##### Table of Contents

FORM 10-Q



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Quarterly Report under Section 13 of the

Securities Exchange Act of 1934



Quarter ended June 30, 2001



Commission File Number 0-24320



NAPRO BIOTHERAPEUTICS, INC.

|Incorporated in Delaware | IRS ID No. 84-1187753
|------------------------ | ---------------------



6304 Spine Road, Unit A

Boulder, CO 80301

(303) 516-8500

NaPro BioTherapeutics, Inc. (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

The number of shares outstanding of each of the issuer's classes of common stock as of July 25, 2001:

|Common Stock, $.0075 par value | 28,209,060
|------------------------------ | ----------



Total number of pages in document-18



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NaPro BioTherapeutics, Inc.



Table of Contents

|                                                                                      | Page
|------------------------------------------------------------------------------------- | ----
|Part I Financial Information                                                          |     
|Consolidated Financial Statements                                                     |     
|Balance Sheet                                                                         | 3   
|Operations Statement                                                                  | 5   
|Cash Flow Statement                                                                   | 6   
|Notes to Consolidated Financial Statements                                            | 8   
|Management's Discussion and Analysis of Financial Condition and Results of Operations | 8   
|Quantitative and Qualitative Disclosures about Market Risk                            | 15  
|                                                                                      |     
|Part II Other Information                                                             |     
|Legal Proceedings                                                                     | 15  
|Changes in Securities                                                                 | 16  
|Defaults Upon Senior Securities                                                       | 16  
|Submission of Matters to a Vote of Security Holders                                   | 16  
|Other Information                                                                     | 17  
|Exhibits and Reports on Form 8-K                                                      | 17  
|Signatures                                                                            | 18  



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Part I. Financial Information

Item 1. Consolidated Financial Statements

NaPro BioTherapeutics, Inc.

Balance Sheet
Assets

|                            | June 30,2001(unaudited) | December 31,2000
|--------------------------- | ----------------------- | ----------------
|
|
|Current assets:             |                         |                 
|Cash and cash equivalents   | $ 23,062,000            | $ 18,982,000    
|Accounts receivable         | 2,451,000               | 1,413,000       
|Inventory:                  |                         |                 
|Raw materials               | 2,051,000               | 2,409,000       
|Work-in-process             | 2,794,000               | 1,438,000       
|Finished goods              | 398,000                 | 1,926,000       
|                            | -------------           | -------------   
|                            | 5,243,000               | 5,773,000       
|Prepaid expense and other   | 1,924,000               | 1,461,000       
|                            | -------------           | -------------   
|Total current assets        | 32,680,000              | 27,629,000      
|                            |                         |                 
|Property and equipment, net | 11,808,000              | 9,637,000       
|Inventory, raw materials    | 426,000                 | 484,000         
|Other assets                | 315,000                 | 251,000         
|                            | -------------           | -------------   
|Total assets                | $ 45,229,000            | $ 38,001,000    
|                            | =========               | =========       

See accompanying notes

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NaPro BioTherapeutics, Inc.

Balance Sheet
Liabilities and Stockholders' Equity



|                                                                                                                                                                                                                                            | June 30, 2001(unaudited) | December 31,2000
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ----------------
|
|
|Current liabilities:                                                                                                                                                                                                                        |                          |                 
|Accounts payable                                                                                                                                                                                                                            | $ 4,128,000              | $ 3,371,000     
|Accrued payroll and payroll taxes                                                                                                                                                                                                           | 1,515,000                | 955,000         
|Notes payable-current portion                                                                                                                                                                                                               | 419,000                  | 135,000         
|Deferred income                                                                                                                                                                                                                             | 1,400,000                | ---             
|                                                                                                                                                                                                                                            | -------------            | -------------   
|Total current liabilities                                                                                                                                                                                                                   | 7,462,000                | 4,461,000       
|                                                                                                                                                                                                                                            |                          |                 
|Notes payable-long term                                                                                                                                                                                                                     | 14,925,000               | 14,953,000      
|Deferred income-long term                                                                                                                                                                                                                   | 7,058,000                | ---             
|                                                                                                                                                                                                                                            |                          |                 
|                                                                                                                                                                                                                                            |                          |                 
|Stockholders' equity                                                                                                                                                                                                                        |                          |                 
|Preferred stock, $.001 par value:
          Authorized shares-2,000,000
          Issued-none                                                                                                                                               | ---                      | ---             
|Non-voting common stock, convertible on disposition
          into voting common stock, $.0075 par value:
          Authorized shares-1,000,000
          Issued and outstanding shares-none in 2001 (unaudited),
          395,000 in 2000 | ---                      | 3,000           
|Common stock, $.0075 par value: 
          Authorized shares-45,000,000
          Issued shares-28,444,603 in 2001 (unaudited),
          26,758,144 in 2000                                                                                | 213,000                  | 201,000         
|Additional paid-in capital                                                                                                                                                                                                                  | 95,458,000               | 88,970,000      
|Accumulated deficit                                                                                                                                                                                                                         | (79,047,000)             | (69,245,000)    
|Treasury stock-254,306 shares in 2001 (unaudited)
          and 405,885 in 2000                                                                                                                                                             | (840,000)                | (1,342,000)     
|                                                                                                                                                                                                                                            | -------------            | -------------   
|Total stockholders' equity                                                                                                                                                                                                                  | 15,784,000               | 18,587,000      
|                                                                                                                                                                                                                                            | -------------            | -------------   
|Total liabilities and stockholders' equity                                                                                                                                                                                                  | $45,229,000              | $38,001,000     
|                                                                                                                                                                                                                                            | =========                | =========       



See accompanying notes



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NaPro BioTherapeutics, Inc.

Operations Statement
(Unaudited)



|                                                          | Quarter Ended
June 30, | Six Months Ended
June 30,
|--------------------------------------------------------- | ---------------------- | -------------------------
|                                                          | 2001                   | 2000                     
|                                                          |                        |                          
|Product Sales                                             | $ 2,158,000            | $ 3,298,000              
|                                                          |                        |                          
|Expense:                                                  |                        |                          
|Research, development and cost of products
          sold | 7,978,000              | 4,510,000                
|General and administrative                                | 2,193,000              | 2,063,000                
|Loss on disposal of assets                                | ---                    | 2,245,000                
|                                                          | -------------          | -------------            
|                                                          | 10,171,000             | 8,818,000                
|                                                          | -------------          | -------------            
|Operating loss                                            | (8,013,000)            | (5,520,000)              
|                                                          |                        |                          
|License fees  (Note 1)                                    | 300,000                | ---                      
|Interest income                                           | 273,000                | 37,000                   
|Interest expense                                          | (261,000)              | (162,000)                
|                                                          | -------------          | -------------            
|Net loss                                                  | $(7,701,000)           | $(5,645,000)             
|                                                          | =========              | =========                
|                                                          |                        |                          
|Basic and diluted loss per share                          | $ (0.28)               | $ (0.24)                 
|                                                          | =========              | =========                
|                                                          |                        |                          
|Weighted average shares outstanding                       | 27,422,181             | 23,362,717               
|                                                          | =========              | =========                

See accompanying notes.



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NaPro BioTherapeutics, Inc.

Cash Flow Statement
(Unaudited)

|                                                                                                     | Six Months Ended 
June 30,
|---------------------------------------------------------------------------------------------------- | --------------------------
|                                                                                                     | 2001                      
|Operating activity                                                                                   |                           
|Net loss                                                                                             | $(9,802,000)              
|Adjustments to reconcile net loss to net cash
provided (used) by operating activity:                 |                           
|Depreciation                                                                                         | 642,000                   
|Amortization of license fee income                                                                   | (392,000)                 
|Amortization of license fee expense                                                                  | 497,000                   
|Biomass development cost                                                                             | 453,000                   
|Accretion of debt issue cost                                                                         | 20,000                    
|Compensation paid with common stock and stock options                                                | 46,000                    
|Retirement contributions paid with common stock                                                      | 720,000                   
|Loss on disposal of assets                                                                           | ---                       
|Changes in operating assets and liabilities:                                                         |                           
|Accounts receivable                                                                                  | (1,038,000)               
|Inventory                                                                                            | 588,000                   
|Prepaid expense and other assets                                                                     | (304,000)                 
|Accounts payable                                                                                     | 757,000                   
|Accrued liabilities                                                                                  | 560,000                   
|Deferred income                                                                                      | 8,850,000                 
|                                                                                                     | -------------             
|Net cash provided (used) by operating activity                                                       | 1,597,000                 
|Net cash used by investing activity                                                                  |                           
|Additions to property and equipment                                                                  | (3,266,000)               
|Financing activity                                                                                   |                           
|Proceeds from notes payable                                                                          | 384,000                   
|Payments of notes payable                                                                            | (148,000)                 
|Proceeds from the sale of common stock, and exercise 
          of common stock options and warrants | 5,513,000                 
|                                                                                                     | -------------             
|Net cash provided by financing activity                                                              | 5,749,000                 
|                                                                                                     | -------------             
|Net increase in cash and cash equivalents                                                            | 4,080,000                 
|Cash and cash equivalents at beginning of period                                                     | 18,982,000                
|                                                                                                     | -------------             
|Cash and cash equivalents at end of period                                                           | $23,062,000               
|                                                                                                     | =========                 

See accompanying notes.



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NaPro BioTherapeutics, Inc.

Cash Flow Statement (continued)
(Unaudited)

|                                                                           | Six Months Ended
June 30,
|-------------------------------------------------------------------------- | -------------------------
|                                                                           | 2001                     
|Supplemental schedule of activity                                          |                          
|                                                                           |                          
|Interest paid                                                              | $499,000                 
|                                                                           |                          
|Noncash transactions:                                                      |                          
|Issuance of common stock to prepay retirement
          plan contributions | 720,000                  
|Depletion of plantation cost to inventory                                  | ---                      
|                                                                           |                          
|Convert non-voting common stock to voting common                           | 3,000                    

See accompanying notes.



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NaPro BioTherapeutics, Inc.

Notes to Consolidated Financial Statements
June 30, 2001
(Unaudited)



1.     Basis of Presentation and Adoption of Accounting Policy

The accompanying financial statements are unaudited. However, in the opinion of management, the financial statements reflect all adjustments, consisting of only normal recurring adjustments, necessary for fair presentation. Interim results of operations are not indicative of results for the full year. These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2000.

Effective in 2001 NaPro capitalizes initial payments it receives when it licenses its technology to third parties. NaPro amortizes such capitalized cost over the expected economic life of the technology.

2.      Common Stock

In April 2001, NaPro received a $5 million milestone payment under the strategic licensing, development and marketing agreement with Abbott Laboratories. The milestone payment was in the form of cash for 888,889 shares of common stock at $5.625 per share. No further equity investments from Abbott are contemplated under the current Stock Purchase Agreement.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition. You should read this discussion in conjunction with (1), the financial statements and notes included elsewhere in this report and (2), the financial statements, notes, and related management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2000. Special Note: Certain statements below constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, referred to as the "Reform Act". See "Special Note Regarding Forward Looking Statements."

General

NaPro BioTherapeutics, Inc. is a biopharmaceutical company focused on the development, production and licensing of complex natural product pharmaceuticals as well as the development and licensing of novel genetic technologies for applications in human therapeutics and diagnostics, pharmacogenomics and agrobiotechnology. Natural product substances have been, and continue to be, the primary source of new prototype chemotherapeutic anti-cancer agents. Our lead product is paclitaxel, a naturally occurring chemotherapeutic anti-cancer agent found in certain species of yew, or *Taxus* trees. In addition to our efforts with paclitaxel and genetics, we are also working on several types of compounds which we believe have promising activity as anti-cancer agents. We believe some of these agents function by new and novel mechanisms, which may increase their likelihood of success as new chemotherapeutics. We



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are also actively engaged in evaluating the in-licensing or purchase of potential new products and/or technologies, whether or not those products or technologies are derived from natural products. Our evaluations of new products and technologies may involve examination of individual molecules, classes of compounds or platform technologies, in the cancer field and otherwise. Acquisitions of new products or technologies may involve the purchase of, or merger with, other companies.

We continue to incur substantial expense for research and development related to preclinical and clinical studies, improving manufacturing processes and other development activity. Accordingly, we have incurred significant operating losses, including operating losses of approximately $16.2 million and $10.8 million for the years ended December 31, 2000 and 1999, respectively. For the six months ended June 30, 2001, we incurred an operating loss of $9.8 million, resulting in an accumulated deficit of $79 million as of June 30, 2001. We expect that we will continue to have a high level of operating expense and will be required to make significant up-front expenditures in connection with our paclitaxel biomass procurement, product development and research and development activities. We anticipate that operating losses will continue until such time, if ever, as we are able to generate sufficient revenue to support our operations.

Primarily, our ability to generate sufficient revenue to support our operations depends upon the successful completion of our paclitaxel development program. Our strategy for that program has been to form strategic alliances through long-term exclusive agreements with major pharmaceutical companies. On July 23, 1999, we entered into an exclusive collaborative agreement of up to 20 years covering the U.S. and Canada with Abbott Laboratories to develop and commercialize one or more formulations of paclitaxel for the treatment of a variety of cancers. Under our agreement with Abbott, we are responsible for supply of bulk drug. Abbott is responsible for finishing, regulatory filings, marketing, and sale of the finished drug product. Most primary decisions related to the paclitaxel development program are made by a joint Abbott-NaPro Development Committee. In March 2001, we and Abbott filed an ANDA with the FDA for paclitaxel.

In connection with the Abbott agreement, we may receive total funding of up to $118 million in the form of development and marketing milestone payments, a secured loan and equity investments. In July 1999 we received an initial $1 million fee. Through April 2001 Abbott purchased 2,000,000 shares of our common stock for a total purchase price of $11 million, including 888,889 shares purchased in April 2001 for $5 million.

Contingent upon our successful achievement of all development milestones, including the payments received through April 2001, we could receive up to $41 million consisting of $30 million in development fees and $11 million for the purchase of 2 million shares of common stock.

In addition, we have access to a total of $20 million under a secured loan arrangement with Abbott, including draws through June, 2001 of $15.1 million. The loan bears a primary interest rate of 6.5% and is due in full on the earlier of: (i) the second anniversary of the first sale of finished product by Abbott to a wholesaler or end-user customer following approval of finished product by the FDA; (ii) the termination of the Abbott agreement; or (iii) January 1, 2007. The loan is limited to a borrowing base of collateralized assets, recomputed monthly. The majority of our hard assets are collateralized as security for the loan.



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Contingent upon receiving regulatory approval and achieving certain commercial sales thresholds over several years, we may receive additional milestone payments from Abbott in the range of zero up to $57 million. We cannot assure that regulatory approval or sales thresholds will be achieved.

Under terms of the agreement, Abbott will purchase bulk drug from us. If the paclitaxel product is approved and commercialized, Abbott will pay a percentage of its net paclitaxel sales to us, less Abbott's payments for purchase of bulk drug. Abbott may terminate the agreement at any time with or without cause. Should Abbott terminate without cause, it may be obligated to make payments to us.

In 1992 we entered into a 20-year exclusive agreement with F.H. Faulding & Co., Ltd., Australia's largest domestic pharmaceutical company, for the clinical development, sale, marketing and distribution of our paclitaxel. Faulding, with 2000 sales of approximately $1.2 billion, actively markets anti-cancer pharmaceuticals and other health care products in Australia, Asia and other countries throughout the world. In 2000, we amended the Faulding agreement to, among other things, add additional countries to Faulding's exclusive territory. In 2001 we entered into a separate agreement with Faulding covering development and sale of our paclitaxel in Europe. Including the new agreement for Europe, the Faulding territory includes substantially all of the world other than the U.S., Canada, Japan, Israel, the former Soviet Union and parts of Africa. Faulding has received marketing approval for, and is selling our paclitaxel as ANZATAXTM in more than 20 countries.

In Europe, we are responsible for regulatory filings and will supply paclitaxel raw material exclusively to Faulding to formulate and finish the product. We cannot assure that we will receive regulatory approval in Europe. Should we receive approval, Faulding will then market and sell the final proprietary paclitaxel formulation in Europe. We will share equally the net sales of the product in Europe. Under the agreement, Faulding paid an up-front licensing fee to us of $7.5 million. We may be obligated to return up to $2 million of the fee should certain future events not occur.

An offer from Mayne-Nickless Ltd., an Australian company, for the purchase of Faulding has been accepted by Faulding's board and is now subject to shareholder approval in the fall. We expect Mayne-Nickless to sell the pharmaceutical business of Faulding after the completion of the merger. These proposed transactions could have a material adverse effect on our business, financial condition and results of operations.

In January 2001 we received approval in Israel to sell paclitaxel under the trade name BiotaxTM. We have established an exclusive supply and distribution agreement with Tzamal Pharma for the development and distribution of paclitaxel in Israel. The Israeli Ministry of Health has approved Biotax for use in a variety of cancers and Tzamal has already received orders representing a meaningful share of the Israeli paclitaxel market.

In June 2001 we and JCR Pharmaceuticals Co., Ltd. entered into a mutually exclusive development, supply and distribution agreement for paclitaxel in Japan. Under the agreement, we will be responsible for manufacturing and supplying the finished drug. JCR and we will jointly be responsible for the clinical and regulatory program necessary for seeking approval to market paclitaxel in Japan. JCR will fund the clinical and regulatory program. JCR will be responsible for the sales and distribution of the product in Japan upon its approval.



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JCR, headquartered in Ashiya, Japan, is a research and development oriented pharmaceutical manufacturer, focusing on the research of bioactive substances such as enzymes, hormones, enzyme inhibitors, growth factors and stimulating factors. It is also engaged in the development and research of bioengineered products such as recombinant human growth hormone.

Results of Operations

Quarter ended June 30, 2001, compared to the quarter ended June 30, 2000 Sales for the 2001 quarter were $2.2 million, a decrease of $1.1 million from the 2000 quarter. The decrease related partially to a decrease in product payments due from Faulding. Shipments to and payments from strategic partners may vary significantly on a quarter-to-quarter basis depending on a number of factors including the level of sales to the customers of the strategic partners, the selling price of such sales, changes in approved markets, and the level of inventory carried by the strategic partners. This quarter-to-quarter variability will continue until stable commercial demand has been established for the product in a major market.

Research and development and cost of products sold expense for the 2001 quarter was $8 million, an increase of $3.5 million from the 2000 quarter. The increase resulted primarily from cost related to an anticipated commercial launch in the United States and biomass development cost.

General and administrative expense for the 2001 quarter was $2.2 million, an increase of $100,000 from the 2000 quarter. The increase was primarily attributable to increased payroll cost.

Loss on disposal of assets for the 2000 quarter was $2.2 million. There was no comparable expense in the 2001 quarter. In 1996 we initiated the construction of expanded manufacturing facilities in Boulder, Colorado. We suspended such construction in 1998. Due to the signing of the agreement with Abbott and other reasons, we restarted such construction. Because of manufacturing improvements and design changes, certain cost incurred in the earlier construction that had been recorded in fixed assets as construction-in-progress no longer had utility in the current improvements. Accordingly, in the June 2000 quarter we expensed $2.2 million of such cost.

In the 2001 quarter we earned $300,000 of license fee income. We had no comparable income in the 2000 quarter. This income related to amortization of license fees recorded as deferred income.

Interest income for the 2001 quarter was $300,000, an increase of $300,000 from the 2000 quarter. This increase is a result of carrying higher cash balances.

Interest expense for the 2001 quarter was $300,000, an increase of $100,000 from the 2000 quarter. This increase is primarily a result of a larger balance on the Abbott loan.

Six months ended June 30, 2001, compared to the six months ended June 30, 2000 Sales for the 2001 period were $6.1 million, up $2.1 million from the 2000 period. Shipments to and payments from strategic partners may vary significantly between periods depending on a number of factors including the level of sales to the customers of the strategic partners, the selling price of such sales, changes in approved markets, and the level of inventory carried by the strategic partners.

Research and development and cost of products sold expense for the 2001 period was $12.3 million, an increase of $5.7 million from the 2000 period. The increase resulted primarily from cost related to an anticipated commercial launch in the United States and increases in research spending for products and technology other than paclitaxel.



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General and administrative expense for the 2001 period was $4 million, an increase of $400,000 from the 2000 period. The increase was primarily attributable to increased payroll expense.

In the 2001 period we earned $400,000 of license fee income. We had no comparable income in the 2000 period. This income related to amortization of up-front license fees paid by our partners and capitalized in accordance with SEC Staff Accounting Bulletin 101.

Interest income for the 2001 period was $500,000, an increase of $400,000 from the 2000 period. This increase is a result of carrying higher cash balances.

Interest expense for the 2001 period was $500,000, an increase of $200,000 from the 2000 period. This increase is primarily a result of a larger balance on the Abbott loan.

Liquidity and Capital Resources

Our capital requirements have been, and will continue to be, significant. As of June 30, 2001, we had a working capital balance (current assets minus current liabilities) of $25.2 million compared to a working capital balance of $23.1 million as of December 31, 2000. We have a $20 million secured borrowing arrangement with Abbott, of which $15.1 million was outstanding as of June 30, 2001. To date, we have funded our capital requirements primarily with the net proceeds of public offerings of common stock of approximately $21.1 million, with private placements of equity securities of approximately $54.8 million, with the exercise of warrants and options of $7 million and with net borrowing of $15.3 million.



Our agreement with Abbott is expected to be a significant ongoing capital source. See Management's Discussion and Analysis - General.

We believe our existing capital, anticipated sales in the near future, and available borrowing and milestone payments from our development partners can provide adequate funding for our necessary operations and capital expenditures in the near future. However, pharmaceutical development and manufacturing, and the related capital expenditures, are costly processes. We may in-license or purchase new products or technologies and we expect to make significant capital expenditures. We therefore will seek substantial additional capital in the near future, if it is available at financially acceptable terms. We cannot assure that we will be able to do so.

Working Capital and Cash Flow Cash and cash equivalents increased $4.1 million to $23.1 million for the six months ended June 30, 2001, from $19 million at December 31, 2000. During the 2001 period net cash provided by operations of $1.6 million and by financing activity of $5.7 million was offset by investment activity of $3.3 million.

Inventory was $5.7 million at June 30, 2001. The amount of inventory is dependent on a number of factors, including among others the shipping requirements of our strategic partners, our production planning for meeting those needs, and the timing of biomass harvests. Inventory balances may vary significantly during product development and launch periods.



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Capital Expenditures We spent $3.3 million during the 2001 period for capital projects. These expenditures primarily included expansion of our manufacturing and other facilities, plantation cost and laboratory equipment. We anticipate additional expenditures in the near term, particularly for expansion of manufacturing facilities.

The amount and timing of future capital expenditures will depend upon numerous factors, including:

the cost of manufacturing scale-up for paclitaxel;
     the development of new products;
     the cost of manufacturing resources for new products;
     the nature of our relationship with our strategic partners;
     the progress of our research and development programs;
     the magnitude and scope of these activities;
     the cost of preparing, filing, prosecuting, maintaining and enforcing patent claims and other intellectual property rights;
     competing technological and marketing developments; and
     changes in or terminations of existing strategic relationships.

In the near future we are anticipating significant expenditures for improving efficiency and expanding capacity at our existing manufacturing facilities. We are also expecting to complete the design for, and begin construction of, a new large-scale manufacturing facility during 2001. The expanded scope of our research and development activity will require significant additions to laboratory equipment. All of these factors, and others, lead us to expect a significant increase in capital expenditures in the near future. Although we will seek additional long-term financing to fund the increases in capital expenditures, we cannot assure that we can obtain such financing on terms which are economically favorable for us, if at all.

Net Operating Loss Carryforwards As of December 31, 2000, we had approximately $59 million of net operating loss carryforwards to offset future taxable income. The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating loss carryforwards if there has been a "change of ownership" as described in Section 382 of the Internal Revenue Code. Such a change of ownership may limit our utilization of our net operating loss carryforwards, and could be triggered by sales of securities by us or our stockholders.

Special Note Regarding Forward-looking Statements

This report contains forward-looking statements that involve known and unknown risks, including, without limitation, statements containing the words "believes", "anticipates", "estimates", "may" and words of similar import or statements of management's opinion or statements that are not historical fact. Such forward-looking statements include, among others:

statements concerning our plans, objectives and future economic prospects, such as matters relative to developing new products;
     the availability of patent and other protection for our intellectual property;
     the completion of regulatory filings;
     the prospects for and timing of regulatory approvals;
     the need and plans for and availability of additional capital;



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the amount and timing of capital expenditures;
     the timing of product introductions and sales;
     the availability of raw materials;
     prospects for future operations; and
     other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions 
          concerning matters that are not historical facts.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following:

the inability to obtain regulatory approvals for paclitaxel or a delay in such approvals;
competition from Bristol and other existing and new producers of paclitaxel and other drugs;
technological advances in cancer treatment and drug development that may obsolesce paclitaxel;
the risks associated with patent litigation;
the ability to obtain rights to technology;
the ability to obtain, maintain and enforce patents;
the ability to maintain trade secrets;
the ability to obtain raw materials and commercialize manufacturing processes;
the effectiveness of our paclitaxel and other pharmaceuticals we develop in treating disease;
the results of preclinical and clinical studies;
the results of research and development activities;
the ability to purchase or license new products;
the successful development of new products;
the business abilities and judgment of our management and other personnel;
the ability to hire skilled personnel to perform research and development and to run our manufacturing operations;
the ability of contract manufacturers to perform adequately under anticipated contracts;
the decision-making processes of regulatory agencies;
changes in and compliance with governmental regulations;
the effect of capital market conditions and other factors on capital availability;
the ability of Abbott, Faulding, Tzamal and JCR to perform their obligations under their existing agreements with us;
our ability to perform our obligations under our existing and future agreements;
our limited relevant operating history upon which an evaluation of our prospects can be made;
the effect on sales, cash flow and earnings from foreign exchange rate fluctuations;
adverse economic and general business conditions;
and other factors referenced in this report.

These factors are not intended to be an all-inclusive enumeration of the business risks we face. Reference is also made to the risk factors discussed in our registration statement filed with the Securities and Exchange Commission on December 1, 2000. The forward-looking statements included in this report represent our view as of the date of this report. The reader should not assume that the statements made herein remain accurate at any future date. We do not intend to update these statements and undertake no duty to any person to make any update under any circumstance.



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Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

During the quarter ended June 30, 2001, the majority of our revenue resulted from sales of paclitaxel to Faulding.

Faulding purchases paclitaxel from us at a price that varies in proportion to the price at which Faulding sells paclitaxel. Under the Faulding agreement, we are paid a fixed percentage of Faulding's sales price for paclitaxel. Each year, Faulding estimates the sales price it will receive for paclitaxel in the upcoming year, and, based upon that estimate, we determine the price we will charge Faulding (the "Unadjusted Price"). We recognize the corresponding sales at the time of shipment of paclitaxel to Faulding. However, Faulding's actual selling price may differ from the amounts originally budgeted and indicated to us by Faulding. In the summer, Faulding communicates to us the final amount and type of sales made during the preceding fiscal year, and an adjustment is calculated that may increase or decrease our sales of products to Faulding during that year.

Faulding's sales are made in the currencies of each of the countries in which it sells paclitaxel. As a result, our sales are affected by fluctuations in the value of these various foreign currencies relative to the U.S. dollar. In the past, fluctuations in various currencies were a significant factor in reductions in the price we charge Faulding. If changes in foreign currency markets continue to cause a decrease in the price per gram we receive from Faulding, there could be a material adverse effect on our earnings and cash flow. Our sales to JCR, if any, and to Tzamal, are subject to the same risk.

Certain statements set forth in Item 3 may constitute "forward-looking statements". See "Special Note Regarding Forward-looking Statements."



Part II--Other Information

Item 1.  Legal Proceedings

In September 2000 we and Abbott filed a patent infringement suit in the U.S. District Court for the District of Colorado against Bristol alleging infringement of U.S. Patent numbers 5,972,992 and 5,977,164 which relate to paclitaxel. In November 2000 we amended the complaint to add U.S. Patent number 6,140,359 to our claims of patents that Bristol is infringing. Bristol has asserted defenses that if successful, would result in the invalidity or unenforceability of the patents. A finding of invalidity or unenforceability of the patents could have a material adverse affect on us. The trial is set for June 2002.

In June 2001 we and Abbott filed a patent infringement suit in the United States District Court for the Western District of Pennsylvania against Mylan Laboratories, Inc. The suit alleges infringement of U.S. Patent numbers 5,733,888 and 6,140,359 which relate to paclitaxel. Mylan has asserted defenses that if successful, would result in the invalidity or unenforceability of the patents. A finding of invalidity or unenforceability of the patents could have a material adverse affect on us.

In July 2001 we were successful in opposing European Patent number 0 584 001, issued to Bristol relating to methods of administering paclitaxel, the active ingredient in Bristol's anticancer drug, TAXOL®, in Europe. The European Patent Office ruled that this patent is now invalid. A related United Kingdom administration patent we opposed last year was similarly revoked by the United Kingdom courts.



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Existing regulatory approvals have a direct impact on the clinical and marketing strategy we are pursuing.

In December 1992, Bristol obtained NDA approval in the U.S. for its paclitaxel product. Under the Waxman-Hatch Act, a non-patented drug such as paclitaxel that gains approval through an NDA process is granted a five-year period of marketing exclusivity, which prevents submission by another party of an ANDA for generic substitutes until such period of exclusivity expires. Bristol's exclusivity period in the United States expired in December 1997. However, additional Waxman-Hatch Act provisions may result in an additional 30 month delay in the approval of an ANDA if the sponsor (in this case Bristol) has listed a patent related to the product with the FDA, and institutes a lawsuit based on that patent prior to the time that a generic approval is received. Bristol currently has several patents related to paclitaxel listed. In March 2001, we and Abbott filed an ANDA for paclitaxel with the FDA. In June, 2001, Bristol filed a lawsuit against Abbott based upon those patents in the U.S. District Court for the District of New Jersey. Accordingly, Abbott's ANDA approval in the United States could be delayed. A statute comparable to the Waxman-Hatch Act exists in Europe, although the related period of exclusivity is ten years. We believe that Bristol's European exclusivity period ends in 2003.

Item 2.  Changes in Securities. None.

Item 3.  Defaults upon Senior Securities. None.

Item 4.  Submission of Matters to a Vote of Security Holders

At the Annual Meeting of Stockholders held on June 21, 2001 (the "Annual Meeting"), the following proposals were adopted by the margins indicated:

1.     The election of three Class II directors to hold office until the 2004 Annual Meeting.

|                   |       | Number of Shares
|------------------ | ----- | ----------------
|Nominee            | Class | For             
|Edward L. Erickson | II    | 22,354,019      
|Richard N. Perle   | II    | 22,354,019      
|Patricia A. Pilia  | II    | 22,237,735      



2.     Approval of amendments to our 1994 Long Term Performance Incentive Plan (the "1994 Plan") providing for an increase in the maximum number of shares of common stock issuable as awards under the 1994 Plan, providing for the automatic grant of non-qualified stock options to purchase common stock to the members of the Research and Development Committee of the Board of Directors upon their initial appointment to the Committee, providing for the automatic grant of options to purchase common stock to the members of the Research and Development Committee who continue service on that committee following an Annual Meeting, and providing for an increase in the maximum number of shares subject to one or more awards that can be granted to any 1994 Plan participant in one taxable year of the Company.



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|        | Number of Shares
|------- | ----------------
|For     | 17,584,352      
|Against | 5,514,383       
|Abstain | 89,581          



3.     To ratify the selection by the Board of Directors of Ernst & Young LLP as our independent auditors for the year ending December 31, 2001:

|        | Number of Shares
|------- | ----------------
|For     | 23,135,766      
|Against | 36,125          
|Abstain | 16,425          

Item 5.  Other Information. None.

Item 6.  Exhibits and Reports on Form 8-K

Current reports on Form 8-K: None.

Exhibits. None.



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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, NaPro has duly caused this report to be signed on its behalf.

|                | NaPro BioTherapeutics, Inc.                                                                                                    
|--------------- | -------------------------------------------------------------------------------------------------------------------------------
|August 13, 2001 | /s/ Leonard P. Shaykin 
Chairman of the Board of Directors
Chief Executive Officer
(Principal Executive Officer)               
|                |                                                                                                                                
|August 13, 2001 | /s/ Gordon Link
Gordon Link
Vice President and Chief Financial Officer
(Principal Financial Officer) 
President, NaPro Genomics
|                |                                                                                                                                
|August 13, 2001 | /s/ Robert L. Poley
Robert L. Poley
Controller
(Principal Accounting Officer)                                                  







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