GENSTAR THERAPEUTICS CORP
S-3, 2000-04-20
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS
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<PAGE>


  As filed with the Securities and Exchange Commission on April 20, 2000

                                                Registration No. 333-
                                                                     ------
================================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM S-3
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933

                        ------------------------------

                       GenStar Therapeutics Corporation
                            (formerly UroGen Corp.)
                (Name of small business issuer in its charter)

                        ------------------------------

                                   Delaware
                       (State or other jurisdiction of
                        incorporation or organization)

                                  33-0687976
                               (I.R.S. Employer
                            Identification Number)

                               10835 Altman Row,
                                   Suite 150
                              San Diego, CA 92121

                              (858) 450-5949
  (Address and  telephone number of principal executive office and principal
                              place of business)

                        ------------------------------

                              Robert E. Sobol, MD
                     President and Chief Executive Officer

                       GenStar Therapeutics Corporation
                          10835 Altman Row, Suite 150
                              San Diego, CA 92121

                                (858) 450-5949
           (Name, address and telephone number of agent for service)
                                  Copies to:

                           Dennis J. Doucette, Esq.
                             Luce Forward Hamilton
                                and Scripps LLP
                         600 West Broadway, Suite 2600
                              San Diego, CA 92101
                                (619) 236-1414

                        ------------------------------

     Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.

     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] _________

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] _____

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
                                                                           Proposed
    Title of each class                               Proposed             Maximum
    of securities to be        Amount to be       maximum offering    Aggregate offering       Amount of
         registered           Registered (1)      price per unit (2)       price (2)        registration fee
- ------------------------------------------------------------------------------------------------------------
<S>                           <C>                 <C>                 <C>                   <C>
       Common Stock,
      $0.001 par value        10,695,632 shares          $6.39           $68,323,697            $18,037
- ------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Represents shares already issued plus the estimated maximum number of
     shares of the Common Stock of the Registrant which may be issued to the
     Selling Security Holders upon exercise of the warrants for Common Stock. In
     the event of a stock split, stock dividend or similar transaction involving
     the Common Stock of the Registrant, in order to prevent dilution, the
     number of shares registered shall be automatically increased to cover
     additional shares in accordance with Rule 416 (a) under the Securities Act.

(2)  Estimated solely for the purpose of calculating the registration fee in
     accordance with Rule 457(c) under the Securities Act of 1933, as amended,
     calculated in accordance with Rule 457(c) on the basis of the average of
     the bid and ask prices reported for such securities on the Electronic
     Bulletin Board on April 18, 2000.



- --------------------------------------------------------------------------------
                                ______________

     The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>

                                   PROSPECTUS

                       GenStar Therapeutics Corporation
                            (Formerly UroGen Corp.)

                               10,695,632 Shares
                                  COMMON STOCK




     On January 21, 2000, we sold 6,362,801 shares of common stock and warrants
for 1,773,899 shares of common stock in a private placement raising $8.3
million. On February 20, 2000, we sold 2,000,000 shares of common stock in a
private placement raising $17 million. GenStar issued warrants to purchase
360,000 shares of common stock to the investment banker related to the January
2000 financing. The purpose of this registration statement is to register the
resale of the common stock sold and the shares of common stock underlying the
warrants by their current holders.

     In August 1997, we issued a warrant to purchase 200,000 shares of GenStar
Common Stock to Robert E. Sobol, who was the Chief Operating Officer at the time
and is currently the President and Chief Executive Officer of GenStar. The
warrant was exercisable at $0.05 per share and included a "net exercise"
provision where Dr. Sobol can elect to receive fewer shares upon exercise rather
than pay the exercise price in cash. In February 2000, Dr. Sobol exercised the
warrant using the "net exercise" provision and received 198,933 shares of
GenStar common stock. This registration statement is also registering the resale
of those shares.

     On April 18, 2000, the closing price of our common stock, which is quoted
on the American Stock Exchange under the symbol "GNT", was $7.13 per share.

                                --------------

                        THE COMMON STOCK OFFERED HEREBY
              INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
                             BEGINNING ON PAGE 5.

                                 -------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.


            THE DATE OF THIS PROSPECTUS IS APRIL 20, 2000

<PAGE>

                              PROSPECTUS SUMMARY


     You should read this summary together with the more detailed information
and our Financial Statements and notes appearing elsewhere in this
prospectus.

                                      -2-

<PAGE>


                       GenStar Therapeutics Corporation
                           (Formerly UROGEN CORP.)

     GenStar Therapeutics Corporation is a biotechnology company dedicated to
the development of innovative gene therapy products for the treatment of
hemophilia, cancer and other genetic disorders. Gene therapy is technology that
uses genetic materials as therapeutic agents to treat disease. Gene therapy
seeks to restore, augment or correct gene functions either by the addition of
normal genes or by neutralizing the activity of defective genes. An essential
requirement of gene therapy is a suitable delivery system for introducing
therapeutic genes into cells. Two major approaches which have been used are
viral and non-viral delivery systems, also called vectors.

     Prior to July 1998, GenStar was a biotechnology company developing gene
therapy products for the diagnosis and treatment of prostate cancer. We had
licensed technology in this area and were evaluating gene delivery systems. In
July 1998, GenStar acquired equipment from the gene therapy unit of Baxter
Healthcare Corporation together with exclusive rights to gene delivery
technologies in exchange for 1,841,219 shares of our common stock and 5,830
shares of our Series A Preferred Stock. See "Certain Relationships and Related
Transactions - Baxter Agreements" for a description of this transaction. The
technology acquired from Baxter is based upon gene transfer systems derived from
a type of cold virus called an adenovirus. We believe this adenoviral system
provides superior gene transfer efficiency and expression compared to other gene
therapy approaches. Gene expression is the biological process the body employs
to make proteins from the genetic code of DNA. High levels of gene expression
mean that high levels of proteins are made. The gene transfer system has been
engineered to remove the original adenovirus genes which all then replaced with
therapeutic genes. These genetically engineered therapeutic viruses contain less
than 3% of the original adenovirus. We believe that removal of unwanted
adenoviral genes permits increased gene transfer capacity with a high level of
expression of the gene being delivered. In addition, there is improved safety
compared to standard gene transfer systems. Because these therapeutic viruses
are engineered to minimize the presence of adenoviral genes, they are termed
"Mini-Ad" vectors. These Mini-Ad vectors retain the ability to infect other
cells and the efficient gene transfer characteristics of original adenoviruses.
Importantly, we believe we have engineered capabilities into our Mini-Ad systems
which provide for sustained, high level expression of the gene being
transferred. We believe our gene transfer and expression systems will advance
the capabilities of gene therapy for disease management, providing what we
believe to be efficient gene transfer and long term gene expression desired for
effective theraputic treatments.

     The research performed at Baxter before we licensed the technology was
focused on the use of this delivery system to treat hemophilia and cancer. We
have continued our research and development of products for the treatment of
hemophilia and prostate cancer. Two gene therapy products are under development:
1) Factor VIII Mini-Ad Vector for the treatment of hemophilia; 2) Tumor killing
Interleukin-3 (IL-3) Adenoviral Vectors for the treatment of prostate cancer.
The Factor VIII Mini-Ad Vector for hemophilia is expected to provide a greater
duration of the normally occurring protein, Factor VIII, preventing chronic
bleeding and joint damage which are characteristic of this disorder. The IL-3
Adenoviral product is comprised of a mixture of two adenoviral vectors which
complement each other resulting in replication of the virus in tumor tissues,
leading to destruction of tumor cells, radiation sensitization and anti-tumor
immune responses for the treatment of prostate cancer.

     GenStar was incorporated as Urogen Corp. in Delaware in June 1995 as a
wholly-owned subsidiary of Medstone International, Inc., a Delaware Company. The
business of GenStar was formed from the molecular biology and small molecule
pharmaceuticals divisions of Medstone. GenStar operated as two divisions of
Medstone from July 1, 1991 to December 29, 1996, when the operations of these
divisions were transferred into UroGen Corp. On February 9, 1996, Medstone
distributed all of the outstanding stock of UroGen Corp. to its shareholders by
issuing a dividend of one share of UroGen common stock for each share of
Medstone stock held as of December 29, 1995. In March 2000, we changed our name
from Urogen Corp. to GenStar Therapeutics Corporation. Our principal executive
offices are located at 10835 Altman Row, Suite 150, San Diego, California 92121,
and our telephone number is (858) 450-5949.


                                      -3-
<PAGE>

                                  THE OFFERING

<TABLE>
<S>                                                            <C>
Common stock offered by GenStar                                None

Common stock offered by the selling stockholders               10,695,632 shares, including 2,133,898
                                                               shares issuable upon exercise of the
                                                               warrants

Common stock outstanding after the offering                    21,260,662 shares
                                                               23,394,560 shares assuming all 2,133,898
                                                               shares are issued upon exercise of the
                                                               unexercised warrants

Use of proceeds                                                GenStar will not receive proceeds from
                                                               the sale of the Shares offered. The warrants
                                                               include a net exercise provision. Accordingly,
                                                               we may not receive significant proceeds from
                                                               exercise of the warrants.
</TABLE>

The above number of shares outstanding after the offering is based on the shares
outstanding as of April 18, 2000. This number excludes:

 .     3,666,916 shares subject to outstanding options at a weighted average
      exercise price of $1.34 as of April 18, 2000.

 .     2,230,001 shares issuable upon exercise of outstanding warrants, other
      than those which are a subject of this prospectus, at a weighted average
      exercise price of $0.52 per share as of April 18, 2000.

 .     An aggregate of 1,733,358 shares available for future issuance under our
      stock option plans as of April 18, 2000.

                  Summary Consolidated Financial Information
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                          For the
                                                                                          period
                                                                                         from July
                                                                                         1, 1991 to
                                                  Year Ended December 31,               December 31,
                                  -------------------------------------------------     ------------
                                   1999     1998(1)      1997       1996      1995          1999
                                  ------   --------     ------    -------    ------      -----------
<S>                               <C>      <C>          <C>       <C>        <C>         <C>
Statement of Operations Data:

Net revenues...................      118   $   192      $  194    $     -     $   -      $      959
Total costs and expenses ......    3,528     7,858         497        522        75          16,587
Loss from operations...........   (3,410)   (7,666)       (303)      (522)      (75)        (15,628)
Other income (expense).........      (72)        -           -         64         -              (8)
Interest income (expense)......     (336)     (296)          4         14         -            (614)

Net loss.......................   (3,818)  $(7,962)     $ (299)   $  (444)    $ (75)      $ (16,250)

Net loss per share.............  $ (0.35)  $ (1.00)     $(0.04)   $ (0.07)      N/A

Weighted average shares
 outstanding...................   10,763     7,997       7,311      5,980       N/A
</TABLE>
_________________________
(1)  Includes a one-time charge of $5,455,000 related to the write-off of
     acquired in-process technology.  See "Management's Discussion and Analysis
     of Financial Condition and Results of Operations -- Results of Operations."

<TABLE>
<CAPTION>
                                                                 December 31
                                               --------------------------------------------
                                               1999      1998      1997      1996      1995
                                               ----      ----      ----      ----      ----
<S>                                           <C>      <C>          <C>       <C>       <C>
Balance Sheet Data(1):
Working capital (deficit)...................    448   $(1,274)        6       235         1
Total assets................................  1,827     1,098        78       253       163
Long-term debt, net of current portion......  1,927     1,274         -         -         -
Stockholders equity (deficit)...............   (905)   (1,934)        9       237       163
</TABLE>


(1)  In January 2000, we raised gross proceeds of $8.3 million from the sale of
     common stock and warrants for common stock. In February 2000 we raised
     gross proceeds of $17.0 million from the sale of common stock. The proceeds
     from these transactions are not included in our December 31, 1999 balance
     sheet data.
                                      -4-
<PAGE>


                                 RISK FACTORS

     An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below and the other information
contained in this prospectus before deciding to invest in our common stock. The
risks described below are not the only ones facing our company. Additional risks
not presently known to us or which we currently consider immaterial may also
adversely affect our business. If any of the following risks actually happen,
our business, financial condition and operating results could be materially
adversely affected. In this case, the trading price of our common stock could
decline, and you could lose part or all of your investment.

     This prospectus contains forward-looking statements that involve risks and
uncertainties. The statements contained in this prospectus that are not purely
historical are forward-looking statements, including statements regarding our
expectations, beliefs, intentions or strategies regarding the future. All
forward-looking statements included in this document are based on information
available to Genstar on the date of this prospectus. Our actual results could
differ materially from those anticipated in these forward-looking statements as
a result of various factors, including those set forth in the following risk
factors and elsewhere in this prospectus.

GENSTAR RISKS

We will need substantial additional funding, which may not be available and may
limit our growth.

     Our operations to date have consumed substantial amounts of cash. The
negative cash flow from operations is expected to continue and to accelerate for
at least the next three years. The development of our products will require a
commitment of substantial funds to conduct the costly and time-consuming
research, preclinical and clinical testing necessary to bring our products to
market and to establish manufacturing and marketing capabilities. Genstar's
future capital requirements will depend on many factors:

     .    the progress of our research and development programs;

     .    the progress of preclinical and clinical testing;

     .    the time and cost involved in obtaining regulatory  approvals;

     .    the cost of filing, prosecuting, defending and enforcing patent claims
          and other intellectual property rights;

     .    competing technological and market developments; and

     .    our ability to establish collaborative and other arrangements with
          third parties, such as licensing and manufacturing agreements.

     Baxter has committed to fund the development of our hemophilia product
under the Developmental Collaboration Agreement until we treat the first patient
in Phase I clinical trials, at which time they will pay us a $2 million
milestone payment. Additionally, in January 2000, we raised $8.3 million related
to the sale of common stock and warrants for common stock. We expect that our
existing capital resources and the amounts committed by Baxter will enable us to
maintain our current and planned operations for at least the next twelve months.
We will need to raise substantial additional capital to fund our operations. We
intend to seek this additional funding either through collaborative arrangements
or through public or private equity or debt financings. We cannot be certain
that additional

                                      -5-
<PAGE>


financing will be available on acceptable terms, or at all. If we raise
additional funds by issuing equity securities you will experience further
dilution with respect to the stock purchased in this offering. If adequate funds
are not available, we may be required to delay or reduce the scope of our
operations or to obtain funds through arrangements with collaborative partners
or others that may require us to relinquish rights we may have acquired in the
interim.




We are in the early stage of product development. Our technology requires
additional research and development, clinical testing and regulatory clearances
prior to marketing our products. If any of our potential products fail, our
business may not succeed.

     Our products are in the early stages of development. They will require
additional research and development, clinical testing and regulatory clearances.
We currently do not sell any products and do not expect to have any products
commercially available for at least two years. Our proposed products are subject
to the risks of failure inherent in the development of gene therapy products
based on innovative technologies.

     As a result, we are not able to predict whether our research and
development activities will result in any commercially viable products or
applications. In our industry, the majority of the potential products fail to
enter clinical studies, and the majority of products entering clinical studies
after achieving promising preclinical results are not commercialized
successfully.

We have limited manufacturing and marketing experience, which may impair the
sale of our products.

     We cannot guarantee that we will be able to develop manufacturing or
marketing capabilities successfully, either on our own or through third parties.
To date, we have engaged only in the development of pharmaceutical technology
and products, and have more limited experience in manufacturing or procuring
products in commercial quantities or in marketing pharmaceutical products. We
have only limited experience in conducting clinical trials and other later-stage
phases of the regulatory approval process. We cannot be certain that we will be
able to engage successfully in any of these activities for any of the products
we attempt to commercialize.

                                   -6-
<PAGE>

Our business is expanding rapidly and our business prospects may suffer if we
are not able to effectively manage the growth of our operations and successfully
integrate new personnel.

     We currently plan to expand our operations to include development of our
prostate cancer program and other programs yet to be identified. Additionally,
while we currently have a manufacturing facility to produce material for Phase I
and II clinical trials, if we decide to establish a commercial-scale
manufacturing facility, we will require substantial additional funds and
personnel and will be required to comply with extensive regulations applicable
to such a facility. This growth may strain our management and operations. Our
ability to manage growth depends on the ability of our officers and key
employees to:

 .   broaden our management team and to attract, hire and retain skilled
     employees;

 .   implement and improve our operational, management information and
     financial control systems;

 .   expand, train and manage our employee base; and

 .   develop additional expertise among existing management personnel.

We depend on future collaborations with others, which may be difficult to
obtain, and our revenues may depend on the efforts of third parties.

     Our strategy for the development, clinical testing, manufacturing and
commercialization of our products includes entering into various collaborations
with corporate partners, licensors, licensees and others. We have entered into a
distribution agreement with Baxter Healthcare Corporation under which Baxter has
the exclusive right to market, sell and distribute the hemophilia product.
Therefore, any revenues we may receive from the hemophilia product are dependent
on the efforts of Baxter. To the extent that we enter into additional co-
promotion, distribution or other licensing arrangements, any revenues we receive
will depend on the efforts of the other parties in these arrangements.

     We may not be able to negotiate these collaborative arrangements on
acceptable terms, if at all. Even if we enter into these collaborative
arrangements, they may not be successful. If we are unable to establish these
arrangements, Genstar would need to raise additional capital to undertake these
activities at our own expense. In addition, we may encounter significant delays
in introducing our products into some markets or find that the development,
manufacture or sale of our products in these markets is adversely affected by
the absence of these collaborative agreements.

We are a development stage company with a limited operating history; We expect
continued losses and may never become profitable.

     We are considered a development stage company because we have not yet
generated revenues from sales. From our inception in July 1991 through December
31, 1999, we have incurred cumulative losses of approximately $16.3 million,
almost all of which consisted of research and development and general and
administrative expenses. We expect our losses to increase in the future as we
begin our clinical trials and increase our research and development activities.
It is possible that we may never achieve significant revenues or become
profitable.

     Even if we eventually generate revenues from sales, we expect to incur
significant operating losses over the next several years. Our ability to become
profitable and to achieve long-term success will depend on:

 .   the time and expense necessary to develop our proposed products;

 .   whether and how quickly we can obtain regulatory approvals for proposed
     products; and

 .   our success in bringing these products to market.

                                      -7-

<PAGE>


     See "Selected Consolidated Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Inability to protect our technologies through patent protection could allow
competitors to exploit our proprietary products and technologies.

     We actively pursue patent protection for our proprietary products and
technologies. We hold one U.S. patent and currently have 7 U.S. patent
applications pending and several foreign patent applications pending. In
addition, we have numerous foreign patent applications pending corresponding to
our U.S. patents. However, our patents may not protect us against our
competitors. We may be required to file suit to protect our patents, and we
cannot be certain that we will have the resources necessary to pursue such
litigation or otherwise protect our patent rights.

     In April 1999, the United States Patent and Trademark Office issued a
patent to another company for an adenoviral vector technology. This patent may
be competitive with our Mini-Ad vector technology. Although we do not believe
that our technology infringes upon any valid claim of this patent, we cannot be
certain that our position would be substantiated if challenged.

     We also rely on trade secret protection for our unpatented proprietary
technology. However, trade secrets are difficult to protect. Others could
develop substantially equivalent information or gain access to our trade
secrets.

  We have a policy requiring that our employees and consultants execute
proprietary information agreements upon commencement of employment or consulting
relationships. These agreements provide that all confidential information
developed or made known to the individual during the course of the relationship
must be kept confidential except in specified circumstances. However, these
agreements may not successfully protect our trade secrets or other proprietary
information.

     Others could assert claims against us based on their patents. Claims
could seek damages as well as an injunction prohibiting clinical testing,
manufacturing and marketing of the product at issue. If any actions are
successful, in addition to any potential liability for damages, we could be
required to obtain a license in order to continue to manufacture or market the
product at issue. It is possible that any license required under any patent
would not be made available on acceptable terms, if at all. There has been, and
we believe that there will continue to be, significant litigation in the
pharmaceutical industry regarding patent and other intellectual property rights.
If we become involved in any litigation, a substantial portion of our financial
and personnel resources could be consumed, regardless of the outcome of
litigation. See "Business - Patents and Licenses."

Competition for highly-skilled personnel is intense and the success of our
business depends on our ability to attract and retain key personnel.

     Our future success, if any, depends to a significant degree upon the
continued service of key technical and senior management personnel, particularly
Paul D. Quadros and Robert E. Sobol, MD, the loss of whose services might
significantly delay our product development and commercialization efforts.  We
do not have agreements with Mr. Quardros or Mr. Sobol which would assure
retention of their services for more than sixty days.

     We will also need substantial additional expertise in the areas of
manufacturing, marketing and finance, among others, in order to achieve our
business objectives. Competition for qualified personnel is intense, and the
loss of key personnel or the inability to attract and retain the additional
skilled personnel required for the expansion of our business could damage our
business.

                                      -8-
<PAGE>


INDUSTRY RISKS

Clinical trials are designed to test the safety and efficacy of our potential
products in human patients. Successful clinical trials depend on the complexity
of the potential product and the rate of patient enrollment. If the clinical
trials are not successful, we will incur additional expense and our potential
products may not be approved for sale.

     Extensive and costly clinical testing will be necessary to assess the
safety and efficacy of our potential products. The rate of completion of
clinical trials depends on, among other factors, the type, novelty and
complexity of the product and the rate of patient enrollment. Patient enrollment
is a function of many factors, including:

 .   the nature of the clinical trial protocols;

 .   the existence of competing protocols;

 .   size of the patient population;

 .   proximity of patients to clinical sites; and

 .   eligibility criteria for the study.

     There are other companies conducting clinical trials in patients with
hemophilia. As a result, we must compete with them for clinical sites,
physicians and the limited number of patients with hemophilia who fulfill the
stringent requirements for participation in clinical trials. Delays in patient
enrollment will increase costs and delay the introduction of our potential
products, thereby harming our business and financial condition.

     Even if we successfully enroll patients in our clinical trials, we cannot
guarantee they will respond to our potential products. We think it is prudent to
expect setbacks. If we do not comply with the U.S. Food and Drug Administration
regulations applicable to clinical trials, our trials could be delayed,
suspended or cancelled, or the FDA might not accept the results of our trials.
The FDA may suspend clinical trials at any time if it concludes that the
subjects participating in our trials are being exposed to unacceptable health
risks. Further, we cannot assure you that human clinical testing will show any
current or future product candidate to be safe and effective .

We face intense competition and must cope with rapid technological change, which
may adversely affect earnings and financial condition and/or render our
potential products obsolete.

     Genstar is engaged in a rapidly changing field. Existing products and
therapies to treat hemophilia and prostate disorders will compete directly with
the products that we are seeking to develop and market. Competition from fully
integrated pharmaceutical companies and more established biotechnology companies
is expected to increase. Most of these companies have significantly greater
financial resources and expertise than we do in the following areas:

 .   research and development;

 .   manufacturing;

 .   preclinical and clinical testing;

 .   obtaining regulatory approvals; and

 .   marketing.

                                      -9-
<PAGE>

     Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical
companies. Many of these competitors have significant products approved or in
development and operate large, well-funded research and development programs.

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

     In addition, our competitors may develop more effective or more affordable
products, or achieve earlier patent protection or product commercialization and
market penetration than we will. Additionally, technologies developed by our
competitors may render our potential products uneconomical or obsolete, and we
may not be successful in marketing our potential products against competitors.

We need to comply with significant government regulation to obtain product
approvals and to market products after approvals.  Compliance with government
regulation can be a costly and time consuming process, with no assurance of
ultimate approval. If these approvals are not obtained, we will not be able to
sell our potential products.

     Various agencies in the United States and abroad regulate the testing,
manufacturing, labeling, distribution, marketing and advertising of proposed
products and ongoing research and development activities. The U.S. Food and Drug
Administration, the U.S. National Institute of Health and comparable agencies
in foreign countries impose many requirements on the introduction of new
pharmaceutical products through lengthy and detailed clinical testing
procedures, and other costly and time consuming compliance procedures. These
requirements make it difficult to estimate when our potential products will be
commercially available, if at all.

     Our potential products will require substantial clinical trials and FDA
review as new drugs. We cannot predict with certainty when we might submit any
of our proposed products currently under development for regulatory review. Once
we submit a product for review, we cannot guarantee that FDA or other regulatory
approvals will be granted on a timely basis, if at all.

     If we are delayed or fail to obtain required approvals, our business and
results of operations would be damaged. If we fail to comply with regulatory
requirements, either prior to approval or in marketing our products after
approval, we could be subject to regulatory or judicial enforcement actions.
These actions could result in:

 .   product recalls or seizures;

 .   injunctions;

 .   civil penalties;

 .   criminal prosecution;

 .   refusal to approve new products and withdrawal of existing approvals;
     and

 .   enhanced exposure to product liabilities.

     If we sell our products outside the U.S., we will be subject to regulatory
requirements governing these sales. These requirements vary widely from country
to country and could delay introduction of our products in those countries.

                                      -10-
<PAGE>

The pricing of our product may depend on third-party payors, whose reimbursement
and/or cost control policies may limit the revenues from our products.

     In both domestic and foreign markets, sales of our products, if any, will
depend, in part, on the extent to which third-party payors, including government
agencies such as Medicare, managed care providers and private health insurers
will reimburse users for the costs of our products and any related treatments.
If those who buy our products are not adequately reimbursed, they may forego or
reduce use.

     Third-party payors are engaged in ongoing efforts to reduce the costs of
pharmaceutical products. In the United States, an increasing emphasis on managed
care and consolidation of hospital purchasing has and is expected to continue to
place pressure on pharmaceutical prices, and may reduce the prices we can charge
for our potential products. In many major foreign markets, pricing approval is
required before sales can commence and prices are often set by governmental
authorities. These price controls are subject to change at unpredictable times.
Market acceptance of our potential products will be severely curtailed if
adequate coverage and reimbursement levels are not provided by governmental
authorities and private third-party payors.

We face the risk of product liability claims which may affect our earnings and
financial condition; we do not currently have product liability insurance
coverage, which increases our financial exposure to these claims.

     Our business will expose us to potential product liability risks that are
inherent in the testing, manufacturing and marketing of human therapeutic
products. Product liability results from harm to patients using our potential
product that was either not communicated as a potential side-effect, or was more
extreme that communicated. We currently have no clinical trial liability
insurance for our human clinical trials and will be required to obtain insurance
prior to beginning the trials. We will require all patients enrolled in the
clinical trials to sign consents which explain the risks involved with
participating in the trial. The consents, however, provide only a limited level
of protection and product liability insurance will be required. We may not be
able to obtain and maintain product liability insurance for all of our clinical
trials. We may not be able to obtain or maintain product liability insurance in
the future on acceptable terms or with adequate coverage against potential
liabilities, which would expose us to potential product liability.

Accidents related to hazardous materials used in our research and development
efforts, could subject us to significant liability.

     Our research and development efforts involve the controlled use of
hazardous materials and biological hazardous materials, such as isopropyl
alcohol, ethanol and bromides. Although we believe that our safety procedures
for handling and disposing of such materials comply with the standards
prescribed by state and federal 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 damages that
result and any such liability could exceed our resources.

RISKS RELATED TO THIS OFFERING



                                      -11-

<PAGE>



There may be an adverse impact on the value of your investment from shares
eligible for future sale.

     Sales of shares of our common stock in the public market, including shares
being registered in this prospectus and shares which will be issued when stock
options are exercised, could have an adverse effect on the market price of our
common stock. The common stock being registered for resale in this prospectus
represents 50% of our total outstanding shares, assuming exercise of all of the
warrants being registered. Sales of this stock might also make it more difficult
for us to sell equity securities and equity-related securities in the future at
a time and price that is acceptable.


                                     -12-
<PAGE>

                                USE OF PROCEEDS

We will not receive proceeds from the sale of the common stock offered in this
prospectus. The maximum amount we could receive upon exercise of the warrants is
$1,600,434. However, the warrants include a "net exercise" provision where the
investors can elect to receive fewer shares upon exercise rather than pay the
exercise price in cash. Accordingly, we may not receive significant proceeds
from the exercise of the warrants. In addition, as the warrants can be exercised
at any time until January 21, 2005 and are exercisable at the option of the
holder, we cannot predict when we might receive any cash proceeds. Any amount we
do receive will be used for general working capital purposes.

                          PRICE RANGE OF COMMON STOCK

     Our common stock traded on the over-the-counter market on the electronic
bulletin board under the symbol "UROG" until April 18, 2000 at which time it
began trading on the American Stock Exchange under the symbol "GNT". Our common
stock began trading on February 13, 1998, upon the lapse of the prohibition on
transfers imposed at the time the common stock was first distributed. The
following table shows for the periods indicated the high and low closing prices
for the common stock:

<TABLE>
<CAPTION>
                                                                                               High            LOW
- --------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>             <C>
FISCAL YEAR ENDED December 31, 1998
       First Quarter                                                                          $ 2.25          $0.22
       Second Quarter                                                                         $ 1.25          $0.31
       Third Quarter                                                                          $ 1.00          $0.38
       Fourth Quarter                                                                         $ 0.50          $0.32
FISCAL YEAR ENDED December 31, 1999
       First Quarter                                                                          $ 0.40          $0.31
       Second Quarter                                                                         $ 0.33          $0.25
       Third Quarter                                                                          $ 0.33          $0.13
       Fourth Quarter                                                                         $ 0.60          $0.25
FISCAL YEAR ENDED December 31, 2000
       First Quarter                                                                          $19.00          $0.66
       Second Quarter (through April 18, 2000)                                                $ 8.13          $6.00
</TABLE>

     On April 18, 2000, the last reported sale price of the common stock as
reported on the American Stock was $7.13 per share. As of April 18, 2000, there
were approximately 900 holders of record of common stock.

                                DIVIDEND POLICY

     We have never paid any cash dividends on our common stock to date. We
currently anticipate that we will retain all future earnings, if any, to fund
the development and growth of our business and do not anticipate paying any cash
dividends for at least the next five years, if ever.

                                     -13-

<PAGE>

                                CAPITALIZATION

     The following table sets forth our actual capitalization as of December 31,
1999, (i) actual capitalization of GenStar and (ii) the pro forma capitalization
of GenStar giving effect to the January 2000 and February 2000 financings for
aggregate net proceeds of $23,458,188. This table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and Notes thereto included elsewhere in
this prospectus.

<TABLE>
<CAPTION>
                                                                  December 31,           December 31,
                                                                     1999                   1999
                                                                   (Actual)             (Pro Forma)
                                                                (in thousands)         (in thousands)
                                                                --------------         --------------
<S>                                                               <C>                    <C>
Advance from related party                                         $  1,876               $  1,876

Capital lease obligation, net of current portion                         51                     51

Stockholders' equity (deficit):

   Preferred Stock - $0.01 par value; 5,000,000 shares
    authorized; 8,828 shares issued and outstanding
    actual and pro forma                                                  -                      -

   Common Stock - $0.001 par value; 40,000,000 shares
    authorized;  12,104,101 shares issued and outstanding
    (actual) and 20,446,901 (pro forma)                                  12                     20

   Additional paid-in capital                                        11,607                 35,057

   Deficit accumulated during development stage                     (12,524)               (12,524)
                                                                   --------               --------

        Total stockholders' equity (deficit)                       $   (905)              $ 22,553
                                                                   --------               --------

        Total capitalization                                       $  1,022               $ 24,480
                                                                   ========               ========
</TABLE>

(1)  The number of shares of common stock issued and outstanding above excludes:



     .    793,760 shares of common stock issued upon exercise of options and
          warrants subsequent to December 31, 1999 through April 18, 2000 for
          aggregate proceeds of $32,000.

     .    3,666,916 shares subject to outstanding options at a weighted average
          exercise price of $1.34 as of April 18, 2000.

     .    3,888,795 shares issuable upon exercise of outstanding warrants, of
          which 1,414,168 are being registered by this prospectus, at a weighted
          average exercise price of $0.63 per share as of April 18, 2000.

     .    An aggregate of 1,733,358 shares available for future issuance under
          our stock option plans as of April 18, 2000.

See "Description of Capital Stock" and Notes to the Financial statements.

                                     -14-
<PAGE>

                     SELECTED CONSOLIDATED FINANCIAL DATA


     The following selected historical financial data of GenStar Therapeutics
Corporation (formerly UroGen Corp., and the UroGen division of Medstone,
Urogen's predecessor) reflect GenStar's operating results as a stand-alone
entity during 1996, 1997, 1998 and 1999, and GenStar's historical operation as a
division of Medstone for the prior periods. The financial data as of December
31, 1998 and 1999 and for each of the years in the three-year period ended
December 31, 1999, and for the period from July 1, 1991, our inception, have
been derived from the unaudited financial statements of the Company, included
elsewhere in this prospectus. The financial data for all other periods and dates
have been derived from audited financial statements of GenStar or of the UroGen
division of Medstone which are not included in this prospectus. The data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements,
related notes and other financial information included in this prospectus.

<TABLE>
<CAPTION>
                                                                                             Period from
                                                                                             July 1, 1991
                                                                                            (inception) To
                                                      Year ended December 31,                December 30,
                                        --------------------------------------------------  --------------
                                          1999      1998      1997      1996      1995            1999
                                        --------  --------  --------  --------  --------    --------------
                                              (in thousands, except per share data)
<S>                                     <C>       <C>       <C>       <C>       <C>         <C>
Statement of Operations Data:
 Net revenues.........................   $   118   $   192   $   194  $      -  $      -         $     959
                                         -------   -------   -------  --------  --------         ---------
 Costs and expenses:
    Cost of sales.....................         -         -         -         -         -               822
    Research and development..........     2,711     1,916       346       348        75             8,146
    General and administrative........       817       487       151       174         -             2,164
    Write-off of acquired in-process
        technology....................         -     5,455         -         -         -             5,455
                                         -------   -------   -------  --------  --------         ---------
          Total costs and expenses....     3,528     7,858       497       522        75            16,587
                                         -------   -------   -------  --------  --------         ---------
    Loss from operations..............     3,410    (7,666)     (303)     (522)      (75)          (15,628)

  Other income (expense)..............       (72)        -         -        64         -                (8)
  Interest expense....................      (360)     (306)        -         -         -              (666)
  Interest income.....................        24        10         4        14         -                52
                                         -------   -------   -------  --------  --------         ---------
  Net loss............................   $(3,818)  $(7,962)  $  (299) $   (444) $    (75)        $ (16,250)
                                         =======   =======   =======  ========  ========         =========

Net loss per share....................   $ ( .35)  $ (1.00)  $ (0.04) $  (0.07)      N/A
                                         =======   =======   =======  ========
Weighted average shares outstanding...    10,763     7,997     7,311     5,980       N/A
                                         =======   =======   =======  ========
</TABLE>

<TABLE>
<CAPTION>

                                                                           December 31,
                                                       -------------------------------------------------------
                                                       1999         1998        1997         1996         1995
<S>                                                    ----         ----        ----         ----        -----
Balance Sheet Data (1):                                <C>         <C>          <C>          <C>         <C>
Working capital (deficit)........................      $  448       $(1,274)        6          235           1
Total assets.....................................       1,827         1,098        78          253         163
Long-term debt, net of current portion...........       1,927         1,274         -            -           -
Stockholders' equity (deficit)...................        (905)       (1,934)        9          237         163
</TABLE>

(1) In January 2000, we raised gross proceeds of $8.3 million related to the
    sale of common stock and warrants for common stock. In February 2000, we
    raised gross proceeds of $17.0 million from the sale of common stock. The
    proceeds from these transactions are not included in our December 31, 1999
    balance sheet data.
                                     -15-
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     This prospectus contains forward-looking statements that involve risks and
uncertainties. The statements contained in this prospectus that are not purely
historical are forward-looking statements including without limitation
statements regarding our expectations, beliefs, intentions or strategies
regarding the future. All forward-looking statements included in this document
are based on information available to us on the date hereof, and we assume no
obligation to update any such forward-looking statements. Our actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth below,
under "Risk Factors" and elsewhere in this prospectus.

OVERVIEW

     GenStar commenced operations as a stand-alone entity in January 1996 and
has been in the development stage since inception. Our original mission was to
develop products to treat diseases in urology, with a particular interest in
prostate cancer. We had licensed technology that uses the IL-3 gene to treat
several types of cancer, but did not have technology to deliver the gene. On
July 8, 1998, we entered into an agreement with Baxter Healthcare Corporation in
which we acquired the exclusive rights to gene delivery technologies and
laboratory equipment. The gene delivery technology will be used to enhance our
existing technology and to develop products to deliver other genes. We believe
that the gene delivery technology provides a higher level of expression of the
gene being delivered compared to other gene therapy approaches. Prior to our
license of the technology, Baxter had been developing this technology for the
treatment of hemophilia and cancer and has continued to fund the development of
our Factor VIII product for hemophilia. See "Certain Relationships and Related
Transactions-Baxter Agreements."

     In exchange for the exclusive license to the gene delivery technology and
equipment, we issued 1,841,219 shares of common stock and 5,830 shares of Series
A preferred stock to Baxter. The assets acquired from Baxter were valued based
on the fair market value of our common stock on the date of the agreement. We
obtained an appraisal of the value of the equipment acquired. Based upon the
very early stage of development of the technology, the value of the technology
was charged to acquired in-process technology.

     Our current activities consist of the development of the gene transfer
system in our Factor VIII Mini-Ad product for hemophilia and our tumor killing
IL-3 viral vector product for prostate cancer. We anticipate defining additional
uses for our vector technology and potentially acquiring other technologies. We
expect to incur increasing research and development expenditures as we focus our
efforts on further development of these products. We expect no significant
revenues and to incur significant operating losses for at least the next five
years.







                                     -16-
<PAGE>






RESULTS OF OPERATIONS

Revenues

  GenStar has generated revenues to date of $959,000 from contract research
agreements and grants. Total revenues for the years ended December 31, 1997,
1998 and 1999 were $194,000, $192,000 and $118,000, respectively. We anticipate
seeking additional research agreements and grants to help fund research and
development efforts; however, we do not expect that contract research will
result in significant revenues in the future. We do not anticipate revenues from
products for at least five years. Product revenues are contingent on the success
of our clinical trials.

Research and development and acquired in-process technology

  Research and development expenses and acquired in-process technology charges
during the years ended December 31, 1997, 1998 and 1999 were $346,000,
$7,371,000 and $2,711,000, respectively. Research and development expenses
during 1997 and through June 30, 1998 consisted primarily of payments to
consultants who were performing research and to fees related to technology
licenses and patent applications. Following consummation of the Baxter
transaction on July 8, 1998, research and development costs were expanded to
include the costs of the hemophilia and cancer programs acquired from Baxter,
but which were continued at Baxter until the employees and tangible assets
involved were moved to our facilities in October 1998. Additionally, the
technology acquired from Baxter valued at $5,455,505 was charged to acquired in-
process technology in 1998 due to the early stage of development. We estimate
that it will take five years and approximately $30 million dollars to complete
the Factor VIII product and obtain regulatory approvals, if we are able to
obtain approvals.

  We anticipate increasing research and development expenditures in the future
as we conduct preclinical and clinical testing necessary to bring our products
to market and to establish manufacturing and marketing capabilities. We have
recently completed the process of developing a facility to manufacture the
materials for Phase I and Phase II clinical trials for our hemophilia product.
We estimate that the costs to develop the facility and manufacture materials for
Phase I clinical trials will be approximately $4,400,000, which will be funded
by Baxter under the developmental collaboration agreement. We are unable to
estimate the costs to develop manufacturing facilities for Phase III clinical
trials and for commercial quantities of our potential products and the costs to
develop marketing capabilities, because we have not determined whether we will
build these capabilities within the company or enter into collaborative
arrangement with others to perform these functions.

General and administrative expenses

  General and administrative expenses during the years ended December 31, 1997,
1998 and 1999 were $151,000, $488,000 and $817,000, respectively. General and
administrative expenses include the costs of our administrative personnel and
consultants, office lease expenses and other overhead costs, including legal and
accounting costs. General and administrative expenses have increased related to
the increased level of operations and we expect general and administrative
expenses to continue to increase to support our increasing research and
development activities.

Interest income and expense

  Interest income during the three years ended December 31, 1999 of $4,000,
$10,000 and $24,000, respectively, is a result of investment of excess cash in
money market accounts. Interest expense for the three years ended December 31,
1999 was none, $306,000 and $360,000, respectively. Interest expense in 1998 was
comprised of $266,000 of amortization of the discount on convertible notes
payable and $40,000 related to the 8% interest rate on the notes. Interest
expense in 1999 was comprised of $309,000 of amortization of the discount on
convertible notes payable, $25,000 related to the 8% interest rate on the notes
and $26,000 related to interest on the capital lease line.

LIQUIDITY AND CAPITAL RESOURCES

  Net cash used by operating activities was $643,000 and $3,812,000 during the
years ended December 31, 1998 and 1999, respectively. Net cash used by operating
activities consists primarily of GenStar's net loss increased by non-cash
expenses, such as the write-off of in-process technology acquired with stock and
expenses paid via advances from Baxter. Net cash used by investing activities of
$63,000 and $170,000 during 1998 and 1999, respectively, consists of the
purchase of furniture and equipment. Net cash provided by financing activities
of $947,000 during 1998 consists of proceeds from notes payable of $1,030,000
offset by expenses paid to raise capital. Net cash provided by financing
activities of $4,589,000 in 1999 consists primarily of $4,178,000 paid by Baxter
under the credit agreement for development of the hemophilia product and
$400,000 in proceeds from notes payable.

                                     -17-
<PAGE>


     GenStar's future capital requirements will depend on many factors,
including scientific progress in our research and development programs, our
ability to establish collaborative arrangements with others for drug
development, progress with preclinical and clinical trials, the time and costs
involved in obtaining regulatory approvals and effective commercialization
activities. Medstone funded all of GenStar's operations from July 1, 1991, our
inception, through and ending with a $500,000 capital contribution of cash on
February 9, 1996. In July 1998, we completed an offering of 8% Convertible
Subordinated Notes due June 30, 1999, which raised $1,030,000 and which was
converted to common stock on June 22, 1999. In April 1999, we completed another
offering of Convertible Subordinated Notes due March 31, 2000, which raised
$400,000, which also converted to common stock on June 22, 1999. In January
2000, we raised $8,300,000 from the sale of common stock and warrants for
common stock. In February 2000, we raised an additional $17,000,000 from the
sale of common stock. GenStar has incurred net losses of $16,250,000 since its
inception through December 31, 1999, and has never been profitable during its
existence. We expect to incur significant additional operating losses over the
next several years as our research and development efforts expand. Our ability
to achieve profitability depends upon our ability, alone or with others, to
successfully complete development of products, obtain required regulatory
approvals and manufacture and market products. We may not be successful and we
may never attain significant revenues or profitability. Our operations to date
have consumed substantial amounts of cash. The negative cash flow from
operations is expected to continue and to accelerate for at least the next four
years. The development of our products will require a commitment of substantial
funds to conduct the costly and time-consuming research, preclinical and
clinical testing necessary to bring our products to market and to establish
manufacturing and marketing capabilities.

   Under the terms of our Developmental Collaboration Agreement and Credit
Agreements with Baxter (See "Certain Relationships and Related Transactions
Baxter Transactions"), Baxter is required to provide funding for development of
the hemophilia product until we commence a Phase I clinical trial, at which time
a milestone payment of $2,000,000 is due from Baxter. The funding under the
Developmental Collaboration Agreement provided by Baxter is in the form of a
note payable, which can be converted to Series B Preferred Stock at our option
on December 31 of each year of the agreement. The $2,000,000 milestone payment
is in the form of a purchase of Series C Preferred Stock.

We anticipate our existing capital resources, including funds received from
Baxter under the Developmental Collaboration Agreement, will enable us to
maintain our current and planned operations for at least the next two years. We
will need to raise substantial additional capital to fund future operations. We
intend to seek additional funding either through collaborative arrangements or
through public or private equity or debt financings. Additional financing may
not be available on acceptable terms, or at all. If adequate funds are not
available, we may be required to delay or reduce the scope of our operations or
to obtain funds through arrangements with collaborative partners or others that
may require us to relinquish rights we may otherwise have.


                                     -18-
<PAGE>

TECHNOLOGY LICENSES

  GenStar entered into a license agreement with The Immune Response Corporation
in March 1997, which was subsequently amended in January 1999, whereby we
licensed from IRC tumor radiosensitization gene therapy technology. Under the
IRC License, GenStar is obligated to make a milestone payment to IRC of $200,000
upon the approval by the Food and Drug Administration or the governing health
authority of any other country of GenStar's first product related to the
technology licensed from IRC. This fee can be offset against future royalty
payments. GenStar is obligated to pay royalties on its net sales revenue and a
percentage of all revenues received from sublicenses relating to the licensed
technology. Additionally, GenStar agreed in the January 1999 amendment to
reimburse IRC for past patent expenses relating to the licensed technology in
the amount of $59,400 which was paid in February 2000.




     In September 1996, GenStar entered into a license agreement with the
Regents of the University of California to license rights to patents in the
field of diagnosis of cancer using very sensitive molecular biology techniques
that detects the presence of cancer cells. We are required to pay an annual
license maintenance fee of $10,000 until we start selling licensed product. We
are also required to pay milestone fees of $25,000 upon filing an Investigative
Device Exemption Application on a licensed product or method with the Food and
Drug Administration and $50,000 upon marketing approval of a licensed product or
method by the FDA. GenStar must also pay royalties to the UC Regents on its net
sales revenues of licensed products or royalties from sublicenses. A minimum
annual royalty of $50,000 is payable beginning with the year of first commercial
sale of licensed product, but no later than the fifth year of the agreement. The
minimum annual royalty may be credited against revenue-based royalties due for
the year in which the annual minimum payment was made.

YEAR 2000 COMPLIANCE




     In prior years, we discussed the nature and progress of our plans to become
Year 2000 ready. In late 1999, we completed our readiness planning. As a result
of those efforts, we experienced no disruptions in mission critical information
technology and non-information technology systems and believe that those systems
successfully responded to the Year 2000 date change. We expensed approximately
$11,000 during 1999 in connection with remediating systems. We are not aware of
any material problems resulting from Year 2000 issues, either with our internal
systems or the products and services of third parties. We will continue to
monitor our mission critical applications and those of our suppliers and
vendors throughout the year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed promptly.

                                     -19-

<PAGE>


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  At December 31, 1999, our cash and cash equivalents were invested in liquid
checking and money market accounts, which will not change significantly in value
if interest rates change. Accordingly, an immediate 10% change in interest rates
would not have a material impact on our financial condition or results of
operations.

 We do not conduct business with foreign entities, and does not have
any foreign exchange risk.

                                     -20-
<PAGE>


                            GENE THERAPY TECHNOLOGY

  GenStar's business is based on the technology described in this section. For a
complete discussion of GenStar's business, see the Business section below.

  Gene therapy is a technology that uses genetic materials as therapeutic agents
to treat various diseases. Gene therapy seeks to restore or correct defective
gene functions or to enhance normal gene activity. Gene therapy involves two
major components: the genetic material needed to treat the disease and the
system to deliver this material to the therapeutic site.

  An essential requirement of gene therapy is a suitable delivery system for
introducing therapeutic genes. The two major approaches that have been used to
deliver genes are viral and non-viral delivery systems, called vectors.
Different disease targets and routes of administration generally require
delivery systems with differing characteristics. Viral delivery systems are
generally more efficient than non-viral systems.

  Adenoviral vectors, derived from a common cold virus, are one of the most
common vectors being used today. Adenoviral vectors can infect and express genes
in non-dividing as well as dividing cells. Therefore, adenoviral vectors can
deliver genes to a wide variety of cells and tissues. GenStar has developed
improved adenoviral gene delivery systems for therapeutic applications.

                                   BUSINESS

  GenStar Theraputics Corporation is focused on the development of innovative
gene therapy products for the treatment of hemophilia, cancer and other genetic
disorders.

  GenStar's gene delivery systems are derived from a type of cold virus termed
an adenovirus that we believe provides superior gene transfer efficiency and
expression compared to other gene therapy approaches. The gene transfer system
has been engineered to remove the original adenovirus genes which are then
replaced with therapeutic genes. These genetically engineered therapeutic
viruses contain less than 3% of the original adenovirus. We believe that removal
of unwanted adenoviral genes permits increased gene transfer capacity with a
higher level of gene expression and improved safety compared to standard gene
transfer systems. Because these therapeutic viruses are engineered to minimize
the presence of adenoviral gene parts, they are termed "Mini-Ad" viruses. These
Mini-Ad viruses retain the ability to infect cells and the efficient gene
transfer characteristics of the original adenoviruses. We believe our gene
transfer and expression systems will advance the capabilities of gene therapy
for disease management, providing what we believe to be efficient gene transfer
and long term gene expression desired for clinical applications.

  The initial focus of our research and development efforts will be the
generation of products for the treatment of hemophilia and prostate cancer. Two
gene therapy products are under development: 1) Factor VIII Mini-Ad Vector for
the treatment of hemophilia; 2) Complementary Oncolytic Interleukin-3 (IL-3)
Adenoviral Vectors for the treatment of prostate cancer. The Factor VIII Mini-Ad
Vector for hemophilia is expected to provide a greater duration of active Factor
VIII function, which is the protein that prevents the

                                     -21-
<PAGE>


chronic bleeding and joint damage characteristic of this disorder. The IL-3
Adenoviral product is comprised of a mixture of two adenoviruses which
complement each other resulting in viral replication and propagation only in
target tissues, leading to tumor cell destruction, radiation sensitization and
anti-tumor immune responses for the treatment of prostate cancer.

RESEARCH AND DEVELOPMENT

The Mini-Ad System

         The Mini-Ad system is an adenoviral gene delivery system. The system is
derived from a type of cold virus called an adenovirus. The adenovirus has been
engineered to remove the original virus genes that are replaced with therapeutic
genes. These genetically engineered viruses contain less than 3% of the original
adenovirus. We believe that the removal of the majority of the unwanted
adenoviral genes permits increased ability to transfer the therapeutic genes and
permits a high level of expression of the therapeutic genes.





                                     -22-
<PAGE>


Factor VIII Mini-Ad Vector for Hemophilia A / Liver Directed GeneTherapy

         Hemophilia is a bleeding disorder caused by abnormalities in the gene
that produces the protein controlling blood clotting, which is called Factor
VIII. Factor VIII is normally produced in the liver. The ease of delivery and
affinity of adenoviruses for the liver makes adenoviral-based therapies a
logical delivery system to deliver Factor VIII genes. Intravenous injection of
adenoviruses results in delivery of the virus to liver cells. The first Mini-Ad
product under development is for the delivery of the Factor VIII gene for the
treatment of hemophilia A. As the liver is one of the major organs for natural
Factor VIII production, the virus has been engineered to increase Factor VIII
production in this organ. In studies which have been performed on normal and
hemophiliac mice, intravenous injection of this Mini-Ad vector resulted in
Factor VIII concentrations that are twenty to thirty times the level necessary
to prevent bleeding.

         Our Developmental Collaboration Agreement with Baxter Healthcare
Corporation provides for Baxter to fund the development of the Factor VIII Mini-
Ad product until we treat the first patient in the Phase I clinical trial, at
which time Baxter is required to make a milestone payment of $2 million to
maintain their distribution rights. Baxter will receive Series C preferred stock
for the $2 million milestone payment. Baxter is required to make additional
milestone payments if we begin Phase III clinical trials and if we obtain FDA
approval on the Factor VIII product (see Certain Relationships and Related
Transactions").

         We believe that there may be additional product opportunities for this
liver directed gene delivery technology. Diseases resulting from abnormal
function or biochemistry of the liver are among the leading causes of sickness
and death. There are several common genetic liver diseases for which effective
gene therapy to replace defective genes would replace current conventional
therapies, which are either cumbersome or not very effective.

                                     -23-
<PAGE>

Tumor Killing  IL-3 Viral Vector for Prostate Cancer

         Cancer of the prostate gland is the most common cancer among men. It
currently occurs in approximately one in six men and has an annual incidence in
the United States of 187,000 new cases. Our tumor killing IL-3 gene delivery
vector has demonstrated intrinsic anti-tumor killing activity in animal models.
In addition, we believe the product will result in expression of the IL-3 gene,
which sensitizes tumors to the effects of radiation, providing improved
treatment of disease within the prostate, and simultaneously generating anti-
tumor immunity capable of destroying cancerous lesions. We believe that a
significant advantage of our tumor killing IL-3 viral vector product may be its
ability to have anti-tumor activity, while sensitizing tumors to the effects of
standard cancer therapies. These multiple modes of action may have benefits in
the treatment of prostate cancer and other tumors. Successful treatment of
prostate cancer requires complete eradication of tumors within the prostate and
the elimination of undetected tumor cells, which have migrated from the prostate
in approximately fifty percent of patients at the time of initial diagnosis. Our
first tumor killing IL-3 viral vector product is designed to be injected into
tumors and administered in combination with radiation for the treatment of
prostate cancer.



                                      -24-
<PAGE>


The tumor killing IL-3 viral product is comprised of a mixture of two
adenoviruses that complement each other to permit viral replication that kills
tumor cells. In this system, one virus contains certain viral genes that are
only active in prostate cells, and the second virus contains the remainder of
the viral genes necessary for the virus to replicate. The viruses complement
each other, resulting in viral replication and propagation in tumor tissues
leading to tumor cell killing. Adenoviruses kill the cells in which they
replicate. Importantly, we believe the controlled virus can be engineered to
carry and express additional therapeutic genes such as IL-3.

  Preliminary studies with vectors incorporating a prostate specific
antigen (PSA) promoter have cured prostate tumors in animal models following
injection into tumors.



  Our viruses may be further engineered to express therapeutic genes that can
enhance anti-tumor immunity. We have demonstrated that IL-3 gene therapy
sensitizes tumors to the effects of radiation and stimulates anti-tumor immune
responses capable of eradicating tumor cells. In animal tumor models, the
combination of IL-3 gene therapy with radiotherapy was synergistic resulting in
enhanced efficacy of local radiotherapy and generating anti-tumor immunity. We
used IL-3 gene transfer into mouse tumors as a model in these studies. The
tumors injected with IL-3 were more sensitive than unmodified tumors to
irradiation, and after radiation therapy they developed anti-tumor
immune responses. In this study, radiation caused unmodified tumors to regress
only temporarily, and then began progressing again after 10 days. In contrast,
IL-3 gene modified tumors continued to regress after irradiation and complete
tumor remission was achieved. These cured mice developed immunity to
unmodified tumors and were resistant to injection with unmodified tumor cells
three months later in five out of five animals tested. The dose of tumor cells
studied caused tumors in one hundred percent of non-immunized animals.

  We believe our multiple-activity tumor killing, radiation sensitizing, and
immune therapy approach is well suited for the treatment of prostate cancer,
which requires elimination of tumors both within the prostate and at distant
sites where the tumor has spread.

  Approximately 82% of GenStar's employees are engaged in research and
development. During the years ended December 31, 1999, 1998 and 1997, we spent
approximately $2,711,000, $1,916,000 before the non-cash write-off of acquired
in-process technology, and $346,000, respectively, for research and
development.


Manufacturing

  We are currently in the process of developing a manufacturing facility to
produce materials for clinical trials for our hemophilia product. We have
retained consultants with experience in designing, construction and completing
validation for manufacturing operations which comply with the FDA's Good
Manufacturing Practices regulations. We have entered into a facility lease for
the manufacturing operations. We completed construction and validation of the
manufacturing facility in January 2000. Inspection of the manufacturing facility
by the FDA is anticipated to be complete by July 2000.

  We have not yet determined whether we will establish relationships with third
party manufacturers or establish expanded facilities for future manufacturing
needs. Commercial-scale manufacturing will require significant
improvements in our current manufacturing techniques, as well as rigorous
process controls. Companies often encounter manufacturing difficulties during
the course of implementing processes for commercial manufacturing
including:

 .  Problems involving production yields;
 .  quality control and assurance; and

 .  shortages of qualified personnel.

  Manufacturing facilities will be required to be registered with the FDA and
will be subject to inspections confirming compliance with the FDA's Good
Manufacturing Practices regulations. We cannot be sure that we will be able to
produce clinical or commercial quantities of our potential products in
compliance with applicable regulations or at an acceptable cost.

  If we decide to establish relationships with third parties to manufacture our
potential products, we will be dependent on these third parties, which may
adversely affect our profit margins and our ability to develop and commercialize
products on a timely and competitive basis. Further, manufacturing or quality
control problems may arise and third party manufacturers may not be able to
maintain the necessary governmental licenses and approvals to continue
manufacturing our potential products. If we fail to establish relationships with
third parties for our manufacturing requirements on commercially acceptable
terms, we would be required to develop our own manufacturing facility, which
would require a significant amount of time and financial resources. See "Risk
Factors - We have limited manufacturing and marketing experience."

Patents and Licenses

  We believe that patent and trade secret protection is important to our
business and that our future will depend, in part, on our ability to maintain
our technology licenses, protect our own trade secrets, secure additional
patents and operate without infringing the proprietary rights of others. GenStar
currently holds exclusive rights to one issued United States patent which
expires in 2010, and several other pending patent applications that relate to
genetic therapies and molecular diagnostics.

  We have filed a series of United States and foreign patent applications for
the Mini-Ad and Tumor Killing Vector systems. These applications cover all
fields of use for the Mini-Ad system. We have obtained from the Immune Response
Corporation exclusive world-wide rights to a patent application covering the use
of cytokines like IL-3 used in combination with radiation for enhancing the
effects of radiation and stimulating anti-tumor immunity in the treatment of
certain cancers.

  The pharmaceutical and biotechnology fields are characterized by a large
number of patent filings. A substantial number of patents have already been
issued to other pharmaceutical and biotechnology companies. Research has been
conducted for many years in the gene therapy field by pharmaceutical and
biotechnology companies and other organizations. Competitors may have filed
applications for or have been issued patents and may obtain additional patents
and proprietary rights related to products or processes competitive with or
similar to ours. Patent applications are maintained in secrecy for a period
after filing. Publication of discoveries in the scientific or patent literature
tends to lag behind actual discoveries and the filing of related patent
applications. We may not be aware of all of the patents potentially adverse to
GenStar's interest that may have been issued to other companies, research or
academic institutions, or others. No assurances can be given that these patents
do not contain claims relating to GenStar's technology.

  To date, no consistent policy has emerged regarding the breadth of claims
allowed in pharmaceutical and biotechnology patents. If patents have been or are
issued to others containing preclusive or conflicting claims, and these claims
are ultimately determined to be valid, we may be required to obtain licenses to
one or more of these patents or to develop or obtain alternative technology. We
believe that our current and proposed activities do not infringe on any patents
that would be determined to be valid. We cannot assure you that patents do not
exist in the United States or in other countries or that patents will not be
issued to third parties that contain preclusive or conflicting claims with
respect to any of GenStar's technologies. Commercialization of GenStar's
proposed products may require licensing and/or cross-licensing of one or more
patents with other organizations in the field. We cannot assure you that the
licenses that might be required for GenStar's processes or products would be
available on commercially acceptable terms, if at all.

  GenStar's breach of an existing license or failure to obtain a license to
technology required to commercialize its product candidates may have a material
adverse effect on our business, financial condition and results of operations,
Litigation, which could result in substantial cost, may also be necessary to
enforce any patents issued to GenStar or to determine the scope and validity of
third-party proprietary rights. If our competitors prepare and file patent
applications in the United States that claim technology also claimed by us, we
may have to participate in interference proceedings declared by the United
States Patent and Trademark Office to determine the priority of invention, which
could result in substantial cost, even if the eventual outcome is favorable to
us. An adverse outcome could subject GenStar to significant liabilities to third
parties and require us to license disputed rights from third parties or to cease
using such technology.

  GenStar also relies on trade secrets to protect our technology, especially
where patent protection is not believed to be appropriate or obtainable. We
protect our proprietary technology and processes, in part, by confidentiality
agreements with our employees, consultants and collaborators. We can not assure
you that these agreements will not be breached, that we would have adequate
remedies for any breach, or that GenStar's trade secrets or those of its
collaborators or contractors will not otherwise become known or be discovered
independently by competitors.

  Patents issued and patent applications filed internationally relating to
gene therapy are numerous and we cannot assure you that current and potential
competitors or other third parties have not filed or received or will not file
or receive applications in the future for, patents or obtain additional
proprietary rights relating to products or processes used or proposed to be used
by GenStar.

  Additionally, there is certain subject matter which is patentable in the
United States but not generally patentable outside of the United States.
Differences in what constitutes patentable subject matter in various countries
may limit the protection we can obtain on some of our inventions outside of the
United States. For example, methods of treating humans are not patentable in
many countries outside of the United States. These and-or other issues may
prevent GenStar from obtaining patent protection outside of the United States
which would have a material adverse effect on our business, financial condition
and results of operations.

                                     -25-
<PAGE>

Government Regulation

  The production and marketing of our proposed products and our research
and development activities are subject to regulation for safety, effectiveness
and quality by numerous governmental authorities in the United States and other
countries. In the United States, drugs are subject to rigorous FDA regulations.
The Federal Food, Drug, and Cosmetic Act, as amended, the regulations
promulgated thereunder, and other federal and state statutes and regulations
govern, among other things, the testing, manufacture, safety, effectiveness,
labeling, storage, record keeping, advertising and promotion of our products.
Product development and approval within this regulatory framework take a number
of years and involve the expenditure of substantial resources.

  The steps required before our proposed products may be marketed in the United
States include:

 .  preclinical laboratory tests, in vivo preclinical studies and formulation
   studies,

 .  the submission to the FDA of an Initial New Drug application for human
   clinical testing, which must become effective before human clinical trials
   commence,

 .  adequate and well-controlled human clinical trials to establish the safety
   and effectiveness of the drug,

 .  the submission to the FDA of a Product License Application (for a biologic)
   or a New Drug Application (for a drug), and

 .  the FDA approval of the Product License Application or New Drug Application
   prior to any commercial sale or shipment of the drug.

  In addition to obtaining FDA approval for each product and indication, each
domestic manufacturing establishment must be registered with, and approved by,
the FDA. Domestic manufacturing establishments are subject to biennial
inspections by the FDA and must comply with the FDA's good manufacturing
practices for both drugs and devices. To supply products for use in the United
States, foreign manufacturing establishments, including third party facilities,
must comply with the FDA's good manufacturing practices and are subject to
periodic inspection by the FDA or by corresponding regulatory agencies in
countries under reciprocal agreements with the FDA. In addition to FDA
regulation, we are also subject to a variety of additional governmental
regulations under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Energy Reorganization Act
of 1974, the Resource Conservation and Recovery Act and other current and future
federal, state and local regulations.

  Preclinical tests include laboratory evaluation of product chemistry and
formulation, as well as animal studies to assess the potential safety and
effectiveness of the product. Compounds must be adequately manufactured and
preclinical safety tests must be conducted by laboratories that comply with FDA
good laboratory practices regulations. The results of the preclinical tests are
submitted to the FDA as part of an Initial New Drug application and are reviewed
by the FDA prior to the commencement of human clinical trials. There can be no
assurance that submission of an Initial New Drug application will result in FDA
authorization to commence clinical trials.

  Clinical trials involve the administration of the investigational new drug to
healthy volunteers or to patients, under the supervision of qualified principal
investigators. Clinical trials must be conducted in accordance with the FDA's
good clinical practices under protocols that detail the objectives of the study,
the parameters to be used to monitor safety and the effectiveness criteria to be
evaluated. Each protocol must be submitted to the FDA for clearance as part of
the Initial New Drug application. Further, each clinical trial must be conducted
under the auspices of an independent Institutional Review Board ("IRB") at the
institution at which the trial will be conducted. The Institutional Review Board
will consider, among other things, ethical factors, the safety of human
subjects, informed consent and the possible liability of the institution.

  Clinical trials are typically conducted in three sequential phases, but the
phases often overlap. In Phase I, the initial introduction of the drug into
healthy subjects or patients, the drug is tested for safety (adverse effects),
dosage tolerance, absorption, distribution, metabolism, excretion and
pharmacodynamics (clinical pharmacology). Phase II involves studies in a limited
patient population to:

     .  determine the effectiveness of the drug for specific, targeted
        indications,

     .  determine dosage tolerance and optional dosage, and

     .  identify possible adverse effects and safety risks.

  When a compound is found to be effective and to have an acceptable safety
profile in Phase II evaluations, Phase III trials are undertaken to further
evaluate clinical effectiveness and to further test for safety within an
expanded patient population at geographically dispersed clinical study sites.
Phase I, Phase II or Phase III testing may not be completed within any specific
time period, if at all, with respect to any of our products. Furthermore, we or
the FDA may suspend clinical trials at any time if it is believed that the
patients are being exposed to an unacceptable health risk.

  Among other things, the results of the preclinical and clinical studies, along
with manufacturing information, are submitted to the FDA in the form of a
Product License Application or a New Drug Application for approval of the
marketing and commercial shipment of the drug. Upon accepting a company's
marketing approval applications, the FDA generally convenes an Advisory
Committee to review clinical trial results and make a non-binding recommendation
concerning the drug's approval. After considering the Advisory Committee
recommendation and other information, the FDA may or may not issue an approval
letter. This letter sets out the specific terms and conditions that the company
must satisfy in order to receive final approval to market. The testing and
approval process is likely to require substantial time and effort and there can
be no assurance that any approval will be granted on a timely basis, if at all.
The FDA may deny a Product License Application or a New Drug Application if
applicable regulatory criteria are not satisfied, require additional testing or
information, or require postmarketing testing and surveillance to monitor the
safety of the company's products if they do not view the Product License
Application or the New Drug Application as containing adequate evidence of the
safety and effectiveness of the drug. Notwithstanding the submission of data,
the FDA may ultimately decide that the application does not satisfy regulatory
criteria for approval. Moreover, if regulatory approval is granted, such
approval will entail limitations on the indicated uses for which it may be
marketed. Finally, approvals may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial
marketing.

  Under the Orphan Drug Act, the FDA may designate drug products as orphan drugs
if there is no reasonable expectation of recovery of the costs of research and
development from sales in the United States or if these drugs are intended to
treat a rare disease or condition, which is defined as a disease or condition
that affects less than 200,000 persons in the United States. If certain
conditions are met, designation as an orphan drug confers upon the sponsor
marketing exclusivity for seven years following FDA approval of the product,
meaning that the FDA cannot approve another version of the same product for the
same use during the seven-year period. The market exclusivity provision does
not, however, prevent the FDA from approving a different orphan drug for the
same use or the same orphan drug for a different use. We believe that some of
our potential products may qualify for orphan drug designation. Our potential
products may not ultimately receive orphan drug designation, or the benefits
currently provided by an orphan drug designation may be amended or eliminated.
The Orphan Drug Act has been controversial, and many legislative proposals have
from time to time been introduced in Congress to modify various aspects of the
Orphan Drug Act, particularly the market exclusivity provisions. New legislation
may be introduced in the future that may adversely impact the availability or
attractiveness of orphan drug status for any of our potential products.

  Among the conditions for FDA approval is the requirement that the prospective
manufacturer's quality control and manufacturing procedures conform to good
manufacturing practices. In complying with standards set forth in these
regulations, manufacturers must continue to expend time, money and effort in the
area of production and quality control to ensure full technical compliance. The
FDA stringently applies regulatory standards for manufacturing.

  Both of our potential products are in preclinical testing. We anticipate that
it will take between five to ten years for both of our potential products to
complete clinical trials and, if the trials are successful, be approved by the
FDA.

Competition

  The pharmaceutical and biotechnology industries are intensely competitive.
Any product candidate developed by GenStar would compete with existing drugs and
therapies and with others under development. There are many pharmaceutical
companies, biotechnology companies, public and private universities and research
organizations actively engaged in research and development of products for the
treatment of hemophilia and prostate cancer. Many of these organizations have
financial, technical, manufacturing and marketing resources which are greater
than ours. If a competing company develops or acquires rights to a more
efficient, more effective, or safer competitive therapy for treatment of the
same diseases we have targeted, or one which offers significantly lower costs of
treatment, our business, financial condition and results of operations could be
materially adversely affected. We believe that the most significant competitive
factors in the Gene Therapy Field are the effectiveness and safety of a product
due to the relatively early stage of the industry.

  We believe that our product development programs will be subject to
significant competition from companies using alternative technologies, as well
as to increasing competition from companies that develop and apply technologies
similar to ours. Other companies may succeed in developing products
earlier than we do, obtaining approvals for such products from the FDA more
rapidly than we do or developing products that are safer and more effective than
those under development or proposed to be developed by us. We can not assure you
that research and development by others will not render our technology or
potential products obsolete or non-competitive or result in treatments superior
to any therapy developed by us, or that any therapy developed by GenStar will be
preferred to any existing or newly developed technologies.

Marketing and Sales

  We entered a Distribution Agreement with Baxter in July 1998.  Under the
Distribution Agreement, Baxter has the exclusive, worldwide right to market,
sell and distribute all products which are developed under the Development
Collaboration Agreement with Baxter.  It is anticipated that Baxter will fund
the development of the hemophilia product and have distribution rights for all
hemophilia products.  Under the terms of the agreement, GenStar receives a
percentage of the revenues generated by Baxter.

  We have no internal sales force and currently plan to enter into additional
corporate partnership arrangements under which a corporate partner would fund
development of our cancer product and/or other potential products and would have
distribution rights for the product funded.  See "Risk Factors" for a further
discussion of the risks associated with distribution agreements.

Employees

  As of March 31, 2000 GenStar had 27 employees, including 21 in research and
development and 6 in finance and administration. Our continued success will
depend in large measure on our ability to attract and retain highly skilled
employees who are in great demand. None of our employees are represented by a
labor union and we believe that our relations with the employees are generally
good.

Properties

  GenStar leases approximately 4,800 square feet of office and laboratory space
in San Diego, California. The term of the lease expires in May 2000. We have
signed a letter of intent to enter into a lease for approximately 22,000 square
feet of office and laboratory space through 2005. Additionally, we lease
approximately 8,600 square feet of office and laboratory space for our
manufacturing operations in San Diego, California. The term of the lease expires
in August, 2004. We believe our existing and proposed facilities will be
sufficient to meet our anticipated operating needs for at least the next two
years.

Legal Proceedings

  GenStar is not a party to any material litigation or legal proceedings.

                                     -26-

<PAGE>

                                  MANAGEMENT

Directors and Executive Officers

  The names of the directors and executive officers of GenStar, their ages as of
December 31, 1999 and certain information about them are set forth below:

<TABLE>
<CAPTION>
    NAME OF DIRECTORS
  AND EXECUTIVE OFFICERS             AGE        PRINCIPAL OCCUPATION
- --------------------------           ----       --------------------
<S>                                  <C>        <C>
Paul D. Quadros                      53         Chairman of the Board of Directors
Robert E. Sobol, M.D.                47         President, Chief Executive Officer and
                                                   Director
Wei-Wei Zhang. M.D, PhD              42         Senior Vice President, Chief
                                                   Scientific Officer and Director
William Raschke, PhD                 53         Vice President
Carin D. Sandvik                     36         Controller, Chief Accounting Officer
                                                   and Corporate Secretary
Peter F. Bernardoni                  40         Director
Ivor Royston, M.D.                   54         Director
Victor W. Schmitt                    51         Director
</TABLE>

PAUL D. QUADROS has been Chairman of the Board and our Chief Financial
Officer since August 1998. Prior to that Mr. Quadros had been the President and
Chief Executive Officer since April 1997 and prior to that was the Chairman of
the Board, Chief Financial Officer and Secretary since our formation in June
1995. Mr. Quadros was, from January 1985 an officer and from April 1986 a
general partner of Technology Funding, a venture capital management
organization. From 1986 through 1994, Mr. Quadros was a member of Technology
Funding's Commitments Committee, serving as its chairman from 1987 to 1990.
During his affiliation with Technology Funding he also served as Director of
Research and Director of Equity Investments. From 1990 to 1994 Mr. Quadros was
chairman of Technology Funding's Medical Investment Committee and was involved
in managing Technology Funding's healthcare portfolio. Mr. Quadros currently
serves as a director of several private companies and one public company,
Cardiac Science, Inc.

  Prior to joining Technology Funding in 1985, Mr. Quadros was Executive Vice
President of Amreal Securities Corp., an affiliate of Home Federal Savings and
Loan.   Before joining Amreal in April 1984, Mr. Quadros was a Senior Vice
President of Public Storage, Inc., a national real estate developer. Prior to
joining Public Storage in 1981, Mr. Quadros was Assistant Treasurer of The Times
Mirror Company, where he served for seven years in several corporate finance
positions.  Mr. Quadros began his career as a securities analyst and
institutional portfolio manager. Mr. Quadros has a B.A. in Finance from
California State University at Fullerton and an M.B.A. from the UCLA Graduate
School of Management.

  ROBERT E. SOBOL, M.D has been President and Chief Executive Officer since
August 1998. Prior to that Dr. Sobol was the Executive Vice President and Chief
Operating Officer since July 1996. Dr. Sobol was previously the Director of
Clinical Science at Sidney Kimmel Cancer Center, which is affiliated with Sharp
HealthCare, one of the largest healthcare providers in San Diego. Dr. Sobol has
developed clinical applications of immuno therapy and gene therapy for the
treatment of cancer and is a
                                     -27-

<PAGE>

founder of several successful biotechnology ventures. He was a founder and Vice
President of IDEC Pharmaceuticals Corporation, a publicly traded company
developing monoclonal antibody based treatments for cancer and autoimmune
disorders. He was also a founder of GeneSys Therapeutics, a gene therapy company
which merged with publicly traded Somatix Therapy Corporation and subsequently
with Cell GeneSys Incorporated.

  Dr. Sobol led the research team which was the first to treat a brain tumor
patient with cytokine gene therapy. He is also the principal investigator for
one of the first gene therapy protocols approved for the treatment of colon
carcinoma. Dr. Sobol is the Editor of the journal Cancer Gene Therapy.

  Dr. Sobol received a B.A. in Philosophy from Boston University and an M.D.
from The Chicago Medical School. He subsequently trained at the University of
Southern California Medical Center and at the University of California, San
Diego. He is Board Certified in Internal Medicine and Medical Oncology.

  WEI-WEI ZHANG, M.D., PH.D. joined GenStar as Senior Vice President, Chief
Scientific Officer and Director in October 1998. Dr. Zhang has sixteen years of
biomedical research experience including nine years of research management
experience. He was formerly the Director of Molecular Biology in the Gene
Therapy Unit of Baxter Healthcare Corporation since March 1995. Dr. Zhang
established the Department of Molecular Biology at Baxter and initiated a
comprehensive program for the Mini-Ad vector system for in vivo gene therapy.
Dr. Zhang has significant technical expertise in vector technology, particularly
with adenoviral vectors and their application in gene therapy of cancer and
hemophilia. Prior to joining Baxter, Dr. Zhang was an Assistant Professor in the
Department of Thoracic and Cardiovascular Surgery at the University of Texas MD
Anderson Cancer Center, where he was a member of the team that developed
adenovirus-mediated tumor suppressor gene therapy of cancer (Adp53) from lab to
clinic.

  Dr. Zhang received his M.D. from the Zhejiang Medical University in China and
received a Ph.D. in molecular biology, recombinant DNA, and protein chemistry
from The University of Alabama. Dr. Zhang had postdoctoral training in gene
manipulation and transfer technologies at the Baylor College of Medicine.

  WILLIAM C. RASCHKE, PH.D has been Vice President since August 1998 and devotes
his efforts to both scientific and corporate development projects. He was
previously Director of Research since September 1996. Dr. Raschke also holds the
positions of Member and Director of Molecular Immunology of the Sidney Kimmel
Cancer Center (formerly the San Diego Regional Cancer Center), positions he has
held since coming to the Center in 1994. Since March 1997, he has also served as
the Acting Scientific Director of the Center. Dr. Raschke has previously held
positions at SIBIA, Inc. from 1988 to 1994 where he was Senior Research Fellow,
The Salk Institute from 1988 to 1994, and 1975 to 1981 with various staff
appointments and the La Jolla Cancer Research Foundation (now the Burnham
Institute) from 1981 to 1988 as Associate Scientific Director and Staff
Scientist.

  Dr. Raschke has served as a reviewer for the National Institute of Health with
two four-year terms on the Experimental Immunology Study Section, the American
Cancer Society and The National Science Foundation, as well as international
funding agencies. He also reviews manuscripts for various immunology and cancer
journals.

  Dr. Raschke received a B.S. in Chemistry from the University of Texas, Austin
and a Ph.D. in Biochemistry from the University of California, Berkley. He
conducted post graduate training at the Salk

                                     -28-


<PAGE>

Institute in Developmental Biology and Immunology.

  CARIN D. SANDVIK has served as Controller, Chief Accounting
Officer and Corporate Secretary since joining GenStar in October 1998. Prior to
joining GenStar, Ms. Sandvik was a Senior Manager in the Technology Industry
Group at Pricewaterhouse Coopers LLP (formerly Price Waterhouse LLP), where she
had served in various positions for twelve years. Ms. Sandvik received a B.A. in
Business Administration with an emphasis in Accounting from the University of
San Diego.

  PETER F. BERNARDONI is a Partner of Technology Funding. Mr. Bernardoni joined
Technology Funding as an Investment Officer in 1988, was elected as a Vice
President in 1992 and a Partner in 1994. Mr. Bernardoni has served as a member
of Technology Funding's Commitments Committee since 1994 and as Chairman of
Technology Funding's Medical Investment Committee since 1994. Prior to joining
Technology Funding, Mr. Bernardoni was employed for six years by IBM and served
in several capacities including Design Engineer and as a manager for large scale
information systems in major pharmaceutical and hospital accounts.

  Mr. Bernardoni has served as a Director for several private and two public
companies, Poly Medical Industrial and Circadian.  He currently serves on the
Board of Endocare, Inc., Avalon Imaging and Reflection Technology, and is
Chairman of Portable Energy Products.

  Mr. Bernardoni has a B.S.M.E. from Santa Clara University and an M.S.M.E. from
Stanford University.

  IVOR ROYSTON, M.D. was the Chairman of the Board from April 1997 until August
1998. Prior to that, he served as President and Chief Executive Officer. He has
served as a Director since our formation in June 1995. Dr. Royston was appointed
by the President of United States to the National Cancer Advisory Board during
1996.

  Dr. Royston is the President and Chief Executive Officer of Sidney Kimmel
Cancer Center (formerly the San Diego Regional Cancer Center), a position he has
held since founding the Center in 1990. He is also a General Partner of Forward
Ventures, a life science venture capital firm. From 1977 to 1993, Dr. Royston
held various positions in academic medicine at the University of California, San
Diego (UCSD) School of Medicine. Dr. Royston also served as Director, Clinical
Immunology Program at the UCSD Cancer Center and Chief of Oncology at the San
Diego VA Medical Center.

  Dr. Royston was a founder and Director of Hybritech, Inc., GeneSys
Therapeutics Corporation and IDEC Pharmaceuticals, Inc. He has served on the
Board of Directors of various companies, including Unisyn Technologies, Inc.,
Medstone International Inc., Sequana Therapeutics, Inc., Corixa, Inc.,
CombiChem, Inc. IDEC Pharmaceuticals and GenQuest, Inc. He currently is a member
of the Board of Directors of the Sidney Kimmel Cancer Center.

  Dr. Royston received a B.A. in Human Biology from Johns Hopkins University and
an M.D. from the Johns Hopkins School of Medicine.  He later trained in internal
medicine and oncology at Stanford University and is board certified in both
Internal Medicine and Medical Oncology.

  VICTOR W. SCHMITT is President, Venture Management, Baxter Healthcare
Corporation. He has held this position since 1994 and is responsible for the
creation and management of Baxter's interests in development-stage biotech
companies. Prior to his current assignment, he held the operating position of

                                     -29-


<PAGE>

President, Baxter Biotech Europe. He has also served as Vice President, Business
Development and Finance for Baxter's Blood Therapy Group.

  Mr. Schmitt joined Baxter from a sixteen-year career with the American Red
Cross Blood Services.  At the Red Cross Blood Services, Mr. Schmitt held
positions in marketing and operations.  At the time of his departure, he was
Vice President, Blood Services with responsibility for the organization's
national blood services program.

  Mr. Schmitt holds a B.S. from the University of Virginia and an M.B.A. from
the University of Maryland.  He serves on the Board of Directors of a number of
development-stage biotech companies.

Compensation of Directors

  Cash Compensation

     GenStar does not compensate its Directors for their services as such.
However, Directors are reimbursed for their out-of-pocket expenses in attending
Board meetings.

  1995 Directors' Option Plan

     Non-employee directors also receive stock options under GenStar's 1995
Directors' Option Plan (the "Directors' Plan"). The Directors' Plan was adopted
and approved by the shareholders of the Company in 1995 and amended in 2000 to
provide automatic, nondiscretionary grants of options to non-employee directors
of the Company. A total of 550,000 shares of Common Stock have been reserved for
issuance under the Directors' Plan. The Directors' Plan provides that each non-
employee director is automatically granted an option to purchase 45,000 shares
of GenStar Therapeutics Corporation Common Stock upon his or her initial
election or appointment as an non-employee director (Initial Options).
Subsequently, each non-employee director who has served for at least six months
will be granted an additional option to purchase 15,000 shares of GenStar
Therapeutics Corporation Common Stock on December 31 of each year so long as he
or she remains a non-employee director (Subsequent Options). The exercise price
of the options granted to non-employee directors must be the fair market value
of GenStar Common Stock on the date of grant.

  Options granted to non-employee directors have ten-year terms, subject to a
non-employee director's continued service as a director. Initial Options vest
over three years at a rate of 33.3% per year. Subsequent options vest one year
from the grant date. As of December 31, 1999, options to purchase 50,000 shares
of Common Stock to non-employee directors has been granted under the Directors'
Plan.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

  Section 16(a) of the Exchange Act ("Section 16") requires GenStar's executive
officers, directors and beneficial owners of more than 10% of GenStar Common
Stock to file reports of ownership and changes in ownership of GenStar Common
Stock with the Securities and Exchange Commission, and to furnish us with copies
of all Section 16(a) forms they file. Based solely on its review of the copies
of such forms received by it, or written representations from certain reporting
persons that no Form 5's were required for those persons, four reporting persons
filed late Section 16 filings during 1999.

                                     -30-



<PAGE>

Board Meetings and Committees

     The Board of Directors of the Company held a total of six meetings during
the year ended December 31, 1999. The Board of Directors has a Compensation
Committee and an Audit Committee.

     The Compensation Committee of the Board of Directors consists of Mr.
Bernardoni, Mr. Quadros and Mr. Schmitt and held three meetings during the year
ended December 31, 1999. The Compensation Committee establishes executive
compensation policy, determines the salary and bonuses of the executive officers
and recommends to the Board of Directors stock option grants for executive
officers.

     The Audit Committee of the Board of Directors consists of Mr. Bernardoni,
Mr. Schmitt and Mr. Quadros. The Audit Committee was formed in January 1999 and
has held no meetings to date. The Audit Committee recommends engagement of our
independent accountants and is primarily responsible for approving the services
performed by our independent accountants and for reviewing and evaluating our
accounting principles and its system of internal accounting controls.



Compensation Committee Interlocks and Insider Participation

     Two of the members of the Compensation Committee are independent Directors.
Only Mr. Quadros is a member of the Compensation Committee and an officer and
employee.


Indemnification

     Our certificate of incorporation and bylaws contain certain provisions
relating to the limitations of liability and indemnification of directors and
officers. The certificate of incorporation provides that our directors shall not
be personally liable to GenStar or its stockholders for monetary damages for any
breach of fiduciary duty as a director, except for liability:

     .  For any breach of the director's duty of loyalty to us or our
        stockholders;

     .  For acts or omissions not in good faith or which involve intentional
        misconduct or a knowing violation of law;

     .  In respect of certain unlawful payments of dividends or unlawful stock
        repurchases or redemption as provided in Section 174 of the Delaware
        General Corporation Law, or

     .  For any transaction from which the director derives any improper
        personal benefit.

     Our certificate of incorporation also provides that if Delaware law is
amended after the approval by our stockholders of the certificate of
incorporation to authorise corporate action further eliminating or limiting the
personal liability of directors, than the liability of our directors shall be
eliminated or limited to the fuller extent permitted by Delaware law. The
foregoing provisions of the certificate of incorporation are not intended to
limit the liability of directors or officers for any violation of applicable
federal securities laws. In addition, as permitted by Section 145 of the
Delaware General Corporation Law, our bylaws provide that:

     .  We are required to indemnify our directors and executive officers to the
        fullest extent permitted by Delaware law;

     .  We may, in our discretion, indemnify other officers, employees and
        agents as provided by Delaware law;

     .  To the fullest extent permitted by Delaware law, but subject to various
        exceptions, we are required to advance all expenses incurred by our
        directors and executive officers in connection with a legal proceeding;

     .  The right conferred in the bylaws are not exclusive;

     .  We are authorised to enter into indemnification agreement with our
        directors, officers, employees and agents; and

     .  We may not retroactively amend the bylaw provisions relating to
        indemnity.

     Our bylaws provide that we shall indemnify our directors to the fullest
extent permitted by Delaware law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law.

                                     -31-


<PAGE>

                            EXECUTIVE COMPENSATION

  The table below sets forth information for the annual and long-term
compensation of the Chief Executive Officer and all executive officers who
received cash compensation greater than $100,000 during the three years ended
December 31, 1999 for services to GenStar in all capacities during the three
years ended December 31, 1999.  No other corporate officer received cash
compensation in excess of $100,000 during the three years ended December 31,
1999:

                          Summary Compensation Table

<TABLE>
<CAPTION>
                                                                               Long-Term Compensation
                                                                              -------------------------
                                                        Annual Compensation   Restricted     Securities       All Other
                                                      -----------------------
                                               Fiscal    Salary      Bonus       Stock       Underlying      Compensation
        Name and Principal Position            Period      ($)        ($)      Award ($)    Options (#)          ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>    <C>            <C>      <C>           <C>              <C>
Paul D. Quadros (1)........................    1999    $120,000           -          -           81,903          $13,951(7)
 Chairman of the Board                         1998    $ 95,000           -          -                -          $ 4,188(4)
                                               1997    $ 60,000           -          -                -                -

Robert E. Sobol, M.D  (2)..................    1999    $200,000           -          -          627,141          $30,927(8)
  President and Chief Executive Officer        1998    $162,917           -          -                -          $10,562(5)
                                               1997    $143,379           -          -                -                -

Wei-Wei Zhang, M.D., PhD  (3)..............    1999    $160,000     $30,000          -          781,713          $81,712(9)
   Sr. Vice President and Chief                1998    $ 40,000           -          -                -          $ 3,052(6)
     Scientific Officer                        1997           -           -          -                -                -
</TABLE>

(1)  Mr. Quadros served as the President and CEO from April 1997 to August 1998.

(2)  Dr. Sobol served as the Executive Vice President and Chief Operating
     Officer from June 1996 until August 1998.

(3)  Dr. Zhang joined GenStar in October 1998.  His annual salary is
     $160,000.

(4)  Includes $2,800 and $1,388 in Company contributions to 401k Plan Deferred
     Compensation Plan, respectively.

(5)  Includes $4,667 and $5,895 in Company contributions to 401k Plan Deferred
     Compensation Plan, respectively.

(6)  Includes $1,867 and $1,185 in Company contributions to 401k Plan Deferred
     Compensation Plan, respectively.

(7)  Includes $8,400 and $5,551 in Company contributions to 401k Plan Deferred
     Compensation Plan, respectively.

(8)  Includes $11,200 and $19,727 in Company contributions to 401k Plan Deferred
     Compensation Plan, respectively.

(9)  Includes $11,200 and $14,178 in Company contributions to 401k Plan and
     Deferred Compensation Plan, respectively and $56,344 paid for
     relocation.

     There were no options to purchase GenStar's Common Stock exercised
during the fiscal year ended December 31, 1999.



The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1999 and the options held by each of the Named
Executive Officers:

<TABLE>
<CAPTION>
                            Number of                                                      Number of
                            Securities   Percentage of                                     Securities    Value of
                            Underlying   Total Options                                     Underlying   Unexercised
                             Options       Granted to                                      Unexercised  In-the-Money
Name and Principal           Granted       Employees    Exercise Prices     Expiration     Options at    Options at
     Position                In 1999        In 1999        ($/Share)           Date         12/31/99      12/31/99
     -------                 -------        -------        --------            ----         --------      --------
<S>                         <C>          <C>            <C>                 <C>            <C>          <C>
Paul D. Quadros
 Chairman of the Board        81,903           2.7%           $0.32           03/23/09        81,903       $ 22,933

Robert E. Sobol
 President & CEO             627,141          20.9%           $0.32           03/23/09       627,141       $175,599

Wei-Wei Zhang
 Sr. VP and CSO              781,713          26.0%           $0.32           03/23/09       781,713       $218,880
</TABLE>

     Change in Control Arrangements

     GenStar's 1995 Stock Option Plan authorizes the acceleration or payment
of awards and related shares in the event of a Change in Control as defined in
the Plan.  Acceleration or payment may cause part or all of the
consideration involved to be treated as a "parachute payment" under the Internal
Revenue Code of 1986, as amended, which may subject the recipient
thereof to a 20% excise tax and which may not be deductible.

     Employment Agreement

     In April 1997, Paul D. Quadros entered into an employment agreement with
GenStar which provides for a monthly base salary of $10,000 and health insurance
and other benefits as Genstar customarily provides to its employees. If Mr.
Quadros is terminated by Genstar without cause, Mr. Quadros is entitled to
receive his base salary and benefits for six months from the date of
termination, and one-half of his base salary and benefits for months six through
twelve after termination. Mr. Quadros is required to give the Genstar sixty days
written advance notice of his intent to resign.

                                     -32-


<PAGE>

                CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

BAXTER TRANSACTIONS

     In July 1998, GenStar executed various agreements with Baxter Healthcare
Corporation pursuant to which we acquired certain rights and assets from Baxter.
Under the terms of the agreements, GenStar obtained the rights to Baxter's
adenoviral-based gene transfer technologies and certain equipment in exchange
for 5,830 shares of non-voting convertible Series A Preferred Stock and
1,841,219 shares of Common Stock. The shares issued to acquire the gene transfer
technologies were valued at $5,455,505 based on the fair value of the stock on
the date of issuance and was charged to acquired in-process technology due to
the early stage of development of the technology. The value of the stock issued
for fixed assets was $343,937 based upon the fair value of those assets.

     Baxter will provide funding to GenStar for continued research and
development of this technology as it relates to the treatment of hemophilia
under the Developmental Collaboration Agreement. Baxter will provide such
funding through the date on which the treatment of the first patient in a Phase
I clinical trial begins. This development funding is provided under a Credit
Agreement. The balance outstanding under the Credit Agreement as of December 31,
1999 was $1,876,000. Amounts outstanding under the Credit Agreement are due and
payable on December 31 of each year during the term of the agreement. At
GenStar's option, the amounts may be paid by issuing to Baxter the number of
shares of Series B Preferred Stock determined by dividing the outstanding amount
under the Credit Agreement by one thousand. The balance has been presented as a
non-current liability on the accompanying balance sheet due to GenStar's
conversion right and because we intend to convert the debt rather than repay it
with cash. Amounts outstanding under the Credit Agreement do not accrue interest
unless GenStar is in default, in which case the amount due bears interest at
prime plus 4%. As of December 31, 1999 we had issued 2,998 shares of Series B
Preferred Stock to convert $2,998,000 outstanding under the Credit
Agreement.

     GenStar entered into a Distribution Agreement with Baxter under which
Baxter will have an exclusive, worldwide right to market, sell and distribute
all products which may be developed under the Developmental Collaboration
Agreement. The term of the Distribution Agreement is the longer of ten years
from the date of regulatory approval of the first product or the expiration of
the last to expire of any related patents issued on or before ten years from the
date of regulatory approval.

     UroGen, Baxter and certain founding shareholders entered into the Investor
Rights Agreement under which the shares held by these entities are subject to
certain restrictions on transferability of the shares until July 8, 2003 and
have certain registration rights.  Additionally, under this agreement, Baxter
has the right to purchase up to twenty percent of any new securities issued and
has the obligation to purchase Series C Preferred Stock at a price of $1,000 per
share upon our achievement of the following milestones:

     .  $2,000,000 upon treatment of the first patient in a Phase I clinical
        trial for a product developed under the Developmental Collaboration
        Agreement;

     .  $5,000,000 upon commencement of Phase III clinical trials of a product
        developed under the Developmental Collaboration Agreement; and

     .  $10,000,000 upon approval by the Food and Drug Administration of a
        product developed under the Developmental Collaboration Agreement.



                                     -33-


<PAGE>

MEDSTONE AGREEMENTS

  GenStar Therapeutics Corporation was incorporated as Urogen Corp. on June 30,
1995 as a wholly-owned subsidiary of Medstone International, Inc. UroGen Corp.
was formed from the medical biology and small molecule pharmaceuticals divisions
of Medstone, which were started in 1991. From 1991 until the distribution of
Urogen common stock on February 9, 1996, we relied upon Medstone for financial
support. We also relied on Medstone for assistance with personnel management and
financial administration. Upon completion of the Distribution, we began to
operate independently from Medstone.



                                     -34-
<PAGE>




SIDNEY KIMMEL CANCER CENTER

  Sidney Kimmel Cancer Center originally owned 339,000 shares of GenStar Common
Stock and Dr. Royston is Chief Executive Officer of SKCC. GenStar has entered
into the following transactions with SKCC:

  In June 1996, GenStar and SKCC entered into an affiliation agreement with a
three year term. Under the affiliation agreement, SKCC agreed to provide the
following services:

  .  to allow Dr. Royston to serve as GenStar's Chief Executive Officer and
     devote part time executive services to GenStar;

  .  to lease approximately 100 square feet of office space in SKCC's facility;

  .  to allow GenStar to consult and confer with scientific staff of SKCC;
     and

  .  to make available clerical support for up to ten hours per week at a
     compensation rate of $10.00 per hour.

  In exchange GenStar agreed to make the following payments:

  .  cash consideration of $3,000 per month;

  .  conveyance of certain equipment with a book value of approximately $42,000;
     and

  .  339,000 shares of GenStar Therapeutics Corporation Common Stock.

     The affiliation agreement was amended in May 1997 to reduce the monthly
cash consideration to $1,000 due to Dr. Royston's resignation as Chief Executive
Officer of GenStar.

  In September 1997, the affiliation agreement was terminated and GenStar signed
a sublease agreement with SKCC for use of approximately 500 square feet of
office and laboratory space on a month to month basis. The monthly rent for the
space was $1,065.

  In August 1998, GenStar and SKCC entered into a new sublease agreement for
approximately 4,800 square feet of office and laboratory space.  The monthly
lease payment is approximately $14,800 plus our share of facility expenses.  The
lease expires in May 2000.

  In November 1997, GenStar entered into a license agreement with Dr. Daniel
Mercola and SKCC under which GenStar obtained an exclusive right to certain
technology. GenStar was obligated to pay royalties on its net sales revenues and
a percentage of revenues from sublicenses relating the technology. Additionally,
GenStar was required to make minimum annual royalties of $30,000 for the
duration of the agreement. GenStar terminated this license agreement in 1999.


In February 2000, GenStar entered into a letter of intent to lease approximately
22,000 square feet of office and laboratory space from SKCC for a five year
term.

OTHER TRANSACTIONS

  In August 1997, GenStar issued a warrant to purchase 200,000 shares of Common
Stock to Dr. Sobol. This warrant was exercisable at $0.05 per share (the fair
market value of the Common Stock on the date of grant) and expired on July 31,
2001. This warrant was exercised in February 2000.

  In July 1998, we received $1,030,000 representing proceeds from the sale of
unsecured convertible notes payable which bore interest at 8% per annum and were
due on June 30, 1999, unless previously converted.  The notes were convertible,
at the option of the holder, into Common Stock at $1.00 per share and

                                     -35-
<PAGE>


automatically converted on June 22, 1999 into 1,030,000 shares of Common Stock
immediately prior to the filing of this registration statement to register the
resale of the underlying shares. In addition, each note holder received a
warrant to purchase a number of shares of Common Stock of GenStar equal to one
share for each $2.00 of principal under the purchased note. The warrants are
exercisable for seven years from issuance and have an exercise price of $0.74
per share. The warrants were valued at an aggregate value of $305,910 and
recorded to interest expense. The following GenStar officers and directors
participated in this transaction: Mr. Quadros, Dr. Sobol, Dr. Raschke and Dr.
Royston each purchased notes for $50,000 and received a warrant for 25,000
shares of Common Stock.

     In April 1999, we received $400,000 representing proceeds from the sale of
unsecured convertible notes payable which bear interest at 8% per annum and are
due on March 31, 2000, unless previously converted. The notes were convertible,
at the option of the holder, into Common Stock at $0.30 per share and
automatically converted on June 22, 1999 into 1,333,333 shares of Common Stock
immediately prior to the filing of this registration statement to register the
resale of the underlying shares. In addition, each note holder received a
warrant to purchase a number of shares of Common Stock of GenStar equal to one
share for each $0.30 of principal under the purchased note. The warrants are
exercisable for seven years from issuance and have an exercise price of $0.30
per share. The warrants were valued at an aggregate value of $266,667 and
recorded to interest expense. The following GenStar officers and directors
participated in this transaction:

     .  Mr. Quadros purchased notes for $10,000 and received a warrant for
        33,333 shares of Common Stock.

     .  Dr. Raschke purchased notes for $40,000 and received warrants for
        133,333 shares of Common Stock.

     .  Carin Sandvik purchased notes for $5,000 and received warrants for
        16,667 shares of Common Stock.

     .  Dr. Royston purchased notes for $25,000 and received a warrant for
        83,333 shares of Common Stock.

     .  Dr Raschke and his spouse also received a Finder's Fee for amounts
        raised in this offering of $9,250 in cash and warrants for 30,833 shares
        of common stock exercisable at $0.30 per share for seven years.

In January 2000, we completed an offering of 6,362,801 shares of common stock
and warrants to purchase 1,773,899 shares of common stock for $8.3 million.
Victor W. Schmitt, a director of the company, purchased 33,113 shares of common
stock and a warrant exercisable for 16,556 shares of common stock at an
aggregate purchase price of $25,000.

                                     -36-
<PAGE>

                         DESCRIPTION OF CAPITAL STOCK

   The authorized capital stock of the GenStar Therapeutics Corporation consists
of 40,000,000 shares of Common Stock, $.001 par value, and 5,000,000 shares of
Preferred Stock, $.001 par value, of which 40,000 shares are designated Series A
Preferred Stock, $.01 par value, 10,000 shares are designated Series B Preferred
Stock, and 17,000 shares are designated Series C Preferred Stock.

Common Stock

   As of March 31, 2000, there were 21,308,000 shares of common stock
outstanding held of record by approximately 900 registered holders.

   Subject to preferences that may be applicable to any outstanding Preferred
Stock, holders of Common Stock are entitled to receive ratably the dividends
which may be declared by the Board of Directors out of funds legally available.
We have not paid any cash dividends on Common Stock. Each holder of Common Stock
is entitled to one vote for each share held of record on all matters submitted
to a vote in the election of directors. In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share ratably in all assets remaining after payment of liabilities and the
liquidation preference of any outstanding Preferred Stock. Holders of Common
Stock have no preemptive rights and have no rights to convert their Common Stock
into any other securities and there are no redemption provisions with respect to
these shares. All of the outstanding shares of Common Stock are fully paid and
non-assessable.

   The transfer agent and registrar for GenStar Therapeutics Corporation Common
Stock is U.S. Stock Transfer.

Preferred Stock

   As of March 31, 2000, there were 5,830 shares of Series A Preferred Stock
outstanding.  Holders of the Series A Preferred Stock are not entitled to
receive dividends with respect to the Series A Preferred, have a liquidation
preference amount of ten dollars ($10.00) per share prior to any distribution to
holders of Common Stock, and have no voting rights.  The Series A Preferred
Stock is convertible to Common Stock on a 1000 to 1 basis, provided, however,
that no shares are convertible prior to July 8, 2001.

   As of March 31, 2000, there were 2,998 shares of Series B Preferred Stock
issued and outstanding. It is anticipated that Series B Preferred Stock will be
issued only to Baxter related to amounts funded by Baxter under the Credit
Agreement. Holders of the Series B Preferred Stock are not entitled to receive
dividends, have a liquidation preference amount of one thousand dollars
($1,000.00) per share prior to any distribution to Series A Preferred Stock and
holders of Common Stock and have no voting rights, except for a vote as to
whether GenStar may issue additional Series B Preferred Stock. The Series B
Preferred Stock may be converted into Common Stock or into Series A Preferred
Stock at the option of the holder, and converts automatically to Common Stock
upon the earlier of:

   .  the first business day following the treatment of the first patient under
      an Initial New Drug Application for a Collaboration Product (as defined)
      commences in a Phase I Clinical Trial (the "IND Milestone Date"),

   .  the date five years after the last advance of funds by Baxter under the
      Credit Agreement between Baxter and GenStar through and including the IND
      Milestone date and

   .  automatic conversion pursuant to the terms of the Credit Agreement (See
      "Certain Relationships and Related Transactions - Baxter Transactions").


   The Series B Preferred Stock is convertible to Common Stock in an amount
equal to:

   .  the quotient of the Liquidation Value (adjusted for Recapitalizations),
      divided by one hundred and ten percent (110%) of the per share Fair Market
      Value of GenStar Common Stock (as defined), multiplied by

   .  the number of shares of Series B Preferred converted. The Series B
      Preferred Stock is convertible into Series A Preferred on a one for one
      basis.

   .  The "Liquidation Value" shall initially be $1,000 per share of Series B
      Preferred.

                                      -37-
<PAGE>


     As of March 31, 2000, there were no shares of Series C Preferred Stock
issued and outstanding. It is anticipated that Series C Preferred Stock will be
sold only to Baxter upon GenStar meeting certain specified milestones (the
"Series C Milestones" - see "Certain Relationships and Related Transactions -
Baxter Transactions"). Holders of the Series C Preferred Stock are not entitled
to receive dividends, have a liquidation preference amount of one thousand
dollars ($1,000.00) per share prior to any distribution to holders of Series A
Preferred Stock and to holders of Common Stock and have no voting rights, except
as to the issuance of additional Series C Preferred Stock. Each share of Series
C Preferred may be converted to Common Stock or to Series A Preferred Stock at
the option of the holder, and converts automatically upon the earlier of:

     .  the first business day following the approval by the FDA of the right to
        market, sell or distribute any product using the Mini-Ad Vector
        Technology for treatment of blood clotting disorders in humans relating
        to hemophilia A, which has been developed pursuant to the Development
        Agreement between Baxter and GenStar and

     .  the date seven years after the achievement of the most recently achieved
        Series C Milestone.

     The Series C Preferred Stock is convertible to Common Stock in an amount
 equal to:

     .  the quotient of the Liquidation Value (adjusted for Recapitalizations),
        divided by one hundred and ten percent (110%) of the per share Fair
        Market Value of GenStar Common Stock (as defined), multiplied by

     .  the number of shares of Series C Preferred converted. The Series C
        Preferred Stock is convertible into Series A Preferred on a one for one
        basis.

     The Preferred Stock may be issued from time to time in one or more
additional series. Our Board of Directors has authority to fix the designation,
powers, preferences and rights of each additional series and the qualifications,
limitations and restrictions thereon and to increase or decrease the number of
shares of series, but not below the number of shares of the series then
outstanding, without any further vote or action by the shareholders. Except in
accordance with the Baxter Transaction described below, we have no present plans
to issue any shares of Preferred Stock.

Stock Options

  The 1995 Directors' Option Plan (the "Director Plan") was adopted by the Board
and approved by the Shareholders in 1995, and amended in February 2000 to
provide automatic, nondiscretionary grants of options to non-employee directors
of the Company. A total of 550,000 shares of Common Stock has been reserved for
issuance under the Director Plan. The Director Plan provides that each non-
employee director is automatically granted an option to purchase 45,000 shares
of GenStar Common Stock upon his or her initial election or appointment as an
non-employee director. Subsequently, each non-employee director who has served
for at least six months will be granted an additional option to purchase 15,000
shares of GenStar Common Stock on December 31 of each year so long as he or she
remains an non-employee director. The exercise price of options granted to non-
employee directors must be the fair market value of GenStar Common Stock on the
date of grant.

  Options granted to non-employee directors have a ten-year term, subject to a
non-employee director's continued service as a director. The initial options
granted to non-employee directors vest over three years at the rate of one-third
per year and the annual options vest one year from the date of the grant. As of
December 31, 1999, options to purchase 50,000 shares of Common Stock had been
granted under the Director Plan and options to purchase 35,000 shares were
vested.

  The 1995 Stock Plan authorizes the Board of Directors, or one or more
committees which the Board may appoint from among its members, to grant options
and rights to purchase Common Stock to officers, key employees, consultants and
certain advisors to the Company.  Options granted under the 1995 Stock Plan may
be either "incentive stock options" as defined in Section 422 of the Internal
Revenue Code of 1986, as amended, or nonstatutory stock options, as determined
by the Board or the Committee. The

                                     -38-
<PAGE>


1995 Stock Plan initially reserved 1,850,000 shares for issuance under the Plan
to be increased the first day of each year by the number of shares equal to two
percent of the Company's total outstanding common shares. Options granted
pursuant to the 1995 Stock Plan have exercise periods of ten years and vest over
one to four years.

  In March 1999, the Board adopted the 1999 Stock Plan, which was approved by
the stockholders in February 2000. The 1999 Stock Plan authorizes the Board of
Directors, or one or more committees which the Board may appoint from among its
members, to grant options and rights to purchase Common Stock to officers, key
employees, consultants and certain advisors to the Company. Options granted
under the 1999 Stock Plan may be either incentive stock options, or nonstatutory
stock options, as determined by the Board or the Committee. The 1999 Stock Plan
initially reserved 4,000,000 shares for issuance under the Plan to be increased
the first day of each year by the number of shares equal to two percent of the
Company's total outstanding common shares. Options granted pursuant to the 1999
Stock Plan have exercise periods of four years and generally vest over four
years.

Warrants

  In April 1999, GenStar completed an offering of 8% Convertible Subordinated
Notes in which we raised $400,000.  Each Note holder received a warrant to
purchase a number of shares of Common Stock equal to one share conversion share
resulting in warrants to purchase 1,333,333 shares of Common Stock. The Warrants
are exercisable for seven years from issuance and have an exercise price of
$0.30. The warrants are valued at an aggregate value of $266,667 and recorded to
interest expense. The warrants include a provision whereby the holder may
exercise via surrender of debt or equity instruments of GenStar.

     In July 1998, we completed a $1,030,000 offering of 8% Convertible
Subordinated Notes. Each note holder received a warrant to purchase a number of
shares of Common Stock equal to one conversion share for each $2.00 of principal
resulting in warrants to purchase 515,000 shares of Common Stock. The Warrants
are exercisable for seven years from issuance and have an exercise price of
$0.74. The warrants were valued at an aggregate value of $305,910 and recorded
to interest expense. The warrants include a provision whereby the holder may
exercise via surrender of debt or equity instruments of GenStar.

     A license agreement granted to the licensor a warrant to purchase
additional shares of GenStar common stock to maintain a fully-diluted ownership
percentage of two percent (2%) or increase its ownership percentage up to three
percent (3%). The warrant rights were exercisable at prices ranging from $.03 to
$.04 per share. This warrant was exercised in May 1999.

  In 1997, GenStar issued a warrant to purchase 200,000 shares of common stock
to Dr. Robert E. Sobol, who was the Chief Operating Officer at the time. These
warrants were exercisable at $.05 per share and expired on July 31, 2001. The
warrant was exercised in February 2000.

  In September 1999, GenStar issued a warrant for 250,000 shares of Common Stock
to the lessor related to an equipment lease line. The warrants are exercisable
at $0.30 per share and expire in August 2007. The warrant was valued at $45,000
and is being amortized to interest expense over the term of the lease.

  In January 2000, GenStar issued warrants to purchase an aggregate of 1,773,899
shares of common stock to various investors related to an offering of 6,362,801
shares of common stock which raised $8.3 million. The warrants have a five year
term and are exercisable at $0.75 per share. Additionally, GenStar issued a
warrant to purchase 360,000 shares of common stock to the investment banker used
for the January 2000 financing.

                                     -39-
<PAGE>

              PRINCIPAL STOCKHOLDERS AND SELLING STOCKHOLDERS

     The following table sets forth information with respect to the principal
stockholders of GenStar and selling stockholders and the shares of common stock
beneficially owned by them as of March 31, 2000, and assumes the exercise in
full of the warrants issued in connection with the January 2000 Financing. All
of these shares were held of record with sole voting and investment power,
subject to applicable community property laws, by the named individual and/or by
his or spouse, except as indicated in the footnotes below. For each selling
stockholder, the number of shares beneficially owned includes shares issuable
upon exercise of the warrants for which the underlying shares are covered by
this prospectus. Because the selling stockholders may offer all or some portion
of the shares of common stock being offered pursuant to this Prospectus, no
estimate can be given as to the amount of the common stock that will be held by
the selling stockholders upon termination of any sales. None of the non-
officer/director selling stockholders has had any position, office or other
material relationship with us in the past three years.

<TABLE>
<CAPTION>
                                                           Shares Beneficially                                    Shares Owned
                                                           Owned Prior to Sale                                  Assuming all Sold
                                                        ------------------------           Number            -----------------------
  Directors, Executive Officers, 5%                                        Percent        of Shares                       Percent
Stockholders and Selling Stockholder                     Number              (%)           Offered          Number          (%)
- ---------------------------------------                -----------       ----------     ------------      -----------   ----------
<S>                                                    <C>               <C>            <C>               <C>           <C>
Victor W. Schmitt (1)                                   1,890,888            8.8%            49,669       1,841,219         8.6%
Baxter Healthcare Corporation (1)                       1,841,219            8.6%                 -       1,841,219         8.6%
Ivor Royston                                            1,024,963            4.8%                 -       1,024,963         4.8%
Peter Bernardoni (2)                                      760,032            3.6%                 -         760,032         3.6%
Technology Funding Venture Partner IV L.P. (2)            730,032            3.4%                 -         730,032         3.4%
Paul D. Quadros (4)                                       562,363            2.6%                 -         562,363         2.6%
William C. Raschke (4)                                    610,861            2.8%                 -         610,861         2.8%
Robert E. Sobol (3) (4)                                   674,126            3.1%           198,933         473,193         2.2%
Wei-Wei Zhang (4)                                         309,426            1.4%                 -         304,868         1.4%
Carin D. Sandvik (4)                                      112,708              *                  -         112,708           *
All executive officers and directors as a group
   (9 persons)                                          5,945,367           27.2%           248,602       5,696,765        26.0%

Aries Master Fund                                       3,366,989           15.6%         3,366,989               -           -
Aries Domestic Fund                                     1,553,307            7.2%         1,553,307               -           -
Steven Alexander Consultants, LLC                       1,294,702            6.1%         1,294,702               -           -
Wayne Rothbaum                                            640,500            3.0%           640,500               -           -
Clearwater Offshore Fund, Ltd.                            550,000            2.6%           550,000               -           -
Mitchell Silber                                           540,000            2.5%           540,000               -           -
EGM Medical Technology Fund, L.P.                         433,014            2.0%           433,014               -           -
EGM Medical Technology Offshore Fund                      288,676            1.4%           288,676               -           -
Aries Domestic Fund II, L.P.                              249,536            1.2%           249,536               -           -
Guarantee & Trust Company DBA Steven Oliveira IRA         248,344            1.2%           248,344               -           -
Perceptive Life Sciences, LLP                             198,676              *            198,676               -           -
Joseph Edelman                                            198,676              *            198,676               -           -
Sven Borho                                                149,007              *            149,007               -           -
Lindsay A. Rosenwald, M.D.                                124,336              *            124,336               -           -
Mark Simon                                                 99,339              *             99,339               -           -
David Jaroslawicz                                          99,336              *             99,336               -           -
David Geliebter                                            90,000              *             90,000               -           -
Scott Ganeles                                              90,000              *             90,000               -           -
Mark C. Rogers, M.D.                                       62,168              *             62,168               -           -
John Nicholson                                             49,671              *             49,671               -           -
Josh Stern                                                 49,669              *             49,669               -           -
Marc Pentopoulos                                           40,000              *             40,000               -           -
Wayne Rubin                                                31,084              *             31,084               -           -
</TABLE>

                                     -40-
<PAGE>



*    less than 1%

     (1)  Excludes 5,830 shares of non-voting Series A Preferred Stock
     convertible subsequent to July 8, 2001 into 5,830,000 shares of common
     stock held by Baxter Healthcare Corporation. Excludes 2,998 shares of non-
     voting Series B Preferred Stock convertible into common stock at market
     value at the date of conversion. Baxter Healthcare Corporation and Mr.
     Victor W. Schmitt are entitled to exercise voting and investment power with
     respect to all shares owned by Baxter Healthcare Corporation, and
     therefore, are deemed to be beneficial owner of these shares.

     (2)  Includes 291,667 shares issuable upon exercise of presently
     outstanding warrants held by Technology Funding Venture Partners IV, an
     Aggressive Growth Fund, L.P. Technology Funding, Inc. and Technology
     Funding Ltd., of which Peter Bernardoni is an officer and a partner, are
     the managing general partners of Technology Funding Venture Partners IV, an
     Aggressive Growth Fund, L.P. Technology Funding and Mr. Bernardoni are
     entitled to exercise voting and investment power with respect to all shares
     owned by Technology Funding Venture Partners IV, an Aggressive Growth Fund,
     L.P. and therefore are deemed to be beneficial owner of these shares. Mr.
     Bernardoni also owns currently exercisable options to purchase 30,000
     shares.



     (3)  Includes options for common stock exercisable within 60 days.

     (4)  Beneficial ownership excludes shares which are not held in the name of
     the stockholder (i.e. held in street name).

                                     -41-
<PAGE>

                             PLAN OF DISTRIBUTION

    GenStar will not receive any of the proceeds of the sale of the shares
offered in this prospectus. The shares of Common Stock may be sold from time to
time to purchasers directly by the Selling Securityholders. Alternatively, the
Selling Securityholders may from time to time offer the Securities through
brokers, dealers or agents who may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholders and/or
the purchasers of the Securities for whom they may act as agent. The Selling
Securityholders and any such brokers, dealers or agents who participate in the
distribution of the Securities may be deemed to be "underwriters," and any
profits on the sale of the Securities by them and any discounts, commissions or
concessions received by any such brokers, dealers or agents might be deemed to
be underwriting discounts and commissions under the Securities Act. To the
extent the Selling Securityholders may be deemed to be underwriters, the Selling
Securityholders may be subject to certain statutory liabilities, including, but
not limited to, under Sections 11, 12 and 17 of the Securities Act and Rule 10b-
5 under the Exchange Act.

    The Securities offered hereby may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
Securities may be sold by one or more of the following methods, without
limitation:

    .   a block trade in which the broker or dealer so engaged will attempt to
        sell the Securities as agent but may position and resell a portion of
        the block as principal to facilitate the transaction;

    .   purchases by a broker or dealer as principal and resale by such broker
        or dealer for its account pursuant to this prospectus;

    .   ordinary brokerage transactions and transactions in which the broker
        solicits purchasers;

    .   an exchange distribution in accordance with the rules of such exchange;

    .   face-to-face transactions between sellers and purchasers without a
        broker-dealer;

    .   through the writing of options; and

    .   other.

    At any time a particular offer of the Securities is made, a revised
prospectus or prospectus supplement, if required, will be distributed which will
set forth the aggregate amount and type of Securities being offered and the
terms of the offering, including the name or names of any underwriters, dealers
or agents, any discounts, commissions, concessions and other items constituting
compensation from the Selling Securityholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers. The prospectus supplement
and, if necessary, a post-effective amendment to the registration statement of
which this prospectus is a part, will be filed with the Commission to reflect
the disclosure of additional information with respect to the distribution of the
Securities. In addition, the Securities covered by this prospectus may be sold
in private transactions or under Rule 144 rather than pursuant to this
prospectus.

    To the best of our knowledge, there are currently no plans, arrangement or
understandings between any Selling Securityholders and any broker, dealer, agent
or underwriter regarding the sale of the Securities by the Selling
Securityholders. There is no assurance that any Selling Securityholder will sell
any or all of the Securities offered by it hereunder or that any such Selling
Securityholder will not transfer, devise or gift such Securities by other means
not described in this prospectus.

     The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M which may limit the timing of purchases and sales of any of the Securities by
the Selling Securityholders and any other such person. Furthermore, Regulation M
of the Exchange Act may restrict the ability of any person engaged in the
distribution of the Securities to engage in market-making activities with
respect to the particular Securities being distributed for a period of up to
five business days prior to the commencement of such distribution. All of the
foregoing may affect the marketability of the Securities and the ability of any
person or entity to engage in market-making activities with respect to the
Securities.

                                     -42-
<PAGE>

     Pursuant to the Registration Rights Agreement entered into in connection
with the offer and sale of the Notes by the Company, each of the Company and the
Selling Securityholders will be indemnified by the other against certain
liabilities, including certain liabilities under the Securities Act, or will be
entitled to contribution in connection therewith.

     GenStar has agreed to pay substantially all of the expenses incidental
to the registration, offering and sale of the Securities to the public other
than commissions, fees and discounts of underwriters, brokers, dealers and
agents.

                                 LEGAL MATTERS

     The validity of the Common Stock being offered hereby will be passed upon
for the Company by Luce Forward Hamilton & Scripps LLP, San Diego, California.

                                    EXPERTS


     The financial statements as of December 31, 1999 and 1998 and for each of
the three fiscal years in the period ended December 31, 1999 included in this
registration statement have been so included in reliance on the report of Ernst
& Young LLP, independent auditors, given on the authority of said firm as
experts in auditing and accounting.


                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The SEC allows us to "incorporate by reference" into this prospectus the
documents we file with them, which means that we can disclose important
information to you by referring you to these documents. The information that we
incorporate by reference into this prospectus is considered to be part of this
prospectus, and information that we file later with the SEC automatically
updates and supersedes any information in this prospectus. We incorporate by
reference into this prospectus the documents listed below:

     .  Annual Report on Form 10-KSB for the fiscal year ended December 31,
        1999, as filed with the SEC on March 30, 2000, under Section 13(a) of
        the Securities Exchange Act of 1934, as amended (the "Exchange Act");

     .  Current Report on Form 8-K, as filed with the SEC on April 11, 2000;

     .  The description of our common stock contained in our Registration
        Statement on Form 8-A, as filed with the SEC on April 17, 2000 under the
        Exchange Act, including any amendment or report filed for the purpose of
        updating such description; and

     .  All other reports filed by us under Section 13(a) or 15(d) of the
        Securities Exchange Act of 1934 since the end of our fiscal year ended
        December 31, 1999.

     All documents we have filed with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 subsequent to the date of this
prospectus and prior to the filing of a post-effective amendment indicating that
all securities offered have been sold (or which re-registers all securities then
remaining unsold), are deemed to be incorporated in this prospectus by this
reference and to be made a part of this prospectus from the date of filing of
such documents.

     We will provide, without charge, upon written or oral request of any
person, including a beneficial owner, to whom a copy of this prospectus is
delivered, a copy of any or all of the foregoing documents and information that
has been or may be incorporated in this prospectus by reference. Requests for
such documents and information should be directed to GenStar Therapeutics
Corporation, Attention: Carin Sandvik, Corporate Controller and Corporate
Secretary, 10835 Altman Row, Suite 150, San Diego, California 92121, telephone
number (858) 450-5949.


                      WHERE YOU CAN FIND MORE INFORMATION

     GenStar is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy and information statements, and other information with the Securities and
Exchange Commission. Such reports, proxy and information statements, and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as the regional offices of the
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. You may obtain information on the operation of Public
Reference Room by calling the SEC at 1-800-SEC-0330. Such reports, proxy
statements and other information can also be inspected at the offices of the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006. The Commission maintains a World Wide Web site that
contains reports, proxy and information statements, and other information that
are filed through the Commission's Electronic Data Gathering, Analysis and
Retrieval System. This Web site can be accessed at http://www.sec.gov.

    Genstar has filed with the Commission a Registration Statement on Form S-3
under the Securities Act with respect to the Common Stock offered hereby. This
prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to Urogen, the notes and the common stock,
reference is made to the registration statement and the exhibits and schedules
thereto. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the registration statement, each such statement being qualified in all
respects by such reference. Copies of the registration statement, including all
exhibits thereto, may be obtained from the Commission's principal office in
Washington, D.C. upon payment of the fees prescribed by the Commission, or may
be examined without charge at the offices of the Commission described above.


                                     -43-
<PAGE>

================================================================================

     No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, in connection with the offer made by this prospectus, and, if given
or made, such information or representations must not be relied upon as having
been authorized by the corporation. Neither the delivery of this prospectus nor
any sale made hereunder shall, under any circumstances, create an implication
that there has been no change in the affairs of the corporation since the date
hereof. This prospectus does not constitute an offer or solicitation by anyone
in any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not authorized to do so or
to anyone to whom it is unlawful to make such offer or solicitation in such
jurisdiction.

- --------------------------------------------------------------------------------
                               TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                       Page
                                                                       ----
<S>                                                                    <C>
Prospectus Summary...................................................    2
GenStar Therapeutics Corporation.....................................    3
The Offering.........................................................    4
Risk Factors.........................................................    5
Use of Proceeds......................................................   13
Price Range of Common Stock..........................................   13
Dividend Policy......................................................   13
Capitalization.......................................................   14
Selected Consolidated Financial Data.................................   15
Management's Discussion and Analysis of Financial Condition and
 Results of Operations...............................................   16
Business.............................................................   21
Management...........................................................   27
Certain Relationships and Related Transactions.......................   33
Description of Capital Stock.........................................   37
Principal Stockholders and Selling Stockholders......................   40
Plan of Distribution.................................................   42
Legal Matters........................................................   43
Experts..............................................................   43
Where you can find more information..................................   43
Incorporation of Certain Documents by Reference......................   43
</TABLE>


                                 UroGen Corp.



                      10,695,632 SHARES OF COMMON STOCK


- --------------------------------------------------------------------------------
                                  PROSPECTUS
- --------------------------------------------------------------------------------


                                April 20, 2000

================================================================================
<PAGE>

                                    PART II

                    INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby.  Normal commission expenses and brokerage fees are payable
individually by the Selling Securityholders.  All amounts are estimated except
the Securities and Exchange Commission registration fee.

<TABLE>
<CAPTION>
                                                                      Amount
                                                                      ------
<S>                                                                  <C>
SEC registration fee...............................................  $18,037
Accounting fees and expenses.......................................    1,000
Legal fees and expenses............................................    3,000
Printing expenses..................................................    5,000
Miscellaneous fees and expenses....................................    1,000
                                                                     -------
Total..............................................................  $28,037
                                                                     =======
</TABLE>

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

  Under Section 145 of the Delaware General Corporation Law, the Registrant has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under Securities Act.  The
Registrant's Bylaws provide that the Registrant will indemnify its directors and
executive officers and may indemnify other officers to the fullest extent
permitted by law.  Under its Bylaws, indemnified parties are entitled to
indemnification for negligence, gross negligence and otherwise to the fullest
extent permitted by law.  The Bylaws also require the Registrant to advance
litigation expenses in the case of stockholder derivative actions or other
actions. The indemnified party is required to repay such advances if it is
ultimately determined that the indemnified party is not entitled to
indemnification.

  In addition, the Registrant's Certificate of Incorporation provides that,
pursuant to Delaware law, it directors shall not be liable for monetary damages
for breach of the directors' fiduciary duty of care to the Registrant and its
stockholders.  This provision in the Certificate of Incorporation does not
eliminate the duty of care, and in appropriate circumstances equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law.  In addition, each director is subject to liability for
breach of the director's duty of loyalty to the Registrant for acts or omissions
not in good faith or involving intentional misconduct, for knowing violation of
law, for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law.  The provision also does not affect a director's
responsibilities under any other law, such as federal securities laws or state
or federal environmental laws.

  The Registrant has entered into indemnity agreements with each of it directors
and executive officers.  Such indemnity agreements contain provisions that are
in some respects broader than the specific indemnification provisions contained
in Delaware law.

  The foregoing summaries are necessarily subject to the complete text of the
statute, the Articles, the Bylaws and agreements referred to above and are
qualified in their entirety by reference thereto.

                                     II-1
<PAGE>

  Reference is made to the form of Note and Warrant Purchase Agreements included
below as Exhibits 10.9 and 10.11 for provisions regarding indemnification of the
Company's officers, directors and controlling persons against liabilities,
including liabilities under the Securities Act.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

  Since the distribution of the Company's stock in February 1996, the Company
has issued the following unregistered securities:

  (1)  In June 1996, the Company issued 339,000 shares of common stock at a
       price of $0.05 per share, the fair value as determined by the Board of
       Directors, to Sidney Kimmel related to an Affiliation Agreement (see
       "Certain Relationships and Related Transactions").

  (2)  In March 1997, the Company issued 147,791 shares of common stock at a
       price of $0.05 per share, the fair value as determined by the Board of
       Directors, to The Immune Response Corporation related to a License
       Agreement (see "Management's Discussion and Analysis of Financial
       Condition and Results of Operations"). The Company also issued The Immune
       Response Corporation a warrant to purchase additional shares to maintain
       a fully-diluted ownership percentage of two percent (2%) or increase its
       ownership to three percent (3%) with exercise prices ranging from $0.03
       to $0.04 per share.

  (3)  In August 1997, the Company issued a warrant to purchase 200,000 shares
       of Common Stock to an officer of the Company. The warrant is exercisable
       at $0.05 per share, the fair value as determined by the Board of
       Directors, and expires on July 31, 2001.

  (4)  In July 1998 and April 1999, the Company received $1,030,000 and
       $400,000, respectively and issued convertible subordinated notes to
       thirty-five private investors. These notes were convertible into
       1,030,000 and 1,333,333 shares of common stock, respectively. Holders of
       the convertible subordinated notes also received warrants to purchase
       515,000 and 1,333,333 shares of common stock at $0.74 and $0.30,
       respectively. (See "Certain relationships and related transactions").

  (5)  In July 1998, the Company issued 1,841,219 shares of Common Stock and
       5,830 shares of Series A Preferred Stock to Baxter Healthcare Corporation
       related to the purchase of exclusive rights to certain technologies and
       certain related equipment with an estimated fair value of $5,455,505 (see
       "Certain Relationships and Related Transactions").

  (6)  In January 1999, the Company issued 704 shares of Series B Preferred
       Stock to Baxter Healthcare Corporation to convert $704,000  funded under
       the Developmental and Collaboration Agreement (see "Certain Relationships
       and Related Transactions").

  (7)  In January 2000, the Company issued 6,362,801 shares of Common Stock and
       warrants for 1,773,899 shares of Common Stock to twenty-two institutional
       and private accredited investors for $8,308,588. The warrants are
       exercisable for five years and have an exercise price of $0.74 per
       share.

   (8) In February 2000, the Company issued 2,000,000 shares of Common Stock to
       three institutional accredited investors for $17,000,000.

GenStar Therapeutics Corporation relied on the exemption from registration
provided by Rule 506 of Regulation D, and Section 4(2) under the Securities Act
of 1933, as amended, for each of the above issuances.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

       (a)    Exhibits

Exhibit No.   DESCRIPTION

   2.1           Distribution Agreement between the Company and Medstone
                 International Inc.(1)
   2.2           Asset Purchase Agreement, dated as of February 28, 1998,
                 UroGen and Baxter Healthcare Corporation(2)
   2.3           Amendment to Asset Purchase Agreement, dated as of May 27,
                 1998, between UroGen and Baxter(2)
   3.1           Certificate of Incorporation of the Company(1)
   3.2           Bylaws of the Company(1)
   3.3           Certificate of Designation of Preferences and Rights of Series
                 A Preferred Stock of UroGen(2)
   3.4           Certificate of Designation of Preferences and Rights of Series
                 B Preferred Stock of UroGen(2)
   3.5           Certificate of Designation of Preferences and Rights of Series
                 C Preferred Stock of UroGen(2)
   3.6           Certificate of Amendment of the Restated Certificate of
                 Incorporation(4)

   5.1           Opinion of Luce, Forward, Hamilton & Scripps LLP regarding the
                 legality of securities being registered
  10.1           Contribution Agreement between the Company and Medstone
                 International, Inc. dated October 31, 1995(1)
  10.2           Form of Indemnification Agreement(1)
  10.3           UroGen Corp. 1995 Stock Plan(1)
  10.4           UroGen Corp. 1995 Director Option Plan(1)

                                     II-2

<PAGE>

  10.5           License Agreement, dated March 5, 1997, between UroGen and The
                 Immune Response Corporation(3)
  10.6           Amendment to License Agreement, dated January 29, 1999, between
                 UroGen and The Immune Response Corporation(3)
  10.7           License Agreement, dated November 5, 1997, by and among UroGen,
                 Sidney Kimmel Cancer Center and Daniel A. Mercola, M.D.,
                 Ph.D.(3)
  10.8           License Agreement, dated September 20, 1996 between UroGen and
                 The Regents of the University of California(3)
  10.9           Form of Note and Warrant Purchase Agreement, dated July 8, 1998
                 between UroGen and various investors(3)
  10.10          Warrant Certificate, dated July 31, 1997, between UroGen and
                 Robert E. Sobol(3)
  10.11          Distribution Agreement, dated July 8, 1998, by and among Urogen
                 and Baxter(2)
  10.12          Investor Rights Agreement, dated July 8, 1998, between UroGen
                 and Baxter(2)
  10.13          Developmental Collaboration Agreement, dated July 8, 1998
                 between UroGen and Baxter(2)
  10.14          Credit Agreement, dated July 8, 1998, between UroGen and
                 Baxter(2)
  10.15          Technology License Agreement, dated July 8, 1998, between
                 UroGen and Baxter(2)
  10.16          Form of Note and Warrant Purchase Agreement, dated April 28,
                 1999 between UroGen and various investors(3)
  10.17          UroGen Corp. 1999 Stock Plan(5)
  10.18          Form of Common Stock and Warrant Purchase Agreement dated
                 January 21, 2000 between UroGen and various investors(5)
  10.19          Form of Common Stock Purchase Agreement dated January 21, 2000
                 between UroGen and various investors(5)
  10.20          Form of Common Stock Purchase Agreement dated February 22,
                 2000 between Urogen and various investors(4)
  23.1           Consent of Ernst & Young LLP, Independent Auditors
  23.2           Consent of Luce, Forward, Hamilton & Scripps (in the opinion
                 filed as Exhibit 5.1 hereto)
  24.1           Power of Attorney (contained on page II-5 hereto)
  27             Financial Data Schedule(4)
__________________________________________

     (1) Previously filed with the Company's Application For Registration on
Form 10-SB dated February 9, 1996.

     (2) Previously filed with the Company's Current Report on Form 8-K dated
July 23, 1998

     (3) Previously filed with the Company's Annual Report on Form 10-KSB/A
dated May 24, 1999.

     (4) Previously filed with the Company's Annual Report on Form 10-KSB dated
March 30, 2000.

     (5) Previously filed with the Company's Registration Statement on Form SB-2
dated February 10, 2000.

     (b)  Financial Statement Schedules

     All schedules have been omitted because the information required to be set
forth in the schedules is not applicable or is shown in the financial statements
or notes to the financial statements.

ITEM 17.  UNDERTAKINGS

     (a)  The undersigned Registrant hereby undertakes:

          (1)  To file, during any period in which offers or sales are being
               made, a post-effective amendment to the Registration Statement:

               (i)    To include any prospectus required by Section 10(a)(3) of
                      the Act;

               (ii)   To reflect in the prospectus any facts or events arising
                      after the effective date of this Registration Statement
                      (or the most recent post-effective amendment thereof)
                      which,

                                     II-3
<PAGE>

                      individually or in the aggregate, represent a fundamental
                      change in the information set forth in the Registration
                      Statement (or the most recent post-effective amendment
                      thereof) which, individually or in the aggregate,
                      represent a fundamental change in the information set
                      forth in the Registration Statement. Notwithstanding the
                      foregoing, any increase or decrease in volume of
                      securities offered (if the total dollar value of
                      securities offered would not exceed that which was
                      registered) and any deviation from the low or high and of
                      the estimated maximum offering range may be reflected in
                      the form of prospectus filed with the Commission pursuant
                      to Rule 424(b) if, in the aggregate, the changes in volume
                      and price represent no more than 20 percent change in the
                      maximum aggregate offering price, set forth in the
                      "Calculation of Registration Fee" table in the effective
                      registration statement; and

               (iii)  To include any material information with respect to the
                      plan of distribution not previously disclosed in the
                      Registration Statement or any material change to such
                      information in the Registration Statement.

          (2)  That, for the purpose of determining any liability under the Act,
               each such post-effective amendment that contains a form of
               prospectus shall be deemed to be a new registration statement
               relating to the securities offered therein, and the offering of
               such securities at that time shall be deemed to be the initial
               bona fide offering thereof.

          (3)  To file a post-effective amendment to remove from registration
               any of the securities that remain unsold at the end of the
               offering.

     (b)  Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in Act and will be
governed by the final adjudication of such issue.


                                     II-4
<PAGE>

                                  SIGNATURES

     In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of San
Diego, State of California, on the 20th day April 2000.

                                     GENSTAR THERAPEUTICS CORPORATION


                                     By:  /s/ ROBERT E. SOBOL
                                          ------------------------------------
                                          President, Chief Executive Officer,
                                          and Director


                               POWER OF ATTORNEY

      KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below appoints Paul D. Quadros, Robert E. Sobol and Carin D. Sandvik,
and each of them his/her true and lawful attorney-in-fact and agents with full
power of substitution and resubstitution, for him/her and in his/her name, place
and stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, including any post-effective amendments as well as any
related registration statement (or amendment thereto) filed in reliance upon
Rule 462(b) under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.


                                  SIGNATURES


     In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
                  NAME                                            TITLE                                  DATE
- -----------------------------------------       ---------------------------------------------------     -------------------------
<S>                                             <C>                                                     <C>
/s/ PAUL D. QUADROS                             Chairman of the Board, Chief Financial Officer
- -----------------------------------------       and Director (Principal Financial Officer)              April 20, 2000

/s/ ROBERT E. SOBOL                             President, Chief Executive Officer and Director         April 20, 2000
- -----------------------------------------

/s/ WEI-WEI ZHANG                               Senior Vice President, Chief Scientific Officer
- -----------------------------------------       and Director                                            April 20, 2000

/s/ CARIN D. SANDVIK                            Corporate Controller and Corporate Secretary
- -----------------------------------------       (Principal Accounting Officer)                          April 20, 2000

/s/ PETER F. BERNARDONI                         Director                                                April 20, 2000
- -----------------------------------------
</TABLE>

                                     II-5
<PAGE>

<TABLE>
<CAPTION>
                  NAME                                            TITLE                                  DATE
- -----------------------------------------       ---------------------------------------------------     -------------------------
<S>                                             <C>                                                     <C>
/s/ IVOR ROYSTON                                Director                                                April 20, 2000
- -----------------------------------------

/s/ VICTOR W. SCHMITT                           Director                                                April 20, 2000
- -----------------------------------------
</TABLE>


                                     II-6

<PAGE>

                                                                     EXHIBIT 5.1


April 20, 2000

GenStar Therapeutics Corporation
10835 Altman Row, Suite 150
San Diego, California 92121

    Re: Registration Statement on Form S-3
        GenStar Therapeutics Corporation common stock, par value $.001 per share
        -----------------------------------------------------------------------

Ladies and Gentlemen:

    We are counsel for GenStar Therapeutics Corporation, a Delaware corporation
(the "Company"), in connection with the preparation of the Registration
Statement on Form S-3 (the "Registration Statement") as to which this opinion is
a part, filed with the Securities and Exchange Commission (the "Commission") on
April 20, 2000 for the resale of up to 10,695,632 shares of common stock, $.001
par value, of the Company by selling shareholders (the "Shares").

    In connection with rendering our opinion as set forth below, we have
reviewed and examined originals or copies of such corporate records and other
documents and have satisfied ourselves as to such other matters as we have
deemed necessary to enable us to express our opinion hereinafter set forth.

    Based upon the foregoing, it is our opinion that:

    The issued Shares covered by the Registration Statement and registered on
behalf of the Company, when issued in accordance with the terms and conditions
set forth in the Registration Statement, will be duly authorized, validly
issued, fully paid and nonassessable. The Shares to be issued upon the
conversion of certain warrants, as covered by the Registration Statement and
registered on behalf of the Company, when issued in accordance with the terms
and conditions set forth in the Registration Statement, will be duly authorized,
validly issued, fully paid and nonassessable.

    We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus included in the Registration Statement.

Very truly yours,


/s/ LUCE, FORWARD, HAMILTON & SCRIPPS LLP
- -----------------------------------------
LUCE, FORWARD, HAMILTON & SCRIPPS LLP


<PAGE>

                                                                    EXHIBIT 23.1

              CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 8, 2000 with respect to the financial statements
of GenStar Therapeutics Corporation included in the Registration Statement (Form
S-3) and related Prospectus for the registration of shares of its common stock.

                                                 /s/ ERNST & YOUNG LLP
San Diego, California


April 20, 2000


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