10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2002

OR

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

For the transition period from              to             

Commission file number: 0-11749

Scios Inc.

(Exact name of Registrant as specified in its charter)

Delaware	95-3701481
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Scios Inc.

820 W. Maude Ave.

Sunnyvale, CA 94085

(Address of principal executive offices) (Zip code)

(408) 616-8200

(Registrant’s telephone number including area code)

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

Number of shares outstanding of the issuer’s common stock, par value $.001 per share, as of April 15, 2002: 46,260,099.

SCIOS INC.

Consolidated Balance Sheets

(in thousands, except share data and per share data)

	March 31, 2002			December 31, 2001
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	44,032		$	58,296
Marketable securities		15,484			7,351
Accounts receivable, net		9,582			6,943
Inventory		1,196			1,158
Prepaid expenses and other assets		4,122			4,214
Total current assets		74,416			77,962
Marketable securities, non-current		51,440			63,669
Property and equipment, net		10,148			10,424
Other assets		1,592			4,123
Total assets	$	137,596		$	156,178
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	5,835		$	9,625
Accrued employee compensation		7,647			9,685
Other accrued liabilities		9,128			7,206
Current portion of long-term debt		40,922			33,035
Total current liabilities		63,532			59,551
Deferred contract revenue		4,873			—
Long-term debt		11,085			15,479
Total liabilities		79,490			75,030
Stockholders’ equity:
Preferred stock; $.001 par value; 20,000,000 shares authorized; 4,991 issued and outstanding		—			—
Common stock; $.001 par value; 150,000,000 shares authorized; issued and outstanding 46,226,867 and 46,015,167, respectively		46			46
Additional paid-in capital		562,888			561,352
Treasury stock; shares of 40,000 and 30,000, respectively		(644	)		(445	)
Deferred warrant costs		(5,520	)		(6,794	)
Deferred compensation		(106	)		(106	)
Accumulated other comprehensive income		568			999
Accumulated deficit		(499,126	)		(473,904	)
Total stockholders’ equity		58,106			81,148
Total liabilities and stockholders’ equity	$	137,596		$	156,178

The accompanying notes are an integral part of these consolidated financial statements.

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SCIOS INC.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

	Three months ended March 31,
	2002			2001
	(Unaudited)
Revenues:
Product sales	$	15,373		$	—
Research and development contracts and royalties		1,071			1,097
Psychiatric product sales and co-promotion commissions, net of expenses		—			1,483
Gain on sale of marketing rights		—			9,363
		16,444			11,943
Costs and expenses:
Cost of product sales		1,011			—
Research and development		14,855			9,480
Selling, general and administration		24,714			6,480
		40,580			15,960
Loss from operations		(24,136	)		(4,017	)
Other income (expense):
Interest income		808			812
Interest expense		(1,944	)		(849	)
Realized gains (losses) on securities		(77	)		254
Other income (expense)		127			(423	)
		(1,086	)		(206	)
Net loss	$	(25,222	)	$	(4,223	)
Other comprehensive loss
Change in unrealized gains (losses) on securities		(431	)		116
Comprehensive loss	$	(25,653	)	$	(4,107	)
Loss per common share:
Basic and diluted	$	(0.55	)	$	(0.11	)
Weighted average number of common shares outstanding used in calculation of:
Basic and diluted		46,091,188			39,290,982

The accompanying notes are an integral part of these consolidated financial statements.

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SCIOS INC.

Consolidated Statements of Cash Flows

(in thousands)

	Three months ended March 31,
	2002			2001
	(Unaudited)
Cash flows from operating activities:
Net loss	$	(25,222	)	$	(4,223	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,474			872
Loss (gain) on disposal of marketable securities		77			(254	)
Accrued interest payable		1,634			849
Loss on disposal of property and equipment		75			365
Amortization of deferred compensation		—			311
Allowance for bad debt, returns, and discounts		204			—
Stock option issued to non-employee for services rendered		47			—
Changes in assets and liabilities:
Accounts receivable		(2,843	)		(6,987	)
Inventory		(38	)		—
Prepaid expenses and other assets		2,623			(856	)
Accounts payable		(3,790	)		(668	)
Accrued employee compensation		(2,038	)		233
Other accrued liabilities		1,922			(746	)
Deferred contract revenue		4,873			179
Net cash used in operating activities		(21,002	)		(10,925	)
Cash flows from investing activities:
Purchases of property and equipment		(962	)		(446	)
Sales/maturities of marketable securities		116,795			43,625
Purchases of marketable securities		(113,207	)		(36,581	)
Net cash provided by investing activities		2,626			6,598
Cash flows from financing activities:
Issuance of common stock		1,489			1,649
Purchase of treasury stock		(199	)		—
Payment of commercialization agreement		(928	)		—
Proceeds from commercialization agreement		3,750			—
Net cash provided by financing activities		4,112			1,649
Net decrease in cash and cash equivalents		(14,264	)		(2,678	)
Cash and cash equivalents at beginning of period		58,296			3,291
Cash and cash equivalents at end of period	$	44,032		$	613
Supplemental cash flow data:
Cash paid during the period for interest	$	928		$	—
Change in net unrealized gains (losses) on securities	$	(431	)	$	116
Discount on commercialization obligation	$	1,274		$	—

The accompanying notes are an integral part of these consolidated financial statements.

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SCIOS INC.

Notes to Consolidated Financial Statements

(unaudited)

1.    Basis of Presentation

The accompanying unaudited consolidated financial statements of Scios have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not contain all of the information and footnotes required by generally accepted accounting principles in the United States of America for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation of Scios’ interim consolidated financial information. These consolidated financial statements and notes should be read in conjunction with the audited financial statements of Scios included in our Annual Report on Form 10-K for the year ended December 31, 2001.

The results of operations for the three months ended March 31, 2002 are not necessarily indicative of the operating results that may be reported for the fiscal year ending December 31, 2002 or for any other future period.

2.    Computation of Loss Per Share

The potentially dilutive effect of outstanding options to purchase common stock would have been anti-dilutive as to the reported loss per share in both 2002 and 2001, and they were therefore excluded from the diluted loss per share calculation for both periods. Although potentially dilutive, the optional repayment of the Genentech loan through the issuance of preferred stock would have been anti-dilutive in both 2002 and 2001 and was therefore excluded from the calculations.

At March 31, 2002, Scios had 8,199,312 outstanding stock options at exercise prices ranging from $3.8125 to $27.60 per share. At March 31, 2001, Scios had 5,125,383 outstanding stock options at exercise prices ranging from $3.6875 to $21.38 per share.

3.    Industry and Geographic Segment Information

We operate in one business segment, using one measurement of profitability for our business. We receive revenue from product sales and from licensing and development of products from partners in the United States, Europe and Asia Pacific. At March 31, 2002, all long-lived assets were located in the United States. Revenues for the three months ended March 31, 2002 were earned from sales of Natrecor^® and from royalties from licenses in the United States, and from royalty income from sales of Fiblast^® spray by Kaken in Japan.

Revenues for the three months ended March 31, 2001 were earned in the United States, from research collaboration agreements, royalties from licenses, psychiatric product sales and co-promotion commissions net of expenses, and gain on sale of marketing rights to GSK.

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4.    GlaxoSmithKline Agreement

In March 2002, GlaxoSmithKline, or GSK, and Scios finalized the agreement in which Scios will license Natrecor, its treatment for acute congestive heart failure, to GSK in all European markets. Under the terms of the agreement, GSK will have the rights to sell and distribute the product for which we will receive an up-front fee and milestone payments totaling £15.0 million British Pounds (which at March 31, 2002 equaled approximately $21.4 million U.S. Dollars), in addition to future royalties in the identified countries. In March 2002, we received a nonrefundable license fee of £3.5 million British Pounds (which equaled approximately $4.9 million U.S. Dollars), and recorded this amount as deferred contract revenue. Scios will manufacture and supply the bulk product to GSK. Both companies will work together to continue clinical development of Natrecor in Europe.

5.    Gain on Sale of Marketing Rights

In the first quarter of 2001, the marketing rights for psychiatric product sales were sold to GSK. The marketing rights were originally licensed from GSK under a 1990 licensing agreement. In order to effect the purchase, the licensing agreement was terminated effective March 31, 2001, and we received from GSK $4.0 million in 2001 and $3.0 million in 2002 and expect to receive $2.4 million in 2003.

We recognized a one-time gain on the sale of $9.4 million, which has been classified on the statement of operations under the caption Gain on Sale of Marketing Rights. In addition, we ended the deployment of our Psychiatric Sales Marketing Division sales force and terminated certain full-time support personnel. Severance payments for these personnel amounted to approximately $788,000.

6.    Notes Receivable from Officers

At March 31, 2002, we had notes receivable from three officers. The first note is in the amount of $280,040 with interest at 5.18% per annum, due and payable on February 28, 2002. The maturity date of the note agreement was amended to February 28, 2003. The loan was granted in connection with the payment of income taxes for restricted stock granted to the officer. This loan is collateralized by the vested portion of the officer’s stock options and is classified with other current assets on the balance sheet at March 31, 2002. The officer repaid the note in full in April 2002.

The second note is in the amount of $16,666 with interest at 5.82% per annum. This loan will be forgiven in 2002 based on the continued employment of the officer and is collateralized by the officer’s residence. The loan was granted in connection with a housing subsidy for the officer to live in California. This note balance is classified with other assets on the balance sheet at March 31, 2002.

The third note is in the amount of $120,000 with interest at 10.0% per annum. This loan will be forgiven in 2006 based on the continued employment of the officer and is collateralized by the officer’s residence. The loan was granted in connection with a housing subsidy for the officer to live in California. This loan is classified as other assets on the balance sheet at March 31,2002.

7.    Lease Commitments

We lease five facilities in Sunnyvale, California with agreements that expire between 2003 and 2008 including a new lease signed in March 2002 covering 8,400 square feet in Sunnyvale, California that expires in 2003. In addition, we lease a warehouse in Mountain View, California that expires in 2003.

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8.    Treasury Stock

Treasury stock of 40,000 shares at March 31, 2002 was stated at cost and was considered issued and outstanding. During September 2001, the Board of Directors authorized the repurchase of up to $10 million of Scios common stock. The repurchases are to be made through open-market transactions at the discretion of management as market conditions warrant. As of March 31, 2002, we had repurchased 40,000 shares of our common stock at an average purchase price of $16.11 per share.

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

The following discussion should be read in conjunction with our audited consolidated financial statements, including the related notes, contained in our Annual Report on Form 10-K for the year-ended December 31, 2001. The following discussion also contains forward-looking statements about our plans, objectives and future results. These forward-looking statements are based on our current expectations, and we assume no obligation to update this information. Realization of these plans and results involves risks and uncertainties, and our actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include those set forth under “Risk Factors” in this report on Form 10-Q.

Overview

We are a biopharmaceutical company developing novel treatments for cardiovascular and inflammatory diseases. Our disease-based technology platform integrates expertise in protein biology with computational and medicinal chemistry to identify novel targets and rationally design small molecule compounds for large markets with unmet medical needs. We launched Natrecor^® following U.S. Food and Drug Administration, or FDA, approval of Natrecor (nesiritide) for the treatment of acute congestive heart failure, or CHF, on August 13, 2001. We are focused on the development of three product candidates, Natrecor, for the treatment of acute congestive heart failure, SCIO-469, an oral, small molecule inhibitor of p38 kinase for the treatment of rheumatoid arthritis (RA); and small molecule inhibitors of the receptor for TGF-beta, a cytokine that has been implicated in diseases characterized by chronic scar formation, or fibrosis.

Recent Developments

In January 2002, we initiated the FUSION, or Management of Patients with CHF After Hospitalization with Follow Up Serial Infusions Of Natrecor, study, a multi-center, randomized, open-label pilot study that will be conducted at approximately 40 U.S. sites and will enroll over 200 patients. Patients will be randomized to receive either their usual long-term cardiac medications, with or without IV inotropes, or serial infusions of Natrecor in addition to their usual long-term cardiac medications, excluding IV inotropes. All treatment groups will have weekly outpatient visits, and Natrecor patients will receive infusions for 4 to 6 hours at each weekly visit. Patients will receive study treatment for 12 weeks, followed by a one-month follow up period. Data from the FUSION study are expected to be available in the first quarter of 2003. As of April 19, 2002, 37 patients have been enrolled in the study.

In February 2002, we began enrollment in a Phase IIa clinical trial evaluating SCIO-469, our novel oral p38 kinase inhibitor, for the treatment of rheumatoid arthritis (RA). This multi-center, randomized, placebo-controlled clinical study will enroll 120 patients who have active RA and are receiving methotrexate. The main objective of the study is to evaluate the safety and tolerability of six escalating doses of SCIO-469 in RA patients. The company expects to announce results from this study in the first quarter of 2003. As of April 19, 2002, 20 patients have been enrolled in the study.

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In March 2002, we added a new drug candidate to our pipeline that could become the first oral inhibitor of transforming growth factor (TGF)-beta. TGF-beta is a multifunctional cytokine, a signaling protein that is produced in a broad range of diseases characterized by unregulated scarring and eventual organ failure. Research has indicated that excessive activation of TGF-beta is involved with driving scar tissue formation, which is thought to contribute to the progressive loss of function seen in a variety of conditions. Diseases in which TGF-beta may play a role include congestive heart failure, chronic obstructive pulmonary disease, liver cirrhosis and kidney disease. Current therapies for these conditions treat symptoms exclusively or are only modestly effective in slowing disease progression.

In March 2002, GlaxoSmithKline or GSK and Scios finalized the agreement in which Scios will license Natrecor, a treatment for acute heart failure, to GSK in all European markets. Under the terms of the agreement, GSK will have the rights to sell and distribute the product for which we will receive an up-front fee and milestone payments totaling £15.0 million British Pounds (which at March 31, 2002 equaled approximately $21.4 million U.S. Dollars), in addition to future royalties in the identified countries. In March 2002, we received £3.5 million British Pounds (which equaled approximately $4.9 million U.S. Dollars), which has been recorded as deferred contract revenue. Scios will manufacture and supply the bulk product to GSK. Both companies will work together to continue clinical development of Natrecor in Europe. In order to obtain European approval for Natrecor, GSK expects to use the extensive clinical data Scios submitted to obtain approval from the U.S. Food and Drug Administration in August 2001. The companies expect to launch Natrecor in Europe in the first half of 2004.

In April 2002, we announced that Natrecor has received an Ambulatory Payment Classification (APC) pass-through code under the Hospital Outpatient Prospective Payment System from the Centers for Medicare & Medicaid Services. The pass-through payment code for Natrecor allows Medicare reimbursement for acutely decompensated heart failure patients with dyspnea (shortness of breath) at rest or with minimal activity treated with Natrecor in an outpatient setting. The reimbursement code became effective April 1, 2002.

Results of Operations

Three Months Ended March 31, 2002 and 2001

Revenues

Product Sales.    Product sales for the three months ended March 31, 2002 were $15.4 million versus none for the three months ended March 31, 2001. The increase was due to the sales of Natrecor, which was approved by the FDA and launched by us in August 2001.

Research and Development Contract Revenues and Royalties.    Research and development contract revenues and royalties were $1.1 million for the three months ended March 31, 2002 and 2001. In 2002, research and development contract revenues and royalties were primarily due to royalty payments from sales of Fiblast Spray in Japan by Kaken of $0.6 million, and royalties from Biosite of $0.1 million and other research collaboration agreements of $0.4 million. In 2001, research and development contract revenues and royalties primarily reflect our Alzheimer’s research collaboration agreements with Eli Lilly & Company (“Eli Lilly”) of $0.5 million, royalties from sales of BNP testing by Abbott Laboratories of $0.3 million, and other research collaboration agreements of $0.3 million. Effective as of December 31, 2001, Eli Lilly and we jointly terminated the collaboration.

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Net Product Sales and Co-Promotion Commissions.    Net psychiatric product sales and co-promotion commissions for the three months ended March 31, 2002 were none versus $1.5 million for the three months ended March 31, 2001. The decrease of $1.5 million from 2001 to 2002 was due to the sale of marketing rights for certain psychiatric products to GSK and the termination of the license agreement in March 2001. At the same time, we dissolved our Psychiatric Sales and Marketing Division and the deployment of the PSMD sales force.

Gain on Sale of Marketing Rights.    The decrease of $9.4 million from 2001 to 2002 was due to the sale of marketing rights for certain psychiatric products to GSK and the termination of the license agreement in March 2001. Commencing in the fourth quarter of 2000, we solicited and received bids regarding the sale of our exclusive marketing rights for certain GSK psychiatric products sold by us. The marketing rights were eventually sold to GSK. The marketing rights were originally licensed from GSK under a 1990 licensing agreement. In order to effect the sale, the licensing agreement was terminated effective March 31, 2001, and we received from GSK $4.0 million in 2001 and $3.0 million in 2002 and expect to receive a final payment of $2.4 million in 2003. We recognized a gain on the sale of the marketing rights of $9.4 million related to the sale in the first quarter of 2001.

Costs and Expenses

Cost of Product Sales.    Cost of product sales were $1.0 million for the three months ended March 31, 2002 and none for the three months ended March 31, 2001. The expenses were due to the cost to manufacture and distribute Natrecor and royalties on a cross license agreement.

Research and Development.    Research and development expenses were $14.9 million and $9.5 million for the three months ended March 31, 2002 and 2001, respectively. The expenses were mainly attributable to clinical expenses related to Natrecor, research and clinical expenses related to our p38 kinase inhibitor program, pre-clinical development of the TGF-beta program, and the cost associated with ADHERE, Acute Decompensated HEart failure national REgistry, a nationwide registry to collect and analyze demographic and treatment data about patients hospitalized due to acutely decompensated heart failure.

Selling, General and Administrative.    Selling, general and administrative expenses were $24.7 million, and $6.5 million for the three months ended March 31, 2002 and 2001, respectively. The increase of $18.2 million was primarily due to selling and marketing expenses to launch Natrecor and the addition of general and administrative staff to support the increase in overall headcount. These sales and marketing expenses include the cost of a 188-person sales force and management team, the addition of a sales operations group, the commissions to the sales force on Natrecor sales, and the expenses of promotional and marketing programs.

Other Income (Expense)

Net other income (expense) were $(1.1) million and $(0.2) million for the three months ended March 31, 2002 and 2001, respectively. The increase of $0.9 million in other income (expense) was principally due to the $1.1 million increase in interest expense due to the debt with PharmaBio Development, an affiliate of Innovex.

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Liquidity and Capital Resources

To date, our operations and capital requirements have been financed primarily with the proceeds of public and private sales of common stock and preferred stock, research and development partnerships, collaborative agreements with pharmaceutical firms, product sales and investment income. At March 31, 2002, our combined cash, cash equivalents and marketable securities (both current and non-current) totaled $111.0 million.

In January 2001, we entered into a sale and marketing alliance with Innovex, a subsidiary of Quintiles Transnational Corp. As part of the original three and one half year agreement, PharmaBio Development, Inc., an affiliate of Innovex, agreed to fund $30.0 million of our costs to launch Natrecor over the first 24 months of the commercialization of Natrecor and to loan us up to $5.0 million. In December 2001, Scios, Innovex and PharmaBio amended the January 2001 agreement. The amendment will enable Scios, at its option, to assume control of the Natrecor sales force in June 2003, one year ahead of schedule, and we eliminated the $5.0 million line of credit provided by PharmaBio to Scios. Of the $30.0 million funding from PharmaBio, we received $13.75 million through March 31, 2002, and will receive the remaining $16.25 million over the next 14 months. As part of the funding agreement, we pay PharmaBio a declining royalty rate on net sales of Natrecor through early 2008. As of March 31, 2002, we have paid PharmaBio $0.9 million in payments. We also granted PharmaBio a fully vested warrant to purchase 700,000 shares of our common stock at an exercise price of $20.00 per share. These warrants are exercisable over the next 14 months beginning December 2001 through May 2003.

In December 2001, we entered into a binding summary of terms with Glaxo Group Ltd., an affiliate of GlaxoSmithKline, or GSK, in which we will license Natrecor to GSK in all European markets. The final agreement was effective March 31, 2002. Under the terms of the agreement, GSK will have the rights to sell and distribute the product for which we will receive an up-front fee and milestone payments totaling £15.0 million British Pounds (which at March 31, 2002 equaled approximately $21.4 million U.S. Dollars), in addition to future royalties in the identified countries. We will manufacture and supply the bulk product to GSK. Both companies will work together to continue clinical development of Natrecor in Europe. In order to obtain European approval for Natrecor, GSK expects to use the extensive clinical data we submitted to obtain approval from the FDA in August 2001. The companies expect to launch Natrecor in Europe in the first half of 2004. We received £3.5 million British Pounds or approximately $4.9 million U.S. Dollars and recognized this amount as deferred contract revenue as of March 31, 2002.

As of March 31, 2002 we had $33.4 million due to Genentech of which $20.0 million can be repaid in the Company’s Series B preferred stock at anytime through December 31, 2002. In addition, if the Company should decide to convert the loan to preferred stock, a portion of the loan that is not convertible will become due and payable before December 31, 2002. The amount of the loan that is due before the maturity date is based on a formula that considers the amount of loan converted to stock and the outstanding loan balance.

Net cash used in operating activities of $21.0 million in the quarter ended March 31, 2002 was primarily attributable to the net loss of $25.2 million, partially offset by increases in net operating assets and liabilities of $0.7 million and non-cash expenses of $3.5 million.

Net cash provided by investing activities of $2.6 million in the quarter ended March 31, 2002 consisted of a net increase in sales/maturities of marketable securities of $3.6 million, partially offset by purchases of property and equipment of $1.0 million.

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Net cash provided by financing activities of $4.1 million in the quarter ended March 31, 2002 was due to the proceeds from the PharmaBio commercialization agreement of $3.7 million, and the issuance of common stock of $1.5 million, partially offset by the royalty payments to PharmaBio under the commercialization agreement of $0.9 million and purchases of treasury stock of $0.2 million.

We expect our existing cash, cash equivalents and marketable securities, proceeds from existing collaborations, agreement with PharmaBio, and our marketing agreement with GSK and revenues from sales of Natrecor will enable us to maintain our current and planned operations for at least the next twelve months. In the event we will need additional financing for the operation of our business, including the commercialization of our products currently under development, we will consider collaborative arrangements and additional public or private financing, including additional equity financing. Factors influencing the availability of additional financing include our progress in product development, investor perception of our prospects and the general condition of the financial markets. We cannot assure you that we will be successful in obtaining collaborative agreements, or in receiving milestone and/or royalty payments under those agreements, that our existing cash and marketable securities resources will be adequate or that additional financing will be available when needed or that, if available, this financing will be obtained on terms favorable to us or our stockholders. Insufficient funds may require us to delay, scale back or eliminate some or all of our research or development programs or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. If we raise additional funds by issuing equity securities, substantial dilution to existing stockholders may result.

Risk Factors

You should carefully consider the risks described below before making an investment decision. Our business, financial condition or results of operations could be harmed by any of these risks. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. This document also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of the risks faced by us, including those described below and elsewhere in this document.

Risks Related to Natrecor

If Natrecor does not gain market acceptance, our business will suffer.

Natrecor may not gain market acceptance among physicians, patients, healthcare payers and the medical community. We will need to educate doctors and other healthcare advisors of the safety and clinical efficacy of Natrecor and its potential advantages over other treatments. The degree of market acceptance of Natrecor will also depend on a number of factors, including:

• the degree of clinical efficacy and safety;

• cost-effectiveness of Natrecor;

• its advantage over alternative treatment methods; and

• reimbursement policies of government and third party payers.

To the extent market acceptance of Natrecor is limited, our revenues may suffer.

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If the FDA determines that our third-party manufacturing facilities are not adequate, we may lose the ability to manufacture and sell Natrecor.

Periodically, the FDA is likely to inspect each of the facilities involved in manufacturing Natrecor. Natrecor is manufactured for us by BioChemie GmbH, a subsidiary of Novartis, in Austria and is shipped in powder form to Abbott Laboratories in McPherson, Kansas where it is blended, filled and packaged for shipment. Although each facility has previously passed FDA inspections, future inspections may find deficiencies in the facilities or processes that may delay or prevent the manufacture or sale of Natrecor. If deficiencies are identified, we may lose the ability to supply and sell Natrecor for extended periods of time.

We rely on third-party manufacturers, and if they experience any difficulties with their manufacturing processes, we may not obtain sufficient quantities of Natrecor to assure availability.

We rely on third parties for the manufacture of bulk drug substances and final drug product for clinical and commercial purposes relating to Natrecor. BioChemie GmbH is responsible for manufacturing Natrecor in bulk quantities and Abbott Laboratories is responsible for blending, filling and packaging Natrecor, and if they encounter problems in these processes, our revenues from future sales of Natrecor could decrease. Natrecor is manufactured using industry-accepted recombinant manufacturing techniques, which must be conducted under strict controls and tight timelines. Natrecor is subject to strict quality control testing during all phases of production and prior to its release to the market. Any quality control testing failures could lead to a reduction in the available supply of Natrecor. BioChemie depends on outside vendors for the timely supply of raw materials used to produce Natrecor. Once a supplier’s materials have been selected for use in BioChemie’s manufacturing process, the supplier in effect becomes a sole or limited source of that raw material due to regulatory compliance procedures. We depend on these third parties to perform their obligations effectively and on a timely basis. If these third parties fail to perform as required, our ability to deliver Natrecor on a timely basis would be impaired. In addition, in the event of a natural disaster, equipment failure, power failure, strike or other difficulty, we may be unable to replace our third party manufacturers in a timely manner and would be unable to manufacture Natrecor to meet market needs.

In the area of acute CHF, we face competition from companies with substantial financial, technical and marketing resources, which could limit our future revenues from Natrecor.

Many therapeutic options are available for patients with acute CHF. Competing drugs fall into three main categories: vasodilators, inotropes and diuretics. Natrecor would compete against both vasodilators and inotropes in the acute CHF market. Many of these drugs are available in generic formulation with an associated low cost. We may not be able to compete effectively with these long-standing current forms of therapy. In addition, Natrecor costs more than many of these existing drugs, which may harm our competitive position relative to these drugs.

New drugs in development for the treatment of acute CHF would also compete with Natrecor if approved by the FDA or other regulatory agencies. Tezosentan^®, a non-selective endothelin receptor antagonist, is being developed by Actelion Ltd. and has been evaluated in Phase II clinical trials as a vasodilator for the treatment of acute CHF.

In addition, Abbott had previously submitted an NDA for Simdax^®, a calcium sensitizer described as an inotrope, but withdrew the application in 2000. However, Abbott appears to be moving forward with development of this product. If any such new drug in development is approved by the FDA or other regulatory agencies, we may not be able to compete effectively with these new forms of therapy.

11

If we fail to gain approval for Natrecor and our other product candidates in international markets, our market opportunities will be limited.

We have not yet filed for marketing clearance for the use of Natrecor or any other product candidates in foreign countries, and we may not be able to obtain any international regulatory approvals for Natrecor or any other product we develop. If we fail to obtain those approvals or if such approvals are delayed, the geographic market for Natrecor or our other product candidates would be limited.

We will require a partner to market and commercialize Natrecor and our other product candidates in markets other than Europe.

We plan to partner with other companies for the sale of Natrecor and our other product candidates outside of the United States. In December 2001, we entered into an agreement with GSK in all European markets. Under the terms of the agreement, GSK will have the rights to sell and distribute Natrecor for which Scios will receive up-front fee and milestone payments, in addition to future royalties on European sales. Scios will manufacture and supply the bulk product (active pharmaceutical ingredient) to GSK. In March 2002, GSK and Scios finalized the agreement.

We also plan to partner Natrecor in markets other than European markets. We cannot assure you that we will be able to enter into such arrangements on favorable terms or at all. In addition, partnering arrangements could result in lower levels of income to us than if we marketed our products entirely on our own. In the event that we are unable to enter into a partnering arrangement for Natrecor or our other product candidates in international markets, we cannot assure you we will be able to develop an effective international sales force to successfully market and commercialize those products. If we fail to enter into partnering arrangements for our products and are unable to develop an effective international sales force, our revenues would be limited.

The success of Natrecor in the European market is highly dependent on obtaining European approval and our licensing agreement with GSK for marketing, promotion and sales activities.

In order to obtain European Approval for Natrecor, GSK expects to use the extensive clinical data we submitted to obtain approval from the FDA in August 2001. If we receive the necessary approvals, we expect to launch Natrecor in Europe in the first half of 2004. However, while the clinical data used to support the FDA submission is expected to be adequate for European approval, further clinical trials may be necessary and adverse results from such additional trials could result in a failure to receive European approval. Even if additional trials are successful, a requirement to conduct further clinical trials would delay the launch of Natrecor in Europe, which may result in lower than anticipated revenues for Scios.

Under the terms of the agreement, GSK will have the rights to sell and distribute Natrecor for which Scios will receive an up-front fee and milestones payments, in addition to future royalties on European sales. Accordingly, our revenue from sales of Natrecor in Europe will be highly dependent on GSK’s ability to effectively market and sell Natrecor.

The companies intend to conduct a health outcome trial, commencing in 2002, which the companies will use to assess market acceptance of Natrecor in major European countries. The health outcomes trial could affect the price at which Natrecor will be sold. We cannot be assured that a preferred price for Natrecor will be obtainable and that market acceptance of Natrecor will be achieved.

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If we fail to obtain additional marketing approvals from the FDA for the use of Natrecor for additional therapeutic indications or if after approval such approval is subsequently revoked, our revenues from Natrecor will suffer.

In order to expand the medical uses, or therapeutic indications, for which we may market Natrecor, we must successfully complete additional clinical trials, which could be lengthy and expensive and will require the allocation of both substantial management and financial resources. Thereafter, we will have to apply separately to the FDA for clearance to market Natrecor for other indications. We cannot assure you that we will be able to successfully complete the required clinical trials or that the FDA will approve Natrecor for any additional indications. In addition, even if Natrecor is approved by the FDA, we cannot exclude the possibility that serious adverse events related to the use of Natrecor might occur in the future, which could either limit its use or cause the FDA to revoke our approval to market Natrecor.

Other Risks Related to Scios

We have a history of losses, expect to operate at a loss for the foreseeable future and may never be profitable.

We may not be able to achieve or earn a profit in the future. We began operations in December 1981, and since that time, with the sole exception of 1983, we have not earned a profit on a full-year basis. Our losses have historically resulted primarily from our investments in research and development. As of March 31, 2002, we had an accumulated deficit of approximately $499.1 million.

To date, nearly all of our revenues have come from:

• sales of Natrecor beginning in August 2001;

• one-time sales of bulk FGF product and royalties from Fiblast Spray sales by Kaken in Japan;

• one-time signing fees from our corporate partners under agreements supporting the research, development and commercialization of our product candidates;

• one-time payments from our corporate partners when we achieved regulatory or development milestones;

• research funding from our corporate partners; and

• our psychiatric sales and marketing division, the operations which we dissolved on March 31, 2001.

We expect that our research, development and clinical trial activities and regulatory approvals, together with future general and administrative activities and the costs associated with launching and commercializing our product candidates and launching and commercializing Natrecor in the United States, will result in significant expenses for the foreseeable future.

Our operating results are subject to fluctuations that may cause our stock price to decline.

Our revenues and expenses have fluctuated significantly in the past. This fluctuation has in turn caused our operating results to vary significantly from quarter to quarter and year to year. We expect the fluctuations in our revenues and expenses to continue, and thus, our operating results should also continue to vary significantly. These fluctuations may be due to a variety of factors including:

• our success in selling Natrecor;

• the timing and realization of milestone and other payments from our corporate partners;

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• the timing and amount of expenses relating to our research and development, product development and manufacturing activities; and

• the extent and timing of costs related to our activities to obtain patents on our inventions and to extend, enforce and/or defend our patents and other rights to our intellectual property.

Because of these fluctuations, it is possible that our operating results for a particular quarter or quarters will not meet the expectations of public market analysts and investors, causing the market price of our common stock to decline. We believe that period-to-period comparisons of our operating results are not a good indication of our future performance, and you should not rely on those comparisons to predict our future operating or share price performance.

We depend on our key personnel and we must continue to attract and retain key employees and consultants.

We depend on our key scientific and management personnel. Our ability to pursue the development of our current and future product candidates depends largely on retaining the services of our existing personnel and hiring additional qualified scientific personnel to perform research and development. We also rely on personnel with expertise in clinical testing, government regulation, manufacturing and marketing. Attracting and retaining qualified personnel will be critical to our success. We may not be able to attract and retain personnel on acceptable terms given the competition for such personnel among biotechnology, pharmaceutical and healthcare companies, universities and non-profit research institutions. Failure to retain our key scientific personnel or to attract additional highly qualified personnel could delay the development of our product candidates and harm our business.

Other than Natrecor, our product candidates are at early stages of development, and if we are unable to develop and commercialize these product candidates successfully, we will not generate revenues from these products.

We face the risk of failure normally found in developing biotechnology products based on new technologies. Successfully developing, manufacturing, introducing and marketing our early-stage product candidates, including SCIO-469 and our inhibitors of TGF-beta, will require several years and substantial additional capital.

Our operations depend on compliance with complex FDA and comparable international regulations. If we fail to obtain approvals on a timely basis or to achieve continued compliance, the commercialization of our products could be delayed.

We cannot assure you that we will receive the regulatory approvals necessary to commercialize our product candidates, which could cause our business to fail. Our product candidates are subject to extensive and rigorous government regulation by the FDA and comparable agencies in other countries. The FDA regulates, among other things, the development, testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale and distribution of biopharmaceutical products. If our potential products are marketed abroad, they will also be subject to extensive regulation by foreign governments. In addition, we have only limited experience in filing and pursuing applications necessary to gain regulatory approvals, which may impede our ability to obtain such approvals.

The results of pre-clinical studies and clinical trials of our products may not be favorable.

In order to obtain regulatory approval for the commercial sale of any of our product candidates, we must conduct both pre-clinical studies and human clinical trials. These studies and trials must demonstrate that

14

the product is safe and effective for the clinical use for which we are seeking approval. In the first quarter of 2002, we began Phase IIa clinical trials of our lead p38 kinase inhibitor small molecule compound. The results of these or other clinical trials that we may conduct in the future may not be successful. Adverse results from our current or any future trials would harm our business. We also face the risk that we will not be permitted to undertake or continue clinical trials for any of our product candidates in the future. Even if we are able to conduct such trials, we may not be able to satisfactorily demonstrate that the products are safe and effective and thus qualify for the regulatory approvals needed to market and sell them. Results from pre-clinical studies and early clinical trials are often not accurate indicators of results of later-stage clinical trials that involve larger human populations.

Our products use novel alternative technologies and therapeutic approaches, which have not been widely studied.

Our product development efforts focus on novel alternative therapeutic approaches and new technologies that have not been widely studied. These approaches and technologies may not be successful. We are applying these approaches and technologies in our attempt to discover new treatments for conditions that are also the subject of research and development efforts of many other companies.

Rapid changes in technology and industry standards could render our potential products unmarketable.

We are engaged in a field characterized by extensive research efforts and rapid technological development. New drug discoveries and developments in our field and other drug discovery technologies are accelerating. Our competitors may develop technologies and products that are more effective than any we develop or that render our technology and potential products obsolete or noncompetitive. In addition, our potential products could become unmarketable if new industry standards emerge. To be successful, we will need to enhance our product candidates and design, develop and market new product candidates that keep pace with new technological and industry developments.

Many other companies are targeting the same diseases and conditions as we are. Competitive products from other companies could significantly reduce the market acceptance of our products.

The markets in which we compete are well established and intensely competitive. We may be unable to compete successfully against our current and future competitors. Our failure to compete successfully may result in pricing reductions, reduced gross margins and failure to achieve market acceptance for our potential products. Our competitors include pharmaceutical companies, biotechnology companies, chemical companies, academic and research institutions and government agencies.

For example, many pharmaceutical and biotechnology companies have initiated research programs similar to ours. Many of these organizations have substantially more experience and more capital, research and development, regulatory, manufacturing, sales, marketing, human and other resources than we do. As a result, they may:

• develop products that are safer or more effective than our product candidates;

• obtain FDA and other regulatory approvals or reach the market with their products more rapidly than we can, reducing the potential sales of our product candidates;

• devote greater resources to market or sell their products;

• adapt more quickly to new technologies and scientific advances;

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• initiate or withstand substantial price competition more successfully than we can;

• have greater success in recruiting skilled scientific workers from the limited pool of available talent;

• more effectively negotiate third-party licensing and collaboration arrangements; and

• take advantage of acquisition or other opportunities more readily than we can.

In addition, our product candidates, if approved and commercialized, will compete against well-established existing therapeutic products that are currently reimbursed by government health administration authorities, private health insurers and health maintenance organizations. We face and will continue to face intense competition from other companies for collaborative arrangements with pharmaceutical and biotechnology companies, for relationships with academic and research institutions and for licenses to proprietary technology. In addition, we anticipate that we will face increased competition in the future as new companies enter our markets and as scientific developments continue to expand the understanding of various diseases. While we will seek to expand our technological capabilities to remain competitive, research and development by others may render our technology or product candidates obsolete or noncompetitive or result in treatments or cures superior to any therapy developed by us.

If we are unable to protect our intellectual property rights adequately, the value of our potential products could be diminished.

Our success is dependent in part on obtaining, maintaining and enforcing our patents and other proprietary rights. Patent law relating to the scope of claims in the biotechnology field in which we operate is still evolving and surrounded by a great deal of uncertainty. Accordingly, we cannot assure you that our pending patent applications will result in issued patents. Because certain U.S. patent applications may be maintained in secrecy until a patent issues, we cannot assure you that others have not filed patent applications for technology covered by our pending applications or that we were the first to invent the technology.

Other companies, universities and research institutions have or may obtain patents and patent applications that could limit our ability to use, manufacture, market or sell our product candidates or impair our competitive position. As a result, we may have to obtain licenses from other parties before we could continue using, manufacturing, marketing or selling our potential products. Any such licenses may not be available on commercially acceptable terms, if at all. If we do not obtain required licenses, we may not be able to market our potential products at all or we may encounter significant delays in product development while we redesign potentially infringing products or methods.

In addition, although we own a number of patents, including issued patents and patent applications relating to Natrecor and certain of our p38 kinase inhibitors, the issuance of a patent is not conclusive as to its validity or enforceability, and third parties may challenge the validity or enforceability of our patents. We cannot assure you how much protection, if any, will be given to our patents if we attempt to enforce them and they are challenged in court or in other proceedings. It is possible that a competitor may successfully challenge our patents or that challenges will result in limitations of their coverage. In addition, the cost of litigation to uphold the validity of patents can be substantial. If we are unsuccessful in such litigation, third parties may be able to use our patented technologies without paying licensing fees or royalties to us.

16

Moreover, competitors may infringe our patents or successfully avoid them through design innovation. To prevent infringement or unauthorized use, we may need to file infringement claims, which are expensive and time consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or may refuse to stop the other party from using the technology at issue on the grounds that its technology is not covered by our patents. Policing unauthorized use of our intellectual property is difficult, and we cannot assure you that we will be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.

In addition to our patented technology, we also rely on unpatented technology, trade secrets and confidential information. We may not be able to effectively protect our rights to this technology or information. Other parties may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology. We require each of our employees, consultants and corporate partners to execute a confidentiality agreement at the commencement of an employment, consulting or collaborative relationship with us. However, these agreements may not provide effective protection of our technology or information or, in the event of unauthorized use or disclosure, they may not provide adequate remedies.

If we fail to negotiate or maintain successful arrangements with third parties, our development and marketing activities may be delayed or reduced.

We have entered into, and we expect to enter into in the future, arrangements with third parties to perform research, development, regulatory compliance, manufacturing or marketing activities relating to some or all of our product candidates. If we fail to secure or maintain successful collaborative arrangements, our development and marketing activities may be delayed or reduced. We may be unable to negotiate favorable collaborative arrangements that, if necessary, modify our existing arrangements on acceptable terms. Most of our agreements can be terminated under certain conditions by our partners. In addition, our partners may separately pursue competing products, therapeutic approaches or technologies to develop treatments for the diseases targeted by us or our efforts. Even if our partners continue their contributions to the collaborative arrangements, they may nevertheless determine not to actively pursue the development or commercialization of any resulting products. Also, our partners may fail to perform their obligations under the collaborative arrangements or may be slow in performing their obligations. In these circumstances, our ability to develop and market potential products could be severely limited.

Risks Related to our Industry

We face uncertainties over reimbursement and healthcare reform.

In both domestic and foreign markets, future sales of our potential products, if any, will depend in part on the availability of reimbursement from third-party payers such as government health administration authorities, private health insurers and other organizations. Third-party payers are increasingly challenging the price and cost-effectiveness of medical products and services. Significant uncertainty exists as to the reimbursement status of newly approved health care products. Even if we were to obtain regulatory approval, our product candidates may not be considered cost-effective and adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investments in product development. Legislation and regulations affecting the pricing of pharmaceuticals may change before any of our product candidates is approved for marketing. Adoption of such legislation and regulations could further limit reimbursement for medical products and services. If the government and third party payers fail to provide adequate coverage and reimbursement rates for our potential products, the market acceptance of our products may be adversely affected.

17

We may be required to defend lawsuits or pay damages in connection with the alleged or actual harm caused by our product candidates.

We face an inherent business risk of exposure to product liability claims in the event that the use of our product candidates is alleged to have resulted in harm to others. This risk exists in clinical trials as well as in commercial distribution. In addition, the pharmaceutical and biotechnology industries in general have been subject to significant medical malpractice litigation. We may incur significant liability if product liability or malpractice lawsuits against us are successful. Although we maintain product liability insurance, we cannot be sure that this coverage is adequate or that it will continue to be available to us on acceptable terms.

We use hazardous materials in our business, and any claims relating to improper handling storage or disposal of these materials could harm our business.

Our research and development activities involve the controlled use of hazardous materials, chemicals, biological agents and radioactive compounds. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by such laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any resulting damages, and any such liability could exceed our resources. We may be required to incur significant costs to comply with these laws in the future. Failure to comply with these laws could result in fines and the revocation of permits, which could prevent us from conducting our business.

Our stock price continues to experience large fluctuations, and you could lose some or all of your investment.

The market price of our stock has been and is likely to continue to be highly volatile. These price fluctuations have been rapid and severe. The market price of our common stock may fluctuate significantly in response to the following factors, most of which are beyond our control:

• variations in our quarterly operating results;

• changes in securities analysts’ estimates of our financial performance;

• changes in market valuations of similar companies;

• announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

• additions or departures of key personnel;

• future sales of common stock;

• announcements by us or our competitors of technological innovations of new therapeutic products, clinical trial results and developments in patent or other proprietary rights;

• announcements regarding government regulations, public concern as to the safety of drugs developed by us or others or changes in reimbursement policies; and

18

• fluctuations in stock market price and volume, which are particularly common among securities of biopharmaceutical companies.

We are at risk of securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology companies have experienced greater than average stock price volatility in recent years. Several years ago, we were the subjects of a securities class action lawsuit, which was eventually dismissed with a determination that the plaintiffs had no basis for their claim. If we face such litigation in the future, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

We have implemented provisions in our charter documents that may ultimately delay, discourage or prevent a change in our management or control of us.

Our certificate of incorporation and bylaws contain provisions that could make it more difficult for our stockholders to replace or remove our directors or to effect any other corporate action. These provisions include those which:

• prohibit holders of less than ten percent of our outstanding capital stock from calling special meetings of stockholders;

• prohibit stockholder action by written consent, thereby requiring stockholder actions to be taken at a meeting of our stockholders; and

• establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

Moreover, our certificate of incorporation does not provide for cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates.

Some of the above provisions may also have possible anti-takeover effects, which may make an acquisition of us by a third party more difficult, even if such an acquisition could be beneficial to our stockholders. In addition, our certificate of incorporation also authorizes us to issue up to 20,000,000 shares of preferred stock in one or more different series with terms to be determined by our board of directors at time of issuance. As of March 31, 2002, an aggregate of 71,053 shares of preferred stock had been designated for issuance as Series A or Series B preferred stock by the board of directors and 4,991 shares of Series B preferred stock were issued and outstanding. Issuance of other shares of preferred stock could also be used as an anti-takeover device.

Item 3.    Quantitative and Qualitative Disclosure About Market Risk

We are exposed to a variety of risks, including changes in interest rates affecting the return on our investments and foreign currency fluctuations. In the normal course of our business, we employ established policies and procedures to manage our exposure to fluctuations in interest rates and foreign currency values.

Our exposure to market rate risk for changes in interest rates relate primarily to our investment portfolio. We attempt to place our investments with high quality issuers and, by policy, limit the amount of credit exposure to any one issuer and do not use derivative financial instruments in our investment portfolio.

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We maintain an investment portfolio of various issuers, types and maturities, which consist of both fixed and variable rate financial instruments. These securities are classified as available-for-sale, and consequently, are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component in stockholders’ equity, net of applicable taxes. At any time, sharp changes in interest rates can affect the value of our investment portfolio and its interest earnings. Currently, we do not hedge these interest rate exposures. However, through our money manager, we maintain management control systems to monitor interest rate risk. The risk management control systems use analytical techniques as well as other procedures to review interest rate risk. Assuming a hypothetical interest rate increase of 10%, the fair value of our total investment portfolio as of March 31, 2002 would have potentially incurred a loss of $177,000.

Our exposure to foreign currency fluctuations is currently limited to our supply contract for Natrecor, which is denominated in the Euro; the GSK agreement, which is denominated in the British Pound; and the royalty income from sales of Fiblast spray by Kaken, which is denominated in the Japanese Yen. Changes in the exchange rate between the Euro and the U.S. dollar could adversely affect our manufacturing costs. Changes in the exchange rate between the British Pound and U.S. dollar could adversely affect our milestone and future royalty payments. Changes in the exchange rate between the Japanese Yen and U.S. dollar could adversely affect our future royalty payments. All of our other contracts are denominated in U.S. dollars. Exposure to foreign currency exchange rate risk may change over time as our business evolves and our products are introduced into international markets. Currently, we do not hedge against any foreign currencies and, as a result, could incur unanticipated gains or losses.

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PART II.    OTHER INFORMATION

Item 6.    Exhibits and reports on Form 8-K

(a) Exhibits

10.53 License and Supply Agreement between the Registrant and Glaxo Group Ltd. dated March 31, 2002. Portions of the exhibit have been omitted pursuant to a request for confidential treatment.

(b) Reports on Form 8-K

None.

SIGNATURES

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

	SCIOS INC.
May 1, 2002	By:	/s/    RICHARD B. BREWER
		Richard B. Brewer, President and CEO

May 1, 2002	By:	/s/    DAVID W. GRYSKA
		David W. Gryska, Senior Vice President and CFO

21

EX-10.53

                                                                   EXHIBIT 10.53


                          LICENSE AND SUPPLY AGREEMENT

     THIS LICENSE AND SUPPLY AGREEMENT (the "Agreement") is made effective as of
the 31st day of March, 2002 (the "Effective Date") by and between SCIOS, INC., a
Delaware corporation having its principal place of business at 820 West Maude
Avenue, Sunnyvale, CA, USA 94085 ("Scios"), and GLAXO GROUP LTD., a corporation
organized under the laws of England having its principal place of business at
Glaxo Wellcome House, Berkeley Avenue, Greenford, Middlesex UB6 ONN, United
Kingdom ("GSK"). Scios and GSK are sometimes referred to herein individually as
a "Party" and collectively as the "Parties".

                                    RECITALS

     A. GSK and Scios are parties to the Summary of Terms, which contemplates
that the Parties will enter into a more definitive agreement which shall replace
the Summary of Terms.

     B. GSK and Scios wish to enter into this Agreement, which when effective
shall constitute the "Definitive Agreement" contemplated in the Summary of
Terms.

     NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Parties hereto agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

     When used in this Summary of Terms, the following terms shall have the
meanings indicated below.

     1.1 "Acceptable Label" means a label for the Original Product satisfying
the criteria set forth on Schedule 1.1.

     1.2 "Active Pharmaceutical Ingredient" or "API" means Natrecor(R) in active
bulk form meeting the API Specifications.

     1.3 "Affiliate" means an individual, trust, business trust, joint venture,
partnership, corporation, association or any other entity which (directly or
indirectly) is controlled by, controls or is under common control with a Party.
For the purposes of this definition, the term "control" (including, with
correlative meanings, the terms "controlled by" and "under common control with")
as used with respect to any Party, shall mean the possession (directly or
indirectly) of at least 50 percent of the outstanding voting securities of a
corporation or comparable equity interest in any other type of entity.

     1.4 "API Specifications" shall mean the specifications for Active
Pharmaceutical Ingredient attached hereto as Schedule 1.4.

     1.5 "Combination Product" means [*****].


[*****] - A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
          SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION



     1.6 "Commercialization" means all activities undertaken relating to the
marketing, promotion, distribution, use, storage, sale and offer for sale of a
Product including, without limitation, advertising and any Phase IV clinical
trials.

     1.7 "Controlled" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
or other arrangement with a Third Party.

     1.8 "Cost of Goods" means: [*****]

     1.9 "Development" means:

         (a) all activities relating to obtaining and/or maintaining Regulatory
Approval of the Original Product in the Territory with an Acceptable Label
including, without limitation, clinical trials and the preparation, submission,
review and development of data or other information related thereto ("Type 1
Development");

         (b) Phase IV clinical trials supporting pre-launch and
commercialization of the Product but not contributing to obtaining and/or
maintaining Marketing Authorization Applications of the Original Product and any
New Product in the Territory, and excluding the Health Outcomes Study ("Type 2
Development");

         (c) all activities relating to obtaining and/or maintaining Marketing
Authorization of a New Product in the Territory, including Phase III clinical
trials and the preparation, submission, review and development of data or other
information related thereto but excluding pre-clinical, Phase I and Phase II
clinical development ("Type 3 Development"); and

         (d) design and conduct of the Health Outcomes Study.

The term "Development" shall not include process development or final finish or
fill of Product.

     1.10 "Development Expenses" means the expenses incurred by GSK for
Development pursuant to a Development Plan.

     1.11 "Development Plan" means a comprehensive plan for Development of
Products under the direction of GSK, adopted as provided in Article 2, below.

     1.12 "Field" means the development, use, distribution, importation,
storage, marketing, sale and offer for sale of Product for any human
pharmaceutical use other than as a diagnostic reagent.

     1.13 "Final Product Specifications" means the specifications for Product in
final form for commercialization and distribution, labeled in accordance with
local regulatory requirements and custom. The Final Product Specifications are
attached hereto as Schedule 1.13.

[*****] - A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
          SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

                                      -2-



     1.14 "GSK Knowhow" means all Information relating to the Product developed
by GSK as a result of its activities under this Agreement.

     1.15 "GSK Patents" means patent applications, and patents issuing from such
patent applications, which GSK has applied for or owns as a result of its
activities under this Agreement, as well as divisionals, continuations,
continuations-in-part, reissues, reexaminations, renewals, extensions, utility
models, additions and supplementary protection certificates to any such patents
and patent applications which are necessary for development, use, importation,
manufacture, formulation, packaging, sale or offer for sale of Product outside
of the Territory.

     1.16 "Health Outcomes Study" means one or more pharmaco-economic studies
with respect to the Original Product, designed and conducted by GSK pursuant to
Section 2.3, below.

     1.17 "Information" means, whether or not patentable: (i) techniques and
data including inventions, practices, methods, know-how, data (including
pharmacological, toxicological and clinical test data, regulatory submissions
and data and analytical and quality control data), marketing, distribution, and
sales data or descriptions, (ii) compounds, compositions of matter, assays and
biological materials, and (iii) dossiers of information necessary for Regulatory
Approvals.

     1.18 "Launch" means the first commercial sale of a Product in a country in
the Territory by GSK or any of its Affiliates or sub-licensees following receipt
of Regulatory Approval in such country.

     1.19 "Major Market" shall mean each of [*****].

     1.20 "Market Acceptance Criteria" shall mean those objective criteria
regarding market acceptance of Product in each Major Market set forth on
Schedule 1.20.

     1.21 "Marketing Authorization Application" means an application for
Regulatory Approval required before commercial sale or use of the Product in the
Field in a regulatory jurisdiction.

     1.22 "Marketing Plan" means a plan setting forth the basis for
Commercialization of the Product in the Major Markets, as devised by GSK and
approved by the Steering Committee.

     1.23 "Natrecor(R)" means nesiritide or B-type natriuretic peptide (BNP) the
amino acid sequence of which is listed in Schedule 1.23, and any derivatives,
variants, analogs, homologs, fragments, N-terminally or C-terminally extended
forms, conjugates, salts, esters and amides thereof.

     1.24 "New Product" means: (i) a line extension, alternative delivery
system, additional formulation or other modification of the Original Product,
(ii) any modifications to the manufacturing process used for the Original
Product or any New Product which are material, and (iii) any preparation or
product containing Natrecor(R) for treatment of an indication other than label
indications for the Original Product approved as of the Effective Date.

[*****] - A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
          SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

                                      -3-



     1.25 "Net Sales" means, with respect to the Original Product or a New
Product that is not a Combination Product, the amount invoiced by GSK or an
Affiliate or sublicensee of GSK for sales of a Product in the Territory, less
deductions for the following items:

     (i)   reasonable transportation and insurance charges borne by the selling
           party,

     (ii)  sales and excise taxes or customs duties paid by the selling party
           and any other governmental charges imposed upon the sale of the
           Product,

     (iii) rebates or allowances actually granted or allowed, including
           government and managed care rebates,

     (iv)  quantity discounts, cash discounts or chargebacks actually granted,
           allowed or incurred in the ordinary course of business in connection
           with the sale of the Product, and

     (v)   allowances or credits to customers, not in excess of the selling
           price of the Product, on account of governmental requirements,
           rejection, outdating, recalls or return of the Product.

[*****]

     1.26 "Original Product" means the formulation of Natrecor(R) (nesiritide)
intravenous B-type natriuretic peptide (BNP) commercially sold by Scios in the
U.S.A. as of the Effective Date for the treatment of acute decompensated heart
failure. Attached hereto as Schedule 1.26 is the package insert for the Original
Product as of the Effective Date.

     1.27 "Patent Expenses" means [*****]

     1.28 "Product" means the Original Product, any New Product and any
Combination Product.

     1.29 "Quality Assurance Agreement" means a technical and quality assurance
agreement establishing each Party's responsibilities with respect to release and
shipment of API

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                                      -4-



to GSK hereunder. The Quality Assurance Agreement shall be negotiated in good
faith by the Parties promptly after the Effective Date and shall be subject to
their mutual agreement independent of the Steering Committee.

     1.30 "Regulatory Approval" means all approvals (including pricing and
reimbursement approvals) and licenses, registrations or authorizations of a
Regulatory Authority, necessary for the use, import, storage, export, transport,
filling, labeling, packaging (to the extent that filling, labeling or packaging
are carried out by GSK or its Affiliates) or sale of a Product in a regulatory
jurisdiction in the Territory. "Regulatory Approval" shall not, however, include
any regulatory approvals related to the manufacture of API and supply of API by
Scios to GSK as contemplated herein.

     1.31 "Regulatory Authority" means a governmental entity with the authority
to grant Regulatory Approvals.

     1.32 "Scios Know-How" means all Information now or hereafter within the
Control of Scios necessary or useful for the Development or Commercialization of
the Product in the Territory, or for the filling, labeling and packaging of the
Product anywhere in the world for use or sale in the Territory.

     1.33 "Scios Patents" means: (i) those patents and patent applications shown
on Schedule 1.33 attached hereto, (ii) all patents issuing from such patent
applications, divisionals, continuations, continuations-in-part, reissues,
reexaminations, renewals, extensions, utility models, additions and
supplementary protection certificates to any such patents and patent
applications, and (iii) all patents and patent applications now or hereafter
owned or Controlled by Scios necessary or useful for the development, use,
importation, formulation, packaging, sale or offer for sale of Product in the
Territory.

     1.34 "Steering Committee" means the entity described in Article 3, below.

     1.35 "Summary of Terms" means an agreement between the Parties titled
"Binding Summary of Terms" and dated as of December 20, 2001.

     1.36 "Territory" means those countries of Western Europe, Central Europe
and Eastern Europe listed in Schedule 1.36.

     1.37 "Third Party" means an entity other than Scios or GSK or their
respective Affiliates.

                                   ARTICLE 2
                               PRODUCT DEVELOPMENT

     2.1 Scope of Development. Upon the Effective Date, GSK will assume
responsibility for Development throughout the Territory pursuant to a
Development Plan. Scios shall provide GSK with reasonable assistance in the
Development of the Original Product and with respect to

                                      -5-



New Products which Scios, in its sole discretion, may have developed up to and
including Phase II clinical trials. [*****]

     2.2 Development Plan.

         2.2.1 Timing. [*****]

         2.2.2 Content of the Development Plan. The Development Plan shall,
subject to Section 2.4, below, cover:

               (a) [*****]

               (b) [*****]

     2.3 Health Outcomes Study. Promptly following the Effective Date the
Parties shall in good faith design and thereafter implement, under the direction
of GSK, one or more mutually acceptable Health Outcomes Studies for use as
appropriate in establishing pricing and reimbursement for the Original Product
in the Major Markets. GSK shall regularly report to the Steering Committee on
the progress of each Health Outcomes Study. Within 30 days after completion of
all Health Outcomes Studies and delivery to Scios of a copy of the final report
detailing the results thereof, Scios shall pay to GSK the lesser of: (i) [*****]
and (ii) [*****]. This amount shall be due regardless of the outcome of the
Health Outcomes Studies.

     2.4 Development Effort. GSK shall carry out its responsibilities under the
Development Plan using reasonable efforts consistent with the efforts that GSK
employs for its own products which have substantially the same market potential
in the Territory, and in accordance with all applicable legal and regulatory
requirements including, without limitation, then-current Good Laboratory
Practices, Good Clinical Practices, and Good Manufacturing Practices; [*****].

     2.5 Ownership of Regulatory Approvals. [*****]

     2.6 Communication with Regulatory Authorities. GSK shall have primary
responsibility for dealing with Regulatory Authorities in the Territory,
including filing all supplements and other documents with such authorities with
respect to obtaining Regulatory Approvals, reporting all adverse drug
experiences related to the Product, and handling all Product complaints. GSK
shall promptly furnish Scios with copies of all substantive correspondence it
has had with each Regulatory Authority (including, without limitation, a copy of
the final Marketing Approval Application filed with the EMEA), and with contact
reports concerning substantive conversations or meetings with each such
authority relating to Development or Commercialization. At each meeting of the
Steering Committee, GSK shall provide to the Steering Committee a report
describing the regulatory filing status of each Product throughout the
Territory.

     2.7 Costs of Development. Subject to Section 2.3, above, [*****]


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                                      -6-



     2.8 Development of New Products Outside the Territory. Scios shall have the
sole responsibility for development of New Products outside of the Territory.
Scios shall regularly disclose to GSK its plans for New Product development and
afford GSK a reasonable opportunity to comment thereon. Notwithstanding the
foregoing, Scios shall be free, after having considered the suggestions from
GSK, to develop New Products outside of the Territory as it sees fit.

                                   ARTICLE 3
                         MANAGEMENT OF THE COLLABORATION

     3.1 Steering Committee. Within 30 days after the Effective Date, Scios and
GSK shall create a Steering Committee consisting of four qualified
representatives of each Party. A Party may change or replace its representatives
on the Steering Committee as it deems appropriate, by notice to the other Party;
provided, however, that each Party's designees shall be qualified by experience
and training to address the issues anticipated in each meeting of the Steering
Committee in which such member participates. Each member of the Steering
Committee shall devote all time reasonably necessary to participate actively on
the Steering Committee to optimize the development and commercialization of
Products as contemplated herein. Each Party will designate one of its members of
the Steering Committee as co-chairperson. The co-chairperson appointed by each
Party shall be empowered to bind such Party to decisions of the Steering
Committee to the extent contemplated herein.

     The Steering Committee may set up such subcommittees to advise it as it
deems appropriate. It is currently contemplated that the Steering Committee
shall promptly designate a manufacturing subcommittee which shall advise Scios
with respect to its supply and manufacturing obligations (including issues
related to alternative sources of supply and Cost of Goods). Notwithstanding the
foregoing, Scios, after reasonable consideration of GSK's views and the advice
of the Steering Committee (including the manufacturing subcommittee), shall have
sole discretion as to how it manages and satisfies its obligations hereunder
with respect to the manufacture and supply of API.

     3.2 Meetings of the Steering Committee. The Steering Committee shall hold
meetings at such times and places as shall be determined by the co-chairpersons.
The meetings shall be held no less frequently than once every [*****] in the
period from the Effective Date through the third year after the first Launch in
a Major Market, and [*****] thereafter. Steering Committee meetings may be held
in person or by telephone or video conference. The co-chairpersons shall
alternate in keeping written minutes which shall reflect the decisions taken at
the meetings. Such minutes shall be circulated to the Steering Committee for
review and approval within two weeks after each meeting.

     3.3 Function of the Steering Committee. The Steering Committee, directly or
through one or more subcommittees, shall manage the long-range strategy and
planning for Development and Commercialization, coordinate the activities of the
Parties under this Agreement, and perform such other functions as appropriate to
further the purposes of this Agreement as determined by the Parties.

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                                      -7-



     3.4 Decision Making. To the extent feasible, the Steering Committee shall
make decisions and take actions by consensus after an open discussion of the
matters as to which decisions are being made. [*****]

     3.5 Limitations of Powers of the Steering Committee. The Steering Committee
shall have only such powers as are expressly delegated to it in this Agreement.
The Steering Committee is not a substitute for the rights or the obligations of
the Parties and, inter alia, shall not have the authority to amend this
Agreement. Except as expressly set forth herein, the Steering Committee shall
not be involved with the day-to-day management of this Agreement.

     3.6 Liaison Manager. Each Party will designate one of its members of the
Steering Committee to act as the liaison manager to the other Party to
facilitate the performance of the rights and satisfaction of the obligations of
the Parties hereunder; provided, however, that designation of liaison managers
shall not restrict the right of the Parties to communicate among themselves as
they see fit.

                                   ARTICLE 4
                                COMMERCIALIZATION

     4.1 General. GSK shall be solely responsible for the Commercialization of
the Products throughout the Territory. It is understood and agreed that GSK
shall have the right not to Commercialize any Product in any country of the
Territory in the event that it would so decide with respect to a product of its
own having substantially the same market potential in such country.

     4.2 Marketing Plan. [*****]

     4.3 Commercialization Efforts.

     [*****]

     4.4 Product Spend. [*****]

     4.5 Advertising and Education

         4.5.1 GSK shall disclose to Scios all promotional platforms, campaign
themes, advertising and educational programs in the Major Markets containing the
Natrecor(R) trademark if such Trademark is available and appropriate for use in
the Territory. Scios shall have not less than 30 days after such disclosure to
review and comment thereon. Such programs shall be consistent with such
reasonable guidelines for the use of the Natrecor(R) trademark as Scios may from
time to time promulgate.

         4.5.2 All written or visual promotional and educational materials,
advertising, Product labeling, and documentary information regarding the Product
in the Territory shall, to

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                                      -8-



the extent practical, identify Scios as the supplier and licensor of the
Product.

     4.6 Pricing in the Territory. [*****]

                                    ARTICLE 5
                             MANUFACTURE AND SUPPLY

     5.1 Exclusive Supply and Purchase. [*****]

     5.2 Failure to Supply. [*****]

     5.3 Filling, Labeling and Packaging. [*****]

     5.4 Manufacturing Approvals. Notwithstanding Sections 2.5 and 2.6, above,
Scios will use diligent efforts to make necessary filings to obtain, or to cause
a Third Party manufacturer of API to obtain, the necessary regulatory approvals
for the manufacture of API as contemplated herein. GSK shall be promptly
notified of any proposed change in the process for the manufacture of API which
impacts the Marketing Authorization Applications and Regulatory Approval in the
Territory as well as any proposed change as to the site at which such
manufacture is to occur. Thereafter, the Parties shall in good faith consult as
to the best way of ensuring sufficient supply of API to GSK; provided, however,
that Scios shall in any event ensure a sufficient source of supply of API (as
approved by the relevant Regulatory Authorities) to GSK pending regulatory
approval, if required, to such proposed process changes or site change, and
provided that such supply is consistent with Sections 5.6 and 5.7, below. Except
as required of Scios by law, no API incorporating any such proposed change and
no API manufactured at any proposed new facility shall be supplied by Scios to
GSK hereunder without such changes having first been approved by the appropriate
Regulatory Authorities in the Major Markets or other mutual agreement by the
Parties, which regulatory approvals the Parties agree to pursue diligently
following notice from Scios of such proposed changes.

     5.5 Specifications. Scios warrants that the Active Pharmaceutical
Ingredient it supplies hereunder shall meet the API Specifications, and shall
have been manufactured in accordance with the Quality Assurance Agreement and
with all applicable laws and regulations including, without limitation, the
then-current European Good Manufacturing Practice ("GMP") compliance standards.
The API Specifications and Quality Assurance Agreement may be amended by mutual
agreement (such agreement not to be unreasonably withheld) to the extent
required by Regulatory Authorities. As New Products are developed, the Parties
will by mutual agreement establish appropriate specifications for such New
Products.

     5.6 Forecasts.

         (a) [*****]

         (b) [*****]


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                                      -9-



     5.7 Purchase Orders. [*****]

     5.8 Delivery. All orders for deliveries of API to GSK shall be FCA
Incoterms 2000, Scios' contract manufacturing facility in Kundl, Austria (or
such other contract manufacturing facility as Scios may establish during the
term of this Agreement). Risk of loss for the Product passes to GSK upon
delivery to GSK's designated premises. GSK shall arrange and pay for the carrier
and any expenses associated with shipping and insuring Product supplied
hereunder. [*****]

     5.9  Inspection and Rejection.

          5.9.1 [*****]

          5.9.2 [*****]

          5.9.3 [*****]

          5.9.4 [*****]

     5.10 Remedies.

          5.10.1 [*****]

          5.10.2 [*****]

     5.11 Supply Price and Payment Mechanism.

          5.11.1 [*****]

          5.11.2 [*****]

          5.11.3 [*****]

          5.11.4 [*****]

          5.11.5 [*****]

                                    ARTICLE 6
                                 CONFIDENTIALITY

     6.1 Confidentiality; Exceptions. The receiving Party shall keep
confidential and shall not publish or otherwise disclose or use for any purpose
other than as provided for in this Agreement any Information and other
information and materials furnished to it by the other Party pursuant to this
Agreement, or any provision of this Agreement that is the subject of an
effective order of the Securities Exchange Commission granting confidential
treatment pursuant to the Securities Act of 1934, as amended (collectively,
"Confidential Information"), except to the extent that it can be established by
the receiving Party that such Confidential Information:

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                                      -10-



               (i)   was already known to the receiving Party at the time of
disclosure by the other Party;

               (ii)  was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving Party;

               (iii) became generally available to the public or otherwise part
of the public domain after its disclosure by the disclosing Party and other than
through any act or omission of the receiving Party in breach of this Agreement;
or

               (iv)  was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others.

               (v)   was developed by the receiving Party's employees without
the use of or access to confidential information of the disclosing Party, as
demonstrated by contemporaneous written records of the receiving Party.

     6.2 Authorized Disclosure. A Party may disclose Confidential Information of
the other Party to the extent such disclosure is reasonably necessary in filing
or prosecuting patent applications, prosecuting or defending litigation,
complying with applicable governmental regulations or conducting preclinical or
clinical trials, provided that if a Party is required by law to make any such
disclosure it will, to the extent practicable, give reasonable advance notice to
the other Party of such disclosure requirement and, except to the extent
inappropriate in the case of patent applications, use reasonable efforts to
secure confidential treatment of such Confidential Information required to be
disclosed. In addition, each Party shall be entitled to disclose Confidential
Information, under a binder of confidentiality containing provisions as
protective as those of this Article 6, to a Third Party for the purpose of
carrying out activities authorized under this Agreement, including disclosures
to authorized or potential sub-licensees. [*****]

     6.3 Survival. This Article 6 shall survive the expiration or termination of
this Agreement for a period of [*****]; provided, however, that Confidential
Information regarding Scios' manufacturing process for API shall be kept
confidential by GSK during the term of this Agreement and for a further period
of [*****] after the expiration or termination of this Agreement, subject to the
exceptions in Section 6.1, above.

                                    ARTICLE 7
                             INFORMATION AND REPORTS

     7.1 Information and Reports During Development and Commercialization.

         7.1.1 To the extent necessary or useful to enable the Parties to
perform their respective obligations or exercise their respective rights
hereunder, GSK and Scios will each regularly disclose and make available to the
other without charge all Information (including, without limitation, copies of
all preclinical and clinical reports) known to them. Without limiting

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                                      -11-



the foregoing, promptly following the Effective Date, and at reasonable
intervals thereafter, Scios shall disclose and transfer to GSK all Scios
Know-how as is necessary or useful for the exercise by GSK of its rights
hereunder.

          7.1.2 [*****]

          7.1.3 [*****]

          7.1.4 [*****]

     7.2  Publicity Review.

          7.2.1 On or about January 7, 2002, the Parties announced the
establishment of an alliance for the marketing and development of Products in
the Territory and its key terms in a mutually agreed press release issued
simultaneously by both Parties. Following the Effective Date, neither Party
shall originate any publicity, news release, or other announcement relating to
this Agreement or to performance hereunder (collectively, "Disclosure"), without
the prior prompt review and written approval of the other, which approval shall
not be unreasonably withheld. Once specific information has been approved for
disclosure, that information may be reiterated in any subsequent Disclosure
without further approval; provided, however, that the Parties shall, to the
extent lawful, maintain the confidentiality of financial information contained
in this Agreement and resulting from the activities contemplated hereunder.

          7.2.2 Notwithstanding Section 7.2.1, a Party may make any Disclosure
it believes in good faith based upon the advice of its counsel or its auditors
is required by applicable law and without the prior approval of the other Party
may make such disclosures as are required by the rules or regulations of the
U.S. Securities and Exchange Commission or its UK counterpart. With respect to
disclosures other than those required under such rules or regulations, prior to
making such Disclosure, the disclosing Party shall provide the other Party with
a written copy or rendition of the materials proposed to be disclosed and
provide the receiving Party with an opportunity to promptly review the proposed
Disclosure.

     7.3  Use of Names. Except as required by law or in furtherance of the
exercise of its rights hereunder, neither Party shall use the name of the other
in any public announcement, press release or other public document related to
this Agreement or the understanding reflected herein without the written consent
of such other Party, which consent shall not be unreasonably withheld or
delayed. No such approval shall be required to republish a disclosure previously
made or otherwise in the public domain.

     7.4  Adverse Drug Events. Each Party shall, in a timely fashion in
accordance with the Data Safety Exchange Agreement attached as Schedule 7.4
attached hereto, report to the other Party any adverse event observed during any
use of a Product.

     7.5  Recall

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                                      -12-



          7.5.1 Any necessary recall of Product or any batch of Product from the
market in the Territory shall be effected by GSK at GSK's reasonable discretion
following, to the extent practicable, consultation with Scios.

          7.5.2 [*****]

          7.5.3 [*****]

          7.5.4 [*****]

          7.5.5 In the event of a recall of Products, each Party shall
immediately notify the other Party and cooperate in a manner which is
appropriate and reasonable under the circumstances.

     7.6  GSK shall be entitled to discontinue its Development, distribution
and/or sale of any Product if new toxicity, safety findings or side effects
shall occur that are so severe as to justify such discontinuation. In such event
the Parties shall in good faith attempt to find a mutually agreeable solution.
If the Parties are unable to agree on a mutually agreeable solution and GSK has
ceased marketing any Product for more than 60 days in any country, then Scios
shall have the right to terminate this Agreement with respect to such Product
and such country.

     7.7  [*****]

                                    ARTICLE 8
                                  PATENT RIGHTS

     8.1 Scios Patents. [*****]

     8.2 GSK Patents. [*****]

     8.3 Abandonment. [*****]

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                                      -13-



     8.4 Infringement. [*****]

     8.5 Third Party Claims. [*****]

                                    ARTICLE 9
                                    LICENSES

     9.1 License Grant by Scios. Subject to the terms and conditions of this
Agreement, Scios hereby grants to GSK and GSK hereby accepts from Scios a sole
and exclusive license under the Scios Patents and Scios Know-How and the
Natrecor(R) trademark to develop, use, import, formulate, package, sell and
offer for sale Products within the Field in the Territory.

     9.2 License Grant by GSK. Subject to the terms and conditions of this
Agreement, GSK hereby grants to Scios and Scios hereby accepts from GSK a sole
and exclusive royalty-free license under the GSK Patents and GSK Know-How to
manufacture, develop, use, import, formulate, package, sell and offer for sale
Products outside of the Territory.

     9.3 Sub-licensing. GSK may sub-license in any country in the Territory the
license granted to it on notice to and with the consent of Scios, which consent
shall not be unreasonably withheld or delayed. No such consent shall be required
in the event of a sub-license by GSK to an Affiliate of GSK. Scios may
sub-license the license granted to it with respect to GSK Patents to any Scios
licensee outside of the Territory which in turn agrees to permit Scios to
sublicense to GSK, at no cost, patent rights related to any Product owned or
controlled by such sub-licensee. Scios may sub-license the license granted to it
with respect to GSK Knowhow only upon prior agreement of GSK, which may be
withheld or granted in GSK's sole discretion. No such GSK consent shall be
required, however, in the event of a sub-license by Scios to an Affiliate of
Scios.

     9.4 Use of Licenses. Neither Party shall use or disseminate the Patents or
Know-How of the other Party other than as expressly provided under this
Agreement.

                                   ARTICLE 10
                                PAYMENTS TO SCIOS

     10.1 License Fee. The Parties acknowledge that prior to the Effective Date
GSK has paid to Scios a nonrefundable license fee of [*****].

     10.2 Milestone Payments. GSK shall notify Scios immediately upon the
achievement of each of the milestones set forth below, whereupon Scios shall
immediately invoice GSK for the amount due. Within [*****] after the achievement
of each such milestone (and subject to Scios having previously provided such
invoice at least [*****] prior to the due date), GSK shall make a non-refundable
milestone payment to Scios in the amount set forth below. Each milestone payment
shall be due only once, notwithstanding the number of Products actually
developed or commercialized by GSK hereunder.

       -------------------------------------- ---------------------
        Milestone                              Payment
       -------------------------------------- ---------------------


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                                      -14-




       -------------------------------------- ---------------------
        [*****]                                [*****]
       -------------------------------------- ---------------------
        [*****]                                [*****]
       -------------------------------------- ---------------------
        [*****]                                [*****]
       -------------------------------------- ---------------------

     10.3 Royalty Payments. In addition to the foregoing license fee and
milestone payments, GSK shall pay to Scios royalties on Net Sales in each
calendar year at the following rates:

          [*****]

     10.4 Term of Royalty Obligations. [*****]

     10.5 Royalty Reductions.

                [*****]

     10.6 Royalties Payable Only Once; Sales to Affiliates and Sub-Licensees.
[*****]

     10.7 Reports. [*****]

     10.8 Accounting and Audits.

          (a) GSK shall keep, and shall require its Affiliates and sub-licensees
to keep, complete and accurate records of the latest [*****] of sales of
Products on which royalties are due hereunder and of Development and
Commercialization expenditures for purposes of Section 4.4, above. For the
purpose of verifying royalties due to Scios hereunder and expenditures claimed
by GSK hereunder for purposes of Section 4.4, Scios shall have the right
annually, at Scios's expense, to retain an independent certified public
accountant selected by Scios and reasonably acceptable to GSK, to review such
records in the location(s) where such records are maintained by GSK, its
Affiliates or its sub-licensees upon reasonable notice and during regular
business hours and under obligations of confidence. Results of such review shall
be made available to both Scios and GSK. If the review reflects an underpayment
of royalties to Scios such underpayment shall be promptly remitted to Scios,
together with interest at LIBOR plus two percent. If the underpayment of
royalties, or any over reporting of expenditures by GSK is equal to or greater
than [*****], then GSK pay all of the costs of such review. If the review
reflects an overpayment to Scios, Scios shall promptly refund the amount of the
overpayment to GSK, together with interest calculated at LIBOR plus two percent.

          (b) Scios shall keep complete and accurate records of the latest
[*****] of supply hereunder sufficient to enable GSK to confirm Scios' Cost of
Goods. For the purpose of verifying Cost of Goods, GSK shall have the right
[*****] to retain an independent certified public accountant selected by GSK and
reasonably acceptable to Scios, to review such records in the location(s) where
such records are maintained, upon reasonable notice and during regular business
hours and under obligations of confidentiality. Results of such review shall be
made available to both Scios and GSK. If the review reflects an overcharge by
Scios, such overcharge

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                                      -15-



shall be promptly remitted to GSK, together with interest calculated in the
manner provided in Section 10.9, below. If the amount of such overcharge is
equal to or greater than [*****], then Scios pay all of the costs of such
review. If the review reflects an undercharge by Scios, GSK shall promptly
refund the amount of the overpayment to Scios, together with interest calculated
at LIBOR plus two percent.

     10.9 Currency and Method of Payment. Except as expressly provided herein
(e.g. with respect to API supplied by Scios), all payments due or payable
hereunder shall be made in Pounds Sterling delivered by wire transfer to such
account as Scios may identify from time to time on notice to GSK. Royalty
payments due hereunder with respect to sales not denominated in Pounds Sterling
shall be converted using the applicable conversion rates for buying Pounds
Sterling used in GSK Group's financial reporting systems for the last business
day of the calendar quarter for which such royalties are payable. GSK shall pay
interest to Scios on the amount of any payments that are not paid on or before
the date such payments are due under this Agreement at a rate of LIBOR plus two
percent for the applicable period, calculated on the number of days such payment
is delinquent.

     10.10 Tax Withholding. The Parties shall use all reasonable and legal
efforts to reduce tax withholding on payments made to Scios hereunder.
Notwithstanding such efforts, if GSK concludes that tax withholdings under the
laws of any country are required with respect to payments due to Scios, GSK
shall withhold the required amount and pay it to the appropriate governmental
authority. In such a case, GSK will promptly provide Scios with original
receipts or other evidence reasonably desirable and sufficient to allow Scios to
document such tax withholdings adequately for purposes of claiming foreign tax
credits and similar benefits. No withholding deduction shall be made if Scios
furnishes lawful documentation demonstrating that the payment due is exempt from
withholding according to the applicable convention for the avoidance of double
taxation between the United States and Great Britain or other applicable law or
treaty.

     10.11 Blocked Payments. If, by reason of applicable laws or regulations in
any country, it becomes impossible or illegal for GSK or its Affiliates or
sub-licensees to transfer, or have transferred on its behalf, royalties or other
payments due hereunder to Scios, such royalties or other payments shall be
deposited in local currency in the relevant country to the credit of Scios in a
recognized banking institution designated by Scios or, if none is designated by
Scios within a period of 30 days after inquiry from GSK, in a recognized banking
institution selected by GSK and identified by notice to Scios.

     10.12 Invoice Address. Scios invoices for payments due from GSK hereunder
shall be sent (in the manner in which notice is to be sent as provided in
Section 16.4, below) to:

           Corporate Accounting
           GSK House
           980 Great West Road
           Brentfort
           Middlesex TW8 9GS


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          SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION


                                      -16-




           United Kingdom

                                   ARTICLE 11
                                   TRADEMARKS

     11.1 Use of Trademark. Absent mutual agreement or as provided in Section
11.2, below, GSK shall market, advertise, sell or distribute Products only under
the trademark Natrecor(R).

     11.2 Responsible Party. GSK, in consultation with Scios, shall be
responsible for maintaining the trademark Natrecor(R) in all countries in the
Territory in which such mark is registered as of the Effective Date if such
trademark is available and appropriate for use in the Territory and, in Scios'
name, for establishing and maintaining such trademark in other countries in the
Territory in which GSK intends to Commercialize the Products, all at GSK's
expense. In the event that GSK reasonably determines that the trademark
Natrecor(R) is unavailable or inappropriate in any country in the Territory, GSK
shall have the right, at its sole expense, in consultation with Scios, and in
GSK's name, to establish an alternative trademark under which it shall
Commercialize Product in such country.

     11.3 Infringement. [*****]

     11.4 End of Agreement. [*****]

                                   ARTICLE 12
              REPRESENTATIONS AND WARRANTIES; COMPETITIVE PRODUCTS

     12.1 Joint Representations and Warranties. [*****]

     12.2 Representations and Warranties by Scios. Scios represents and warrants
to GSK that, as of the Effective Date, to the actual knowledge of the executive
officers and directors of Scios:

          [*****]

     12.3 Performance by Affiliates and Sub-licensees. The Parties recognize
that each may perform some or all of its obligations under this Agreement
through Affiliates or, to the extent permitted, by sub-licensees. Nonetheless,
each Party shall remain responsible and shall be the guarantor of the
performance by its Affiliates and sub-licensees and shall cause its Affiliates
and sub-licensees to comply with the provisions of this Agreement in connection
with such performance. In the event of a dispute arising out of the actions of
an Affiliate or sub-licensee under this Agreement, each of GSK and Scios may
proceed directly against the other Party, without any obligation to first
proceed against the Affiliate or sub-licensee.

     12.4 Competing Product Development. [*****]

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          SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

                                      -17-



                                   ARTICLE 13
                              TERM AND TERMINATION

     13.1 Term. The term of this Agreement shall commence on the Effective Date
and shall expire upon the termination or expiration in all of the countries of
the Territory of the royalty obligations set forth in Section 10.4, above.

     13.2 Termination for Material Breach. If either Party materially breaches
this Agreement at any time, which breach is not cured within 30 days of notice
thereof from the non-breaching Party, the non-breaching Party shall have the
right to terminate this Agreement on notice to the Party in breach following the
expiration of such cure period; provided, however, that if the Party alleged to
be in breach shall have invoked the dispute resolution mechanism of Article 15
prior to the expiration of such cure period then termination shall not be
effective until the sooner of abandonment of such proceedings by the Party
alleged to be in breach or completion of the dispute resolution proceedings and
a non-appealable finding in arbitration in favor of the non-breaching Party.

     13.3 Termination for Challenge to Patent Rights. [*****]

     13.4 Unilateral Termination by GSK. GSK may, at any time by delivery of 90
days' prior notice to Scios, elect to abandon its rights and obligations with
respect to any country in the Territory, or to terminate this Agreement in toto;
provided, however, that GSK shall not have the right to terminate as to any one
country in the European Union without terminating as to all such countries. Upon
notice by GSK pursuant to this Section 13.4, this Agreement and all obligations
of Scios and GSK hereunder with respect to the country or countries in question
shall terminate. In the event that GSK terminates its rights with respect to one
or more countries but not the entire Territory, then this Agreement shall remain
in effect with respect to the countries not subject to such termination which
countries shall, thereafter, be considered the "Territory."

     13.5 Bankruptcy. All rights granted to GSK hereunder are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy
Code (the "Code") licenses of rights to "intellectual property" as defined in
Section 101(52) of the Code. GSK, as a licensee of such rights under this
Agreement shall retain and may fully exercise all of its rights and elections
under the Code, subject to performance by GSK of its obligations under this
Agreement. Scios further agrees that, in the event of the commencement of a
bankruptcy proceeding by or against Scios under the Code, GSK shall be entitled
to a complete duplicate of (or complete access to, as appropriate) any such
intellectual property and all embodiments thereof, which shall promptly be
delivered to GSK, at its sole expense: (i) upon written request from GSK
following commencement of a bankruptcy proceeding by or against Scios, or (ii)
if not delivered pursuant to subsection (i), above, upon written request from
GSK following the rejection in bankruptcy of this Agreement by or on behalf of
Scios. In the event of a filing for bankruptcy or insolvency by Scios, Scios
shall confirm to the receiver, trustee or liquidator that GSK Knowhow and GSK
Patents are the sole property of GSK and may not be disposed of by Scios except
as expressly provided herein. To the extent that Scios hereafter renegotiates
its supply agreement with Biochemie GmbH, Scios shall in good faith endeavor to
obtain assurance

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                                      -18-




that, in the event that such agreement is subject to termination because of
bankruptcy or insolvency on the part of Scios, GSK shall have the right to
assume Scios' rights and obligations thereunder without interruption.

     13.6 Effect of Termination

          13.6.1 Termination of this Agreement shall not relieve the Parties of
any liability, including any obligation to make payments hereunder, which
accrued hereunder prior to the effective date of such termination, nor preclude
a Party from pursuing all rights and remedies it may have hereunder or at law or
in equity with respect to any breach of this Agreement nor prejudice a Party's
right to obtain performance of any obligation which accrued hereunder prior to
the effective date of such termination. Upon termination (but not expiration of
the term of this Agreement), all licenses and rights to Patents and Know-How
granted hereunder shall terminate.

          13.6.2 Upon termination of this Agreement (but not expiration of its
term), all Confidential Information supplied by one Party shall be returned by
the other Party except for one copy of such information retained solely for
legal archival or regulatory purposes;

          13.6.3 Upon termination of this Agreement (but not expiration of its
term), GSK shall cooperate in the prompt transfer to Scios of all Marketing
Authorization Applications and Regulatory Approvals related to the Products in
the Territory, and shall diligently take such other actions and execute such
other instruments, assignments and documents as may be necessary to effect the
transfer or reconveyance of rights hereunder to Scios and the relinquishment of
such rights by GSK.

          13.6.4 Following termination of this Agreement, GSK shall have [*****]
to sell any Product in its possession as of the effective date of termination,
subject to its obligation to pay royalties to Scios as provided hereinabove with
respect to such sales.

     13.7 Surviving Rights. [*****]

                                   ARTICLE 14
                                 INDEMNIFICATION

     14.1 Indemnification by GSK. [*****]

     14.2 Indemnification by Scios. [*****]

     14.3 Procedure. A Party seeking indemnification under Section 14.1 or
Section 14.2, shall inform the other Party of a claim as soon as reasonably
practicable after it receives notice of the Third Party claim, permit the
indemnifying Party to assume direction and control of the defense of the Third
Party claim (including the right to settle the claim solely for monetary
consideration), and cooperate as requested (at the expense of the indemnifying
Party) in the defense of the Third Party claim.

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          SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

                                      -19-



     14.4 Insurance. [*****]

                                   ARTICLE 15
                               DISPUTE RESOLUTION

     15.1 Disputes. All disputes arising between the Parties hereunder or with
respect to this Agreement shall be resolved solely as provided in this Article
15. Any such dispute which the Parties are unable to resolve directly may be
referred by either Party to the Steering Committee for resolution. If the
Steering Committee is unable to resolve such dispute within 30 days after
referral, either Party may, on notice to the other, have such dispute referred
to the CEO of Scios and the European Chairman of GSK for attempted resolution by
good faith negotiation. If such individuals are unable to resolve such dispute
within 30 days after referral, then either Party may thereafter seek to resolve
the dispute through arbitration in accordance with the Rules of Arbitration of
the International Chamber of Commerce by one or more arbitrators appointed in
accordance with such rules, in English. The place of arbitration shall be
London, England, if arbitration is requested by Scios and shall be San
Francisco, California, if arbitration is requested by GSK.

     15.2 Applicable Law. This Agreement shall be governed by and construed
under the substantive laws of the State of New York, without regard to conflicts
of law principles.

                                   ARTICLE 16
                                  MISCELLANEOUS

     16.1 Assignment.

          16.1.1 [*****]

          16.1.2 [*****]

          16.1.3 [*****]

     16.2 Force Majeure. Except as otherwise expressly provided herein, neither
Party shall lose any rights hereunder or be liable to the other Party for
damages or losses on account of failure of performance by the defaulting Party
if the failure is occasioned by government action, war, acts of gods, or any
other similar or dissimilar cause beyond the control of the defaulting Party,
provided that the Party claiming force majeure has exerted all reasonable
efforts to avoid or remedy such force majeure.

     16.3 Further Actions. Each Party agrees to execute, acknowledge and deliver
such further instruments, and to do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.

     16.4 Notices. All notices hereunder shall be in writing and shall be deemed
given if delivered personally or by facsimile transmission with confirmed
answer-back, mailed by registered mail (return receipt requested), postage
prepaid, or sent by internationally recognized

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                                      -20-



express courier service, to the Parties at the addresses set forth below (or at
such other address for a Party as shall be specified by like notice; provided,
that notices of a change of address shall be effective only upon receipt
thereof). Notice by personal delivery shall be deemed effective upon receipt.
Notice by courier or registered mail shall be deemed effective three business
dates after the date sent. Notice by fax shall be deemed effective upon receipt
by the sending Party of confirmation of receipt of the fax by the receiving
Party.

     If to Scios:          749 North Mary Avenue
                           Sunnyvale, CA 94085
                           Fax: 408-616-8319
                           Attn:  General Counsel

     If to GSK:            Glaxo Wellcome House
                           Berkeley Avenue
                           Greenford, Middlesex
                           UB6 ONN, United Kingdom
                           Fax:  01144 2080 47 69 04
                           Attn:  Company Secretary

     16.5 Waiver. The waiver from time to time by either of the Parties of any
of their rights or their failure to exercise any remedy shall not operate or be
construed as a continuing waiver of same or of any other of such Party's rights
or remedies provided in this Agreement.

     16.6 Severability. If any term, covenant or condition of this Agreement or
the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then the remainder of this Agreement, or
the application of such term, covenant or condition to Parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Agreement shall be
valid and be enforced to the fullest extent permitted by law. In such event the
Parties shall in good faith attempt to reform this Agreement to reflect the
intent and anticipated consequences of the invalidated or unenforcable
provision, to the extent possible in a way that is lawful.

     16.7 Ambiguities. Ambiguities, if any, in this Agreement shall not be
construed against either Party, irrespective of which Party may be deemed to
have authored the ambiguous provision.

     16.8 Headings. The section and article headings contained herein are for
the purposes of convenience only and are not intended to define or limit the
contents of said sections or articles.

     16.9 Counterparts. This Agreement may be executed in two counterparts, each
of which shall be deemed an original, but which together shall constitute one
and the same instrument.

                                      -21-



     16.10 Entire Agreement. This Agreement (including all Schedules hereto)
sets forth all the covenants, promises, agreements, warranties, representations,
conditions and understandings between the Parties hereto and supersedes and
terminates all prior agreements and understandings between the Parties. Upon the
Effective Date, the Summary of Terms shall be deemed to have been terminated.

     16.11 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER HEREUNDER FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, STRICT LIABILITY OR OTHERWISE.

IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the Effective Date.

SCIOS INC.                               GLAXO GROUP LTD.

By:  Matthew R. Hooper                   By:   S. Bicknell
   ------------------------------------      -----------------------------------

Its: Vice President & General Counsel    Its:  Secretary
    ------------------------------------      ----------------------------------






                                      -22-




                                  Schedule 1.1

                                Acceptable Label





                                  SCHEDULE 1.1

                               ACCEPTABLE LABELING

Acceptable Labeling will be achieved provided the following criteria are met:


1. [*****]

2. [*****]

3. [*****]

4. [*****]

5. [*****]


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                                  SCHEDULE 1.4

                               API Specifications






[*****]



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                                  Schedule 1.13

                          Final Product Specifications






[*****]


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          SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.




                                  Schedule 1.20

                           Market Acceptance Criteria




                                  Schedule 1.20

                           Market Acceptance Criteria

[*****]




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                                  SCHEDULE 1.23

                         AMINO ACID SEQUENCE OF NATRECOR









                                  SCHEDULE 1.23

                        AMINO ACID SEQUENCE FOR NATRECOR

                        SER-PRO-LYS-MET-VAL-GLN-GLY-SER-
                        GLY-CYS-PHE-GLY-ARG-LYS-MET-ASP-
                      ARG-ILE-SER-SER-SER-SER-GLY-LEU-GLY-
                           CYS-LYS-VAL-LEU-ARG-ARG-HIS



                                  Schedule 1.26

                                 Package Insert





                                                                        Item 2-A
                                                                  Package Insert

NATRECOR(R) (NESIRITIDE)
FOR INJECTION
FOR INTRAVENOUS INFUSION ONLY

DESCRIPTION

Natrecor(R) (nesiritide) is a sterile, purified preparation of a new drug class,
human B-type natriuretic peptide (hBNP), and is manufactured from E. coli using
recombinant DNA technology. Nesiritide has a molecular weight of 3464 g/mol and
an empirical formula of C143H244N50O42S4. Nesiritide has the same 32 amino acid
sequence as the endogenous peptide, which is produced by the ventricular
myocardium.


            [GRAPHIC: Picture of amino acid sequence for Nesiritide]



Natrecor is formulated as the citrate salt of rhBNP, and is provided in a
sterile, single-use vial. Each 1.5 mg vial contains a white- to off-white
lyophilized powder for intravenous (IV) administration after reconstitution. The
quantitative composition of the lyophilized drug per vial is: nesiritide 1.58
mg, mannitol 20.0 mg, citric acid monohydrate 2.1 mg, and sodium citrate
dihydrate 2.94 mg.

Mechanism of Action

Human BNP binds to the particulate guanylate cyclase receptor of vascular smooth
muscle and endothelial cells, leading to increased intracellular concentrations
of guanosine 3'5'-cyclic monophosphate (cGMP) and smooth muscle cell relaxation.
Cyclic GMP serves as a second messenger to dilate veins and arteries. Nesiritide
has been shown to relax isolated human arterial and venous tissue preparations
that were preconstracted with either endothelin-1 or the alpha-adrenergic
agonist, phenylephrine.

In human studies, nesiritide produced dose-dependent reductions in pulmonary
capillary wedge pressure (PCWP) and systemic arterial pressure in patients with
heart failure.

In animals, nesiritide had no effects on cardiac contractility or on measures of
cardiac electrophysiology such as atrial and ventricular effective refractory
times or atrioventricular node conduction.

Naturally occurring atrial natriuretic peptide (ANP), a related peptide,
increases vascular permeability in animals and humans and may reduce
intravascular volume. The effect of nesiritide on vascular permeability has not
been studied.

Pharmacokinetics

In patients with congestive heart failure (CHF), Natrecor administered
intravenously by infusion or bolus exhibits biphasic disposition from the
plasma. The mean terminal elimination half-life (t1/2) of Natrecor is
approximately 18 minutes and was associated with approximately 2/3 of the
area-under-the-curve (AUC). The mean initial elimination phase was estimated to
be approximately 2 minutes. In these patients, the mean





volume of distribution of the central compartment (Vc) of Natrecor was estimated
to be 0.073 L/kg, the mean steady-state volume of distribution (Vss) was 0.19
L/kg, and the mean clearance (CL) was approximately 9.2 mL/min/kg. At steady
state, plasma BNP levels increase from baseline endogenous levels by
approximately 3-fold to 6-fold with Natrecor infusion doses ranging from 0.01 to
0.03 (micro)g/kg/min.

Elimination

Human BNP is cleared from the circulation via the following three independent
mechanisms, in order of decreasing importance: 1) binding to cell surface
clearance receptors with subsequent cellular internalization and lysosomal
proteolysis; 2) proteolytic cleavage of the peptide by endopeptidases, such as
neutral endopeptidase, which are present on the vascular lumenal surface; and 3)
renal filtration.

Special Populations

Although Natrecor is eliminated, in part, through renal clearance, clinical data
suggest that dose adjustment is not required in patients with renal
insufficiency. The effects of Natrecor on PCWP, cardiac index (CI), and systolic
blood pressure (SBP) were not significantly different in patients with chronic
renal insufficiency (baseline serum creatinine ranging from 2 mg/dL to 4.3
mg/dL), and patients with normal renal function. The population pharmacokinetic
(PK) analyses carried out to determine the effects of demographics and clinical
variables on PK parameters showed that clearance of Natrecor is proportional to
body weight, supporting the administration of weight-adjusted dosing of Natrecor
(i.e., administration on a (micro)g/kg/min basis). Clearance was not influenced
significantly by age, gender, race/ethnicity, baseline endogenous hBNP
concentration, severity of CHP (as indicated by baseline PCWP, baseline CI, or
New York Heart Association [NYHA] classification), or concomitant administration
of an ACE inhibitor.

Effects of Concomitant Medications

The co-administration of Natrecor with enalapril did not have significant
effects on the PK of Natrecor. The PK effect of co-administration of Natrecor
with other IV vasodilators such as nitroglycerin, nitroprusside, milrinone, or
IV ACE inhibitors has not been evaluated. During clinical studies, Natrecor was
administered concomitantly with other medications, including: diuretics,
digoxin, oral ACE inhibitors, anticoagulants, oral nitrates, statins, class III
antiarrhythmic agents, beta-blockers, dobutamine, calcium channel blockers,
angiotensin II receptor antagonists, and dopamine. Although no PK interactions
were specifically assessed, there did not appear to be evidence suggesting any
clinically significant PK interaction.

Pharmacodynamics

The recommended dosing regimen of Natrecor is a 2 (micro)g/kg IV bolus followed
by an intravenous infusion dose of 0.01 (micro)g/kg/min. With this dosing
regimen, 60% of the 3-hour effect on PCWP reduction is achieved within 15
minutes after the bolus, reaching 95% of the 3-hour effect within 1 hour.
Approximately seventy percent of the 3-hour effect on SBP reduction is reached
within 15 minutes. The pharmacodynamic (PD) half-life of the onset and offset of
the hemodynamic effect of Natrecor is longer than what the PK half-life of 18
minutes would predict. For example, in patients who developed symptomatic
hypotension in the VMAC (Vasodilation in the Management of Acute Congestive
Heart Failure) trial, half of the recovery of SBP toward the baseline value
after discontinuation of reduction of the dose of Natrecor was observed in about
60 minutes. When higher doses of Natrecor were infused, the duration of
hypotension was sometimes several hours.

Clinical Trials

Natrecor has been studied in 10 clinical trial including 941 patients with CHF
(NYHA class II-III 61%, NYHA class IV 36%; mean age 60 years, women 28%). There
were five randomized, multi-center, placebo- or active




controlled studies (comparative agents included nitroglycerin, dobutamine,
milrinone, nitroprusside, or dopamine) in which 772 patients with decompensated
CHF received continuous infusions of Natrecor at doses ranging from 0.01 to 0.03
(micro)g/kg/min. (See the ADVERSE REACTION section for relative frequency of
adverse events at doses ranging from the recommended dose up to 0.03
(micro)g/kg/min). Of these patients, the majority (n = 541, 70%) received the
Natrecor infusion for at least 24 hours; 371 (48%) received Natrecor for 24-48
hours, and 170 (22%) received Natrecor for greater than 48 hours.

In controlled trials, Natrecor has been used alone or in conjunction with other
standard therapies, including diuretics (79%), digoxin (62%), oral ACE
inhibitors (55%), anticoagulants (38%), oral nitrates (32%), statins (18%),
class III antiarrhythmic agents (16%), beta-blockers (15%), dobutamine (15%),
calcium channel blockers (11%), angiotensin II receptor antagonists (6%), and
dopamine (4%). Natrecor has been studied in a broad range of patients, including
the elderly (42% > 65 years of age), women (30%), minorities (26% black), and
patients with a history of significant morbidities such as hypertension (67%),
previous myocardial infarction (50%), diabetes (44%), atrial
fibrillation/flutter (34%), nonsustained ventricular tachycardia (25%),
ventricular tachycardia/fibrillation (12%), preserved systolic function (9%),
and acute coronary syndromes less than 7 days before the start of Natrecor (4%).

The VMAC (Vasodilation in the Management of Acute Congestive Heart Failure)
trial was a randomized, double-blind study of 489 patients (246 patients
requiring a right heart catheter, 243 patients without a right heart catheter)
who required hospitalization for management of shortness of breath at rest due
to acutely decompensated CHF. The study compared the effects of Natrecor,
placebo, and IV nitroglycerin when added to background therapy (IV and oral
diuretics, non-IV cardiac medications, dobutamine, and dopamine). Patients with
acute coronary syndrome, preserved systolic function, arrhythmia, and renal
insufficiency were not excluded. The primary endpoints of the study were the
change from baseline in PCWP and the change from baseline in patients' dyspnea,
evaluated after three hours. Close attention was also paid to the occurrence and
persistence of hypotension, given nesiritide's relatively long (compared to
nitroglycerin) PK and PD half-life.

Natrecor was administered as a 2 (micro)g/kg bolus over approximately 60
seconds, followed by a continuous fixed dose infusion of 0.01 (micro)g/kg/min.
After the 3-hour placebo-controlled period, patients receiving placebo crossed
over to double-blinded active therapy with either Natrecor or nitroglycerin. The
nitroglycerin dose was titrated at the physician's discretion. A subset of
patients in the VMAC trial with central hemodynamic monitoring who were treated
with Natrecor (62 of 124 patients) were allowed dose increases of Natrecor after
the first 3 hours of treatment if the PCWP was 20 mm Hg and the SBP was 100 mm
Hg. Dose increases of a 1 (micro)g/kg bolus followed by an increase of the
infusion dose by 0.005 (micro)g/kg/min were allowed every 3 hours, up to a
maximum dose of 0.03 (micro)g/kg/min. Overall, 23 patients in this subset had
the dose of Natrecor increased in the VMAC trial.

In a second double-blind study, 127 patients requiring hospitalization for
symptomatic CHF were randomized to placebo or to one of two doses of Natrecor
(0.015 (micro)g/kg/min preceded by an IV bolus of 0.3 (micro)g/kg, and 0.03
(micro)g/kg/min preceded by an IV bolus of 0.6 (micro)g/kg). The primary
endpoint of the trial was the change in PCWP from baseline to 6 hours, but the
effect on symptoms also was examined.

Effects on Symptoms

In the VMAC study, patients receiving Natrecor reported greater improvement in
their dyspnea at 3 hours than patients receiving placebo (p = 0.034).

In the dose-response study, patients receiving both doses of Natrecor reported
greater improvement in dyspnea at 6 hours than patients receiving placebo.

Effects on Hemodynamics




The PCWP, right atrial pressure (RAP), CI, and other hemodynamic variables were
monitored in 246 of the patients in the VMAC trial. There was a reduction in
mean PCWP within 15 minutes of starting the Natrecor infusion, with most of the
effect seen at 3 hours being achieved within the first 60 minutes of the
infusion (see Pharmacodynamics).

In several studies, hemodynamic parameters were measured after Natrecor
withdrawal. Following discontinuation of Natrecor, PCWP returns to within 10% of
baseline within 2 hours, but no rebound increase to levels above baseline state
was observed. There was also no evidence of tachyphylaxis to the hemodynamic
effects of Natrecor in the clinical trials.

The following table and graph summarize the changes in the VMAC trial in PCWP
and other measures during the first 3 hours.

                      MEAN HEMODYNAMIC CHANGE FROM BASELINE



- -------------------------------------------------------------------------------------------------------------------
                                                            Placebo           Nitroglycerin            Natrecor
Effects at 3 Hours                                         (n = 62)              (n = 60)             (n = 124)
- -------------------------------------------------------------------------------------------------------------------
                                                                                             
Pulmonary capillary wedge pressure (mm Hg)                   -2.0                 -3.8                  -5.8(2)
- -------------------------------------------------------------------------------------------------------------------
Right atrial pressure (mm Hg)                                 0.0                 -2.6                  -3.1(2)
- -------------------------------------------------------------------------------------------------------------------
Cardiac index (L/min/M2)                                      0.0                  0.2                   0.1
- -------------------------------------------------------------------------------------------------------------------
Mean pulmonary artery pressure (mm Hg)                       -1.1                 -2.5                  -5.4(2)
- -------------------------------------------------------------------------------------------------------------------
Systemic vascular resistance (dynes*sec*cm-5)                -44                  -105                  -144
- -------------------------------------------------------------------------------------------------------------------
Systolic blood pressure(1) (mm Hg)                           -2.5                 -5.7(2)               -5.6(2)
- -------------------------------------------------------------------------------------------------------------------


(1) Based on all treated subjects: Placebo n=142, nitroglycerin n=143, Natrecor
    n=204
(2) p less than 0.05 compared to placebo







       [GRAPHIC: GRAPH COMPARING MEAN CHANGES IN PCWP OVER A 3 HOUR PERIOD
                    FOR PLACEBO, NITROGLYCERIN and NATRECOR]






The VMAC study does not constitute an adequate effectiveness comparison with
nitroglycerin. In this trial, the nitroglycerin group provides a rough landmark
using a familiar therapy and regimen.

Effect on Urine Output

In the VMAC trial, in which the use of diuretics was not restricted, the mean
change in volume status (output minus input) during the first 24 hours in the
nitroglycerin and Natrecor groups was similar: 1279 + 1455 mL and 1257 + 1657
mL, respectively.

INDICATIONS AND USAGE

Natrecor is indicated for the intravenous treatment of patients with acutely
decompensated congestive heart failure who have dyspnea at rest or with minimal
activity. In this population, the use of Natrecor reduced pulmonary capillary
wedge pressure and improved dyspnea.

CONTRAINDICATIONS

Natrecor is contraindicated in patients who are hypersensitive to any of its
components. Natrecor should not be used as primary therapy for patients with
cardiogenic shock or in patients with a systolic blood pressure  90 mm Hg.

WARNINGS

Administration of Natrecor should be avoided in patients suspected of having, or
known to have, low cardiac filling pressures.

PRECAUTIONS

General: Parenteral administration of protein pharmaceuticals of E. coli-derived
products should be attended by appropriate precautions in case of an allergic or
untoward reaction. No serious allergic or anaphylactic reactions have been
reported with Natrecor.

Natrecor is not recommended for patients for whom vasodilating agents are not
appropriate, such as patients with significant valvular stenosis, restrictive or
obstructive cardiomyopathy, constrictive pericarditis, pericardial tamponade, or
other conditions in which cardiac output is dependent upon venous return, or for
patients suspected to have low cardiac filling pressures. (See
CONTRAINDICATIONS.)

Renal: Natrecor may affect renal function in susceptible individuals. In
patients with severe heart failure whose renal function may depend on the
activity of the renin-angiotensin-aldosterone system, treatment with Natrecor
may be associated with azotemia. When Natrecor was initiated at doses higher
than 0.01 (micro)g/kg/min (0.015 and 0.03 (micro)g/kg/min), there was an
increased rate of elevated serum creatinine over baseline compared with standard
therapies, although the rate of acute renal failure and need for dialysis was
not increased. In the 30-day follow-up period in the VMAC trial, 5 patients in
the nitroglycerin group (2%) and 9 patients in the Natrecor group (3%) required
first-time dialysis.

Cardiovascular: Natrecor may cause hypotension. In the VMAC trial, in patients
given the recommended dose (2 (micro)g/kg bolus followed by a 0.01
(micro)g/kg/min infusion) or the adjustable dose, the incidence of symptomatic
hypotension in the first 24 hour was similar for Natrecor (4%) and IV
nitroglycerin (5%). When hypotension occurred, however, the duration of
symptomatic hypotension was longer with Natrecor (mean duration was 2.2 hours)
than with nitroglycerin (mean duration was 0.7 hours). In earlier trials, when
Natrecor




was initiated at doses higher than the 2-(micro)g/kg bolus followed by a
0.01-(micro)g/kg/min infusion (i.e., 0.015 and 0.030 (micro)g/kg/min preceded by
a small bolus), there were more hypotensive episodes and these episodes were of
greater intensity and duration. They were also more often symptomatic and/or
more likely to require medical intervention (see ADVERSE REACTIONS). Natrecor
should be administered only in setting where blood pressure can be monitored
closely, and the dose of Natrecor should be reduced or the drug discontinued in
patients who develop hypotension (see Dosing Instructions). The rate of
symptomatic hypotension may be increased in patients with a blood pressure 100
mm Hg at baseline, and Natrecor should be used cautiously in these patients. The
potential for hypotension may be increased by combining Natrecor with other
drugs that may cause hypotension. For example, in the VMAC trial in patients
treated with either Natrecor or nitroglycerin therapy, the frequency of
symptomatic hypotension in patients who received an oral ACE inhibitor was 6%,
compared to a frequency of symptomatic hypotension of 1% in patients who did not
receive an oral ACE inhibitor.

Drug Interactions: No trials specifically examining potential drug interactions
with Natrecor were conducted, although many concomitant drugs were used in
clinical trials. No drug interactions were detected except for an increase in
symptomatic hypotension in patients receiving oral ACE inhibitors (see
PRECAUTIONS, Cardiovascular).

The co-administration of Natrecor with IV vasodilators such as nitroglycerin,
nitroprusside, milrinone, or IV ACE inhibitors has not been evaluated (these
drugs were not co-administered with Natrecor in clinical trials).

Carcinogensis, Mutagenesis, Impairment of Fertility: Long-term studies in
animals have not been performed to evaluate the carcinogenic potential or the
effect on fertility of nesiritide.

Nesiritide did not increase the frequency of mutations when used in an in vitro
bacterial cell assay (Ames test). No other genotoxicity studies were performed.

Pregnancy; Category C: Animal developmental and reproductive toxicity studies
have not been conducted with nesiritide. It is also not known whether Natrecor
can cause fetal harm when administered to pregnant women or can affect
reproductive capacity. Natrecor should be used during pregnancy only if the
potential benefit justifies any possible risk to the fetus.

Nursing Mothers: It is not known whether this drug is excreted in human milk.
Therefore, caution should be exercised when Natrecor is administered to a
nursing woman.

Pediatric Use: The safety and effectiveness of Natrecor in pediatric patients
has not been established.

Geriatric Use: Of the total number of subjects in clinical trials treated with
Natrecor (n = 941), 38% were 65 years or older and 16% were 75 years or older.
No overall differences in effectiveness were observed between these subjects and
younger subjects, and other reported clinical experience has not identified
differences in responses between the elderly and younger patients. Some older
individuals may be more sensitive to the effect of Natrecor than younger
individuals.



ADVERSE REACTIONS

Adverse events that occurred with at least a 3% frequency during the first 24
hours of Natrecor infusion are shown in the following table.





- ---------------------------------------------------------------------------------------------------------------------------
                                        VMAC Trial                              Other Long Infusion Trials
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                             Natrecor (micro)g/kg/min
                                                           Natrecor                         -------------------------------
                                        Nitroglycerin      Recommended Dose     Control*     0.015           0.03
Adverse Event                           (n = 216)          (n = 273)            (n = 256)    (n = 253)       (n = 246)
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                              
Cardiovascular
- ---------------------------------------------------------------------------------------------------------------------------
Hypotension                                 25(12%)           31(11%)           20(8%)         56(22%)        87(35%)
- ---------------------------------------------------------------------------------------------------------------------------
  Symptomatic Hypotension                   10(5%)            12(4%)             8(3%)         28(11%)        42(17%)
- ---------------------------------------------------------------------------------------------------------------------------
  Asymptomatic Hypotension                  17(8%)            23(8%)            13(5%)         31(12%)        49(20%)
- ---------------------------------------------------------------------------------------------------------------------------
Ventricular Tachycardia (VT)                11(5%)             9(3%)            25(10%)        25(10%)        10(4%)
- ---------------------------------------------------------------------------------------------------------------------------
  Non-sustained VT                          11(5%)             9(3%)            23(9%)         24(9%)          9(4%)
- ---------------------------------------------------------------------------------------------------------------------------
Ventricular Extrasystoles                    2(1%)             7(3%)            15(6%)         10(4%)          9(4%)
- ---------------------------------------------------------------------------------------------------------------------------
Angina Pectoris                              5(2%)             5(2%)             6(2%)         14(6%)          6(2%)
- ---------------------------------------------------------------------------------------------------------------------------
Bradycardia                             1(less than 1%)        3(1%)        1(less than 1%)     8(3%)         13(5%)
- ---------------------------------------------------------------------------------------------------------------------------
Body as a Whole
- ---------------------------------------------------------------------------------------------------------------------------
Headache                                    44(20%)           21(8%)            23(9%)         23(9%)         17(7%)
- ---------------------------------------------------------------------------------------------------------------------------
Abdominal Pain                              11(5%)             4(1%)            10(4%)          6(2%)          8(3%)
- ---------------------------------------------------------------------------------------------------------------------------
Back Pain                                    7(3%)            10(4%)             4(2%)          5(2%)          3(1%)
- ---------------------------------------------------------------------------------------------------------------------------
Nervous
- ---------------------------------------------------------------------------------------------------------------------------
Insomnia                                     9(4%)             6(2%)             7(3%)         15(6%)         15(6%)
- ---------------------------------------------------------------------------------------------------------------------------
Dizziness                                    4(2%)             7(3%)             7(3%)         16(6%)         12(5%)
- ---------------------------------------------------------------------------------------------------------------------------
Anxiety                                      6(3%)             8(3%)             2(1%)          8(3%)          4(2%)
- ---------------------------------------------------------------------------------------------------------------------------
Digestive
- ---------------------------------------------------------------------------------------------------------------------------
Nausea                                      13(6%)            10(4%)            12(5%)         24(9%)         33(13%)
- ---------------------------------------------------------------------------------------------------------------------------
Vomiting                                     4(2%)             4(1%)             2(1%)         6(2%)          10(4%)
- ---------------------------------------------------------------------------------------------------------------------------



* Includes dobutamine, milrinone, nitroglycerin, placebo,
  dopamine, nitroprusside, or amrinone

Adverse events that are not listed in the above table that occurred in at least
1% of patients who received any of the above Natrecor doses included:
Tachycardia, atrial fibrillation, AV node conduction abnormalities, catheter
pain, fever, injection site reaction, confusion, paresthesia, somnolence,
tremor, increased cough, hemoptysis, apnea, increased creatinine, sweating,
pruritis, rash, leg cramps, amblyopia, anemia. All reported events (at least 1%)
are included except those already listed, those too general to be informative,
and those not reasonably associated with the use of the drug because they were
associated with the condition being treated or are very common in the treated
population.

In placebo and active-controlled clinical trials, Natrecor has not been
associated with an increase in atrial or ventricular tachyarrhythmias. In
placebo-controlled trials, the incidence of VT in both Natrecor and placebo
patients was 2%. In the PRECEDENT (Prospective Randomized Evaluation of Cardiac
Ectopy with Dobutamine or Natrecor Therapy) trial, the effects of Natrecor (n =
163) and dobutamine (n = 83) on the provocation or aggravation of existing
ventricular arrhythmias in patients with decompensated CHF was




compared using Holter monitoring. Treatment with Natrecor (0.015 and 0.03
(micro)g/kg/min without an initial bolus) for 24 hours did not aggravate
pre-existing VT or the frequency of premature ventricular beats, compared to a
baseline 24-hour Holter tape.

Clinical Laboratory

In the PRECEDENT trial, the incidence of elevations in serum creatinine to > 0.5
mg/dL above baseline through day 14 was higher in the Natrecor 0.015
(micro)g/kg/min group (17%) and the Natrecor 0.03 (micro)g/kg/min group (19%)
than with standard therapy (11%). In the VMAC trial, through day 30, the
incidence of elevations in creatinine to > 0.5 mg/dL above baseline was 28% and
21% in the Natrecor (2 (micro)g/kg bolus followed by 0.010 (micro)g/kg/min) and
nitroglycerin groups, respectively.

Effect on Mortality

In the VMAC trial, the mortality rates at six months in the patients receiving
Natrecor and nitroglycerin were 25.1% (95% confidence interval, 20.0% to 30.5%)
and 20.8% (95% confidence interval, 15.5% to 26.5%), respectively. In all
controlled trials combined, the mortality rates for Natrecor and active control
(including nitroglycerin, dobutamine, nitroprusside, milrinone, amrinone and
dopamine) patients were 21.5% and 21.7%, respectively.

OVERDOSAGE

No data are available with respect to overdosage in humans. The expected
reaction would be excessive hypotension, which should be treated with drug
discontinuation or reduction (see PRECAUTIONS) and appropriate measures.

DOSAGE AND ADMINISTRATION

Natrecor (nesiritide) is for intravenous use only. There is limited experience
with administering Natrecor for longer than 48 hours. Blood pressure should be
monitored closely during Natrecor administration. If hypotension occurs during
the administration of Natrecor, the dose should be reduced or discontinued and
other measures to support blood pressure should be started (IV fluids, changes
in body position). In the VMAC trial, when symptomatic hypotension occurred,
Natrecor was discontinued and subsequently could be restarted at a dose that was
reduced by 30% (with no bolus administration) once the patient was stabilized.
Because hypotension caused by Natrecor may be prolonged (up to hours), a period
of observation may be necessary before restarting the drug.

Preparation

1. Reconstitute one 1.5 mg vial of Natrecor by adding 5 mL of diluent removed
   from a pre-filled 250 mL plastic IV bag containing the diluent of choice. The
   following preservative-free diluents are recommended for reconstitution: 5%
   Dextrose Injection (D5W), USP; 0.9% Sodium Chloride Injection, USP; 5%
   Dextrose and 0.45% Sodium Chloride Injection, USP, or 5% Dextrose and 0.2%
   Sodium Chloride Injection, USP.

2. Do not shake the vial. Rock the vial gently so that all surfaces, including
   the stopper, are in contact with the diluent to ensure complete
   reconstitution. Use only a clear, essentially colorless solution.

3. Withdraw the entire contents of the reconstituted Natrecor vial and add to
   the 250 mL plastic IV bag. This will yield a solution with a concentration of
   Natrecor of approximately 6 (micro)g/mL. The IV bag should be inverted
   several times to ensure complete mixing of the solution.



4. Use the reconstituted solution within 24 hours, as Natrecor contains no
   antimicrobial preservative. Parenteral drug products should be inspected
   visually for particulate matter and discoloration prior to administration,
   whenever solution and container permit. Reconstituted vials of Natrecor may
   be left at Controlled Room Temperature (20 - 25(degree)C; 68 - 77(degree)F)
   as per United States Pharmacopeia (USP) or may be refrigerated (2 -
   8(degree)C; 36 - 46(degree)F) for up to 24 hours.

Dosing Instructions

The recommended dose of Natrecor is an IV bolus of 2 (micro)g/kg followed by a
continuous infusion of 0.01 (micro)g/kg/min. Natrecor should not be initiated at
a dose that is above the recommended dose.

Prime the IV tubing with an infusion of 25 mL prior to connecting to the
patient's vascular access port and prior to administering the bolus or starting
the infusion.

Bolus followed by infusion: After preparation of the infusion bag, as described
previously, withdraw the bolus volume (see table below) from the Natrecor
infusion bag, and administer it over approximately 60 seconds through an IV port
in the tubing. Immediately following the administration of the bolus, infuse
Natrecor at a flow rate of 0.1 mL/kg/hr. This will deliver a Natrecor infusion
dose of 0.01 (micro)g/kg/min.

To calculate the appropriate bolus volume and infusion flow rate to deliver a
0.01 (micro)g/kg/min dose, use the following formulas (or refer to the following
dosing table):

              BOLUS VOLUME (ML) = PATIENT WEIGHT (KG) DIVIDED BY 3

             INFUSION FLOW RATE (ML/HR) = 0.1 X PATIENT WEIGHT (KG)

                      NATRECOR WEIGHT-ADJUSTED BOLUS VOLUME
                             AND INFUSION FLOW RATE

          (2 (MICRO)G/KG BOLUS FOLLOWED BY A 0.01 (MICRO)G/KG/MIN DOSE)
- --------------------------------------------------------------------------------
Patient Weight(kg)          Volume of Bolus(mL)           Rate of Infusion(mL/h)
- --------------------------------------------------------------------------------
      60                          20.0                            6
- --------------------------------------------------------------------------------
      70                          23.3                            7
- --------------------------------------------------------------------------------
      80                          26.7                            8
- --------------------------------------------------------------------------------
      90                          30.0                            9
- --------------------------------------------------------------------------------
     100                          33.3                           10
- --------------------------------------------------------------------------------
     110                          36.7                           11
- --------------------------------------------------------------------------------

Dose Adjustments: The dose-limiting side effect of Natrecor is hypotension. Do
not initiate Natrecor at a dose that is higher than the recommended dose of a 2
(micro)g/kg bolus followed by an infusion of 0.01 (micro)g/kg/min. In the VMAC
trial there was limited experience with increasing the dose of Natrecor above
the recommended dose (23 patients, all of whom had central hemodynamic
monitoring). In those patients, the infusion dose of Natrecor was increased by
0.005 (micro)g/kg/min (preceded by a bolus of 1 (micro)g/kg), no more frequently
than every 3 hours up to a maximum dose of 0.03 (micro)g/kg/min. Natrecor should
not be titrated at frequent intervals as is done with other IV agents that have
a shorter half-life (see Clinical Trials).

Chemical/Physical Interactions

Natrecor is physically and/or chemically incompatible with injectable
formulations of heparin, insulin, ethacrynate sodium, bumetamide, enalaprilat,
hydralazine, and furosemide. These drugs should not be co-administered as
infusions with Natrecor through the same IV catheter. The preservative sodium
metabisulfite is incompatible with Natrecor. Injectable drugs that contain
sodium metabisulfite should not be administered in




the same infusion line as Natrecor. The catheter must be flushed between
administration of Natrecor and incompatible drugs. Natrecor binds to heparin and
therefore could bind to the heparin lining of a heparin-coated catheter,
decreasing the amount of Natrecor delivered to the patient for some period of
time. Therefore, Natrecor must not be administered through a central
heparin-coated catheter. Concomitant administration of a heparin infusion
through a separate catheter is acceptable.

Storage

Store Natrecor at controlled room temperature (20 - 25(degree)C; 68 -
77(degree)F); excursions permitted to 15 - 30(degree)C (59 - 86(degree)F; see
USP Controlled Room Temperature), or refrigerated (2 - 8(degree)C; 36 -
46(degree)F). Keep in carton until time of use.

HOW SUPPLIED

Natrecor is provided as a sterile lyophilized powder in 1.5 mg, single-use
vials. Each carton contains one vial and is available in the following package:

1 vial/carton (NDC 65847-205-25)

US patent No. 5,114,923 and 5,674,710.
Distributed by Scios Inc.
820 West Maude Ave
Sunnyvale, CA 94085
Copyright. 2001 Scios Inc.
NA1030.01

                 Revised September 2001



                                  SCHEDULE 1.33

                                  SCIOS PATENTS



                                  SCHEDULE 1.33

                                  SCIOS PATENTS

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                                  Schedule 1.36

                                    Territory





                                  SCHEDULE 1.36

                                    Territory

                 WESTERN, CENTRAL AND EASTERN EUROPEAN COUNTRIES
                 -----------------------------------------------

 ------------------ ----------------- ---------------- ------------------------
      European         European                           Central and Eastern
      Community     Economic Area        Others                 European
 ------------------ ----------------- ---------------- ------------------------
  Austria            Iceland           Andorra          Albania
 ------------------ ----------------- ---------------- ------------------------
  Belgium            Liechtenstein     Cyprus           Armenia
 ------------------ ----------------- ---------------- ------------------------
  Denmark            Norway            Israel           Azerbaijan
 ------------------ ----------------- ---------------- ------------------------
  Finland                              Malta            Belarus
 ------------------ ----------------- ---------------- ------------------------
  France                               Vatican City     Bosnia & Hertzegovina
 ------------------ ----------------- ---------------- ------------------------
  Germany                              Switzerland      Bulgaria
 ------------------ ----------------- ---------------- ------------------------
  Greece                               San Marino       Croatia
 ------------------ ----------------- ---------------- ------------------------
  Ireland                              Monaco           Czech Republic
 ------------------ ----------------- ---------------- ------------------------
  Italy                                                 Estonia
 ------------------ ----------------- ---------------- ------------------------
  Luxembourg                                            Georgia
 ------------------ ----------------- ---------------- ------------------------
  Netherlands                                           Hungary
 ------------------ ----------------- ---------------- ------------------------
  Portugal                                              Kazakstan
 ------------------ ----------------- ---------------- ------------------------
  Spain                                                 Kyrgyzstan
 ------------------ ----------------- ---------------- ------------------------
  Sweden                                                Latvia
 ------------------ ----------------- ---------------- ------------------------
  United Kingdom                                        Lithuania
 ------------------ ----------------- ---------------- ------------------------
                                                        Macedonia
 ------------------ ----------------- ---------------- ------------------------
                                                        Moldova
 ------------------ ----------------- ---------------- ------------------------
                                                        Poland
 ------------------ ----------------- ---------------- ------------------------
                                                        Romania
 ------------------ ----------------- ---------------- ------------------------
                                                        Russia
 ------------------ ----------------- ---------------- ------------------------
                                                        Slovakia
 ------------------ ----------------- ---------------- ------------------------
                                                        Tajikistan
 ------------------ ----------------- ---------------- ------------------------
                                                        Turkmenistan
 ------------------ ----------------- ---------------- ------------------------
                                                        Ukraine
 ------------------ ----------------- ---------------- ------------------------
                                                        Uzbekistan
 ------------------ ----------------- ---------------- ------------------------
                                                        Yugoslavia
 ------------------ ----------------- ---------------- ------------------------




                                  Schedule 7.4

                         Safety Data Exchange Agreement




                              SAFETY DATA EXCHANGE

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