates may be found to be ineffective or to cause harmful side effects
during clinical trials, may take longer to progress through clinical trials than
had been anticipated, may fail to receive necessary regulatory approvals, may
prove impracticable to manufacture in commercial quantities at reasonable costs
and with acceptable quality, may not be subject to patient reimbursement from
third party payors such as Medicare or may fail to achieve market acceptance.
Completion of research, preclinical testing and clinical trials may take several
years, and the length of time varies substantially with the type, complexity,
novelty and intended use of the product.  In addition, data obtained from
preclinical and clinical activities are susceptible to varying interpretations,
which could delay, limit or prevent regulatory approval.  Delays or rejections
may be encountered based upon many factors, including changes in regulatory
policy during the period of product development.  There is no assurance that any
of the Company's development programs will be successfully completed, that any
regulatory applications to conduct clinical trials will be approved by the FDA
or other regulatory authorities or that clinical trials will commence or proceed
as planned.

     All of the Company's product candidates are subject to extensive regulation
and will require approval from the FDA and other regulatory agencies prior to
commercial sale.  The cost to the Company of conducting clinical trials for any
product candidate can vary dramatically based on a number of factors, including
the order and timing of clinical indications pursued and the extent of
development and financial support, if any, from collaborators.  See "-Future
Capital Needs; Uncertainty of Additional Funding," "-Uncertainties of Regulatory
Approval; Government Regulation" and "Business - Government Regulation."

     In addition, because the Company will, in a number of cases, rely on its
contractual rights to access data collected by others in phases of its clinical
trials, the Company is dependent on the continued satisfaction by such parties
of their contractual obligations to provide such access and to cooperate with
the Company in the execution of successful filings with the FDA.  There is no
assurance that the FDA will permit such reliance or that such data will prove
reliable.  If the Company were unable to rely on clinical data collected by
others, the Company may be required to repeat clinical trials, which could
significantly delay commercialization and require significantly greater capital,
which may or may not be available to the Company.

                                      -18-
<PAGE>

     The rate of completion of the Company's clinical trials is dependent upon,
among other factors, the number of patients to be included in the trial and the
rate of patient enrollment.  Patient enrollment is a function of many factors,
including the size of the patient population, the nature of the protocol, the
proximity of patients to clinical sites and the eligibility criteria for the
study.  More advanced studies requiring patients with particular clinical
indications may require longer enrollment periods.  Delays in planned patient
enrollment may result in delays in commencement of clinical trials and increased
costs, which could have a material adverse effect on the Company's business,
financial condition, prospects and results of operations. See "Business -
Government Regulation."

RISKS RELATED TO THE VASCULAR GENOMICS INC. OPTION

     In June 1997, Corvas entered into an option agreement with VGI pursuant to
which Corvas makes certain monthly option payments and, under a related research
and development agreement, VGI is required to pay to Corvas certain amounts to
sponsor its research and development expenses related to VGI's vascular
targeting technology.  Under the option agreement, the Company has the option
through June 2000 to acquire all of the stock of VGI with Corvas Common Stock,
or in certain circumstances at the option of the Company, a combination of cash
and 633,600 shares of Common Stock.  The maximum aggregate purchase price ranged
from $13,866,000 to $19,960,000 as of December 31, 1997.  There is no assurance
that the goals of the Company's research and development efforts in connection
with the VGI technology will be achieved or that the technology will enable
Corvas or its collaborations to develop drugs for targeting therapeutics.  If
the Company elects to exercise its option, the acquisition will be dilutive to
existing Corvas stockholders.  The Company may have to decide whether to
exercise the option before it is able to assess whether the VGI technology will
have any commercial value or provide any return on investment to Corvas.
Further, if Corvas elects not to exercise its option, VGI may require Corvas to
purchase 19.9% of its outstanding stock for $3,960,000 in Corvas Common Stock,
which would result in additional dilution to existing stockholders.  See
"Business - Strategic Alliances."

UNCERTAINTIES OF REGULATORY APPROVAL; GOVERNMENT REGULATION

     The developing, testing, manufacturing, labeling, advertising, promotion,
export, sale and distribution and marketing of the Company's product candidates
are subject to extensive regulation by numerous governmental authorities in the
U.S. and other countries.  Any drug developed by the Company must undergo
rigorous preclinical and clinical testing and an extensive regulatory approval
process mandated by the FDA, certain state regulatory agencies and equivalent
foreign authorities before it can be marketed in such jurisdiction.  These
processes can take a number of years and require the expenditure of substantial
resources, which may or may not be available to the Company.  Products, if any,
resulting from the Company's existing research and development programs are not
expected to be commercially available for a number of years, if at all.  See "-
Future Capital Needs, Uncertainty of Additional Funding."

     The activities required before a pharmaceutical agent may be marketed in
the U.S. begin with preclinical testing.  Preclinical tests include
laboratory evaluation of product chemistry and animal studies to assess the
potential safety and efficacy of the product and its formulations.  The
results of these studies must be submitted to the FDA as part of an IND,
which must be reviewed and become effective pursuant to FDA regulations
before proposed clinical testing can begin.  Typically, clinical testing
involves a three-phase process. In Phase I, clinical trials are conducted
with a small number of subjects to determine the early safety profile and the
pattern of drug distribution and metabolism. In Phase II, clinical trials are
conducted with groups of patients afflicted with a specified disease in order
to determine preliminary efficacy, optimal dosages and expanded evidence of
safety.  In Phase III, large scale, multi-center, comparative clinical trials
are conducted with patients afflicted with a target disease in order to
provide enough data for the statistical proof of efficacy and safety required
by the FDA and others.  The results of the preclinical and clinical testing
are then submitted to the FDA, for a pharmaceutical product in the form of an
NDA, or for a biological product in the form of a BLA, for approval to
commence commercial sales.  In responding to an NDA or BLA, the FDA may grant
marketing approval, request additional information or deny the application if
it determines that the application does not demonstrate, to the satisfaction
of the FDA, that the product is safe and effective for its labeled
indications.  For approved products, the FDA requires that adverse effects be
reported to the FDA and may also require post-marketing testing to monitor
for adverse effects, which can involve significant expense.

                                      -19-
<PAGE>

     The time required for completing such testing and obtaining such approvals
is uncertain and approval itself may not be obtained.  To date, the Company has
conducted early stage human clinical testing of three product candidates, NAPc2,
CVS-1123 and CORSEVIN M.  Further testing of NAPc2 by Corvas, CORSEVIN M by
Centocor and the Company's other product candidates in research and development
may reveal undesirable and unintended side effects or other characteristics that
may prevent or limit their commercial use.  The FDA or the Company and its
collaborators may decide to discontinue or to suspend clinical trials at any
time if the subjects or patients who are participating in such trials are being
exposed to unacceptable health risks.  There is no assurance that the Company
will not encounter problems in clinical trials that will cause the FDA, the
Company or a collaborator to delay or to suspend clinical trials.  Furthermore,
there is no assurance that any of the Company's products will be approved by the
FDA, state or local authorities or equivalent foreign authorities for any
indication.  Even if regulatory approval of a product candidate is granted, such
approval may entail limitations on the indicated uses for which the product may
be marketed.  In addition, a marketed product, its manufacturer and the
facilities in which the product is manufactured are subject to continual review
and periodic inspections.  Later discovery of previously unknown problems with a
product, manufacturer or facility may result in liability for the Company, or
restrictions on such product or manufacturer, including withdrawal of the
product from the market, which would have a material adverse effect on the
Company's business, financial condition, prospects and results of operations.
See "- Unpredictability of Conducting Preclinical and Clinical Trials," "- Risk
of Product Liability; Uncertainty and Availability of Insurance" and "Business -
Government Regulation."

TECHNOLOGICAL CHANGE AND COMPETITION

     The Company is engaged in a rapidly evolving field. Competition from other
biotechnology companies, pharmaceutical companies and research and academic
institutions is intense and expected to increase.  There is no assurance that
the Company's competitors will not succeed in developing products based on the
Company's technology or other technologies which are more effective than
technologies or products being developed by the Company or which would render
the Company's technology and products obsolete and noncompetitive.

     Many of the Company's competitors may have substantially greater financial,
technical and human resources than the Company.  In addition, many of these
competitors may have significantly greater experience than the Company in
undertaking preclinical testing and clinical trials of new pharmaceutical
products and obtaining regulatory approvals of human therapeutic products.  The
Company's competitors may succeed in obtaining FDA approval for products more
rapidly than the Company.  Furthermore, if the FDA permits the Company to
commence commercial sales of products, the Company will compete with respect to
manufacturing efficiency and sales and marketing capabilities, areas in which it
has limited or no experience and where many of its competitors have
significantly greater experience.  See "- Manufacturing Limitations," "-Absence
of Sales or Marketing Experience" and "Business - Competition."

     Products under development by the Company address an array of markets.  The
Company's competition will be determined in part by the potential indications
for which the Company's compounds are developed and approved.  For certain of
the Company's potential product candidates, an important factor in competition
may be the timing of market introduction of its, or competitive, products.
Accordingly, the relative speed with which Corvas or its collaborators can
develop products, complete the clinical trials and the regulatory approval
processes, and supply commercial quantities of the products to the market is
expected to be an important competitive factor.  The Company expects that
competition among products approved for sale will be based on, among other
things, product efficacy, safety, reliability, availability, price and patent
position.

DEPENDENCE ON QUALIFIED PERSONNEL

     The Company's success is highly dependent on its ability to attract and
retain qualified scientific and management personnel.  The loss of the services
of the principal members of the Company's management and scientific staff may
impede the Company's ability to commercialize its products.  In order to
commercialize its products, the Company must maintain and expand its personnel,
particularly in the areas of clinical trial management, manufacturing, sales and
marketing.  The Company faces intense competition for such personnel from other
companies, academic institutions, government entities and other organizations.
There is no assurance that the Company will be successful in hiring or retaining
qualified personnel.  Managing the integration of new personnel, and Company
growth in general, could pose significant risks to the Company's development and
progress.

                                      -20-
<PAGE>

     The continued employment of the Chief Executive Officer, Randall E. Woods,
and the Executive Vice President, Research and Development, George P. Vlasuk,
Ph.D., is key to the Company's success.  Each of these employees has an
employment agreement with the Company, but the agreements provide for "at-will"
employment with no specified term.

     John E. Crawford, the Company's Executive Vice President, Chief Financial
Officer and Corporate Secretary, resigned from the Company effective April 3,
1998.  Mr. Crawford will continue to provide services to the Company on a
consulting basis through June 15, 1998.  The Company is in the process of
recruiting a business development executive to perform the business development
duties performed by Mr. Crawford and also intends to recruit a person to assume
the investor relations duties being performed by Mr. Crawford.  Ms. Carolyn
Felzer, the Company's Senior Director of Finance, will become the principal
accounting officer.  Ms. Felzer has worked at Corvas in various financial
capacities under the direction of Mr. Crawford for nearly seven years, including
five years as Controller.

     There is intense competition for qualified personnel in the areas of the
Company's activities, and there is no assurance that the Company will be able to
continue to attract and retain the personnel necessary.  Failure to attract and
retain key personnel could have a material adverse effect on the Company's
business, financial condition, prospects and results of operations.  See
"Business - Human Resources" and "Management."

MANUFACTURING LIMITATIONS

     In order for the Company's products to be successful, they must be
manufactured in sufficient commercial quantities, in compliance with regulatory
requirements, and at an acceptable cost.  The Company has limited experience in
pilot scale manufacturing.  For larger-scale production, as will be required for
Phase I and later phases of clinical testing, the Company must rely on third
parties to manufacture its product candidates.  If the Company is unable to
contract for large-scale manufacturing capabilities on acceptable terms, or, in
such event, develop its own manufacturing capabilities (which itself would
require additional funds and expertise which may not be available to the
Company), the Company's ability to conduct clinical trials may be adversely
affected, resulting in the delay or preclusion of submission of products for
regulatory approval, which in turn could adversely affect the Company's
business, financial condition, prospects and results of operations.  See
"Business - Properties and Manufacturing."

PATENTS AND PROPRIETARY RIGHTS

     The Company's success will depend in part on its ability to obtain
patent protection for its products, both in the U.S. and other countries.
The patent position of biotechnology and pharmaceutical companies is highly
uncertain and involves complex legal and factual questions.  There is also
uncertainty as to the breadth of claims that will be allowed in biotechnology
patents.  The Company intends to file applications as appropriate for patents
covering both its products and processes.  At present, Corvas owns or holds
exclusive rights in 30 U.S. patents and has been notified of 12 allowed
patent applications in the U.S.  Of the issued patents, 24 are owned by the
Company and six are licensed by the Company.  Corvas has filed or holds
licenses to 31 additional patent applications that currently are pending in
the USPTO.  Foreign counterparts of certain of the U.S. applications have
been filed in many countries.  In addition, Corvas holds rights in ten
foreign-issued patents; Corvas owns seven such patents and is the exclusive
licensee, in a defined field of use, of the remaining three foreign patents.
There is no assurance that patents will issue from any of the Company's owned
or licensed patent applications or as to the breadth or scope of protection
that claims allowed under any issued patents will provide to protect the
Company.  In addition, there is no assurance that any patents issued or
licensed to the Company will not be challenged, invalidated or circumvented,
or that the rights granted thereunder will provide proprietary protection to
the Company.

                                      -21-
<PAGE>

     While the Company is aware of issued patents in the Company's field and may
be aware of pending applications published outside of the U.S., it is uncertain
whether these patents and applications will require the Company to alter
products or processes, obtain licenses or cease certain activities.  If the
Company is required to obtain such licenses, there is no assurance the Company
will be able to obtain any necessary licenses at a reasonable cost.  Failure by
the Company to obtain a license to any technology that it requires to
commercialize its products and obtain FDA approval within an acceptable period
of time, if required to do so, would have a material adverse effect on the
Company's business, financial condition, prospects and results of operations.
Litigation, which could result in substantial costs to the Company, may also be
necessary to enforce patents issued to the Company or to determine the scope and
validity of others' proprietary rights.

     In 1993, the USPTO declared an interference to determine the priority of
invention between a patent for which some rights are licensed to the Company and
a patent application for which rights are held by other parties.   In 1996, the
USPTO added a second patent application to the proceeding and redeclared the
interference.  Rights to the Second Patent Application are held by other
parties, at least some of which also hold rights in the First Patent
Application.  The subject matter of the patent and these applications is
recombinant tissue factor, which is used by Ortho to determine the blood
clotting abilities of patients.  The Company is contesting the other parties'
claims of prior invention; however, there is no assurance that the Licensed
Patent will be upheld.  The Company believes that the ultimate resolution of the
above matter will not have a material adverse impact on the Company's business,
financial condition, prospects or results of operation.  See "- Legal
Proceedings" and "- Patents and Proprietary Rights."

     In addition to patents, the Company relies on trade secrets and proprietary
know-how, which it seeks to protect, in part, through appropriate
confidentiality and proprietary information and inventions agreements with its
current and prospective collaborative partners, employees, scientific advisors
and consultants.  There is no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors.

     Certain of the Company's research has been funded in part by the SBIR
program or by other government funding.  As a result of such funding, Government
Rights will exist in any technology, including inventions, developed with the
funding.  These rights include the grant of a non-exclusive, paid-up, worldwide
license to such inventions for any governmental purpose.  In addition, the
government has the right to require the Company to grant an exclusive license to
any of these inventions to a third party if the government determines that (i)
adequate steps have not been taken to commercialize such inventions, (ii) such
action is necessary to meet public health or safety needs or (iii) such action
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 substantially
manufacture products using the invention in the U.S.  In addition, the Company's
licenses may also relate to technology developed with federal funding and,
therefore, may also be subject to Government Rights.  See "Business - Patents
and Proprietary Rights."

ABSENCE OF SALES, MARKETING OR DISTRIBUTION EXPERIENCE

     The Company has limited experience in sales, marketing and distribution.
To market and distribute any of its products directly, the Company must develop
a substantial marketing and sales force with technical expertise and supporting
distribution capability.  Alternatively, the Company may obtain the assistance
of a pharmaceutical company or other entity with a large distribution system and
a large direct sales force.  Other than its collaboration and license agreements
with Schering-Plough, Pfizer, Centocor and Ortho, the Company does not have any
existing distribution arrangements with any entity for its products.  There is
no assurance that the Company will be able to establish sales, marketing and
distribution capabilities of its own or enter into separate arrangements with
any other entity.  See "-Technological Change and Competition."

                                      -22-
<PAGE>

UNCERTAINTY RELATED TO PHARMACEUTICAL PRICING AND REIMBURSEMENT

     In both domestic and foreign markets, sales of the Company's product
candidates will depend in part upon the availability of reimbursement from
third-party payors, such as government health administration authorities,
managed care providers, private health insurers and other organizations.
Third-party payors are increasingly challenging the price and cost
effectiveness of medical products and services.  Significant uncertainty
exists as to the reimbursement status of newly-approved health care products.
 In many major markets outside the U.S., pricing approval is required before
sales can commence.  There is no assurance as to what price can be obtained
for any of the Company's products that reach the market or whether
government-approved prices, once established, will not be reduced in
subsequent years.  There is no assurance that the Company's product
candidates, when and if commercialized, will be considered cost effective or
that adequate third-party reimbursement will be available to enable the
Company to maintain price levels sufficient to realize an appropriate return
on its investment in product development. Legislation and regulations
affecting the pricing of pharmaceuticals may change before the Company's
proposed products are approved for marketing.  Adoption of such legislation
could further limit reimbursement for medical products.  If adequate coverage
and reimbursement levels are not provided by the government and third-party
payors for the Company's product candidates, the market acceptance of such
products would be adversely affected, which would have a material adverse
effect on the Company's business, financial condition, prospects and results
of operations.

RISK OF PRODUCT LIABILITY; UNCERTAINTY AND AVAILABILITY OF INSURANCE

     The testing, marketing and sale of human diagnostic and therapeutic
products exposes the Company to significant and unpredictable risks of product
liability claims in the event of allegations that the use of its technology or
products results in adverse effects.  Such risks will exist even with respect to
any products that receive regulatory approval for commercial sale.  While the
Company has obtained liability insurance for its products in clinical trials,
there is no assurance that it will be sufficient to satisfy any liability that
may arise.  There is no assurance that adequate insurance coverage, in either
clinical or commercial products, will be available in the future at an
acceptable cost, if at all, or that a product liability claim would not
adversely affect the Company's business, financial condition, prospects or
results of operations.

ENVIRONMENTAL REGULATIONS

     The Company is subject to a variety of governmental regulations related to
the use, storage, discharge and disposal of toxic or other hazardous substances
and certain radioactive materials used in the Company's operations. The Company
itself uses, stores, discharges and disposes of such hazardous substances in
accordance with applicable regulations, and generally contracts with third
parties for the disposal of such substances.  The Company, however, generally
stores its low level radioactive waste at its facility until the materials are
no longer considered radioactive because there are no facilities presently
permitted to accept such waste in California or neighboring states.  Any failure
to comply with current or future regulations could result in civil penalties or
criminal fines being imposed on the Company, or its officers, directors or
employees, as well as suspension of production, alteration of its manufacturing
process or cessation of operations.  Such regulations could require the Company
to acquire expensive remediation or abatement equipment or to incur additional
expenses to comply with environmental regulations or to remedy a problem arising
in connection with such substances or materials.  Any failure by the Company or
its third party contractors to properly manage the use, storage or disposal of,
or adequately restrict discharge of hazardous or toxic substances or radioactive
waste could subject the Company to significant liabilities which could have a
material adverse effect on the Company's business, financial condition,
prospects or results of operations.  See "Business - Properties and
Manufacturing."

                                      -23-
<PAGE>

VOLATILITY OF COMMON STOCK PRICE

     The market prices for securities of biotechnology companies, including
Corvas, have historically been highly volatile and the market from time to time
has experienced significant price and volume fluctuations that are unrelated to
the operating performance of such companies.  Moreover, the Company's relatively
low trading volume increases the likelihood and severity of volume fluctuations
which likely will result in a corresponding increase in the volatility of
Corvas' Common Stock price.  Factors such as announcements of technological
innovations or new commercial therapeutic products by the Company or others,
announcements of adverse or favorable preclinical or clinical results of the
Company's or other entities' drug candidates, governmental regulations,
developments in patent or other proprietary rights, developments in the
Company's relationships with its collaborative partners, public concern as to
the safety of drugs developed by the Company or others, general market
conditions and the timing of decisions by existing Corvas stockholders to sell
large positions of the Company's Common Stock may have a significant effect on
the market price of the Company's Common Stock.  Fluctuations in financial
performance from period to period also may have a significant impact on the
market price of the Common Stock.  See "Price Range of Common Stock."

ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN CHARTER PROVISIONS;
 STOCKHOLDER RIGHTS PLAN

     Certain provisions of Delaware law applicable to the Company could delay or
make more difficult a merger, tender offer or proxy contest involving the
Company, including Section 203 of the Delaware General Corporation Law, which
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years from the date the person
became an interested stockholder unless certain conditions are met.  The
Company's Certificate of Incorporation (the "Certificate") provides for
staggered terms for the members of the Board of Directors.  In addition, the
Company currently has Preferred Stock issued and outstanding which entitles the
holders thereof to rights not available to holders of Common Stock.
Furthermore, the Board of Directors of the Company may issue additional shares
of Preferred Stock without stockholder approval and on such terms as the Board
of Directors may determine.  The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future.  In addition, the Company's
Certificate and Bylaws require advanced stockholder notice to nominate directors
and raise matters at the annual meeting of stockholders and do not provide for
cumulative voting in the election of directors.  Further, pursuant to the terms
of its Stockholder Rights Plan (the "Stockholder Rights Plan"), the Company has
distributed a dividend of one right for each outstanding share of Common Stock.
These rights could cause substantial dilution to the ownership percentage of a
person or group that attempts to acquire the Company on terms not approved by
the Board of Directors and may have the effect of deterring hostile takeover
attempts.  All of the foregoing could have the effect of delaying, deferring or
preventing a change in control of the Company and could limit the price that
certain investors might be willing to pay in the future for shares of the
Company's Common Stock.  See "Description of Capital Stock."

FORWARD-LOOKING STATEMENTS

     This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act.  All
statements, other than statements of historical facts, included in this Report
which address activities, events or developments which the Company expects or
anticipates will or may occur in the future, including, but not limited to, the
development of its potential products and research programs, the timing of
clinical trials, the levels of anticipated research and development and capital
expenditures and the Company's ability to execute its business strategies, are
forward-looking statements.  These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future developments as
well as other factors it believes are appropriate under the circumstances.
However, whether actual results and developments will conform with the Company's
expectations and predictions is subject to a number of risks and uncertainties
which could cause actual results to differ materially from the Company's
expectations, including the risk factors discussed in this Report and other
factors, many of which are beyond the control of the Company.  Consequently, all
of the forward-looking statements made in this Report are qualified by these
cautionary statements and there is no assurance that the actual results or
developments anticipated by the Company will be realized or, even if
substantially realized, that they will have the expected consequences to, or
effects on, the Company or its business, financial condition, prospects or
results of operations.  The Company assumes no obligation to update publicly any
such forward-looking statements, whether as a result of new information, future
events or otherwise.  See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."

                                      -24-
<PAGE>

HUMAN RESOURCES

     As of March 18, 1998, Corvas employed 72 individuals on a full-time
basis,18 of whom hold Ph.D. degrees.

     A significant number of the Company's management and professional employees
have had prior experience with pharmaceutical, biotechnology or medical product
companies.  Corvas believes that it has been highly successful in attracting
skilled and experienced scientific personnel; however, competition for such
personnel is intense.  None of the Company's employees is covered by a
collective bargaining agreement.  All of the Company's employees are covered by
confidentiality and arbitration agreements, and certain of its officers have
employment contracts.  The Company believes that its relationship with its
employees is good.


ITEM 2.  PROPERTIES

     Corvas presently occupies approximately 30,200 square feet of laboratory
and office space in San Diego, California pursuant to a lease that expires in
September 1998 and has a one-year renewal option remaining.  Corvas is in
preliminary negotiations with its current landlord for additional contiguous
space comprising 21,400 square feet and is simultaneously seeking to extend the
lease on its current facility.

     The Company does not have manufacturing facilities for pilot scale or
commercial production of compounds under development as therapeutic products.
The Company must presently rely on third parties to manufacture its candidate
products for clinical testing.

     In connection with the Company's recombinant tissue factor product that
the Company manufactured from 1992 to 1997, and is currently in negotiations
to transfer to Ortho, Corvas had established a set of standard operating
procedures, and outside manufacturers produced the raw materials for this
product.  See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Subsequent Events." For its therapeutic product
candidates, however, the Company will need to establish quality control and
quality assurance programs to the extent the Company will manufacture any
such products when and if fully developed.  Otherwise, the Company will
continue to be dependent on contract manufacturers or strategic partners.
There is no assurance that these manufacturers will be available or will meet
the Company's requirements for quality, quantity and timeliness, or that the
Company would be able to find substitute manufacturers, if necessary.


ITEM 3.  LEGAL PROCEEDINGS

     The Company is not a party to any material pending legal proceedings and is
not aware of any material proceedings that are contemplated by any third party
or governmental authority.

     In 1993, the USPTO declared an interference to determine the priority of
invention between a patent for which some rights are licensed to the Company and
a patent application for which rights are held by other parties.  In 1996, the
USPTO added a second patent application to the proceeding and redeclared the
interference.  Rights to the Second Patent Application are held by other
parties, at least some of which also hold rights in the First Patent
Application.  The subject matter of the patent and these applications is
recombinant tissue factor, which is used by Ortho to determine the blood
clotting abilities of patients.  The Company is contesting the other parties'
claims of prior invention; however, there is no assurance that the Licensed
Patent will be upheld.  The Company believes that the ultimate resolution of the
above matter will not have a material adverse impact on the Company's business,
financial condition, prospects or results of operation.


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

     None

                                      -25-
<PAGE>

                                      PART II

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

     The Company's Common Stock began trading on the Nasdaq National Market on
January 30, 1992 under the symbol "CVAS."  Prior to January 30, 1992, there was
no public market for the Company's Common Stock.  The following table sets forth
for the periods indicated the high and low sale prices of Common Stock as
reported by the Nasdaq National Market.
<TABLE>
<CAPTION>

                                        HIGH                LOW
                                        -------            ------
 <S>                                    <C>                <C>
 YEAR ENDED DECEMBER 31, 1997
 Fourth Quarter......................    $5 5/8             $3 3/4
 Third Quarter.......................     6 3/4              4
 Second Quarter......................     6 5/8              4 5/8
 First Quarter.......................     7 3/8              5 3/8

 YEAR ENDED DECEMBER 31, 1996
 Fourth Quarter......................    $6                 $2 3/4
 Third Quarter.......................     5 1/2              2 7/8
 Second Quarter......................     7                  4 3/4
 First Quarter.......................     6 1/8              3 5/8
</TABLE>

     On March 18, 1998, the last reported sale price of the Common Stock was
$4.00 per share.  As of March 18, 1998, there were approximately 730 holders of
record of the Common Stock.

                                      -26-
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The selected data presented below under the captions "Statements of
Operations Data" and "Balance Sheets Data" for, and as of the end of, each of
the years in the five-year period ended December 31, 1997, are derived from and
should be read in conjunction with the financial statements of Corvas
International, Inc., which financial statements have been audited by KPMG Peat
Marwick LLP, independent certified public accountants.  The financial statements
as of December 31, 1997 and 1996, and for each of the years in the three-year
period ended December 31, 1997, and the independent auditors' report thereon,
are included elsewhere in this Report.

<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                    -----------------------------------------------------------------------------
                                                                      (In thousands, except per share amounts)
                                                           1997             1996           1995              1994          1993
                                                    ---------------    ------------    ------------      ---------      ---------
 <S>                                                    <C>              <C>             <C>               <C>            <C>
 STATEMENTS OF OPERATIONS DATA:

      REVENUES:
 Revenue from collaborative agreements                    $ 5,811        $  5,480        $  4,354         $   ---         $   ---
 License fees and milestones                                4,100             400             500             ---             100
 Net product sales                                            374             224             406             280             323
 Royalties                                                    120             161             142             183             230
 Research grants                                              ---             ---             ---             667             192
                                                       ----------       ---------        --------         -------        --------
       Total revenues                                      10,405           6,265           5,402           1,130             845

      COSTS AND EXPENSES:
 Research and development                                   9,705          10,901           9,723          11,378          12,115
 General and administrative                                 4,469           3,181           2,582           3,159           3,067
 Cost of products sold                                        194             134             211              83             105
 Litigation settlement and related
   expenses                                                   ---             ---             ---             535             ---
 Restructuring charge                                         ---             ---             ---           1,575             ---
                                                       ----------       ---------        --------        --------        --------
        Total costs and expenses                           14,368          14,216          12,516          16,730          15,287
                                                       ----------       ---------        --------        --------        --------
      Loss from operations                                 (3,963)         (7,951)         (7,114)        (15,600)        (14,442)
      Other income, net                                     1,511           1,242             821             697           1,073
                                                       ----------       ---------        --------        --------        --------
      Net loss                                        $    (2,452)     $   (6,709)     $   (6,293)     $  (14,903)     $  (13,369)
                                                       ----------       ---------        --------        --------        --------
                                                       ----------       ---------        --------        --------        --------
      Basic and diluted net loss per share(1)         $     (0.18)     $    (0.52)     $    (0.67)     $    (1.60)     $    (1.44)
                                                       ----------       ---------        --------        --------        --------
                                                       ----------       ---------        --------        --------        --------
      Shares used in calculation of net loss
         per share(1)                                      13,873          12,882           9,374           9,336           9,295
                                                       ----------       ---------        --------        --------        --------
                                                       ----------       ---------        --------        --------        --------


<CAPTION>

                                                                                 DECEMBER 31,
                                                       ----------------------------------------------------------------------------
                                                           1997             1996            1995             1994            1993
                                                       -----------    -------------   -------------    ------------      ----------
<S>                                                     <C>            <C>             <C>              <C>
BALANCE SHEETS DATA:
 Cash, cash equivalents and short-term
      debt securities                                     $26,120         $28,596        $ 12,451           $19,867         $23,180
 Working capital                                           21,133          24,254           7,372            13,902          22,477
 Total assets                                              28,214          30,639          14,462            22,509          26,522
 Accumulated deficit                                      (69,749)        (67,297)        (60,588)          (54,295)        (39,392)
 Total stockholders' equity                                22,445          24,347           8,768            14,647          24,474

</TABLE>
_____________________

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

                                      -27-
<PAGE>

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

     EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS.  FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
IN "BUSINESS - RISK FACTORS", AS WELL AS ELSEWHERE IN THIS REPORT.

OVERVIEW

     Formed in 1987, Corvas is a biopharmaceutical firm engaged in the design
and development of a new generation of therapeutic agents in the fields of blood
clot formation (thrombosis), inflammation, cancer and other diseases.  To date,
the Company has not generated significant revenues from product sales.  The
Company has not been profitable since inception and expects to incur substantial
additional operating losses on an annual basis over the next several years as
the Company expands its research and development programs.  There is no
assurance that the Company will successfully develop, commercialize, manufacture
or market its products or generate sufficient revenues to become profitable on a
sustained basis or at all.  At December 31, 1997, the Company had an accumulated
deficit of $69,749,000.

RESULTS OF OPERATIONS

     Total operating revenues increased to $10,405,000 in 1997 from $6,265,000
in 1996 and $5,402,000 in 1995.  The $4,140,000 increase in 1997 as compared to
1996 was primarily due to a $331,000 increase in revenues from collaborative
agreements and a $3,700,000 increase in license fees and milestones.  Revenues
from collaborative agreements in 1997 included (i) $4,000,000 attributable to
the Company's strategic alliance agreement with Schering-Plough to collaborate
on the discovery and commercialization of orally active inhibitors of
coagulation Factor Xa, (ii) $919,000 recognized pursuant to a June 1997 license
and collaboration agreement with Schering-Plough regarding the design and
development of oral inhibitors of a key protease necessary for hepatitis C virus
replication, (iii) $480,000 recognized pursuant to a research and development
agreement with VGI, a private company with a proprietary position in a novel
vascular targeting technology, which was initiated in June 1997 along with an
option agreement to acquire all of its outstanding stock, and (iv) $412,000
attributable to the Company's research and option agreement with Pfizer to
collaborate on the development of NIF.  License fees and milestones in 1997 were
principally attributable to (i) a $3,000,000 milestone payment received upon
selection of a clinical development compound in the Company's collaboration with
Schering-Plough to develop orally active thrombin inhibitors, (ii) license fees
of $850,000 in connection with Pfizer exercising its option on the NIF program,
and (iii) an initial license fee of $250,000 attributable to the hepatitis C
collaboration with Schering-Plough.  The remaining revenues in 1997 of $494,000
were attributable to royalties and product sales which were not materially
different from the 1996 amounts.  The Company expects to discontinue its product
sales in 1998.  See "- Subsequent Events."

     The $863,000 increase in 1996 revenues as compared to 1995 was primarily
due to an increase in revenues from collaborative agreements of $1,126,000,
which was partially offset by a $182,000 decrease in product sales, and a
$100,000 decrease in license fees and milestones.  Revenues from collaborative
agreements in 1996 included (i) $4,000,000 attributable to the Company's
strategic alliance agreement with Schering-Plough on the discovery and
commercialization of orally active thrombin inhibitors, (ii) $1,000,000 paid by
Schering-Plough to extend its option (which it later exercised) covering
inhibitors of coagulation Factor Xa, and (iii) $480,000 attributable to the
Pfizer collaboration covering NIF.  License fees and milestones in 1996 included
(i) a $250,000 milestone payment from Ortho-Clinical Diagnostics Inc. ("Ortho"),
a Johnson and Johnson company, and (ii) license fees of $150,000 pursuant to the
Pfizer collaboration.  The remaining revenues of $385,000 were attributable to
royalties and product sales.

     Research and development expenditures, which accounted for 68% of the total
costs and expenses in 1997, 77% in 1996 and 78% in 1995, decreased to $9,705,000
in 1997 from $10,901,000 in 1996 and $9,723,000 in 1995.  The $1,196,000
decrease in 1997 as compared to 1996 was primarily due to the expenditure of
$2,098,000 in 1996 for the manufacture of clinical supplies and preclinical
testing of NAPc2 which were not incurred in 1997, partially offset by an
increase of $941,000 attributable to the initiation of the vascular targeting
program.  See "Business - Strategic Alliances."  The $1,178,000 increase in 1996
as compared to 1995 was primarily due to costs incurred in 1996 for NAPc2.
Research and development expenses are expected to increase by more than
$11,000,000 in 1998 primarily due to expanded clinical trials and additional
staffing for its ongoing programs.

                                      -28-
<PAGE>

     General and administrative expenses increased to $4,469,000 in 1997 from
$3,181,000 in 1996 and $2,582,000 in 1995.  The $1,288,000 increase in 1997 as
compared with 1996 was primarily due to $309,000 in increased legal and other
costs incurred in connection with business development activities, $279,000 in
increased administrative recruiting and relocation costs, $277,000 in increased
facilities costs and $250,000 in increased administrative headcount and related
costs.  The $599,000 increase in 1996 compared with 1995 was primarily due to
$276,000 incurred in connection with the hiring of a new Chief Executive
Officer, $146,000 of business development costs and $104,000 in increased
investor relations costs.

     Total other income was $1,511,000 in 1997, $1,242,000 in 1996 and $821,000
in 1995.  The Company received net proceeds of $19,714,000 from equity offerings
in 1996 and also received $10,000,000 from collaborative agreements in late 1996
and early 1997.  As a result of these capital infusions, there were higher cash
balances available for investments.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, the Company's operations have been funded primarily
through public offerings and private placements of equity securities,
revenues and milestones from collaborative agreements, research grants and
license agreements, and interest income earned on cash and investment
balances. The Company's principal sources of liquidity are its cash and cash
equivalents, time deposits and debt securities which, net of a restricted
time deposit, totaled $26,060,000 and $28,536,000 as of December 31, 1997 and
1996, respectively. Working capital as of December 31, 1997 and 1996 was
$21,133,000 and $24,254,000, respectively.  Available cash is invested in
accordance with an investment policy set by the Board of Directors, which has
the objectives to preserve principal, maintain adequate liquidity and
maximize income.  The policy provides guidelines concerning the quality, term
and liquidity of investments. The Company presently invests its excess cash
in interest-bearing, investment-grade securities.

     Net cash used in operations was $2,560,000 for the year ended December 31,
1997, compared to $5,285,000 for the year ended December 31, 1996.  This
decrease was primarily due to receipt in 1997 of a $3,000,000 milestone payment
from Schering-Plough upon selection of a clinical development compound in the
thrombin inhibitor program.  Net cash of $1,947,000 was provided by investing
activities for the year ended December 31, 1997, compared to net cash of
$15,847,000 used in investing activities for the year ended December 31, 1996.
This change is primarily the result of an increase in investment maturities in
1997 which were purchased with proceeds from equity offerings in 1996.  Net cash
provided by financing activities was $455,000 for the year ended December 31,
1997, compared to $21,907,000 for the year ended December 31, 1996.  This is
primarily the result of $19,714,000 raised by the Company through common stock
offerings and proceeds of $2,000,000 from the sale of preferred stock in 1996.

     The Company expects to incur substantial additional costs in the
foreseeable future, including costs related to clinical and preclinical studies
and expanding its research and development activities.  The Company expects such
costs to increase by approximately $11,000,000 in 1998, including costs related
to an Investigational New Drug Application ("IND") expected to be filed in the
first quarter of 1998 for NAPc2.  As a result, the Company expects to experience
substantial additional operating losses and negative cash flows from operations
over the next several years.  As of December 31, 1997, the Company believes its
existing capital resources and interest earned thereon should be sufficient to
satisfy its anticipated funding requirements for at least the next 12 months.
In addition, the Company may also receive additional funds through milestone
payments and royalties on sales of products in connection with its alliances.
However, there is no assurance that the Company will receive any additional
amounts under existing or any future alliances.

                                      -29-
<PAGE>

     Strategic collaborations with Schering-Plough and Pfizer provide for
payments to the Company if and when certain milestones are met.  However, there
is no assurance that any future milestones will be achieved.  During the first
quarter of 1997, a development compound was selected by Schering-Plough in the
orally active thrombin inhibitor program, which triggered a $3,000,000 milestone
payment; the next milestone in this program is $1,000,000 to be paid upon filing
by Schering-Plough of an IND, or its foreign equivalent, for initiating clinical
trials in the U.S. or in any corresponding foreign jurisdiction.  In the first
quarter of 1998, Pfizer notified Corvas of a milestone achieved upon Pfizer's
commencement of a clinical trial for NIF, which will result in a payment to
Corvas of $1,000,000.  In the Company's collaboration with Schering-Plough
covering inhibitors of the replication of the hepatitis C virus, the next
milestone is a $500,000 payment upon identification of an initial lead compound
in this program.  In addition to these milestones, the Company may also receive
additional milestone payments and royalties on sales of products in connection
with its existing alliances, as well as from any future alliances.  If all of
the milestones on all of the Company's existing collaborations are met, Corvas
could receive up to a total of $97,500,000 in future milestone payments and
research and development funding over the next several years.  However, there is
no assurance that the Company will achieve any such milestones or receive any
such amounts under these or any future alliances.

     In June 1997, the Company entered into an option agreement to acquire all
of the outstanding stock of VGI, a vascular targeting company.  If this option
is exercised prior to its termination on June 30, 2000, the acquisition will be
made with newly-issued Corvas Common Stock or, in certain circumstances at the
option of the Company a combination of cash and 633,600 shares of Common Stock.
The aggregate acquisition price, which is based on the timing of option
exercise, ranges from a minimum as of December 31, 1997 of $13,866,000 to a
maximum of $19,960,000.  If this option is exercised, the Company expects a
noncash charge to earnings for in-process research and development.  If Corvas
elects not to exercise its option, VGI may require the Company to purchase 19.9%
of its outstanding stock for $3,960,000 in Corvas Common Stock.  During the
option period, Corvas will make monthly option payments of approximately $83,000
to VGI.  In addition, under a research and development agreement, VGI is
required to make monthly payments of $80,000 to Corvas to be applied to research
and development covering the VGI technology.  Although the net impact of these
payments is not material, the Company may incur substantial additional costs to
develop this technology.

     The Company's future capital requirements will depend on many factors,
including, but not limited to, the following: continued scientific progress in
its drug discovery programs; the magnitude of these programs; the progress of
preclinical testing and clinical trials; the costs involved in complying with
the regulatory process; the costs involved in filing, prosecuting, maintaining
and enforcing patent claims; competing technological and market developments;
changes in its existing research relationships; the ability of the Company to
establish and to maintain collaborative or licensing arrangements; the cost of
manufacturing scale-up; and the effectiveness of activities and arrangements to
commercialize existing and potential products.  In 1997, the Company invested
approximately $837,000 in capital equipment and leasehold improvements.  The
Company expects to invest approximately $1,000,000 in 1998 for additional
property and equipment as research and development activities progress.  The
Company leases its laboratory and office facilities under an operating lease and
anticipates that it will need to expand its facilities over the next several
years.

     To continue its long-term product development efforts, the Company must
raise substantial additional funds through public or private sales of
securities, collaborative arrangements or other methods of financing.  The
Company's ability to raise additional funds through such sales of securities
depends in part on investors' perceptions of the biotechnology industry, in
general, and of the Company, in particular.  The market for biotechnology
company stocks has historically been highly volatile and, accordingly, there is
no assurance that additional funding will be available, or, if available, that
it will be available on acceptable terms.  If additional funds are raised by
issuing securities, further dilution to stockholders will likely result.  The
Company may enter into additional collaborative relationships to develop and
commercialize certain of its current or future technologies or products.  There
is no assurance that the Company will be able to establish such relationships on
satisfactory terms, if at all, or that agreements with collaborators will
successfully reduce the Company's funding requirements.  In addition, the
Company has not attempted to establish bank financing arrangements, and there is
no assurance that it would be able to establish such arrangements on
satisfactory terms, if at all.  If adequate funds are not available, the Company
may be required to significantly delay, scale back or discontinue one or more of
its drug discovery programs or other aspects of its operations, or obtain funds
through arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies, product candidates
or products that the Company would not otherwise relinquish or at prices below
that at which the Company would otherwise choose to relinquish such rights.

                                      -30-
<PAGE>

     At December 31, 1997, the Company had available net operating loss
carryforwards of approximately $61,300,000 for federal income tax reporting
purposes which begin to expire in 2002.  The net operating loss carryforwards
for state purposes, which expire five years after generation, are approximately
$24,300,000.  The Company has unused research and development tax credits for
federal income tax reporting purposes of $2,800,000 at December 31, 1997.  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.

     In 1993, the U.S. Patent and Trademark Office (the "USPTO") declared an
interference to determine the priority of invention between a patent for which
some rights are licensed to the Company (the "Licensed Patent") and a patent
application for which rights are held by other parties (the "First Patent
Application").  In 1996, the USPTO added a second patent application to the
proceeding (the "Second Patent Application") and redeclared the interference.
Rights to the Second Patent Application are held by other parties, at least some
of which also hold rights in the First Patent Application.  The subject matter
of the patent and these applications is recombinant tissue factor, which is used
by Ortho to determine the blood clotting abilities of patients.  The Company is
contesting the other parties' claims of prior invention; however, there is no
assurance that the Licensed Patent will be upheld.  See "Business - Legal
Proceedings."

SUBSEQUENT EVENTS

     The Company has reached an understanding with Ortho, subject to final
documentation, for the transfer of the Company's manufacturing activities
related to recombinant tissue factor.  This understanding involves the transfer
to Ortho of all rights under a license agreement related to recombinant tissue
factor pursuant to which the Company is currently a licensee, the modification
of a license to Corvas-developed technology from non-exclusive to worldwide
exclusive, the sale of equipment used in the manufacturing process of such
product and the transfer of certain production methodologies.  Ortho has assumed
responsibility for the manufacturing of such product and accordingly, the
Company has discontinued its manufacturing operations.  Upon completion of this
transaction, the Company expects to record as revenue in 1998 a license payment
as well as other income related to the sale of equipment, and will no longer
record product sales from this product.  The carrying amount of the equipment to
be sold in conjunction with this transfer was not material as of December 31,
1997.  There is no assurance that the Company will be able to complete this
transaction or, if completed, what will be the final terms of such transaction.

NEW ACCOUNTING STANDARDS

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130").  SFAS 130 established standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements.  This statement shall be
effective for fiscal years beginning after December 15, 1997.  Reclassification
of financial statements for earlier periods provided for comparative purposes is
required.  At this time, the Company does not expect that this statement will
have a significant impact on the financial position or results of operations for
the year ending December 31, 1998.

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131").  SFAS 131 established
standards regarding how public companies report information about operating
segments in annual financial statements and requires that selected information
about operating segments be reported in interim financial reports to
stockholders.  The Company does not have operating segments and, therefore, does
not believe SFAS 131 will require any additional disclosures or any changes in
its current disclosures.


YEAR 2000 COMPLIANCE
      The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures and therefore is addressing
this risk by testing and upgrading its financial and other systems to be
compliant with the Year 2000.  Neither the cost nor the impact of achieving
Year 2000 compliance is expected to be material to the operations of the
Company.

                                      -31-
<PAGE>

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, 1997 and 1996.......................     F-2
Statements of Operations for the three years ended December 31, 1997..     F-3
Statements of Stockholders' Equity for the three
 years ended December 31, 1997 .......................................     F-4
Statements of Cash Flows for the three years ended
 December 31, 1997 ...................................................     F-5
Notes to Financial Statements ........................................     F-7
</TABLE>

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

     None

                                      -32-
<PAGE>

                                      PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information regarding the Directors and Executive Officers of the Company
as of March 18, 1998 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
the Company's 1998 Proxy Statement and is incorporated by reference into this
Report.

EXECUTIVE OFFICERS AND DIRECTORS

     The executive officers and directors of the Company, their ages as of March
18, 1998, and certain other information about them is set forth below:

<TABLE>
<CAPTION>
                  NAME                    AGE             POSITION
                  ----                    ---             --------
<S>                                       <C>  <C>
Randall E. Woods (1)....................  46   President and Chief Executive
                                               Officer, Director

John E. Crawford........................  43   Executive Vice President, Chief
                                               Financial Officer and Corporate
                                               Secretary

George P. Vlasuk, Ph.D..................  42   Executive Vice President,
                                               Research and Development

Carolyn M. Felzer.......................  40   Senior Director of Finance,
                                               Assistant Corporate Secretary

John H. Fried, Ph.D.(1).................  68   Chairman of the Board

M. Blake Ingle, Ph.D. (1)(2)............  55   Director

R. Douglas Norby........................  62   Director

Michael Sorell, M.D. (2)................  50   Director

W. Leigh Thompson, Jr., M.D., Ph.D. (3).  59   Director

Gerard Van Acker (2)....................  54   Director

Nicole Vitullo (3)......................  40   Director
</TABLE>
____________

(1)  Member of Executive Committee
(2)  Member of Audit Committee
(3)  Member of Compensation and Stock Option Committee

     RANDALL E. WOODS has served as President and Chief Executive Officer and a
director of Corvas since May 1996.  Prior to joining Corvas, Mr. Woods served as
the President of the U.S. Operations, Boehringer Mannheim Pharmaceuticals
Corporation, a pharmaceutical company, from March 1994 to March 1996, and was
Vice President of Marketing and Sales from December 1993 to March 1994.  From
1973 to December 1993, he served in various capacities at Eli Lilly and Company
("Eli Lilly"), a pharmaceutical company, where he was most recently responsible
for the marketing of hospital products.  Mr. Woods received an M.B.A. from
Western Michigan University.

                                      -33-
<PAGE>

     JOHN E. CRAWFORD, a founder of Corvas, has served as Chief Financial
Officer since the Company's organization in May 1987, Executive Vice President
since April 1989 and Corporate Secretary since March 1991.  Mr. Crawford also
served as President from May 1987 to April 1989, Chief Operating Officer from
April 1989 to February 1991, Corporate Secretary from May 1987 to June 1989 and
as a director from May 1987 to March 1991.  He currently serves on the Board of
Directors for Navius Corporation, a privately held firm that develops vascular
stents.  Mr. Crawford received an M.B.A. from the University of Chicago Graduate
School of Business. Mr. Crawford has resigned from the Company effective April
3, 1998, but will continue to perform services for the Company on a consulting
basis through June 15, 1998.

     GEORGE P. VLASUK, PH.D. has served as the Company's Executive Vice
President, Research and Development since September 1996.  Previously,
Dr. Vlasuk served as Vice President, Biological Research from January 1995 to
September 1996, as Executive Director, Molecular Pharmacology from July 1993 to
January 1995 and as Director, Molecular Pharmacology from July 1991 to July
1993.  Before joining Corvas, he was employed for six years at Merck Sharp &
Dohme Research Laboratories, a pharmaceutical company, most recently as
Associate Director of Hematology Research.  Dr. Vlasuk received his Ph.D. in
biochemistry from Kent State University.

     CAROLYN M. FELZER has served as Senior Director of Finance and Assistant
Corporate Secretary since December 1997.  Previously, Ms. Felzer served as the
Company's Controller from January 1993 through December 1997 and as Accounting
Manager from July 1991 through January 1993.  Prior to joining Corvas, Ms.
Felzer held various financial positions since beginning her career at Peat,
Marwick, Mitchell & Co., an accounting firm now known as KPMG Peat Marwick.  She
received a B.S. in accounting from The Pennsylvania State University and is a
Certified Public Accountant.

     JOHN H. FRIED, PH.D. was elected Chairman of the Board in February 1997,
and has served as a director of the Company since May 1992.  He has been
President of Fried & Company, Inc., a biopharmaceutical consulting firm,
since March 1992.  Dr. Fried served in various executive capacities at Syntex
Corporation ("Syntex"), a pharmaceutical company, from April 1964 to March
1992. He served as President of Syntex Research from 1976 to March 1992,
Senior Vice President of Syntex from 1981 to 1985, and Vice Chairman of
Syntex from 1985 to January 1993.  Dr. Fried is also Chairman of the Board of
Alexion Pharmaceuticals, Inc. and President of Fried & Company, Inc.

     M. BLAKE INGLE, PH.D. has served as a director of the Company since January
1994.  Dr. Ingle was the President and Chief Executive Officer of Canji, Inc., a
biopharmaceutical company, from March 1993 to his retirement in February 1996,
when it was acquired by Schering-Plough.  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 was a director of Telios Pharmaceuticals, Inc. ("Telios"), a
biotechnology company, and was its Chief Executive Officer from December 1994 to
January 1995.  Telios filed for protection under Chapter 11 in the Federal
Bankruptcy Court in January 1995 and was subsequently acquired by INTEGRA, L.S.
He currently serves on the Boards of Directors of Synbiotics Corporation and
Vical, Inc. and is a member of the Board of Trustees at The La Jolla Cancer
Research Foundation.

     R. DOUGLAS NORBY has served as a director of the Company since December
1997.  Since October 1996, he has served as Executive Vice President and
Chief Financial Officer of LSI Logic Corporation ("LSI"), a semiconductor
company, and also serves on the Board of Directors of LSI.  He was a member
of the Board of Directors of Epitope, Inc., an Oregon-based technology
company, from 1989 through February 1998.  He served as Senior Vice President
and Chief Financial Officer at Mentor Graphics Corporation, a software
company, from July 1993 to November 1996, and as President of Pharmetrix
Corporation, a drug delivery company, from July 1992 to September 1993.
Previously, Mr. Norby held several positions including Senior Vice President
and Chief Financial Officer of Syntex, President and Chief Operating Officer
with Lucasfilm, and in various consulting capacities for McKinsey & Company.

                                      -34-
<PAGE>

     MICHAEL SORELL, M.D. has served as a director of the Company since April
1996.  Since March 1996, he has been the Managing Partner of MS Capital, LLC, an
advisement firm based in New York.  From July 1986 to February 1992, he was
associated with Morgan Stanley & Co. ("Morgan Stanley"), 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 and principal 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.  Dr. Sorell
also serves on the Board of Directors of Dynagen, Inc.

     W. LEIGH THOMPSON, JR., M.D., PH.D. has served as a director of the
Company since January 1996.  Dr. Thompson retired in December 1994 as Chief
Scientific Officer of Eli Lilly, where he had served in various capacities
since 1982.  He has been President and Chief Executive Officer of Profound
Quality Resources, Ltd., a consulting company, since January 1995 and serves
on the Boards of Directors of GeneMedicine, Inc., Chrysalis International
Corporation (formerly DNX Corporation), Guilford Pharmaceuticals, Inc.,
Orphan Medical, Inc., Ergo Sciences Corporation, La Jolla Pharmaceutical
Company, Medarex, Inc., BAS, Inc., DepoMed, Inc., Ophidian Pharmaceuticals,
Inc., Inspire Pharmaceuticals, Inc., Ontogeny, Inc. and PenWest
Pharmaceutical Co.

     GERARD VAN ACKER has served as a director of the Company since March 1991.
Mr. Van Acker has been President and Chief Executive Officer of
Investeringsmaatschappij voor Vlaanderen, N.V., the Investment Company for
Flanders, based in Antwerp, Belgium, since founding it in 1980.  Since October
1989 Mr. Van Acker has also been a director of BARCO, N.V.

     NICOLE VITULLO has served as a director of the Company since April 1996.
She was a Vice President from November 1992 to November 1996, and a Senior Vice
President since November 1996, of Rothschild Asset Management, Inc., which
manages two publicly traded funds, International Biotechnology Trust and
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 Boards of Directors of Cytel
Corporation, Anergen, Inc., Onyx Pharmaceuticals Inc. and Cadus Pharmaceutical
Corporation.

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 1998 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 "Stock Ownership of
Management and Certain Beneficial Owners" in the 1998 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 1998 Proxy Statement.

                                      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

                                      -35-
<PAGE>

(b)  Reports on Form 8-K:

     No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.

(c)  Exhibits

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

<TABLE>
<CAPTION>

EXHIBIT
NUMBER              DESCRIPTION BY DOCUMENT
-------             -----------------------
<C>     <S>
3.1     Amended and Restated Certificate of Incorporation.(8)

3.2     Bylaws.(8)

3.3     Certificate of Designation of the Series A Convertible Preferred Stock, dated as of
        December 14, 1994 (Filed as part of Exhibit 10.33).

3.4     Certificate of Designation of the Series B Convertible Preferred Stock, dated as of
        December 20, 1996.(19)

3.5     Certificate of Designation of the Series C Junior Participating Preferred Stock, dated
        as of October 6, 1997.(22)

4.1     Reference is made to exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 10.17, 10.22, 10.23, 10.35 and 10.37.

4.2     Specimen stock certificate.(1)

10.1*   Form of Indemnification Agreement between the Company and each director and executive officer.(1)

10.2*   Stock Option Plan of the Company, as amended.(1)

10.3*   Form of Incentive Stock Option Agreement under the Stock Option Plan.(1)

10.4*   Form of Non-Incentive Stock Option Agreement under the Stock Option Plan.(1)

10.5*   Second Stock Option Plan of the Company.(1)

10.6*   Incentive Stock Option Agreement Between the Company and David S. Kabakoff, dated as of
        October 2, 1989.(1)

10.7*   Non-Statutory Stock Option Agreement of Theodor H. Heinrichs, dated October 17, 1991.(2)

10.8*   Form of Employee Stock Purchase Plan.(1)

10.9*   1991 Incentive and Compensation Plan of the Company, as amended.(1)(18)

10.10*  Form of Incentive Stock Option Agreement under the 1991 Incentive and Compensation
        Plan of the Company.(2)

10.11*  Form of Non-Qualified Stock Option Agreement under the 1991 Incentive and Compensation
        Plan of the Company.(2)

10.12*  Form of Restricted Stock Purchase Agreement between the Company and certain individuals
        or entities, and attached schedule.(1)

10.13   Second Amended and Restated Stock Registration Rights Agreement between the Company and
        certain investors and warrantholders named therein, dated as of February 15, 1991, as
        amended on March 19, 1991, November 13, 1991 and December 4, 1991, and supplemental letter
        agreement dated December 12, 1991.(1)

10.14*  Employment Agreement between the Company and John E. Crawford, dated as of April 17, 1989
        (Replaced by Exhibit 10.50).(1)

10.15*  Consulting Agreement between the Company and John H. Fried, dated as of June 3, 1992.(6)

10.16   Antibody Option Agreement between the Company and Centocor, Inc., dated as of
        November 7, 1991, with exhibit.(1)(4)

10.17   Voting Agreement between Centocor Delaware, Inc. and certain equity security
        holders of the Company dated November 20, 1991.(1)

                                      -36-
<PAGE>

<CAPTION>

EXHIBIT
NUMBER              DESCRIPTION BY DOCUMENT
-------             -----------------------
<C>     <S>
10.18   Standstill Letter Agreement between the Company and Centocor, Inc., dated
        November 20, 1991.(1)

10.19   Research and License Agreement for Human Tissue Factor for Diagnostic
        Purposes between the Company and Scripps Clinic and Research Foundation,
        dated May 19, 1988, as amended, including exhibits.(1)(4)

10.20   Agreement for International Business Combination (Series C and D
        Preferred Stock (subsequently converted to Common Stock)) between the
        Company and Plant Genetic Systems, N.V. and Take Off Fonds, N.V., dated
        as of March 6, 1991.(1)

10.21   Series E, F and G Preferred Stock Purchase Agreement (subsequently
        converted to Common Stock) between the Company and Centocor Delaware,
        Inc., dated as of November 20, 1991.(1)

10.22   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)

10.23   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)

10.24  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)

10.25  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)

10.26  Waiver  of  Conversion Price Adjustment Agreement between the Company and
       Centocor Delaware, Inc., dated as of January 10, 1992.(1)

10.27  Supply  Agreement  and  License  Agreement  between the Company and Ortho
       Diagnostic  Systems, Inc., dated June 8, 1992, amended as to confidential
       treatment pursuant to a Form 8 filed March 18, 1993.(3) (5)

10.28  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.(6)

10.29  Permanent  Waiver  of Right of Centocor, Inc. to nominate second director
       under  Series  E,  F  and  G  Preferred Stock Purchase Agreement filed as
       Exhibit 10.21 herein.(8)

10.30  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.(8)

10.31* 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).(10)

10.32  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.(10)(11)

10.33  Series  A  Preferred  Stock  Purchase  Agreement  between the Company and
       Schering Corporation, dated as of December 14, 1994.(10)(11)

10.34  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.(12)

10.35  Form  of Warrant Agreement to purchase Common Stock of the Company issued
       to  certain individuals affiliated with Ventana Leasing, Inc. on June 16,
       1995.(13)

10.36  Collaborative  Research  and  Option  Agreement  between  the Company and
       Pfizer Inc. and Pfizer Limited, dated as of October 14, 1995.(13)(15)

10.37  Common  Stock  and  Warrant  Purchase  Agreement  between the Company and
       certain purchasers, dated as of February 2, 1996, with exhibits.(13)

                                      -37-
<PAGE>
<CAPTION>

EXHIBIT
NUMBER              DESCRIPTION BY DOCUMENT
-------             -----------------------
<C>     <S>
10.38* Employment  Agreement  between the Company and Donald H. Picker, dated as
       of February 2, 1996, with certain exhibits thereto.(13)

10.39* Loan  Agreement  between the Company and Donald H. Picker, dated February
       23,  1996,  the  Promissory  Notes and letter agreement and Deed of Trust
       related thereto.(14) (18)

10.40  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.(14)

10.41  Permanent  Waiver  of  Right of Centocor, Inc. to nominate director under
       Series  E,  F  and  G  Preferred  Stock  Purchase  Agreement (see Exhibit
       10.21).(14)

10.42* Consulting  Agreement between the Company and David S. Kabakoff, dated as
       of May 1, 1996.(16)

10.43* Consulting  Agreement between the Company and Theodor H. Heinrichs, dated
       as of May 1, 1996.(17)

10.44* Employment  Agreement  by  and  between the Company and Randall E. Woods,
       dated  as  of  May  10,  1996, with certain exhibits thereto (Replaced by
       Exhibit 10.53). (17)

10.45* Promissory  Note  between  the  Company and Randall E. Woods, dated as of
       June 25, 1996, and Deeds of Trust related thereto. (18)

10.46* Separation  Agreement  between the Company and Donald H. Picker, dated as
       of July 18, 1996. (18)

10.47* Extension  of  Promissory  Note between the Company and Randall E. Woods,
       dated as of December 7, 1996 (see Exhibit 10.45). (19)

10.48* Separation Agreement between the Company and Howard R. Soule, dated as of
       January 28, 1997. (19)

10.49* Extension  of  Consulting  Agreement  between  the  Company  and David S.
       Kabakoff, dated as of February 20, 1997. (19)

10.50* Employment  Agreement  by  and  between the Company and John E. Crawford,
       dated as of March 18, 1997. (19)

10.51* Employment  Agreement  by  and  between the Company and William C. Ripka,
       dated as of March 18, 1997. (19)

10.52* Employment  Agreement  by  and  between the Company and George P. Vlasuk,
       dated as of March 18, 1997. (19)

10.53* Employment  Agreement  by  and  between the Company and Randall E. Woods,
       dated as of March 18, 1997. (19)

10.54  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.(20)

10.55  License  and  Collaboration  Agreement  between  the Company and Schering
       Corporation, dated as of June 11, 1997. (21) (24)

10.56  License  and  Collaboration  Agreement  between the Company and Schering-
       Plough Ltd., dated as of June 11, 1997. (21) (24)

10.57  Option Agreement between the Company and Vascular Genomics Inc., dated as
       of June 29, 1997, with exhibits. (21) (25)

10.58  Research  and  Development  Agreement  between  the  Company and Vascular
       Genomics Inc., dated as of June 29, 1997, with exhibits. (21) (25)

10.59* Amended  and  Restated  Secured  Promissory  Note between the Company and
       Randall  E.  Woods,  dated  as of August 28, 1997 (see Exhibits 10.45 and
       10.47). (22)

10.60* Rights  Agreement  between  the  Company  and American Stock Transfer and
       Trust Company, dated as of September 18, 1997. (22)

10.61* Separation  Agreement  between the Company and William C. Ripka, dated as
       of September 23, 1997. (23)

                                      -38-
<PAGE>
<CAPTION>

EXHIBIT
NUMBER              DESCRIPTION BY DOCUMENT
-------             -----------------------
<C>     <S>
10.62* Separation  Agreement  between the Company and John E. Crawford, dated as
       of March 24, 1998.

21.1   Subsidiary of the Company.(1)

23.1   Independent Auditors' Consent.

24.1   Power of Attorney. Reference is made to page 40.

27.1   Financial Data Schedule.
</TABLE>
--------------
      (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)  Incorporated by reference to Quarterly Report on Form 10-Q, filed
          August 14, 1992.

     (4)  Portions of this exhibit have been granted confidential treatment
          pursuant to an order granted by the Securities and Exchange Commission
          on January 30, 1992.

     (5)  Portions of this exhibit have been granted confidential treatment
          pursuant to an order granted by the Securities and Exchange
          Commission on December 10, 1992.

     (6)  Incorporated by reference to Annual Report on Form 10-K, filed
          March 30, 1993.

     (7)  Incorporated by reference to Quarterly Report on Form 10-Q, filed
          May 14, 1993.

     (8)  Incorporated by reference to Annual Report on Form 10-K, filed
          February 23, 1994.

     (9)  Incorporated by reference to Quarterly Report on Form 10-Q, filed
          November 14, 1994.

     (10) Incorporated by reference to Annual Report on Form 10-K, filed
          March 30, 1995.

     (11) Portions of this exhibit have been granted confidential treatment
          pursuant to an order granted by the Securities and Exchange
          Commission on May 11, 1995.

     (12) Incorporated by reference to Quarterly Report on Form 10-Q, filed
          November 13, 1995.

     (13) Incorporated by reference to Annual Report on Form 10-K, filed
          February 28, 1996.

     (14) Incorporated by reference to Registration Statement on Form S-1 (No.
          333-2644), filed March 25, 1996.

     (15) Portions of this exhibit have been granted confidential treatment
          pursuant to an order granted by the Securities and Exchange
          Commission on April 26, 1996.

     (16) Incorporated by reference to Quarterly Report on Form 10-Q, filed
          May 13, 1996.

     (17) Incorporated by reference to Registration Statement on Form S-1 (No.
          333-2644), as amended, filed May 31, 1996.

     (18) Incorporated by reference to Quarterly Report on Form 10-Q, filed
          August 12, 1996.

     (19) Incorporated by reference to Annual Report on Form 10-K, filed
          March 28, 1997.

     (20) Incorporated by reference to Quarterly Report on Form 10-Q, filed
          May 14, 1997.

     (21) Incorporated by reference to Quarterly Report on Form 10-Q, filed
          August 13, 1997.

     (22) Incorporated by reference to Current Report on Form 8-K, filed
          October 8, 1997.

     (23) Incorporated by reference to Quarterly Report on Form 10-Q, filed
          November 12, 1997.

     (24) Portions of this exhibit have been granted confidential treatment
          pursuant to an order granted by the Securities and Exchange
          Commission on August 26, 1997.

     (25) Confidential treatment has been requested from the Securities and
          Exchange Commission for portions of this exhibit.

*         Indicates executive compensation plan or arrangement.

                                      -39-
<PAGE>

                                  SIGNATURES

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

                                    CORVAS INTERNATIONAL, INC.


Date:  March 27, 1998               By:  /S/ RANDALL E. WOODS
                                         -------------------------------------
                                         Randall E. Woods
                                         President and Chief Executive Officer

                                 POWER OF ATTORNEY

     KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Randall E. Woods and John E. Crawford, 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, 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  27, 1998
--------------------------------------      Officer and Director
       Randall E. Woods                     (Principal Executive
                                            Officer)

 /s/ JOHN E. CRAWFORD                       Executive Vice President        March  27, 1998
--------------------------------------      and Chief Financial Officer
      John E. Crawford                      (Principal Financial and
                                            Accounting Officer)

 /s/ JOHN H. FRIED, PH.D.                   Chairman of the Board of        March  27, 1998
--------------------------------------      Directors
    John H. Fried, Ph.D.

 /s/ M. BLAKE INGLE, PH.D.                  Director                        March  27, 1998
--------------------------------------
     M. Blake Ingle, Ph.D.

 /s/ R. DOUGLAS NORBY                       Director                        March  27, 1998
--------------------------------------
      R. Douglas Norby

 /s/ MICHAEL SORRELL, M.D.                  Director                        March  27, 1998
--------------------------------------
    Michael Sorell, M.D.

 /s/ W. LEIGH THOMPSON, JR., M.D., PH.D.    Director                        March  27, 1998
---------------------------------------
 W. Leigh Thompson, Jr., M.D., Ph.D.

 /s/ GERARD VAN ACKER                       Director                        March  27, 1998
---------------------------------------
       Gerard Van Acker

 /s/ NICOLE VITULLO                         Director                        March  27, 1998
---------------------------------------
          Nicole Vitullo

</TABLE>
                                      -40-

<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, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1997.   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 generally accepted auditing
standards. 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, 1997 and 1996, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1997, in conformity with generally accepted accounting principles.

                                         KPMG Peat Marwick LLP

San Diego, California
February  6, 1998


                                 F-1
<PAGE>

                              CORVAS INTERNATIONAL, INC.

                                    BALANCE SHEETS
                   (In thousands, except share and per share data)
<TABLE>
<CAPTION>

                                                                                   DECEMBER 31,
                                                                          --------------------------
                                                                               1997          1996
                                                                          -----------      ---------
<S>                                                                        <C>             <C>
ASSETS

Current assets:
     Cash and cash equivalents                                             $    2,044     $    2,202
     Short-term debt securities held to maturity and time
        deposits, partially restricted (notes 2 and 6)                         24,076         26,394
     Receivables                                                                  289            438
     Notes receivable from related parties (note 9)                               153            200
     Other current assets                                                         340            312
                                                                           ----------      ---------
         Total current assets                                                  26,902         29,546
                                                                           ----------      ---------
Property and equipment, net (note 3)                                            1,312          1,093
                                                                           ----------      ---------
                                                                             $ 28,214       $ 30,639
                                                                           ----------      ---------
                                                                           ----------      ---------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                      $      299     $      358
     Accrued expenses                                                             623            713
     Accrued vacation                                                             191            194
     Current portion of capital lease obligation (note 6)                         ---             27
     Deferred revenue (note 7)                                                  4,656          4,000
                                                                           ----------     ----------
         Total current liabilities                                              5,769          5,292
                                                                           ----------     ----------
Deferred revenue (note 7)                                                         ---          1,000

Stockholders' equity (notes 4 and 7):
    Preferred stock, $0.001 par value, 10,000,000 shares
      authorized; issued and outstanding:
        Series A Convertible: 1,000,000 shares in 1997 and in
          1996 (liquidating preference $5 per share)                                1              1
        Series B Convertible: 250,000 shares in 1997 and in 1996
          (liquidating preference $8 per share)                                   ---            ---
    Common stock, $0.001 par value, 50,000,000 shares
      authorized;  issued and outstanding 13,950,000 shares
      in 1997 and 13,717,000 shares in 1996                                        14             14
    Additional paid-in capital                                                 92,179         91,629
    Accumulated deficit                                                       (69,749)       (67,297)
                                                                           -----------     ----------
         Total stockholders' equity                                            22,445         24,347

Commitments and contingencies (notes 6, 7 and 10)
                                                                          -----------     ----------
                                                                            $  28,214       $ 30,639
                                                                          -----------     ----------
                                                                          -----------     ----------
</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,
                                                                   ------------------------------------------
                                                                        1997           1996            1995
                                                                   --------------  -------------   -----------
<S>                                                                 <C>             <C>           <C>
REVENUES:
     Revenue from collaborative
        agreements (note 7)                                          $     5,811    $     5,480    $     4,354
     License fees and milestones (note 7)                                  4,100            400            500
     Net product sales (note 11)                                             374            224            406
     Royalties (note 7)                                                      120            161            142
                                                                    ------------    ------------    -----------
          Total revenues                                                  10,405          6,265          5,402
                                                                    ------------    ------------    -----------

COSTS AND EXPENSES:
     Research and development (note 7)                                     9,705         10,901          9,723
     General and administrative                                            4,469          3,181          2,582
     Cost of products sold (note 11)                                         194            134            211
                                                                    ------------    ------------    -----------
          Total costs and expenses                                        14,368         14,216         12,516
                                                                    ------------    ------------    -----------
          Loss from operations                                            (3,963)        (7,951)        (7,114)
                                                                    ------------    ------------    -----------
OTHER INCOME:
     Interest income, net                                                  1,510          1,191            835
     Other income (expense)                                                    1             51            (14)
                                                                    ------------    ------------    -----------
                                                                           1,511          1,242            821
                                                                    ------------    ------------    -----------
          Net loss                                                   $    (2,452)   $    (6,709)   $    (6,293)
                                                                    ------------    ------------    -----------
                                                                    ------------    ------------    -----------
          Basic and diluted net loss per share                       $     (0.18)   $     (0.52)   $     (0.67)
                                                                    ------------    ------------    -----------
                                                                    ------------    ------------    -----------
          Shares used in calculation
          of net loss per share                                           13,873         12,882          9,374
                                                                    ------------    ------------    -----------
                                                                    ------------    ------------    -----------
</TABLE>


See accompanying notes to financial statements.

                                      F-3

<PAGE>

                                      CORVAS INTERNATIONAL, INC.
                                   Statements of Stockholders' Equity
                                For the Three Years Ended December 31, 1997
                                              (In thousands)

<TABLE>
<CAPTION>

                                                                      Series A                     Series B
                                                                    Convertible                    Convertible
                                                                   Preferred Stock                Preferred Stock
                                                            ------------------------------  -------------------------
                                                                  Shares           Amount       Shares        Amount
                                                            ----------------     ---------   -----------     --------
<S>                                                           <C>                 <C>           <C>            <C>
       Balance as of December 31, 1994                             1,000          $      1          --       $    --

  Common stock issued upon exercise of
    stock options                                                     --                --          --            --
  Common stock issued pursuant to employee stock
    purchase plan                                                     --                --          --            --
  Common stock issued pursuant to employee
    performance stock award                                           --                --          --            --
  Amortization of deferred compensation                               --                --          --            --
  Foreign currency translation adjustment                             --                --          --            --
  Net loss                                                            --                --          --            --
                                                            ------------         ---------    --------      --------
       Balance as of December 31, 1995                             1,000                 1          --            --

  Common stock issued for cash, net of issuance costs                 --                --          --            --
  Common stock issued upon exercise of
    stock options                                                     --                --          --            --
  Common stock issued pursuant to employee stock
    purchase plan                                                     --                --          --            --
  Common stock issued pursuant to litigation
    settlement                                                        --                --          --            --
  Series B preferred stock issued for cash, net of
    issuance costs                                                    --                --         250            --
  Net loss                                                            --                --          --            --
                                                           -------------        ----------   ---------      --------
       Balance as of December 31, 1996                             1,000                 1         250            --

  Common stock issued upon exercise of
    stock options                                                     --                --          --            --
  Common stock issued pursuant to employee stock
    purchase plan                                                     --                --          --            --
  Common stock issued in exchange for services                        --                --          --            --
  Net loss                                                            --                --          --            --
                                                           -------------        ----------   ---------     ---------
       Balance as of December 31, 1997                             1,000          $      1         250       $    --
                                                           -------------        ----------   ---------     ---------



<CAPTION>



                                                           Common Stock        Additional
                                                        --------------------     Paid-in   Accumulated    Deferred
                                                         Shares      Amount      Capital     Deficit    Compensation
                                                        ---------   --------  -----------  -----------  -------------
<S>                                                     <C>          <C>      <C>          <C>          <C>
       Balance as of December 31, 1994                     9,352     $   9    $   69,149    $ (54,295)      $   (83)


  Common stock issued upon exercise of
    stock options                                            74         --           150           --            --
  Common stock issued pursuant to employee stock
    purchase plan                                            16         --            35           --            --
  Common stock issued pursuant to employee
    performance stock award                                   6         --            12           --            --
  Amortization of deferred compensation                      --         --            --           --            83
  Foreign currency translation adjustment                    --         --            --           --            --
  Net loss                                                   --         --            --       (6,293)           --
                                                        -------     ------   -----------    ---------      --------
       Balance as of December 31, 1995                    9,448          9        69,346      (60,588)           --

  Common stock issued for cash, net of issuance costs     4,000          4        19,710           --            --
  Common stock issued upon exercise of
    stock options                                           133          1           248           --            --
  Common stock issued pursuant to employee stock
    purchase plan                                            11         --            27           --            --
  Common stock issued pursuant to litigation
    settlement                                              125         --           298           --            --
  Series B preferred stock issued for cash, net of
    issuance costs                                           --         --         2,000           --            --
  Net loss                                                   --         --           ---       (6,709)           --
                                                        -------     ------   -----------    ---------      --------
       Balance as of December 31, 1996                   13,717         14        91,629      (67,297)           --

  Common stock issued upon exercise of
    stock options                                           203         --           411           --            --
  Common stock issued pursuant to employee stock
    purchase plan                                            15         --            71           --            --
  Common stock issued in exchange for services               15         --            68           --            --
  Net loss                                                   --         --            --       (2,452)           --
                                                        -------    -------   -----------    ---------      --------
       Balance as of December 31, 1997                   13,950      $  14     $  92,179    $ (69,749)      $    --
                                                        -------    -------   -----------    ---------      --------
                                                        -------    -------   -----------    ---------      --------


<CAPTION>

                                                         Foreign
                                                        Currency            Total
                                                       Translation       Stockholders'
                                                        Adjustment          Equity
                                                      -------------      -------------
<S>                                                     <C>               <C>
       Balance as of December 31, 1994                   $   (134)        $   14,647

  Common stock issued upon exercise of
    stock options                                              --                150
  Common stock issued pursuant to employee stock
    purchase plan                                              --                 35
  Common stock issued pursuant to employee
    performance stock award                                    --                 12
  Amortization of deferred compensation                        --                 83
  Foreign currency translation adjustment                     134                134
  Net loss                                                     --             (6,293)
                                                         --------        -----------
       Balance as of December 31, 1995                         --              8,768

  Common stock issued for cash, net of issuance costs          --             19,714
  Common stock issued upon exercise of
    stock options                                              --                249
  Common stock issued pursuant to employee stock
    purchase plan                                              --                 27
  Common stock issued pursuant to litigation
    settlement                                                 --                298
  Series B preferred stock issued for cash, net of
    issuance costs                                             --              2,000
  Net loss                                                     --             (6,709)
                                                         --------        -----------
       Balance as of December 31, 1996                         --             24,347

  Common stock issued upon exercise of
    stock options                                              --                411
  Common stock issued pursuant to employee stock
    purchase plan                                              --                 71
  Common stock issued in exchange for services                 --                 68
  Net loss                                                     --             (2,452)
                                                         --------         ----------
       Balance as of December 31, 1997                   $     --         $   22,445
                                                         --------         ----------
                                                         --------         ----------

</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,
                                                                                 -----------------------------------------------
                                                                                     1997               1996             1995
                                                                                 ------------     --------------    ------------
<S>                                                                               <C>               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
          Net loss                                                                $  (2,452)        $  (6,709)        $  (6,293)
          Adjustments to reconcile net loss to
              net cash used in operating activities:
                Depreciation and amortization                                           618               767               834
                Amortization of premiums and discounts on investments                  (419)             (160)             (377)
                Amortization of deferred compensation                                    --                --                83
                Stock compensation expense                                               68                 4                12
                Translation loss                                                         --                --                92
                Loss on disposal of property and equipment                               --                --               154
                Change in assets and liabilities:
                      (Increase) decrease in receivables                                149              (100)              (32)
                      Increase in other current assets                                  (28)              (62)               (8)
                      Increase (decrease) in accounts payable, accrued
                         expenses, accrued benefits, accrued vacation and
                         accrued litigation settlement expenses                        (152)              314            (1,191)
                      Decrease in deferred rent                                          --               (34)             (211)
                      Increase (decrease) in deferred revenue                          (344)              695              (695)
                                                                                  ---------          --------          --------
                         Net cash used in operating activities                       (2,560)           (5,285)           (7,632)
                                                                                  ---------          --------          --------
CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchases of investments held to maturity                                  (43,518)         (39,195)          (14,927)
          Proceeds from maturity of investments held to maturity                      46,255           23,985            20,460
          Purchases of property and equipment                                           (837)            (437)             (577)
          Proceeds from sale of property and equipment                                    --               --               256
          Repayments from (loans to) related parties                                      47             (200)               --
                                                                                  ----------         --------          --------
                         Net cash provided by (used in) investing activities           1,947          (15,847)            5,212
                                                                                  ----------         --------          --------
                                                                                                                  (Continued)
</TABLE>
                                      F-5
<PAGE>

                                           CORVAS INTERNATIONAL, INC.

                                       Statements of Cash Flows, Continued
                                                 (In thousands)

<TABLE>
<CAPTION>

                                                                                          Years ended December 31,
                                                                              ----------------------------------------------
                                                                                1997              1996               1995
                                                                              --------       -------------       -----------
<S>                                                                           <C>               <C>                 <C>
   CASH FLOWS FROM FINANCING ACTIVITIES:
             Principal payments under capital lease obligation                $  (27)           $   (77)           $  (71)
             Net proceeds from issuance of preferred stock                        --              2,000                --
             Net proceeds from issuance of common stock                          482             19,984               185
                                                                              -------         ----------          --------
                               Net cash provided by financing activities         455             21,907               114
   Effect of exchange rate changes on cash                                        --                 --                46
                                                                              -------         ----------          --------
   Net increase (decrease) in cash and cash equivalents                         (158)               775            (2,260)

   Cash and cash equivalents at beginning of period                            2,202              1,427             3,687
                                                                              -------         ----------          --------
   Cash and cash equivalents at end of period                                 $2,044            $ 2,202            $1,427
                                                                              -------         ----------          --------
                                                                              -------         ----------          --------
   SUPPLEMENTAL DISCLOSURES:
             Interest paid                                                    $    --           $     6            $   11
             Noncash financing activities -
                 Common stock issued under litigation settlement agreement    $    --           $   298            $   --

</TABLE>

   See accompanying notes to financial statements.

                                      F-6

<PAGE>


                             CORVAS INTERNATIONAL, INC.

                           Notes to Financial Statements
                             December 31, 1997 and 1996

(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
     design and development of a new generation of therapeutic agents in the
     fields of blood clot formation (thrombosis), inflammation, cancer and other
     diseases.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  CASH EQUIVALENTS:

          Cash equivalents consist of investments in a short-term government
          fund and are stated at cost, which approximates market value.

     (b)  SHORT-TERM DEBT SECURITIES HELD TO MATURITY AND TIME DEPOSITS:

          Short-term debt securities consist of government-backed debt
          instruments.  Short-term debt securities are carried at amortized cost
          which approximates market value and mature at various dates through
          June 30, 1998.  At both December 31, 1997 and 1996, a $60,000 time
          deposit was restricted related to the facility lease.  See Note 6.

          The Company has the ability and intent to hold its investments until
          their maturity and, therefore, records its investments at amortized
          cost, adjusted for the amortization or accretion of premiums or
          discounts.

     (c)  DEPRECIATION AND AMORTIZATION:

          Depreciation for financial reporting purposes 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.  Assets held under capital lease are amortized over the life of
          the lease.

     (d)  RESEARCH AND DEVELOPMENT COSTS:

          Research and development costs are expensed in the period incurred.

     (e)  PATENTS:

          Costs to obtain and maintain patents are expensed as incurred.

     (f)  NET LOSS PER SHARE:

          As of December 31, 1997, the Company adopted Statement of Financial
          Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").  All
          current and prior period information presented conforms to the
          provisions of SFAS 128.  Basic and diluted net loss per share are
          computed using the weighted average number of common and common
          equivalent shares outstanding. Common equivalent shares from
          convertible preferred stock, stock options and warrants are excluded
          from the computation because their effect is antidilutive.



                                       F-7
<PAGE>
                             CORVAS INTERNATIONAL, INC.

                      Notes to Financial Statements, Continued

     (g)  REVENUE RECOGNITION:

          Revenue from collaborative agreements is generally recognized over the
          term of the agreement; advance payments received in excess of amounts
          earned are classified as deferred revenue.  License fees and
          milestones are generally recognized upon achievement of certain
          milestones or receipt of license fees.  Revenue on product sales is
          recorded at the time of shipment.

     (h)  USE OF ESTIMATES:

          Management of the Company has made a number of estimates and
          assumptions relating to the reporting of assets and liabilities and
          the disclosure of contingent assets and liabilities at the date of the
          financial statements and the reported amounts of revenues and expenses
          during the reporting period to prepare these financial statements in
          conformity with generally accepted accounting principles.  Actual
          results could differ from those estimates.

     (i)  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 amount of cash and cash equivalents, short-term
          debt securities held to maturity and time deposits, receivables, other
          current assets, accounts payable, accrued expenses, accrued vacation,
          capital lease obligations and deferred revenue, included in the
          accompanying balance sheets, approximate the estimated fair value of
          those instruments because of their short-term nature.  The fair value
          of the notes receivable from related parties cannot be determined due
          to their related party nature.

     (j)  ACCOUNTING FOR STOCK OPTIONS:

          The Company accounts for its stock option plans in accordance with the
          recognition provisions of Accounting Principles Board ("APB") Opinion
          No. 25, "Accounting for Stock Issued to Employees" and related
          interpretations.  Accordingly, stock compensation expense would be
          recorded on the date of grant only if the current market price of the
          underlying stock exceeded the exercise price.

          In 1995, the Financial Accounting Standards Board issued Statement of
          Financial Accounting Standards No. 123, "Accounting for Stock-Based
          Compensation" ("SFAS 123").  SFAS 123 permits companies to recognize
          as expense over the vesting period the fair value of all stock-based
          awards on the date of grant, or to continue measuring compensation
          expense for those plans using the intrinsic value method prescribed in
          APB Opinion  No. 25.  SFAS 123 requires that companies electing to
          continue using the intrinsic value method must provide pro forma net
          income and pro forma earnings per share disclosures for grants made in
          1995 and future years as if the fair-value method defined in SFAS 123
          had been applied.  The Company has elected to continue to apply the
          provisions of APB Opinion No. 25 and provide the pro forma disclosure
          provisions of SFAS 123.

                                     F-8

<PAGE>

                             CORVAS INTERNATIONAL, INC.

                      Notes to Financial Statements, Continued


     (k)  IMPAIRMENT AND DISPOSITION OF LONG-LIVED ASSETS:

          As of January 1, 1996, the Company adopted 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").  SFAS 121 requires losses from impairment to be recorded on
          long-lived assets used in operations 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 adoption of SFAS 121 did not have a material effect on
          the Company's financial statements.

(3)  PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                             -----------------
                                                               1997      1996
                                                             -------   -------
     <S>                                                     <C>       <C>
          Machinery and equipment                            $ 3,885   $ 3,235
          Furniture and fixtures                                 143       143
          Leasehold improvements                                 833       782
                                                             -------   -------

             Total property and equipment                      4,861     4,160

          Less accumulated depreciation and amortization      (3,549)   (3,067)
                                                             -------   -------

                                                             $ 1,312   $ 1,093
                                                             -------   -------
                                                             -------   -------
</TABLE>


(4)  STOCKHOLDERS' EQUITY

     (a)  PREFERRED STOCK:

          In December 1996, in conjunction with a strategic alliance with
          Schering-Plough Corporation ("Schering-Plough") (See Note 7), the
          Company issued 250,000 shares of Series B Convertible Preferred Stock,
          resulting in net proceeds of $2,000,000.  Each share of Series B
          Preferred Stock is convertible into one share of the Company's Common
          Stock, and will automatically convert if the market price of the
          Company's Common Stock for 10 consecutive trading days exceeds $12.00
          per share.  As a result, 250,000 shares of Common Stock have been
          reserved for the potential conversion of Series B Preferred Stock.
          Each share of Series B Preferred Stock is entitled to a fixed,
          cumulative dividend of $0.64 per share per annum, when and if declared
          by the Board of Directors.  No such dividends have been declared.  In
          addition, each share is entitled to one vote and has a liquidating
          preference of $8.00 plus any declared and unpaid dividends.

          Also in conjunction with its strategic alliance with Schering-Plough,
          the Company issued 1,000,000 shares of Series A Convertible Preferred
          Stock in December 1994, resulting in net proceeds of $4,864,000.  Each
          share of Series A Preferred Stock is convertible into one share of the
          Company's Common Stock, and will automatically convert if the market
          price of the Company's Common Stock for 10 consecutive trading days
          exceeds $7.50 per share.  As a result, 1,000,000 shares of Common
          Stock have been reserved for the potential conversion of Series A
          Preferred Stock.  Each share of Series A Preferred Stock is entitled
          to a fixed, cumulative dividend of $0.40 per share per annum, when and
          if declared by the Board of Directors.  No such dividends have been
          declared.  In addition, each share is entitled to one vote and has a
          liquidating preference of $5.00 plus any declared and unpaid
          dividends.
                                        F-9

<PAGE>

                             CORVAS INTERNATIONAL, INC.

                      Notes to Financial Statements, Continued

          The Company is authorized to issue a total of 10,000,000 shares of
          preferred stock.

     (b)  COMMON STOCK:

          In July 1996, the Company completed a public offering of 1,000,000
          shares of Common Stock, resulting in net proceeds of $4,885,000.

          In February 1996, the Company completed a private placement of equity
          securities consisting of 3,000,000 units to a group of institutional
          buyers, resulting in net proceeds of $14,829,000.  Each unit consisted
          of one share of Common Stock and one callable warrant to purchase one
          additional share of Common Stock.

          In February 1992, the Company completed its initial public offering of
          3,000,000 shares of Common Stock, resulting in net proceeds of
          $32,470,000.  The Company filed Restated Articles of Incorporation in
          February 1992 which increased to 50,000,000 the number of shares of
          authorized Common Stock.

     (c)  STOCK OPTIONS:

          The Company has several plans and agreements under which incentive
          stock options, non-statutory stock options, stock appreciation rights,
          restricted stock awards, dividend equivalents, performance awards and
          stock payments can be granted to key personnel, including officers,
          directors, and outside consultants.  The grants are authorized by the
          Compensation and Stock Option Committee of the Board of Directors.
          Generally options have a term of 10 years and become exercisable over
          a four-year period beginning one year from the date of grant at 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 of 85% of the fair market value on the date of grant.  Most
          options granted after December 1, 1994 vest 25% at the end of the
          first year and 6.25% per quarter each quarter thereafter.  Options
          granted to certain consultants in 1997 have a term of two years, and
          vest 50% at the end of each of the first and second years.   Activity
          under these plans and agreements from 1995 through 1997 is as follows
          (in thousands except per share amounts):

<TABLE>
<CAPTION>

                                         NUMBER OF SHARES     WEIGHTED-AVERAGE
                                           UNDER OPTION    EXERCISE PRICE PER SHARE
                                         ----------------  ------------------------
<S>                                      <C>               <C>
          Outstanding, December 31, 1994     1,088                 $ 4.11
               Granted                         755                 $ 2.26
               Exercised                       (74)                $ 2.02
               Cancelled                      (711)                $ 4.73
                                             -----

          Outstanding, December 31, 1995     1,058                 $ 2.44
               Granted                       1,079                 $ 4.56
               Exercised                      (133)                $ 1.86
               Cancelled                      (350)                $ 4.17
                                             -----

          Outstanding, December 31, 1996     1,654                 $ 3.51
               Granted                         648                 $ 4.70
               Exercised                      (203)                $ 2.03
               Cancelled                       (34)                $ 4.54
                                             -----

          Outstanding, December 31, 1997     2,065                 $ 4.01
                                             -----
                                             -----
</TABLE>

                                        F-10

<PAGE>
                             CORVAS INTERNATIONAL, INC.

                      Notes to Financial Statements, Continued

          As of December 31, 1997, the range of exercise prices of options
          outstanding was $0.70 - $7.06 and the weighted-average remaining
          contractual life of these options was 8.15 years. The number of
          options exercisable at December 31, 1997, 1996 and 1995 was 875,000,
          615,000 and 342,000, respectively, and the weighted-average exercise
          price of those options was $3.36, $2.47 and $2.28, respectively.

          In January and April 1996, the Board of Directors approved, and in
          June 1996 the Company's stockholders ratified, an amendment to the
          current stock option plan to increase the aggregate number of options
          authorized for issuance to 2,225,000.  Further, the number of options
          issuable will automatically increase each quarter such that the number
          of options issuable at the beginning of any quarter will equal 18% of
          the number of outstanding shares of Common Stock, as adjusted.  A
          total of 2,511,000 options are authorized for issuance as of December
          31, 1997, and an additional 542,000 shares are reserved for future
          grant.

          In January 1995, the Company offered certain holders of stock options,
          excluding outside directors of the Company, the opportunity to
          exchange an issued option for a new stock option on a one-for-one
          basis at the market value on January 16, 1995.  After a waiting period
          of six months (12 months for officers), vesting of the exchanged
          options was restored to the level existing prior to the exchange.  A
          total of 608,000 options at an average exercise price of $4.83 were
          exchanged for options with an exercise price of $2.19 per share.
          These options are included as grants and cancellations in the
          preceding table.

          For certain options granted prior to the Company's initial public
          offering, deferred compensation expense was recognized for the excess
          of the deemed fair value over the exercise price at the date of grant.
          This deferred compensation was amortized to expense ratably over the
          vesting period of each option.  All such deferred compensation expense
          was amortized prior to December 31, 1995.

          The Company applies APB Opinion No. 25 in accounting for its plans.
          Had the Company determined compensation cost based on the fair value
          at the grant date for its stock options under SFAS 123, the Company's
          net loss and loss per share would have been increased to the pro forma
          amounts indicated below (in thousands):

<TABLE>
<CAPTION>

                                       1997           1996           1995
                                   -----------    -----------    -----------
<S>                                <C>            <C>            <C>
     Net loss - As reported        $  (2,452)     $  (6,709)     $  (6,293)

     Net loss - Pro forma          $  (4,398)     $  (8,149)     $  (7,221)

     Basic and diluted net loss
       per share - As reported     $   (0.18)     $   (0.52)     $   (0.67)

     Basic and diluted net loss
       per share - Pro forma       $   (0.32)     $   (0.63)     $   (0.77)

</TABLE>

          The full impact of calculating compensation cost for stock options
          under SFAS 123 is not reflected in the pro forma net loss amounts
          presented above because compensation cost is expensed over the
          options' vesting period of four years, and compensation cost for
          options granted prior to January 1, 1995 is not considered.

                                        F-11

<PAGE>

                             CORVAS INTERNATIONAL, INC.

                      Notes to Financial Statements, Continued

          The per share weighted-average fair market value of stock options
          granted during 1997, 1996 and 1995 at an exercise price equal to the
          fair market value on the date of grant was $3.23, $4.17 and $1.98,
          respectively, on the date of grant using the Black-Scholes
          option-pricing model. The per share weighted-average fair market value
          of stock options granted during 1997, 1996 and 1995 at an exercise
          price less than the fair market value on the date of grant was $4.97,
          $3.95 and $1.90 on the date of grant. The following weighted-average
          assumptions were used: 1997 - expected dividend yield of 0%, risk-free
          interest rate of 6.24%, expected life of 7.47 years, and expected
          volatility of 87.63%; 1996 - expected dividend yield of 0%, risk-free
          interest rate of 5.86%, expected life of 7.64 years, and expected
          volatility of 92.67%; 1995 - expected dividend yield of 0%, risk-free
          interest rate of 6.61%, expected life of 8.39 years, and expected
          volatility of 96.35%.

     (d)  PERFORMANCE AWARDS:

          In January 1995, the Company granted a total of 6,000 shares of Common
          Stock as a performance award to all employees as of that date,
          excluding senior management of the Company.  These shares were fully
          vested and non-restrictive.  No such shares were issued in the years
          ended December 31, 1997 or 1996.

     (e)  WARRANTS:

          In conjunction with the private placement of equity securities in
          February 1996, the Company issued 3,000,000 warrants to purchase an
          equal number of shares of Common Stock. The warrants are exercisable
          at $6.00 per share over a six-year period from the date of purchase.
          As of December 31, 1997, no warrants had been exercised.

          In conjunction with the negotiation of equipment leases entered into
          in 1990, the Company issued warrants to purchase 9,000 shares of
          Preferred Stock (subsequently converted to Common Stock) to the
          lessors in lieu of security deposits.  The warrants are exercisable at
          $6.13 or $7.00 per share over a period of ten years from the inception
          of the leases.  As of December 31, 1997, no warrants had been
          exercised.  The lease agreements are described in Note 6.

     (f)  STOCK PURCHASE PLAN:

          In December 1991, the Company adopted an employee stock purchase plan
          that provides for the issuance of up to 150,000 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 Compensation and Stock Option 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 the fair market value at the beginning of each
          offering period or of the fair market value on predetermined dates.
          As of December 31, 1997, 73,000 shares of Common Stock have been
          issued pursuant to this plan.  Had the Company determined compensation
          cost based on the fair market value at the date of grant for these
          shares under SFAS 123, the effect would not have been material to the
          Company's net loss and loss per share for 1997, 1996 and 1995.

     (g)  STOCK AWARD:

          In November 1997, the Company issued 15,000 shares of Common Stock to
          an employee in exchange for services rendered, for which a charge of
          $68,000 was recorded on the accompanying statements of operations.


                                        F-12
<PAGE>

                             CORVAS INTERNATIONAL, INC.

                      Notes to Financial Statements, Continued


     (h)  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
          Corvas Common Stock or announces a tender offer for 20% or more of the
          Common Stock.  If the Rights become exercisable, all rightsholders,
          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.

(5)  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 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.

     The Company has no net, taxable temporary differences which would require
     recognition of deferred tax liabilities and, due to the uncertainty of
     future realizability, has recorded a valuation allowance against any
     deferred tax assets for deductible temporary differences and tax operating
     loss carryforwards.  The Company increased its valuation allowance by
     approximately $1,100,000 and $2,100,000 for the years ended December 31,
     1997 and 1996, respectively, primarily as a result of the increase in tax
     operating loss carryforwards.

     At December 31, 1997, the Company had available net operating loss
     carryforwards of approximately $61,300,000 for federal income tax reporting
     purposes which begin to expire in 2002.  The net operating loss
     carryforwards for state purposes, which expire five years after generation,
     are approximately $24,300,000.  The Company has unused research and
     development tax credits for federal income tax purposes of $2,800,000 at
     December 31, 1997.

     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-13
<PAGE>

                             CORVAS INTERNATIONAL, INC.

                      Notes to Financial Statements, Continued

(6)  COMMITMENTS

     (a)  LEASE COMMITMENTS:

          The Company currently leases its principal facility under an operating
          lease.  This facility lease expires in September 1998 and the Company
          has one one-year renewal option remaining.  Terms of the lease provide
          for escalating rent payments.  For financial reporting purposes, rent
          expense was recognized on a straight-line basis over the term of the
          base lease, which ended on September 30, 1996.  Accordingly, rent
          expense recognized in excess of cash rent paid was reflected as
          deferred rent through September 30, 1996.  Total rent expense
          recognized under this lease for the years ended December 31, 1997,
          1996 and 1995 was $924,000, $846,000 and $733,000, respectively.

          In 1994, the Company entered into a capital equipment lease for
          certain equipment in the amount of $221,000 to be paid over 36 months.
          The amortization expense on this lease for the years ended December
          31, 1997, 1996 and 1995 was $15,000, $44,000 and $44,000,
          respectively.

          The Company has entered into various operating leases for the purchase
          of equipment. All of these leases have expired and, accordingly, no
          lease expense was recognized pursuant to these leases for the years
          ended December 31, 1997 or 1996.  Lease expense on these leases in the
          year ended December 31, 1995 was $58,000.

          The annual future minimum commitment under the facility lease as of
          December 31, 1997 is as follows.

<TABLE>
<CAPTION>

              <S>                                <C>
              Total minimum lease payments       $    718,000
                                                 ------------
                                                 ------------
</TABLE>


     (b)  LETTER OF CREDIT:

          The Company has an unused standby letter of credit of $60,000 that
          bears interest at the prime rate plus 1% and expires on September 30,
          1998 with provisions for annual renewal.  This letter of credit,
          collateralized by a $60,000 time deposit, is pledged in lieu of a
          security deposit against the principal facility lease discussed above.


                                        F-14
<PAGE>

                             CORVAS INTERNATIONAL, INC.

                      Notes to Financial Statements, Continued

(7)  COLLABORATIVE AGREEMENTS

     In June 1997, the Company entered into both an option agreement to
     acquire all of the outstanding stock of Vascular Genomics Inc. ("VGI"),
     a private company with a proprietary position in a novel vascular
     targeting technology, as well as a research and development agreement.
     The three-year option agreement requires the Company to make monthly
     option payments of $83,000, which are recorded as research and
     development expenses on the statements of operations, during the term of
     the option.  If this option is exercised prior to its termination on
     June 30, 2000, the acquisition will be made with newly-issued Corvas
     Common Stock or, in certain circumstances at the option of the Company,
     a combination of cash and 633,600 shares of Common Stock.  The aggregate
     acquisition price, which is based on the timing of option exercise,
     ranges from a minimum as of December 31, 1997 of $13,866,000 to a
     maximum of $19,960,000.  Exercise of the option would be automatically
     triggered if the Company enters into a partnering agreement which has an
     aggregate value equal to the dollar value of the acquisition price
     applicable to that date and covers any portion of this technology.  If
     this option is exercised, the Company expects a noncash charge to
     earnings for in-process research and development.  If Corvas elects not
     to exercise its option, VGI may require the Company to purchase 19.9% of
     its outstanding stock for $3,960,000 in Corvas Common Stock.  Under the
     terms of a research and development agreement executed as part of such
     transaction, VGI is required to make monthly payments of $80,000 to
     Corvas to be applied to research and development covering the VGI
     technology.  The accompanying statements of operations include $480,000
     of revenue from collaborative agreements in 1997 attributable to VGI.
     Pursuant to these agreements, the Company received an exclusive,
     fully-paid, royalty-free worldwide license, with the right to grant
     sublicenses, to the VGI technology.

     Also in June 1997, the Company entered into a license and collaboration
     agreement with Schering-Plough which covers the design and development of
     orally-bioavailable inhibitors of a key protease necessary for hepatitis C
     virus replication.  Under the terms of this agreement, Schering-Plough
     received an exclusive worldwide license for products developed from Corvas
     compounds under the agreement.  Schering-Plough is responsible for all
     development, manufacturing and marketing of the products.  The Company
     received a license fee of $250,000 and received prepaid research funding
     for a one-year period.  Revenue recognized in 1997 includes $250,000 of
     license fees and $919,000 of revenue from collaborative agreements;
     $656,000 of prepaid research funding is included as deferred revenue on the
     balance sheets as of December 31, 1997.  The initial term of the research
     program is one year; Schering-Plough may extend the program for up to two
     additional one-year periods.  The funding for each extension year will be
     dependent on the manpower applied to the program, within an established
     minimum and maximum.  The Company will also receive milestone payments and
     royalty payments on product sales if products are successfully
     commercialized from this agreement.


                                        F-15

<PAGE>

                             CORVAS INTERNATIONAL, INC.

                      Notes to Financial Statements, Continued

     In October 1995, the Company entered into a research and option agreement
     of up to eighteen months with Pfizer Inc. ("Pfizer") to collaborate on the
     development of neutrophil inhibitory factor ("NIF"), an anti-inflammatory
     agent with therapeutic potential for stroke and other indications.  The
     option period concluded in October 1996, but Pfizer extended its option and
     began to make monthly payments of $125,000 through January 1997 to retain
     its option rights.  In February 1997, Pfizer elected to exercise its option
     to enter into an exclusive license and development agreement on this
     program.  Under the agreement, Pfizer paid the Company $1,000,000 due upon
     execution of the agreement, less $200,000 applied from amounts paid to
     extend the option period from October 1996 to January 1997.  The
     accompanying statements of operations reflect 1997 license fees of $850,000
     pursuant to this collaboration of which $800,000 was paid upon exercise of
     the option and $50,000 was applied from the January 1997 payment to extend
     the option period.  Also included in the 1997 statements of operations is
     $412,000 of revenue from collaborative agreements recognized as a result of
     a portion of the option extension payment from January and research funding
     earned in 1997. Revenue recognized in 1996 includes $480,000 of revenue
     from collaborative agreements, $150,000 of license fees and $50,000 of
     other income. Revenue recognized in 1995 includes license fees of $500,000
     and revenue from collaborative agreements of $354,000.  Pursuant to
     exercise of the option, Pfizer received an exclusive, worldwide license to
     further develop, manufacture and market NIF as a therapeutic agent, and is
     responsible for funding all further development of NIF, including costs
     associated with clinical trials and limited activities at Corvas.  Pfizer
     will compensate the Company for certain costs of research and preclinical
     development of NIF over a two-year period ending March 31, 1999. The
     Company will also receive milestone payments and royalty payments on
     product sales if products are successfully commercialized from this
     agreement.  See Note 11.

     In December 1994, the Company entered into a strategic alliance agreement
     with Schering-Plough to collaborate on the discovery and commercialization
     of orally-active thrombin inhibitor drugs for the prevention and treatment
     of chronic cardiovascular disorders. Under the terms of the agreement,
     Schering-Plough compensated the Company for certain costs of research and
     preclinical development of thrombin inhibitors over a two-year period which
     ended December 31, 1996.  Revenue from collaborative agreements in the
     amount of $4,000,000 was recognized in each of 1996 and 1995 pursuant to
     this agreement.  In January 1997, the Company received a $3,000,000
     milestone payment from Schering-Plough upon selection of a clinical
     development compound in this program.  The Company may also receive further
     milestone payments and royalties on sales of therapeutics which may result
     from this alliance.  Schering-Plough, which is responsible for certain
     preclinical development and all future clinical trials and regulatory
     activities, received exclusive worldwide manufacturing and marketing rights
     for any resulting thrombin inhibitors.

     Under a separate agreement also completed in December 1994, Schering-Plough
     purchased 1,000,000 shares of Series A Convertible Preferred Stock of the
     Company which resulted in net proceeds of $4,864,000.

     In conjunction with the agreements completed in December 1994,
     Schering-Plough acquired an exclusive one-year option (renewable for one
     additional year) to expand the alliance to include a second blood
     clotting enzyme, Factor Xa.  In January 1996, Schering-Plough renewed
     this option and exercised it in December 1996.  Under the terms of this
     agreement, Schering-Plough will compensate the Company for certain costs
     of research and preclinical development of coagulation Factor Xa
     inhibitors over a two-year period ending December 31, 1998.  The
     $1,000,000 fee paid to extend the option was recorded as revenue from
     collaborative agreements in 1996. A $5,000,000 payment received in
     December 1996 was recorded as deferred revenue at December 31, 1996.  Of
     this amount, $4,000,000 was recognized in 1997 as revenue from
     collaborative agreements.  The remaining $1,000,000, along with an
     additional $3,000,000 received in December 1997, is recorded as deferred
     revenue at December 31, 1997 and will be recognized as revenue in 1998.
     Exercise of this option  also resulted in the purchase of 250,000 shares
     of Series B Convertible Preferred Stock in 1996, which yielded net
     proceeds of $2,000,000.

                                        F-16
<PAGE>

                             CORVAS INTERNATIONAL, INC.

                      Notes to Financial Statements, Continued


     In June 1992, the Company entered into two agreements with Ortho-Clinical
     Diagnostics Inc. ("Ortho"), a Johnson & Johnson company, granting Ortho
     exclusive worldwide rights to market certain diagnostic reagents.  Ortho is
     obligated to order stipulated minimum amounts each year, or must pay the
     Company the deficiency between the minimum and the amount actually ordered.
     Net product sales for the years ended December 31, 1997, 1996 and 1995 were
     $285,000, $130,000 and $282,000, respectively.  These agreements provide
     that Ortho pay royalties based on unit sales of this product, as well as
     two milestone payments.  A $250,000 milestone payment was recorded as
     revenue in 1996; the first milestone payment was received in 1992.  For the
     years ended December 31, 1997, 1996 and 1995, royalties under this
     agreement amounted to $120,000, $161,000 and $142,000, respectively.  See
     Note 11.

     The Company has also entered into research and licensing agreements with
     universities and other research institutions which have required the
     Company to make royalty payments for the years ended December 31, 1997,
     1996 and 1995 of $16,000, $17,000 and 15,000, respectively.

(8)  EMPLOYEE BENEFITS PLAN

     Effective January 1, 1988, the Board of Directors approved the Corvas
     401(k) Compensation Deferral Savings Plan ("The Plan"), adopting provisions
     of the Internal Revenue Code Section 401(k).  The Plan was approved by the
     IRS in 1989, and was amended and restated in 1995.  The 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, 1997.

(9)  RELATED PARTY TRANSACTIONS

     Notes receivable from related parties as of December 31, 1997 consist of a
     loan, evidenced by a promissory note, granted to an executive officer of
     the Company on June 25, 1996 in connection with the officer's relocation to
     San Diego. The balance sheets at December 31, 1996 reflected the original
     loan in the amount of $200,000, secured by the executive officer's former
     residence.  In August 1997, $47,000 was paid, leaving a balance of $153,000
     as of December 31, 1997.  This note bears no interest and is due and
     payable in full on the earlier of (i) September 18, 1998, (ii) the
     settlement or other final determination of a lawsuit related to such
     executive officer's current residence, or (iii) within 90 days of such
     executive officer's termination of employment with the Company.

     Notes receivable from related parties at December 31, 1996 consisted of two
     loans; the $200,000 loan described above, plus another loan in the amount
     of $120,000. This second loan in the amount of $120,000 was made to another
     executive officer of the Company on February 23, 1996.  On July 8, 1996,
     such executive officer resigned from the Company.  Of the $120,000 loan,
     $60,000 was repaid during 1996, and the remaining $60,000 was reserved at
     December 31, 1996 and forgiven in 1997.

(10) LEGAL MATTERS

     In 1993, the U.S. Patent and Trademark Office (the "USPTO") declared an
     interference to determine the priority of invention between a patent for
     which some rights are licensed to the Company (the "Licensed Patent") and a
     patent application for which rights are held by other parties (the "First
     Patent Application").  In 1996, the USPTO added a second patent application
     to the proceeding (the "Second Patent Application") and redeclared the
     interference.  Rights to the Second Patent Application are held by other
     parties, at least some of which also hold rights in the First Patent
     Application.  The subject matter of the patent and these applications is
     recombinant tissue factor, which is used by Ortho to determine the blood
     clotting abilities of patients.  The Company is contesting the other
     parties' claims of prior invention; however, there can be no assurance that
     the Licensed Patent will be upheld.

                                        F-17

<PAGE>

                             CORVAS INTERNATIONAL, INC.

                      Notes to Financial Statements, Continued


(11) SUBSEQUENT EVENTS (UNAUDITED)

     In February 1998, Pfizer notified the Company of a milestone achieved
     pursuant to the companies' strategic alliance agreement.  This milestone,
     which is payable upon Pfizer's commencement of a Phase I clinical trial of
     NIF, will result in a payment to the Company of $1,000,000, which will be
     recorded as revenue in 1998.  See Note 7.

     The Company has reached an understanding with Ortho, subject to final
     documentation, for the transfer of the Company's manufacturing activities
     related to recombinant tissue factor.  This understanding involves the
     transfer to Ortho of all rights under a license agreement related to
     recombinant tissue factor pursuant to which the Company is currently a
     licensee, the modification of a license to Corvas-developed technology from
     non-exclusive to worldwide exclusive, the sale of equipment used in the
     manufacturing process of such product and the transfer of certain
     production methodologies.  Ortho has assumed responsibility for the
     manufacturing of such product and, accordingly, the Company has
     discontinued its manufacturing operations.  Upon completion of this
     transaction, the Company expects to record as revenue in 1998 a license
     payment as well as other income related to the sale of equipment.  The
     carrying amount of the equipment to be sold in conjunction with this
     transfer was not material as of December 31, 1997.  There is no assurance
     that the Company will be able to complete this transaction or, if
     completed, what will be the final terms of such transaction.



                                        F-18