**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**






**FORM
      10-Q**




**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR****15(d) OF
                THE SECURITIES EXCHANGE ACT OF
                1934**





**For
      the quarterly period ended March 31, 2007**





**or**





**o**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR****15(d) OF
                THE SECURITIES EXCHANGE ACT OF
                1934**


**For
      the transition period from _______ to ___________**







**Commission
      File Number 000-51169**





**ASPREVA
      PHARMACEUTICALS CORPORATION**




(Exact
      name
      of registrant as specified in its charter)


**British
                Columbia, Canada**
              (State
                or other jurisdiction of
              incorporation
                or organization)
            **98-0435540**
              (I.R.S.
                Employer
              Identification
                No.)


**1203
      - 4464 Markham Street,**


**Victoria,
      British Columbia,**


**Canada
      V8Z 7X8**


(Address
      of
      principal executive office)





**(250)
      744-2488**


(Registrant’s
      telephone number, including area code)





Indicate
      by
      check mark whether the registrant (1) has filed all reports required to be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the preceding 12 months (or for such shorter period that the registrant was
      required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days: Yes o No x





Indicate
      by
      check mark whether the registrant is a large accelerated filer, an accelerated
      filer, or a non-accelerated filer. See definition of “accelerated filer and
      large accelerated filer” in Rule 12b-2 of the Exchange Act:





Large
                Accelerated Filerx
            Accelerated
                Filero
            Non-accelerated
                Filero





Indicate
      by
      check mark whether the registrant is a shell company (as defined in Rule 12b-2
      of the Exchange Act): Yes o No x





As
      of April
      25, 2007, the registrant had 35,179,448 common shares outstanding.


















**ASPREVA
      PHARMACEUTICALS CORPORATION**


**FORM
      10-Q**


**For
      the Quarterly Period Ended March 31, 2007**




**TABLE
      OF CONTENTS**





**Page****PART
                I - FINANCIAL INFORMATION**Item 1.
                Financial Statements (unaudited)Consolidated
                Balance Sheets - March 31, 2007 and December 31, 2006
            3Consolidated
                Statements of Income - Three month periods ended March 31, 2007 and
                2006
            4Consolidated
                Statements of Cash Flows - Three month periods ended March 31, 2007
                and
                2006
            5Notes
                to Consolidated Financial Statements
            6Item 2.
                Management’s Discussion and Analysis of Financial Condition and Results of
                Operations
            11Item 3.
                Quantitative and Qualitative Disclosures About Market Risk
            20Item 4.
                Controls and Procedures
            21**PART
                II - OTHER INFORMATION**Item
                1. Legal Proceedings
            22Item
                1A. Risk Factors
            22Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            31Item
                3. Defaults Upon Senior Securities
            31Item
                4. Submission of Matters to a Vote of Security Holders
            31Item
                5. Other Information
            32Item
                6. Exhibits
            33SIGNATURE
            34





2


**PART
      I - FINANCIAL INFORMATION**


**Item 1.
      FINANCIAL STATEMENTS**


**ASPREVA
      PHARMACEUTICALS CORPORATION**


**CONSOLIDATED
      BALANCE SHEETS**


**(in
      thousands of U.S. dollars)**


**(unaudited)**





**March
                31,**
              **2007**
            
            **December
                31,**
              **2006****ASSETS**CurrentCash
                and cash equivalents
            
            $
            17,610
            
            $
            49,217Restricted
                cash
            
            
            742
            
            
            731Marketable
                securities (Note 3)
            
            
            259,602
            
            
            210,678Accounts
                receivable
            
            
            65,228
            
            
            57,426Prepaid
                expenses
            
            
            883
            
            
            394Deferred
                income tax asset
            
            
            2,175
            
            
            2,142Foreign
                currency contracts (Note 8)
            
            
            95
            
            
            298Total
                current assets
            
            
            346,335
            
            
            320,886Property
                and equipment, net
            
            
            6,180
            
            
            4,736Deferred
                income tax asset
            
            
            1,493
            
            
            1,435**TOTAL
                ASSETS**
            
            $
            354,008
            
            $
            327,057**LIABILITIES
                AND SHAREHOLDERS’ EQUITY**CurrentAccounts
                payable
            
            $
            10,110
            
            $
            14,279Income
                taxes payable
            
            
            4,016
            
            
            11,769Accrued
                liabilities
            
            
            7,431
            
            
            8,604Foreign
                currency contracts (Note 8)
            
            
            2,078
            
            
            1,695Unearned
                royalty advance
            
            
            6,597
            
            
            6,559Current
                portion under capital leases
            
            
            251
            
            
            329Current
                portion of deferred lease inducement
            
            
            147
            
            
            130Deferred
                income tax liability
            
            
            814
            
            
            742Total
                current liabilities
            
            
            31,444
            
            
            44,107Long-term
                portion under capital leases
            
            
            68
            
            
            91Long-term
                portion of deferred lease inducement
            
            
            355
            
            
            391Deferred
                income tax liability
            
            
            834
            
            
            830Total
                liabilities
            
            
            32,701
            
            
            45,419Commitments
                and contingencies (Notes 7 and 12)Shareholders’
                equity (Note 6)Common
                sharesAuthorized:
                unlimitedIssued
                and outstanding
            
            
            151,044
            
            
            150,815March
                31, 2007  - 35,172,657December
                31, 2006  - 35,159,619Additional
                paid-in capital
            
            
            15,749
            
            
            13,049Retained
                earnings
            
            
            155,039
            
            
            118,625Accumulated
                other comprehensive loss
            
            
            (525
            )
            
            (851
            )Total
                shareholders’ equity
            
            
            321,307
            
            
            281,638**TOTAL****LIABILITIES
                AND SHAREHOLDERS’ EQUITY**
            
            $
            354,008
            
            $
            327,057





See
      accompanying notes to consolidated financial statements.





3


**ASPREVA
      PHARMACEUTICALS CORPORATION**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**(in
      thousands of U.S. dollars, except per share amounts)**


**(unaudited)**





**Three
                Months Ended March 31,****2007**
            
            **2006****Royalty
                revenue**(Note
                2)
            
            $
            59,273
            
            $
            62,680**Expenses**Research
                and development
            
            
            12,270
            
            
            9,814Marketing,
                general and administrative
            
            
            9,802
            
            
            6,11122,072
            
            
            15,925Operating
                income
            
            
            37,201
            
            
            46,755**Other
                income (expense)**Foreign
                exchange gain (loss)
            
            
            (14
            )
            
            866Interest
                and other income
            
            
            3,322
            
            
            1,420Total
                other income
            
            
            3,308
            
            
            2,286**Income
                before income taxes**
            
            
            40,509
            
            
            49,041Income
                tax expense (Note 9)
            
            
            4,095
            
            
            4,289**Net
                income**
            
            $
            36,414
            
            $
            44,752**Net
                income per common share**(Note
                5)Basic
            
            $
            1.04
            
            $
            1.30Diluted
            
            $
            1.03
            
            $
            1.25





See
      accompanying notes to consolidated financial statements.







4


**ASPREVA
      PHARMACEUTICALS CORPORATION**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(in
      thousands of U.S. dollars)**


**(unaudited)**





**Three
                Months Ended March 31,****2007**
            
            **2006****Operating
                Activities**Net
                income for the period
            
            $
            36,414
            
            $
            44,752Adjustment
                to reconcile net income to cash provided by operating
                activities:Depreciation
                and amortization
            
            
            215
            
            
            122Deferred
                taxes
            
            
            (52
            )
            
            917Stock-based
                compensation
            
            
            2,849
            
            
            973Net
                change in non-cash working capital items related to
                operations:Accounts
                receivable
            
            
            (5,338
            )
            
            (19,116
            )Prepaid
                expenses
            
            
            (489
            )
            
            (833
            )Restricted
                cash
            
            
            (11
            )
            
            (2
            )Accounts
                payable
            
            
            (4,132
            )
            
            2,157Income
                taxes payable
            
            
            (7,753
            )
            
            2,840Accrued
                liabilities
            
            
            (1,174
            )
            
            (1,541
            )Net
                cash flows from operating activities
            
            
            20,529
            
            
            30,269**Investing
                Activities**Purchases
                of marketable securities
            
            
            (86,609
            )
            
            (55,615
            )Redemptions
                of marketable securities
            
            
            36,169
            
            
            53,955Purchase
                of property and equipment
            
            
            (1,677
            )
            
            (54
            )Net
                cash flows used in investing activities
            
            
            (52,117
            )
            
            (1,714
            )**Financing
                Activities**Issuance
                of common shares
            
            
            80
            
            
            1,405Payments
                on capital lease obligations
            
            
            (99
            )
            
            (109
            )Net
                cash flows (used in) from financing activities
            
            
            (19
            )
            
            1,296Net
                (decrease) increase in cash and cash equivalents
            
            
            (31,607
            )
            
            29,851Cash
                and cash equivalents, beginning of the period
            
            
            49,217
            
            
            14,759Cash
                and cash equivalents, end of the period
            
            $
            17,610
            
            $
            44,610See
                Note 10 for supplemental cash flow information





See
      accompanying notes to consolidated financial statements.


5


**ASPREVA
      PHARMACEUTICALS CORPORATION**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(unaudited)**


(all
      tabular
      amounts in thousands of U.S. dollars other than share or per share data or
      unless otherwise stated)


March
      31,
      2007







**1.**
            **Nature
                of Business and Basis of
                Presentation**


****


Unless
      the
      context otherwise required, all references to “Aspreva”, “we”, “our” and “us”
refer to Aspreva Pharmaceuticals Corporation and its subsidiaries.




We
      were
      incorporated on December 20, 2001 under the Canada Business Corporation Act
      and continued under the Business Corporations Act (British Columbia) on
      November 19, 2004. Our principal business is to identify, develop and
      commercialize new indications for approved drugs and drug candidates for
      patients living with less common diseases.





We
      have
      prepared these consolidated financial statements in accordance with U.S.
      generally accepted accounting principles for interim financial statements and
      with the instructions for Form 10-Q and Article 10 of Regulation S-X.
      Accordingly, the financial statements do not include all of the information
      and
      footnotes required by U.S. generally accepted accounting principles for annual
      financial statements. The financial statements should be read in conjunction
      with our audited consolidated financial statements and notes thereto included
      in
      our Annual Report on Form 10-K for the year ended December 31, 2006 filed with
      the United States Securities and Exchange Commission on February 26,
      2007.





In
      the
      opinion of management, these consolidated financial statements include all
      normal and recurring adjustments considered necessary to present fairly our
      financial position, results of operations and cash flows. The results for the
      three months ended March 31, 2007 are not necessarily indicative of the
      operating results for the full year or for any other interim period subsequent
      to March 31, 2007.




**2.**
            **Significant
                Accounting Policies**





Our
      significant accounting policies are the same as described in Note 2 to our
      Notes
      to Consolidated Financial Statements included in our Annual Report on Form
      10-K
      for the year ended December 31, 2006 filed with the United States Securities
      and
      Exchange Commission on February 26, 2007, except for the adoption of Financial
      Accounting Standards Board, or FASB, Interpretation No. 48, Accounting for
      Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109,
      or
      FIN 48. The following is a summary of the significant accounting policies used
      in the preparation of these financial statements.





**Income
      Taxes**


Effective
      January 1, 2007, Aspreva adopted FIN 48. FIN 48 clarifies the accounting for
      uncertainty in income taxes recognized in an enterprise’s financial statements
      in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN
      48
      prescribes a recognition threshold and measurement attribute for financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. FIN 48 also provides guidance on derecognizing,
      measurement, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. The implementation of FIN 48 did not have
      a
      material impact on Aspreva’s consolidated financial statements. As of January 1,
      2007 and March 31, 2007 we did not recognize any assets or liabilities for
      unrecognized tax benefits relative to uncertain tax positions.





**Revenue
      Recognition**


In
      accordance with the terms of our agreement with Hoffmann - La Roche Inc. and
      F.
      Hoffmann - La Roche Ltd, collectively Roche, we earn a royalty based on an
      equal
      sharing of incremental net sales of CellCept in non-transplant indications
      above
      a negotiated baseline less a distribution fee, payable on a quarterly basis.
      This baseline is subject to an annual price index adjustment. Roche and Aspreva
      set the baseline for 2007 at CHF 131.3 million. Royalty revenue is recognized
      net of value added tax in accordance with the provisions of the Securities
      and
      Exchange Commission’s Staff Accounting Bulletin No. 104, (SAB 104), *Revenue
      Recognition* ,
      which sets
      forth criteria that must be met in order to recognize revenue: (i) there is
      persuasive evidence that an arrangement exists; (ii) delivery of the products
      and/or services has occurred; (iii) the selling price is fixed or determinable;
      and (iv) collectibility is reasonably assured.





Roche
      and
      Aspreva have developed a proprietary sales tracking methodology to audit net
      sales of CellCept and to determine the portion attributable to sales from use
      in
      non-transplant indications. The results of this audit lag actual net sales
      by
      approximately six months. Roche and Aspreva use actual total CellCept sales
      results and estimates of the quarterly split between net sales attributed to
      transplant and non-transplant indications to calculate the royalty payment
      payable to us at the end of each quarter. We record a portion of this royalty
      payment as revenue within quarterly financial results, with the balance recorded
      as unearned royalty advance and subject to a subsequent reconciliation.





This
      reconciliation process is undertaken quarterly, based on the most recent
      available audit information, and limits reconciliation payments to either Roche
      or Aspreva to a maximum amount of 4.0 million Swiss Francs, or CHF, per quarter.
      Thus, at any period end we carry a maximum of CHF 4.0 million for each quarter
      that has not been reconciled, classified as unearned royalty advance on the
      balance sheet. As at March 31, 2007, there was CHF 8.0 million ($6.6 million)
      recorded in unearned royalties as the royalties for the fourth quarter of 2006
      and first quarter of 2007 have not been reconciled.





6





**3.**
            **Marketable
                Securities**


****


*Available
      for sale debt securities*




**Cost**
            
            **Accrued**
              **interest**
            
            **Gross**
              **unrealized**
              **gains**
            
            **Gross**
              **unrealized**
              **losses**
            
            **Approximate**
              **market**
              **and
                carrying**
              **value****March
                31, 2007**
            
            $
            256,688
            
            $
            2,468
            
            $
            599
            
            $
            (153
            )
            $
            259,602**December
                31, 2006**
            
            $
            208,762
            
            $
            1,820
            
            $
            153
            
            $
            (57
            )
            $
            210,678








**4.**
            **Stock-Based
                Compensation**


****


We
      measure
      stock-based awards using the Black-Scholes option pricing model and amortize
      the
      fair value of granted stock options to the consolidated statement of operations
      over the vesting period of the options on an accelerated basis. We estimate
      the
      fair value of options using the following assumptions:








**Three
                Months Ended March 31,****2007**
            
            **2006**Expected
                stock price volatility
            
            
            70%
            
            
            70%Average
                risk-free interest rate
            
            
            4.0%
            
            
            4.0%Expected
                option life in years
            
            
            5.0
            
            
            5.0Dividend
                yield
            
            
            0%
            
            
            0%Forfeiture
                rate
            
            
            5%
            
            
            3%




Included
      within the statements of income are the following charges for stock-based
      compensation:




**Three
                Months Ended March 31,****2007**
            
            **2006**Research
                and development expense
            
            $
            900
            
            $
            341Marketing,
                general and administrative expense
            
            
            1,949
            
            
            632Total
                stock-based compensation
            
            $
            2,849
            
            $
            973





Stock
      option
      transactions for the three month period ended March 31, 2007, and the number
      of
      stock options outstanding as of March 31, 2007, are summarized below:





****
            
            **Number
                of**
            
            **Weighted******
            
            **Optioned**
            
            **Average******
            
            **Common**
            
            **Exercise******
            
            **Shares**
            
            **Price***Exercisable
                in Canadian dollars***Outstanding
                at December 31, 2006**
            
            
            2,011,371
            
            $
            17.92Options
                granted
            
            
            694,100
            
            
            23.35Options
                forfeited
            
            
            (38,258
            )
            
            14.47Options
                exercised
            
            
            (13,038
            )
            
            5.52**Outstanding
                at March 31, 2007**
            
            
            2,654,175
            
            $
            19.45**Exercisable
                at March 31, 2007**
            
            
            805,206
            
            $
            13.91





The
      stock
      options expire at various dates from September 2013 to February 2017. As of
      March 31, 2007, a total of 445,727 common shares are available for future grant
      under the Aspreva 2002 Incentive Stock Option Plan. The stock options typically
      have a ten year contractual life and vest ratably over a period of one to four
      years from the date of grant.





7





**5.**
            **Net
                Income per Common Share**


****


We
      calculate
      net income per common share in accordance with SFAS No. 128, *Earnings
      per Share* ,
      which
      requires the presentation of basic and diluted net income per common share
      using the treasury stock method.





The
      denominators for basic and diluted net income per common share for the three
      month periods ended March 31, 2007 and 2006 were calculated as follows:





**Three
                Months Ended March 31,****2007**
            
            **2006**Weighted
                average shares outstanding used for basic net income per common
                share
            
            
            35,165,100
            
            
            34,375,761Effect
                of dilutive stock options
            
            
            241,038
            
            
            1,186,127Effect
                of dilutive warrants
            
            
            -
            
            
            128,255Weighted
                average shares outstanding used for diluted net income per common
                share
            
            
            35,406,138
            
            
            35,690,143




Due
      to their
      anti-dilutive nature, the following potentially issuable shares were omitted
      from the calculation of diluted net income per common share for these periods:





**As
                of March 31,****2007**
            
            **2006**Stock
                options
            
            
            826,082
            
            
            551,724





**6.**
            **Shareholders’
                Equity**





**Statement
      of Shareholders’ Equity**


The
      following table summarizes the activity in our shareholders’ equity from
      December 31, 2006 to March 31, 2007: ****


**Number**
              **of
                Shares**
            
            **Common**
              **Shares**
            
            **Additional**
              **Paid-In**
              **Capital**
            
            **Accumulated
                Other Comprehensive Income (Loss)**
            
            **Retained
                Earnings**
            
            **Total
                Shareholders’ Equity****Balance,
                as of December 31, 2006**
            
            
            35,159,619
            
            $
            150,815
            
            $
            13,049
            
            $
            (851
            )
            $
            118,625
            
            $
            281,638Shares
                issued on:Exercise
                of options
            
            
            13,038
            
            
            229
            
            
            (149
            )
            
            -
            
            
            -
            
            
            80Stock-based
                compensation expense
            
            
            -
            
            
            -
            
            
            2,849
            
            
            -
            
            
            -
            
            
            2,849Unrealized
                gain on derivative financial instruments, net of tax
            
            
            -
            
            
            -
            
            
            -
            
            
            159
            
            
            -
            
            
            159Reclassification
                of unrealized gain on derivative financial instruments, net of
                tax
            
            
            -
            
            
            -
            
            
            -
            
            
            (147
            )
            
            -
            
            
            (147
            )Unrealized
                gain on marketable securities, net of tax
            
            
            -
            
            
            -
            
            
            -
            
            
            314
            
            
            -
            
            
            314Net
                income for the period
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            36,414
            
            
            36,414**Balance,
                as of March 31, 2007**
            
            
            35,172,657
            
            $
            151,044
            
            $
            15,749
            
            $
            (525
            )
            $
            155,039
            
            $
            321,307





**Comprehensive
      Income**


Comprehensive
      income for the three month periods ended March 31, 2007 and 2006 was $36.7
      million and $45.0 million, respectively.




**7.**
            **Contractual
                Obligations and
                Commitments**





We
      have
      agreements with clinical sites and contract research organizations for the
      conduct of our clinical trials. We make payments to these sites and
      organizations based upon the number of patients enrolled and the period of
      follow-up in the trials. At March 31, 2007, we have commitments to these groups
      amounting to $29.6 million over the next three years.





Occasionally,
      we enter into agreements with third parties in the ordinary course of business
      that include indemnification provisions that are customary in the industry.
      Those indemnifications generally require us to compensate the other party for
      certain damages and costs incurred as a result of third party claims or damages
      arising from these transactions. These indemnification provisions may survive
      termination of the underlying agreement. The nature of the indemnification
      obligation prevents us from making a reasonable estimate of the maximum
      potential amount we could be required to pay. Historically, we have not made
      any
      indemnification payments under such agreements and no amount has been accrued
      in
      the accompanying consolidated financial statements with respect to these
      indemnification obligations.






8




**8.**
            **Derivative
                Financial Instruments**


We
      use
      derivative financial instruments to hedge foreign currency exposures in the
      business. Our royalty payments are received from Roche in Swiss francs, or
      CHF,
      on a quarterly basis 45 days after each quarter end. Sales of CellCept are
      denominated in multi-currencies and are converted to CHF by Roche for the
      purpose of calculating amounts to be paid to us. To the extent the Swiss franc
      increases in value relative to these other currencies, the total aggregate
      CHF
      value of CellCept sales decreases and the amount that we are entitled to may
      be
      reduced. To mitigate this risk, at the beginning of each quarter, we enter
      into
      noon average rate contracts, or NARCs, to sell U.S. dollars and Euros and buy
      CHF. The NARCs are designed to hedge our direct exposures of forecasted
      transactions and pursuant to SFAS No. 133 *Accounting
      for Derivative Instruments and Hedging Activities* qualify as
      cash flow hedges. Forward contracts to sell CHF are entered into with settlement
      dates that coincide with the date we receive our royalty payments from Roche.
      The forward contracts entered into are based on forecasts and as such they
      are
      initially designated as cash flow hedges. For the period from the quarter end
      to
      the settlement date, the hedges are re-designated and are treated as fair value
      hedges. Any change in value between quarter end and settlement date is recorded
      in other income or expense as a foreign exchange gain or loss.





As
      a result
      of our global operations with offices in Canada and Europe we incur significant
      amount of our research and development and general and administrative
      expenditures in Canadian dollars, euros and pounds sterling. In order to hedge
      against the impact of fluctuations in the value of the Canadian dollar, euro
      and
      pounds sterling relative to the U.S. dollar, we enter into short-term forward
      contracts to purchase both Canadian dollars, euros and pounds sterling. Forward
      hedges relating to forecasted expenditures are cash flow hedges.





The
      following is a summary of the derivative instruments in place at March 31,
      2007:





**Hedge
                designation**
            
            **Type**
              **of
                hedge**
            
            **Currency**
              **Exchanged**
            
            **Settlement**
              **dates**
            
            **Total**
              **Notional**
              **Amount**
            
            **Average**
              **Settlement**
              **Amount**Cash
                Flow
            
            Forward
                Contract
            
            Sell
                USD buy CAD
            
            April
                2007 - March 2008
            
            9,763USD
            
            0.8796Cash
                Flow
            
            Forward
                Contract
            
            Sell
                USD buy GBP
            
            April
                2007 - March 2008
            
            5,325
                USD
            
            1.8896Cash
                Flow
            
            Forward
                Contract
            
            Sell
                CHF buy GBP
            
            May
                2007 - November 2007
            
            1,927
                CHF
            
            2.3064Cash
                Flow
            
            Forward
                Contract
            
            Sell
                CHF buy CAD
            
            May
                2007 - November 2007
            
            2,803
                CHF
            
            1.0618Cash
                Flow
            
            Forward
                Contract
            
            Sell
                USD buy Euro
            
            April
                2007 - December 2007
            
            1,321
                USD
            
            1.3060Cash
                Flow
            
            Forward
                Contract
            
            Sell
                CHF buy Euro
            
            May
                2007 - November 2007
            
            347
                CHF
            
            1.6027Fair
                Value - dual purpose
            
            Forward
                Contract
            
            Sell
                CHF buy USD
            
            May
                2007
            
            58,016
                CHF
            
            1.2185Cash
                Flow - dual purpose
            
            Forward
                Contract
            
            Sell
                CHF buy USD
            
            August
                2007 - February 2008
            
            164,363
                CHF
            
            1.2057Cash
                Flow
            
            NARC
            
            Sell
                USD buy CHF
            
            May
                2007 - August 2007
            
            57,334
                USD
            
            0.8299Cash
                Flow
            
            NARC
            
            Sell
                Euro buy CHF
            
            May
                2007 - August 2007
            
            12,370
                Euro
            
            0.6231





The
      fair
      value of the derivative financial instruments is the estimated amount that
      we
      would receive (or pay) to terminate a contract at the reporting date. At March
      31, 2007, the fair value of our forward contracts and NARCs totaled ($1.3)
      million and $(731,000) respectively. Cash flow hedges amounting to ($981,000)
      were recorded in Other Comprehensive Income; and ($1.0) million of fair value
      and cash flow hedges were recorded in revenue.





We
      do not
      use derivative financial instruments for speculative or trading purposes, nor
      do
      we hold or issue leveraged derivative financial instruments. All activity is
      governed by a board approved hedging policy and is monitored for compliance
      on
      an ongoing basis.





**9.**
            **Income
                Taxes**




The
      provision for income taxes was $4.1 million for the three months ended March
      31,
      2007, resulting in an effective global tax rate of 10.1% for the period. The
      difference between the effective tax rate and the statutory Canadian federal
      income tax rate of 34.1% relates to differing foreign tax rates, changes in
      our
      future income tax valuation allowance and utilization of tax pools. We believe
      the overall effective global tax rate for the full year will be less than
      15%.





Effective
      January 1, 2007 we adopted FIN 48. The total amount of unrecognized tax benefits
      as of the date of adoptions was $2.6 million, and, if recognized, the full
      amount would impact the effective tax rate.  As at March 31, 2007, the
      total amount of unrecognized tax benefits is $2.8 million.  We expect the
      unrecognized tax benefit will decrease by $614,000 within the next
      twelve months as we expect profitability in jurisdictions in which we have
      recognized valuation allowances on the respective net operating
      losses.





Our
      accounting policy is to treat interest and penalties relating to unrecognized
      tax benefits as a component of income taxes.





Aspreva
      is
      subject to taxes in Switzerland, Canada, the United Kingdom and the United
      States. The tax years which remain subject to examination by major jurisdictions
      as of March 31, 2007 include 2003 to present. The Canadian tax authorities
      commenced an audit in the fourth quarter of 2006 on our Scientific Experimental
      and Research Development claim for 2004. We do not believe there will be any
      material impact on Aspreva’s financial position or results of operations as a
      consequence of this audit. In addition, the Canadian tax authorities have
      informed us that they will commence an audit of Canadian tax returns for the
      years of 2003 to 2005, during the second quarter of 2007.







9





**10.**
            **Supplemental
                Cash Flow**





Supplemental
      cash flow information is as follows:




**Three
                Months Ended March 31,****2007**
            
            **2006**Income
                taxes paid
            
            $
            11,995
            
            $
            219Interest
                paid
            
            
            6
            
            
            12





**11.**
            **Related
                Party Transactions**





We
      retain
      Farris, Vaughan, Wills & Murphy LLP, a law firm where R. Hector MacKay-Dunn,
      Q.C., is a senior partner. Mr. MacKay-Dunn is a member of our board of directors
      and acts as our Corporate Secretary. In the three months ended March 31, 2007
      and 2006, we incurred legal fees payable to Farris, Vaughan, Wills & Murphy
      LLP, of $115,000 and $143,000, respectively, of which $78,000 has been paid
      as
      of March 31, 2007. In 2007 and 2006, these fees relate primarily to general
      corporate legal advice.




**12.**
            **Contingencies**





From
      time to
      time, we may be involved in litigation relating to claims arising out of our
      operations. We are not currently involved in any material legal proceedings.




**13.**
            **Comparative
                Figures**





Certain
      of
      the comparative figures have been reclassified to conform to the presentation
      adopted in the current period.





**14.**
            **Recent
                Accounting Pronouncements**





In
      September
      2006, the FASB issued Statement of Financial Accounting Standards No. 157, *Fair
      Value Measurements* ,
      or
      SFAS 157. SFAS 157 establishes a framework for measuring fair value
      and expands disclosures about fair value measurements. The changes to current
      practice resulting from the application of this statement relate to the
      definition of fair value, the methods used to measure fair value, and the
      expanded disclosures about fair value measurements. SFAS 157 is effective for
      fiscal years beginning after November 15, 2007. Earlier adoption is permitted,
      provided the company has not yet issued financial statements, including for
      interim periods, for that fiscal year. We do not expect the adoption of this
      standard to have a material impact on our consolidated financial
      statements.






10





**Item
      2.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**  **OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS**








You
      should
      read the following discussion and analysis by our management of our financial
      condition and results of operations in conjunction with our audited consolidated
      financial statements and related notes thereto included as part of our Annual
      Report on Form 10-K for the year ended December 31, 2006 and our unaudited
      consolidated financial statements for the three month period ended March 31,
      2007. Our consolidated financial statements have been prepared in accordance
      with U.S. generally accepted accounting principles and are presented in U.S.
      dollars.




**Forward-Looking
      Statements**




*The
      information in this discussion contains forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
      Securities Exchange Act of 1934 and/or forward-looking information under
      applicable Canadian provincial securities laws (collectively, “forward-looking
      statements”), which are subject to the “safe harbor” created by those sections.
      The words “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”,
“plans”, “projects”, “will”, “would” and similar expressions are intended to
      identify forward-looking statements, although not all forward-looking statements
      contain these identifying words. The forward-looking statements in this
      discussion include, but are not limited to, statements
      concerning:*





•
            *our
                strategy;*•
            *our
                future operations;*•
            *our
                future financial position;*•
            *our
                future revenues;*•
            *our
                projected costs;*•
            *prospects,
                plans and objectives of our management;*•
            *our
                expectations regarding our relationship with Hoffmann - La Roche
                Inc. and
                F. Hoffmann - La Roche Ltd, or collectively Roche;*•
            *our
                expectations regarding the development of CellCept for certain autoimmune
                indications; and*•
            *our
                expectations with respect to our clinical trials of
                CellCept.*





*With
      respect to the forward-looking statements contained in this discussion, we
      have
      made numerous assumptions regarding, among other things:*





•
            *our
                ability to complete our clinical trials of
                CellCept;*•
            *our
                ability to file a supplemental new drug application, or sNDA, with
                the
                U.S. Food and Drug Administration, or FDA, as well as other applicable
                filings with the European Union and Canadian regulatory
                authorities;*•
            *our
                ability to protect our intellectual property rights and to not infringe
                on
                the intellectual property rights of others;*•
            *our
                ability to comply with applicable governmental regulations and
                standards;*•
            *our
                ability to succeed at establishing a successful commercialization
                program
                for CellCept in any indication for which it may be approved;
                and*•
            *other
                assumptions set forth in Part II, Item 1A “Risk Factors” in this Quarterly
                Report on Form 10-Q.*





*We
      may
      not actually achieve the plans, intentions, or expectations disclosed in our
      forward-looking statements or the underlying assumptions thereto, and you should
      not place undue reliance on our forward-looking statements. These
      forward-looking statements involve risks and uncertainties that could cause
      our
      actual results to differ materially from the plans, intentions and expectations
      disclosed in the forward-looking statements and underlying assumptions,
      including, without limitation, those set forth in Part II, Item 1A “Risk
      Factors” in this Quarterly Report on Form 10-Q. Our forward-looking statements
      do not reflect the potential impact of any future acquisitions, mergers,
      dispositions, joint ventures or investments we may make. We do not assume any
      obligation to update any forward-looking statements, other than as required
      by
      applicable law.*







**Overview**




Aspreva
      is a global pharmaceutical company focused on identifying, developing, and,
      upon
      approval, commercializing evidence-based medicines for patients living with
      less common diseases.




Our
      objective is to successfully complete our current clinical programs while
      seeking growth opportunities that will allow us to leverage the clinical,
      medical affairs and commercial infrastructure that we have established.
      Potential opportunities for growth include the acquisition or licensing of
      products in various stages of clinical or commercial development from
      pharmaceutical or biotechnology companies.





**Collaborative
      Agreements**




Our
      initial
      focus in autoimmune diseases led us to identify the potential efficacy of the
      drug CellCept, (mycophenolate mofetil, or MMF) in the treatment of autoimmune
      diseases. In July 2003, we entered into our first collaboration with Roche
      for
      exclusive world-wide rights, excluding Japan, to develop and, upon regulatory
      approval, commercialize CellCept, for all autoimmune indications. CellCept
      is an
      immunosuppressant or “anti-rejection” drug currently approved by the FDA for use
      in the prevention of rejection in patients receiving heart, kidney and liver
      transplants. It is important to note that CellCept is not currently approved
      by
      the FDA for use in autoimmune indications.





Under
      the
      terms of our collaboration agreement with Roche, we agreed to conduct three
      clinical programs for the indications lupus nephritis, pemphigus vulgaris and
      myasthenia gravis. In 2006, we discontinued our myasthenia gravis development
      program. We are responsible for  assembling
      the necessary materials from these programs for any filings made and Roche
      are
      responsible for submitting the applications to the relevant regulatory
      authorities. Roche will be the holder of any regulatory submissions and any
      resulting approvals.




11







Pursuant
      to
      our collaboration agreement with Roche we are entitled to a royalty based on
      an
      equal sharing of incremental net sales of CellCept in non-transplant indications
      above a negotiated baseline less a distribution fee, payable on a quarterly
      basis. This baseline is subject to an annual price index adjustment and
      accordingly, Roche and Aspreva set that the baseline for 2007 at Swiss Francs
      (CHF) 131.3 million.





We
      use a
      proprietary methodology for tracking sales of CellCept. This enables Roche
      and
      Aspreva to determine the portion of Roche’s net sales attributable to the use of
      CellCept in non-transplant indications. We and Roche have agreed that autoimmune
      sales are considered the equivalent of non-transplant sales for the purposes
      of
      our agreement. We have the right to audit Roche’s calculations of the net sales
      of CellCept attributable to non-transplant sales, including all data used in
      the
      sales tracking methodology, on an annual basis. We also rely on third party
      data
      providers, such as International Medical Statistics, or IMS, and the United
      Network for Organ Sharing to supplement our information regarding the sales
      tracking of CellCept in transplant and autoimmune diseases and to validate
      our
      market assumptions underlying our agreed upon tracking methodology.





If
      we and
      Roche receive regulatory approval for the use of CellCept in the treatment
      of
      any autoimmune indications, we will be obligated to commercialize CellCept
      for
      such indications pursuant to a jointly agreed commercialization plan with Roche.
      Following regulatory approval, we plan to field a small targeted sales force
      to
      conduct promotional detailing presentations to targeted physicians in the United
      States and in the major European markets, and to develop targeted marketing
      and
      advertising strategies and materials. We are reviewing various options regarding
      sales force deployment, including size, and will make a final decision of the
      most appropriate deployment based on a full analysis and agreement with our
      partners. We also plan to focus on medical education activities. Roche will
      conduct all manufacturing and distribution of CellCept. Roche will also continue
      to record all sales and will retain control over the pricing of
      CellCept.





Our
      collaboration agreement with Roche currently excludes Japan as a licensed
      territory and thus excludes that region from our revenue sharing arrangement.
      In
      April 2006, Aspreva entered into a non-binding collaboration agreement with
      Chugai Pharmaceuticals Co., Ltd., for the development of CellCept in Japan
      for
      certain autoimmune indications. If Chugai, with agreement from the Japanese
      regulatory authorities, determines to move forward with its proposed trial
      in 2007, we will complete the details of our agreement and provide an update
      at
      that time.




**Clinical
      Development Program**





We
      currently
      have two clinical development programs underway to evaluate CellCept in the
      treatment of the autoimmune diseases: lupus nephritis and pemphigus vulgaris.
      In
      October 2006, we completed a third development program for the treatment of
      myasthenia gravis. Based on the preliminary results of our myasthenia gravis
      trial, we do not intend to continue any further development of CellCept in
      the
      treatment of myasthenia gravis.





Our
      clinical
      programs have been designed, in accordance with our discussions with the FDA,
      to
      utilize portions of existing clinical data provided by investigator initiated
      trials, or IITs. We expect to use the results of an IIT conducted by Dr. Ellen
      Ginzler of State University of New York, or SUNY Downstate Medical Center in
      Brooklyn, New York, to support our supplemental new drug application, or sNDA,
      with the FDA for the use of CellCept in the treatment of lupus nephritis. The
      results of Dr. Ginzler’s study (as published in the November 24, 2005 issue of
      the *New
      England Journal of Medicine* )
      are
      supportive of the potential efficacy and safety of CellCept in the induction
      phase of lupus nephritis, adding to the existing body of data that supports
      the
      potential benefit of CellCept in the treatment of lupus nephritis. It is
      important to note that CellCept is not currently approved by the FDA for use
      in
      any autoimmune indications.





Although
      the
      results of Dr. Ginzler’s study are encouraging, a separate prospective, adequate
      and well-controlled study such as our international phase III lupus nephritis
      study is necessary to provide substantive evidence of the potential safety
      and
      efficacy of CellCept in patients with lupus nephritis.





**Lupus
      Nephritis**





Systemic
      lupus erythematosus, commonly referred to as lupus, is a complex autoimmune
      disease affecting numerous organs and tissues. The immune system, which
      typically fights off viruses and bacteria, loses the ability to differentiate
      between foreign substances, or antigens, and its own cells and tissues. The
      involvement of the kidney, known as lupus nephritis, is considered to be the
      most serious manifestation of lupus. From our analysis of various sources of
      data, we also estimate that there are about 600,000 diagnosed lupus nephritis
      patients worldwide.




The
      Lupus
      Foundation of America estimates that between 500,000 and 1.5 million Americans
      have lupus. This wide range demonstrates the challenge that exists when trying
      to determine the true prevalence of less common diseases such as lupus. Our
      analysis shows that there are currently about 600,000 patients being treated
      for
      lupus in the U.S. health care system. Since clinicians estimate that one third
      to one half of all lupus patients have lupus nephritis, it is projected that
      this disease affects at least 200,000 Americans. Based on data from
      third-party data providers such as IMS Health, we estimate that approximately
      13.5% of lupus nephritis patients in the U.S. are being treated with CellCept.
      Neither we nor Roche market CellCept for the treatment of any autoimmune disease
      and the FDA has not approved the use of CellCept for the treatment of any
      autoimmune disease.





*Clinical
      and Regulatory Progress*





In
      July
      2005, we initiated enrollment of patients with biopsy-proven lupus nephritis
      into our two phase, international phase III trial comparing CellCept to the
      current standard of care for inducing treatment response and maintaining
      remission in patients suffering from lupus nephritis.





The
      open-label induction phase was designed as a 24-week study comparing CellCept
      to
      cyclophosphamide, the current standard of care for inducing treatment response
      in patients with lupus nephritis. In September 2006, we announced the completion
      of patient enrollment into this phase of the study, reaching total enrolment
      of
      371 patients. The last patient received their final dose in the induction phase of
        this
        trial in March 2007 and we plan to achieve data lock in the second quarter
        of
        2007. We expect, if the data is supportive, to file regulatory
        submissions, including an sNDA with the FDA, as well as appropriate filings
        with
        the European Union and Canadian regulatory authorities, in the fourth quarter
        of
        2007.




12







Patients
      who successfully completed the induction phase of our lupus nephritis study,
      and
      who were eligible, have been re-randomized into the maintenance phase, a blinded
      study comparing CellCept to azathioprine in maintaining remission and renal
      function in subjects with lupus nephritis. Patients will remain in this study
      until they have a relapse of disease, need a treatment that the protocol does
      not allow, or withdraw for any other reason. The study will continue until
      a
      predetermined number of patients have left the study or for a maximum of 36
      months.





**Pemphigus
      Vulgaris**





Pemphigus
      vulgaris is a rare dermatological autoimmune disease that, according to the
      International Pemphigus Foundation, affects approximately 40,000 people
      worldwide. Symptoms include painful and life-threatening blistering of the
      skin
      and mucous membranes which can cover much of the body.





*Clinical
      and Regulatory Progress*





In
      March
      2006, we completed enrollment of 77 patients in our international phase III
      trial of CellCept in the treatment of pemphigus vulgaris. In this trial,
      CellCept is compared to placebo with both groups receiving corticosteroids
      as
      background therapy. The trial is a randomized, double-blind, placebo controlled
      comparison study of CellCept and placebo and is designed to investigate the
      efficacy and safety of CellCept for patients with pemphigus vulgaris over a
      treatment period of 52 weeks. The primary end points encompass both minimal
      disease activity, defined as no new persistent lesions, together with a low
      steroid dose.





In
      June
      2006, we received orphan drug designation with the FDA for CellCept in the
      treatment of pemphigus vulgaris. In the third quarter of 2006, based on
      discussions with the FDA, we amended the protocol to increase the statistical
      power of the study by 15 patients. As a result, we re-opened enrollment with
      a
      revised target of 92 patients. We now expect to complete the trial during 2008
      and our goal is to file an sNDA with the FDA, as well as appropriate filings
      with the European Union and Canadian regulatory authorities, by the end of
      2008.




**Myasthenia
      Gravis**





Myasthenia
      gravis is a debilitating, chronic autoimmune neuromuscular disease in which
      the
      body produces auto antibodies which prevent the nerves from sending messages
      to
      the muscles. According to the Myasthenia Gravis Foundation, myasthenia gravis
      affects approximately 70,000 to 100,000 people worldwide, including
      approximately 36,000 people in the United States.





*2006
      Clinical and Regulatory Progress*





On
      October
      26, 2006, we announced preliminary results of our analysis of the data from
      our
      myasthenia gravis study. While we continue to believe that the study design,
      sample size, choice of efficacy endpoints, requirements for background therapy
      and dose of CellCept were sufficient to demonstrate a treatment effect, the
      study failed to demonstrate a treatment difference between 36 weeks of treatment
      with CellCept and placebo in patients with mild to moderate myasthenia
      gravis on background oral corticosteroids and cholinesterase inhibitors.
      CellCept is well tolerated in this patient population and the safety profile
      is
      consistent with what we would expect. There is no evidence that CellCept
      worsened symptoms of myasthenia gravis and approximately 45% of patients were
      able to achieve the target endpoint of minimal myasthenia gravis symptoms and
      low prednisone and cholinesterase inhibitor doses; however, this percentage
      of
      patients was no different from the control arm. In fact, the results of our
      trial are consistent with the results of our preliminary analysis of the 80
      patient investigator initiated trial for myasthenia gravis led by Dr. Donald
      Sanders of Duke University with The Muscle Study Group, a consortium of academic
      centers. We had intended to use the clinical data from Dr. Sanders’ trial to
      support our application for the use of CellCept in the treatment of myasthenia
      gravis; however, because of the results of these two studies, we do not intend
      to conduct further studies of CellCept in myasthenia gravis.





**Preliminary
      Studies**





Based
      on our
      analysis of existing clinical trial and scientific data, we believe that
      CellCept has the potential to be effective in treating other autoimmune
      diseases. We are supporting the study of some of these diseases such as
      cardiovascular disease in lupus patients and multiple sclerosis through
      Investigator Initiated Trials. These trials help to answer key clinical
      questions regarding CellCept’s potential ability to help these patients and
      provide scientific evidence to support physicians’ management of patients
      suffering with these debilitating conditions. In addition, this early stage
      research provides us with valuable data to help determine if there is a business
      case for continuing further clinical development.





**Commercialization**





We
      intend to
      design our future commercialization activities to comply with the laws and
      regulations enforced by applicable regulatory authorities. Our overall
      commercialization strategy is to target a small subset of specialty physicians
      who treat a majority of patients with the greatest underserved medical needs.





Prior
      to
      regulatory approval of CellCept for any autoimmune indications, we are
      conducting extensive market research regarding specialty physician prescribing
      practices and product positioning, and will undertake a market preparation
      program. We currently are fielding a team of medical liaison specialists and
      other medical professionals whose primary role is to help us identify knowledge
      gaps in the treatment of lupus nephritis and in the potential use of CellCept
      and to assist us in our clinical development planning. We currently have 12
      such
      field based medical advisors deployed in the U.S. and major EU
      markets.




13


Although
      CellCept is currently approved in Malaysia for the treatment of lupus nephritis,
      we do not currently have an approved drug in any other market.








**Critical
      Accounting Policies and Significant Judgments and Estimates**





The
      preparation of our consolidated financial statements requires us to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and the disclosure of contingent assets and liabilities at the
      date
      of the financial statements as well as the reported revenues and expenses during
      the reporting periods. We base our estimates on historical experience and on
      various other factors that we believe are reasonable under the circumstances,
      the results of which form the basis for making judgments about the carrying
      value of assets and liabilities that are not apparent from other sources. Actual
      results may differ from these estimates under different assumptions or
      conditions.




Significant
      accounting policies are more fully described in the notes to our audited
      consolidated financial statements and notes thereto, included as part of our
      Annual Report on Form 10-K for the year ended December 31, 2006. However, we
      believe the following accounting policies relating to revenue recognition,
      stock-based compensation, clinical trial accounting, provision for income taxes
      and derivative instruments are the most critical accounting policies for
      assessing our financial performance.





**Revenue
      Recognition**





Pursuant
      to
      our agreement with Roche commencing April 1, 2005, we became entitled to a
      royalty based on an equal sharing of incremental net sales of CellCept in
      non-transplant indications above a negotiated baseline less a distribution
      fee,
      payable on a quarterly basis. This baseline is subject to an annual price index
      adjustment. Roche and Aspreva reset the baseline for 2007 to CHF 131.3 million,
      after taking into account the price index adjustment. We follow the provisions
      of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104,
      or SAB 104, *Revenue
      Recognition* ,
      which sets
      forth criteria that must be met in order to recognize revenue: (i) there is
      persuasive evidence that an arrangement exists; (ii) delivery of the products
      and/or services has occurred; (iii) the selling price is fixed or determinable;
      and (iv) collectibility is reasonably assured.





Roche
      and
      Aspreva have developed a proprietary sales tracking methodology to audit net
      sales of CellCept and to determine the portion attributable to sales from use
      in
      non-transplant indications. The results of this audit lag actual net sales
      by
      approximately six months. Roche and Aspreva use actual total CellCept sales
      results and estimates of the quarterly split between net sales attributed to
      transplant and non-transplant indications to calculate the royalty payment
      payable to us at the end of each quarter. We record a portion of this royalty
      payment as revenue within quarterly financial results, with the balance recorded
      as unearned royalty advance and subject to a subsequent reconciliation.





Once
      the six
      month lag period has passed, and audited results can be obtained, Aspreva and
      Roche employ a mechanism to reconcile audited amounts against the royalty
      previously paid to us. This reconciliation process is undertaken quarterly,
      based on the most recent available audit information. This reconciliation
      mechanism, however, will limit reconciliation payments to either Roche or
      Aspreva to a maximum amount of CHF 4.0 million per quarter. If the
      results of the reconciliation indicate that the CHF 4.0 million collar
      has been exceeded in favor of the same party for two consecutive quarters,
      we
      and Roche have agreed upon a mechanism to review the sales tracking methodology
      and/or our methodology for estimating royalty payments and introduce appropriate
      changes. The terms of this collar may be changed prospectively at any time
      by
      the joint committee formed under our agreement with Roche, on which we have
      equal representation.





We
      record
      all but CHF 4.0 million of the royalty payment as revenue within
      quarterly financial results. In subsequent quarters, consistent with the timing
      of the reconciliation described above, the remaining CHF 4.0 million
      of the royalty payment, as well as any additional payments to us or from us
      to
      Roche as a result of such reconciliation will be recorded in the period the
      reconciliation is completed. Thus, at any period end we will carry a maximum
      of
      CHF 4.0 million for each quarter that has not then been reconciled,
      classified as unearned royalty advance on the balance sheet. At March 31, 2007,
      there was CHF 8.0 million ($6.6 million) recorded in unearned royalties as
      the
      fourth quarter of 2006 and the first quarter of 2007 have not been
      reconciled.





In
      March
      2007, Aspreva and Roche agreed to the final audited results for the net sales
      relating to the third quarter of 2006. The resulting reconciliation payment
      of
      $1.4 million is payable to Aspreva within 45 days of quarter end. For the three
      month period ended March 31, 2007, we recorded royalty revenue of $59.3 million,
      which is comprised of $54.5 million for the first quarter initial royalty
      payment ($57.8 million less $3.3 million collar recorded as unearned royalty
      advance) and a net reconciliation amount of $4.8 million arising from the
      reconciliation of audited net sales data to the initial royalty payment for
      the
      third quarter of 2006. The initial royalty payment and reconciliation payment
      are recorded in accounts receivable as of March 31, 2007, and are payable to
      us
      within 45 days of March 31, 2007.





**Stock-Based
      Compensation**





Stock-based
      compensation expense, which is a non-cash charge, results in part from
      estimating the fair value of employee stock options granted using the
      Black-Scholes option pricing model. The exercise price for option grants are
      based on the market value of our common shares.





We
      account
      for employee stock options in accordance with the provisions of Statement of
      Financial Accounting Standards No. 123(R), *Share-based
      Payment* ,
      a revision
      of SFAS 123. The Black-Scholes option pricing model requires the input of the
      fair value of our stock at the date of grant of the stock options as well as
      the
      input of several subjective assumptions including: the expected life of the
      option, the expected volatility at the time the options are granted, and the
      expected forfeiture rate at the time the options were granted. Our current
      estimate of expected stock price volatility is 70%, expected option life is
      five
      years, and expected forfeiture rate is 5%. The estimated grant date fair value
      of our options as calculated by the Black-Scholes option pricing model is
      amortized, using the accelerated method, over the vesting period, which is
      generally two to four years.





Changes
      in
      the inputs and assumptions can materially affect the measure of the estimated
      fair value of our employee stock options. Also, the accounting estimate of
      stock-based compensation expense is reasonably likely to change from period
      to
      period as further stock options are granted and
      adjustments are made for stock option forfeitures and cancellations.




14







Included
      within the statements of income are the following charges for stock-based
      compensation:


**Three
                Months Ended March 31,****2007**
            
            **2006**(in
                millions)Research
                and development expense
            
            $
            0.9
            
            $
            0.4Marketing,
                general and administrative expense
            
            
            1.9
            
            
            0.6Total
                stock-based compensation
            
            $
            2.8
            
            $
            1.0




**Clinical
      Trial Accounting**





We
      record
      expenses for clinical research organizations, investigators and other vendors
      based upon the estimated amount of work completed on each trial. These estimates
      may or may not match the actual services performed by the organizations as
      determined by patient enrollment levels and related activities. We monitor
      patient enrollment levels and related activities to the extent possible through
      internal reviews, correspondence and discussions with contract research
      organizations and review of contractual terms.





However,
      if
      we have incomplete or inaccurate information, we may underestimate activity
      levels associated with various trials at a given point in time. In this event,
      we could record significant research and development expenses in future periods
      when the actual activity level becomes known. All such costs are charged to
      research and development expenses as incurred. To date, we have not experienced
      material changes in these estimates.





**Income
      Taxes**





We
      have
      established a wholly-owned subsidiary, Aspreva Pharmaceuticals SA, a Swiss
      company, which is the principal party to our agreement with Roche. We have
      obtained a tax ruling from the Swiss tax authorities pursuant to which, certain
      income attributable to the exploitation of the CellCept rights we acquired
      from
      Roche and certain income attributable to the exploitation of rights we may
      acquire in the future from other third parties, will be subject to a reduced
      tax
      rate in Switzerland.





We
      believe that our effective overall global corporate tax rate realized
      through this structure will be less than 15%.





We
      believe
      that our agreement with Roche should not be classified as a partnership for
      U.S. federal income tax purposes. If this belief is incorrect, the income
      of our Swiss subsidiary that is from sources within the United States, if any,
      could be taxable in the United States on a net income basis. In such event,
      our
      effective tax rate and our tax liability could increase.





If
      we fail
      to maintain our tax structure, or one or more of the various taxation
      authorities successfully assert that more profits should be allocated to their
      respective tax jurisdictions, this may result in a higher overall effective
      tax
      rate. The foregoing analysis only applies to our agreement with Roche. Any
      future collaborations that we enter into may be structured differently and
      may
      result in different tax consequences.





We
      account
      for income taxes under the liability method. Deferred tax assets and liabilities
      are recognized for the differences between the financial statement and income
      tax bases of assets and liabilities, and for operating losses and tax credit
      carry forwards. A valuation allowance is provided for the portion of deferred
      tax assets that is more likely than not to be unrealized. Deferred tax assets
      and liabilities are measured using the enacted tax rates and laws.




Effective
      January 1, 2007,
      Aspreva adopted Financial Accounting Standards Board, or FASB issued FASB
      Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement No. 109, or FIN 48. The implementation of
      FIN
      48 did not have a material impact on Aspreva’s consolidated financial
      statements. As of January 1, 2007 and March 31, 2007 we did not recognize any
      assets or liabilities for unrecognized tax benefits relative to uncertain tax
      positions.




**Derivative
      Instruments**




We
      utilize
      foreign exchange forward contracts and other derivative instruments to manage
      our exposure to foreign exchange fluctuations.





We
      account
      for our derivative instruments in accordance with SFAS No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* .
      Derivative
      instruments are recorded as assets or liabilities, measured at fair value.
      Derivatives that are not hedges, or are not designated as hedges, are adjusted
      to fair value through income. If the derivative is a hedge, depending upon
      the
      nature of the hedge, changes in the fair value of the derivatives are either
      offset against the fair value of assets, liabilities or firm commitments through
      income, or recognized in other comprehensive income (loss) until the hedged
      item
      is recognized in income. The ineffective portion of a derivative’s change in
      fair value is immediately recognized in income.








**Results
      of Operations and Overview**





Presented
      below is a comparison of our results of operations for the three month periods
      ended March 31, 2007 and 2006.





Revenue
      for
      the three month period ended March 31, 2007 was $59.3 million versus $62.7
      million for the three month period ended March 31, 2006. Net income for the
      three month period ended March 31, 2007 was $36.4 million, or $1.03 per fully
      diluted share versus $44.8 million, or $1.25 per fully diluted share for the
      three month period ended March 31, 2006.





15


**Royalty
      Revenue**





In
      accordance with the terms of our agreement with Roche we earn a royalty based
      on
      an equal sharing of incremental net sales of CellCept in non-transplant
      indications above a negotiated baseline less a distribution fee, payable on
      a
      quarterly basis. This baseline is subject to an annual price index adjustment.
      Accordingly, Roche and Aspreva have set the baseline to CHF 131.3 million for
      2007.





Under
      this
      agreement with Roche, we and Roche calculate and record the royalty payment
      due
      to us at the end of each quarter. We recognize a portion of this royalty payment
      as revenue within our quarterly financial results, and record CHF 4.0 million
      of
      the royalty payment due to us as unearned royalty advance on our consolidated
      balance sheets. This amount is subject to a subsequent reconciliation between
      Roche and Aspreva at which time the remaining CHF 4.0 million (approximately
      $3.3 million) of the royalty payment, as well as any additional payments to
      us
      or from us resulting from the reconciliations, will be recorded in the period
      the reconciliation is completed.





The
      following summarizes the royalty revenue we have earned over the last five
      quarters under our agreement with Roche:




**March
                31,**
              **2006**
            
            **June
                30,**
              **2006**
            
            **September
                30,**
              **2006**
            
            **December
                31,**
              **2006**
            
            **March
                31,**
              **2007**(in
                millions of
                U.S. dollars)Initial
                quarterly payment less collar
            
            $
            46.5
            
            $
            48.7
            
            $
            47.1
            
            $
            50.0
            
            $
            54.5Reconciliation
                amount
            
            
            16.2
            
            
            3.0
            
            
            0.8
            
            
            2.5
            
            
            4.8Total
                royalty revenue
            
            $
            62.7
            
            $
            51.7
            
            $
            47.9
            
            $
            52.5
            
            $
            59.3








Our
      first
      quarter 2007 revenue represents an increase over the fourth quarter 2006 revenue
      of $6.8 million and a decrease of $3.4 million over the first quarter of 2006.
      First quarter 2007 revenue includes the positive impact of foreign exchange
      and
      reconciliation payable to Aspreva. The reconciliation amount is in compliance
      with the terms of our collaboration agreement with Roche and the sales
      tracking methodology. We continue to expect that the reconciliation amounts
      will
      be well within the collar as stated in the agreement moving
      forward.





In
      March
      2006, Aspreva and Roche agreed to the final audited results for the net sales
      relating to the third quarter of 2005. The audit results were in excess of
      the
      CHF 4.0 million collar for the second consecutive quarter and, in accordance
      with our collaboration agreement, Roche and Aspreva agreed to settle this amount
      in full, resulting in a $16.2 million reconciliation amount being recognized
      in
      that quarter.




Our
      only
      revenue is from our collaboration agreement with Roche. In the first
      quarter of 2007, we estimate that 40% of our revenue was derived from
      sales of CellCept in U.S. markets, 20% from major European markets (UK, Spain,
      Italy, France and Germany) and the remainder from rest of world
      markets.





**Research
      and Development Expenses**





From
      inception to March 31, 2007, we have incurred total research and development
      expenses of $101.8 million. Research and development expenses include clinical
      development expenditures for the use of CellCept to treat lupus nephritis,
      pemphigus vulgaris; and myasthenia gravis; regulatory affairs expenses related
      to CellCept; sponsorship of preliminary studies of CellCept efficacy in multiple
      Investigator Initiated Trials (“IIT’s”); and expenses related to our business
      development team which is working to identify potential new drug opportunities.
      We expense research and development costs as they are incurred.





Clinical
      expenses primarily include clinical trial costs, salaries and related costs
      for
      clinical and regulatory personnel, supplies and materials, consultant services
      and facilities. Business development expenses primarily include salaries and
      related costs for business development personnel, and consultant services
      related to our efforts to identify other drug opportunities.





The
      following table shows the allocation of research and development
      expenses:


**Annual**
              **total**
            
            **Annual**
              **total**
            
            **Annual**
              **total**
            
            **For
                the three months**
              **ended
                March 31,**
            
            **Total
                from inception to March 31****2004**
            
            **2005**
            
            **2006**
            
            **2006**
            
            **2007**
            
            **2007**(in
                millions of U.S. dollars)Lupus
                nephritis
            
            $
            4.9
            
            $
            11.9
            
            $
            23.9
            
            $
            3.9
            
            $
            6.6
            
            $
            47.4Myasthenia
                gravis
            
            
            2.2
            
            
            11.3
            
            
            12.0
            
            
            3.0
            
            
            1.7
            
            
            27.6Pemphigus
                vulgaris
            
            
            1.3
            
            
            3.3
            
            
            3.4
            
            
            1.0
            
            
            1.0
            
            
            9.4Other
            
            
            -
            
            
            0.7
            
            
            3.2
            
            
            0.5
            
            
            0.6
            
            
            4.5Clinical
                development expenditures
            
            
            8.4
            
            
            27.2
            
            
            42.5
            
            
            8.4
            
            
            9.9
            
            
            88.9Business
                development expenditures
            
            
            1.7
            
            
            3.0
            
            
            5.5
            
            
            1.4
            
            
            2.4
            
            
            12.9Total
            
            $
            10.1
            
            $
            30.2
            
            $
            48.0
            
            $
            9.8
            
            $
            12.3
            
            $
            101.8







16





Research
      and
      development expenses were $12.3 million for the three month period ended
      March 31, 2007, compared to $9.8 million for the three month period ended March
      31, 2006. The increase of $2.5 million was due to a $1.5 million increase
      in our clinical development programs and $1.0 million increase in our business
      development operations. Clinical development costs increased as a result of:
      a
      $2.7 million increase in our lupus nephritis program costs reflecting the
      continued increase in activity as recruitment increased from 30% in the first
      quarter of 2006 to over 100% in 2007; a $1.3 million decrease in our myasthenia
      gravis program as a result of the discontinuation of the program in October
      2006; and $100,000 increase in the funding of other programs including
      preliminary studies for the use of CellCept in the treatment of cardiovascular
      disease in autoimmune patients and multiple sclerosis patients.





We
      incurred
      an increase of $750,000 in salaries and related costs in the three month period
      ended March 31, 2007 as we continue to build out our global business development
      and clinical teams in our Canadian, European and U.S. offices. Stock-based
      compensation increased by $559,000 from the first quarter in 2006 as a result
      of
      additional higher-priced options issued since March 2006 and forfeitures of
      previously issued options recognized in the first quarter of 2006.





The
      total
      number of employees engaged in research and development increased from 53 at
      March 31, 2006 to 57 at March 31, 2007, which includes 14 employees in our
      business development function.





*Clinical
      Development Expenses*





A
      majority
      of our research and development expenditures to date have been related to the
      clinical development of CellCept for autoimmune indications. We currently have
      rights to one clinical product, CellCept, and are focused on the use of CellCept
      to treat two specific autoimmune indications: lupus nephritis and pemphigus
      vulgaris. A third development program in myasthenia gravis was discontinued
      in
      October 2006. In addition, we are sponsoring preliminary studies for the
      potential utility of CellCept in the treatment of diseases such as multiple
      sclerosis and cardiovascular disease in autoimmune patients.





The
      last
      patient received their final dose in the induction phase of our trial for
      the use of CellCept in the treatment of lupus nephritis in March 2007 and we
      plan to achieve data lock in the second quarter of 2007. However, we may not
      be
      able to complete our CellCept projects on schedule as our patient enrollment
      may
      be slower than expected, the results from a clinical trial may not be favorable,
      or the FDA or other regulatory agencies may require additional clinical trials.
      Further, data from clinical trials is subject to varying interpretation, and
      may
      be deemed insufficient by the regulatory agencies reviewing applications for
      marketing approvals. As such, clinical development and regulatory programs
      are
      subject to risks and changes that may significantly impact our expense
      projections and development timelines.





**Marketing,
      General and Administrative Expenses**





Marketing,
      general and administrative expenses consist primarily of costs and salaries
      associated with building our infrastructure, costs of general corporate
      activities, and salaries and related costs for personnel in executive, finance,
      accounting, corporate compliance and operational functions. Prior to regulatory
      approval of CellCept for any autoimmune indications, we limit our marketing
      activity to conducting extensive market research regarding specialty physician
      prescribing practices and product positioning, and undertaking a market
      preparation program. We currently are fielding a team of 12 field-based medical
      liaison physicians and other medical professionals in the U.S. and major EU
      markets who interact with potential future presenters and medical advisors
      to
      help us identify knowledge gaps in the potential use of CellCept and to assist
      us in our clinical development planning.





Marketing,
      general and administrative expenses were $9.8 million for the three month
      period ended March 31, 2007, compared to $6.1 million for the three month period
      ended March 31, 2006. The increase of $3.7 was primarily due to additional
      salary expenses, as we increased the number of employees undertaking marketing,
      general and administrative activities, as we continued the build out of our
      European and U.S. operations. Stock-based compensation increased by $1.3 million
      over the first quarter of 2006 as a result of additional higher-priced options
      issued since March 2006 and forfeitures of previously issued options recognized
      in the first quarter of 2006.





The
      total
      number of employees engaged in marketing, general and administrative
      activities increased from 60 at March 31, 2006 to 78 at March 31,
      2007.




For
      the
      three month period ended March 31, 2007 our marketing costs represented 43%
      of
      total marketing, general and administrative expenses compared to 35% for the
      first quarter of 2006. We expect our marketing infrastructure expenses to
      continue to increase as we continue to build out our U.S. and European
      operations. Our marketing program costs will increase significantly immediately
      prior to and after obtaining regulatory approvals. We expect the growth in
      our
      general and administrative expenses to keep pace with overall company activity
      as we continue to build our operations to support our business, incur the
      additional costs of being a publicly traded company, and support our agreement
      with Roche and additional collaborations.





**Foreign
      Exchange Gain (Loss)**





Foreign
      exchange losses were $14,000 for the three month period ended March 31, 2007,
      compared to gains of $866,000 for the three month period ended March 31, 2006.
      The net foreign exchange losses were due to the decline in the U.S. Dollar
      against the Swiss Franc during the quarter, offset by the overall gain in the
      U.S. Dollar against the Canadian dollar, British pound and Swiss Franc from
      December 31, 2006.





**Interest
      and Other Income**





Interest
      and
      other income was $3.3 million for the three month period ended March 31, 2007,
      compared to $1.4 million for the three month period ended March 31, 2006. The
      increase of $1.9 million was due to higher average investment balances during
      the three month period ended March 31, 2007 and higher average rates of return
      on those investments.





17


**Income
      Taxes**





The
      provision for income taxes was $4.1 million for the three months ended March
      31,
      2007, resulting in an effective global tax rate of 10.1% for the period. The
      difference between the effective tax rate and the statutory Canadian federal
      income tax rate of 34.1% relates to significant profit in our Swiss subsidiary
      with favourable foreign tax rates, changes in our future income tax valuation
      allowance and utilization of tax pools.





We
      expect
      our global structure to yield an effective tax rate of less than 15% going
      forward.




**Liquidity
      and Capital Resources**





**Sources
      of Liquidity**





As
      of March
      31, 2007, we had working capital of $314.9 million, which included $277.2
      million in cash, cash equivalents and marketable securities. In aggregate,
      our
      cash and investment resources increased by $17.3 million from $259.9 million
      at
      December 31, 2006. We had $65.2 million in accounts receivable at March 31,
      2007, of which $64.8 million is due from Roche and payable to us within 45
      days
      of March 31, 2007.




We
      expect to
      continue to devote substantial resources to continue the development of CellCept
      for the treatment of lupus nephritis and pemphigus vulgaris, and to continue
      to
      pursue other new drug opportunities. The investment in CellCept development
      includes funding phase III clinical trials as well as regulatory expenses
      to support approval. In addition, we are expanding our infrastructure to prepare
      for the potential commercialization of CellCept for these indications.





We
      expect
      that our available cash resources, and the revenue from our agreement with
      Roche, will be sufficient to support our operations for at least 12 months;
      however, if we pursue new indications for CellCept or pursue other drug
      opportunities, we may need to raise additional external funds through the sale
      of additional equity or debt securities. The sale of additional equity and
      debt
      securities may result in additional dilution to our shareholders. Additional
      financing may not be available in amounts or on terms acceptable to us or at
      all. If we are unable to obtain this additional financing, we may be required
      to
      reduce the scope of, delay or eliminate some or all of our planned research,
      development and commercialization activities, which could harm our
      business.





**Cash
      Flows**




**Operating
      activities**  **





Net
      cash
      from operating activities was $20.5 million for the three month period
      ended March 31, 2007, compared to $30.3 million for the three month period
      ended
      March 31, 2006. The decrease of $9.8 million in net cash flows from operating
      activities reflects a $16.2 million decrease due to accounts payable, income
      taxes payable and accrued liabilities and a $8.3 million decrease in net income,
      offset by a $1.0 million increase in non-cash expenditures and a $13.8 million
      increase due to accounts receivable.




**Investing
      activities**





Net
      cash
      used in investing activities was $52.1 million for the three month period
      ended March 31, 2007, compared to $1.7 million for the three month period
      ended March 31, 2006. Purchases of investments in marketable securities during
      the three month period ended March 31, 2007 were $86.6 million, and were
      partially offset by proceeds from sales of short-term investments in marketable
      securities of $36.2 million. Royalty revenue received in the three month
      period ended March 31, 2007 was more than sufficient to fund our current
      operations, which allowed us to invest more of our funds into higher rate,
      longer term maturities as compared to the three month period ended March 31,
      2006.





**Financing
      activities**





Net
      cash
      used by financing activities was $19,000 for the three month period ended March
      31, 2007, compared to $1.3 million cash provided for the three month period
      ended March 31, 2006. The decrease of $1.3 million was due to the lower number
      of stock options being exercised in the current period.








**Hedging
      Activities**




We
      utilize a
      hedging program to manage our exposure to the impact of foreign currency
      exchange rate fluctuations on our revenue and expenditure cash flows. The
      program is governed by a hedging policy approved by our Board of Directors
      and
      limits the use of derivatives to simple foreign exchange forward contracts
      and
      noon average rate contracts. The contracts are intended to protect against
      changes in the value of the U.S. dollar relative to other currencies. The policy
      limits the hedged amount between 40% and 80% of forecasted revenue and 60%
      to
      80% of forecasted expenditures in foreign currencies. Our hedges are initiated
      on a regular basis to maintain a rolling twelve months of hedge
      position.




We
      use
      derivative financial instruments to hedge our royalty revenue. Our royalty
      payments are received from Roche in Swiss francs, or CHF on a quarterly basis
      45
      days after each quarter end. Sales of  CellCept are denominated in
      multi-currencies and are converted to CHF by Roche for the purpose of
      calculating amounts to be paid to us.






18




To
      the
      extent the Swiss franc increases in value relative to these other currencies,
      the total aggregate CHF value of CellCept sales decreases and the amount that
      we
      are entitled to may be reduced. To mitigate this risk, at the beginning of
      each
      quarter, we enter into noon average rate contracts, or NARCs, to sell U.S.
      dollars and Euros and buy CHF. The NARCs are designed to hedge our direct
      exposures of forecasted transactions and pursuant to SFAS No. 133 qualify as
      cash flow hedges. Forward contracts to sell CHF are entered with settlement
      dates that coincide with the date we receive our royalty payments from Roche.
      The forward contracts entered into are based on forecasts and as such they
      are
      initially designated as cash flow hedges. For the period from the quarter end
      to
      the settlement date, the hedges are re-designated and are treated as fair value
      hedges. Any change in value between quarter end and settlement date is recorded
      in foreign exchange gain (loss).





As
      a result
      of our global operations with offices in Canada and the United Kingdom, we
      incurred significant amount of our research and development and general and
      administrative expenditures in both Canadian dollars and pounds sterling. In
      order to hedge against the impact of fluctuations in the value of the Canadian
      dollar and pound sterling relative to the U.S. dollar, we enter into short-term
      forward contracts to purchase both Canadian dollars and pounds sterling. Forward
      hedges relating to forecasted expenditures are cash flow hedges.





The
      fair
      value of the derivative financial instruments is the estimated amount that
      we
      would receive or pay to terminate a contract at the reporting date. At March
      31,
      2007 the amount we would pay to terminate all open contracts is $2.0
      million.







**Contractual
      Obligations and Commitments**




As
      of March
      31, 2007, there was no material change in our capital lease or operating lease
      obligations or any other long-term liabilities reflected on our consolidated
      balance sheet as compared to such obligations and liabilities at
      December 31, 2006.





We
      also have
      agreements with clinical sites, and contract research organizations for the
      conduct of our clinical trials. We make payments to these sites and
      organizations based upon the number of patients enrolled and the period of
      follow-up in the trials. At March 31, 2007, we have commitments to these groups
      amounting to $27.5 million over the next three years. In addition we have
      contractual commitments for investigator initiated trials totaling $2.1 million
      over the next three years.








**Credit
      Facilities**





We
      have
      various agreements with a Canadian chartered bank providing for revolving demand
      facilities and a lease line in the aggregate amount of $3.6 million. As of
      March 31, 2007 we had $691,000 of outstanding indebtedness under our credit
      facilities. The Canadian chartered bank may cancel or restrict the availability
      of any unutilized portion of our facilities at any time and from time to time
      without notice. Our credit facilities are secured by a security agreement
      constituting a first ranking security interest in all our personal
      property.








**Off-Balance
      Sheet Arrangements**








Since
      inception we have not engaged in material off-balance sheet activities,
      including the use of structured finance, special purpose entities or variable
      interest entities.








**Related
      Party Transactions**








For
      a
      description of our related party transactions during the three month period
      ended March 31, 2007, please see Note 11 to our Notes to Consolidated Financial
      Statements.







**Recent
      Accounting Pronouncements**





In
        September
        2006, the FASB issued Statement of Financial Accounting Standards No. 157, *Fair
        Value Measurements* ,
        or
        SFAS 157. SFAS 157 establishes a framework for measuring fair value
        and expands disclosures about fair value measurements. The changes to current
        practice resulting from the application of this statement relate to the
        definition of fair value, the methods used to measure fair value, and the
        expanded disclosures about fair value measurements. SFAS 157 is effective
        for
        fiscal years beginning after November 15, 2007. Earlier adoption is permitted,
        provided the company has not yet issued financial statements, including for
        interim periods, for that fiscal year. We do not expect the adoption of this
        standard to have a material impact on our consolidated financial
        statements.


19


**Item
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**








**Market
      Risks**








We
      are
      exposed to market risk, including changes to interest rates and foreign currency
      exchange rates.




We
      maintain
      risk management control systems to monitor the risks associated with foreign
      currency exchange rates and our derivative and financial instrument positions.
      To reduce the volatility relating to these exposures, we enter into various
      derivative hedging transactions pursuant to our investment and risk management
      policies and procedures. We do not use derivatives for speculative purposes.
      Though we intend for our risk management control systems to be comprehensive,
      there are inherent risks that may only be partially offset by our hedging
      programs should there be unfavorable movements in foreign currency exchange
      rates.




**Interest
      Rate Risk**




Our
      material
      interest-bearing assets consisted of cash, cash equivalents and marketable
      securities. The balance of our interest-bearing portfolio, including cash,
      cash
      equivalents and investments, was $277.2 million or 80.0% of total current assets
      at March 31, 2007. Interest income related to this portfolio was $3.3 million
      for the three month period ended March 31, 2007. Our interest income is
      sensitive to changes in the general level of interest rates, primarily U.S.
      interest rates. In this regard, changes in U.S. interest rates affect the
      interest-bearing portfolio.




**Foreign
      Currency Exchange and Foreign Economic Conditions Risk**








Financial
      risk is the risk to our results of operations that arises from fluctuations
      in
      interest rates and foreign exchange rates and the degree of volatility of these
      rates. Foreign exchange risk arises as our investments, which finance
      operations, are substantially denominated in U.S. dollars, our royalty payments
      are received in Swiss francs and our expenses are denominated in several foreign
      currencies, including U.S. dollars, Canadian dollars, pounds sterling and euros.


If
      exchange
      rates change by 10%, we do not believe that it would have a material impact
      on
      our results of operations or cash flows to date. However, future exchange rate
      fluctuations may affect our future operating results.




To
      mitigate
      the risk of foreign exchange fluctuations against the U.S. dollar, we have
      entered into a number of foreign exchange forward contracts and noon average
      rate contracts.








**Counterparties
      Credit Risks**




We
      could be
      exposed to losses related to the financial instruments described in Note 8
      to
      the Notes to Consolidated Financial Statements should one of our counterparties
      default. We attempt to mitigate this risk through credit rating monitoring
      procedures.




20


**Item
      4. CONTROLS AND PROCEDURES**








**Evaluation
      of disclosure controls and procedures**








We
      maintain
“disclosure controls and procedures” (as such term is defined under Securities
      Exchange Act Rule 13a-15(e)) that are designed to ensure that information
      required to be disclosed in our reports is recorded, processed, summarized
      and
      reported within the time periods specified in the Securities and Exchange
      Commission’s rules and forms, and that such information is accumulated and
      communicated to our management, including our Chief Executive Officer and Chief
      Financial Officer, as appropriate, to allow timely decisions regarding required
      disclosures. In designing and evaluating the disclosure controls and procedures,
      our management recognized that any controls and procedures, no matter how well
      designed and operated, can provide only reasonable assurance of achieving the
      desired control objectives and in reaching a reasonable level of assurance
      our
      management necessarily was required to apply its judgment in evaluating the
      cost-benefit relationship of possible controls and procedures.








We
      have
      carried out an evaluation under the supervision and with the participation
      of
      our management, including our Chief Executive Officer and Chief Financial
      Officer, of the effectiveness of the design and operation of our disclosure
      controls and procedures as of March 31, 2007. Based upon their evaluation and
      subject to the foregoing, our Chief Executive Officer and Chief Financial
      Officer concluded that our disclosure controls and procedures were reasonably
      effective in ensuring that information required to be disclosed by us in this
      Quarterly Report on Form 10-Q was recorded, processed, summarized and reported
      within the time periods specified in the Securities and Exchange Commission’s
      rules and Form 10-Q.








**Changes
      in internal controls**








There
      were
      no changes in our internal controls over financial reporting during the three
      month period ended March 31, 2007 that have materially affected or are
      reasonably likely to materially affect our internal controls over financial
      reporting.





21


**PART
      II - OTHER INFORMATION**








**ITEM 1.
      LEGAL PROCEEDINGS**








None.














**ITEM
      1A. RISK FACTORS**








**Risks
      Related to Our Business**





**We
      anticipate that substantially all of our revenue for the foreseeable future
      will
      be from royalties based on sales of CellCept and we may not be able to sustain
      our profitability.**




Our
      operating results may fluctuate from period to period for a number of reasons.
      In budgeting our operating expenses, some of which are fixed in the short term,
      we assume that revenues will continue to grow. Even a relatively small revenue
      shortfall or a small increase in operating expenses may cause our results to
      be
      below expectations. A revenue shortfall or increase in operating expenses could
      arise from any number of factors including:




•
            lower
                than expected revenues on commercial sales of CellCept;•
            higher
                than expected operating expenses as we further develop CellCept for
                autoimmune indications, seek additional collaborations and operate
                as a
                public company;•
            higher
                than expected levels of marketing expenses and the expenses of potentially
                launching CellCept and any future products for our targeted indications;
                and•
            fluctuations
                in currency exchange rates.





We
      anticipate that substantially all of our revenue for the foreseeable future
      will
      be from royalties based on sales of CellCept pursuant to our agreement with
      Roche. Our revenue is dependent on Roche and our mutual ability to track product
      sales arising from the use of CellCept by transplant patients. The methodology
      for accurately tracking sales of CellCept that has been agreed to may be a
      source of dispute with Roche, which may negatively affect our revenue and our
      relationship.





**If
      we and Roche are unable to successfully manage our collaboration, the
      development and commercialization of CelICept for autoimmune indications may
      be
      delayed or prevented.**




Our
      collaboration with Roche involves a complex sharing of control over decisions,
      responsibilities, costs and benefits. Development and promotional activities
      related to CellCept in the autoimmune indications are approved by a joint
      committee, consisting of an equal number of our representatives and Roche's
      representatives. In the event that the joint committee is unable to reach
      consensus on an issue, the dispute will be referred to senior management of
      both
      parties. Unless and until senior management reaches agreement on such dispute,
      neither party will have the right to implement any changes to the status quo
      that would result from resolution of such matter. Ultimate decision making
      authority is vested in us as to some matters and in Roche as to other matters.
      Although we are responsible for compiling and preparing all applications for
      regulatory approval of CellCept in autoimmune indications, Roche has the
      ultimate decision making authority to submit these applications to the
      appropriate regulatory authorities. If Roche does not approve the application
      we
      prepared, or requires that we revise or modify the application, this could
      result in delays in receipt of regulatory approvals. In addition, Roche may
      develop and commercialize, either alone or with others, products that are
      similar to, or competitive with, CellCept. Roche may also change the focus
      of
      its development and commercialization efforts and dedicate fewer resources
      to
      CellCept or our collaboration.




**If
      we do not satisfy our obligations under the Roche agreement or if the agreement
      is terminated we may be forced to limit or cease our operations.**




Our
      agreement with Roche requires us to use commercially reasonable efforts to
      conduct three clinical trial programs for CellCept in autoimmune indications
      pursuant to an agreed upon development plan. Roche may allege that we are in
      breach of a material obligation under our agreement and seek to litigate the
      allegation. If Roche is successful in such litigation, Roche may either be
      awarded damages based upon such breach or the agreement might be terminated.
      After 2011, either party may terminate the agreement if there is a lack of
      non-transplant sales over the baseline for a prolonged period. In addition,
      if
      CellCept is withdrawn from or recalled in any given country, either party may
      terminate the agreement with respect to that country. If the agreement is
      terminated in its entirety or in a given country we may be forced to limit
      or
      cease our operations.




Our
      agreement with Roche contains provisions requiring us to comply with applicable
      laws and regulations, including restrictions on the promotion of approved drugs
      for off label uses. If it were determined by the FDA or other regulatory
      authority that we violated the rules relating to off label promotion in
      connection with our pre-approval communications regarding CellCept, we may
      be
      deemed by Roche to be in material breach of the agreement. If we fail to cure
      any material breach of the agreement, Roche may commence legal action for
      damages and/or seek to terminate our agreement.




22


**If
      Roche does not manufacture, distribute, price or sell CellCept at levels which
      generate sufficient revenue for us to operate, we may have to limit or cease
      our
      operations.**





We
      do not
      own or operate any manufacturing or distribution facilities. Roche, not Aspreva,
      controls the manufacture of CellCept and we have no alternative supplier. If
      we
      are unable to obtain adequate supplies of CellCept from Roche for our clinical
      trials, they could be delayed or prevented. In addition, if there is a shortage
      of CellCept, Roche may decide to allocate available supplies of CellCept to
      purchasers for use in transplant indications and not autoimmune or other
      indications, thereby reducing our revenues. Roche is solely responsible for
      distributing and selling CellCept, and setting the price, including all
      discounts and rebates, of CellCept.




Roche's
      control over the manufacture, distribution, pricing and sale of CellCept exposes
      us to a number of risks which are outside our control including:




•
            Roche
                may fail to comply with FDA-mandated current good manufacturing practices
                or similar regulations in other jurisdictions resulting in mandated
                production halts or limitations;•
            Roche
                may experience manufacturing quality or control issues which halt
                or limit
                CellCept production;•
            a
                manufacturing plant may be closed as a result of a natural disaster
                or
                work stoppage;•
            Roche
                may experience short or long-term supply problems, or problems
                distributing CellCept, including difficulties importing or exporting
                supplies or products;•
            Roche
                may decrease its efforts to market and promote CellCept for the transplant
                indications thus lowering the visibility of CellCept in the market;
                and•
            Roche
                may set a low price for CellCept or give discounts or rebates that
                effectively lower the price of CellCept, which in either case could
                reduce
                our revenues.





However,
      we
      may in the future outsource the manufacturing of supply for our clinical trials
      to third parties other than Roche, subject to approval from Roche and the
      FDA.





**The
      expiration of Roche's patents covering CellCept may reduce our revenue as
      competitors may seek to sell generic versions of CellCept.**




Roche
      owns
      the patents covering the composition matter of CellCept. The United States
      patent covering CellCept expires in May 2009. Counterparts of this patent expire
      in most European countries in late 2010, but in some instances (for example,
      Spain, Portugal, Greece and Romania) expire as early as December 2007. Roche
      patents covering the process for manufacture of CellCept expire in the United
      States in July 2012, and in most other countries
      in
      July 2013. We and Roche expect that following expiration of composition of
      matter patents competitors may manufacture and sell generic versions of
      CellCept, at a lower price, which would reduce CellCept's revenues. In certain
      jurisdictions, including most Canadian provinces, legislation mandates generic
      substitution for brand name drugs.




If
      we obtain
      an orphan drug designation and FDA approval of CellCept for an indication,
      we
      would be entitled to seven years of marketing exclusivity for that orphan drug
      indication. In June 2006, we were granted orphan drug designation for CellCepts’
use in pemphigus vulgaris. In March 2006, Roche and Aspreva agreed not to pursue
      orphan drug designation for CellCept's use in lupus nephritis. However, if
      a
      competitor obtained approval of a generic form of CellCept for another
      indication, such as transplant use, physicians would not be prevented from
      prescribing the generic drug for the orphan indication during the period of
      marketing exclusivity. Such prescribing practices could adversely affect the
      sales of CellCept for the orphan indication.





**We
      may incur significant liability if it is determined that we are promoting the
      "off-label" use of drugs or are otherwise found in violation of federal and
      state regulations in the United States or elsewhere.**




Physicians
      may prescribe drug products for uses that are not described in the product's
      labelling and that differ from those approved by the FDA or other applicable
      regulatory agencies. Such off-label uses are common across medical specialities.
      We are aware that some physicians are prescribing CellCept for the treatment
      of
      certain autoimmune diseases, including lupus nephritis, although neither we
      nor
      Roche are permitted to promote CellCept for the treatment of any autoimmune
      diseases, and the FDA and other regulatory agencies have not approved the use
      of
      CellCept for any autoimmune indications. Although the FDA and other regulatory
      agencies do not regulate a physician's choice of treatments, the FDA and other
      regulatory agencies do restrict communications on the subject of off-label
      use.
      Companies may not promote drugs for off-label uses. Accordingly, prior to
      approval of any autoimmune indications for CellCept, we may not promote CellCept
      for such indications. The FDA and other regulatory agencies actively enforce
      regulations prohibiting promotion of off-label uses and the promotion of
      products for which marketing clearance has not been obtained. A company that
      is
      found to have improperly promoted off-label uses may be subject to significant
      liability, including civil and administrative remedies as well as criminal
      sanctions.




Notwithstanding
      the regulatory restrictions on off-label promotion, the FDA and other regulatory
      authorities allow companies to engage in truthful, non-misleading, and
      non-promotional speech concerning their products. We engage in medical education
      activities and communicate with investigators and potential investigators
      regarding our clinical trials. Although we believe that all of our
      communications regarding CellCept are in compliance with the relevant regulatory
      requirements, the FDA or another regulatory authority may disagree, and we
      may
      be subject to significant liability, including civil and administrative remedies
      as well as criminal sanctions.




We
      and our
      collaborators are also subject to the U.S. federal False Claims Act and U.S.
      federal Anti-Kickback law. We have developed a comprehensive compliance program
      that seeks to establish internal controls to facilitate adherence to the rules
      and program requirements to which we are and will become subject. If, however,
      we are determined to have violated these and other laws, we could incur
      significant penalties and be subject to criminal prosecution. Roche might deem
      any such determination by a governmental authority to constitute a material
      breach of our agreement. In addition, management's attention could be diverted
      and our reputation and our ability to enter into future collaborations could
      be
      damaged.






23




**If
      CellCept and any future products do not gain meaningful market acceptance we
      are
      not likely to generate significant revenues or sustain
      profitability.**




The
      degree
      of market acceptance for any product that we commercialize will depend on a
      number of factors, including:




•
            acceptance
                by physicians and patients of each product as safe and
                effective;•
            potential
                advantages over existing or alternative therapies, including
                cost;•
            actual
                or perceived safety of similar classes of products;•
            relative
                convenience and ease of administration;•
            reimbursement
                policies of government and third-party payors;•
            effectiveness
                of our sales, marketing and medical education efforts;
                and•
            scope
                of the product label approved by the FDA and other regulatory
                agencies.





Hospitals
      or
      physicians may not choose to administer CellCept or any future product to the
      entire intended market, if at all. If CellCept and any future products do not
      achieve meaningful acceptance in their intended markets or if the intended
      market is smaller than anticipated, we are not likely to generate significant
      revenues or maintain profitability.




**Any
      failure or delay in obtaining additional capital may curtail the development
      or
      commercialization of CellCept or any future products.**




We
      expect
      that our future need for additional capital will be substantial. The extent
      of
      this need will depend on many factors, some of which are beyond our control,
      including:





•
            our
                ability to develop and obtain regulatory approval for CellCept and
                any
                future products in our targeted indications;•
            our
                ability to establish marketing and sales capabilities and the costs
                of
                launching CellCept and any future products for our targeted
                indications;•
            the
                extent of costs associated with protecting and expanding our patent
                and
                other intellectual property rights;•
            market
                acceptance of CellCept and any future products for our targeted
                indications;•
            future
                payments, if any, we receive or make under existing or future
                collaborative arrangements;•
            the
                timing of regulatory approvals needed to market products for our
                targeted
                indications;•
            the
                need to acquire licenses for new products or compounds;
                and•
            compliance
                with rules and regulations implemented by the U.S. Securities and
                Exchange
                Commission, Canadian provincial securities regulatory authorities,
                the
                NASDAQ Global Select Market and the Toronto Stock
                Exchange.





We
      have no
      committed sources of additional capital. Funds may not be available to us in
      the
      future on favorable terms, if at all, and we may be required to delay, reduce
      the scope of, or eliminate research and development efforts or clinical trials
      for CellCept or other future products. We may also be forced to curtail or
      restructure our operations, obtain funds by entering into arrangements with
      collaborators on unattractive terms or relinquish rights to technologies or
      product candidates that we would not otherwise relinquish in order to continue
      our operations.




**If
      we are not successful in establishing additional collaborations we will not
      be
      able to grow our business.**




Our
      long-term success depends upon our ability to identify drugs and drug candidates
      with significant potential and to acquire the rights for those indications
      from
      multiple collaborators, thus creating multiple sources of revenue. We face
      intense competition from other companies for collaborative arrangements with
      pharmaceutical and biopharmaceutical companies, and there are no barriers
      prohibiting other companies from adopting our business model. Pharmaceutical
      and
      biopharmaceutical companies may also decide to pursue new indications for their
      products themselves, rather than enter into collaborative arrangements to
      develop new indications. In addition, accurate sales tracking may be difficult
      or impossible under future collaborations which may preclude a collaboration
      or
      lead to disputes once a collaboration has been established. We
      currently have one collaboration agreement with Roche and one
      non-binding collaboration with Chugai. If we are unable to enter into additional
      collaborations, we will continue to be dependent upon Roche for substantially
      all our revenues, and we will be limited in our ability to grow our business.
      In
      addition, the fact that we are collaborating with Roche, or other potential
      collaborators, may be viewed negatively by other potential collaborators, making
      them less likely to enter into arrangements with us.




**The
      terms and conditions of any future collaboration agreements may be less
      favorable than our agreement with Roche.**




Our
      strategy
      is to seek collaborations with pharmaceutical and biopharmaceutical companies
      to
      develop and commercialize new indications. Any new collaborations that we may
      secure will likely involve drugs or drug candidates, or collaborators, with
      characteristics different from CellCept or Roche. These characteristics may
      include:




•
            costs
                to manufacture, distribute and sell;•
            patent
                terms;•
            expenditures
                by our collaborators on research and development;•
            size
                and difficulty of development programs for potential product
                indications;•
            competitive
                threats; and•
            other
                factors relevant to the development and commercialization of such
                products.





We
      expect
      that any new collaborations will be highly negotiated, and the above
      characteristics all may play a role in the financial terms of such
      collaborations, possibly resulting in any or all of the following:




•
            our
                payment of upfront or milestone fees for product
                rights;






24






•
            greater
                clinical trial expenses;•
            longer
                timelines to approval;•
            lower
                revenue sharing percentages;•
            shorter
                agreement periods; or•
            less
                than global product rights.





In
      addition,
      any new collaboration agreement may provide that we only begin sharing revenue
      with our collaborator after some long period of time after entering into such
      collaboration, or after some specific action or approval over which we may
      have
      limited control.




**If
      we fail to establish sufficient marketing and sales promotion capabilities,
      or
      enter into successful arrangements with third parties to conduct these
      activities, we may be unable to generate sufficient revenue to continue our
      operations.**




Roche
      is
      solely responsible for distributing and selling CellCept. If we obtain approval
      of CellCept for autoimmune indications, or any future products, we intend to
      market and promote them through our own sales promotion force in the United
      States and certain other countries. We currently have no sales promotion
      capabilities, limited marketing capabilities, limited infrastructure to support
      such activities, and have limited experience in the commercialization of
      pharmaceutical products. We may not be able to attract and retain qualified
      marketing or sales promotion people or be able to establish an effective sales
      promotion force.




In
      countries
      where we do not have a sales promotion force, we may establish relationships
      with third parties. However, we may not be able to enter into such arrangements
      on favorable terms or at all and to the extent that we enter into such
      arrangements, our revenue will depend on their efforts, which may not be
      successful.





**If
      product liability lawsuits are successfully brought against us, we will incur
      significant liabilities and may be required to limit the commercialization
      of
      our product candidates.**




Our
      use of
      CellCept and other products in clinical trials, and our future promotion of
      any
      products, may expose us to product liability claims and associated adverse
      publicity. We have a global product clinical trial insurance policy, with
      aggregate coverage of $10.0 million, for countries not requiring a local
      insurance policy (including the United States and Canada). In addition, we
      have
      policies in varying amounts for all the other countries in which we are
      conducting clinical trials, and which do not fall within the scope of our global
      policy. Our insurance coverage may not protect us against any or all of the
      product liability claims which could be brought against us in the future. Prior
      to the commercialization of CellCept in autoimmune indications, we expect to
      obtain product liability insurance for potential claims associated with our
      promotion of CellCept. However, we may not be able to obtain or maintain
      adequate insurance coverage at a commercially reasonable cost or in sufficient
      amounts or scope to protect us against potential losses. Roche is obligated
      to
      indemnify us for any product liability claims, except if the claims arise due
      to
      false or misleading promotional activity on our part. In the event a product
      liability claim is brought against us, we may be required to pay legal and
      other
      expenses to defend the claim and, if such a claim is successful, damage awards
      not covered by our insurance. We may also be obligated to indemnify our
      collaborators. Defending any product liability claim or claims could require
      us
      to expend significant financial and managerial resources.





**If
      our competitors are able to develop and market products that are preferred
      over
      CellCept or other product candidates that we may develop, we may not be able
      to
      generate sufficient revenues to continue our operations.**





We
      may not
      be able to contend successfully with competitors. The biotechnology and
      pharmaceutical industries are highly competitive and subject to significant
      and
      rapid technological change as researchers learn more about diseases and develop
      new technologies and treatments. Our current and potential competitors generally
      include major multinational pharmaceutical companies, biopharmaceutical firms,
      specialty pharmaceutical companies, universities and other research
      institutions.




In
      the
      transplant market, CellCept currently competes with Novartis' product, Myfortic.
      If CellCept is approved for any autoimmune indications, Novartis may choose
      to
      also pursue clinical trials and regulatory approval for the same indications.
      If
      approved, CellCept will also compete with immunosuppressants, such as steroids
      and cytotoxic agents, including cyclophosphamide, cyclosporine and azathioprine.
      A cytotoxic agent is an anti-cancer substance that acts by killing or preventing
      the division of cells. In addition, we are aware of several companies that
      have
      products in development or on the market that may be competitive with CellCept
      in lupus nephritis and pemphigus vulgaris. Some of the companies have commenced
      clinical trials for products targeting the same markets and indications that
      we
      are addressing.








The
      existence of these products, other products or treatments of which we are not
      aware, or products or treatments that may be developed in the future may reduce
      the marketability of CellCept and any future products, particularly to the
      extent such products:





•
            are
                more effective;•
            have
                fewer or less severe adverse side effects;•
            have
                better patient compliance;•
            receive
                better reimbursement terms;•
            are
                accepted by more physicians;•
            are
                more adaptable to various modes of dosing;•
            have
                better distribution channels;•
            are
                easier to administer; or•
            are
                less expensive.





Some
      of our
      competitors, either alone or together with their collaborators, have
      substantially greater financial resources and larger research, development
      and
      regulatory staffs than we do. In addition, many of our competitors, either
      alone
      or together with their collaborators, have significantly
      greater experience than we do in discovering, developing, manufacturing and
      marketing products. Additional mergers and acquisitions in the pharmaceutical
      and biotechnology industries may result in even more resources being
      concentrated in our competitors.






25




**If
      we are unable to effectively manage our expected future growth, we may be unable
      to develop or commercialize CellCept or any other product candidate
      successfully.**




In
      the
      quarter ended March 31, 2007, we increased our number of employees by 2 and,
      as
      of March 31, 2007, we had 135 employees. In order to continue the development
      and potential commercialization of CellCept for autoimmune indications and
      enter
      into new collaborations we will need to expand our clinical development,
      regulatory, marketing and sales promotion capabilities. We currently have
      operations in Canada, the United States, the United Kingdom, and Switzerland.
      Our ability to manage our global operations and expected growth will require
      us
      to continue to improve our operational, financial and management controls,
      reporting systems and procedures. We may not be able to make such improvements
      in an efficient or timely manner and may discover deficiencies in existing
      systems and controls. Our ability to develop and commercialize products for
      new
      indications and compete effectively, and our future financial performance will
      depend, in part, on our ability to manage any future growth
      effectively.




**We
      depend on our executive officers, and if we are not able to retain them or
      recruit additional qualified personnel, we may be unable to successfully develop
      or commercialize CellCept.**




Our
      success depends upon the continued contributions of our executive officers
      and
      scientific and technical personnel. Due to the specialized knowledge that each
      of our executive officers possess with respect to CellCept and our
      operations, the loss of service of any of our executive officers could
      delay or prevent the successful completion of the clinical trials necessary
      for
      the commercialization of CellCept for lupus nephritis or pemphigus vulgaris
      and
      could harm our relationship with Roche. We carry key man life insurance coverage
      of $1.3 million for each of Richard M. Glickman and Noel F. Hall. We do not
      carry key man life insurance for any of our other executive
      officers.




We
      have employment agreements with each of our executive officers; however, each
      may terminate their employment upon notice and without cause or good reason.
      On
      May 2, 2007, Mr. Glickman announced his intention to step down as Chief
      Executive Officer during 2007. We currently are not aware that any other
      executive officer is planning to leave or retire.





Our
      success
      also depends in part on our ability to attract and retain highly qualified
      scientific, commercial and administrative personnel. In order to pursue our
      product development and commercialization strategies, we will need to attract
      and hire additional personnel with experience in a number of disciplines,
      including clinical testing, government regulation, sales and marketing, drug
      reimbursement and information systems. There is intense competition for
      personnel in the fields in which we operate. We have not experienced difficulty
      to date in attracting and retaining the personnel we require. If, however,
      we
      are unable to continue to attract new employees and retain existing employees,
      we may be unable to continue our development and commercialization
      activities.





**We
      may incur losses associated with currency fluctuations and may not be able
      to
      effectively hedge our exposure.**




Our
      operations are in many instances conducted in currencies other than the U.S.
      dollar and fluctuations in the value of currencies relative to the U.S. dollar
      could cause us to incur currency exchange losses. All amounts paid by Roche
      to
      us will be in Swiss Francs. In addition, we currently conduct some operations
      and incur a portion of our expenses in Canadian dollars, pounds sterling and
      other foreign currencies. Although we have implemented currency hedging
      techniques to mitigate the impact of currency fluctuations on our financial
      results, these techniques do not eliminate the effects of currency fluctuations
      with respect to anticipated revenues or cash flows, and, as they are short
      term
      in nature, do not protect us from prolonged periods of currency
      fluctuations.




CellCept
      net
      sales are denominated in multiple currencies and will be converted to Swiss
      Francs **** by
      Roche for
      the purpose of calculating amounts to be paid to us. To the extent the Swiss
      Franc increases in value relative to these other currencies, the total aggregate
      value of CellCept's net sales will decrease and the amount, if any, that we
      are
      entitled to may be reduced.




**Risks
      Related to Regulatory Matters**




**We
      will not be able to commercialize our product candidates if our clinical trials
      do not demonstrate safety and efficacy in humans.**




We
      are
      currently not authorized to market CellCept for autoimmune indications in any
      jurisdiction, and we may never be authorized to market CellCept for any
      autoimmune indication. The development and commercialization of CellCept for
      autoimmune indications, and any future products, are subject to extensive and
      rigorous regulation by the U.S. federal government, principally the FDA, other
      federal, state and local agencies, and governmental authorities elsewhere.
      Prior
      to marketing CellCept for any autoimmune indication, we must conduct, at our
      own
      expense, extensive clinical trials to demonstrate with substantial evidence
      to
      the satisfaction of the FDA and other regulatory authorities that CellCept
      is
      safe and effective for the indication. We have no prior experience as a company
      in conducting clinical trials. Preclinical studies and clinical trials are
      expensive, can take many years and have uncertain outcomes. In addition, the
      regulatory approval procedures vary among countries and additional testing
      may
      be required in some jurisdictions. It may take several years to complete the
      requisite clinical trials, and a product candidate may fail any stage of
      testing. Difficulties and risks associated with clinical trials may result
      in
      our failure to receive regulatory approval to market CellCept for autoimmune
      indications or our inability to commercialize any future products for new
      indications. The FDA, other regulatory authorities, our collaborators, or we
      may
      suspend or terminate clinical trials at any time. The commencement and
      completion of our clinical trials could be delayed or prevented by several
      factors, including:






26




•
            delays
                in obtaining regulatory approvals to commence or continue a
                study;•
            delays
                in identifying and reaching agreement on acceptable terms with prospective
                clinical trial sites;•
            insufficient
                quantities of the study drug;•
            slower
                than expected rates of patient recruitment and enrollment or the
                inability
                to reach full enrollment;•
            inconclusive
                or negative interim results during clinical trials, including lack
                of
                effectiveness or unforeseen safety issues;•
            death
                of, or serious adverse effects experienced by, one or more patients
                during
                a clinical trial even if the reasons are not related to the study
                drug,
                including the advanced stage of the patient's disease or medical
                condition;•
            uncertain
                dosing issues;•
            inability
                to monitor patients adequately during and after
                treatment;•
            inability
                or unwillingness of contract laboratories to follow good laboratory
                practices;•
            inability
                or unwillingness of clinical investigators to follow our clinical
                protocols or good clinical practices generally; and•
            inability
                or unwillingness of other third parties to perform data collection
                and
                analysis in a timely or accurate
                manner.







Delays
      or
      failures in obtaining regulatory approvals may:




•
            delay
                or prevent the commercialization of any product that we develop for
                new
                indications;•
            diminish
                any competitive advantages;•
            reduce
                or eliminate revenue from the sale of CellCept and any future products;
                and•
            adversely
                affect our ability to attract new collaborators; and,•
            impact
                our staffing levels.





The
      results
      of early clinical trials do not necessarily predict the results of later
      clinical trials. Drugs in later clinical trials may fail to show desired safety
      and efficacy traits despite having progressed through initial clinical trials.
      In October 2006, we announced preliminary results of our phase III trial of
      CellCept for the treatment of myasthenia gravis. The results of our analysis
      indicated that CellCept failed to meet both the primary and secondary endpoints.
      Given the results of the study we have discontinued our development efforts
      in
      this area. We are aware that Roche conducted three phase III clinical trials
      for
      CellCept in the treatment of rheumatoid arthritis which did not demonstrate
      efficacy. Even if we believe the data collected from clinical trials of drugs
      are promising, such data may not be sufficient to support approval by the FDA
      or
      any other regulatory authority. The FDA or other regulatory authorities could
      also interpret our data differently, which could delay, limit or prevent
      regulatory approval.




We
      expect to
      rely in part on the results of CellCept clinical trials that were previously
      performed by or on behalf of Roche and on clinical trials that were previously
      performed or are being performed by third-party physicians. These trial results
      may not be predictive of the results of the clinical trials that we plan to
      conduct for the purposes of our targeted indications. In addition, the results
      of prior clinical trials may not be acceptable to the FDA or other regulatory
      authorities because the data may be incomplete, outdated or not otherwise
      acceptable for inclusion in our submissions for regulatory approval for CellCept
      in autoimmune indications.




**Even
      if CellCept or any future product candidate receives regulatory approval, we
      and
      our collaborators may still face development and regulatory difficulties that
      may delay or impair future sales.**




If
      we or our
      collaborators obtain regulatory approval for CellCept for any of our targeted
      indications, or any other product, we and our collaborators will continue to
      be
      subject to extensive regulation by the FDA, other federal authorities, certain
      state agencies and regulatory authorities elsewhere. These regulations will
      impact many aspects of our operations and the drug manufacturer's operations
      including manufacture, record keeping, quality control, adverse event reporting,
      storage, labelling, advertising, promotion, sale and distribution, export and
      personnel. The FDA and state agencies may conduct periodic inspections to assess
      compliance with these requirements. We, together with our collaborators, will
      be
      required to conduct post-marketing surveillance of the product. We also may
      be
      required to conduct post-marketing studies. Our or our collaborators' failure
      to
      comply with applicable FDA and other regulatory requirements, or the later
      discovery of previously unknown problems, may result in restrictions
      including:




•
            delays
                in commercialization;•
            refusal
                by the FDA or other similar regulatory agencies to review pending
                applications or supplements to approved applications;•
            product
                recalls or seizures;•
            warning
                letters;•
            suspension
                of manufacturing;•
            withdrawals
                of previously approved marketing applications;•
            fines
                and other civil penalties;•
            injunctions,
                suspensions or revocations of marketing licenses;•
            refusals
                to permit products to be imported to or exported from the United
                States;
                and•
            criminal
                prosecutions.





Post-approval
      marketing laws and regulations in other jurisdictions generally provide for
      the
      same types of sanctions that may be imposed in the United States.





**We
      may experience delays in patient enrollment, which would delay regulatory
      approval of CellCept in autoimmune indications and possibly reduce our
      revenues.**




Our
      ability
      to obtain, and the timing of, regulatory approval for CellCept in any autoimmune
      indication depends in part on our ability to successfully complete clinical
      trials of CellCept in that autoimmune indication. The ability to complete
      clinical trials depends, in part, on the rate of patient enrollment and patient
      retention, which is a function of many factors, some of which are beyond our
      control. In particular, because some of our clinical
      trials will be blinded so that some patients receive CellCept and others receive
      another drug or a placebo, and because CellCept is marketed for transplant
      indications and prescribed by physicians, patients may not want to participate
      in a clinical trial in which they could receive a placebo or drug other than
      CellCept.




27







**If
      third-party clinical research organizations do not perform in an acceptable
      and
      timely manner, our clinical trials could be delayed or
      unsuccessful.**




We
      have
      limited experience as a company in conducting and managing clinical
      trials, and rely on third parties, including contract research organizations,
      outside consultants and principal investigators to assist us in managing,
      monitoring and conducting our clinical trials. We rely on these parties to
      assist in the recruitment of sites for participation in clinical trials, to
      maintain positive relations with the clinical sites and to ensure that these
      sites conduct the trials in compliance with the protocol and our instructions.
      If these third parties fail to perform satisfactorily or do not adequately
      fulfill their obligations to us, our clinical trials may be delayed or
      unsuccessful. The FDA or other regulatory agencies may inspect some of our
      clinical sites or our third-party vendors' sites, to determine if our clinical
      trials are being conducted according to current good clinical practices. If
      the
      FDA or another applicable regulatory agency determines that our third-party
      vendors are not in compliance with applicable regulations, we may be required
      to
      delay, repeat or terminate such clinical trials. Any delay, repetition or
      termination of our clinical trials could prevent or delay the commercialization
      of CellCept for autoimmune indications and any other future product
      candidate.


**If
      government and third-party payors fail to provide coverage and adequate
      reimbursement rates for our product candidates, our revenues and potential
      for
      profitability will be reduced.**




In
      the
      United States and elsewhere, our product revenues will depend principally upon
      the reimbursement rates established by third-party payors, including government
      health administration authorities, managed-care providers, public health
      insurers, private health insurers and other organizations. These third-party
      payors are increasingly challenging the price, and examining the cost
      effectiveness, of medical products and services. In addition, significant
      uncertainty exists as to the reimbursement status, if any, of newly approved
      drugs, pharmaceutical products or product indications. We may need to conduct
      post-marketing clinical trials in order to demonstrate the cost-effectiveness
      of
      products. Such studies may require us to commit a significant amount of
      management time and financial and other resources. CellCept is included in
      various drug compendia as a commercially approved drug in connection with the
      prevention of organ rejection and certain third party payors provide
      reimbursement for this use of CellCept because of such inclusion. However,
      CellCept or other future products may not be reimbursed or covered by any of
      these third-party payors for our targeted indications.




In
      some
      countries other than the United States, particularly the countries of the
      European Union and Canada, the pricing of prescription pharmaceuticals is
      subject to governmental control. In these countries, obtaining pricing approval
      from governmental authorities can take six to twelve months or longer after
      the
      receipt of regulatory marketing approval of a product for an indication. To
      obtain reimbursement or pricing approval in some countries, we may be required
      to conduct a clinical trial that compares the cost-effectiveness of a product
      that is the subject of a collaboration with us to other available therapies.
      If
      reimbursement of such products is unavailable or limited in scope or amount
      or
      if pricing is set at unsatisfactory levels our revenues could be
      reduced.




Domestic
      and
      foreign governments continue to propose and pass legislation designed to reduce
      the cost of healthcare, including drugs. In the United States, there have been,
      and we expect that there will continue to be, federal and state proposals to
      implement similar governmental control. In addition, increasing emphasis on
      managed care in the United States will continue to put pressure on the pricing
      of pharmaceutical products. For example, the Medicare Prescription Drug
      Improvement and Modernization Act of 2003 reforms the way Medicare will cover
      and reimburse for pharmaceutical products. The legislation expands Medicare
      coverage for drug purchases by the elderly and has resulted in a new
      reimbursement methodology based on average sales prices for certain drugs.
      In
      addition, the new legislation provides authority for limiting the number of
      outpatient drugs that will be covered in any therapeutic class. As a result
      of
      the new legislation and the expansion of federal coverage of drug products,
      we
      expect that there will be additional pressure to contain and reduce costs.
      The
      Medicaid program has recently been modified and state healthcare laws and
      regulations will soon be amended to conform to the federal changes. The new
      laws
      and regulations will reduce Medicaid reimbursement. Cost control initiatives
      could decrease the established reimbursement rates that we receive for any
      products in the future, which would limit our revenues and profitability.
      Legislation and regulations affecting the pricing of pharmaceutical products,
      including CellCept, may change at any time, which could further limit or
      eliminate reimbursement rates for CellCept or other products.





**Risks
      Related to Intellectual Property**




**We
      may incur significant expenses or be prevented from developing or
      commercializing products as a result of an intellectual property infringement
      claim.**




Our
      commercial success depends in part on our ability to operate without infringing
      the patents and other proprietary rights of third parties. Infringement
      proceedings in the pharmaceutical and biotechnology industries are lengthy,
      costly and time-consuming and their outcome is uncertain. If we become involved
      in any patent litigation, interference or other administrative proceedings,
      we
      will incur substantial expense and the efforts of our technical and management
      personnel will be significantly diverted. As a result of such litigation or
      proceedings we could lose our proprietary position and be restricted or
      prevented from developing, manufacturing and selling the affected products,
      incur significant damage awards, including punitive damages, or be required
      to
      seek third-party licenses that may not be available on commercially acceptable
      terms, if at all.




Although
      Roche has an extensive patent estate covering the composition of matter, methods
      of treatment and manufacture of CellCept, it is possible that a third party
      may
      be issued a patent covering some aspect of CellCept or its use. If this happens,
      we and Roche may be restricted from developing and commercializing CellCept
      for
      autoimmune indications. If a third party brings an infringement claim against
      us
      based solely upon the development or promotion of CellCept in autoimmune
      indications, Roche has the right under our agreement to deduct 50% of its cost
      in defending such action, plus any amounts paid in settlement or in a judgment
      against Roche or Aspreva, from the calculation of CeIlCept's net sales prior
      to
      determining our share of such sales. Roche is obligated to indemnify us if
      the
      infringing activity relates to the development and commercialization of CellCept
      in both transplant and non-transplant indications.






28


**If
      we or our collaborators are unable to adequately protect or enforce our
      intellectual property, our competitive position could be
      impaired.**




Our
      commercial success depends in part on our ability to:





•
            obtain
                patents or rights to patents and maintain their
                validity;•
            protect
                our trade secrets; and•
            effectively
                enforce our proprietary rights or patents against
                infringers.





Patent
      applications may not result in patents being issued. Until a patent is issued,
      the claims covered by the patent may be narrowed or removed entirely and
      therefore we may not obtain adequate patent protection. As a result, we may
      face
      unanticipated competition, or conclude that, without patent rights, the risk
      of
      bringing products to the market is too great. Even if we or our collaborators
      are issued patents covering our products we cannot predict with certainty
      whether we or our collaborators will be able to ultimately enforce our patents
      or proprietary rights. Any patents that we own or license may be challenged,
      invalidated or circumvented and may not provide us with protection against
      competitors. We or our collaborators may be forced to engage in costly and
      time-consuming litigation in order to protect our intellectual property rights.
      In addition, our collaborators may choose not to enforce or maintain their
      intellectual property rights, and we may be forced to incur substantial
      additional costs to maintain or enforce such rights. Patent rights may not
      provide us with adequate proprietary protection or competitive advantages
      against competitors with similar products or technologies. The laws of certain
      foreign countries do not protect our intellectual property rights to the same
      extent as do the laws of the United States.




In
      addition
      to patents, we rely on trade secrets and proprietary know-how. We seek
      protection, in part, through confidentiality and non-disclosure agreements.
      These agreements may not provide meaningful protection of our technology or
      adequate remedies in the event of unauthorized use or disclosure of confidential
      and proprietary information and, in any event, others may develop independently,
      or obtain access to, the same or similar information. Our failure or inability
      to protect our trade secrets and proprietary know-how could impair our
      competitive position.




**Our
      stock price is volatile and purchasers of our common shares could incur
      substantial losses.**




Our
      stock
      price is volatile. Since our initial public offering on March 4, 2005 and
      through April 30, 2007, our common shares have traded on the NASDAQ Global
      Select Market between $11.00 and $34.89 per share. The stock market in general
      and the market for biopharmaceutical and biotechnology companies in particular
      have experienced extreme volatility that has often been unrelated to the
      operating performance of particular companies. The price for our common shares
      may be influenced by many factors, including:




•
            our
                ability to develop and obtain regulatory approval for CellCept and
                any
                future products in our targeted indications;•
            our
                ability to establish marketing and sales capabilities and the costs
                of
                launching CellCept and any future products for our targeted
                indications;•
            market
                acceptance of CellCept and any future products for our targeted
                indications;•
            developments
                concerning our collaboration with Roche;•
            our
                success in establishing additional collaborations;•
            regulatory
                developments in the United States, Canada and other
                countries;•
            developments
                or disputes concerning patents or other proprietary
                rights;•
            public
                concern over CellCept or any future products;•
            litigation;•
            the
                departure of key personnel;•
            future
                sales of our common shares;•
            variations
                in our financial results or those of companies that are perceived
                to be
                similar to us;•
            investors’
                perceptions of us; and•
            general
                economic, industry and market
                conditions.





**If
      there are substantial sales of our common shares, our stock price could decline.**




If
      our
      existing shareholders sell a large number of our common shares or the public
      market perceives that existing shareholders might sell our common shares, the
      market price of our common shares could decline significantly.




**Our
      executive officers, directors and major shareholders continue to have
      substantial control over us and will maintain the ability to control all matters
      submitted to shareholders for approval.**




As
      of March
      31, 2007, our directors and executive officers, together with their affiliates,
      beneficially owned approximately 22% of our outstanding common shares, including
      shares subject to outstanding stock options and warrants. These shareholders,
      acting together, can exercise significant influence over all matters requiring
      shareholder approval, including the election of directors and any amendment
      of
      our notice of articles or articles. This concentration of ownership could also
      have the effect of delaying or preventing a change in our control.




**Our
      articles, our shareholder rights plan and certain Canadian laws could delay
      or
      deter a change of control.**




Our
      authorized preferred capital stock is available for issuance from time to time
      at the discretion of our board of directors, without shareholder approval.
      Our
      articles grant our board of directors the authority, subject to the corporate
      law of British Columbia, to determine or alter the special rights and
      restrictions granted to or imposed on any wholly unissued series of preferred
      shares, and such rights may be superior to those of our common
      shares.




29


Also,
      pursuant to our shareholder rights plan, anyone who seeks to acquire 20% or
      more
      of our outstanding common shares is required to make a bid complying with
      specific provisions of the plan.




Limitations
      on the ability to acquire and hold our common shares may be imposed by the
      Competition Act (Canada). This legislation permits the Commissioner of
      Competition of Canada to review any acquisition of a significant interest in
      us.
      This legislation grants the Commissioner jurisdiction to challenge such an
      acquisition before the Canadian Competition Tribunal if the Commissioner
      believes that it would, or would be likely to, result in a substantial lessening
      or prevention of competition in any market in Canada. The Investment Canada
      Act
      (Canada) subjects an acquisition of control of a company by a non-Canadian
      to
      government review if the value of our assets as calculated pursuant to the
      legislation exceeds a threshold amount. A reviewable acquisition may not proceed
      unless the relevant minister is satisfied that the investment is likely to
      be a
      net benefit to Canada.




Any
      of the
      foregoing could prevent or delay a change of control and may deprive or limit
      strategic opportunities for our shareholders to sell their shares.





**We
      may be a passive foreign investment company for U.S. tax purposes which may
      negatively affect U.S. investors.**




For
      U.S.
      federal income taxation purposes, we will be a passive foreign investment
      company, or PFIC, if in any taxable year either: (a) 75% or more of our gross
      income consists of passive income; or (b) 50% or more of the value of our assets
      is attributable to assets that produce, or are held for the production of,
      passive income. If we meet either test, our shares held by a U.S. person in
      that
      year will be PFIC shares for that year and all subsequent years in which they
      are held by that person. We were a PFIC prior to 2005 and may be
      a PFIC in future taxable years. Gain realized by a U.S. investor from the sale
      of PFIC shares is taxed as ordinary income, as opposed to capital gain, and
      subject to an interest charge unless the U.S. person has timely made a certain
      tax election.




The
      PFIC
      rules are extremely complex. A U.S. person is encouraged to consult his or
      her
      U.S. tax advisor before making an investment in our shares.





**As
      a
      foreign private issuer, we are subject to different U.S. securities laws and
      rules than a domestic U.S. issuer, which may limit the information publicly
      available to our shareholders.**




As
      a foreign
      private issuer we are not required to comply with all the periodic disclosure
      requirements of the Securities Exchange Act of 1934 and therefore there may
      be
      less publicly available information about Aspreva than if we were a U.S.
      domestic issuer. In addition, our officers, directors, and principal
      shareholders are exempt from the reporting and "short-swing" profit recovery
      provisions of Section 16 of the Securities Exchange Act of 1934 and the rules
      thereunder. However, under Canadian provincial securities laws, our officers,
      directors and principal shareholders are required to file reports in electronic
      format through the System for Electronic Disclosure by Insiders, or SEDI,
      disclosing changes in beneficial ownership of, or control or direction over,
      our
      common shares and other securities. Our shareholders can access such reports
      at
      www.sedi.ca.








**You
      may be unable to enforce actions against us, or certain of our directors and
      officers, under U.S. federal securities laws.**




We
      are a
      corporation organized under the laws of British Columbia, Canada. A majority
      of
      our directors and officers reside principally in Canada. Because all or a
      substantial portion of our assets and the assets of these persons are located
      outside the U.S., it may not be possible for you to effect service of process
      within the United States upon us or those persons. Furthermore it may not be
      possible for you to enforce against us or them in the United States, judgments
      obtained in U.S. courts based upon the civil liability provisions of the U.S.
      federal securities laws or other laws of the U.S. There is doubt as to the
      enforceability, in original actions in Canadian courts, of liabilities based
      upon the U.S. federal securities laws and as to the enforceability in Canadian
      courts of judgments of U.S. courts obtained in actions based upon the civil
      liability provisions of the U.S. federal securities laws. Therefore, it may
      not
      be possible to enforce those actions against us or certain of our directors
      and
      officers.




30


**ITEM 2.
      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS.**








None.








**ITEM 3.
      DEFAULTS UPON SENIOR SECURITIES**








None.











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








None.








31


**ITEM 5.
      OTHER INFORMATION**








*Executive
      Officer Cash Bonuses and Stock Options*








On
      February
      6, 2007, the Compensation Committee recommended and our Board of Directors
      approved cash bonuses and the grant of stock options to our Chief Executive
      Officer, Chief Financial Officer and our three most highly compensated executive
      officers who earned at least $100,000 of total compensation for the year ended
      December 31, 2006, as follows:


**Named
                Executive**
              **Officer**
            **Position**
            **Cash
                Bonus**
              **Awarded
                (1)**
            **Number
                of Shares**
              **Subject
                to Stock Options (2)**Richard
                Glickman
            Chairman
                and Chief Executive Officer
            $139,000
            30,000Noel
                Hall
            President
            90,000
            20,000Bruce
                Cousins
            Executive
                Vice President and Chief Financial Officer
            80,000
            35,000Charles
                Goulburn
            Executive
                Vice President, Global Pharmaceutical Operations
            75,000
            20,000Richard
                Jones
            Chief
                Scientific Officer
            42,000
            18,000




(1)
            The
                cash bonuses were fully accrued at December 31, 2006 and did not
                impact
                expenses for the three month period ended March 31, 2007.





(2)
            Each
                stock option has an exercise price payable in Canadian dollars of
                C$23.93
                ($20.24), being the closing price of our common shares on February
                5,
                2007 (the trading session ending immediately prior to the time of
                grant) as reported on the Toronto Stock Exchange, has a ten year
                term and
                vests in equal monthly amounts for 48 months from the date of
                grant.





*2006
      Performance Bonus Calculation*




Each
      executive officer is eligible for a discretionary performance bonus determined
      as a percentage of such executive officer's annual base salary as set forth
      in
      such officer's employment agreement with Aspreva. The Compensation Committee
      reviews and recommends to the Board of Directors all compensation decisions
      relating to our executive officers. The Compensation Committee reviews annually:
      (i) the annual corporate objectives of Aspreva, which in general include
      operating, business development and clinical and product development goals;
      and
      (ii) the general personal objectives of each executive officer as proposed
      by our Chief Executive Officer. The Compensation Committee undertakes a review
      to establish the extent to which such objectives have been met for the purpose
      of determining each executive officer’s annual cash bonus to recommended to the
      Board of Directors for approval. In reviewing the performance of each named
      executive officer, the Compensation Committee also considers each executive
      officer’s level of leadership, teamwork and general participation in the
      development of individuals responsible to the executive officer.





On
      February
      6, 2007, the Compensation Committee recommended and our Board of Directors
      approved annual discretionary performance bonuses to our executive officers
      in
      the range of 50% to 84% of their maximum allowable bonus. The Compensation
      Committee has also approved the corporate and personal goals pursuant to which
      the performance of the executive officers will be evaluated in 2007 for the
      purposes of recommending to the Board of Directors the award of discretionary
      performance bonuses and stock option grants. Please see the 2007 Discretionary
      Variable Compensation Plan filed as Exhibit 10.34 to this Quarterly Report
      on
      Form 10-Q, the description of which is incorporated herein by
      reference.




32


**ITEM 6.
      EXHIBITS.**


10.34
            
            2007
                Discretionary Variable Compensation Plan.31.1
            
            Certification
                of the Chief Executive Officer, as required by Rule 13a-14(a) of
                the
                Securities and Exchange Act of 1934, as amended.31.2
            
            Certification
                of the Chief Financial Officer, as required by Rule 13a-14(a) of
                the
                Securities and Exchange Act of 1934, as amended.32.1*
            
            Certification
                of the Chief Executive Officer, as required by Rule 13a-14(b) of
                the
                Securities and Exchange Act of 1934, as amended and Section 1350
                of
                Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section
                1350).32.2*
            
            Certification
                of the Chief Financial Officer, as required by Rule 13a-14(b) of
                the
                Securities and Exchange Act of 1934, as amended  and Section
                1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C.
                Section 1350).





*
      The
      certifications attached as Exhibits 32.1 and 32.2 accompany this quarterly
      report on Form 10-Q, are not deemed filed with the Security and Exchange
      Commission and are not to be incorporated by reference into any filing of
      Aspreva Pharmaceuticals Corporation under the Securities Act of 1933, as
      amended, or the Securities Exchange Act of 1934, as amended, whether made before
      or after the date of this Form 10-Q, irrespective of any general incorporation
      language contained in such filing.




33


**SIGNATURE**








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








ASPREVA
                PHARMACEUTICALS CORPORATIONMay
                8,
                2007
            /s/
                Bruce G. CousinsBruce
                G. CousinsExecutive
                Vice President and Chief Financial Officer(Principal
                Financial and Accounting Officer)





34


**EXHIBIT
      INDEX**




10.34
            
            2007
                  Discretionary Variable Compensation Plan.31.1
            
            Certification
                of the Chief Executive Officer, as required by Rule 13a-14(a) of
                the
                Securities and Exchange Act of 1934, as amended.31.2
            
            Certification
                of the Chief Financial Officer, as required by Rule 13a-14(a) of
                the
                Securities and Exchange Act of 1934, as amended.32.1*
            
            Certification
                of the Chief Executive Officer, as required by Rule 13a-14(b) of
                the
                Securities and Exchange Act of 1934, as amended and Section 1350
                of
                Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section
                1350).32.2*
            
            Certification
                of the Chief Financial Officer, as required by Rule 13a-14(b) of
                the
                Securities and Exchange Act of 1934, as amended and Section 1350
                of
                Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section
                1350).





*
      The
      certifications attached as Exhibits 32.1 and 32.2 accompany this quarterly
      report on Form 10-Q, are not deemed filed with the Security and Exchange
      Commission and are not to be incorporated by reference into any filing of
      Aspreva Pharmaceuticals Corporation under the Securities Act of 1933, as
      amended, or the Securities Exchange Act of 1934, as amended,whether made before
      or after the date of this Form 10-Q, irrespective of any general incorporation
      language contained in such filing.






35