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                                                                      Exhibit 99

RISK FACTORS

WE HAVE NOT BEEN PROFITABLE

     We have incurred net losses since 1994, including net losses of
approximately $8.8 million, $7.7 million, and $8.8 million during 2000, 1999,
and 1998, respectively. As of December 31, 2000, our accumulated deficit was
approximately $44.9 million. The Company expects net losses to continue at least
into mid 2003. A substantial portion of our revenues have been generated from
the sales of our pharmaceutical excipients. Our future profitability will depend
on several factors, including:

     -    the completion of the development of and successful commercialization
          of pharmaceutical products using our TIMERx controlled release
          technology;

     -    the addition of new product development collaborations;

     -    an increase in sales of our pharmaceutical excipient products; and

     -    the amount of our funding obligations under certain of our
          collaborations.

OUR CONTROLLED RELEASE PRODUCTS THAT ARE GENERIC VERSIONS OF BRANDED CONTROLLED
RELEASE PRODUCTS THAT ARE COVERED BY ONE OR MORE PATENTS MAY BE SUBJECT TO
LITIGATION

     We expect that our collaborators will file ANDAs for our controlled release
products that are generic versions of branded controlled release products that
are covered by one or more patents. It is likely that the owners of the patents
covering the brand name product or the sponsors of the NDA with respect to the
branded product will sue or undertake regulatory initiatives to preserve
marketing exclusivity, as Pfizer did with respect to Nifedipine XL. Any
significant delay in obtaining FDA approval to market our product candidates as
a result of litigation, as well as the expense of such litigation, whether or
not we or our collaborators are successful, could have a material adverse effect
on our business, financial condition and results of operations.

WE ARE DEPENDENT ON COLLABORATORS TO CONDUCT FULL-SCALE BIOEQUIVALENCE STUDIES
AND CLINICAL TRIALS, OBTAIN REGULATORY APPROVALS FOR, AND MANUFACTURE, MARKET,
AND SELL OUR TIMERx CONTROLLED RELEASE PRODUCTS

     We develop and commercialize our TIMERx controlled release products in
collaboration with pharmaceutical companies. We are parties to collaborative
agreements with third parties relating to certain of our principal products, for
instance, we are relying on Ivax to conduct full-scale bioequivalence studies
and clinical trials, obtain regulatory approvals for, and manufacture, market
and sell one of our TIMERx controlled release products and Endo to develop and
commercialize an extended release version of oxymorphone and Celltech to develop
D6428. We are also dependent on Mylan with respect to the marketing and sale of
the 30 mg strength of Pfizer's generic version of Procardia XL. Our
collaborators may not devote the resources necessary or may otherwise be unable


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to complete development and commercialization of these potential products. Our
existing collaborations are subject to termination without cause on short notice
under certain circumstances.

     If we cannot maintain our existing collaborations or establish new
collaborations, we would be required to terminate the development and
commercialization of products or undertake product development and
commercialization activities at our own expense. Moreover, we have limited
experience in conducting full-scale bioequivalence studies and clinical trials,
preparing and submitting regulatory applications and manufacturing, marketing
and selling our TIMERx controlled release products. We may not be successful in
performing these activities.

     Our existing collaborations and any future collaborations with third
parties may not be scientifically or commercially successful. Factors that may
affect the success of our collaborations include the following:

     -    our collaborators may be pursuing alternative technologies or
          developing alternative products, either on their own or in
          collaboration with others, that may be competitive with the product as
          to which they are collaborating with us, which could affect our
          collaborator's commitment to the collaboration with us;

     -    reductions in marketing or sales efforts or a discontinuation of
          marketing or sales of our products by our collaborators would reduce
          our revenues, which will be based on a percentage of net sales by the
          collaborator;

     -    our collaborators may terminate their collaborations with us, which
          could make it difficult for us to attract new collaborators or
          adversely affect our perception in the business and financial
          communities; and

     -    our collaborators may pursue higher priority programs or change the
          focus of their development programs, which could affect the
          collaborator's commitment to us.


WE FACE SIGNIFICANT COMPETITION, WHICH MAY RESULT IN OTHERS DISCOVERING,
DEVELOPING OR COMMERCIALIZING PRODUCTS BEFORE OR MORE SUCCESSFULLY THAN WE DO

     The pharmaceutical industry is highly competitive and is affected by new
technologies, governmental regulations, health care legislation, availability of
financing, litigation and other factors. Many of our competitors have longer
operating histories and greater financial, marketing, legal and other resources
than we do and than certain of our collaborators do.

     Our TIMERx business faces competition from numerous public and private
companies and their controlled release technologies, including ALZA's oral
osmotic pump (OROS(R)) technology, multiparticulate systems marketed by Elan and
Biovail, traditional matrix systems marketed by SkyePharma, plc and other
controlled release technologies marketed or under development by Andrx
Corporation, among others.

     In addition to developing controlled release versions of immediate release
products, we have concentrated a significant portion of our initial development
efforts on generic versions of branded controlled release products. The success
of generic versions of branded controlled release products based on our TIMERx
technology will depend, in large part, on the intensity of competition from the
branded controlled release product, other generic versions of the branded
controlled release product

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and other drugs and technologies that compete with the branded controlled
release product, as well as the timing of product approval. Competition from
other generic versions of branded controlled release products will also reduce
the royalty rate to be paid to us under several of our collaborations.

     The generic drug industry is characterized by frequent litigation between
generic drug companies and branded drug companies. Those companies with
significant financial resources will be better able to bring and defend any such
litigation.

     In our excipients business, we compete with a number of large manufacturers
and other distributors of excipient products, many of which have substantially
greater financial, marketing and other resources than the Company. Our principal
competitor in this market is FMC Corporation, which markets its own line of MCC
excipient products and J. Rettenmaier & Sohne GmbH, a European manufacturer and
marketer of MCC and sodium starch glycolate products.

WE REQUIRE ADDITIONAL FUNDING

     Our requirements for additional capital are substantial and will depend on
many factors, including:

     -    the timing and amount of payments received under existing and possible
          future collaborative agreements;

     -    the structure of any future collaborative or development agreements;

     -    the progress of our collaborative and independent development
          projects;

     -    revenues from our excipients business;

     -    the costs to us of clinical studies for our products; and

     -    the prosecution, defense and enforcement of patent claims and other
          intellectual property rights.

     The Company has no committed sources of capital except for the CIT credit
facility. The Company anticipates its existing capital resources, including the
amount available under the $10 million financing arrangement with CIT Credit
will not be sufficient to fund operations through 2001, and believes Penwest
will need to raise additional funds. Penwest is currently seeking additional
funds through transactions relating to its business lines and/or private
financings. The additional financing may not be available to Penwest on
acceptable terms, if it all.

     If adequate funds are not available, Penwest may able required to (i)
significantly curtail its product commercialization efforts, including
terminating existing collaborative agreements; (ii) obtain funds through
arrangements with collaborative partners or others on favorable terms that may
require Penwest to relinquish rights to certain of its technologies, product
candidates, or products which Penwest would otherwise pursue on its own or that
would significantly dilute the Company's stockholders; (iii) significantly scale
back or terminate operations and/or; (iv) seek relief under applicable
bankruptcy laws.


IF OUR CLINICAL TRIALS ARE NOT SUCCESSFUL OR TAKE LONGER TO COMPLETE THAN WE
EXPECT, WE MAY NOT BE ABLE TO DEVELOP AND COMMERCIALIZE CERTAIN OF OUR PRODUCTS

     In order to obtain regulatory approvals for the commercial sale of certain
of our potential products, including controlled release versions of immediate
release drugs such as the and new chemical entities, our collaborators will be
required to complete clinical trials in humans to demonstrate the

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safety and efficacy of the products. Our collaborators may not be able to obtain
authority from the FDA or other regulatory agencies to commence or complete
these clinical trails.

     The results from preclinical testing of a product that is under development
may not be predictive of results that will be obtained in human clinical trials.
In addition, the results of early human clinical trials may not be predictive of
results that will be obtained in larger scale advanced stage clinical trials.
Furthermore, we, one of our collaborators, or the FDA may suspend clinical
trails at any time if the subjects or patients participating in such trails are
being exposed to unacceptable health risks, or for other reasons.

     The rate of completion of clinical trials is dependent in part upon the
rate of enrollment of patients. Patient accrual is a function of many factors
including the size of the patient population, the proximity of patients to
clinical sites, the eligibility criteria for the study and the existence of
competitive clinical trials. Delays in planned patient enrollment may result in
increased costs and program delays.

     We and our collaborators may not be able to successfully complete any
clinical trial of a potential product within any specified time period. In some
cases, we may not be able to complete the trial at all. Moreover, clinical
trials may not show any potential product to be safe or efficacious. Thus, the
FDA and other regulatory authorities may not approve any of our potential
products for any indication.

     Our business, financial condition, or results of operations could be
materially adversely affected if:

     -    we or our collaborators are unable to complete a clinical trial of one
          of our potential products;

     -    the results of any clinical trial are unfavorable; or

     -    the time or cost of completing the trial exceeds our expectations.

WE MAY NOT OBTAIN REGULATORY APPROVAL; THE APPROVAL PROCESS CAN BE
TIME-CONSUMING AND EXPENSIVE

     The development, clinical testing, manufacture, marketing and sale of
pharmaceutical products are subject to extensive federal, state and local
regulation in the United States and other countries. This regulatory approval
process can be time-consuming and expensive.

     We may encounter delays or rejections during any stage of the regulatory
approval process based upon the failure of clinical data to demonstrate
compliance with, or upon the failure of the product to meet, the FDA's
requirements for safety, efficacy and quality; and those requirements may become
more stringent due to changes in regulatory agency policy or the adoption of new
regulations. After submission of a marketing application, in the form of an NDA
or an ANDA, the FDA may deny the application, may require additional testing or
data and/or may require postmarketing testing and surveillance to monitor the
safety or efficacy of a product. While the U.S. Food, Drug and Cosmetic Act, or
FDCA, provides for a 180-day review period, the FDA commonly takes one to two
years to grant final approval to a marketing application (NDA or ANDA). Further,
the terms of approval of any marketing application, including the labeling
content, may be more restrictive than we desire and could affect the
marketability of products incorporating our controlled release technology.


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     Some of the controlled release products that we are developing with our
collaborators are generic versions of branded controlled release products, which
require the filing of ANDAs. Certain ANDA procedures for generic versions of
controlled release products are the subject of petitions filed by brand name
drug manufacturers, which seek changes from the FDA in the approval process for
generic drugs. These requested changes include, among other things, tighter
standards for certain bioequivalence studies and disallowance of the use by a
generic drug manufacturer in its ANDA of proprietary data submitted by the
original manufacturer as part of an original new drug application. Any changes
in FDA regulations that make ANDA approvals more difficult may have a material
adverse effect on our business, financial condition and results of operations.

     Other products containing our TIMERx controlled release technology require
the filing of an NDA. A full NDA must include complete reports of preclinical,
clinical and other studies to prove adequately that the product is safe and
effective, which involves, among other things, full clinical testing, and as a
result requires the expenditure of substantial resources. In certain cases
involving controlled release versions of FDA-approved immediate release drugs,
we may be able to rely on existing publicly available safety and efficacy data
to support an NDA for controlled release products under Section 505(b)(2) of the
FDCA when such data exists for an approved immediate release version of the same
chemical entity. However, we can provide no assurance that the FDA will accept
such section 505(b)(2) NDA, or that we will be able to obtain publicly available
data that is useful. The section 505(b)(2) NDA process is a highly uncertain
avenue to approval because the FDA's policies on section 505(b)(2) NDAs have not
yet been fully developed. There can be no assurance that the FDA will approve an
application submitted under section 505(b)(2) in a timely manner or at all.

     The FDA also has the authority to revoke or suspend approvals of previously
approved products for cause, to debar companies and individuals from
participating in the drug-approval process, to request recalls of allegedly
violative products, to seize allegedly violative products, to obtain injunctions
to close manufacturing plants allegedly not operating in conformity with current
Good Manufacturing Practices (GMP) and to stop shipments of allegedly violative
products. The FDA may seek to impose pre-clearance requirements on products
currently being marketed without FDA approval, and there can be no assurance
that the Company or its third-party manufacturers or collaborators will be able
to obtain approval for such products within the time period specified by the
FDA.

EVEN IF WE OBTAIN MARKETING APPROVAL, OUR PRODUCTS WILL BE SUBJECT TO ONGOING
REGULATORY REVIEW

     If regulatory approval of a product is granted, such approval may be
subject to limitations on the indicated uses for which the product may be
marketed or contain requirements for costly post-marketing follow-up studies. As
to products for which marketing approval is obtained, the manufacturer of the
product and the manufacturing facilities will be subject to continual review and
periodic inspections by the FDA and other regulatory authorities. The subsequent
discovery of previously unknown problems with the product, manufacturer or
facility may result in restrictions on the product or manufacturer, including
withdrawal of the product from the market.

     If we fail to comply with applicable regulatory requirements, we may be
subject to fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and criminal prosecution.


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THE MARKET MAY NOT BE RECEPTIVE TO PRODUCTS INCORPORATING OUR TIMERx CONTROLLED
RELEASE TECHNOLOGY

     The commercial success of products incorporating our controlled release
technology that are approved for marketing by the FDA and other regulatory
authorities will depend upon their acceptance by the medical community and third
party payors as clinically useful, cost-effective and safe.

     Other factors that we believe could materially affect market acceptance of
these products include:

     -    the timing of the receipt of marketing approvals and the countries in
          which such approvals are obtained;

     -    the safety and efficacy of the product as compared to competitive
          products; and

     -    the cost-effectiveness of the product and the ability to receive third
          party reimbursement.

OUR SUCCESS DEPENDS ON OUR PROTECTING OUR PATENTS AND PATENTED RIGHTS

     Our success depends in significant part on our ability to develop
patentable products, to obtain patent protection for our products, both in the
United States and in other countries, and to enforce these patents. The patent
positions of pharmaceutical firms, including us, are generally uncertain and
involve complex legal and factual questions. As a result, patents may not issue
from any patent applications that we own or license. If patents do issue, the
claims allowed may not be sufficiently broad to protect our technology. In
addition, issued patents that we own or license may be challenged, invalidated
or circumvented. Our patents also may not afford us protection against
competitors with similar technology.

     Our success also depends on our not infringing patents issued to
competitors or others. We are aware of patents and patent applications belonging
to competitors and others that may require us to alter our products or
processes, pay licensing fees or cease certain activities.

     We may not be able to obtain a license to any technology owned by a third
party that we require to manufacture or market one or more products. Even if we
can obtain a license, the financial and other terms may be disadvantageous.

     Our success also depends on our maintaining the confidentiality of our
trade secrets and patented know-how. We seek to protect such information by
entering into confidentiality agreements with employees, consultants, licensees
and pharmaceutical companies. These agreements may be breached by such parties.
We may not be able to obtain an adequate, or perhaps, any remedy to such a
breach. In addition, our trade secrets may otherwise become known or be
independently developed by our competitors.

WE ARE INVOLVED IN AND MAY BECOME INVOLVED IN ADDITIONAL PATENT LITIGATION OR
OTHER INTELLECTUAL PROPERTY PROCEEDINGS RELATING TO OUR PRODUCTS OR PROCESSES
WHICH COULD RESULT IN LIABILITY FOR DAMAGE OR STOP OUR DEVELOPMENT AND
COMMERCIALIZATION EFFORTS

     The pharmaceutical industry has been characterized by significant
litigation and interference and other proceedings regarding patents, patent
applications and other intellectual property rights. The types of situations in
which we may become parties to such litigation or proceedings include:


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     -    We or our collaborators may initiate litigation or other proceedings
          against third parties to enforce our patent rights.

     -    We or our collaborators may initiate litigation or other proceedings
          against third parties to seek to invalidate the patents held by such
          third parties or to obtain a judgment that our products or processes
          do not infringe such third parties' patents.

     -    If our competitors file patent applications that claim technology also
          claimed by us, we or our collaborators may participate in interference
          or opposition proceedings to determine the priority of invention.

     -    If third parties initiate litigation claiming that our processes or
          products infringe their patent or other intellectual property rights,
          we and our collaborators will need to defend against such proceedings.

     An adverse outcome in any litigation or other proceeding could subject us
to significant liabilities to third parties and require us to cease using the
technology that is at issue or to license the technology from third parties. We
may not be able to obtain any required licenses on commercially acceptable terms
or at all.

     The cost of any patent litigation or other proceeding, even if resolved in
our favor, could be substantial. Although the legal costs of defending
litigation relating to a patent infringement claim (unless such claim relates to
TIMERx in which case such costs are our responsibility) are generally the
contractual responsibility of our collaborators, we could nonetheless incur
significant unreimbursed costs in participating and assisting in the litigation.
Some of our competitors may be able to sustain the cost of such litigation and
proceedings more effectively than we can because of their substantially greater
resources. Uncertainties resulting from the initiation and continuation of
patent litigation or other proceedings could have a material adverse effect on
our ability to complete in the marketplace. Patent litigation and other
proceedings may also absorb significant management time.

     In 1994, the Boots Company PLC filed in the European Patent Office, or the
EPO, an opposition to a patent granted by the EPO to us relating to our TIMERx
technology. In June 1996, the EPO dismissed Boots' opposition, leaving intact
all claims included in the patent. Boots has appealed this decision to the EPO
Board of Appeals, and a court date has been set in June 2001 for an appellate
hearing and a court date has been set in June 2001 for an appellate hearing. We
can provide no assurance that we will prevail in this matter.

WE HAVE ONLY LIMITED MANUFACTURING CAPABILITIES AND WILL BE DEPENDENT ON THIRD
PARTY MANUFACTURERS.

     We lack commercial scale facilities to manufacture our TIMERx material in
accordance with current GMP requirements prescribed by the FDA. We currently
rely on a third party pharmaceutical company for the bulk manufacture of our
TIMERx material for delivery to our collaborators.

     There are a limited number of manufacturers that operate under GMP
regulations capable of manufacturing our TIMERx material. We have not yet
qualified a second source of supply. In the event that our current manufacturer
is unable to manufacture the TIMERx material in the required quantities or at
all, we may be unable to obtain alternative contract manufacturing, or obtain
such manufacturing on commercially reasonable terms.


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     If our third party manufacturer fails to perform its obligations, we may be
adversely affected in a number of ways, including:

     -    our collaborators may not be able to meet commercial demands for our
          products on a timely basis;

     -    our collaborators may not be able to initiate or continue clinical
          trials of products that are under development; and

     -    our collaborators may be delayed in submitting applications for
          regulatory approvals of our products.

     We have limited experience in manufacturing TIMERx material on a commercial
scale and no facilities or equipment to do so. If we determine to develop our
own manufacturing capabilities, we will need to recruit qualified personnel and
build or lease the requisite facilities and equipment. We may not be able to
successfully develop our own manufacturing capabilities. Moreover, it may be
very costly and time consuming for us to develop such capabilities.

     The manufacture of any of our products (both TIMERx material and
excipients) is subject to regulation by the FDA and comparable agencies in
foreign countries. Any delay in complying or failure to comply with such
manufacturing requirements could materially adversely affect the marketing of
our products and our business, financial condition and results of operations.

WE ARE DEPENDENT UPON A SOLE SOURCE SUPPLIER FOR THE GUMS USED IN OUR TIMERx
MATERIAL AND UPON A LIMITED NUMBER OF SUPPLIERS FOR THE WOOD PULP USED IN THE
MANUFACTURE OF OUR EXCIPIENTS

     Our TIMERx drug delivery system is a hydrophilic matrix combining primarily
two polysaccharides, xanthan and locust bean gums, in the presence of dextrose.
We purchase these gums from a sole source supplier. Emcocel and Prosolv, our two
largest selling excipients, are manufactured from a specialty grade of wood
pulp. We have qualified alternate suppliers with respect to such materials, but
we can provide no assurance that interruptions in supplies will not occur in the
future or that we will not have to obtain substitute suppliers. Any interruption
in these supplies could have a material adverse effect on our ability to
manufacture bulk TIMERx for delivery to our collaborators or to manufacture
these excipients.

IF OUR COLLABORATORS FAIL TO OBTAIN AN ADEQUATE LEVEL OF REIMBURSEMENT BY THIRD
PARTY PAYORS FOR OUR CONTROLLED RELEASE PRODUCTS, THEY MAY NOT BE ABLE TO
SUCCESSFULLY COMMERCIALIZE CONTROLLED RELEASE PRODUCTS IN CERTAIN MARKETS

     The availability of reimbursement by governmental and other third party
payors affects the market for any pharmaceutical product. These third party
payors continually attempt to contain or reduce the costs of health care by
challenging the prices charged for medical products and services. In certain
foreign countries, particularly the countries of the European Union, the pricing
of prescription pharmaceuticals is subject to governmental control.

    The generic versions of controlled release products being developed by us
and our collaborators may be assigned an AB rating if the FDA considers the
product to be therapeutically equivalent to the branded controlled release drug.
Failure to obtain an AB rating from the FDA would indicate that for certain
purposes the drug would not be deemed to be therapeutically equivalent, would
not be fully

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substitutable for the branded controlled release drug and would not be relied
upon by Medicaid and Medicare formularies for reimbursement.

     In both the U.S. and certain foreign jurisdictions, there have been a
number of legislative and regulatory proposals to change the health care system.
Further proposals are likely. The potential for adoption of these proposals may
affect our ability to raise capital, obtain additional collaborative partners
and market our products.

     If we or our collaborators obtain marketing approvals for our products, we
expect to experience pricing pressure due to the trend toward managed health
care, the increasing influence of health maintenance organizations and
additional legislative proposals. We may not be able to sell our products
profitably if reimbursement is unavailable or limited in scope or amount.

WE WILL BE EXPOSED TO PRODUCT LIABILITY CLAIMS AND MAY NOT BE ABLE TO OBTAIN
ADEQUATE PRODUCT LIABILITY INSURANCE

     Our business exposes us to potential product liability risks which are
inherent in the testing, manufacturing, marketing and sale of pharmaceutical
products. Product liability claims might be made by consumers, health care
providers or pharmaceutical companies or others that sell our products. These
claims may be made even with respect to those products that are manufactured in
licensed and regulated facilities or that otherwise possess regulatory approval
for commercial sale.

     We are currently covered by primary product liability insurance in the
amount of $1 million per occurrence and $2 million annually in the aggregate on
a claims-made basis and by umbrella liability insurance in excess of $25 million
which can also be used for product liability insurance. This coverage may not be
adequate to cover any product liability claims. Product liability coverage is
expensive. In the future, we may not be able to maintain or obtain such product
liability insurance at a reasonable cost or in sufficient amounts to protect us
against losses due to liability claims. Any claims that are not covered by
product liability insurance could have a material adverse effect on our
business, financial condition and results of operations.

THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE

     The market price of our common stock, like the market prices for securities
of pharmaceutical, biopharmaceutical and biotechnology companies, have
historically been highly volatile. The market from time to time experiences
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. Factors such as fluctuations in our
operating results, future sales of our common stock, announcements of
technological innovations or new therapeutic products by us or our competitors,
announcements regarding collaborative agreements, clinical trial results,
government regulation, developments in patent or other proprietary rights,
public concern as to the safety of drugs developed by us or others, changes in
reimbursement policies, comments made by securities analysts and general market
conditions may have a significant effect on the market price of the common
stock.

CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND OF
WASHINGTON LAW, AS WELL AS THE RIGHTS AGREEMENT TO WHICH WE ARE A PARTY, MAKE A
TAKEOVER OF PENWEST MORE DIFFICULT

     Provisions of our Certificate of Incorporation, our Bylaws and Washington
law, as well as the Rights Agreement to which we are a party, may have the
effect of deterring hostile takeovers or delaying or preventing changes in
control or management of our company, including transactions in which our
stockholders might otherwise receive a premium for their shares over then
current market

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prices. In addition, these provisions may limit the ability of stockholders to
approve transactions that they may deem to be in their best interest.





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