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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

              [X] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended December 31, 2000

                        Commission file number 0-27914

                        RIBOZYME PHARMACEUTICALS, INC.
            (Exact Name of Registrant as Specified in Its Charter)


       DELAWARE                                          34-1697351
(State of incorporation)                    (I.R.S. Employer Identification No.)


                2950 WILDERNESS PLACE, BOULDER, COLORADO 80301
                   (Address of principal executive offices)

                                (303) 449-6500
             (Registrant's telephone number, including area code)

        SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
                                     NONE

        SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
                    COMMON STOCK, PAR VALUE $0.01 PER SHARE

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  [X]  No  [_]

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of March 23, 2001, was approximately $88,971,156.

As of March 23, 2001, the registrant had 16,294,655 shares of common stock, Par
value $.01 per share, outstanding.

                     DOCUMENTS INCORPORATED BY REFERENCE:

Registrant's definitive Proxy Statement which will be filed on or before April
30, 2001 with the Securities and Exchange Commission in connection with
Registrant's annual meeting of stockholders to be held on May 17, 2001 is
incorporated by reference into Part III of this Report.

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                               TABLE OF CONTENTS

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                                                                                                                       Page
                                                                                                                      -------
                                                 PART I
<S>          <C>                                                                                                      <C>
Item 1       Business                                                                                                       3

Item 2.      Properties                                                                                                    12

Item 3.      Legal Proceedings                                                                                             12

Item 4.      Submission of Matters to a Vote of Security Holders                                                           12

                                                 PART II

Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters                                         13

Item 6.      Selected Financial Data                                                                                       14

Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations                         15

Item 7A.     Quantitative and Qualitative Disclosures About Market Risk                                                    19

Item 8.      Financial Statements and Supplementary Data                                                                   20

Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                          20

                                                 PART III

Item 10.     Directors and Executive Officers of Registrant                                                                21

Item 11.     Executive Compensation                                                                                        23

Item 12      Security Ownership of Certain Beneficial Owners and Management. Changes in Control                            23

Item 13.     Certain Relationships and Related Transactions                                                                23

                                                 PART IV

Item 14.     Exhibits, Financial Statements and Reports on Form 8-K                                                        24
</TABLE>

ANGIOZYME(TM), HEPTAZYME(TM), HERZYME(TM) and HepBzyme(TM) are trademarks of
Ribozyme Pharmaceuticals, Inc.

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                                   BUSINESS

An overview of our company

     We are developing a new class of drugs based on "ribozymes." Ribozymes are
engineered molecules that have the ability to cleave RNA, including mRNA and
viral RNA, thereby selectively inhibit protein production and viral replication.
Because many human diseases result from abnormal protein production or viral
replication, ribozymes are expected to be useful in developing pharmaceutical
candidates for a broad range of human diseases.

     We are currently in clinical development and preclinical testing for the
following four product candidates:

     .     ANGIOZYME, for the treatment of solid tumor cancers, which is being
           developed in collaboration with Chiron Corporation. We initiated
           Phase II clinical trials for ANGIOZYME in the first quarter of 2001.

     .     HEPTAZYME, for the treatment of chronic Hepatitis C being developed
           solely by us. We expect to initiate a Phase II clinical trial for
           HEPTAZYME in the third quarter of 2001.

     .     HERZYME, for the treatment of breast and other cancers, which is
           being developed trials in collaboration with Elan Corporation plc and
           its affiliates. We recently filed an IND for HERZYME in Canada and we
           expect to begin Phase I clinical trials in 2001.

     .     HepBzyme, for the treatment of Hepatitis B, which is in preclinical
           testing. We expect to file an IND for HepBzyme in 2001.

     We have also used ribozymes for target discovery and validation, the
process by which the life science industry identifies genes that cause or
contribute to human disease. In 1998, we decided to focus on the therapeutic
potential of ribozymes and transferred our target discovery and validation
technology to a newly-formed German company, Atugen, for a significant equity
interest in Atugen. Currently, we own a 31.6% interest in Atugen.


Genetic function and human disease

     The abnormal production of proteins directly causes many human diseases.
The abnormality may be due to a defective gene or to the over- or under-
production of a protein by a "normal" gene. The abnormal production of proteins
may have direct effects on cells within the body or may initiate a series of
events involving other proteins within the body, thereby producing disease. The
gene functions of infectious agents, such as viruses, allow replication and
growth of infectious agents in the human body.

     Production of proteins from genes, called "protein expression," generally
involves two steps. First, the information from the DNA sequence of the gene is
"transcribed" to mRNA. The second step involves "translation" of the mRNA and
its information into a protein. The process by which genetic information is
"expressed" in the form of a protein is highly selective; production of a
particular protein generally requires its own specific DNA sequence which leads
to a corresponding  mRNA sequence. Blocking a gene's function, and hence the
production of its associated proteins, is an increasingly vital tool in
diagnosing and treating human disease.


Our ribozyme technology

     Our approach to drug discovery and development begins by either identifying
a gene in humans causing or contributing to disease or identifying an essential
gene in a disease-causing infectious agent. We analyze the nucleotide sequence
of the mRNA corresponding to the target gene and create a complementary ribozyme
nucleotide sequence.

     A ribozyme is a sequence of nucleotides that has binding sequences along
with a catalytic core capable of cleaving a specific RNA molecule, including
mRNA and viral RNA. Ribozymes act as "molecular scissors" by cutting RNA
molecules into two ineffective strands, thereby preventing protein production.
Each ribozyme destroys only a specifically targeted RNA sequence, thereby
minimizing the risk of unwanted side effects. Since ribozymes can be applied to
any RNA in principle, we have the potential to develop ribozymes as an entirely
new class of therapeutic agents having broad applicability.


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     In addition, ribozymes can be used to identify gene function and to
validate the disease contributing function of a specific gene. In this way,
ribozymes can be used to assist in the identification of new drug candidates.
Our ribozyme technology is an important bridge between the growing knowledge
regarding gene function and its contribution to the treatment or prevention of
human diseases.

     We initially test the effectiveness of the ribozyme in cell culture or in
animal models. If the ribozyme reduces or stops production of the protein
associated with the disease, or slows the associated growth or spread of the
disease, not only has the disease contributing function of the gene been
validated, but also a drug candidate has been identified.

     Once we identify a target gene and related ribozyme, we optimize the
ribozyme's effectiveness by varying the length of the portion of the ribozyme
which binds to the RNA to maximize the ribozyme's selectivity and by modifying
the chemical structure to increase the ribozyme's stability in the human body.
To date, we have achieved a number of significant milestones important to the
development of ribozymes and related technical issues, including the following:

     Design. We have developed a proprietary computer program to design
ribozymes against sites in a target RNA sequence. This program allows us to
accelerate the identification of potential ribozyme product candidates and to
design multiple back-up candidates.

     Stability. To be useful as a treatment, a ribozyme must remain stable in
human serum and cells long enough to destroy the targeted RNA and ideally long
enough for each ribozyme molecule to destroy several RNA molecules. Unmodified
ribozymes are stable and fully active in human serum for only a few seconds. We
have successfully produced chemically-modified ribozymes that are stable and
fully active in human serum for more than 10 days. We believe this level of
stability will be sufficient for ribozymes to be effective drugs.

     Selectivity. Based on third-party studies and our internal work, we believe
that a ribozyme with a binding region of approximately 15 nucleotides is
optimal. A binding region of this length is expected to match, on a statistical
basis, only one specific RNA sequence in the coding region of entire human
genome. Since the ribozyme should interact only with the target RNA, it should
not affect other genes' functions and, therefore, should not have significant
side effects when used as a drug. The high degree of selectivity of ribozymes
has been demonstrated both by us and by third parties, including our
collaborators.

     Delivery. Successful development of any drug requires that the drug be
delivered to the desired site in the body. We are exploring a number of delivery
possibilities, including local and systemic delivery of chemically synthesized
ribozymes. For example, we have demonstrated systemic delivery of chemically
synthesized ribozymes without any delivery vehicle using either intravenous or
subcutaneous delivery in several animal models and in humans. We have also shown
that ribozymes can be delivered via a single subcutaneous injection by patients
at home with extended presence of the ribozymes in the patient's blood. This
method provides increased convenience to patients and facilitates compliance
with prescribed protocols.

     Safety. We have completed single and multiple dose animal safety studies
with several ribozymes that have confirmed the ribozymes' lack of toxicity. For
example, both ANGIOZYME and HEPTAZYME have shown a lack of toxicity in rodents
and monkeys. As a result, the FDA allowed initial human clinical trials to be
carried out in healthy volunteers. A Phase Ia trial in healthy volunteers and a
Phase I/II trial in cancer patients have now been completed and ANGIOZYME and
HEPTAZYME have each shown an excellent safety and tolerability profile.

     Effectiveness. We have demonstrated through internal research and in
conjunction with our collaborators that our ribozymes reduce the amount of
target mRNA and the level of corresponding protein produced as well as inhibit
the development of disease. Studies showing the effectiveness of ribozymes have
been conducted in multiple animal models for cancer in both models of solid
tumor growth and metastasis, and in cell cultures and animals for viral
replication.

     Manufacturing. To meet our needs for preclinical studies, clinical trials
and the eventual commercialization of ribozymes, we must have the ability to
manufacture a sufficient amount of ribozymes. We and our collaborators have
developed proprietary technology allowing us to synthesize up to 2000 stabilized
ribozymes in hundreds of microgram quantities per month. These quantities are
sufficient to permit us to perform direct cell-based screening of multiple
potential target sites in short periods of time. We have also developed the
capability to manufacture kilogram quantities under the FDA's current good
manufacturing practices. In addition, in January 2000 we entered into an
agreement with Avecia Limited providing for the transfer of our proprietary
manufacturing processes and intellectual property to enable Avecia to
manufacture ribozyme products for

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us. We expect to be able to produce the drugs currently under development in
sufficient quantities at commercially feasible cost, and of the quality required
by the FDA, for anticipated clinical trials for our current product candidates.


The potential advantages of ribozymes in treating a disease

     We believe that ribozymes offer the following significant advantages over
traditional approaches to treating diseases:

     Broad Applicability. Once a gene has been identified, a ribozyme can be
designed to target and destroy the associated mRNA to inhibit the related gene
function. Therefore, all diseases for which a gene can be identified as a cause
or an essential contributing factor of diseases are potentially treatable with a
ribozyme drug. In addition, identifying the essential genes of viruses and other
infectious agents that cause human disease creates the potential to develop
ribozyme products to inhibit these genes from functioning and, consequently,
prevent the targeted infectious agent from surviving or reproducing.

     High Selectivity. The mechanism by which traditional drugs act on a target
gene or protein often is not well understood. Consequently, the side effects of
such drugs are difficult to predict and characterize. Side effects may be
reduced or avoided by using ribozymes designed to attach to and cut only a
specific targeted mRNA, a significant advantage over traditional drug therapies.
We have observed the selectivity of ribozymes in both animal studies and human
clinical trials. Because of this selectivity, only the function of the targeted
genetic sequence is affected; other molecules and gene functions are not
altered.

     Destruction of Target. Instead of temporarily preventing gene function like
traditional drugs, ribozymes destroy the target mRNA and stop the associated
protein production. By contrast, most drugs do not destroy their target. This
inherent feature of ribozymes may offer a significant advantage in the treatment
of diseases caused by infectious agents such as viruses. For example, cleavage
of target viral mRNA by ribozymes will inhibit the virus's ability to propagate,
which may result in significant reduction in viral load in the patient.


Our business strategy

     Our strategy is to use our unique and patented ribozyme technology to
identify and develop a new class of drugs to treat human diseases for which
there are large numbers of patients and insufficient treatments. The primary
elements of our strategy are to:

     Develop Ribozyme Drugs by Pursuing Multiple Product Candidates Across a
Number of Diseases. Our strategy is to take advantage of the broad applicability
of ribozymes by expanding the number of diseases upon which we are focused. Our
first four product candidates target large and diverse markets including solid
tumor cancers, metastatic cancers and infectious diseases. We have research
underway on ribozymes which address multiple other diseases with large and unmet
markets. Our near-term goal is to augment our existing pipeline by introducing
one new product candidate into preclinical development before the end of 2001.

     Maximize Value of New Product Candidates through Expanded Internal
Development. We have entered into and intend to continue to collaborate with
major pharmaceutical companies to develop and commercialize many of our leading
product candidates. Prior to entering into future collaboration agreements, we
intend to demonstrate our new product candidate's commercial potential through
preclinical testing or clinical trials. We believe that by extending the period
during which we maintain complete control over new product candidates, we will
be able to negotiate more favorable terms in future collaboration agreements. We
may also pursue commercialization of certain new product candidates
independently.

     Focus on Human Therapeutics and License Other Applications of Our
Technology. In 1998, we decided to concentrate our research and development
efforts on the therapeutic potential of ribozymes and transferred our target
discovery and validation technology to Atugen. We expect Atugen to continue to
build the target discovery and validation business by actively pursuing new
collaborations with major pharmaceutical and biotechnology companies. We will
look for further opportunities to license our technology for certain non-
therapeutic applications, including diagnostic and agricultural applications, to
third parties.


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     Maintain and Expand Our Patent Portfolio and Proprietary Technology. We
currently own, or have exclusive licenses to over 140 issued or allowed patents
worldwide and have more than 100 patent applications pending worldwide. In 1999,
we acquired certain ribozyme intellectual property from Innovir Laboratories,
Inc. to further strengthen our intellectual property portfolio. We dedicate
substantial resources to the discovery of new inventions to maximize the value
of our proprietary technology. We aggressively pursue patent protection to
maintain worldwide rights to control the development and sale of ribozymes.


Our product programs

     The development process for our products starts with research and
preclinical development. Research includes identification of a target protein,
synthesis of an appropriate ribozyme to block expression of the target protein,
and testing the activity of the ribozyme in a specific cell population.
Preclinical testing includes pharmacology and toxicology testing in cell culture
and animal models, product formulation, dosage studies and manufacturing scale-
up for submission of the necessary data to comply with regulatory requirements
of the FDA and similar agencies in other countries prior to commencement of
human trials.


ANGIOZYME

     We are developing ANGIOZYME primarily as a treatment for advanced solid
tumors such as colorectal, renal cell, lung, breast and melanoma. These cancers
account for over 550,000 new cancer cases and nearly 300,000 deaths per year in
the United States alone. In addition, ANGIOZYME may be used in products for the
treatment of other diseases in which angiogenesis is a contributor such as
macular degeneration and diabetic retinopathy.

     For a cancerous tumor to grow, the body must generate new blood vessels in
the tumor to supply the blood necessary for tumor growth, a process known as
angiogenesis. In many cases, the Vascular Endothelial Growth Factor (VEGF)
molecule and its receptor are essential to angiogenesis. ANGIOZYME was developed
to inhibit the production of the high affinity VEGF receptor, thereby slowing or
stopping angiogenesis and related tumor growth and metastasis. We and
independent third parties have conducted animal studies which have shown
dramatic reduction in tumor growth and metastasis using ribozymes alone and in
conjunction with existing cytotoxic cancer therapies.

     In January 1999, we completed a Phase Ia clinical trial in healthy
volunteers. This trial, conducted on 14 healthy volunteers, demonstrated safety
and tolerability and showed no drug related side effects. In 1999, we also
completed a Phase Ib clinical trial to test for safety and tolerability in 16
cancer patients with a broad spectrum of solid tumors and metastasis. No
clinically significant drug related side effects were seen, and the presence of
ANGIOZYME in the blood of patients in excess of amounts needed to show efficacy
in animals was observed up to 24 hours when ANGIOZYME was administered
subcutaneously.

     We initiated a Phase I/II multi-dose clinical trial in cancer patients in
November 1999. This trial examined the effects of ANGIOZYME when given daily to
cancer patients. ANGIOZYME was given via a subcutaneous injection once a day, at
home, by the patients themselves.   A total of 31 patients received ANGIOZYME.
The drug was well tolerated with minimal side-effects consisting mostly of
injection site reactions.  The patients were on ANGIOZYME for a median of 90
days with a range of 2 days to 298 days and, as of March 2000, one patient was
still receiving ANGIOZYME.  Based on the results of this trial, we have
initiated a Phase II trial in patients with metastatic breast cancer and we are
planning to initiate additional Phase II clinical trials in patients with
metastatic colorectal cancer, metastatic non-small cell lung cancer, metastatic
melanoma and metastatic renal cell cancer.  The goal of these trials is to
detect clinical activity in these patients with advanced solid tumors.

     We are developing ANGIOZYME in collaboration with Chiron. While we share
development costs and profits equally with Chiron, we have the final decision-
making authority on all development decisions and activities and we have
retained the right to manufacture ANGIOZYME. If one party discontinues funding
its share of the costs of clinical development, that party would not share
equally in the profits from product sales but would receive a royalty based on
net sales of that product. However, the non-participating party may regain its
interest in the profits of ANGIOZYME by repaying the other party one-half of the
development costs incurred solely by the other party, plus a predetermined risk
premium, at either the commencement of Phase III testing or the filing of a New
Drug Application or Product License Application. Chiron has indicated its desire
not to participate in the Phase II clinical trials for renal cell and melanoma.


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HEPTAZYME

     Our anti-HCV ribozyme, HEPTAZYME, is being developed to treat Hepatitis C,
a viral disease of the liver. There are over four million chronically infected
persons in the United States and over 170 million worldwide. Hepatitis C infects
approximately 50,000 people and has over 10,000 deaths associated with it each
year in the United States. It is the most common blood borne infection in the
United States and has been identified as a "silent epidemic" and "a daunting
challenge to public health" by the United States Congress.

     Current therapies for Hepatitis C are effective in less than 50% of
patients and have serious side effects. Our research and preclinical testing
have indicated that the anti-HCV ribozyme selectively cuts Hepatitis C RNA in a
manner that significantly inhibits viral replication in cell culture. It is also
expected to be effective against all known Hepatitis C sub-types, which now
number over 90. Preclinical data of our anti-HCV ribozyme was published in the
February 2000 issue of Hepatology.

     Two clinical trials with HEPTAZYME have been completed. In the first
clinical trial, seventeen healthy volunteers received HEPTAZYME as a single
dose. HEPTAZYME was well tolerated and no serious adverse events were reported.
In the second clinical trial, 24 patients with compensated chronic HCV infection
were administered HEPTAZYME at escalating doses for a total of 28 days. The drug
was well tolerated with no serious adverse events. Based on the results of these
two trials, we are planning to initiate a Phase II study to evaluate the effects
of longer-term, higher doses of HEPTAZYME on the levels of HCV in patients with
compensated chronic HCV infections.

     In March 1999, we entered into a collaboration with Eli Lilly pursuant to
which they were granted the exclusive worldwide right to develop and
commercialize HEPTAZYME and any other ribozyme drug for the treatment of
Hepatitis C in return for payment of all research, development and
commercialization costs of HEPTAZYME. In 1999, Eli Lilly paid us $9.2 million
pursuant to this agreement which included a $7.5 million equity investment and
$1.7 million of research funding.

     In September 2000, we entered into an agreement with Eli Lilly to
repurchase all rights to HEPTAZYME. Eli Lilly had directed the clinical trials
for HEPTAZYME to date under the licensing agreement. According to the repurchase
agreement, we reacquired the global rights to HEPTAZYME and will direct all
subsequent clinical trials. We agreed to pay royalties to Eli Lilly on future
net sales of HEPTAZYME, as well as milestone payments if we complete an
agreement for the development or marketing rights to HEPTAZYME with a third
party or if we file a New Drug Application for HEPTAZYME, whichever comes first.
Pursuant to the repurchase agreement, Eli Lilly converted the outstanding five
shares of our Series L Convertible Preferred Stock into 636,640 shares of our
common stock on December 28, 2000 (the Termination Date). The conversion price
was based on a preferred share value of $1.5 million for each of the five shares
outstanding. The price per share of the common stock was based on the average
closing price of our common stock for the 30 days prior to the termination date.
In addition, we issued to Eli Lilly $3,000,000 of our common stock, which
resulted in 252,632 shares, as payment for Eli Lilly's efforts in generating and
providing data. The price per share was based on the closing market price of our
common stock on the Termination Date. In return, Eli Lilly paid us a termination
fee of approximately $2.8 million.


HERZYME

     We are developing HERZYME, a potential product to treat breast and other
cancers. More than 170,000 new breast cancer patients are diagnosed each year in
the United States. Approximately 30% of these patients overexpress the Her-2
gene indicating that regulation of the Her-2 gene could have a beneficial impact
on the disease. HERZYME specifically targets and downregulates Her-2, and is
expected to have a benign side effect profile similar to other ribozymes in
clinical development.    An IND was filed with the Therapeutics Products
Programme (TPP) in Canada on February 28, 2001.  We are currently planning a
Phase I clinical trial to evaluate HERZYME in patients with metastatic cancer
whose tumors overexpress Her-2

     In January 2000, we completed formation of a joint venture with Elan
whereby we have licensed HERZYME and Elan licensed its MEDIPAD(R) drug delivery
technology to the joint venture, Medizyme Pharmaceuticals. The MEDIPAD(R) system
is a disposable continuous subcutaneous drug delivery system which allows a
patient to administer the drug at home over two days with a single MEDIPAD(R)
device, thus avoiding hospitalization, intravenous delivery and doctor visits.
Medizyme paid a license fee of $15.0 million to Elan for the use of its
MEDIPAD(R) drug delivery technology.

     We contributed $12.0 million in initial funding to Medizyme in exchange for
80.1% of Medizyme's capital stock. Our capital contribution was funded by our
sale to Elan of 12,015 shares of our Series A preferred stock for $12.0 million.
The Series A preferred stock has a dividend rate of 6.0%. At the end of the
development period, expected to be mid-2002, Elan has the right to exchange our
Series A preferred stock for 30.1% of the capital stock of Medizyme owned by us
or convert it prior to January 2006 into up to approximately 1.2 million shares
of our common stock.

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     Elan purchased 641,026 shares of our common stock for $5.0 million and
committed to purchase an additional $5.0 million of common stock in May 2001 at
a per share price representing a premium of up to 30% of the price based on the
average closing price for the 45 trading days preceding the purchase, but not
less than such 45 trading day average. In addition, Elan received warrants to
purchase 500,000 shares of our common stock at an average exercise price of
$18.00.

     We have estimated that Medizyme will require $15.0 million in funding
through the development period to cover future operating and development costs.
Elan has provided us with a $12.0 million credit facility on a draw-down basis
for us to use, if desired, to fund our portion of Medizyme's operating costs
over a 30 month period. Elan may convert this debt into shares of our Series B
Convertible Preferred Stock. The Series B Convertible Preferred Stock has a
dividend rate of 12.0% and may be converted at any time into our common stock at
a 50% premium to the average price of our common stock for the 60 trading days
prior to the time of the applicable draw down on the credit facility. As of
December 31, 2000 we have provided Medizyme $3.4 million in funding, of which
$2.7 million was through the credit facility.

HepBzyme

     We are also developing HepBzyme, a potential product to treat chronic
Hepatitis B viral infection.  According to the World Health Organization, there
are more than 350 million people world wide who have chronic HBV infection.  The
natural progression of chronic HBV infection over a 10-20 year period leads to
cirrhosis in 20-50% of patients and progression of HBV infection to
hepatocellular carcinoma has been well documented.  Current therapies for
chronic HBV infections are effective in less than 50% of patients and many have
side effects.  Furthermore, treatment with approved antivirals leads to the
development of resistance in up to 30% of the patients after 1 year.  We have
developed a ribozyme, HepBzyme, targeting several transcripts of the HBV virus.
This ribozyme has shown potent antiviral effects both in cell culture and in a
transgenic model of HBV infection.  In December of 2000 RPI announced the
selection of HepBzyme as a product development candidate and initiated
preclinical studies.  We anticipate the filing of an IND and the initiation of a
Phase I trial in 2001.


Atugen

     We have also used ribozymes and other oligonucleotides for target discovery
and validation, the process by which genes that cause or contribute to human
diseases are identified. These technologies use ribozymes and other
oligonucleotides to block the function of genetic sequences. The effect of the
ribozyme or other oligonucleotides in cell cultures or animal models is then
analyzed to determine whether the protein associated with the disease or the
disease itself is reduced or eliminated. Alternatively, a genetic sequence, the
function of which is unknown, can be analyzed using ribozyme or other
oligonucleotide inhibition in a collection of cell culture assays or animal
models that represent a broad range of biological functions.

     In 1998, we decided to focus on the therapeutic potential of ribozymes and
transferred our target discovery and validation technologies to Atugen in
exchange for a significant equity interest in Atugen. Financing for Atugen
consisted of a $2.0 million cash contribution by us and a venture capital
investment of $7.0 million. In addition, Atugen received commitments from the
German government for grants and loans for up to $10.0 million.

     We will benefit from Atugen's activities in the future in several ways:

     .     we currently own 31.6% of Atugen's outstanding voting stock;
     .     we will be paid by Atugen for ribozymes and other material
           manufactured by us pursuant to our manufacturing rights;
     .     we will be paid by Atugen for a portion of our costs of prosecuting
           patents applicable to Atugen's business;
     .     we will be paid by Atugen for certain administrative and other
           services rendered by us to Atugen; and
     .     we retain the right to use the target discovery and validation
           technology in non-high throughput applications for our own use and in
           connection with limited research and development collaborations with
           third parties.

     Atugen's primary goal is to accelerate discovery and validation of human
health therapeutic targets. It will provide a variety of technologies and
services to utilize information emerging from human genome sequencing efforts to
determine which genes are key factors causing human disease. The significant
technology base transferred by us to Atugen combined with the substantial
initial capitalization should allow Atugen to improve the speed and certainty of
identifying and validating new therapeutic targets both for corporate partners
and for internal use.

     We have the right to name two designees to Atugen's Board of Directors,
including the Chairman of the Board, as long as


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we own 30% of Atugen's outstanding stock. Nonetheless, most corporate actions
taken by Atugen require a 75% vote or consent of the holders of Atugen's
outstanding stock. Atugen currently has approximately 50 employees.

     As part of the formation, Atugen received exclusive royalty-free licenses
to our extensive patents and technologies for target discovery and validation.
We received a one-time $2.0 million license payment in 1999 for a portion of the
licensed technology. The initial technology base includes our entire gene
function identification and target validation technologies for both chemically
synthesized and expressed nucleic acids, including target site selection, cell
culture assays, RNA and other assays, optimized delivery vehicles and animal
pharmacology.


Our competition

     We are engaged in the rapidly changing business of developing treatments
for human disease through gene modulation. Competition among entities attempting
to develop gene modulation products for disease treatment is intense and is
expected to increase. We face direct competition from other companies engaged in
the research, development and commercialization of ribozyme-based technology as
well as competition from companies attempting other methods of gene expression
control. In addition, we compete with large pharmaceutical companies and
established biotechnology firms, many of whom are developing new products for
the treatment of the same diseases targeted by us. In some cases, those
companies have already commenced clinical trials for their products. Many of
these companies have significantly greater financial resources and expertise in
research and development, manufacturing, preclinical studies and clinical
trials, obtaining regulatory approvals and marketing than we do. Our
collaborators and licensees may be conducting research and development programs
using non-ribozyme technologies directed at the same diseases that we are
targeting. Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical and
biotechnology companies. In addition, our competitors may complete clinical
trials, obtain required regulatory approvals and commence commercial sales of
their products before us, thus achieving a significant competitive advantage.

     Academic institutions, governmental agencies and other public and private
research organizations also conduct research, seek patent protection and
establish collaborative arrangements for products and clinical development and
marketing. These companies and institutions compete with us in recruiting and
retaining highly qualified scientific and management personnel.


Our patents and proprietary technology

     Protecting patents and other proprietary rights is crucial to developing
our business. In addition to patents, we rely upon trade secrets, know-how and
continuing technological innovations in the design, synthesis, and purification
of ribozymes and in nucleic acid chemistry. We also rely on licensing
opportunities to develop and maintain our competitive position. It is our policy
to file patent applications when appropriate to protect technology, inventions,
and improvements that are considered important in the development of our
business.

     At the core of our technology are inventions and patents of the University
of Colorado developed by Dr. Thomas R. Cech and various of his associates.
Pursuant to the University's policies, these inventions and the related patents
became the property of the University. The Cech technology was assigned to the
University's affiliate, University Research Corporation, or URC, which in turn
assigned the rights to license parts of the Cech technology to Competitive
Technologies, Inc. United States Biochemical Corporation, or USB, licensed the
Cech technology pursuant to two sublicenses. We have entered into a license with
URC and sublicenses with USB and Competitive Technologies pursuant to which we
have obtained the exclusive (except for non-commercial academic research)
worldwide right to the Cech technology to, among other things, make, use and
sell ribozymes and ribozyme products covered by the licensed patents. The URC
license and USB sublicense are fully paid. The Competitive Technologies license
provides for the payment of a royalty on sales of ribozyme products covered by
the licensed patents. We may grant sublicenses to the licensed technology
subject to the payment to Competitive Technologies of a share of royalty income
from such sublicenses or a royalty on sales from sublicensed products, methods
or services, depending on the particular licensed patents involved. In addition,
we must pay Competitive Technologies a share of any option fee, license fee,
prepaid royalty or other "front-end" fee other than equity or research and
development funding paid in connection with such sublicense.

     In August 1999, we acquired all of the non-external guide sequence
ribozyme-based intellectual property assets of Innovir Laboratories, a
subsidiary of NEXELL Therapeutics, Inc. The acquisition included 28 patents and
patent applications plus two trademarks. The intellectual property included
ribozyme motifs, uses of oligonucleotides for therapeutics, target validation
and diagnostics, chemical modifications of oligonucleotides and oligonucleotide
delivery, detection, manufacturing and purification.


                                       9
<PAGE>

We acquired these assets from Innovir in exchange for our common stock, warrants
for our common stock and a small amount of cash.

     As part of our overall intellectual property strategy, we selectively enter
into agreements with academic institutions either to license pre-existing
technology or to support the development of new technologies and gain the
commercial rights to such new technologies.

     As a result of these licenses and sublicenses, and our own internal
research, we currently have certain rights to more than 140 issued or allowed
patents, and more than 100 patent applications under consideration worldwide.
This includes exclusive worldwide rights to 106 patents issued in the United
States, 4 patents issued in Europe, 1 patent issued in Japan, 2 patents issued
in Korea, 5 patents issued in Mexico and 15 patents issued in Australia. In
addition, Notices of Allowance have been received for at least 7 patents from
the United States Patent and Trademark Office. Seven of the 106 United States
issued patents, 1 European patent and 1 Japanese patent cover enzymatic RNA and
the use of an enzymatic RNA to cleave a single stranded RNA (collectively the
"Cech Patents"). We believe that the Cech Patents grant us the right to exclude
others from practicing ribozyme technology as it is currently known to us in the
United States, Europe and Japan irrespective of the application, the method of
production, the method of purification, or the ribozyme motif used. Unless
extended, the Cech Patents will expire in December 2008 in the United States and
December 2007 in Europe and in Japan. The additional issued patents cover both
ribozyme technology (e.g., ribozyme design, synthesis, chemical modifications,
delivery, ribozyme motifs, vector production, target site selection) as well as
application to specific therapeutic targets. None of our other material patents
expire before 2013.

     In addition, we have filed or hold exclusive licenses to more than 100
pending United States and related foreign applications. Our patent portfolio
includes approximately 40 United States applications for various areas of
interest in human therapeutics and diagnostics and agricultural uses. The
portfolio also includes approximately 80 United States applications related to
the chemistry, design, optimization, manufacture and delivery of ribozyme
products. These patents collectively extend our ribozyme patent coverage well
beyond the life of the Cech Patents.

     We have filed opposition documents against two patents granted to a
competitor in Europe. In one of the opposition proceedings in Europe, we were
successful in invalidating various claims relating to the hammerhead ribozyme
composition. The European patent office found that the claims of the granted
patent drawn to the so-called Non-GUX (where X is U, A, C or G) ribozymes were
not patentable. We do not believe this European-granted patent covers those
ribozymes that we have in clinical trials. Opposition proceedings against two of
our European and Japanese patents were initiated by our competitors. The
Japanese Opposition Division has rejected competitor oppositions and has issued
a notification that it will maintain our Japanese patent without change. The
opposition proceedings against our European patent resulted in maintenance of
the fundamental "Cech" patent. Our competitors had initiated opposition
proceedings against this patent in 1996. The patent expires in 2006. In July
2000 the European Opposition Division found no grounds for revoking the patent,
but decided to clarify the scope of the claims to cover self-splicing
intervening sequence derived ribozymes. The decision should have no impact on
RPI's ability to commercialize ribozymes, including its ongoing clinical
programs, and will not affect its relationship with partner companies now
engaged in ribozyme co-development. RPI's ability to enforce its patent remains
in effect. We may not have identified all United States and foreign patents that
pose a risk of infringement. In addition, we anticipate interference proceedings
against some of our patents and patent applications in the United States.


Government regulation of our drug development activities

     The development, manufacture and potential sale of therapeutics is subject
to extensive regulation by United States and foreign governmental authorities.
In particular, pharmaceutical products undergo rigorous preclinical and clinical
testing and other approval requirements by the FDA in the United States under
the federal Food, Drug and Cosmetic Act and the Public Health Service Act and by
comparable agencies in most foreign countries.

     Before testing agents with potential therapeutic value in healthy human
test subjects or patients may begin, stringent government requirements for
preclinical data must be satisfied. The data, obtained from studies in several
animal species, as well as from laboratory studies, are submitted in an IND
application or its equivalent in countries outside the United States where
clinical studies are to be conducted. Preclinical data must provide an adequate
basis for evaluating both the safety and the scientific rationale for the
initiation of clinical trials.

     Clinical trials are typically conducted in three sequential phases,
although these phases may overlap. In Phase I, which frequently begins with
initial introduction of the compound into healthy human subjects prior to
introduction into patients, the product is tested for safety, adverse affects,
dosage, tolerance, absorption, metabolism, excretion and clinical pharmacology.


                                       10
<PAGE>

Phase II typically involves studies in a small sample of the intended patient
population to assess the efficacy of the compound for a specific indication to
determine dose tolerance and the optimal dose range as well as to gather
additional information relating to safety and potential adverse effects. Phase
III trials are undertaken to further evaluate clinical safety and efficacy in an
expanded patient population at geographically dispersed study sites to determine
the overall risk-benefit ratio of the compound and to provide an adequate basis
for product labeling. Each trial is conducted in accordance with certain
standards under protocols that detail the objectives of the study, the
parameters to be used to monitor safety and the efficacy criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the IND.

     Data from preclinical and clinical trials are submitted to the FDA as an
NDA for marketing approval and to other health authorities as a marketing
authorization application. The process of completing clinical trials for a new
drug is likely to take a number of years and requires the expenditure of
substantial resources. Preparing an NDA or marketing authorization application
involves considerable data collection, verification, analysis and expense. There
can be no assurance that FDA or any other health authority approval will be
granted on a timely basis, if at all. The approval process is affected by a
number of factors, primarily the risks and benefits demonstrated in clinical
trials as well as the severity of the disease and the availability of
alternative treatments. The FDA or other health authorities may deny an NDA or
marketing authorization application if the authority's regulatory criteria are
not satisfied or may require additional testing or information.

     Even after initial FDA or other health authority approval has been
obtained, further studies, including Phase IV post-marketing studies, may be
required to provide additional data on safety and will be required to gain
approval for the use of a product as a treatment for clinical indications other
than those for which the product was initially tested. Also, the FDA or other
regulatory authorities may require post-marketing reporting to monitor the side
effects of the drug. Results of post-marketing programs may limit or expand the
further marketing of the products. Further, if there are any modifications to
the drug, including changes in indication, manufacturing process or labeling or
a change in manufacturing facility, an application seeking approval of such
changes will be required to be submitted to the FDA or other regulatory
authority.

     Whether or not FDA approval has been obtained, approval of a product by
regulatory authorities in foreign countries must be obtained prior to commencing
commercial sales of the product in such countries. The requirements governing
the conduct of clinical trials and product approvals vary widely from country to
country, and the time required for approval may be longer or shorter than that
required for FDA approval. Although there are some procedures for unified
filings for certain European countries, in general, each country at this time
has its own procedures and requirements. Further, the FDA regulates the export
of products produced in the United States and may prohibit the export of such
products even if they are approved for sale in other countries.

     We are also subject to regulation under the Occupational Safety and Health
Act, the Environmental Protection Act, the Toxic Substances Control Act, the
Resources Conservation and Recovery Act and other present and potential future
federal, state and local regulations.

     Completing the multitude of steps necessary before marketing can begin
requires the expenditure of considerable resources and a lengthy period of time.
Delay or failure in obtaining the required approvals, clearances or permits by
us, our corporate partners or our licensees would have a material adverse affect
on our ability to generate sales or royalty revenue. The impact of new or
changed laws or regulations cannot be predicted with any accuracy.


Our manufacturing and marketing strategies

     To support our preclinical and clinical trial manufacturing requirements,
we constructed manufacturing facilities that we believe comply with applicable
regulatory requirements. We have also established operational quality assurance
and quality control procedures. We believe that our existing facilities and
those available from contract manufacturers will be satisfactory for production
of ribozymes needed through clinical trials for our products currently in
development.

     We do not currently have the internal facilities or means to manufacture,
market, distribute or sell on a commercial scale any of products we may develop.
We have expanded our quality control and quality assurance program internally,
including adopting a set of standard operating procedures designed to assure
that any products manufactured by or for us are made in accordance with cGMP and
other applicable domestic and foreign regulations. In addition, we signed an
agreement with Avecia in January 2000 providing for the transfer of our
proprietary manufacturing processes and intellectual property to enable Avecia
to manufacture ribozyme products. Pursuant to this agreement, we must purchase
minimum quantities of ribozymes over the next three years.


                                      11
<PAGE>

     We expect to market and sell most products developed, at least initially,
directly and through co-promotion or other licensing arrangements with third
parties, including our collaborators. In some markets, we may enter into
distribution or partnership agreements with pharmaceutical or biotechnology
companies that have large, established sales organizations.


Our employees

     As of December 31, 2000, we had 113 full-time employees, including a
technical scientific staff of 79. Our future performance depends significantly
on the continued service of our key personnel. None of our employees are covered
by collective bargaining arrangements. We believe our employee relations are
good.


ITEM 2.    PROPERTIES

     We lease approximately 57,000 square feet of laboratory, manufacturing and
office space in two adjacent buildings in Boulder, Colorado, under operating
leases that last through October 2006 and June 2007. Our facilities are
sufficient to meet our needs at least through 2002.


ITEM 3.    LEGAL PROCEEDINGS

     We, along with our chief executive officer, are defendants in several
related lawsuits which purport to be class actions on behalf of purchasers of
common stock of the Company on November 16 and 17, 1999. The lawsuits, which are
substantially identical, allege the defendants violated certain federal
securities laws based upon an allegedly misleading announcement made on November
15, 1999. The cases have been consolidated in the United States District Court,
District of Colorado.   As of March 2001, the lawsuits have entered a discovery
phase, with all discovery to be completed by October 1, 2001.  Trial to a jury
has been scheduled to commence on July 2, 2002.  We believe that the suits are
without merit and we intend to vigorously defend ourselves, and our chief
executive officer, against the allegations.


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

     None.


                                      12
<PAGE>

                                    PART II

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

     Our common stock is traded on the NASDAQ National Market under the symbol
"RZYM." The last sale price of the common stock as reported on the NASDAQ
National Market on March 22, 2001, was $5.78 per share. At March 22, 2001, there
were approximately 179 holders of record of our common stock. The following
table sets forth, for the periods indicated, the high and low sales prices per
share of our common stock as reported on the NASDAQ National Market.

<TABLE>
<CAPTION>
                                                                                                   High         Low
                                                                                                  ------       ------
<S>                                                                                              <C>         <C>
    Year Ended December 31, 1998
       First Quarter........................................................................      $ 9.34       $ 5.13
       Second Quarter.......................................................................      $10.50       $ 4.88
       Third Quarter........................................................................      $ 6.25       $ 2.00
       Fourth Quarter.......................................................................      $ 7.63       $ 3.31
   Year Ended December 31, 1999
       First Quarter........................................................................      $ 5.75       $ 4.06
       Second Quarter.......................................................................      $ 6.88       $ 3.88
       Third Quarter........................................................................      $ 7.00       $ 4.25
       Fourth Quarter.......................................................................      $22.00       $ 4.81
   Year Ended December 31, 2000,
       First Quarter........................................................................      $71.88       $ 9.50
       Second Quarter.......................................................................      $29.38       $12.00
       Third Quarter........................................................................      $32.75       $20.25
       Fourth Quarter.......................................................................      $29.00       $ 6.50
   Year Ended December 31, 2001,
       First Quarter (through March 22, 2001)...............................................      $13.69       $ 5.25
</TABLE>


DIVIDEND POLICY

     We have never declared or paid cash dividends on our common stock and do
not anticipate paying any cash dividends in the foreseeable future. We are also
party to agreements restricting our ability to pay dividends.


                                       13
<PAGE>

ITEM 6.    SELECTED FINANCIAL DATA

     The following selected financial data are derived from our audited
financial statements. Our financial statements for 1996, 1997, 1998, 1999 and
2000 have been audited by Ernst & Young LLP, independent auditors. These
historical results do not necessarily indicate future results. When you read
this data, it is important that you also read our financial statements and
related notes, as well as the section "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                                        -----------------------
                                                           2000       1999       1998       1997       1996
                                                           ----       ----       ----       ----       ----
<S>                                                      <C>        <C>        <C>        <C>        <C>
Statement of Operations Data:
  Revenues
    Collaborative agreements...........................  $  8,302   $  5,797   $  8,963   $  1,976   $    759
    Collaborative agreements related parties...........     1,191      1,867          -          -          -
    Collaborative agreements joint venture.............     6,052          -          -          -          -
                                                         --------   --------   --------   --------   --------
     Total revenues....................................    15,545      7,664      8,963      1,976        759

  Expenses
    Research and development...........................    21,721     15,395     16,941     15,170     14,189
    General and administrative.........................     3,723      2,132      1,813      1,886      1,943
                                                         --------   --------   --------   --------   --------
     Total operating expenses..........................    25,444     17,527     18,754     17,056     16,132
                                                         --------   --------   --------   --------   --------
Operating loss.........................................    (9,899)    (9,863)    (9,791)   (15,080)   (15,373)
Other income (expense):
    Interest income....................................     3,196        614        634        795        936
    Interest expense...................................      (151)      (552)      (704)      (844)      (845)
    Other income.......................................         4          -         25          7         14
    Equity in loss of unconsolidated affiliates........    (9,032)      (860)    (1,082)         -          -
                                                         --------   --------   --------   --------   --------
     Total other income (expense)......................    (5,983)      (798)    (1,127)       (42)       105
                                                         --------   --------   --------   --------   --------
Net loss...............................................   (15,882)   (10,661)   (10,918)   (15,122)   (15,268)
                                                         --------   --------   --------   --------   --------
Accretion of dividends on preferred stock..............       716          -          -          -          -
Net loss applicable to common stock....................  $(16,598)  $(10,661)  $ 10,918   $ 15,122   $ 15,268
                                                         ========   ========   ========   ========   ========
Net loss per share (basic and diluted).................  $  (1.15)  $  (1.05)  $  (1.22)  $  (2.04)  $  (2.61)
Shares used in computing net loss per  share (basic
 and diluted)..........................................    14,390     10,158      8,978      7,420      5,845

Balance Sheet Data:
    Cash, cash equivalents and securities
      available-for-sale...............................  $ 64,475   $ 14,000   $  6,512   $ 16,102   $ 17,594
    Working capital....................................    65,002     14,086      4,467     13,238     15,788
    Total assets.......................................    83,897     25,092     19,224     24,850     25,292
    Capital lease obligations and long-term debt,               -
     current portion...................................                  200        498      2,078      1,724
    Capital lease obligations and long-term
      debt, net of current portion.....................     3,757      6,811      4,545      2,752      2,430
    Accumulated deficit................................   (99,965)   (84,083)   (73,422)   (62,505)   (47,383)
    Total stockholders' equity.........................    75,994     14,881     11,034     18,870     20,362
</TABLE>

                                       14
<PAGE>

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

     The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the financial
statements of Ribozyme Pharmaceuticals and related notes included elsewhere in
this Form 10-K. Our discussion contains forward-looking statements based upon
current expectations that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions. Our actual results and the timing of
certain events could differ materially from those anticipated in these forward-
looking statements as a result of certain factors.


Overview of our Business

     We are developing a new class of drugs based on engineered molecules called
"ribozymes." Ribozymes are a form of ribonucleic acid which have the ability to
cleave RNA, including mRNA and viral RNA thereby selectively inhibit protein
production and viral replication. Because many human diseases result from
abnormal protein production, ribozymes are expected to be useful in developing
pharmaceutical candidates for a broad range of human diseases. We are currently
in clinical development and preclinical testing for four product candidates and
expect to begin preclinical testing on one additional product candidate by the
end of 2001.

     We expect to initiate five Phase II clinical trials in 2001 for our lead
product candidate, ANGIOZYME, for the treatment of solid tumor cancers with
which we are in collaboration with Chiron. Also, we expect to initiate a Phase
II clinical trial in 2001 for HEPTAZYME, our product candidate for the treatment
of chronic Hepatitis C.   In addition, we recently formed a joint venture with
Elan to develop HERZYME, a treatment for breast and other cancers. We filed an
IND in Canada in March 2001 for HERZYME. Also, we are in preclinical testing and
expect to file an IND in 2001 for HepBzyme, our product candidate for the
treatment of Hepatitis B.

     To date, we have committed substantially all our resources to our research
and product development programs. We have not generated any revenues from
product sales, nor do we anticipate generating any revenues in the foreseeable
future. Revenue recorded from our collaborative agreements consists of:

     .     Up-front revenue. Up-front non-refundable fees are fully recognized
           upon signing an agreement and are related to the value of the
           research at that point in time. Up-front revenue may also include a
           reimbursement to us of recent expenses related to product development
           which we incurred.

     .     Research revenue. Typically research revenue is based on the fully
           burdened cost of a researcher working on a collaboration. Rates are
           billed per employee, per year, pro-rated for time worked on a
           project. This revenue is typically invoiced on a quarterly basis,
           either up front or in arrears. Revenue is recognized ratably over the
           period, with the balance reflected as deferred revenue until earned.
           The revenue is typically recurring over the term of a collaboration.

     .     License revenue. License revenue is recognized ratably over the term
           of the license. Payments received in advance are recorded as deferred
           revenue until earned.

     .     Milestone revenue. Milestone revenue is recognized in full when the
           related milestone performance goal is achieved. Milestone revenue is
           typically not consistent or recurring in nature.

     Our revenue has consisted primarily of research revenue payments from our
collaborators. All revenues are either deferred as a liability or recognized
upon satisfying revenue criteria. As of December 31, 2000, all revenues that
have been recognized are earned, and no further obligation exists for recognized
revenue. We depend upon funding from external financing and corporate
collaborations for our research and product development programs and expect to
do so for the foreseeable future.

     We have not been profitable since inception and have an accumulated deficit
of $100.0 million as of December 31, 2000. Losses have resulted primarily from
our research and development programs. We expect to incur additional losses as
ANGIOZYME, HEPTAZYME, HERZYME and HepBzyme and other potential product
candidates advance through development and commercialization. In addition,
future milestone payments under some of our collaborations are contingent upon
our meeting particular research or development goals. The amount and timing of
future milestone payments are contingent upon the terms of each collaboration
agreement. Milestone performance criteria are specific to each agreement and
based upon future performance. In some instances, we may forfeit milestone
payments if we fail to accomplish a predetermined goal within a certain time
frame. Therefore, we are subject to significant variation in the timing and
amount of our revenues and results of operations from period to period.


                                       15
<PAGE>

     In 1998, we transferred our target discovery and validation technology
to Atugen in exchange for a substantial equity interest. We will continue our
existing target discovery and validation agreements with our collaborators by
subcontracting to Atugen the services to be performed. We currently own 31.6% of
Atugen and will record our share of any future profits. In 1999, we completely
expensed our remaining investment in Atugen.

     Our revenues are denominated in U.S. dollars, therefore, we have not
been exposed to foreign currency translation risks and have not engaged in any
hedging instruments.

Results of Operations for Twelve Months Ended December 31, 2000 and 1999

           Revenues from collaborative agreements increased $7.8 million to
$15.5 million for the year ended December 31, 2000 from $7.7 million for the
corresponding period in 1999. The increase is primarily due to $6.1 million of
revenue recognized in 2000 from Medizyme, our joint venture with Elan related to
the development of HERZYME. The joint venture began in January 2000 and
therefore no revenues existed for Medizyme in 1999. In addition, the increase
was due to milestone payments we received of $1.5 million in 2000 from Lilly
related to our development of HEPTAZYME. The payments were for filing an IND and
commencing clinical trials for HEPTAZYME.

           Research and development expenses increased $6.3 million to $21.7
million in 2000 from $15.4 million in 1999. The increase is due to the cost of
manufacturing, preclinical and clinical activities to support our drugs in
clinical trials. Research and development expenses consist primarily of:

     .     clinical and preclinical supplies and related costs;

     .     salaries and benefits for scientific, regulatory, quality control and
           pilot manufacturing personnel;

     .     consultants;

     .     supplies;

     .     occupancy costs; and

     .     depreciation for laboratory equipment and facilities.

We expect future research and development expenses to increase from current
levels as ANGIOZYME, HEPTAZYME, HERZYME and HepBzyme, proceed through clinical
and preclinical trials. The effect of increased expenses related to HERZYME will
be absorbed by us indirectly through our equity investment in Medizyme, our
unconsolidated affiliate.

           General and administrative expenses increased $1.6 million to $3.7
million for the year ended December 31, 2000 from $2.1 million for the
corresponding period in 1999. The increase was primarily due to approximately
$1.7 million of non-cash, stock option compensation expense recorded for
performance stock options that vested during 2000. During 2000, a number of
corporate milestones were accomplished, including achieving a market
capitalization of $150 million or more and a number of other financial goals
which were satisfied by the consummation of our agreement with Elan and the
completion of our stock offering in April 2000. We expect general and
administrative expenses to increase as a result of increasing legal and other
professional fees in connection with the overall scale-up of our operations,
business development efforts and patent protection.

           Interest income increased $2.6 million to $3.2 million for the year
ended December 31, 2000 from $614,000 for the corresponding period in 1999. The
increase is due to higher average balances in our cash and cash equivalents and
securities available-for-sale during 2000. Cash balances were higher as a result
of public offerings completed in both July 1999 and April 2000 that resulted in
$58.1 million of cumulative net proceeds. In addition, we received $5.0 million
in January 2000 for the sale of common stock to Elan pursuant to our
collaboration with Elan. Interest income generally fluctuates as a result of the
average amount of cash available for investment and prevailing interest rates.

           Interest expense decreased $401,000 to $151,000 for the year ended
December 31, 2000 from $552,000 for the corresponding period in 1999. The
decrease is due to our repayment of $6.9 million on a debt facility from
Schering AG with proceeds from our 2000 public offering. The remaining balance
of $997,000 was converted into 42,435 shares of our common stock in June 2000.
Subsequently, we borrowed an additional $1.0 million from Schering AG in October
2000 and $2.7 million from Elan related to our joint venture. Therefore,
interest expense is expected to increase in the future as we borrow additional
funds from our partners and arrange for additional financing for operations.


                                       16
<PAGE>

           Equity in loss of unconsolidated affiliates was $9.0 million for the
year ending December 31, 2000, compared to $860,000 for the corresponding period
in 1999. The expense in 2000 is our 80.1% share of Medizyme's recorded loss.
While we own 80.1% of the outstanding common stock of Medizyme, Elan has
retained significant minority investor rights that are considered "participating
rights" as defined in EITF 96-16 Investors Accounting for an Investee When the
Investor Owns a Majority of the Voting Stock but the Minority Shareholder or
Shareholders Have Certain Approval or Veto Rights. Therefore, we do not
consolidate the financial statements of Medizyme, but instead account for our
investment in Medizyme under the equity method of accounting. Medizyme's
expenses include $1.25 million amortized expense in each quarter for payment of
a $15.0 million license fee paid to Elan in January 2000, as well as $6.1
million we invoiced during 2000 for research we conducted on HERZYME.

           The 1999 equity in loss of unconsolidated affiliate was in connection
with our initial cash investment of $2.0 million and the subsequent transfer of
our gene identification and target validation technology to Atugen AG in 1998.
During 1999, we owned 83.2% of Atugen's outstanding common stock and as a result
we recorded our share of Atugen's net losses for 1999 resulting in equity in
loss of unconsolidated affiliate of $860,000. During 1999, we completely
expensed our remaining investment in Atugen and therefore no expense related to
Atugen was recorded during 2000.

Results of Operations for Twelve Months Ended December 31, 1999 and 1998

     Revenues from collaborative agreements decreased $1.3 million to $7.7
million for the year ended December 31, 1999 from $9.0 million for the
corresponding period in 1998. The decrease was primarily due to approximately
$6.2 million of revenue recognized from the Chiron collaboration related to the
development of ANGIOZYME in 1998, compared to $4.0 million recognized from the
Chiron collaboration in 1999. Of the $6.2 million recognized from the Chiron
collaboration in 1998, $5.0 million was a nonrecurring up-front payment for
50.0% of past expenses we incurred for the preclinical development of ANGIOZYME.
The nonrefundable payment became due when Chiron agreed to resume our
collaboration in the development of ANGIOZYME. In addition, 1998 revenues
included approximately $2.6 million related to our target discovery and
validation collaborations with Glaxo Wellcome, Parke-Davis, Roche Bioscience and
Schering AG. In 1999, we subcontracted all existing target discovery and
validation work to Atugen and therefore did not record any revenues related to
those agreements. However, in 1999 we recorded $1.9 million in revenues from
Atugen related to a service agreement in which we received payments for services
and oligonucleotides we provide. In addition, in 1999 we recorded approximately
$1.7 million in research revenues related to our collaboration with Eli Lilly
for the development of HEPTAZYME.

     Research and development expenses decreased to $15.4 million in 1999 from
$16.9 million in 1998. Approximately $1.2 million of the decrease was primarily
attributable to the transfer of approximately 15 employees and their related
expenses to Atugen. In addition, we had decreases of approximately $750,000 in
outside services, consultants and professional fees. However, offsetting the
decreases, during 1999 we had an approximately $450,000 increase in personnel
expenses. The increase was primarily due to hiring additional personnel related
to the overall scale-up of research and product development.

     General and administrative expenses increased to $2.1 million in 1999 from
$1.8 million in 1998. The increase was primarily attributable to lower expenses
incurred in 1998 because of $480,000 of reimbursements we received from Atugen
related to the time our management devoted to Atugen operations. In 1999, Atugen
hired most of its own management; our management devoted limited time to Atugen.
Increases of approximately $180,000 during 1999 were primarily attributable to
increased staffing and associated expenses necessary to manage and support our
expanding product and business development efforts.

     Interest income decreased slightly to $614,000 in 1999 from $635,000 in
1998. The decrease is due to lower average balances in our cash, cash
equivalents and securities available-for-sale during 1999 compared to 1998.
Interest income generally fluctuates as a result of cash available for
investment and prevailing interest rates.

     Interest expense decreased to $552,000 in 1999 from $704,000 in 1998. The
decrease is due to the repayment of a loan for tenant improvements and equipment
in December 1998. Equity in loss of unconsolidated affiliate was $860,000 for
1999 compared to $1.1 million for 1998. This expense is a result of our equity
investment in Atugen.

                                       17
<PAGE>

Liquidity and Capital Resources

     We have financed our operations since inception through sales of equity
securities in public offerings, private placements of preferred and common
stock, funds received under our collaborative agreements and financing under
equipment and tenant improvement loans. From inception through December 31,
2000, we have received approximately:

     .     $29.0 million in net proceeds from private placements;

     .     $89.2 million in net proceeds from public offerings;

     .     $96.0 million from our collaborations; and

     .     $9.8 million from equipment financing.

     We had cash, cash equivalents and securities available-for-sale of $64.5
million at December 31, 2000 compared with $14.0 million at December 31, 1999.
The $50.5 million increase in cash, cash equivalents and securities available-
for-sale is primarily the result of $3.5 million used for operations, net of
revenues of $15.5 million, and $2.2 million used for investments in equipment,
leasehold improvements and patents, offset by:

     .     $52.8 million received in the public offering of our common stock;

     .     $20.0 million received in sales of preferred and common stock to
           corporate collaborators;

     .     $15.4 million invested in Medizyme;

     .     $4.7 million in net borrowings;

     .     $6.9 million used to payoff convertible debt;

     .     $200,000 for payments on loan facilities; and,

     .     $929,000 received for the exercise of stock options.

     We invest our cash, cash equivalents and securities available-for-sale in
interest-bearing, investment-grade securities.

     Accounts receivable at December 31, 2000 were $3.6 million compared to $2.0
million at December 31, 1999. Accounts receivable at December 31, 2000 included
$345,000 due from Atugen for administrative services and patent expenses, $2.0
million due from Medizyme for research support for HERZYME and $1.2 million due
from Chiron for reimbursement of ANGIOZYME fourth quarter expenses.   All
outstanding receivables due from 1999 were received in 2000.

     Total additions for property, plant and equipment for the twelve months
ending December 31, 2000 were $1.4 million, most of which were financed through
our existing equipment loan facility with Schering AG. We anticipate future
equipment needs to be financed by the Schering AG loan facility through 2001, as
well as additional credit facilities yet to be determined.

     In July 1994, we entered into an agreement with Chiron to collaborate
exclusively on up to five specific targets selected by Chiron. Four targets are
currently subject to the exclusivity provision, including ANGIOZYME. Currently,
ANGIOZYME is being developed in collaboration with Chiron and we share equally
all development costs and future profits with Chiron. Chiron has indicated its
desire not to participate in the Phase II clinical trials for renal cell cancer
and melanoma. In 2000, we recorded $4.5 million in revenues from Chiron for
expenses incurred for the clinical development of ANGIOZYME.

     In April 1997 we entered into a purchase agreement with Schering AG and
Schering Berlin Venture Corporation ("SBVC"), an affiliate of Schering AG,
subsequently amended, as part of our target discovery and validation program.
SBVC made a $2.5 million equity investment in us in April 1997 in exchange for
212,766 shares of our common stock and made an additional equity investment of
$2.5 million for 465,117 shares of our common stock in April 1998. Separately,
Schering AG provided loans of $2.0 million in each of 1997, 1998, 1999 and 2000.
Schering AG has agreed to continue to provide loans of up to $2.0 million
annually through 2001, provided that the collaboration is continued. The loans,
which carry an interest rate of 8.0% per annum, are immediately convertible into
equity at the option of Schering AG.  In April 2000, after the completion of our
public offering, we repaid $6.9 million of our outstanding borrowings to
Schering AG.  In June 2000, Schering AG converted $997,000 of the balance into
42,435 shares of our common stock at a conversion price of $23.50. According to
the terms of our agreement with Schering AG, 50.0% of any borrowings on the line
of credit must be collateralized by equipment purchases. At December 31, 2000,
we had $1.0 million in outstanding loans from Schering AG, which was convertible
into approximately 70,800 shares of our common stock. Principal and interest
payments are deferred until maturity of the loans in April 2004.  As a result of
the Atugen formation in 1998, we now subcontract all of our existing target
discovery and

                                       18
<PAGE>

identification programs to Atugen; however, as long as our collaboration
continues with Schering AG we expect to continue to borrow against the loans.

     In March 1999, we entered into a collaboration with Eli Lilly to conduct
research, development and commercialization of HEPTAZYME, our anti-HCV ribozyme
for the treatment of Hepatitis C virus infection.  We granted Lilly the
exclusive worldwide right to develop and commercialize HEPTAZYME in return for
funding all research, development and commercialization costs for the drug.
Under the terms of the agreement, we received approximately $9.2 million during
1999, which included $1.7 million of funding for research and clinical trial
expenses and a $7.5 million equity investment.  In April 1999, Lilly purchased
five shares of our Series L Convertible Preferred Stock for $7.5 million.
Subsequently, in September 2000, we entered into an agreement with Lilly to
repurchase all rights to HEPTAZYME.  Lilly had directed the clinical trials for
HEPTAZYME to date under the licensing agreement; however, according to the
repurchase agreement, we renegotiated the global rights to HEPTAZYME and will
direct all subsequent clinical trials.  Pursuant to the repurchase agreement,
Lilly converted the outstanding five shares of our Series L Convertible
Preferred Stock into 636,640 shares of our common stock in December 2000.   In
addition, we issued to Lilly $3,000,000 of our common stock, which resulted in
252,632 shares, as payment for Lilly efforts in generating and providing
clinical trial data. In return, Lilly paid us a termination fee of $2.8 million
in December 2000.

     In January 2000, we completed a joint venture with Elan for the development
and commercialization of HERZYME, our potential product to treat breast and
other cancers.  In accordance with the collaboration, we sold to Elan our Series
A Convertible Preferred Stock for $12.0 million and, in turn, used those funds
for initial funding of Medizyme.  Also as part of the collaboration, Elan
purchased 641,026 shares of our common stock for a purchase price of $5.0
million.  Elan has also committed to purchase an additional $5.0 million of
common stock in May 2001 at a share price that is at a premium to the then
market price and would also be based on the achievement of certain milestones.
We have estimated that the development of HERZYME will require additional funds
of up to $15 million and, therefore, Elan has made available to us a credit
facility to fund our portion of Medizyme operating costs over a 30 month period.
At the end of December 2000, we utilized the credit facility and had borrowed
$2.7 million.  Elan may convert this debt into shares of our Series B
Convertible Preferred Stock in the future.

     In November 2000, we signed an agreement with Acqua Wellington North
American Equities Fund Ltd. to set up an equity financing facility covering the
sale of up to $60 million of our common stock. Any sale of our common stock will
be made pursuant to a shelf registration we filed with the Securities and
Exchange Commission (SEC) covering the sale of up to 3 million shares of our
common stock. The shelf registration was declared effective by the SEC in
November 2000. We may sell the shares at our discretion and as market conditions
warrant at a small discount to market at the time of sale. We will control the
quantity and timing of each incremental sale of stock, if any. Proceeds from any
sale of stock will be used for general corporate purposes.

     We anticipate that our existing financial resources and expected revenues
from our collaborations, should be sufficient to meet our anticipated operating
and capital requirements through 2002. We expect to incur substantial additional
costs, including:

     .     costs related to our research, drug discovery and development
           programs;

     .     preclinical studies and clinical trials of our products, if
           developed;

     .     prosecuting and enforcing patent claims;

     .     general administrative and legal items; and

     .     manufacturing and marketing of our products, if any.

     At December 31, 2000, we had available net operating loss carryforwards,
research and development credit carryforwards and state investment credit
carryforwards of $86.5 million, $2.8 million and $6,000, respectively, for
income tax purposes. Our ability to utilize our net operating loss carryforwards
is subject to an annual limitation in future periods pursuant to the "change in
ownership" rules under Section 382 of the Internal Revenue Code.


ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to changes in interest rates primarily from our investments
in certain short-term investments.  We invest our excess cash in highly liquid
short-term investments that are typically held for the duration of the term of
the respective instrument.  We do not utilize derivative financial instruments,
derivative commodity instruments or other market

                                       19
<PAGE>

risk sensitive instruments to manage exposure to interest rate changes.
Accordingly, we believe that, while the securities we hold are subject to
changes in the financial standing of the issuer of such securities, we are not
subject to any material risks arising from changes in interest rates, foreign
currency exchange rates, commodity prices, equity prices or other market changes
that affect market risk sensitive instruments.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Submitted as part of Item 14(a) of this Form 10-K and incorporated herein
by reference.


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

     Not applicable.


                                       20
<PAGE>

                                   PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

    The directors, executive officers and key employees of Ribozyme
Pharmaceuticals are as follows:

<TABLE>
<CAPTION>
Name                                                      Age    Position
----                                                      ---    --------
<S>                                                      <C>     <C>
Ralph E. Christoffersen, Ph.D. (1)...................      63    Chief Executive Officer and Director

Howard W. Robin......................................      48    Chief Operating Officer, President and Director

Lawrence E. Bullock..................................      45    Chief Financial Officer and Vice President of Finance and
                                                                 Administration  and Secretary

Lawrence Blatt.......................................      39    Vice President of Research

J. Wayne Cowens, M.D.................................      52    Vice President of Clinical and Regulatory Affairs

Alene A. Holzman.....................................      44    Vice President of Corporate Development

Nassim Usman, Ph.D...................................      41    Vice President of Research and Development

Francine E. Wincott, Ph.D............................      37    Senior Director of Manufacturing Operations

David T. Morgenthaler (1) (2)........................      81    Chairman of the Board

Jeremy L. Curnock Cook (1) (2).......................      51    Director

John Groom (2).......................................      62    Director

David Ichikawa (3)...................................      48    Director

Samuel R. Saks, M.D.(3)..............................      46    Director

Anders P. Wiklund (2) (3)............................      60    Director
</TABLE>
------------------
(1)  Member of the Executive Committee
(2)  Member of the Compensation Committee
(3)  Member of the Audit Committee.

     Ralph E. Christoffersen, Ph.D., has served as Chief Executive Officer and
Director of Ribozyme Pharmaceuticals since June 1992. From 1989 to June 1992,
Dr. Christoffersen was Senior Vice President and Director of U.S. Research at
SmithKline Beecham Pharmaceuticals, a pharmaceutical company. From 1983 to 1989,
he held senior management positions in research at The Upjohn Company, a
pharmaceutical company. Prior to joining The Upjohn Company, Dr. Christoffersen
served as a Professor of Chemistry and Vice Chancellor for Academic Affairs at
the University of Kansas and as President of Colorado State University. He
received his Ph.D. in physical chemistry from Indiana University.

     Howard W. Robin has served as Chief Operating Officer, President and
Director since January 2001. From 1991 to 2001 Mr. Robin was Corporate Vice
President and General Manager at Berlex Laboratories, Inc. and from 1987 to 1991
he served as Vice President of Finance and Business Development and Chief
Financial Officer. From 1984 to 1987 Mr. Robin was Director of Business Planning
& Development at Berlex. He was a Senior Associate with Arthur Anderson &
Company prior to joining Berlex. He received his B.S. in Accounting & Finance
from Farleigh Dickinson University in 1974.

     Lawrence E. Bullock has served as Vice President of Administration and
Finance, Chief Financial Officer and Secretary since January 1996. From December
1990 to January 1996, Mr. Bullock was Chief Financial Officer, Director of
Finance and Administration and Secretary of La Jolla Pharmaceutical Company, a
biopharmaceutical company. Mr. Bullock received his M.B.A. from the University
of Utah.

                                       21
<PAGE>

     Lawrence M. Blatt, Dr. P.H., has served as Vice President of Research since
August 2000.  From January 1999 to July 2000, Dr. Blatt served as Research Vice
President, BioPharmacology and Preclinical.  From January 1998 until January
1999, Dr. Blatt served as Senior Director of Preclinical and Clinical
Development  Prior to joining the Company, Dr. Blatt served as Vice President of
Product Development for the National Genetic Institute, a molecular diagnostic
company, from August 1996 to January 1998.  From August 1984 to January 1996,
Dr. Blatt served in various managerial and scientific positions at Amgen Inc., a
bio-pharmaceutical company.  He received his Doctorate in Public Health
Administration from the University of La Verne in 1996 and his M.B.A. degree
from California Sate University, Northridge in 1988.

     J. Wayne Cowens, M.D., has served as Vice President of Clinical and
Regulatory Affairs since July 1999. From 1992 until July 1999, Dr. Cowens served
as Division Vice President of Product Development for Chiron Corporation, a
biotechnology company. During that time he served as Chiron's commercial
representative on the Ribozyme Pharmaceuticals/Chiron joint project team for the
development of ANGIOZYME. From 1990 until 1992, Dr. Cowens served as Director of
Clinical Oncology at Sterling-Winthrop, a pharmaceutical company, and from 1980
until 1990 as a cancer research Clinician in the Grace Cancer Drug Center at the
Roswell Park Cancer Center. Dr. Cowens received his M.D. degree from The Johns
Hopkins University.

     Alene A. Holzman has served as Vice President of Corporate Development
since December 1999. Ms. Holzman served as Business Development and General
Manager of Target Validation and Discovery Business from April 1997 to December
1999. From January 1990 to March 1997, Ms. Holzman was Vice President of
ChemTrak Corporation, a medical technology firm, where she was responsible for
finance, business development and marketing and sales. From 1987 to 1990, she
was Vice President of CytoSciences, Inc., a biomedical company, and from 1981 to
1987 she was Vice President of Marketing and Sales for Hana Biologics, Inc. (now
Cell Genesys Corporation), a biotechnology firm. Ms. Holzman received her M.B.A.
from the University of California at Berkeley.

     Nassim Usman, Ph.D., has served as Vice President of Research and
Development since August 2000. From December 1999 to July 2000, Dr. Usman served
as Senior Vice President of Research. From May 1996 to December 1999, Dr. Usman
served as Vice President of Research at Ribozyme Pharmaceuticals. From April
1994 until May 1996, Dr. Usman served as Director of Chemistry and Biochemistry
Research and from September 1992 until April 1994 Dr. Usman served as Senior
Scientist in Chemistry and Biochemistry. From January 1987 to September 1992,
Dr. Usman was a Postdoctoral Fellow and Scientist in the Departments of Biology
and Chemistry at the Massachusetts Institute of Technology. Dr. Usman received
his Ph.D. in chemistry from McGill University.

     Francine E. Wincott, Ph.D., has served as Senior Director of Manufacturing
since April 1999.  From March 1997 to March 1999, Dr. Wincott served as Director
of Chemistry and Biochemistry Research and from 1993 to 1997 she was a Senior
Scientist.  From 1990 to 1993 Dr. Wincott was a Scientist involved in developing
therapeutics directed against auto immune diseases at Cortech, Inc., a
biotechnology company .   From 1989 to 1990 she was a Scientist in the Medicinal
Chemistry Group at Merck, Inc., a pharmaceutical company.  Dr. Wincott earned a
B.A. in Chemistry from the University of Pennsylvania and a Ph.D. from Yale
University.

     David T. Morgenthaler has served as a director since February 1992 and was
elected Chairman of the Board in December 1995. Mr. Morgenthaler was a founder
of and has been Managing Partner of Morgenthaler Ventures, a private venture
capital firm, since 1968. He has been a director of a number of public and
private companies. Mr. Morgenthaler received his M.S. degree from the
Massachusetts Institute of Technology.

     Jeremy L. Curnock Cook has served as a director since July 1995. Mr. Cook
was a director of Rothschild Asset Management, an investment management company,
where he was responsible for the Rothschild Bioscience Unit from 1987 until his
retirement in 2000. Mr. Cook founded the International Biochemicals Group in
1975, which he subsequently sold to Royal Dutch Shell in 1985, remaining as
Managing Director until 1987. He is also a director of Targeted Genetics Inc.,
Cantab Pharmaceuticals plc, AMRAD Corporation, Delsys Pharmaceuticals, Inc.,
GlycoDesign, Inc., Valigen, Inc., Inflazyme Pharmaceuticals, Inc. and
Biocompatibles International plc. Mr. Cook received an M.A. in Natural Sciences
from Trinity College Dublin.

     John Groom has served as a director since April 2000.  Mr. Groom served as
President and Chief Operating Officer of Elan Corporation plc from 1996 until
his retirement in 2001. Mr. Groom continues as a director of Elan Corporation
plc.  He served as President and Chief Executive Officer of Athena
Neurosceiences, Inc. from 1987 to 1996.  Mr. Groom is also a director of Ligand
Pharmaceuticals, Inc.

                                      22
<PAGE>

     David Ichikawa has served as a director since May 1998. Mr. Ichikawa has
been employed by Chiron Corporation, a biotechnology company, since September
1994 and is currently Vice President of R&D Business Development and Finance. He
has also held management positions at Boehringer Mannhiem Corporation and Chiron
(Cetus) Corporation. Mr. Ichikawa received his M.B.A. from the University of
California at Berkeley.

     Samuel R. Saks, M.D. has served as a director since April 2000. Dr. Saks
joined ALZA Corporation in 1992 as the Vice President for Medical Affairs and in
1995 he became Senior Vice President, Medical Affairs. In January 2000 he also
became Group Vice President of ALZA Pharmaceuticals. Dr. Saks received his M.D.
with honors form the University of Illinois and completed his residency in
Internal Medicine at the University of Texas Southwestern Medical Center at
Dallas.

     Anders P. Wiklund has served as a director since August 1994. Since January
1997, Mr. Wiklund has been the principal of Wiklund International, an advisory
firm to the biotechnology and pharmaceutical industries. From 1967 through 1996,
Mr. Wiklund served in numerous executive positions for the Kabi and Pharmacia
group of companies, including President and CEO of Kabi Vitrum Inc. and Kabi
Pharmacia, Incorporated. Mr. Wiklund is also a director of Glyco Design, Inc.,
Esperion Therapeutics, Inc., Medivir, A.B. and InSite Vision, Inc., as well as
serving on private company boards. Mr. Wiklund received a Master of Pharmacy
degree from the Pharmaceutical Institute in Stockholm.


ITEM 11.   EXECUTIVE COMPENSATION

     The information required by this item is incorporated by reference from the
information under the caption "Executive Compensation" contained in the Proxy
Statement.


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is incorporated by reference to the
information under the caption "Security Ownership of Certain Beneficial Owners
and Management" contained in the Proxy Statement.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is incorporated by reference to the
information under the caption "Compensation Committee Interlocks and Insider
Participation" and "Certain Transactions" contained in the Proxy Statement.


                                      23
<PAGE>

                                    PART IV

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

(a)(1)     FINANCIAL STATEMENTS


                                                                    PAGE
                                                                   ------
                    Report of Independent Auditors                   F-1
                    Balance Sheets                                   F-2
                    Statements of Operations                         F-3
                    Statements of Stockholders' Equity               F-4
                    Statements of Cash Flows                         F-5
                    Notes to Financial Statements                    F-6

(a)(2)     EXHIBITS

Number                            Description
------                            -----------
   3.1     Amended and Restated Certificate of Incorporation of Ribozyme
           Pharmaceuticals dated April 17, 1996(5)
   3.2     Bylaws of Ribozyme Pharmaceuticals, as amended(1)
   4.1     Specimen Stock Certificate(1)
   4.2     Certificate of Designation, Preferences and Rights of Series L
           Preferred Shares (10)
   4.3     Certificate of Designations, Preferences and Rights of Series A
           Preferred Stock and Series B Preferred Stock (11)
   4.4     Rights Agreement, dated November 22, 2000 between Ribozyme
           Pharmaceuticals, Inc., and American Stock Transfer & Trust Company,
           which includes the form of Certificate of Designation of Series AA
           Junior Participating Preferred Stock attached as Exhibit A thereto
           (14)
  10.1     Form of Indemnity Agreement entered into between Ribozyme
           Pharmaceuticals and its directors and officers, with related
           schedule(1)
  10.2     Ribozyme Pharmaceuticals' Incentive Stock Option Plan, including form
           of Incentive Stock Option Agreement(1)
  10.3     Ribozyme Pharmaceuticals' Non-Qualified Stock Option Plan, including
           form of Non-Qualified Stock Option Agreement(1)
  10.4     Ribozyme Pharmaceuticals' 1996 Stock Option Plan, including forms of
           Incentive Stock Option Nonstatutory Stock Option Agreements(1)
  10.5     Ribozyme Pharmaceuticals' 1996 Stock Employee Stock Purchase Plan (1)
  10.6     Employment Agreement dated January 1, 1997 between Ribozyme
           Pharmaceuticals and Ralph E. Christoffersen(5)
  10.7     Incentive Stock Option Agreement between Ribozyme Pharmaceuticals and
           Ralph E. Christoffersen dated December 23, 1992(1)
  10.8     Incentive Stock Option Agreement between Ribozyme Pharmaceuticals and
           Ralph E. Christoffersen dated September 23, 1994(1)
  10.9     Warrant Purchase Agreement dated March 15, 1995, between Ribozyme
           Pharmaceuticals and Hambrecht & Quist Guaranty Finance(1)
 10.10     Warrant to Purchase Common Stock dated March 15, 1995, issued to
           Hambrecht & Quist G uaranty Finance(1)
 10.11     Warrant to Purchase Common Stock dated February 22, 1993, issued to
           LINC Scientific Leasing(1)
 10.12     Warrant to Purchase Common Stock dated July 30, 1993, issued to
           Douglas E. Olson(1)
 10.13     Warrant to Purchase Common Stock dated July 30, 1993, issued to
           Richard J. Warburg and Ruth P. Warburg(1)
 10.14     Warrant to Purchase Common Stock dated December 28, 1994, issued to
           Competitive Technologies, Inc.(1)
 10.15     Warrant to Purchase Common Stock dated December 29, 1995, issued to
           Silicon Valley Bank(1)
 10.16     Warrant to Purchase Common Stock dated July 26, 1996, issued to
           Silicon Valley Bank(1)
 10.17     Warrant to Purchase Common Stock dated April 17, 1996, issued to
           Chiron Corporation(1)
 10.18     Collaborative Research, Development and Commercialization Agreement
           dated July 15, 1994, between Ribozyme Pharmaceuticals and Chiron
           Corporation(1)
 10.19     Research Collaboration and Licensing Agreement dated November 1,
           1995, between Ribozyme Pharmaceuticals and Pharmacia Biotech, AB(1)
 10.20     Research and Development Collaboration Agreement dated April 19,
           1993, between Ribozyme Pharmaceuticals and Parke-Davis Division of
           Warner- Lambert Company(1)


                                       24
<PAGE>

   10.21   First Amendment to the Research and Development Collaboration
           Agreement dated April 17, 1995, between Ribozyme Pharmaceuticals and
           Parke-Davis Division of Warner-Lambert Company(1)
   10.22   Second Amendment to the Research and Development Collaboration
           Agreement dated February 8, 1996, between Ribozyme Pharmaceuticals
           and Parke-Davis Division of Warner-Lambert Company(1)
   10.23   Financing Agreement dated March 16, 1995, among Wilderness Place
           Holdings L.L.C., Hambrecht & Quist Guaranty Finance, L.P. and
           Ribozyme Pharmaceuticals(1)
   10.24   Negotiable Promissory Note dated October 7, 1992, between Ribozyme
           Pharmaceuticals and Ralph Christoffersen and Addendum dated June 25,
           1993(1)
   10.25   Employment Agreement dated January 8, 1996, between Ribozyme
           Pharmaceuticals and Lawrence E. Bullock(1)
   10.26   Promissory Note dated February 8, 1996, between Ribozyme
           Pharmaceuticals and Lawrence E. Bullock(1)
   10.27   Lease for Real Property dated May 20, 1992, between Aero-Tech
           Investments and Ribozyme Pharmaceuticals(1)
   10.28   Non-Disturbance and Attornment Agreement dated March 31, 1995, among
           General American Life Insurance Company, Aero-Tech Investments,
           Wilderness Place Holdings L.L.C. and Ribozyme Pharmaceuticals(1)
   10.29   Master Lease Agreement dated September 2, 1992, between Ribozyme
           Pharmaceuticals and LINC Scientific Leasing(1)
   10.30   Loan and Security Agreement dated February 28, 1994, between Ribozyme
           Pharmaceuticals and Silicon Valley Bank(1)
   10.31   Loan Modification Agreement dated December 21, 1994, between Ribozyme
           Pharmaceuticals and Silicon Valley Bank(1)
   10.32   Loan and Security Agreement dated December 29, 1995, between Ribozyme
           Pharmaceuticals and Silicon Valley Bank and MMC/GATX Partnership No.
           1(1)
   10.33   Warrant to Purchase Common Stock dated December 29, 1995, issued to
           MMC/GATX Partnership No. 1(1)
   10.34   Agreement dated February 29, 1996, between Ribozyme Pharmaceuticals
           and Chiron Corporation relating to research and development
           funding(1)
   10.35   Amendments to original Employment Agreements between Ribozyme
           Pharmaceuticals and Ralph E. Christoffersen, Lawrence E. Bullock and
           Nassim Usman, pursuant to letters dated November 14, 1996, November
           22, 1996, and December 15, 1996(3)
   10.36   Promissory Note dated June 4, 1996, between Ribozyme Pharmaceuticals
           and Nassim Usman(3)
   10.37   Amendment to Lease for Real Property dated March 13, 1997, between
           Aero- Tech Investments and Ribozyme Pharmaceuticals(3)
   10.38   Employment Agreement dated May 2, 1996, between Ribozyme
           Pharmaceuticals and Nassim Usman(2)
   10.39   Collaboration Agreement Regarding Use of Ribozymes to Determine Gene
           Function dated May 13, 1996, between Ribozyme Pharmaceuticals and
           Chiron Corporation(2)
   10.40   Amended and Restated License Agreement dated November 20, 1996,
           between Ribozyme Pharmaceuticals, University Research Corporation,
           University of Colorado and United States Biochemical Corporation(3)*
   10.41   Amended and Restated Sublicense Agreement dated November 20, 1996,
           between Ribozyme Pharmaceuticals and United States Biochemical
           Corporation(3)*
   10.42   Amended and Restated License Agreement dated November 20, 1996,
           between Ribozyme Pharmaceuticals and Competitive Technologies,
           Incorporated(3)*
   10.43   Memorandum of Understanding dated March 1, 1996, between Ribozyme
           Pharmaceuticals and DowElanco(1)
   10.44   Stock Subscription Agreement dated September 1996 between Ribozyme
           Pharmaceuticals and University of Research Corporation(3)*
   10.45   Stock Subscription Agreement dated November 20, 1996, between
           Ribozyme Pharmaceuticals and United States Biochemical
           Corporation(3)*
   10.46   Assignment of License and Restated License Agreement dated November
           20, 1996, among Ribozyme Pharmaceuticals, United States Biochemical
           Corporation and Competitive Technologies(3)*
   10.47   Letter Agreement dated May 22, 1996, between Ribozyme Pharmaceuticals
           and ALZA Corporation(3)*
   10.48   Research and Development Collaboration Agreement dated December 2,
           1996, between Ribozyme Pharmaceuticals and Protogene Laboratories(3)*
   10.49   License Agreement dated February 14, 1997, between Ribozyme
           Pharmaceuticals and IntelliGene, Ltd.(3)*
   10.50   Subscription Agreement dated April 17, 1995, between Ribozyme
           Pharmaceuticals and Parke-Davis Division of Warner-Lambert Company(1)
   10.51   Stock Purchase Agreement dated June 28, 1995, among Ribozyme
           Pharmaceuticals and investors(1)
   10.52   Agreement dated March 1, 1996, between Ribozyme Pharmaceuticals and
           DowElanco Corporation relating to the conversion of preferred
           stock(1)
   10.53   Stock Subscription Agreement dated October 30, 1995, between Ribozyme
           Pharmaceuticals and Gewestelijke


                                      25
<PAGE>

                Investeringsmaatschappij voor Vlaanderon n.v.(1)
     10.54      Research, License, Supply and Royalty Agreement between Schering
                Aktiengesellschaft and Ribozyme Pharmaceuticals dated April 9,
                1997(4)*
     10.55      Purchase Agreement dated April 9, 1997, among Ribozyme
                Pharmaceuticals, Schering Berlin Venture Corporation and
                Schering Aktiengesellschaft(4)*
     10.56      Employment Agreement dated February 27, 1997, between Ribozyme
                Pharmaceuticals and Alene Holzman(5)
     10.57      Employment Agreement dated July 5, 1997, between Ribozyme
                Pharmaceuticals and Thomas Rossing(5)
     10.58      Executive Bonus Plan dated March 27, 1998(6)
     10.59      Research, Collaboration and License Agreement dated May 19,
                1998, between Ribozyme Pharmaceuticals and Roche Bioscience, a
                division of Syntex (U.S.A.) Inc.(7)*
     10.60      Employment Agreement dated September 8, 1998, between Ribozyme
                Pharmaceuticals and Nassim Usman(8)
     10.61      Participation Agreement dated August 31, 1998, as amended, and
                related documents between Ribozyme Pharmaceuticals and Atugen
                Biotechnology GmbH(9)*
     10.62      Research Collaboration and License Agreement dated March 17,
                1999, between Ribozyme Pharmaceuticals and Eli Lilly and
                Company* (10)
     10.63      Stock Purchase Agreement dated April 30, 1999, between Ribozyme
                Pharmaceuticals and Eli Lilly and Company (10)
     10.64      Employment Agreement dated May 10, 1999 between Ribozyme
                Pharmaceuticals and Dr. Wayne Cowens (10)
     10.65      Securities Purchase Agreement dated January 7, 2000, among
                Ribozyme Pharmaceuticals, Elan International Services, Ltd. and
                Elan Corporation, plc (11)
     10.66**    License Agreement dated January 7, 2000 among Elan
                Pharmaceutical Technologies (a division of Elan Corporation,
                plc), Elan Pharma International Limited and Medizyme
                Pharmaceuticals, Ltd. (11)*
     10.67      Warrant dated January 7, 2000, issued to Elan International
                Services, Ltd. to purchase up to 200,000 shares of Ribozyme
                Pharmaceuticals' common stock (11)
     10.68      Warrant dated January 7, 2000 issued to Elan International
                Services Ltd. to purchase up to 300,000 shares of Ribozyme
                Pharmaceuticals' common stock (11)
     10.69      Convertible Promissory Note dated January 7, 2000, from Ribozyme
                Pharmaceuticals to Elan International Services, Ltd. (11)
     10.70**    Subscription, Joint Development and Operating Agreement dated
                January 7, 2000, among Ribozyme Pharmaceuticals, Elan
                Corporation, plc, Elan Pharma International Limited, Elan
                International Services, Ltd. and Medizyme Pharmaceuticals, Ltd.
                (11)*
     10.71      Funding Agreement dated January 7, 2000 among Ribozyme
                Pharmaceuticals, Elan Pharmaceutical Technologies (a division of
                Elan Corporation, plc), Elan Pharma International Limited and
                Elan International Services, Ltd. (11)
     10.72**    License Agreement dated January 7, 2000, among Ribozyme
                Pharmaceuticals and Medizyme Pharmaceuticals, Ltd. (11)*
     10.73      Registration Rights Agreement dated January 7, 2000, between
                Ribozyme Pharmaceuticals and Elan International Services, Ltd.
                (11)
     10.74      Registration Rights Agreement dated January 7, 2000 among
                Ribozyme Pharmaceuticals, Elan International Services, Ltd. and
                Medizyme Pharmaceuticals Ltd. (11)
     10.75**    Agreement dated January 31, 2000, between Ribozyme
                Pharmaceuticals and Avecia Limited (11)*
     10.76      Employment Agreement dated July 6, 2000 between Ribozyme
                Pharmaceuticals and Dr. Nassim Usman (12)
     10.77      Employment Agreement dated July 6, 2000, between Ribozyme
                Pharmaceuticals and Dr. Lawrence Blatt (12)
     10.78      Repurchase of Ribozyme Product agreement dated September 28,
                2000 between Ribozyme Pharmaceuticals and Eli Lilly and Company
                (13)*
     10.79      Common Stock Purchase Agreement dated December 29, 2000 by and
                between Ribozyme Pharmaceuticals, Inc. and Acqua Wellington
                North America Equities Fund, Ltd. (15)
     10.80      Employment Agreement dated January 4, 2001 between Ribozyme
                Pharmaceuticals and Howard Robin
      23.1      Consent of Ernst & Young LLP, Independent Auditors

----------------
*   Ribozyme Pharmaceuticals has applied for and received confidential
    treatment with respect to portions of these exhibits.

**  Ribozyme Pharmaceuticals has applied for confidential treatment with
    respect to portions of these exhibits.

(1) Documents incorporated by reference herein to certain exhibits to Ribozyme
    Pharmaceuticals' Form SB-2 Registration Statement, File No. 333-1908-D.

(2) Documents incorporated by reference herein to certain exhibits to Ribozyme
    Pharmaceuticals' Form 10-QSB for the


                                      26
<PAGE>

    quarter ended June 30, 1996.

(3) Documents incorporated by reference herein to certain exhibits to Ribozyme
    Pharmaceuticals' Form 10-KSB for the year ended December 31, 1996.

(4) Documents incorporated by reference herein to certain exhibits to Ribozyme
    Pharmaceuticals' Form 8-K dated June 12, 1997.

(5) Documents incorporated by reference herein to certain exhibits to Ribozyme
    Pharmaceuticals' Form SB-2 Registration Statement, File No. 333-34981.

(6) Documents incorporated by reference herein to certain exhibits to Ribozyme
    Pharmaceuticals' Form 10-K for the year ended December 31, 1997.

(7) Documents incorporated by reference herein to certain exhibits to Ribozyme
    Pharmaceuticals' Form 10-Q/A for the quarter ended June 30, 1998.

(8) Documents incorporated by reference herein to certain exhibits to Ribozyme
    Pharmaceuticals' Form 10-Q for the quarter ended September 30, 1998.

(9) Documents incorporated by reference herein to certain exhibits to Ribozyme
    Pharmaceuticals' Form 8-K/A dated June 16, 1999.

(10) Documents incorporated by reference herein to certain exhibits to Ribozyme
     Pharmaceuticals' Form S-1 Registration Statement, File No. 333-75079.

(11) Documents incorporated by reference herein to certain exhibits to Ribozyme
     Pharmaceuticals' Form 8-K dated February 8, 2000.

(12) Documents incorporated by reference herein to certain exhibits to Ribozyme
     Pharmaceuticals' Form 10-Q for the quarter ended June 30, 2000.


(13) Documents incorporated by reference herein to certain exhibits to Ribozyme
     Pharmaceuticals' Form 8-K dated September 28, 2000.

(14) Documents incorporated by reference herein to certain exhibits to Ribozyme
     Pharmaceuticals' Form 8-K dated November 22, 2000.

(15) Documents incorporated by reference herein to certain exhibits to Ribozyme
     Pharmaceuticals' Form 8-K dated December 29, 2000.

(b)  REPORTS ON FORM 8-K

        A report on Form 8-K was filed on September 28, 2000 announcing the
Repurchase of Ribozyme Product Agreement with Eli Lilly and Company.

        A report on Form 8-K was filed on November 22, 2000 announcing the
Company's adoption of a Shareholder Rights Plan.

        A report on Form 8-K was filed on December 29, 2000 announcing the Stock
Purchase Agreement entered into with Acqua Wellington North American Fund, Ltd.


                                       27
<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized in Boulder, Colorado,
on March 29, 2001.

                                       RIBOZYME PHARMACEUTICALS, INC.


                                       By:   /s/ Ralph E. Christoffersen
                                          -------------------------------------
                                             Ralph E. Christoffersen, Ph.D.
                                             Chief Executive Officer and
                                             President

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

<TABLE>
<CAPTION>
           Signature                                             Title                                         Date
           ---------                                             -----                                         ----
<S>                                              <C>                                                    <C>

     /s/ RALPH E. CHRISTOFFERSEN                 Chief Executive Officer and President (Principal          March 29, 2001
------------------------------------------       Executive Officer)
     Ralph E. Christoffersen, Ph.D.


        /s/ LAWRENCE E. BULLOCK                  Vice President, Administration Finance, Chief             March 29, 2001
------------------------------------------       Financial Officer and Secretary (Principal Financial
         Lawrence E. Bullock                     and Accounting Officer)


        /s/ DAVID T. MORGENTHALER                Chairman of the Board of Directors                        March 29, 2001
------------------------------------------
          David T. Morgenthaler


          /s/ JEREMY C. COOK                     Director                                                  March 29, 2001
------------------------------------------
            Jeremy C. Cook


           /s/ JOHN GROOM                        Director                                                  March 29, 2001
------------------------------------------
             John Groom


         /s/ DAVID ICHIKAWA                      Director                                                  March 29, 2001
------------------------------------------
            David Ichikawa


         /s/ SAMUEL R. SAKS                      Director                                                  March 29, 2001
------------------------------------------
         Samuel R. Saks, M.D.


         /s/ ANDERS WIKLUND                      Director                                                  March 29, 2001
------------------------------------------
            Anders Wiklund
</TABLE>

                                       28
<PAGE>

                        REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors
Ribozyme Pharmaceuticals, Inc.

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

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

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


                                        /s/ Ernst & Young LLP

Denver, Colorado
February 23, 2001

                                      F-1
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.
                                BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                        December 31
                                                                                                ------------------------------
                                                                                                    2000              1999
                                                                                                ------------      ------------
<S>                                                                                             <C>               <C>
                                              ASSETS
                                              ------
Current assets:
  Cash and cash equivalents................................................................     $ 32,170,518      $  9,749,822
  Securities available-for-sale............................................................       32,304,162         4,250,259
  Accounts receivable......................................................................        1,278,161         1,545,164
  Accounts receivable--joint venture.......................................................        1,972,788                 -
  Accounts receivable--related parties.....................................................          344,934           484,729
  Notes receivable--related parties........................................................          101,437           138,903
  Prepaid expenses and other...............................................................          176,186           117,668
                                                                                                ------------      ------------
     Total current assets..................................................................       68,348,186        16,286,545
Property, plant, and equipment:
  Machinery and equipment..................................................................        7,867,836         7,330,368
  Leasehold improvements...................................................................        3,913,222         3,763,515
  Office furniture and equipment...........................................................        1,859,389         1,157,907
                                                                                                ------------      ------------
                                                                                                  13,640,447        12,251,790
Accumulated depreciation...................................................................      (10,074,081)       (8,447,884)
                                                                                                ------------      ------------
                                                                                                   3,566,366         3,803,906
Notes receivable--related parties..........................................................          214,750           313,750
Deferred patent costs, net of accumulated amortization (2000-$574,288; 1999-$379,558)......        4,858,036         4,231,307
Investment in joint venture................................................................        6,373,545                 -
Other assets...............................................................................          536,110           456,591
                                                                                                ------------      ------------
Total assets...............................................................................     $ 83,896,993      $ 25,092,099
                                                                                                ============      ============

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

Current liabilities:
  Accounts payable--trade..................................................................     $  1,085,197      $    974,309
  Accrued wages............................................................................          214,003           198,100
  Accrued liabilities......................................................................        1,646,810           428,053
  Deferred revenue, current portion--related parties.......................................          400,000           400,000
  Current portion of long-term debt........................................................                -           200,455
                                                                                                ------------      ------------
     Total current liabilities.............................................................        3,346,010         2,200,917
Deferred revenue, long-term portion--related parties.......................................          800,006         1,200,001
Convertible debt--joint venture............................................................        2,743,213                 -
Convertible debt--related parties..........................................................        1,013,333         6,810,537

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.01 par value; 5,000,000 shares authorized;
  Series A convertible exchangeable, 12,015 and no shares issued and outstanding at
   December 31, 2000 and 1999, respectively (preference in liquidation of $12,015,000).....              120                 -
  Series L convertible, 0 and 5 shares issued and outstanding at December 31, 2000 and
   1999, respectively......................................................................                -                 -
  Accreted preferred stock dividend........................................................          716,456                 -
  Common stock, $.01 par value; 60,000,000 shares authorized; 16,261,477 and 11,263,252
   shares issued and outstanding at December 31, 2000 and 1999, respectively...............          162,615           112,633

Additional paid-in capital.................................................................      175,099,769        98,894,100
Accumulated deficit........................................................................      (99,964,629)      (84,083,072)
Unrealized loss on securities available-for-sale...........................................           (5,424)           (2,399)
Deferred compensation......................................................................          (14,476)          (40,618)
                                                                                                ------------      ------------
     Total stockholders' equity............................................................       75,994,431        14,880,644
                                                                                                ------------      ------------
     Total liabilities and stockholders' equity............................................     $ 83,896,993      $ 25,092,099
                                                                                                ============      ============
</TABLE>

                            See accompanying notes.

                                      F-2
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                           STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                  Year  ended December 31
                                                                        -------------------------------------------
                                                                            2000           1999           1998
                                                                        ------------   ------------   ------------
<S>                                                                     <C>            <C>            <C>
Revenues:
  Collaborative agreements............................................  $  8,301,545   $  5,797,456   $  8,962,813
  Collaborative agreements--joint venture.............................     6,052,429              -              -
  Collaborative agreements--related parties...........................     1,191,338      1,866,942              -
                                                                        ------------   ------------   ------------
     Total revenues...................................................    15,545,312      7,664,398      8,962,813
Expenses:
  Research and development............................................    21,721,055     15,394,602     16,941,652
  General and administrative..........................................     3,723,158      2,132,252      1,812,860
                                                                        ------------   ------------   ------------
     Total expenses...................................................    25,444,213     17,526,854     18,754,512
Operating loss........................................................    (9,898,901)    (9,862,456)    (9,791,699)
Other income (expense):
  Interest income.....................................................     3,195,989        614,045        634,569
  Interest expense....................................................      (150,840)      (551,954)      (703,711)
  Other income........................................................         4,000              -         25,045
  Equity in loss of unconsolidated affiliates.........................    (9,031,805)      (860,216)    (1,081,771)
                                                                        ------------   ------------   ------------
     Total other expense..............................................    (5,982,656)      (798,125)    (1,125,868)
                                                                        ------------   ------------   ------------
Net loss..............................................................   (15,881,557)   (10,660,581)   (10,917,567)
Accretion of dividends on preferred stock.............................       716,456              -              -
Net loss applicable to common stock...................................  $(16,598,013)  $(10,660,581)  $(10,917,567)
                                                                        ============   ============   ============
Net loss per share (basic and diluted)................................  $      (1.15)  $      (1.05)  $      (1.22)
Shares used in computing net loss per share...........................    14,390,068     10,158,244      8,978,355
</TABLE>



                            See accompanying notes.

                                      F-3
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                      STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>


                                                                     Common Stock        Preferred Stock                Additional
                                                                ---------------------   -----------------   Accreted      Paid-In
                                                                  Shares      Amount     Shares    Amount   Dividend      Capital
                                                                ----------   --------   --------   ------   --------   ------------
<S>                                                             <C>          <C>        <C>        <C>      <C>        <C>
Balance at December 31, 1997..................................   8,607,022   $ 86,070          -   $    -          -   $ 81,424,341
Issuance of common stock for cash.............................     465,117      4,651          -        -          -      2,495,349
Issuance of common stock under stock option,
  employee stock purchase and 401(k) plans....................     109,316      1,094          -        -          -        543,524
Compensation for issuance of common stock and options.........           -          -          -                            (29,001)
Net loss......................................................           -          -          -        -          -              -
Change in unrealized loss on securities available-for-sale....           -          -          -        -          -              -

Comprehensive loss............................................
                                                                ----------   --------   --------   ------   --------   ------------

Balance at December 31, 1998..................................   9,181,455     91,815          -        -          -     84,434,213
Issuance of common stock for cash--public offering,
 net of issuance costs of $976,588............................   1,800,000     18,000          -        -          -      5,305,412
Issuance of preferred stock for cash..........................           -          -          5        -          -      7,500,000
Issuance of common stock and warrants in exchange
 for patents..................................................     160,000      1,600          -        -          -      1,039,140
Issuance of common stock under stock option,
  employee stock purchase and 401(k) plans....................     121,797      1,218          -        -          -        575,981
Expense for repricing warrants................................           -          -          -        -          -         42,222
Compensation for issuance of common stock and options.........           -          -          -        -          -         (2,868)
Net loss......................................................           -          -          -        -          -              -
Change in unrealized loss on securities.......................           -          -          -        -          -              -

Comprehensive loss............................................
                                                                ----------   --------   --------   ------   --------   ------------

Balance at December 31, 1999..................................  11,263,252    112,633          5        -          -     98,894,100
Issuance of common stock for cash--public offering,
 net of issuance costs of $3,886,887..........................   3,150,000     31,500          -        -          -     52,841,653
Issuance of common stock for cash--Elan Corporation,
 net of issuance costs of $38,547.............................     641,026      6,410          -        -          -      4,954,099
Issuance of preferred stock for cash..........................           -          -     12,015      120          -     12,014,880
Issuance of common stock for cash--Eli Lilly & Company........     252,632      2,526          -        -          -      2,997,474
Conversion of convertible preferred stock for common shares...     636,640      6,366         (5)       -          -         (6,366)
Conversion of convertible debt for common shares..............      42,435        424          -        -          -        996,781
Issuance of common stock upon the exercise of warrants........      20,250        203          -        -          -           (203)
Issuance of common stock under stock option,
  employee stock purchase and 401(k) plans....................     255,242      2,553          -        -          -      1,394,358
Expense for vesting of performance stock options..............           -          -          -        -          -      1,732,198
Compensation for issuance of common stock options.............           -          -          -        -          -         (2,749)
Preferred stock dividends accrued.............................           -          -          -        -    716,456       (716,456)
Net loss......................................................           -          -          -        -          -              -
Change in unrealized loss on securities.......................           -          -          -        -          -              -

Comprehensive loss............................................
                                                                ----------   --------   --------   ------   --------   ------------
Balance at December 31, 2000..................................  16,261,477   $162,615     12,015   $  120   $716,456   $175,099,769
                                                                ==========   ========   ========   ======   ========   ============

<CAPTION>


                                                                               Unrealized
                                                                Accumulated      Loss on      Deferred
                                                                  Deficit      Securities   Compensation      Total
                                                                ------------   ----------   ------------   ------------
<S>                                                             <C>            <C>          <C>            <C>
Balance at December 31, 1997..................................  $(62,504,924)  $   (5,064)  $   (130,312)  $ 18,870,111
Issuance of common stock for cash.............................             -            -              -      2,500,000
Issuance of common stock under stock option,
  employee stock purchase and 401(k) plans....................             -            -              -        544,618
Compensation for issuance of common stock and options.........             -            -         61,163         32,162
Net loss......................................................   (10,917,567)           -              -    (10,917,567)
Change in unrealized loss on securities available-for-sale....             -        5,064              -          5,064
                                                                                                           ------------
Comprehensive loss............................................                                              (10,912,503)
                                                                ------------   ----------   ------------   ------------

Balance at December 31, 1998..................................   (73,422,491)           -        (69,149)    11,034,388
Issuance of common stock for cash--public offering,
 net of issuance costs of $976,588............................             -            -              -      5,323,412
Issuance of preferred stock for cash..........................             -            -              -      7,500,000
Issuance of common stock and warrants in exchange
 for patents..................................................             -            -              -      1,040,740
Issuance of common stock under stock option,
  employee stock purchase and 401(k) plans....................             -            -              -        577,199
Expense for repricing warrants................................             -            -              -         42,222
Compensation for issuance of common stock and options.........             -            -         28,531         25,663
Net loss......................................................   (10,660,581)           -              -    (10,660,581)
Change in unrealized loss on securities.......................             -       (2,399)             -         (2,399)
                                                                                                           ------------
Comprehensive loss............................................                                              (10,662,980)
                                                                ------------   ----------   ------------   ------------

Balance at December 31, 1999..................................   (84,083,072)      (2,399)       (40,618)    14,880,644
Issuance of common stock for cash--public offering,
 net of issuance costs of $3,886,887..........................             -            -              -     52,873,153
Issuance of common stock for cash--Elan Corporation,
 net of issuance costs of $38,547.............................             -            -              -      4,960,509
Issuance of preferred stock for cash..........................             -            -              -     12,015,000
Issuance of common stock for cash--Eli Lilly & Company........             -            -              -      3,000,000
Conversion of convertible preferred stock for common shares...             -            -              -              -
Conversion of convertible debt for common shares..............             -            -              -        997,205
Issuance of common stock upon the exercise of warrants........             -            -              -              -
Issuance of common stock under stock option,
  employee stock purchase and 401(k) plans....................             -            -              -      1,396,911
Expense for vesting of performance stock options..............             -            -              -      1,732,198
Compensation for issuance of common stock options.............             -            -         26,142         23,393
Preferred stock dividends accrued.............................             -            -              -              -
Net loss......................................................   (15,881,557)           -              -    (15,881,557)
Change in unrealized loss on securities.......................             -       (3,025)             -         (3,025)
                                                                                                           ------------
Comprehensive loss............................................                                              (15,884,582)
                                                                ------------   ----------   ------------   ------------
Balance at December 31, 2000..................................  $(99,964,629)  $   (5,424)  $    (14,476)  $ 75,994,431
                                                                ============   ==========   ============   ============
</TABLE>

                            See accompanying notes.

                                      F-4
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                           STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                        Year ended December 31
                                                                              ------------------------------------------
                                                                                  2000           1999           1998
                                                                              ------------   ------------   ------------
<S>                                                                           <C>            <C>            <C>
Operating activities
Net loss....................................................................  $(15,881,557)  $(10,660,581)  $(10,917,567)
Adjustments to reconcile net loss to net cash used by operating activities:
 Depreciation...............................................................     1,626,197      1,544,142      1,670,825
 Amortization...............................................................       194,730        108,230         92,107
 Equity in loss of unconsolidated affiliates................................     9,031,805        860,216      1,081,771
 Write-off of deferred patent costs.........................................             -         50,232         11,836
 Compensation related to common stock and options...........................     1,975,189        223,337        278,150
 Compensation related to issuance of affiliate's stock......................             -              -         81,000
 Compensation for forgiveness of notes receivable--related parties..........       136,466        102,466        126,466
 Expense related to warrant repricing.......................................             -         42,222              -
 Gain on sale of investment in corporate partner............................             -              -        (25,045)
 Loss on disposal of equipment..............................................             -              -            541
 Accrued interest included in convertible debt--related parties.............       141,864        465,925        291,723
 Recognition of deferred revenue--related parties...........................      (399,995)      (399,999)             -
 Changes in operating assets and liabilities:
  Accounts receivable.......................................................    (1,565,990)     1,868,688     (3,890,537)
  Prepaid expenses and other................................................       (58,518)       (32,902)        90,783
  Other assets..............................................................       (79,519)         3,924        (18,087)
  Accounts payable--trade...................................................       110,888        223,795       (154,167)
  Accrued wages and liabilities.............................................     1,234,660        230,010        150,186
  Deferred revenue--related parties.........................................             -              -      2,000,000
                                                                              ------------   ------------   ------------
Net cash used by operating activities.......................................    (3,533,780)    (5,370,295)    (9,130,015)

Investing activities
Additions to property, plant, and equipment.................................    (1,388,657)    (1,125,854)      (936,395)
Additions to deferred patent costs..........................................      (821,461)      (415,254)      (506,994)
Purchase of Innovir patents.................................................             -        (28,200)             -
Sale of investment in corporate partner.....................................             -              -        275,045
Net (purchases) sales of securities available-for-sale......................   (28,056,928)    (4,252,657)       804,680
Initial investment in unconsolidated affiliate..............................   (12,015,000)             -     (2,022,987)
Additional investment in joint venture......................................    (3,390,350)             -              -
Transfer of restricted cash.................................................             -              -         52,669
Loan repayments--related parties............................................             -         33,000          1,875
Loan advances--related parties..............................................             -       (307,187)       (50,000)
                                                                              ------------   ------------   ------------
Net cash used by investing activities.......................................   (45,672,396)    (6,096,152)    (2,382,107)

Financing activities
Net proceeds from sale of common stock and exercised warrants...............    74,025,976     13,202,936      2,798,630
Payments under loan facilities..............................................    (7,100,455)      (498,179)    (2,077,771)
Borrowings under loan facilities............................................     4,701,351      2,000,000      2,000,000
                                                                              ------------   ------------   ------------
Net cash provided by financing activities...................................    71,626,872     14,704,757      2,720,859
                                                                              ------------   ------------   ------------
Net increase (decrease) in cash and cash equivalents........................    22,420,696      3,238,310     (8,791,263)
Cash and cash equivalents at beginning of year..............................     9,749,822      6,511,512     15,302,775
                                                                              ------------   ------------   ------------
Cash and cash equivalents at end of year....................................  $ 32,170,518   $  9,749,822   $  6,511,512
                                                                              ============   ============   ============
</TABLE>

                            See accompanying notes.

                                      F-5
<PAGE>

                         RIBOZYME PHARMACEUTICALS, INC.

                         NOTES TO FINANCIAL STATEMENTS

                               December 31, 2000

1.   Summary of Significant Accounting Policies


Description of Business

     Ribozyme Pharmaceuticals, Inc. (RPI or the Company) was founded in 1992 to
capitalize on the broad potential of ribozymes for use in the development of
human therapeutics and therapeutic target validation services. To date, the
Company has engaged in the research and development of its ribozyme technology
and has experienced significant operating losses in each fiscal year since
inception. The Company has not generated any revenue from the commercialization
of its ribozyme technology and it expects to continue to incur significant
operating losses over at least the next several years.


Capital Requirements and Management's Plans

     The Company incurred a net loss of $15,881,557 for the year ended December
31, 2000 and has an accumulated deficit of $99,964,629 at December 31, 2000.
Development of the Company's products will require a commitment of substantial
additional funds to conduct the costly and time-consuming research, preclinical
and clinical testing necessary to bring its proposed products to market and to
establish manufacturing and marketing capabilities. The Company's future capital
requirements will depend on many factors, including, among others, the progress
of the Company's research, development and drug discovery efforts, the ability
of the Company to establish collaborative arrangements for clinical testing,
progress with preclinical studies and clinical trials, the time and costs
involved in obtaining regulatory approvals, the costs involved in preparing,
filing, prosecuting, maintaining, defending and enforcing patent claims,
competing technological and market developments, changes in the Company's
existing research relationships, determination as to the commercial potential of
the Company's potential products, effective commercialization activities and
arrangements, and the cost and availability of third-party financing for capital
expenditures.


Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.


Financial Instruments

     Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents and short-
term investments. The Company places its cash equivalents and short-term
investments with high credit-quality financial institutions. The Company invests
its excess cash primarily in money market instruments, and municipal and
floating rate bonds. The Company has established guidelines relative to credit
ratings, diversification and maturities that seek to maintain safety and
liquidity. To date, the Company has not experienced significant losses on any of
these investments.


                                      F-6
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)


Cash and Cash Equivalents

     The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The Company's cash
equivalents are comprised of certificates of deposit, money market funds, and
investment securities.


Property, Plant, and Equipment

     Property, plant, and equipment is stated at cost. Depreciation is computed
by the straight-line method over the estimated useful lives of the assets.
Useful lives of laboratory equipment and furniture are estimated at five years
and all computer equipment is estimated at three years. Leasehold improvements
and equipment subject to financing obligations are amortized on a straight-line
basis over the shorter of their estimated useful lives or the term of the lease.


Deferred Patent Costs

     The Company capitalizes legal costs directly incurred in pursuing patent
applications as deferred patent costs. When such applications result in an
issued patent, the related costs are amortized over the remaining legal life of
the patents, using the straight-line method. On a quarterly basis, the Company
reviews its issued patents and pending patent applications, and if it determines
to abandon a patent application or that an issued patent no longer has economic
value, the unamortized balance in deferred patent costs relating to that patent
is immediately expensed.

     During 1999, the Company acquired certain pending and issued patents
through the issuance of common stock and warrants, valued at approximately $1.0
million. The cost of these patents has been capitalized and is being treated
consistent with the policies discussed above.

     It is possible the above estimates of future economic life of the Company's
commercialization revenues, the amount of anticipated future commercialization
revenues, or both, will be reduced significantly in the near term due to
alternative technologies developed by other biotechnology or pharmaceutical
companies. As a result, the carrying amount of deferred patent costs may be
reduced in the future.


Revenue Recognition and Accounts Receivable

     Revenue from collaborative agreements typically consists of nonrefundable
up-front fees, ongoing research and development funding and milestone, license
fees and other payments. Revenue from nonrefundable up-front fees is recognized
upon signing of the agreement. Revenue from ongoing research and development
funding is recorded as the expenses are incurred. Revenue from milestone,
license fees and other payments will be recognized when earned. Payments
received in advance under these agreements are recorded as deferred revenue
until earned. The Company has no further research commitments from our
collaborators for any revenue recognized. The Company's accounts receivable are
predominately collaborative agreement receivables, and to date, the Company has
not experienced any losses with respect to the collection of its accounts
receivables.

     In 2000, 1999 and 1998, Chiron accounted for approximately 29%, 52% and 70%
of collaborative revenues, respectively. In 2000 Medizyme accounted for
approximately 39% of collaborative revenues. Revenues from Chiron and Medizyme
were for nonrefundable, ongoing research and development fees.


Research and Development Expenses

     Research and development costs are expensed as incurred.


                                      F-7
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)


Accounting for Investments in Affiliates

     The Company accounts for its investments in Medizyme Pharmaceuticals,
Ltd. (Medizyme) and Atugen under the equity method.  The Company has recorded
its share of Medizyme's net losses against its cost basis.  In 1999, the Company
had absorbed its entire cost basis in Atugen through its share of Atugen's net
losses and since the Company has no other funding commitments to Atugen the
Company has ceased recording it share of Atugen's net losses.


Reclassifications

     Certain amounts in the December 31, 1999 and 1998 financial statements were
reclassified to conform with the December 31, 2000 presentation. These
reclassifications had no impact on the reported results of operations.


Impact of Recently issued Accounting Standards

     In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. As amended,
SAB 101, outlines the basic criteria that must be met in order to recognize
revenue and provides guidance for disclosures related to revenue recognition
policies, including revenue earned from collaborations between companies. The
SEC deferred the implementation date of SAB 101 until the quarter ended December
31, 2000, with retroactive application to the beginning of the Company's
calendar year. The Company believes that revenue recorded through December 31,
2000 complies with SAB 101.

  In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 138, which was
issued in June 2000.  SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction.  The Company has no
derivative instruments and therefore the adoption of SFAS No. 133 had no effect
on the Company's financial statements.

     In March 2000, the FASB issued Financial Interpretation No. 44 (FIN 44),
"Accounting for Certain Transactions Involving Stock Compensation." FIN 44
clarifies the application of Accounting Principles Board (APB) Opinion No. 25
for certain issues, such as the definition of an employee for purposes of
applying APB Opinion No. 25, the criteria for determining whether a plan
qualifies as a noncompensatory plan, the accounting consequence of various
modifications to the terms of a previously fixed stock option or award and the
accounting for an exchange of stock compensation awards in a business
combination. Adoption of FIN 44 did not change the Company's existing accounting
policies or disclosures.


2. Securities Available-for-Sale

     At December 31, 2000 and 1999 management determined that certain marketable
securities held by the Company  were available-for-sale. Securities available-
for-sale are carried at fair value, with unrealized gains and losses reported as
a component of stockholders' equity. The amortized cost of debt securities in
this category is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization is included in investment income.
Realized gains and losses and declines in value judged to be other-than-
temporary on securities available-for-sale are included in investment income.
Interest and dividends on securities available-for-sale are included in
investment income. The cost of securities sold is based on the specific
identification method. There were no gross realized gains or losses on sales of
securities available-for-sale in 2000, 1999 or 1998.


                                     F-8
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)


3.   Long-Term Debt

        Long-term debt as of December 31, 2000 and 1999, consists of the
following:

                                                       2000            1999
                                                       ----            ----
     Equipment loan (I)............................ $        -      $  200,455
     Convertible debt--related parties (II)........  1,013,333       6,810,537
     Convertible debt--joint venture (III).........  2,743,213               -
                                                    ----------      ----------
                                                    $3,756,546      $7,010,992
                                                    ==========      ==========

I.      In December 1995, the Company negotiated an equipment credit facility of
        $2,000,000 with a financial institution. The facility commitment was
        terminated on June 30, 1997. The agreement required monthly principal
        and interest payments through November 2000 at which time the loan was
        paid off. The interest rate on these borrowings was 12% at December 31,
        1999.
II.     In April 1997, the Company entered into a collaboration agreement with a
        corporate partner whereby, among other items, the Company may borrow
        from the corporate partner up to $2.0 million annually through 2001. The
        loans are collateralized 50% by equipment purchases. The loans carry an
        interest rate of 8% per annum and under certain circumstances are
        convertible into equity at the option of the corporate partner.
        Principal and interest payments on the loans are deferred until maturity
        of the loans which is in April 2004. In April 2000, the Company paid
        down $6.9 million of the outstanding debt with proceeds from a public
        offering. In June 2000, the corporate partner elected to convert the
        remaining balance of approximately $997,000 into 42,435 shares of the
        Company's common stock. In October 2000, the Company took an additional
        $1.0 million draw down on the debt facility. The collaboration and loan
        facility may be terminated at the option of the corporate partner any
        time.
III.    In January 2000, the Company entered into a joint venture agreement with
        a corporate partner for the development and commercialization of a
        potential product to treat breast and other cancers. The development of
        the drug will require funds of up to $15 million and therefore the
        corporate partner has made available to the Company a convertible
        promissory note to fund up to $12,015,000 of development expenses
        through January 2006. The note carries an interest rate of 12%
        compounded on a semi-annual basis. At the sole discretion of the
        corporate partner, the note is convertible into the Company's Series B
        Preferred Convertible Stock. In lieu of conversion, principal and
        interest payments on the note are deferred until the note matures in
        January 2006.

        Cash paid for interest for the years ended December 31, 2000, 1999 and
1998 was $892,199, $84,029 and $411,988, respectively. At December 31, 2000 the
carrying amounts of the Company's long-term debt approximates the fair value as
all borrowings bear interest rates which are comparable to the current market
rate for such borrowings.

As of December 31, 2000, maturities of long-term debt are as follows:


                                                      Amount
                                                      ------
     2001.......................................    $        -
     2002.......................................             -
     2003.......................................             -
     2004.......................................     1,013,333
     2005.......................................             -
           Thereafter...........................     2,743,213
                                                    ----------
                                                    $3,756,546
                                                    ==========


4.   Leases

        The Company leases office space in two buildings under noncancelable
operating leases that expire in October 2006 and June 2007. According to the
terms of the leases, rent for the buildings will increase each year based on
Consumer Price Index increases, with a minimum of 3.5% and a maximum of 6.0%.
Total rent expense, including miscellaneous laboratory equipment rentals, was
$453,686, $398,452 and $493,188 in 2000, 1999 and 1998, respectively.


                                     F-9
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)


     The Company's minimum operating lease commitments at December 31, 2000 are
as follows:


           2001........................................   $  917,064
           2002........................................      935,176
           2003........................................      939,094
           2004........................................      954,376
           2005........................................      974,457
           2006 and thereafter.........................    1,083,120
                                                          ----------
                                                          $5,803,287
                                                          ==========

           Under a separate agreement, the Company subleases a portion of their
building to Atugen, an unconsolidated affiliate.  The sublease expires in
October 2002.  Rental income from Atugen for 2000 and 1999 was $102,577 and
$73,123, respectively.  Estimated rental income for 2001 is $190,000 and rent
for 2002 will increase subject to the terms of the Company's master lease for
the building.

5.   Stockholders' Equity

           Employee Stock Purchase Plan  The Company adopted an Employee Stock
Purchase Plan (the Purchase Plan), authorizing the issuance of 300,000 shares
pursuant to purchase rights granted to employees of the Company. The Purchase
Plan provides a means by which employees purchase common stock of the Company
through payroll deductions. The Purchase Plan is implemented by offerings of
rights to eligible employees. Generally, each offering is twenty-four months'
duration with purchases occurring on each October 31 and April 30 during each
offering. Common stock is purchased for accounts of employees participating in
the Purchase Plan at a price per share equal to the lower of (i) 85% of the fair
market value of a share of common stock on the date of commencement of
participation in the offering or (ii) 85% of the fair market value of a share of
common stock on the date of purchase. Generally all regular employees, including
executive officers, may participate in the Purchase Plan and may authorize
payroll deduction of up to 15% of their base compensation for the purchase of
stock under the Purchase Plan. The Company's Board of Directors has the
authority to terminate the Purchase Plan at its discretion. Shares are deemed
issued for accounting purposes in the year the shares are purchased.  As of
December 31, 2000, 222,513 shares have been issued under the Purchase Plan.

           Stock Option Plans  The Company has established a Non-Qualified Stock
Option Plan and an Incentive Stock Option Plan (collectively, the Plans, as
amended), under which it authorized stock option grants to purchase up to
2,767,154 shares of the Company's common stock to eligible employees,
consultants, and other individuals, as defined in the Plans. Options to purchase
the Company's common stock are exercisable at a price as determined by the Board
of Directors at the time the option is granted, which shall not be less than
100% of the fair market value (110% in the case of 10 percent shareholders) at
the date of grant. Vesting rights are determined by the Board of Directors at
the time the option is granted and generally past options became exercisable at
twenty percent at the end of each of years one through five. However, in
December 2000 the Board of Directors approved future vesting of grants at
twenty-five percent at the end of each of years one through four.  If not
exercised, the options expire after ten years. The Board of Directors has also
granted certain employees options vesting upon achievement of certain contingent
milestone events.

           During the third quarter of 1998, the Company offered a repricing of
existing stock options to all of its current employees. Pursuant to the offer,
all non-executive employees were allowed to exchange each existing stock option
for a newly priced stock option one for one, with the new stock options having
an exercise price equal to the current market price of the underlying common
stock. If exchanged, the vesting term would start over beginning on the date of
exchange. A similar offer was given to all executives, except the options were
exchanged at a one for .75 ratio. As a result of the offer, 890,921 options were
canceled and 747,060 options were granted, effective September 18, 1998.


                                     F-10
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)


     Changes in stock options for the years ended December 31, 2000, 1999 and
1998 were as follows:

<TABLE>
<CAPTION>
                                                                                                       Exercise
                                                                                  Options                Price
                                                                                  -------              --------
<S>                                                                             <C>                 <C>
Outstanding at December 31, 1997........................................          1,218,890          $ .45--$15.25
Options granted.........................................................          1,174,560          $3.00--$ 8.13
Options exercised/canceled..............................................         (1,045,878)         $ .45--$15.25
                                                                                 ----------          -------------
Outstanding at December 31, 1998........................................          1,347,572          $ .45--$12.78
Options granted.........................................................            598,759          $4.13--$11.31
Options exercised/canceled..............................................           (213,891)         $ .45--$12.78
                                                                                 ----------          -------------
Outstanding at December 31, 1999........................................          1,732,440          $ .45--$12.78
Options granted.........................................................            619,510          $9.13--$58.75
Options exercised/cancelled.............................................           (276,037)         $ .45--$58.75
                                                                                 ----------          -------------
Outstanding at December 31, 2000........................................          2,075,913          $ .45--$31.25
                                                                                 ==========          =============
</TABLE>

     The weighted average exercise price of options outstanding at December 31,
2000, 1999 and 1998 was $8.83, $6.52 and $4.21, respectively.

     Stock options vest as follows:

<TABLE>
<CAPTION>
                                                                                                   Options
                                                                                                   -------
<S>                                                                                           <C>
Currently exercisable.......................................................................        724,316
2001........................................................................................        312,803
2002........................................................................................        277,185
2003........................................................................................        276,639
2004........................................................................................        161,598
2005 and thereafter.........................................................................         37,392
Contingent vesting..........................................................................        285,980
                                                                                                  ---------
  Total.....................................................................................      2,075,913
                                                                                                  =========
</TABLE>

     The following table summarizes information concerning outstanding and
exercisable options as of December 31, 2000:

<TABLE>
<CAPTION>
                                                                                                    Options
                                            Options Outstanding                                    Exercisable
                             ----------------------------------------------------         -------------------------------
                                                 Weighted
                                                  Average           Weighted                                 Weighted
           Range of            Number            Remaining           Average               Number             Average
        Exercise Price       outstanding       Contractual Life    Exercise Price         Exercisable      Exercise Price
      ----------------       -----------       ----------------    --------------         -----------      --------------
<S>                          <C>               <C>                 <C>                    <C>              <C>
       $0.45 -  $ 2.70            97,699             3.53              $ 1.73                  94,366          $ 1.70
       $3.00 -  $ 5.13           736,134             7.84                3.47                 338,712            3.33
       $5.25 -  $ 7.94           327,164             7.91                5.66                 178,836            5.63
       $8.13 -  $ 9.13           277,836             8.83                8.16                  80,212            8.20
      $10.06 -  $11.50           270,500             9.69               11.44                  17,690           10.88
      $12.06 -  $24.38           128,480             9.52               17.15                   3,900           12.78
      $24.69 -  $31.25           238,100             9.63               25.97                  10,600           25.96
                             -----------                                                  -----------

       $0.45 -  $31.25         2,075,913             8.33              $ 8.83                 724,316          $ 4.79
                             ===========             ====              ======             ===========          ======
</TABLE>


                                     F-11
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

     Stock Based Employee Compensation  The Company has elected to follow
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25), and related Interpretations in accounting for its employee
stock. Under APB 25, if the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. During 2000, 1999 and 1998, the Company
recorded $23,393, $25,663 and $32,162, respectively, of compensation relating to
the grant of stock options and the Anti-dilution Agreement, all of which relates
to pre-IPO issuances that have been deferred until vesting has been completed.
In addition, the Company recorded expense of $1.7 million during 2000 related to
performance stock options that vested due to achievement of specific performance
criteria during the year.

     Pro forma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be determined as
if the Company has accounted for its employee stock options under the fair value
method of SFAS 123. The fair value for these options was estimated at the date
of grant using a Black-Scholes option pricing model with the following weighted-
average assumptions for 2000, 1999 and 1998, respectively: risk-free interest
rates of 5.6%, 6.1% and 4.7%; a dividend yield of 0%; volatility factors of the
expected market price of the Company's common stock of 1.08, .971 and .967; and
a weighted-average expected life of the option of 6 years. The weighted average
fair value of stock options granted during 2000, 1999 and 1998 was $18.53, $5.42
and $4.04, respectively.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:

<TABLE>

                                                            2000                 1999                 1998
                                                        ------------         ------------         ------------
        <S>                                             <C>                  <C>                  <C>
        Pro forma net loss                              $(17,699,435)        $(12,071,278)        $(11,948,280)
        Pro forma net loss applicable to common stock   $(18,415,891)        $(12,071,278)        $(11,948,280)
        Pro forma loss per share (basic and diluted)    $      (1.28)        $      (1.19)        $      (1.33)
</TABLE>


     Equity Financing Facility  In November 2000, the Company signed an
agreement with Acqua Wellington North American Equities Fund Ltd. (Acqua
Wellington) to set up an equity financing facility covering the sale of up to
$60 million of the Company's common stock. The financing will be made pursuant
to a shelf registration filed by the Company with the Securities and Exchange
Commission (SEC) covering the sale of up to 3 million shares of its common
stock. The shelf registration was declared effective by the SEC in November
2000. The shares may be sold at the Company's discretion and as market
conditions warrant at a small discount to market at the time of sale. The
Company will control the quantity and timing of each incremental sale of stock.
Proceeds from the sale of stock will be used by the Company for general
corporate purposes.

     Shareholder Rights Plan  In November 2000, the Company adopted a
Shareholder Rights Plan (the Rights Plan) designed to protect and maximize
shareholder value and to assist the Board of Directors in ensuring fair and
equitable benefit to all shareholders in the event of a hostile bid to acquire
the Company. The Rights Plan imposes a significant penalty upon any person or
group that acquires 15 percent or more of the Company's outstanding common stock
without the approval of the RPI Board. Under the Rights Plan, a dividend of one
Preferred Stock Purchase Right was declared for each common share held of record
as of the close of business on December 8, 2000. The rights generally will not
become exercisable unless an acquiring entity accumulates or initiates a tender
offer to purchase 15 percent or more of the Company's common stock. In that
event, each right will entitle the holder, other than the unapproved acquirer
and its affiliates, to purchase either the Company's common stock or shares in
an acquiring entity at one-half of market value. The rights expire on December
8, 2010.

                                      F-12
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

     Common Stock Reserved  Below is a summary of common stock reserved by the
Company at December 31, 2000 for issuance upon the exercise of the various
options, warrants and the 401(k) plan and Purchase Plan.

<TABLE>
<CAPTION>
                                                                                                 SHARES
                                                                                                ---------
        <S>                                                                                     <C>
        Stock option plans...................................................................   2,360,296
        Employee stock purchase plan.........................................................      77,487
        Employee 401(k) stock match..........................................................     211,598
        Warrants at $12.00 per share (expires in 2006).......................................     350,000
        Warrants at $15.00 per share (expires in 2002).......................................     200,000
        Warrants at $15.75 per share (no expiration).........................................       1,270
        Warrants at $20.00 per share (expires in 2007).......................................     300,000
        Warrants at $22.50 per share (2,222 warrants expire in 2005, remainder in 2006)......     448,888
        Warrants at $40.50 per share (expires in 2001).......................................      11,111
                                                                                                ---------
                                                                                                3,960,650
                                                                                                =========
</TABLE>

     The Company's ability to pay dividends is restricted by the terms of its
collaborative, convertible debt and equipment loan facility agreements.


6.   Unconsolidated German Affiliate - Atugen

     In 1998, the Company transferred its gene function and target validation
business and technology to Atugen, a separately funded German affiliate.
Financing for Atugen was accomplished through an equity investment of $2.0
million in cash from the Company in 1998, a venture capital investment of $7.0
million and a commitment by the German government to provide grants and loans of
up to $10.0 million. As a result, at December 31, 1998, the Company retained a
49.5% ownership in Atugen.  However, since formation, Atugen has had additional
rounds of financing and as a result, the Company retained a 31.6% ownership in
Atugen at the end of 2000. The Company accounts for its investment in Atugen
under the equity method of accounting.  In connection with its formation, Atugen
received exclusive royalty-free licenses to the Company's patents and
technologies for target validation and discovery in exchange for a one-time $2.0
million payment which was received by the Company in January 1999. The entire
amount of this one-time payment was deferred at December 31, 1998 and is being
amortized over the five-year term of the license agreement and is reflected in
the Company's equity in earnings.  As of December 31, 1999, the Company had
absorbed its entire cost basis in this equity investment through its share of
Atugen's net losses.

     According to a service agreement executed by both parties, the Company will
provide management support, technologies, facilities and reagents to Atugen for
reasonable fees. The Company will retain rights to develop ribozyme therapeutic
agents against targets validated by Atugen.


7.   Collaborative Agreements

Chiron

     In July 1994, the Company entered into a research and development
collaboration agreement with Chiron to research, develop and market products
directed towards five genetic targets, and all human clinical indications
associated with those targets. The Company and Chiron will share equally in the
costs and profits of any jointly developed products. In addition, Chiron may, at
its option, finance the Company's portion of its Phase II and Phase III drug
development costs for mutually approved programs. The Company retains the option
to reacquire its rights by reimbursing Chiron for such development costs plus a
predetermined risk premium. The term of the research program is five years, with
the terms of the agreement to be extended if products are jointly developed. As
part of this agreement, Chiron made a $10,000,000 equity investment in the
Company.

     In 1998, the Company received $5.0 million from Chiron related to the joint
product development of ANGIOZYME, the Company's lead product candidate for the
treatment of solid tumor cancers. The non recurring payment was a reimbursement
for 50% of past expenses incurred by the Company for the preclinical development
of ANGIOZYME.

                                      F-13
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

In addition, the Company recorded revenue from Chiron of $4,529,795, $4,015,010
and $1,048,138, in 2000, 1999 and 1998, respectively, for 50% of ANGIOZYME
clinical development expenses incurred by the Company. There are no future
obligations between the Company and Chiron related to revenues which were fully
recognized in 2000, 1999 and 1998.

     In connection with the Company's collaboration with Chiron, an operational
audit was performed by Chiron's internal audit department for years ending
December 31, 2000 and 1999. As a result of this audit, the rate the Company
charges per researcher working on the ANGIOZYME collaboration has been brought
into question. The Company and Chiron have been discussing this matter and
expect a resolution in the near term. However, currently it is uncertain as to
whether or not an increase or decrease to the rate is necessary, or whether any
such change will be prospectively or retroactively applied. The Company does not
expect any material changes to the rate charged per researcher or any other
matters of significance related to this collaboration.

Schering AG, Berlin

     On April 9, 1997, the Company entered into a research collaboration with
Schering AG, Berlin, (Schering AG) focusing on the use of ribozymes for
therapeutic target validation, as well as the development of ribozymes as
therapeutic agents. The collaboration utilizes the special selectivity of
ribozymes to validate new molecular therapeutic targets and to discover new
therapeutic agents based on those targets. The Company provides its expertise in
ribozyme design, synthesis and delivery, and Berlex Laboratories, Inc., a U.S.
subsidiary of Schering AG (Berlex) will provide candidate targets, cell culture
screens, animal models and development and commercialization expertise to the
collaboration. Since the formation of Atugen in 1998, the Company has
subcontracted work related to the collaboration to Atugen.  Subsequently, all
revenues from Berlex have been transferred to Atugen as well.

     Schering AG made an equity investment in the Company in May 1997 of $2.5
million in exchange for 212,766 shares of common stock, and made an additional
equity investment of $2.5 million for 465,117 shares in April 1998. Separately,
Schering AG provided a loan of $2.0 million in each of years 1997, 1998, 1999
and 2000. Schering AG is expected to provide a loan of up to $2.0 million in
2001, provided that the collaboration is continued. According to the terms of
the Company's agreement with Schering AG, 50% of any borrowings on the line of
credit must be collateralized by equipment purchases. The loans, which carry an
interest rate of 8% per annum, are convertible into equity at the option of
Schering AG under certain circumstances. In April 2000, after the completion of
a public offering, the Company paid down $6.9 million of the outstanding
borrowings from Schering AG.  In June 2000, Schering AG converted the remaining
balance of $997,205 into 42,435 shares of the Company's common stock at the
market closing price on June 19, 2000 of $23.50. At December 31, 2000, the
outstanding borrowings of $1.0 million were convertible into approximately
70,800 shares of the Company's common stock. Principal and interest payments are
deferred until maturity of the loans which is in April 2004. The Company may
earn success fees upon product development milestones and will manufacture
synthetic ribozyme products and receive royalties on sales of both ribozyme and
non- ribozyme products resulting from the collaboration. All such payments are
subject to some restrictions, including receipt of certain third party consents.
Upon payment of termination fees paid to the Company, the research collaboration
may be terminated at Schering AG's option any time.


Eli Lilly and Company

     In March 1999, the Company entered into a collaboration with Eli Lilly and
Company (Eli Lilly) to conduct research, development and commercialization of
the Company's ribozyme for the treatment of Hepatitis C virus infection,
HEPTAZYME. Under the terms of the agreement, the Company received approximately
$9.2 million in 1999, which included $1.7 million of funding for research and
clinical trial expenses and a $7.5 million equity investment purchasing five
shares of the Company's non-voting convertible Series L preferred stock which
was completed in April 1999. Each share of Series L Convertible Preferred Stock
was convertible into shares of the Company's common stock based upon milestones
related to the development and commercialization of HEPTAZYME.

     In September 2000, the Company entered into an agreement with Eli Lilly to
repurchase all rights to HEPTAZYME.  Eli Lilly had directed the clinical trials
for HEPTAZYME to date under the licensing agreement.  According to the
repurchase agreement, the Company reacquired the global rights to HEPTAZYME and
will direct all subsequent clinical trials.  In addition, the Company agreed to
pay royalties to Eli Lilly on future net sales of HEPTAZYME, as well as
milestone payments if the Company completes an agreement for the development or
marketing

                                      F-14
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

rights to HEPTAZYME with a third party or if the Company files a New Drug
Application for HEPTAZYME, whichever comes first. Pursuant to the repurchase
agreement, Eli Lilly converted the outstanding five shares of the Company's
Series L Convertible Preferred Stock into 636,640 shares of common stock on
December 28, 2000 (the Termination Date). The conversion price was based on a
preferred share value of $1.5 million for each of the five shares outstanding.
The price per share of the common stock was based on the average closing price
of the Company's common stock for the 30 days prior to the Termination Date. In
addition, the Company issued to Eli Lilly $3,000,000 of its common stock, which
resulted in 252,632 shares, as payment for Eli Lilly's efforts in generating and
providing data. The price per share was based on the closing market price of the
Company's common stock on the Termination Date. In return, Eli Lilly paid the
Company a termination fee of approximately $2.8 million. The Company recorded
the $225,891 difference between the value of the stock issued and the
termination fee as a collaboration expense in December 2000.


Elan Corporation

     In January 2000, the Company formed a joint venture with Elan Corporation
(Elan) for the development and commercialization of HERZYME, the Company's
product to treat breast and other cancers. As part of this arrangement, the
Company licensed HERZYME and Elan licensed its MEDIPAD(R) drug delivery
technology to the joint venture, Medizyme Pharmaceuticals, Ltd. (Medizyme). The
MEDIPAD(R) system is a disposable continuous subcutaneous drug delivery system
that allows a patient to administer the drug at home.

     Initial funding of Medizyme included $12.0 million from the Company and
$3.0 million from Elan. The Company's $12.0 million capital contribution was
funded by the sale to Elan of (i) 12,015 shares of the Company's Series A
Convertible Exchangeable Preferred Stock (the Series A Preferred Stock), (ii) a
warrant to purchase up to 200,000 shares of the Company's common stock at an
exercise price of $15.00 per share with a term of two years, and (iii) a warrant
to purchase up to 300,000 shares of the Company's common stock at an exercise
price of $20.00 per share with a term of seven years. The Series A Preferred
Stock has a stated dividend rate of 6.0% which is payable semi-annually through
the issuance of additional shares of Series A Preferred Stock at a nominal value
of $1,000 per share.  At December 31, 2000, the Company has recorded $716,456 as
an accreted dividend related to this preferred stock arrangement.

     As a result of Medizyme's initial capitalization, the Company owns 80.1% of
the outstanding capital stock of Medizyme and Elan owns 19.9%. However, Elan can
exchange, at its option, all of its shares of the Company's Series A Preferred
Stock for 30.1% of RPI's interest in Medizyme. After such redemption, Elan would
own 50% of the then outstanding capital stock of Medizyme. Elan also has the
option of converting its shares of the Company's Series A Preferred Stock into
approximately 1,200,000 shares of RPI's common stock.

     Medizyme paid Elan in cash a $15.0 million non-refundable license fee for
the MEDIPAD(R) drug delivery technology. As a result of this licensing
transaction, Medizyme capitalized the entire license fee and is amortizing the
balance over the three year term of the agreement. The Company estimates that
funding for Medizyme will require approximately $15.0 million in additional
operating and development costs. In connection with expected funding
requirements, Elan has agreed to provide the Company with a $12.0 million credit
facility to fund the Company's pro rata portion of Medizyme's operating costs
over the development period, which is expected to be 30 months. The debt has a
12% interest rate and may be converted into shares of the Company's Series B
Convertible Preferred Stock (the Series B Preferred Stock), which ultimately is
convertible into shares of the Company's common stock at a 50% premium to the
average price of its common stock for the 60 days prior to the time of the
applicable draw down on the credit facility. The Series B Preferred Stock has a
stated dividend rate of 12%, which is payable semi-annually through the issuance
of additional shares of Series B Preferred Stock at a nominal value of $1,000
per share.   During 2000, the Company borrowed $2.7 million on the credit
facility.  For the year ended December 31, 2000, the Company recorded $6.1
million in revenue from Medizyme, of the total $6.2 million of research and
development expenses recorded by Medizyme, and recorded $9.0 million as equity
in the net loss of Medizyme.

     Also in connection with the Medizyme joint venture, Elan purchased 641,026
shares of the Company's common stock for a purchase price of $5.0 million. Elan
has committed to purchase an additional $5.0 million of common stock in April
2001 at a share price that is at a premium to the average closing price for the
45 trading days preceding the purchase, but not less than such 45 trading day
average. The price is also based on the achievement of certain milestones.

                                      F-15
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

     The joint venture agreement provides for equal representation by the
Company and Elan in the operating and management decisions of Medizyme. Due to
the significant minority investor rights retained by Elan Corporation, and its
subsidiaries, the Company accounts for its investment in Medizyme under the
equity method of accounting.  The following table presents unaudited summary
financial information for Medizyme as of December 31, 2000.

<TABLE>
<CAPTION>

Balance Sheet:
--------------
                                 Assets
                                 ------
<S>                                                                        <C>
Cash and cash equivalents                                                  $     10,696
 License Fee, net                                                            10,000,000
                                                                           ------------
   Total Assets                                                            $ 10,010,696
                                                                           ============

                  Liabilities and Stockholders' Equity
                  ------------------------------------

 Accounts payable and accrued liabilities                                  $  2,044,015
 Convertible preferred stock, $1.00 par value; 6,000 shares authorized,
  6,000 shares issued and outstanding at December 31, 2000                        6,000
 Common stock, $1.00 par value; 6,000 shares authorized,
  6,000 shares issued and outstanding at December 31, 2000                        6,000
 Additional paid-in capital                                                  14,988,000
 Contributed surplus                                                          4,232,647
 Accumulated deficit                                                        (11,265,966)
                                                                           ------------
   Total liabilities and stockholders' equity                              $ 10,010,696
                                                                           ============

Results of Operations:
----------------------

 Net investment income                                                     $        471

 Research and development expense                                             6,242,801
 License fee                                                                  5,000,000
 General and administrative                                                      23,636
                                                                           ------------
   Total operating expenses                                                  11,266,437
                                                                           ------------
 Net loss                                                                  $(11,265,966)
                                                                           ============
</TABLE>

8.   Commitments and Contingencies

     At the core of the Company's technology are inventions and patents of the
University of Colorado (CU) which were developed by Dr. Thomas R. Cech and
various associates of Dr. Cech. Pursuant to the policies of CU, these inventions
and the patents issued thereon, (the Cech Technology) became the property of CU.
The Cech Technology was assigned to CU's affiliate, University Research
Corporation (URC), which in turn assigned the rights to license certain of the
Cech Technology to Competitive Technologies, Inc. (CTI), formerly known as
University Patents, Inc. United States Biochemical Corporation (USB) licensed
the Cech Technology pursuant to two sublicenses. One of these sublicenses was
for the Cech Technology held by CTI. In November 1996, USB assigned to the
Company its rights under the sublicense from CTI and the Company entered into an
amended and restated license with CTI. The Company also has obtained a license
from URC and a sublicense from USB for other Cech Technology held by URC. The
CTI license, URC license and USB sublicense together grant the Company the
exclusive (except for non-commercial academic research) worldwide right, among
other things, to make, use and sell RNA enzymes covered by licensed patents and
products incorporating them. The URC license and USB sublicense are fully paid.
The CTI license provides for the payment of a royalty on sales of products
incorporating RNA enzymes, covered by licensed patents, and for certain minimum
annual royalties. The Company may grant sublicenses to the licensed technology
subject to the payment to CTI of a share of royalty income from such sublicenses
or a royalty on sales from sublicensed products, methods or services, depending
on the particular licensed patents involved. In addition, the Company must pay
CTI a share of any option fee, license fee, prepaid royalty or other front-end
fee other than research and development funding paid in connection with such
sublicense. At the Company's discretion, the payment may be in either cash or
equity.

                                      F-16
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

     The Company, along with one or more of its officers or directors, are
defendants in several related lawsuits which purport to be class actions on
behalf of purchasers of common stock of the Company on November 16 and 17, 1999.
The lawsuits, which are substantially identical, allege the defendants violated
certain federal securities laws based upon an allegedly misleading announcement
made on November 15, 1999. The cases have been consolidated in the United States
District Court, District of Colorado. As of February 2001, the lawsuits have
entered a discovery phase, with all discovery to be completed by October 1,
2001.  Trial to a jury has been scheduled to commence on July 2, 2002.   The
Company intends to vigorously defend itself against the allegations.

     In January 2000, the Company entered into a manufacturing agreement whereby
the Company transferred its proprietary manufacturing processes and intellectual
property to enable the manufacturing of its ribozyme products. Pursuant to this
agreement, the Company must purchase minimum quantities of ribozymes over the
next three years, which represents a significant majority of the expected usage
during that time.


9.   Related Party Transactions

     At December 31, 2000, 1999 and 1998, the Company had a total of $316,187,
$295,000 and $280,932, respectively, of non-interest bearing loans due from
executive officers. The balances may be forgiven by the Company under certain
employment agreement provisions. The loan balances are forgivable or payable to
the Company under various terms not to exceed 5 years. The Company forgave
$136,466, $88,000 and $126,466, of these loans during each of the years ending
December 31, 2000, 1999 and 1998, respectively.


10.  Income Taxes

     The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard No. 109, Accounting for Income Taxes (SFAS 109).
Under the provisions of SFAS 109, a deferred tax liability or asset (net of a
valuation allowance) is provided in the financial statements by applying the
provisions of applicable tax laws to measure the deferred tax consequences of
temporary differences that will result in net taxable or deductible amounts in
future years as a result of events recognized in the financial statements in the
current or preceding years.

     At December 31, 2000, the Company has the following net operating loss and
tax credit carryforwards for income tax purposes:

                                    Net         Research and       State
                                 Operating      Development     Investment
        Expiration Date           Losses          Credits         Credits
        ---------------         -----------     ------------    ----------
        2001..................  $         -     $          -    $    6,000
        2007..................    3,506,000          101,000             -
        2008..................    7,363,000          185,000             -
        2009..................    9,239,000          316,000             -
        2010..................   11,953,000          139,000             -
        2011..................   15,125,000          181,000             -
        2012..................   15,291,000          296,000             -
        2018..................   10,109,000          475,000             -
        2019..................    8,215,000          405,000             -
        2020..................    5,729,000          735,000             -
                                -----------     ------------    ----------
           Total..............  $86,530,000     $  2,833,000    $    6,000
                                ===========     ============    ==========

     The Tax Reform Act of 1986 contains provisions that limit the utilization
of net operating loss and tax credit 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 the Company's utilization of its net operating
loss and tax credit carryforwards, and could have been triggered by the
Company's initial public offering or by subsequent sales of securities by the
Company or its shareholders.

                                      F-17
<PAGE>

                        RIBOZYME PHARMACEUTICALS, INC.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

     The components of the Company's deferred tax assets and liabilities, net of
taxes, as of December 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                            2000                 1999
                                                                        ------------         ------------
            <S>                                                         <C>                  <C>
            Deferred tax assets:
              Net operating loss carryforwards..................        $ 32,276,000         $ 31,069,000
              Research and development and state investment
               credit carryforwards..............................          2,839,000            2,118,000
              Depreciation......................................             804,000              592,000
              Equity in loss of unconsolidated affiliate........           3,690,000              724,000
              Deferred income...................................             298,000                    -
              Other.............................................              20,000               23,000
                                                                        ------------         ------------
                                                                          39,927,000           34,526,000
              Valuation allowance...............................         (38,407,000)         (32,716,000)
                                                                        ------------         ------------
              Net deferred tax assets...........................           1,520,000            1,810,000
            Deferred tax liabilities:
              Deferred patent costs.............................           1,407,000            1,178,000
              Deferred income...................................                   -              597,000
              Other.............................................             113,000               35,000
                                                                        ------------         ------------
              Total deferred tax liabilities....................           1,520,000            1,810,000
                                                                        ------------         ------------
                                                                        $          -         $          -
                                                                        ============         ============
</TABLE>

11.  Employee Savings Plan

     The Company has a 401(k) plan which allows participants to contribute 1% to
20% of their salary, subject to eligibility requirements and annual limits. The
Board may, at its sole discretion, approve matching contributions with the
Company's common stock. In 2000, 1999 and 1998, the Board approved a 50% common
stock match equal to total participant deferrals made in each respective year.
The Company stock match is subject to vesting restrictions.

12.  Quarterly Results (Unaudited)


<TABLE>
<CAPTION>
                                          1st Quarter       2nd Quarter       3rd Quarter       4th Quarter
                                          -----------       -----------       -----------      -----------
        <S>                               <C>               <C>               <C>               <C>
        2000
        ----
        Total revenues..............      $ 3,869,866       $ 3,880,969       $ 4,431,417      $ 3,363,060
        Total expenses..............        5,903,705         4,980,378         6,643,395        7,916,735
        Other expense...............        1,688,176           825,367         1,747,890        1,721,223
        Accretion of dividends......                -           360,450           180,225          175,781
                                          -----------       -----------       -----------      -----------
        Net loss....................       (3,722,015)       (2,285,226)       (4,140,093)      (6,450,679)
                                          ===========       ===========       ===========      ===========
        Basic and diluted net loss
        per share...................      $     (0.31)      $     (0.15)      $     (0.27)     $     (0.42)


        1999
        ----
        Total revenues..............      $ 1,701,235       $ 2,175,738       $ 1,806,849      $ 1,980,576
        Total expenses..............        4,319,729         4,161,728         4,266,921        4,778,476
        Other (expense) income......         (516,500)         (240,198)         (105,100)          63,673
                                          -----------       -----------       -----------      -----------
        Net loss....................       (3,134,994)       (2,226,188)       (2,565,172)      (2,734,227)
                                          ===========       ===========       ===========      ===========
        Basic and diluted net loss
        per share...................      $     (0.34)      $     (0.24)      $     (0.23)     $     (0.24)

</TABLE>

                                      F-18