CENTAUR PHARMACEUTICALS INC, S-1/A, 2000-02-03

CENTAUR PHARMACEUTICALS INC
S-1/A, 2000-02-03
PHARMACEUTICAL PREPARATIONS

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<PAGE>

As filed with the Securities and Exchange Commission on February 3, 2000

Registration No. 333-96053

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

AMENDMENT NO. 1

To
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------
CENTAUR PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)

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

<TABLE>
<S> <C> <C>
Delaware 2384 77-0304313
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
</TABLE>

484 Oakmead Parkway
Sunnyvale, California 94086
(408) 822-1600
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)

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

LUCY O. DAY
Chief Financial Officer
Centaur Pharmaceuticals
484 Oakmead Parkway
Sunnyvale, California 94086
(408) 822-1600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies to:

BARRY J. KRAMER, ESQ. STEPHAN HUTTER, ESQ.
DAVID K. MICHAELS, ESQ. Shearman & Sterling
STUART T. TENG. ESQ. Mainzer Landstrasse 16
Fenwick & West LLP 60325 Frankfurt am Main
Two Palo Alto Square (49 69) 97 11-10 00
Palo Alto, California 94306
(650) 494-0600

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

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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. [_]
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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. [_]

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

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>

EXPLANATORY NOTE:

Pages 69, 70, and II-9 and the inside front cover page were omitted from the
initial S-1 filing due to an error in transmission during the Edgar filing
process. We are transmitting this Amendment No. 1 to Form S-1 to include these
pages.
<PAGE>

1,080,000 Shares

[LOGO TO COME]

Common Stock

All of the 1,080,000 shares of common stock, par value $0.001 per share
offered by this prospectus are being offered by Centaur Pharmaceuticals. Inc.

There is only a very limited trading market for our common stock. We
anticipate that most of the common stock that we are offering will be sold
outside of the United States to a limited number of institutional and private
investors. Our common stock will not be listed or quoted on any exchange or
automated quotation system in connection with this offering, and accordingly
we do not anticipate that there will be an active trading market for our
common stock as a result of this offering.

Please see "Risk Factors" beginning on page 6 to read about factors you
should consider before buying the common stock.

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

Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed on the accuracy
or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.

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

We have not registered offers and sales of the common stock outside the
United States under the United States Securities Act of 1933, as amended.
Anyone acting as an underwriter within the meaning of the Securities Act and,
until the date 90 days after the date of the prospectus, any dealers, are
required to deliver the prospectus in connection with any offers and sales in
the United States. Under the Securities Act, the term "underwriter" includes
any person who directly or indirectly participates in the distribution of the
common stock. This term is not limited to the manager of this offering and
other banks, dealers and securities professionals, but would include investors
who resell shares in transactions that are part of the distribution.

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

<TABLE>
<CAPTION>
Per Share Total
--------- -----------
<S> <C> <C>
Initial offering price................................... $ 11.50 $12,420,000
Underwriting discounts and commissions................... $ 0.6325 $ 683,100
Proceeds, before expenses, to Centaur.................... $10.8675 $11,736,900
</TABLE>

The underwriters expect to deliver the shares on , 2000

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

Bank Vontobel AG

The date of this prospectus is , 2000
<PAGE>

Neither we nor the manager has taken any action that would permit a public
offering of shares of our common stock, or possession or distribution of this
prospectus, in any jurisdiction other than the United States. If you come into
possession of this prospectus, you are required to inform yourself about and
to observe any restrictions as to the offering of the shares of common stock
and the distribution of this prospectus.

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

Centaur and NRT are our trademarks. All other trademarks included in this
prospectus are the property of their respective holders.
<PAGE>

PROSPECTUS SUMMARY

This summary is not complete and does not contain all of the information
that may be important to you. You should read the entire prospectus carefully,
including the financial statements and related notes, before making an
investment decision.

Our Business

We are developing a novel class of small molecule pharmaceutical compounds
for the treatment of diseases that result from the interruption and subsequent
restoration of blood supply, known as ischemia and reperfusion, and
inflammation. We believe that these disease processes create stress agents, and
that these agents activate a cascade of events in and around cells, which can
lead to cell damage and death. We believe that our compounds, which we refer to
as (TM)NRTs, can modify the cellular response to these stress agents and
significantly reduce the resulting cellular damage and death.

Our most advanced programs target diseases affecting the brain such as acute
cerebral stroke, Parkinson's disease, AIDS dementia complex and Alzheimer's
disease. In collaboration with AstraZeneca PLC, a multinational pharmaceutical
company based in Europe, a Phase IIa clinical study of an NRT for the
intravenous treatment of acute stroke has been completed in Europe. We believe
that AstraZeneca will initiate Phase IIb/III trials of this compound by mid-
2000. We are also independently conducting Phase IIa clinical studies in the
United States of an orally administered NRT for the treatment of Parkinson's
disease and AIDS dementia. We are working with AstraZeneca to develop an orally
active lead compound for the treatment of Alzheimer's disease. Additionally, we
are conducting pre-clinical programs to develop therapeutics for the treatment
of arthritis and inflammatory bowel disease, and a research program to evaluate
the potential of NRTs to treat heart attacks.

Our approach to the development of therapeutics grew out of the work of our
scientific founders in investigating the role of oxidative stress agents in
disease. These and other stress agents, such as inflammatory mediators, are
produced by the body in higher than normal quantities after an injury, or after
interruption of blood supply. They are also produced at higher rates as
individuals age. Our research has demonstrated that stress agents activate a
cascade of biochemical and molecular events than can cause cell damage and
death. Based on this knowledge, we have designed and developed a library of
proprietary NRTs that we believe may slow or reverse the damaging effects of
these toxic cascades. We have developed candidate NRTs for both oral and
intravenous administration. No treatment-limiting side effects have been
observed in clinical testing of these compounds.

Stroke involves the interruption of blood supply to part of the brain. Our
NRT for the treatment of stroke, NXY-059, protected brain cells against death
in recognized preclinical stroke models. Preclinical studies suggest that the
compound may be effective in humans when administered up to six or more hours
after the stroke has occurred. This long window of activity is important
because stroke patients often experience delays of several hours before
receiving treatment. Phase I clinical testing of NXY-059 to test safety and
obtain a drug distribution and elimination profile in healthy volunteers was
completed by our partner, AstraZeneca, in Sweden in 1998. No treatment-limiting
side effects were observed. A 150 patient Phase IIa clinical trial of NXY-059
for the purpose of testing safety and tolerability in acute stroke patients was
completed by AstraZeneca in Europe in May 1999. No adverse side effects were
observed in this trial, for any category of stroke. We believe, based on
discussions with AstraZeneca, that AstraZeneca will initiate Phase IIb/III
trials of NXY-059 by mid-2000 to obtain information about the efficacy of NXY-
059, and to gather further information on safety. We expect the trials to
consist of two parallel trials totaling over 3,000 patients in North America
and Europe.

1
<PAGE>

Parkinson's disease is a degenerative neurological disorder caused by a
shortage of the chemical messenger dopamine, which is essential for movement
control. A growing body of evidence suggests that inflammation contributes to
Parkinson's disease progression. In certain preclinical models, CPI-1189, our
NRT for the treatment of Parkinson's disease, provided significant protection
to dopamine-producing and other cells in the brain. These results suggested
that CPI-1189 may be effective against the progressive loss of motor and mental
function characteristic of Parkinson's disease. Phase I clinical testing of
CPI-1189 to test safety and obtain a drug absorption and distribution profile
in healthy volunteers was completed in 1998, and no treatment-limiting side
effects were observed. We are currently completing a Phase IIa clinical study
of CPI-1189 for the purpose of testing safety and evaluating preliminary
efficacy information in Parkinson's disease patients.

AIDS dementia refers to the debilitating neurological and cognitive
impairments associated with acquired immune deficiency syndrome, or AIDS. We
believe that AIDS dementia is caused by inflammation and toxins produced as a
result of HIV infection. In addition, we believe that CPI-1189, the same NRT
under development to treat Parkinson's disease, may be effective as a treatment
for AIDS dementia. In laboratory tests using human brain cells, CPI-1189
provided significant protection to these cells from inflammation and toxins
associated with AIDS dementia. We are currently conducting a Phase IIa clinical
trial of this NRT for the purpose of testing safety and evaluating preliminary
efficacy information in AIDS dementia patients. The Neuro AIDS Research
Consortium, a group of eight university medical centers that receives funding
from the U.S. National Institute of Mental Health, provides a substantial
portion of the funding for this trial, and plays a major role in the design and
management of the trial.

Our Alzheimer's disease program is part of the AstraZeneca partnership and
focuses on preventing brain cell damage associated with inflammation related to
a type of protein deposit, known as -amyloid plaque, and tangles, in the brain.
These deposits and tangles have been associated with the memory loss and
behavioral disorders characteristic of Alzheimer's disease. Our research
findings from both cell culture and animal models suggest that NRTs may prevent
the brain cell damage and death induced by these inflammatory agents. In
related studies, the administration of other NRTs has diminished the cognitive
decline in older animals. We are currently undergoing final evaluation of a
number of compounds as candidates for clinical testing in Alzheimer's disease
patients.

We have also established a number of programs to evaluate NRTs for the
treatment of diseases outside of the brain that involve damage caused by stress
agents. One of the most promising of these programs is the evaluation of NRTs
for the treatment of arthritis. Given the important role that inflammation
plays in arthritis, we believe that NRTs could prove to be effective
therapeutics for this disease. We have identified candidate compounds for this
purpose, and research to select a clinical lead compound is underway. We are
also investigating the use of NRTs to treat inflammatory bowel disease, a
disorder of the gastro-intestinal tract in which inflammation plays a major
role, and heart attacks, where the interruption and subsequent restoration of
blood supply to the heart can result in major damage to that organ.

In June 1995, we entered into a collaborative agreement with AstraZeneca to
develop new drugs for the treatment of stroke, Alzheimer's disease, traumatic
brain injury and multi-infarct dementia. Under this agreement, AstraZeneca:

. pays us up to $6.0 million per year for 5 years, primarily to fund our
research for these conditions,

. conducts most of the development of NRTs for these conditions,

. makes payments to us based upon the achievement of specified development
milestones, and

. pays royalties to us on any sales of licensed products, in exchange for
exclusive worldwide marketing and other rights.

2
<PAGE>

We retain worldwide manufacturing rights for the active ingredient of the
products and have an option to obtain certain co-promotion rights in the United
States. We have received approximately $35.7 million through September 30, 1999
under the AstraZeneca agreement.

We have a strong proprietary position protecting our NRT technology which
includes ownership of, or license rights to, 32 United States patents, 35
United States patent applications, 53 foreign patents and 202 foreign patent
applications related to NRTs and their use as pharmaceuticals.

We employ 90 persons, including 24 with Ph.D. and/or M.D. degrees. We occupy
a modern 31,000 square foot laboratory and office facility in Sunnyvale,
California and a 77,000 square foot manufacturing and office/laboratory
facility in Santa Clara, California. The manufacturing area of the Santa Clara
facility, which is approximately 30,000 square feet, is designed and operated
to comply with the U.S. Food and Drug Administration, or FDA, regulations on
Good Manufacturing Practices. A portion of the manufacturing facility is
designed to manufacture compounds for clinical trials, has been licensed by the
California Department of Health Services and is in production, while the
remainder of the manufacturing facility is designed to manufacture compounds
for commercial sale, and is currently undergoing the California licensing
process.

Our executive offices are located at 484 Oakmead Parkway, Sunnyvale,
California 94086. Our telephone number is (408) 822-1600.

3
<PAGE>

The Offering

<TABLE>
<C> <S>
Common Stock offered by Centaur.. 1,080,000 shares
Outstanding after the offering... 16,665,558 shares
Use of proceeds.................. Funding of research and development, capital
expenditures and general corporate purposes,
including working capital.
Swiss security ID number......... 917088
ISIN Code........................ CH0009170884
Settlement system................ SegaIntersettle ("SIS")
Risk Factors..................... See "Risk Factors" for a discussion of
factors you should carefully consider before
deciding to invest in shares of our common
stock.
Expected Closing................. , 2000
</TABLE>

We anticipate that we will sell most of the common stock offered in this
offering outside of the United States to a limited number of institutional and
private investors. While the shares of common stock offered may be traded from
time to time in the Swiss over-the-counter market, we currently anticipate that
the common stock will not be listed or quoted on any exchange or automated
quotation system in connection with this offering. Accordingly, we do not
anticipate that there will be an active trading market for our common stock as
a result of this offering.

The number of shares that will be outstanding after this offering is based
on the actual number of shares outstanding as of September 30, 1999, but
excludes:

. 1,747,660 shares of common stock issuable upon exercise of options
outstanding as of September 30, 1999 under our 1993 Equity Incentive
Plan, 1998 Equity Incentive Plan and 1998 Directors Stock Option Plan,
at a weighted average per share exercise price of $3.50;

. 45,000 shares of common stock reserved as of September 30, 1999 for
issuance upon the exercise of warrants at a weighted average per share
exercise price of $5.11; and

. 1,174,492 shares of common stock reserved as of September 30, 1999 for
future grant or issuance under our 1998 Equity Incentive Plan, 1998
Directors Stock Option Plan and 1998 Employee Stock Purchase Plan.

For more information regarding our equity benefit plans, see "Management--
Directors Compensation" and "--Employee Benefit Plans" and note 9 of notes to
financial statements.

4
<PAGE>

Summary Financial Data
(in thousands, except per share data)

<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
-------------------------------------------- ----------------
1994 1995 1996 1997 1998 1998 1999
----------- ------ ------- ------- -------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenue............. $ 156 $7,875 $12,743 $ 9,573 $ 6,663 $ 5,194 $ 5,609
Operating expenses:
Research and
development.......... 2,735 5,490 7,854 15,646 13,629 9,965 12,101
General and
administrative....... 912 1,385 2,306 2,266 3,494 2,493 3,097
------- ------ ------- ------- -------- ------- -------
Total operating
expenses............... 3,647 6,875 10,160 17,912 17,123 12,458 15,198
------- ------ ------- ------- -------- ------- -------
Income (loss) from
operations............. (3,491) 1,000 2,583 (8,339) (10,460) (7,264) (9,589)
Share of losses in
affiliate.............. -- -- -- -- (305) (220) (191)
Interest and other
income, net............ 41 491 362 1,107 80 47 (85)
------- ------ ------- ------- -------- ------- -------
Net income (loss)....... $(3,450) $1,491 $ 2,945 $(7,232) $(10,685) $(7,437) $(9,865)
======= ====== ======= ======= ======== ======= =======
Net income (loss) per
share:
Basic................. $ (1.44) $ 0.62 $ 1.15 $ (2.64) $ (1.90) $ (2.54) $ (0.64)
======= ====== ======= ======= ======== ======= =======
Diluted............... $ (1.44) $ 0.13 $ 0.24 $ (2.64) $ (1.90) $ (2.54) $ (0.64)
======= ====== ======= ======= ======== ======= =======
Shares used in computing
net income (loss) per
share:
Basic................. 2,401 2,403 2,551 2,742 5,614 2,928 15,535
======= ====== ======= ======= ======== ======= =======
Diluted............... 2,401 11,602 12,514 2,742 5,614 2,928 15,535
======= ====== ======= ======= ======== ======= =======
</TABLE>

The following table summarizes our financial data. The "Actual" column
presents actual summary balance sheet data as of September 30, 1999. The "As
Adjusted" column presents balance sheet data as of September 30, 1999, as
adjusted, which reflects our sale of the 1,080,000 shares of common stock
offered by us in this offering at an offering price per share of $11.50 and
after deducting the estimated underwriting discounts and commissions and
offering expenses.

<TABLE>
<CAPTION>
September 30,
1999
------------------
As
Actual Adjusted
-------- --------
(Unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short term investments........... $ 15,339 $ 26,339
Working capital............................................. 12,005 23,005
Total assets................................................ 26,919 37,919
Long term obligations, net of current portion............... 4,079 4,079
Accumulated deficit......................................... (28,101) (28,101)
Total stockholders' equity.................................. 16,970 27,970
</TABLE>

For an explanation of the determination of shares used in computing basic
and diluted net income (loss) per share, see note 1 of notes to financial
statements.

5
<PAGE>

RISK FACTORS

The shares offered by this prospectus involve a high degree of risk. You
should consider the following risk factors carefully in addition to the other
information in this prospectus before purchasing the shares of common stock
offered by this prospectus.

We are in the development stage and the viability of our products is subject to
significant uncertainties; if we are unable to produce any commercially viable
products, we are unlikely to generate significant revenues or be profitable

We were incorporated in March 1992. All of our potential products are in
research or development, and no revenues have been generated from the sale of
our products. We do not expect any products resulting from our research and
development efforts to be commercially available for at least several years.
Our potential products will require substantial additional research and
development, preclinical and clinical testing and regulatory approval prior to
commercialization. Our product development efforts may not progress as
expected, if at all. In addition, an investor must consider the risks of
failure inherent in the development of pharmaceutical products based on new
technologies.

As a result, we may not be able to produce any commercially viable products,
and therefore may be unable to generate revenues or achieve profitability.

Many of our disease targets do not have widely accepted models; the results of
our preclinical trials may not be indicative of the results from our clinical
trials; our clinical trials may not adequately demonstrate the safety and
efficacy of our products; we do not have any evidence of the efficacy of our
potential products in human clinical trials

Most of the diseases and disorders that we are targeting are highly complex.
Their causes are not fully known, and there are no widely accepted models of
such diseases and disorders. We test potential compounds in a number of models
that we believe provide useful information about the compound, but it is
possible that any or all of these models may not be valid predictors of the
activity of the compound in humans. Data received from tests conducted in these
models can be subject to different interpretations, and our interpretation may
not be correct. Some of our lead compounds have failed to demonstrate efficacy
in at least one of the numerous models in which they have been tested. The
results of preclinical and early clinical studies may not be predictive of
results that will be obtained in later stage testing. Our ongoing clinical
trials may not be completed, and clinical trials of our products under
development may not be permitted, or if permitted, may not be completed. In
addition, clinical trials may not demonstrate the safety and efficacy of any
products to the extent necessary to obtain regulatory approvals for marketing
and may not result in marketable products. Our potential products could prove
to have undesirable side effects or other characteristics that may prevent or
limit their commercial use. No evidence of the efficacy of our potential
products in human clinical trials has been attained to date. The failure to
adequately demonstrate the safety and efficacy of a therapeutic product under
development would delay or prevent regulatory approval of the product and could
seriously harm us.

Our products are based on a novel therapeutic approach and if this approach is
not successful, we may be unable to develop commercially viable products

Our product development efforts center around our family of NRTs that we
believe protect against some of the damaging effects of blood supply
interruption/restoration and inflammation. Our novel approach has not been
widely studied, the mechanisms of action of our technology and compounds are
not well understood, and many of the diseases we are targeting do not have
widely accepted models. If our approach, technologies or product candidates are
not successful, we may be unable to develop commercially viable products.

6
<PAGE>

We will need to enroll patients in our clinical trials that meet the required
criteria for these trials, and if we are unable or delayed in doing so, our
business would be seriously harmed

The ability to undertake and complete clinical trials in a timely manner
depends on the enrollment of patients that meet the required criteria of the
clinical trial. Patient accrual is a function of many factors, including the
size of the patient population, the proximity of patients to clinical sites,
the eligibility criteria for the study and the existence of competitive
clinical studies. We have previously experienced some delays in enrolling
patients in some of our clinical trials. Further delays in planned patient
enrollment in clinical trials may result in increased costs, program delays or
both, which could seriously harm us.

We rely on third parties to develop, market, distribute and sell our potential
products and if these third parties do not perform, we may be delayed or unable
to introduce commercial products or may incur additional costs in doing so

Our strategy for the development and commercialization of our products
requires that we maintain and enter into collaborations with corporate
partners, licensors, licensees and others. We may not be able to enter into any
new collaborative arrangements, and our current and any future collaborative
arrangements may not be successful. To the extent that we are not able to
maintain or establish these arrangements, we would be required to undertake
such activities at our own expense, which would significantly increase our
capital requirements and limit the programs that we are able to pursue. In
addition, we may encounter significant delays in introducing our products into
specific markets or find that the development, manufacture or sale of our
products in these markets is adversely affected by the absence of such
collaborative agreements. We cannot control the amount and timing of resources
that our collaborative partners devote to our programs or potential products,
which can vary because of factors unrelated to the potential product.
Collaborative participation will depend on each collaborator's own financial,
competitive, marketing and strategic considerations, which are outside our
control.

We currently have a collaborative arrangement with AstraZeneca for the
research, development and marketing of drugs for the treatment of stroke,
Alzheimer's disease, traumatic brain injury and multi-infarct dementia. The
interests and motivations of AstraZeneca may not be, or may not remain, aligned
with our interests and motivations. AstraZeneca may not successfully perform
its development, regulatory compliance or marketing functions, and this
collaboration may not continue. Astra has recently completed a merger with
Zeneca Group PLC to form AstraZeneca PLC. It is possible that this merger could
affect AstraZeneca's product development priorities and its relationship with
us. Our revenues to date have consisted primarily of research and development
support from AstraZeneca.

AstraZeneca has the right to terminate its agreement with us, upon twelve
months notice, and can terminate research funding and our manufacturing rights
under the agreement if more than 30% of our voting capital stock is acquired by
a company engaged in the manufacture and/or sale of pharmaceutical products. In
any event, AstraZeneca's obligation to provide us with research funding
terminates as of June 30, 2000. AstraZeneca's research funding to us
represented 89% of our revenue for 1998 and 78% of our revenue for the nine
months ended September 30, 1999. Additionally, there can be no assurance that
AstraZeneca will proceed with Phase IIb/III trials of NYX-059, our stroke
compound. If AstraZeneca does not proceed with such trials, the prospects for
such compound, and for the Company, would be seriously harmed.

If AstraZeneca or any future collaborative partner breaches or terminates
their agreements with us or otherwise fails to conduct their collaborative
activities in a timely manner, the preclinical or clinical development or
commercialization of product candidates or research programs will be delayed,
and we will be required to devote additional resources to product development
and commercialization or terminate certain development programs. For example,
in March 1998, Lundbeck terminated its agreement with us for the development
and marketing of drugs to treat Parkinson's disease.

7
<PAGE>

We will need to obtain additional financing to fund our operations, and if we
fail to obtain such financing our product development programs may be
significantly curtailed or ended

We have generated no product revenue, and none is expected for at least
several years. We believe that our current resources, together with the
proceeds from this offering, will be sufficient to meet our capital
requirements for at least the next twelve months. We anticipate that in the
future, we will need to raise substantial additional funds for research,
development, expansion of manufacturing and administrative facilities and other
expenses, through equity or debt financings, research and development grants,
collaborative relationships or otherwise, prior to the commercialization of any
of our products. Our capital requirements depend on numerous factors,
including:

. the progress of our research and development programs, including clinical
trials;

. the status of our existing collaborative relationship;

. the establishment of additional collaborative relationships, if any;

. the cost and pace of establishing and expanding our manufacturing
capabilities;

. the development of sales and marketing activities, if undertaken by us;

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

. competing technological and market developments.

Additional funding may not be available to us on reasonable terms. Any
additional financing may result in dilution to existing stockholders. If
adequate funds are not available, we may be required to significantly curtail
our research and development programs, including clinical trials, or enter into
arrangements that may require us to relinquish certain material rights to our
potential products on terms that we might otherwise find unacceptable.

We have a history of operating losses and may never be profitable

We have incurred losses since our inception and as of September 30, 1999 had
an accumulated deficit of $28.1 million. We may never achieve significant
revenues or profitable operations. Substantially all of our revenues to date
have been derived from funding from AstraZeneca and, to a significantly lesser
extent, from U.S. government research grants and our now terminated agreement
with Lundbeck. Revenues from product sales and collaborative agreement
royalties are not expected for at least several years, if at all.

We need to hire additional executive officers, including a chief executive
officer; if we fail to attract additional qualified officers and other
employees, or to retain key management and technical personnel, we may be
delayed or unable to conduct our clinical trials and other product development
efforts

Our previous chief executive officer, Brian D. Frenzel, has recently
resigned. In the interim we have appointed Steinar J. Engelsen, our chairman of
the board, as acting chief executive officer, and Charles R. Engles, one of our
directors, as acting chief operating officer. We have commenced a search for a
permanent chief executive officer. We do not know how long it will take to hire
such person. If we are unable to hire such person within a reasonable period of
time, it could delay our plans for future financing, product development and
other activities.

We are highly dependent on key members of our management and scientific
staff. In addition, we rely on key consultants and advisors. The loss of one or
more of these key personnel could have a material adverse effect on our
research, development and product marketing efforts. In addition, we believe
that our future success will depend upon our ability to attract and retain
highly skilled scientific and managerial personnel, particularly as we expand
our activities in clinical trials and the regulatory approval process. We face

8
<PAGE>

significant competition for such personnel from other companies, research and
academic institutions, government entities and other organizations. We may not
be successful in hiring or retaining the personnel we need for continued
growth. If we are unable to hire and retain these personnel, we may be delayed
or unable to conduct our clinical trials and product development efforts.

We need to obtain regulatory approval to commercially manufacture or sell our
products, and if we are unable to obtain this approval, or if approval is
delayed, we will be unable to generate, or be delayed in generating, revenue
from the sale of our products

Our research, development, manufacturing, preclinical and clinical testing,
labeling, distribution, advertising, marketing, promotion and sales activities,
as well as the operations of our current and any future collaborators, are
subject to extensive regulation by numerous government authorities in the
United States and other countries. Our potential products require governmental
approvals for commercialization, which have not yet been obtained. We do not
expect that applications for FDA approval for the marketing and sale of any of
our products will be submitted to the FDA for at least several years. The
approval process, which includes preclinical and clinical testing to establish
safety and efficacy of the product, can take many years and requires the
expenditure of substantial funds and other resources. We have had only limited
experience in conducting preclinical testing and human clinical trials and
obtaining FDA and other regulatory approvals for investigations, and no
experience in obtaining FDA and other regulatory approvals for marketing. Data
obtained from preclinical and clinical activities are susceptible to varying
interpretations, which could delay, limit or prevent regulatory approval. In
addition, delays or rejection may be encountered based upon changes in
regulatory policies for drug approval during the period of product development
and regulatory review. Delays in obtaining such approvals could adversely
affect the marketing of products developed by us and our ability to generate
commercial product revenues.

Clinical studies for our stroke drug candidate were conducted outside the
United States and may not be accepted to support regulatory filings in the
United States

The Phase I and IIa clinical studies for our stroke drug candidate were
conducted by AstraZeneca in Europe. These studies were not required to be and
were not conducted under an FDA Investigational New Drug application. The FDA
may not accept the studies to support regulatory filings in the United States.

Our facilities and any products we are able to bring to commercial market will
be subject to continual review and regulation, and any failure to comply could
cause us to be subject to fines, suspensions or withdrawals of regulatory
approvals, product recalls, operating prohibition or restrictions or criminal
prosecution

Any marketed products we may develop, and our manufacturing facilities, will
be subject to continual review and periodic inspections. Discovery of
previously unknown problems with a product or our facilities may result in
restrictions, including withdrawal of the product from the market. If we fail
to comply with applicable regulatory requirements we may be subject to, among
other things, fines, suspensions and/or withdrawals of regulatory approvals,
product recalls, prohibitions against manufacture, distribution, sales and/or
marketing, operating restrictions, the equitable remedies of disgorgement and
restitution and criminal prosecution. We are also subject to numerous
environmental, health and workplace safety laws and regulations, including
those governing laboratory procedures and the handling of hazardous materials.
Any violations of, and cost of compliance with, these laws and regulations
could seriously harm us.

We are very dependent on our patents and other intellectual property; if our
intellectual property protection proves inadequate, our business could be
materially harmed

Our success will depend to a significant degree on our ability to obtain,
maintain and enforce patent protection for our products and manufacturing
processes or license rights to applicable patents, as well as to preserve our
trade secrets and operate without infringing the proprietary rights of third
parties both in the

9
<PAGE>

United States and other countries. The degree of patent protection afforded to
pharmaceutical and biomedical inventions is uncertain and involves complex
legal and factual questions. As a result, the breadth of claims allowed in
pharmaceutical and biomedical patents cannot be predicted. Patent applications
relating to our potential products or technology may not result in patents
being issued. Our current patents, as well as any that may be issued in the
future, may not afford adequate protection to us, and may not provide a
competitive advantage. In addition, any of our patents may be challenged,
invalidated or infringed. Furthermore, others may independently develop similar
products or processes, duplicate any of our products or, if patents are issued
to us, design around such patents. Litigation, which would result in
substantial cost to us, may be necessary to enforce any patents issued or
licensed to us or to determine the scope and validity of the proprietary rights
of third parties. In some cases, we depend on third parties to prosecute
patents and patent applications for technology that we license, such as the
core technology related to our NRTs licensed from the University of Kentucky
Research Foundation and the Oklahoma Medical Research Foundation. Failure of
these third parties to effectively prosecute these patents could seriously harm
us.

We also seek to protect our proprietary technology by confidentiality
agreements and, if applicable, invention assignment agreements with our
collaborators, advisors, employees and consultants. These agreements may be
breached, we may not have adequate remedies for any breach, and our trade
secrets may otherwise be disclosed to, or discovered by, competitors.

We may be subject to claims for infringement of the intellectual property of
third parties or for breach of the technology licenses upon which our products
are based which, with or without merit, could be costly and time consuming to
defend or settle, and if adversely decided could materially harm us

Our success will also depend on our not infringing patents issued to others
and not breaching the technology licenses upon which our products are based.
Any claims of infringement or breach of technology licenses, with or without
merit, could be time consuming to defend, result in costly litigation and
divert management attention and resources. If our product candidates are found
to infringe upon the patents of others, or otherwise impermissibly utilize the
intellectual property of others, our development, manufacture and sale of such
potential products could be severely restricted or prohibited. In such event,
we may be required to obtain licenses to patents or other proprietary rights of
third parties. Such licenses may not be available on terms acceptable to us, if
at all. If we do not obtain licenses, we could encounter significant delays in
product market introductions while we attempt to design around such patents or
other rights, or we may be unable to develop, manufacture or sell such
products. In addition, the breach of an existing or future license may
seriously harm us.

We have received correspondence from the lawyers for an individual who has
obtained certain patents related to the use of phenyl butyl nitrone or PBN, and
related compounds, and which include claims related to specified reactions of
these compounds with a type of stress agent known as free radicals. PBN is a
commercially available material that is known to react with free radicals in
certain environments. Our founders used PBN in their early research. The
correspondence alleges that certain of our compositions and methodologies may
fall within the scope of this individual's patents, and that the practice of
such by us would constitute willful infringement. Subsequent discussions and
correspondence between this individual and us have not resulted in a resolution
of this matter. We do not believe that these patents seriously harm our ability
to develop and commercialize our products. If, however, we are required to
defend against charges of patent infringement, we may incur substantial costs,
and if we are found to have infringed a third party patent, we could lose the
right to develop or market certain products and/or enforce certain patents.

It is difficult to predict the time at which patent applications may be issued
as patents to us or to our competitors, and proceedings or litigation to
determine the priority of our inventions could be costly

Our competitors may have filed patent applications, may have been issued
patents or may obtain additional patents and proprietary rights relating to
products or processes competitive with ours. There is a substantial backlog of
pharmaceutical and biomedical patent applications at the U.S. Patent and
Trademark Office, or PTO.

10
<PAGE>

Accordingly, we cannot predict the time at which patent applications may issue
as patents to us or to our competitors. Patent applications in the United
States are maintained in secrecy until patents issue, and publication of
discoveries in scientific or patent literature often lag behind the actual
discoveries. Thus, we cannot be certain that we have been or will be the first
to discover the subject matter covered by our patent applications or patents or
that we were the first to file patent applications for such inventions. We may,
therefore, have to participate in interference proceedings declared by the PTO
or litigation to determine priority of inventions, either of which could result
in substantial cost to us.

The pharmaceutical industry is subject to intense competition and, if we are
unable to compete successfully, we may not generate revenues from products we
may develop that are sufficient to offset product development costs

The pharmaceutical industry is subject to intense competition and rapid and
significant technological change. If we are unable to compete successfully, we
may not generate revenues from products we may develop sufficient to offset the
costs of developing those products. Our competitors in the United States and
abroad are numerous and include pharmaceutical and biotechnology companies,
universities and other research institutions. Many of these companies and
institutions are actively engaged in activities similar to ours, including
research and development of products for stroke, Parkinson's disease, AIDS
dementia, Alzheimer's disease and arthritis. While we believe that our products
may offer significant advantages over available products, currently marketed
products often have a significant competitive advantage over new entrants. If
regulatory approvals are received, a number of our potential products will
compete with well-established, FDA approved proprietary and generic therapies
that have generated substantial sales over a number of years and which are
reimbursed from government health administration authorities and private health
insurers. Our products under development may not be able to compete
successfully with existing therapies or with products under development by our
competitors. Many of our competitors have substantially greater financial and
technical resources and production and marketing capabilities than us, and
certain of these competitors may compete with us in establishing development
and marketing agreements with pharmaceutical companies. In addition, many of
our competitors have greater experience than us in conducting preclinical
testing and human clinical trials and obtaining FDA and other regulatory
approvals. Our competitors may succeed in obtaining FDA approval for products
sooner than us.

We have no sales and marketing experience and expect to rely on third parties
to provide significant sales and marketing support; if we are unable to obtain
third party support or provide sales and marketing support directly, we may be
unable to successfully sell the products we may develop

We have no experience in product sales, marketing or distribution. We have
entered into a marketing agreement with AstraZeneca for stroke, Alzheimer's
disease, traumatic brain injury and multi-infarct dementia indications and
intend to establish marketing arrangements with other pharmaceutical companies
with effective distribution capabilities in order to market other product
candidates. We may not be successful in entering into such arrangements. Sales
of our products will depend heavily upon the efforts of AstraZeneca and
possibly other third parties, and their efforts may not be successful. We also
may need to acquire our own direct sales force for some products, and we may
not be able to recruit and retain adequate sales, marketing and distribution
personnel. In addition, our direct marketing efforts may not be able to compete
successfully in the pharmaceutical market.

We have limited manufacturing capabilities and experience, and if we are unable
to achieve or maintain sufficient manufacturing capacity, our competitive
position and our ability to achieve regulatory approval and/or profitability
would be seriously harmed

The manufacturing of sufficient quantities of new drugs is a time consuming,
complex and difficult process. If we are unable to fully develop our own
manufacturing capabilities or obtain and maintain third-party manufacturing
arrangements on acceptable terms, our competitive position and our ability to
achieve regulatory

11
<PAGE>

approval and/or profitability would be seriously harmed. In 1998, we completed
construction of a 30,000 square foot manufacturing facility in Santa Clara,
California. We are in the process of licensing the facility with the California
Department of Health Services. To date, only a small portion of the facility
has been licensed and is in production. As this portion of the facility has
been in production only a relatively short period of time, we may still
encounter problems with it. Additionally, the remainder of the facility may not
receive the necessary regulatory approvals or be satisfactorily put into
production in a timely manner. In any event, we do not expect that the Santa
Clara facility will be capable of producing the quantity of our products that
may be needed for later stage commercial sales. Accordingly, we expect to need
to develop substantial additional capacity by expanding our current facilities
or building new facilities. To meet projected time schedules, we may commence
construction and/or otherwise commit ourselves to additional capacity prior to
FDA or other regulatory approval of the products to be manufactured at the new
facility. The cost of any new facility would be substantial, and such facility
could ultimately prove to be unnecessary if the required approvals are not
obtained or market demand is insufficient. Additionally, we may not be able to
construct a large scale manufacturing facility, and we may not be able to
operate it in an efficient and cost-effective manner and in compliance with
applicable regulatory requirements. If we are unable to manufacture our own
products, we will need to seek third-party manufacturers. We may not be able to
enter into such arrangements on favorable terms. Additionally, if we are unable
to satisfactorily manufacture and deliver the compounds required under our
agreement with AstraZeneca, we could lose some or all of our manufacturing
rights under that agreement.

We have exposure to product liability claims as a result of our clinical trials
and will have substantial exposure if we begin to manufacture, market and sell
products, and our insurance may not be adequate to cover losses resulting from
these claims

The testing, manufacturing, marketing and sale of human therapeutics
involves product liability risks. The use of our product candidates in clinical
trials will also expose us to product liability claims. A product liability
claim could seriously harm us. We currently have limited product liability
insurance coverage for the clinical research use of our product candidates. We
may not be able to maintain this coverage on acceptable terms, and it may not
be adequate to cover product liability claims if they arise. We do not have
product liability coverage for the commercial sale of our products but intend
to obtain this coverage if our products are approved for commercial use.
However, this coverage is expensive, and we may not be able to obtain it on
acceptable terms or in sufficient amounts, if at all. Even if a product
liability claim is covered by insurance, we could be seriously harmed by the
adverse publicity that it could cause.

If third-party payors will not reimburse patients for our products, any
products we develop may not be accepted by the market

Our ability to commercialize our products will depend in part on the
availability of reimbursement from third-party payors, such as government
health administration authorities, private health insurers and other
organizations. Third-party payors frequently challenge the price and cost
effectiveness of medical products and significant uncertainty exists as to the
reimbursement status of newly approved health care products. Our potential
products may not be considered cost effective, and adequate third-party
reimbursement may not be available to enable us to maintain price levels
sufficient to realize an attractive return on our investment in product
development. In addition, for international sales of our products, we and our
collaborators will be required to seek reimbursement on a country by country
basis. In some foreign countries, our potential products may be subject to
governmentally mandated prices that are artificially low. If adequate coverage
and reimbursement levels are not provided by the government and other third-
party payors for uses of our therapeutic products, the market acceptance of
these products could be seriously harmed. Additionally, healthcare reform is
receiving significant attention both in the United States and abroad, and
legislation and regulations affecting the pricing of and reimbursement for
pharmaceuticals may adversely change before our products are approved for
commercial use.

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<PAGE>

Our animal testing and our use of hazardous materials could subject us to
regulatory scrutiny and adverse publicity

Much of our research and development involves the testing of compounds on
laboratory animals. We may be harmed by changes in laws and regulations or by
social pressures that would restrict the use of animals in testing. We may also
be harmed by actions against us or our collaborators by groups of individuals
opposed to this testing. In addition, research and development processes
sponsored by us involve the controlled use of hazardous materials. We and our
collaborators are subject to various international, federal, state and local
laws governing the use, manufacture, storage, handling and disposal of
hazardous materials. We cannot completely eliminate the risk of accidental
contamination or injury. Such an event could result in our being held liable
for damages, which could seriously harm our operations.

We contract with third parties to remove hazardous wastes generated by us.
The disposal of such waste, third-party waste disposal companies with which we
contract, and their disposal sites are regulated by the Environmental
Protection Agency. Any actions initiated by the EPA against us, our third-party
waste disposal companies or their disposal sites could seriously harm our
operations if we or any of our third-party waste disposal companies were to be
held liable in whole or in part for any clean up costs.

There is currently only a very limited trading market for our shares of common
stock, and there is not expected to be an active public market for our shares
after this offering

There is currently only a very limited trading market for our common stock
and we do not expect that an active trading market for our common stock will
develop as a result of this offering. Bank Vontobel AG currently makes a market
for our common stock on the Swiss over-the-counter market, and there has been
very limited trading of our common stock on such market. We are not aware of
any other financial institution that currently makes or intends to make a
market in our common stock. As a result, any liquidity of our common stock will
depend on the continued activities of Bank Vontobel. Bank Vontobel is not
obligated to make a market in our common stock and any such market-making may
be discontinued at any time at the sole discretion of Bank Vontobel. As we
expect that the common stock offered by this prospectus will be purchased by a
relatively small number of investors, we do not expect there to be any
significant increase in the liquidity of, or existence of any trading markets
for, our common stock. While indications of the price at which investors might
be willing to buy or sell shares of our common stock may be available from time
to time to banks, brokers and other financial institutions over electronic
media, and may be available through Bank Vontobel, this information will not
otherwise be generally available to the public. In addition, this information
may not be indicative of the price at which shares of our common stock could
actually be purchased or sold. Information as to the price and volume of actual
transactions in our common stock in the Swiss over-the-counter market is not
publicly reported or available in any print or electronic media. Furthermore,
the Swiss over-the-counter market is not subject to specific regulation or
regulatory oversight.

We may list shares of our common stock on a securities exchange or automated
quotation system at some point in the future. However, any such listing will
likely only be possible if we can successfully complete a future public
offering of our common stock, and our ability to consummate any such public
offering will depend on a number of factors at that time, including market
conditions for public offerings and the general condition of the securities
markets, the prospects for our business, the state of our development and our
historical and anticipated results of operations. Accordingly, we may not ever
be able to effect any future public offering or listing, and an active trading
market for our common stock may not develop or be sustained.

The offering price of the common stock offered by this prospectus has been
established by negotiations between us and Bank Vontobel. See "Underwriting"
for a discussion of the factors considered in determining the initial offering
price. The offering price may not be indicative of the trading price, if any,
of our common stock after the offering and is higher than the most recent
trading price for our stock. The trading price, if any, of the shares of common
stock, like that of the common stock of many other early stage pharmaceutical
and biotechnology companies, may be highly volatile. Factors such as
announcements of technological innovations

13
<PAGE>

or new commercial products by us or our competitors, disclosure of results of
clinical testing or regulatory proceedings, government regulations and
approvals, developments in patent or other proprietary rights, public concern
as to the safety of products developed by us and general market conditions may
have a significant effect on the market price of the common stock. In addition,
most of the world's stock markets have experienced significant price and volume
fluctuations in recent years. This volatility has significantly affected the
market prices of securities of many pharmaceutical and biotechnology companies
for reasons frequently unrelated to or disproportionate to the operating
performance of the specific companies. These broad market fluctuations may
adversely affect the trading price, if any, of our common stock. Finally, the
volatility of the trading price, if any, of our common stock is likely to be
significantly increased, and the trading price, if any, adversely affected, by
the relative illiquidity of any trading market for our common stock.

Future sales of our common stock after this offering could cause our stock
price to decline

Sales of substantial amounts of our common stock after this offering could
cause any trading price of our common stock to decline. These sales also might
make it more difficult for us to sell equity or equity-related securities in
the future at a time and price that we deem appropriate. In addition to the
shares to be sold in this offering, as of December 31, 1999, there were
approximately 15,595,831 shares of our common stock outstanding. 14,095,831 of
these shares are generally currently saleable to the public, subject to
compliance with certain conditions. In addition, we have registered
approximately 2,941,047 shares of common stock that have been reserved for
issuance under our stock option plans. For more information, see "Shares
Eligible for Future Sale."

The shares of common stock issued in this offering will be subject to a market
lock-up agreement which may affect their future liquidity

Persons purchasing shares of the common stock offered pursuant to this
prospectus will be required to enter into a market lock-up agreement which will
generally prohibit the sale of shares of the common stock issued in this
offering for up to 180 days after our initial public offering in which shares
of common stock are listed on an internationally recognized securities exchange
or quotation system, if such an offering is ever made. Accordingly, if such an
offering is made, you may not be able to sell your shares for the 180 day
period after such initial public offering and the trading price may decline
during that period.

We do not intend to register under the Securities Exchange Act of 1934 and
accordingly we will not be subject to the requirements of such law

We do not currently intend to register our common stock with the U.S.
Securities Exchange Commission under the Securities Exchange Act of 1934, as
amended. Accordingly, we will not be required to comply with a number of
requirements of the Exchange Act, including the proxy rules. Furthermore, our
officers and directors, and holders of 10% or more of our common stock, will
not be subject to the provisions of the Exchange Act relating to short-swing
profits and the reporting of their purchases and sales. Further, acquirors of
more than five percent of our outstanding common stock will not be subject to
disclosure requirements under Section 13(d) of the Exchange Act. In addition,
after March 31, 2001, we may be entitled to terminate our obligation to comply
with the periodic reporting requirements of the Exchange Act. However, we have
no present intention to terminate this reporting obligation. We intend to
furnish our stockholders with an annual report containing audited financial
statements and a report thereon by our independent auditors. We also intend to
make available to our stockholders interim reports for each of the first three
quarters of our fiscal year containing unaudited financial information.
However, these reports would not provide some of the information that would be
included in periodic reports filed under the Exchange Act. Termination of our
reporting obligations under the Exchange Act therefore would reduce the
information available to stockholders about the business and financial
condition of the company.

14
<PAGE>

If the holders of our common stock that have registration rights require us to
register a large number of their shares for sale into the public market, the
market price of our common stock and our ability to raise needed capital could
be adversely affected

After this offering, the holders of 12,673,766 shares of our common stock
can require that we register their shares for sale under the Securities Act. If
these holders require that we register a large number of securities for sale in
the public market, these sales could cause the market price for our common
stock to decline. In addition, if we are required to include shares held by
these holders in a company-initiated registration, these sales may have an
adverse effect on our ability to raise needed capital.

After this offering, our directors, executive officers and 5% stockholders will
own approximately 46.1% of our outstanding common stock, and may exercise their
influence to delay or prevent a change in control

Upon completion of this offering, our present directors, executive officers
and 5% stockholders and their affiliates will beneficially own approximately
46.1% of our outstanding common stock. As a result, these stockholders would
likely be able to control our management and affairs and exercise significant
influence over all matters requiring stockholder approval. This concentration
of ownership may delay or prevent a change in control and might affect the
trading price of our common stock and the voting and other rights of the other
stockholders. See "Principal Stockholders" for information concerning the
number of shares of our common stock owned by these persons.

Provisions of our charter documents, Delaware law and our agreement with
AstraZeneca may discourage an acquisition of us

Provisions of our charter documents and of Delaware corporate law could make
it more difficult for a third party to acquire us and could delay or prevent a
change in control. See "Description of Capital Stock" for a discussion of these
provisions of our charter documents and Delaware law. In addition, under our
agreement with AstraZeneca, AstraZeneca can terminate research funding and our
manufacturing rights if more than 30% of our voting capital stock is acquired
by a company engaged in the manufacture and/or sale of pharmaceutical products.
This may make us less valuable to a potential pharmaceutical acquiror and
decrease the likelihood that such a company would pursue an acquisition of us
or decrease the price that such a company would be willing to pay for us.

You will incur immediate and substantial dilution of $9.85 per share, based on
an offering price of $11.50 per share

If you purchase shares of our common stock, you will incur immediate and
substantial dilution in net tangible book value of $9.85 per share, based on an
offering price of $11.50 per share. If holders of outstanding options or
warrants exercise those options or warrants, you will experience further
dilution. See "Dilution."

Special note regarding forward-looking statements

This Prospectus contains forward-looking statements, including, statements
containing the words "believes," "anticipates," "expects" and similar words.
These forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause our actual results, financial condition,
performance or achievements, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
these forward-looking statements.

Given these uncertainties, prospective investors are cautioned not to place
undue reliance on these forward-looking statements, which might not occur. We
disclaim any obligation to publicly update any of these forward-looking
statements to reflect future events or new information.

15
<PAGE>

CENTAUR

Our technology emerged from research begun in the 1980's by our scientific
founders, Dr. John Carney, then at the University of Oklahoma, and Dr. Robert
Floyd at the Oklahoma Medical Research Foundation, with a compound known as
PBN. We were incorporated under the name Centaur Pharmaceuticals, Inc. on
March 17, 1992. Since our inception, we have been developing a novel class of
small molecule pharmaceutical compounds, which we call NRTs, for the treatment
of diseases involving blood supply interruption/restoration and inflammation.
Our initial therapeutic targets are neurodegenerative conditions such as
stroke, Parkinson's disease, AIDS dementia and Alzheimer's disease, in which we
believe that blood supply interruption/restoration and inflammation are major
causes of neuronal damage. We have also established pre-clinical and research
programs evaluating NRTs to treat arthritis, inflammatory bowel disease and
heart attack. We do not own any equity securities of any other corporation,
except for a small investment in Cutanix Corporation. See "Business--Cutanix--
Skin Care Affiliate." We are a Delaware corporation with perpetual existence
whose registered office in the State of Delaware is c/o Corporation Service
Company, 1013 Centre Road, Wilmington, Delaware.

Since October 13, 1998, our common stock has been traded from time to time
in the Swiss over-the-counter market. This market consists of negotiated
transactions from time to time between investors, who may act through banks or
brokers. Trading of our common stock in the Swiss over-the-counter market has
been very limited. The high and low sales prices of our common stock in the
Swiss over-the-counter market were $9.07 and $9.98 in the fourth quarter of
1998, $8.74 and $9.42 in the first quarter of 1999, $8.70 and $10.31 in the
second quarter of 1999 and $9.66 and $10.66 in the third quarter of 1999. There
were no sales of our common stock in the Swiss over-the-counter market in the
fourth quarter of 1999.

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<PAGE>

USE OF PROCEEDS

We estimate that our net proceeds from the sale of the 1,080,000 shares of
common stock offered by us in this offering will be approximately $11.0
million, based upon an initial offering price of $11.50 per share and after
deducting the estimated underwriting discounts and commissions and offering
expenses.

We expect to use the net proceeds of the offering as follows:

. approximately $9.0 million to fund our clinical and preclinical
programs;

. approximately $1.0 million for capital expenditures; and

. the remainder for general corporate purposes, including working capital.

Pending such application, we intend to invest the net proceeds from this
offering in interest-bearing investment grade securities.

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

. the progress of our research and development programs, including
clinical trials;

. the status of our existing collaborative relationship;

. the establishment of additional collaborative relationships, if any;

. the cost and pace of establishing and expanding our manufacturing
capabilities;

. the development of sales and marketing activities, if undertaken by us;

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

. competing technological and market developments.

Furthermore, a portion of the net proceeds of the offering may be used to
acquire other technologies or products that complement our business, although
no such transactions are now being planned or negotiated.

DIVIDEND POLICY

We have never paid any cash dividends on our capital stock. We currently
anticipate that we will retain any future earnings for use in our business and
do not anticipate paying any cash dividends in the foreseeable future.

17
<PAGE>

CAPITALIZATION

The following table sets forth our actual capitalization as of September 30,
1999, and our as adjusted capitalization to give effect to the sale of the
1,080,000 shares of common stock offered by us in this prospectus and our
receipt of the net proceeds.

<TABLE>
<CAPTION>
September 30,
1999
------------------
As
Actual Adjusted
-------- --------
(in thousands,
except share and
per share data)
<S> <C> <C>
Cash, cash equivalents and short term investments.......... $ 15,339 $ 26,339
======== ========
Long-term obligations, net of current portion.............. $ 4,079 $ 4,079
-------- --------
Stockholders' equity
Preferred stock, $0.001 par value: 3,000,000 shares
authorized, no shares issued or outstanding, actual and
as adjusted............................................. -- --
Common Stock, $0.001 par value: 33,000,000 shares
authorized; 15,585,558 shares issued and outstanding,
actual; 33,000,000 shares authorized as adjusted,
16,665,558 shares issued and outstanding as adjusted.... 16 17
Additional paid-in capital............................... 46,511 57,510
Deferred compensation.................................... (1,443) (1,443)
Accumulated other comprehensive income................... (13) (13)
Accumulated deficit...................................... (28,101) (28,101)
-------- --------
Total stockholders' equity............................... 16,970 27,970
-------- --------
Total capitalization................................... $ 21,049 $ 32,049
======== ========
</TABLE>

The number of shares that will be outstanding after the offering is based on
the actual number of shares outstanding as of September 30, 1999. It excludes:

. 1,747,660 shares of common stock subject to options outstanding as of
September 30, 1999 under our 1993 Equity Incentive Plan, 1998 Equity
Incentive Plan and 1998 Directors Stock Option Plan, at a weighted
average per share exercise price of $3.50;

. 45,000 shares of common stock reserved as of September 30, 1999 for
issuance upon the exercise of warrants at a weighted average per share
exercise price of $5.11; and

For more information regarding our equity benefit plans, see "Management--
Directors Compensation" and "--Employee Benefit Plans" and note 9 of notes to
financial statements.

18
<PAGE>

DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the net tangible book value per share of our common stock
after this offering. Net tangible book value dilution per share represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering and the net tangible book value per share of common
stock immediately after completion of this offering.

Our net tangible book value as of September 30, 1999 was approximately $16.5
million or $1.06 per share. Net tangible book value per share is equal to our
total tangible assets less total liabilities, divided by the number of
outstanding shares of common stock. After giving effect to the sale of the
1,080,000 shares of common stock offered by us at an offering price of $11.50
per share, and after deducting the estimated underwriting discounts and
commissions and offering expenses, our net tangible book value as of
September 30, 1999 would have been $27.5 million, or $1.65 per share. This
represents an immediate increase in net tangible book value of $0.59 per share
to existing stockholders and an immediate dilution of $9.85 per share to new
investors purchasing shares at the offering price. The following table
illustrates the per share dilution to new investors:

<TABLE>
<S> <C> <C>
Offering price per share........................................ $11.50
Net tangible book value per share as of September 30, 1999.... $1.06
Increase per share attributable to new investors.............. 0.59
-----
Net tangible book value per share after offering................ 1.65
------
Dilution per share to new investors............................. $ 9.85
======
</TABLE>

The following table sets forth, as of September 30, 1999, the number of
shares of common stock purchased from us, the total consideration paid to us
and the average price per share paid by our existing stockholders and by the
investors purchasing shares of common stock in this offering, at an offering
price of $11.50 per share, before deducting the estimated underwriting
discounts and commissions:

<TABLE>
<CAPTION>
Shares Purchased Total Cash Consideration Average
------------------ ---------------------------- Price
Number Percent Amount Percent Per Share
---------- ------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 15,585,558 93.5% $ 44,928,000 78.3% $ 2.88
New investors........... 1,080,000 6.5 12,420,000 21.7 11.50
---------- ----- --------------- ---------
Total................. 16,665,558 100.0% $ 57,348,000 100.0% $ 3.44
========== ===== =============== =========
</TABLE>

As of September 30, 1999, there were 1,747,660 shares of common stock
issuable upon exercise of outstanding options at a weighted average per share
exercise price of $3.50 and 45,000 shares of common stock issuable upon
exercise of outstanding warrants at a weighted average per share exercise price
of $5.11. For more information regarding our equity benefits plans, see
"Management--Directors Compensation," "Management--Employee Benefits Plans" and
note 9 of notes to financial statements.

19
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the
financial statements included in this prospectus, including the notes to the
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The selected financial data is not
intended to replace the financial statements. The statement operations data for
each of the three years ended December 31, 1996, 1997 and 1998 and the balance
sheet data at December 31, 1997 and 1998, are derived from our financial
statements that have been audited by Ernst & Young LLP, independent auditors,
included elsewhere in this prospectus. The statement of operations data and the
balance sheet data for the year ended December 31, 1995 have been derived from
our audited financial statements not included in this prospectus. The statement
of operations data for the year ended December 31, 1994 and the balance sheet
data at December 31, 1994 are derived from unaudited financial statements not
included in this prospectus. The statement of operations data for the nine
months ended September 30, 1998 and 1999 and the balance sheet data as of
September 30, 1999 are derived from unaudited financial statements included
elsewhere in this prospectus. The unaudited financial statements, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, which are necessary for a fair presentation of the
financial position and results of operations for these periods. Our historical
results are not necessarily indicative of results to be expected in the future.

<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
-------------------------------------------------------- ----------------
1994 1995 1996 1997 1998 1998 1999
------- ------ ------------ ------------ ------------- ------- -------
(Unaudited) (in thousands, except per share data) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenue............. $ 156 $7,875 $ 12,743 $ 9,573 $ 6,663 $ 5,194 $ 5,609
Operating expenses:
Research and
development.......... 2,735 5,490 7,854 15,646 13,629 9,965 12,101
General and
administrative....... 912 1,385 2,306 2,266 3,494 2,493 3,097
------- ------ ------------ ------------ ------------- ------- -------
Total operating
expenses............... 3,647 6,875 10,160 17,912 17,123 12,458 15,198
------- ------ ------------ ------------ ------------- ------- -------
Income (loss) from
operations............. (3,491) 1,000 2,583 (8,339) (10,460) (7,264) (9,589)
Share of losses in
affiliate.............. (305) (220) (191)
Interest and other
income, net............ 41 491 362 1,107 80 47 (85)
------- ------ ------------ ------------ ------------- ------- -------
Net income (loss)....... $(3,450) $1,491 $ 2,945 $ (7,232) $ (10,685) $(7,437) $(9,865)
======= ====== ============ ============ ============= ======= =======
Net income (loss) per
share:
Basic................. $ (1.44) $ 0.62 $ 1.15 $ (2.64) $ (1.90) $ (2.54) $ (0.64)
======= ====== ============ ============ ============= ======= =======
Diluted............... $ (1.44) $ 0.13 $ 0.24 $ (2.64) $ (1.90) $ (2.54) $ (0.64)
======= ====== ============ ============ ============= ======= =======
Shares used in computing
net income (loss) per
share:
Basic................. 2,401 2,403 2,551 2,742 5,614 2,928 15,535
======= ====== ============ ============ ============= ======= =======
Diluted............... 2,401 11,602 12,514 2,742 5,614 2,928 15,535
======= ====== ============ ============ ============= ======= =======
</TABLE>

<TABLE>
<CAPTION>
December 31,
-------------------------------------------- September 30,
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- -------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents
and short term
investments............ $ 7,088 $ 8,699 $10,966 $13,633 $ 18,534 $ 15,339
Working capital......... 6,803 8,199 10,234 11,300 15,160 12,005
Total assets............ 7,985 11,058 15,407 24,243 37,233 26,919
Long-term portion of
obligations, net of
current portion........ 561 343 210 -- 5,802 4,079
Redeemable convertible
preferred stock........ 11,698 11,698 11,698 28,105 -- --
Accumulated deficit..... (4,755) (3,264) (319) (7,551) (18,236) (28,101)
Total stockholders'
equity (net capital
deficiency)............ 7,013 (3,196) (245) (7,035) 25,978 16,970
</TABLE>

For an explanation of the determination of shares used in computing basic
and diluted net income (loss) per share. See note 1 of notes to financial
statements. Shares of redeemable convertible preferred stock converted to
common stock on October 13, 1998, upon the completion of our underwritten
offering of 1,500,000 shares of common stock. See note 9 of notes to financial
statements.

20
<PAGE>

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

The following discussion of our financial condition and results of
operations should be read together with the financial statements and related
notes included elsewhere in this prospectus. This discussion contains forward-
looking statements that involve risks and uncertainties. Our actual results may
differ from those anticipated in these forward-looking statements as a result
of many factors. Factors that may cause such a difference include, but are not
limited to, those set forth under "Risk Factors."

Overview

We were incorporated in March 1992 and have devoted substantially all of our
resources since that time to the research and development of proprietary, small
molecule pharmaceutical compounds for the treatment of diseases involving the
interruption and subsequent restoration of blood supply and inflammation. From
our inception through September 30, 1999, we recognized cumulative revenues
from collaborative research and development agreements and grants of $42.6
million. We do not anticipate revenues from product sales or collaborative
agreement royalties for at least several years. Our sources of potential
revenue for the next several years will be payments under existing and possible
future collaborative arrangements, U.S. government research grants and possible
manufacturing revenue from collaborators for the manufacture of bulk drug
product for use in clinical testing. We have incurred cumulative losses through
September 30, 1999 of $28.1 million. We expect to incur additional significant
operating losses over at least the next several years as we continue our
clinical trial programs and expand our research and preclinical development. We
may never be able to achieve or sustain profitability in the future. Our
results of operations may vary significantly from quarter to quarter.

In June 1995, we entered into a collaborative agreement with AstraZeneca for
the research, development and marketing of NRT drugs to treat stroke,
Alzheimer's disease, traumatic brain injury and multi-infarct dementia.
AstraZeneca paid us $4.0 million upon execution of this agreement as
reimbursement for some previously incurred costs. Under the terms of this
agreement, AstraZeneca has agreed to make payments to us for development
milestones and to pay up to $6.0 million per year for five years primarily as
reimbursement for our project related research, subject to specified
limitations. Additionally, AstraZeneca bears substantially all other costs of
development work under the agreement. The $6.0 million annual research
reimbursement provision will expire in June 2000. AstraZeneca is also obligated
to reimburse us for the manufacture of bulk drug product for use in clinical
testing, and to pay royalties to us on product sales covered by the agreement.
The milestone payments potentially available to us under the AstraZeneca
agreement total $34 million, allocated among 21 separate milestones, of which
two milestones representing $3 million in total had been achieved by us as of
September 30, 1999. We may not achieve any of the remaining milestones.
AstraZeneca received exclusive worldwide marketing rights to any
pharmaceuticals resulting from the collaboration. We retain worldwide
manufacturing rights for the active ingredients of the product and an option to
obtain specified co-promotion rights in the United States for five years.
Through September 30, 1999, we recognized $34.1 million of revenue under the
AstraZeneca agreement. See "Business--AstraZeneca Alliance" for additional
information regarding our relationship with AstraZeneca.

In October 1996, we entered into a research and development collaboration
with H. Lundbeck A/S to jointly commercialize our proprietary drug compound for
Parkinson's disease. Under this agreement, we and Lundbeck jointly funded
research, development, regulatory and other nonresearch activities. Upon
achievement of specified drug development milestones, Lundbeck was to make
milestone payments. From the inception of the Lundbeck collaboration to March
1998, we had recognized $6.0 million of revenue, of which $4.3 million has been
paid in cash and $1.7 million was satisfied by the provision of services by
Lundbeck. In March 1998, Lundbeck terminated its agreement with us based
primarily on a claim that we had breached the agreement by commencing clinical
trials for AIDS dementia, using the same compound as is being used in our
Parkinson's

21
<PAGE>

disease clinical trials, without obtaining consent from Lundbeck. We disputed
this claim. In July 1998, we and Lundbeck entered into an agreement releasing
each party from any further obligations or claims under this agreement.

Results of Operations

Nine Months Ended September 30, 1998 and 1999

Revenues. Substantially all of our revenues have been derived from
collaborative research and development agreements and National Institutes of
Health, or NIH, grants. We record milestone payments received under
collaborative agreements as revenue when the funding party acknowledges that
the milestone requirements have been met. Our revenues for the nine months
ended September 30, 1999 were $5.6 million compared to $5.2 million for the
corresponding period in 1998. In each of the nine month periods, revenue
consisted primarily of research support from AstraZeneca and research grants
from the NIH. There were no signing or milestone payments recognized during
these periods. The increase in revenues for the nine months ended September 30,
1999 compared to the same period in 1998 was primarily due to increased NIH
grant revenue. This increase was partially offset by decreased manufacturing
revenue earned in 1999 from AstraZeneca as our manufacturing of drug compound
for the stroke Phase IIa clinical studies was completed in 1998.

Research and development expenses. Research and development expenses
increased to $12.1 million in the nine months ended September 30, 1999 from
$10.0 million for the same period in 1998. The increase in expenses for the
nine months ended September 30, 1999 compared to the same period in 1998 is
primarily due to increased external clinical study costs in 1999 resulting from
the initiation of Phase IIa clinical studies of our compound for AIDS dementia
in the fourth quarter of 1998. Additionally, the November 1998 completion of
the Santa Clara, California manufacturing facility resulted in increased
depreciation, amortization and facility related expenses in 1999. We expect our
research and development expenses to increase as we undertake new clinical
programs and commence more advanced phases of our Parkinson's disease and AIDS
dementia clinical trials. We are seeking to enter into additional collaborative
research and development agreements to help fund these additional expenses.
However, new collaborators may not be found and total collaborative research
revenue may not be sufficient to offset the anticipated increase in expenses.

General and administrative expenses. General and administrative expenses
increased to $3.1 million in the nine months ended September 30, 1999 from $2.5
million for the same period in 1998, primarily due to increased expenses of
operating as a public reporting company beginning in October 1998 and increased
patent activity. The additional costs of public reporting included public
relations, legal and financial printing costs. We expect that general and
administrative expenses will increase in the future as a result of our
increased corporate development activity and the addition of personnel and
facilities required to support growth in our research and development
activities. In addition, if we are successful in commercializing one or more
drugs, we will incur substantial general, selling and administrative expenses
in connection with the marketing and sales effort. However, we can not assure
you that we will be able to commercialize any of our drug candidates.

Interest and other expense, net. Interest and other expense, net for the
nine months ended September 30, 1999 consisted of net interest expense of
$85,000 compared to $47,000 of net interest expense for the same period in
1998. This change was due to increased interest costs as a result of our $8.9
million debt financing in April 1998, which was partially offset by increased
interest earned on the larger cash balance resulting from our stock offering in
October 1998. We expect to continue to incur interest costs through the
remainder of 1999 at approximately the same rate as in the nine months ended
September 30, 1999, and expect that our interest expense will increase as a
result of decreased cash balances.

Years Ended December 31, 1996, 1997 and 1998

Revenues. Revenues were $12.7 million in 1996, $9.6 million in 1997 and $6.7
million in 1998. These amounts include revenues from the AstraZeneca agreement
of $8.3 million in 1996, $7.1 million in 1997 and

22
<PAGE>

$6.4 million in 1998, revenues from the Lundbeck agreement of $3.7 million in
1996, $2.1 million in 1997 and none in 1998 and NIH grant revenue of $682,000
in 1996, $364,000 in 1997 and $217,000 in 1998. Revenues from AstraZeneca and
Lundbeck decreased in 1998 as no milestone payments were earned from either
AstraZeneca nor Lundbeck and due to termination of the Lundbeck agreement. The
financial impact of the decreased revenue was partially offset by a decrease in
research and development costs related to the Lundbeck collaboration. In 1997,
revenues decreased primarily due to a reduction in milestone payments earned,
partially offset by an increase in research and development support revenue
from Lundbeck. Our milestone revenues have varied significantly during these
periods. In 1996, milestone revenues included $2.0 million recognized under the
AstraZeneca agreement and $3.0 million under the Lundbeck agreement. In 1997,
revenues included recognition of milestone revenue of $1.0 million related to
the AstraZeneca agreement and no milestone revenue related to the Lundbeck
agreement.

Research and development expenses. Research and development expenses
increased from $7.9 million in 1996 to $15.6 million in 1997 and decreased to
$13.6 million in 1998. The increase in 1997 research and development expenses
was primarily due to initiation of AIDS dementia clinical trials in 1997 and
increased activity in our other research and development projects. The decrease
in 1998 was primarily due to a decrease in research and development expenses
related to the Parkinson's project as joint development expenses were reduced
following termination of the Lundbeck agreement, partially offset by increased
payroll and personnel expenses resulting from the hiring of additional
personnel for internal research and development and associated increased
purchases of laboratory supplies and chemicals and by increased equipment
depreciation and facilities expenses. In addition, during 1997 and 1998, we
expanded our funding of work at outside research institutions.

General and administrative expenses. General and administrative expenses
decreased slightly from $2.3 million in 1996 to $2.2 million in 1997 and
increased to $3.5 million in 1998. The increase in 1998 was primarily
attributable to increased legal, patent and deferred compensation costs, as
well as costs related to our October 1998 equity financing.

Interest and other income, net. Interest and other income, net, increased
from $362,000 in 1996 to $1.1 million in 1997, due primarily to increases in
interest received from our cash balances, which increased primarily from the
net proceeds of a $16.4 million private placement completed in early 1997. In
1998, interest and other income, net, decreased to $80,000 due to interest
expense of $859,000 related to our debt financing in June 1998, offset in part
by increased interest earned on the proceeds of our October 1998 equity
financing.

Deferred compensation. We recorded aggregate deferred compensation of
$50,000 in 1996, $2.3 million in 1997 and $2.2 million in 1998, in connection
with certain stock options and warrants that we granted in those periods. The
amortization amounts were allocated primarily to research and development
expenses, and, to a lesser extent, general and administrative expenses. See
note 9 of notes to financial statements.

Net income. We reported net income in 1996 of $2.9 million, largely as a
result of the recognition of signing and milestone revenues under our
collaborative agreements. Our net income decreased to a net loss of $7.2
million in 1997 and a net loss of $10.7 million in 1998, primarily as a result
of reduced revenue and increased operating expenses.

Liquidity And Capital Resources

From inception through September 30, 1999, we have financed our operations
primarily through $41.7 million received from private placements and
underwritten offerings of equity securities, $40.1 million generated from
corporate collaborations, $8.9 million net from a debt financing and $2.7
million from NIH grant funding. As of September 30, 1999, we had approximately
$15.3 million in cash and investment securities. We had debt obligations
totaling $6.3 million at that date, bearing interest at 14.8% per annum. The
debt obligations are secured by equipment and leasehold rights and
improvements, and are payable in monthly installments through 2002. See note 8
of notes to financial statements.

23
<PAGE>

Our operations provided cash of $5.1 million in 1996 and used $6.2 million
of cash in 1997, $7.1 million of cash in 1998 and $6.9 million of cash in the
nine months ended September 30, 1999. These contributions and uses of cash
primarily reflect our net profit or loss for these periods, as adjusted for
changes in our current assets and liabilities and deferred revenue.

Our use of cash in investing activities reflects our purchase of property
and equipment, together with purchases and sales of securities in which we had
invested our cash prior to use. Additions to property and equipment were $2.7
million in 1996, $7.5 million in 1997 and $3.5 million in 1998 and $529,000 in
the first nine months of 1999. The increased spending in 1997 compared to 1996
was primarily due to our investment in our Santa Clara, California
manufacturing facility, which was completed in 1998. Of the $15.0 million
additions to property and equipment since the beginning of 1995, we invested
approximately $9.5 million in our Santa Clara facility and approximately $5.5
million in our Sunnyvale facility. We anticipate incurring capital expenditures
of at least $20 million over the next several years to establish a commercial
scale pharmaceutical manufacturing plant and to expand our research,
development, and administrative facilities and equipment in our Santa Clara
facility. However, these expenditures have not yet been approved by our Board
of Directors, and the amount and timing of our capital expenditures will depend
on the success of clinical trials for our products and on the further
development of plans for commercial production. We plan to fund a significant
portion of our capital expenditures through loans and government grants.
However, this funding may not be available.

We believe that our current resources, together with the proceeds from this
offering, will be sufficient to meet our capital requirements for at least the
next twelve months. We anticipate that following this period we will need to
raise substantial additional funds for research, development, expansion of
manufacturing and administrative facilities and other expenses, through equity
or debt financings, research and development financings, collaborative
relationships or otherwise, prior to the commercialization of any of our
products. Our capital requirements depend on numerous factors, including:

. the progress of our research and development programs, including
clinical trials;

. the status of our existing collaborative relationship;

. the establishment of additional collaborative relationships, if any;

. the status of our existing collaborative relationship;

. the cost and pace of establishing and expanding our manufacturing
capabilities;

. the development of sales and marketing activities, if undertaken by us;

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

. competing technological and market developments.

If we are not able to complete this offering, or enter into one or more
other transactions to provide us with sufficient funds during the next twelve
months, we will be required to significantly curtail our operations and reduce
our staffing levels and other expenses, possibly including clinical trials. In
addition, even if we do complete this offering, we may need to curtail our
operations after the next twelve months if additional financing is not obtained
by that time. Additional funding may not be available to us on reasonable
terms. Any additional financing may result in dilution to existing
stockholders. Any transactions to raise additional funds may require that we
enter into arrangements that may require us to relinquish material rights to
our potential products on terms that we might otherwise find unacceptable.

Quantitative And Qualitative Disclosure About Market Risk

Interest Rate Risk

Our exposure to interest risk relates primarily to our investment portfolio
and our long-term debt obligation.

24
<PAGE>

The fair market value of our investments in fixed rate securities and debt
may be adversely impacted by fluctuations in interest rates. Our investments in
floating rate securities and debt expose our interest income and expense to
changes in interest rates.

The primary objective of our investment activities is to preserve principal
while at the same time maximizing yields without significantly increasing risk.
To achieve this objective, we invest our excess cash in debt instruments of the
U.S. Government and its agencies and high-quality corporate issuers, and, by
policy, restrict our exposure to any single corporate issuer by imposing
concentration limits. To minimize the exposure due to adverse shifts in the
interest rates we maintain an average maturity of one year or less with no
investment having over two years to maturity

The following table provides information about our financial instruments
that are sensitive to changes in interest rates.

Interest Rate Sensitivity
Principal Amount by Expected Maturity (in thousands)
Average Interest Rate

<TABLE>
<CAPTION>
Fair Value
1999 2000 2001 2002 Total 12/31/98
------- ------ ------ ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets

Available for sale
securities............... $12,906 $5,579 -- -- $18,485 $18,485
Average interest rate..... 5.5% 5.4%

Liabilities

Long term debt, including
current portion..........
Fixed rate................ $ 1,967 $2,127 $2,489 $1,186 $ 7,769
Average interest rate..... 14.8% 14.8% 14.8% 14.8% $ 7,372
</TABLE>

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, or SFAS 133, Accounting for Derivative
Financial Instruments and for Hedging Activities which provides a comprehensive
and consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS 133 is effective for years beginning after June 15,
1999 and is not anticipated to have an impact on our results of operations or
financial condition when adopted.

Year 2000 Compliance

As of the date of this prospectus, we are not aware of any Year 2000
compliance problems relating to our operations that would seriously harm our
business. We recognize the need to ensure our operations will not be adversely
impacted by Year 2000 software failures. Software failures due to processing
errors potentially arising from calculations using dates beginning with the
Year 2000 are a known risk. We have established procedures for evaluating and
managing the internal risks and costs associated with this problem and have
substantially completed any upgrade or replacement of software that is not Year
2000 compliant.

We have assessed the possible effect on our operations of the Year 2000
readiness of critical third-parties, such as our collaborative partner and our
suppliers of products and services. For instance, we have contacted our
collaborative partner and they have confirmed that they have an active Year
2000 compliance program. We have contacted the contract research organizations,
or CROs, that conduct our clinical studies to assess their state of readiness
with Year 2000 compliance. Our CROs have implemented Year 2000 compliance
programs and anticipate being compliant by year-end. Should our CROs not be
ready for the Year 2000, there could be delays in clinical trials and issues
with the validity of trial results. This could seriously harm our business and
results of operations. We have completed contingency plans to identify
alternative vendors should significant

25
<PAGE>

third parties fail to adequately address Year 2000 issues. These plans may not
fully mitigate any such failures or problems. Furthermore, there may be certain
critical third parties, such as collaborative partners, CROs, utilities,
telecommunication companies, or material vendors where alternative arrangements
or sources are limited or unavailable.

We have incurred approximately $80,000 through September 30, 1999 on
implementing a Year 2000 compliance plan. A significant portion of our total
Year 2000 project expenses is represented by existing staff that has been
redeployed onto this project. We do not believe that the redeployment of
existing staff has harmed our business or results of operations. In addition,
we do not expect incremental expenses related to the Year 2000 project to
significantly impact its operating results in any one future period.

A substantial portion of our Year 2000 compliance issues are software or
information technology, or IT, issues, which have been resolved by either by
upgrading or replacing non-Year 2000 compliant software. We have evaluated the
non-IT issues, which are not significant. We believe Year 2000 noncompliance by
our critical third-party relationships, such as our collaborative partner,
CROs, utilities, and others may be the most reasonably likely worst case
scenario. We have completed our assessment of the nature and level of this
risk, and have developed a comprehensive contingency plan to address situations
that may result if outside suppliers and service providers are unable to
achieve Year 2000 readiness.

Although we are not aware of any material operational issues associated with
preparing our internal systems for the Year 2000, or material issues with
respect to the adequacy of critical third-party systems, we still may
experience serious unanticipated negative consequences and/or significant costs
caused by undetected errors or defects in these systems or by our failure to
adequately prepare for the results of these errors or defects, including costs
of any related litigation. These consequences could seriously harm our business
and operations.

26
<PAGE>

BUSINESS

Overview

We are developing a novel class of small molecule pharmaceutical compounds
for the treatment of diseases involving the interruption and subsequent
restoration of blood supply, known as ischemia/reperfusion, and inflammation.
We believe that these disease processes create stress agents, and that these
agents activate a cascade of events in and around cells, which can lead to cell
damage and death. We believe that our compounds, which we refer to as NRTs, can
modify the cellular response to these stress agents and significantly reduce
the resulting cellular damage and death.

Our most advanced programs target diseases affecting the brain such as acute
cerebral stroke, Parkinson's disease, AIDS dementia and Alzheimer's disease. In
collaboration with AstraZeneca PLC, a multinational pharmaceutical company
based in Europe, a Phase IIa clinical study of an NRT, which we refer to as
NXY-059, for the intravenous treatment of stroke has been completed in Europe.
We are also independently conducting Phase IIa clinical studies in the United
States of an orally administered NRT for the treatment of Parkinson's disease
and AIDS dementia. We are working with AstraZeneca to develop an orally active
lead compound for the treatment of Alzheimer's disease. We believe that the
cascade of events initiated by stress agents is important in all of these
diseases. Moreover, we believe that a broad range of other diseases involve
these same processes. To evaluate these other opportunities, we are conducting
preclinical programs to develop therapeutics for the treatment of arthritis and
inflammatory bowel disease. We have also established a research program to
evaluate the potential of NRTs to treat heart attacks.

Technology

A wide variety of human diseases and disorders have been linked to cell
damage caused by the interruption and subsequent restoration of blood supply,
known as ischemia/reperfusion, and inflammation. These include acute conditions
associated with the temporary loss of blood supply such as stroke or heart
attacks and debilitating chronic diseases with which inflammation has been
associated such as Parkinson's disease, AIDS dementia, Alzheimer's disease,
arthritis and inflammatory bowel disease. We believe that the processes of
blood supply interruption/restoration and inflammation create stress agents,
such as free radicals and inflammatory mediators, and that these agents
activate a cascade of events in and around cells which leads to cell damage and
cell death. We believe that our NRT compounds can modify the cellular response
to these stress agents and significantly reduce the resulting cellular damage
and death.

As people age, production of stress agents tends to increase and the ability
of the body to cope with these agents decreases. As a result, the damaging
effects of stress agents increase with age. The brain is especially sensitive
to stress agents because it cannot replace damaged neurons and it has
relatively weak defensive systems against stress agents. One of the
consequences of this is that the production and release of relatively low
levels of stress agents have an exaggerated effect on brain cells. Parkinson's
disease and Alzheimer's disease are examples of age-associated brain diseases
that involve the production of stress agents. In addition to brain diseases,
arthritis and heart attack are conditions that are generally more severe in
aged individuals.

We believe that our NRTs reduce the cellular damage and cellular death
caused by stress agents by preventing or modulating the activation of
intracellular signaling cascades triggered by these agents, or by triggering or
modulating other intracellular pathways that inhibit the effect of these
agents. Signaling cascades within a cell determine which genes are activated at
any point in time. Since they control gene expression they are as fundamental
to the functioning of cells as the genes themselves. By modifying the
intracellular signals generated when cells are exposed to stress agents, we
believe that pathological responses can be controlled and the normal function
of cells maintained.

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<PAGE>

We have identified several ways in which we believe that NRTs regulate
cells' response to stress agents, including:

. suppressing signals that cause cells to produce inflammation inducing
agents,

. suppressing signals that cause cells to produce toxic agents that can
damage or destroy cells, and

. altering cell signaling to favor cell survival.

These properties may make it possible to treat acute conditions, like
stroke, by administering NRTs several hours after the initial incident. In
these circumstances, NRTs may be able to stop the escalating cascade of damage,
thus slowing the production of harmful agents and toxins and reducing
inflammation. Additionally, we believe that NRTs may be effective if given
chronically for the treatment of certain degenerative and inflammatory
conditions.

Our technology is based on a proprietary library of small molecule
pharmaceutical compounds, known as NRTs. This technology emerged from research
begun in the 1980's by our scientific founders, Dr. John Carney, then at the
University of Oklahoma, and Dr. Robert Floyd at the Oklahoma Medical Research
Foundation, with PBN, a small organic molecule. Building on this foundation,
over the past eight years we have investigated several different families of
chemicals and synthesized hundreds of novel compounds, many of which have shown
therapeutic potential. This drug discovery process has involved the systematic
preclinical screening and modification of compounds to improve their safety and
efficacy, and drug absorption and distribution profile, using a variety of
screening methods and disease models.

We view both acute and chronic conditions as attractive pharmaceutical
development targets. Most acute conditions require drugs that can be
administered through injection or intravenous solution in the ambulance or
hospital emergency room to achieve rapid effectiveness and that are swiftly
eliminated by the body after they have had their intended effect. Chronic
conditions usually require drugs that are orally active so that they can be
conveniently administered over a long period of treatment and preferably allow
once or twice daily dosing.

We believe that our proprietary NRTs have the following characteristics that
may make them attractive as pharmaceutical candidates:

. Efficacy Profile. NRTs have demonstrated therapeutic effects in
recognized animal models for our target diseases.

. Toxicity Profile. NRTs have shown low toxicity in animal studies at
dosage levels well above those that have demonstrated therapeutic
effects in animal models of disease. NRTs have also been administered to
human patients in Phase IIa clinical studies in stroke, Parkinson's
disease and AIDS dementia, and no treatment-limiting side effects have
been observed.

. Oral Or Intravenous Administration. We have engineered NRTs for either
oral or intravenous administration depending on the target indication.

. Manufacturability. Because our NRTs are small organic compounds, they
are relatively easy and inexpensive to manufacture compared to larger
molecules.

. Compatibility With Existing Therapeutics. Based on limited testing to
date, we have observed little or no interaction between our drugs and
existing therapies, and believe that most NRT drug candidates will prove
to be compatible and administrable with other drugs.

Business Strategy

We plan to apply our proprietary NRT technology to develop new treatments
for a broad range of acute and chronic conditions associated with blood supply
interruption/restoration and inflammation. The principal elements of our
strategy are the following:

. Target large markets with unmet medical needs. In selecting therapeutic
opportunities, we target large pharmaceutical markets that are not
adequately served by existing therapies. We initially focused on

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<PAGE>

diseases of the brain because of their substantial unmet market needs and
the brain's high degree of vulnerability to stress agents. More recently,
we have expanded our drug discovery efforts to include applications
outside the brain where blood supply interruption/restoration and
inflammation are believed to play major roles, such as arthritis,
inflammatory bowel disease and heart attack.

. Emphasize drug discovery and early stage development; partner activities
requiring substantial resources. We emphasize our research and early
stage development capabilities, focusing on the discovery and screening
of new drug candidates and the development of such candidates through
early stage clinical trials. For later stage, larger and more complex
clinical trials, and for worldwide marketing and distribution, we
generally intend to seek strategic collaborations with large
pharmaceutical companies, as we have established with AstraZeneca for
stroke and Alzheimer's disease.

. Protect proprietary position with broad patent coverage. We are building
a strong domestic and international patent position protecting our NRT
technology. Our proprietary position includes ownership of, or license
rights to, 32 United States patents, 35 United States patent
applications, 53 foreign patents and 202 foreign patent applications,
covering NRTs and their use in oxidative tissue damage, degenerative
diseases, inflammatory conditions and the aging process. We have an
active program of patent application and prosecution to protect and
expand our proprietary position in NRT-based compounds and therapies.

. Maximize value added and know how through internal
manufacturing. Because NRTs can be produced by relatively simple
manufacturing processes at relatively moderate cost, we have
established, and are currently expanding, an internal manufacturing
capability. We expect this capability to provide us with the ability to
produce the volume of active ingredient of our product needed through
the clinical trial process and early stage commercial sales, and
positions us to realize manufacturing revenues. It also permits us to
gain the knowledge and insights that come from developing and
implementing production methods and affords us the potential to enhance
our proprietary position.

Product Development Programs

The table below summarizes the status of our principal product development
programs:

<TABLE>
<CAPTION>
Compound Commercialization
Indication Name Status(1) Rights
---------- -------- ---------------------- ----------------------
<S> <C> <C> <C>
Stroke.................. NXY-059 Phase IIa Completed(2) AstraZeneca/Centaur(3)
Parkinson's disease..... CPI-1189 Phase IIa Centaur
AIDS dementia........... CPI-1189 Phase IIa Centaur
Alzheimer's disease..... N/A Preclinical AstraZeneca/Centaur(3)
Arthritis............... N/A Preclinical Centaur
Inflammatory bowel
disease................ N/A Preclinical Centaur
</TABLE>
- --------
(1) "Phase IIa Completed" means that we have completed a controlled clinical
trial of the compound in patients with the targeted disease for purposes
of testing safety and tolerability. "Phase IIa" means that we have
completed Phase I clinical trials of the compound, and have commenced a
controlled clinical trial in patients with the targeted disease for
purposes of testing safety and evaluating preliminary efficacy
information. "Preclinical" refers to projects that have progressed to the
point of intensive screening designed to select a lead compound from
potential candidates. See "--Government Regulation" for more detail
regarding these classifications.
(2) Performed in Europe under the European equivalent of an Investigational
New Drug application, or IND. A U.S. IND was not submitted. We expect to
use the trial results to support Phase IIb/III regulatory filings in the
United States and other countries. We believe that AstraZeneca will
initiate the Phase IIb/III trials, consisting of two parallel trials
totaling over 3,000 patients in North America and Europe, by mid-2000.
(3) Our commercialization rights consist of worldwide manufacturing rights as
to the active ingredient of our product and an option to acquire United
States co-promotion rights. See "--AstraZeneca Alliance."

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<PAGE>

Clinical Programs

Stroke Program

Stroke is classified into two major subtypes, ischemic and hemorrhagic.
Ischemic stroke, which is the more common form, results when blood supply to
the brain is interrupted by the blocking of a blood vessel. When the brain is
deprived of blood for more than a few minutes, brain cells begin a process
that, unless modified, will lead to their death. When blood supply is restored
to the affected area, either through clearing of the obstruction or through
collateral blood flow, it induces a cascade of stress agents that can
accelerate cell death and trigger an inflammatory response causing further
damage. This process can continue for many hours following blood restoration,
resulting in a spreading region of damaged and dead brain cells. Patients may
suffer loss of speech, muscle control and mental capacity and may become
paralyzed, comatose or die depending on which region of the brain is impaired
and the magnitude of the stroke. Hemorrhagic stroke is initiated by the rupture
of vessels supplying blood to the brain, which then causes a secondary ischemic
stroke. The resulting release of hemoglobin containing iron and other blood
factors into the brain can initiate and propagate damaging stress agents,
compounding the damage caused by the secondary ischemic stroke. As a result,
hemorrhagic strokes are often more severe than ischemic strokes.

Until recently, stroke was considered untreatable. The condition was
monitored until the patient stabilized and rehabilitation was begun. In 1996, a
blood clot dissolving agent, tissue plasminogen activator (tPA), was approved
as a therapy for ischemic stroke in the United States. The use of tPA is
intended to restore blood supply to the brain as quickly as possible. While
early blood supply restoration has proven beneficial in ischemic stroke, it
exposes tissue to oxygenated blood, which we believe can lead to a cascade of
damaging stress agents. Other approaches under development by other companies
to treat stroke utilize neuroprotective agents such as N-methyl-D-aspartate, or
NMDA, ion-channel blockers, NMDA-receptor antagonists, calcium channel blockers
and substrates for rebuilding damaged cells. The effectiveness of most of these
approaches is limited by the short window of time following the stroke during
which they must be administered, and some have serious side effects. In
addition, a number of prophylactic therapies for stroke are currently
available, such as surgery to enlarge narrowed blood vessels and the regular
use of anticlotting agents such as aspirin and ticlopidine.

We believe that NRTs may prove effective in treating stroke by neutralizing
the damaging cascade initiated by stress agents, thereby protecting nerve cells
from the damage associated with stroke. Data from preclinical studies suggest
the therapeutic window of activity for NRTs may be significantly longer than
for most other neuroprotective agents. This would be a major advantage in a
disease in which patients may not arrive at the hospital for treatment for
several hours. We also believe that it may be possible to develop an orally
administered drug for prophylactic use by individuals considered at risk for
stroke.

In collaboration with AstraZeneca, we are developing NXY-059 for intravenous
administration as a stroke drug. Preclinical studies in animal models indicate
that NXY-059 reduced neurological and behavioral consequences of permanent and
temporary blockages of blood vessels. Brain cell protection has been
demonstrated in both the core of the brain lesion and the expanding zone at
risk between the core and healthy tissue. Based on these animal studies, we
believe that NXY-059 may be efficacious in humans when used up to six or more
hours post-stroke. This compound yielded dose related brain cell protection at
doses substantially below those that show any toxicity in animal models.
Pursuant to the AstraZeneca agreement, AstraZeneca is to fund certain research,
product development and clinical studies of the drug candidate. AstraZeneca
conducted a Phase I clinical study of NXY-059 in Sweden for the purpose of
testing safety and to obtain a drug absorption and distribution profile in
healthy volunteers. This study, which included a total of 80 persons, was
completed in 1998, and no treatment-limiting side effects were observed.
AstraZeneca subsequently conducted a Phase IIa study of NXY-059 in Europe for
the purpose of testing safety and tolerability in stroke patients. No adverse
side effects were observed in this trial, for any category of stroke. We
believe, based on discussions with AstraZeneca, that AstraZeneca will initiate
Phase IIb/III trials of NXY-059 by mid-2000 to obtain information about the
efficacy of NXY-059, and to gather further information on safety. We expect the
trials to consist of

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<PAGE>

two parallel trials totaling over 3,000 patients in North America and Europe.
AstraZeneca is also currently conducting an additional Phase I study to test
safety and pharmaco-kinetics in renally-impaired patients.

Stroke is the third leading cause of death and the most common cause of
adult disability in the United States. There are approximately 500,000 new
stroke victims each year in the United States. Nearly 150,000 of these victims
die and over 100,000 suffer severe, permanent disability. Of the more than two
million stroke survivors in the United States, two-thirds have some type of
long term disability.

Parkinson's Disease Program

Parkinson's disease is a degenerative nervous system disorder caused by a
shortage of the chemical messenger dopamine, which is essential to movement
control. The disease results from the gradual depletion of dopamine producing
cells located in the region of the brain that coordinates movement, known as
the substantia nigra. Parkinson's disease symptoms generally begin later in
life after roughly 80% of the cells in this region stop functioning properly.
As these cells die, dopamine levels decline, and Parkinson's patients
experience increasing difficulty initiating and controlling movement. Symptoms
of Parkinson's disease include tremors, slowed movement, muscle rigidity and
decreased range of motion. Impaired motor control is often accompanied by
depression and/or dementia. Symptoms become progressively worse until the
patient is totally incapacitated, typically over a 10 to 15 year period. If the
patient does not die from other causes, Parkinson's disease eventually leads to
death from loss of respiratory muscle control.

Although the exact cause of Parkinson's disease is unknown, the disease is
thought to arise from a combination of genetic susceptibility, long term
exposure to natural and man-made toxins and brain inflammation.

Currently available therapeutics and many products currently under
development treat Parkinson's disease symptoms through dopamine replacement or
by prolonging the effectiveness of the dopamine produced by the brain. These
drugs elevate dopamine levels in the brain, but they do not address the
underlying causes of Parkinson's disease. Consequently, they only relieve the
symptoms of the disease, and, as the disease progresses, they tend to lose
their effectiveness and may have dose limiting side effects. A number of
companies are developing alternative therapeutic approaches. These approaches
include the use of nerve growth factors and similarly acting compounds,
compounds that promote the release of chemical messengers and dopamine cell
transplantation. We believe that NRTs may prove effective in treating
Parkinson's disease by protecting dopamine-producing cells from stress agents.

We are developing an orally administered, once-a-day dose, neuroprotective
NRT designated CPI-1189 to treat patients with Parkinson's disease. We have
tested this compound in a number of preclinical models of brain inflammation
and Parkinson's disease, and the compound has provided protection to dopamine
producing cells. Drug distribution studies in animal models have demonstrated
brain penetration while producing little toxicity at administered doses. We
believe that CPI-1189's combination of positive effect in established animal
models of Parkinson's disease and excellent drug absorption and distribution
suggest that it may prove effective in treating the progression of Parkinson's
disease, including both motor dysfunction and mental deficiency.

We have completed Phase I clinical studies of CPI-1189, primarily in the
United States. The Phase I trial was designed to assess the compound's safety
and drug absorption and distribution in healthy volunteers. In studies
involving over 180 subjects, no treatment-limiting side effects were observed.
We are currently conducting a Phase IIa clinical trial in 36 Parkinson's
disease patients for the purpose of testing safety and evaluating preliminary
efficacy information.

There are over 500,000 Parkinson's disease cases in the United States and
over four million worldwide. The onset of disease symptoms usually occurs
between ages 50 and 65, although about 15% of patients develop symptoms in
their 30s and 40s. We expect the number of Parkinson's disease cases to
continue to grow due to demographic trends and the possible earlier diagnosis
of the disease.

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<PAGE>

AIDS Dementia Program

AIDS dementia refers to the debilitating neurological and cognitive
impairments frequently associated with acquired immune deficiency syndrome, or
AIDS. Symptoms of this condition include loss of memory, loss of motor control
and behavioral abnormalities. We believe that AIDS dementia is caused by toxins
and brain inflammation produced as a result of HIV infection. Some individuals
with AIDS dementia develop a condition resembling Parkinson's disease.

No effective treatment for AIDS dementia currently exists. Antiretroviral
agents are sometimes used, but treatment response is frequently unsatisfactory.
We believe that two compounds targeted for AIDS dementia are in Phase II
clinical trials conducted by other companies.

We are developing CPI-1189 for AIDS dementia because we believe that this
compound could delay the occurrence and/or slow the progression of this
disease. In laboratory tests using human brain cells, the compound has provided
protection to cells from injury caused by toxins implicated in AIDS dementia.
Further, CPI-1189 has provided protection to brain cells in animal models of
AIDS dementia. CPI-1189 does not appear to increase the viability of HIV based
on laboratory tests. In addition, it does not appear to suppress immune system
function, based on standard rodent model tests. We believe that this compound
may also be suitable for prophylactic use by HIV infected persons not yet
exhibiting AIDS dementia.

We initiated an AIDS dementia Phase I clinical trial of CPI-1189 in the
United States in October 1997 in HIV infected individuals who were undergoing
treatment with reverse transcriptase and protease inhibitor therapies. This
trial is ongoing. No treatment-limiting side effects have been observed so far
in this trial, just as none were observed when CPI-1189 was tested in our
Parkinson's disease Phase I clinical trials. See "--Parkinson's Disease
Program." We commenced a Phase IIa clinical trial in the fourth quarter of 1998
for the purpose of testing safety and evaluating preliminary efficacy
information in 60 AIDS dementia patients. The Neuro AIDS Research Consortium, a
group of eight hospitals that receives funding from the U.S. National Institute
of Mental Health, is providing a substantial portion of the funding for this
trial, and is playing a major role in the design and management of the trial.

Although we generally intend to attempt to establish collaborations with
larger pharmaceutical companies to develop and market our drug candidates, we
may not need to do so to develop CPI-1189 for AIDS dementia. This is because we
believe that the AIDS dementia market can be reached by a relatively small
sales force, because we believe that a significant portion of the patient
population tends to actively seek and adopt new treatments, and because we
believe that AIDS dementia drug candidates may qualify for faster than normal
regulatory consideration if clinical results are supportive. These factors
could allow us to commercialize CPI-1189 for AIDS dementia without requiring
the larger resources of a major pharmaceutical company.

In the United States, over 750,000 individuals are infected with HIV,
approximately one-third of whom have AIDS. Historically, approximately one-
third of adults and one-half of children with AIDS developed neurological
complications associated with AIDS dementia. New AIDS therapies, such as the
use of protease inhibitors in combination with traditional reverse
transcriptase inhibitors, appear to be effective in extending the life span of
AIDS patients. It is not known whether the development of these new therapies
will affect the prevalence of AIDS dementia, and, if so, whether the effect
will be to increase the prevalence of the disease, due to the increase in the
life span of AIDS patients, or to decrease the prevalence of the disease, due
to the effect of the new therapies.

Pre-Clinical Programs

Alzheimer's Disease Program

Alzheimer's disease is a debilitating neurodegenerative disease which causes
progressive loss of memory, ability to communicate, time and space orientation,
and abstract thinking skills. Anxiety, depression and other changes in
personality are also common symptoms of the disease. Later stage symptoms
include loss of speech,

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<PAGE>

loss of bladder control and total dependence on caregivers. If patients do not
die of other causes during the course of the disease, Alzheimer's disease
ultimately proves fatal. Several genetic factors have been identified as risk
factors for the onset of Alzheimer's disease. Many hypotheses for the causes of
neurodegeneration in Alzheimer's disease have been proposed by medical
researchers. Recent studies suggest that brain inflammation is important to the
onset and progression of Alzheimer's disease.

Alzheimer's disease is distinguished from other dementias by the presence of
protein deposits, known as B-amyloid plaques, and by tangles in the brain. When
B-amyloid plaques comes into contact with brain tissue, they spontaneously
generate stress agents and also causes the formation of sugar by-products,
which produce additional stress agents. Brain inflammation occurs around the
plaques characteristic of Alzheimer's disease, and inflammatory cells and
mediators are typically found in brain regions affected by Alzheimer's disease.
Retrospective studies indicate that users of nonsteroidal anti-inflammatory
drugs such as ibuprofen have a lower incidence of Alzheimer's disease. Since
NRTs appear to have the ability to modify the damaging cascade caused by stress
agents, we believe that NRTs may prove to be effective in treating Alzheimer's
disease.

No effective treatment to significantly slow the progression of Alzheimer's
disease is currently available. Treatments on the market and many of those
under development focus on increasing the level of the chemical messenger
acetylcholine in the brain. The only FDA approved pharmaceuticals to treat
Alzheimer's disease enhance acetylcholine activity by inhibiting
cholinesterase, an enzyme responsible for breaking down acetylcholine in the
brain. These medications provide only limited symptomatic relief, and their
side effects can be significant. A number of other products for the treatment
of Alzheimer's disease are in clinical trials being conducted by other
companies.

Since there are no universally accepted models for Alzheimer's disease, we
utilize a battery of tests looking for candidate drugs that succeed in a
variety of disease models. Initial screens target compounds that prevent the
death of cultured brain cells caused by inflammatory mediators. Later stage
screens look for prevention of age-related decline in cognitive function in
animals. Our objective has been to identify safe compounds that protect brain
function. Several promising drug candidates have been identified, and further
preclinical drug optimization is underway. AstraZeneca supports the research
and the development of therapeutics for the treatment of Alzheimer's disease
under the AstraZeneca agreement, which funding obligation expires June 2000.
See "--AstraZeneca Alliance."

Alzheimer's disease affects four million people in the United States. The
incidence of Alzheimer's disease increases steadily with age, affecting
approximately five percent of individuals aged 65 and over 40% of people at age
80. The elderly are the fastest growing population segment in the United
States.

Arthritis Program

Arthritis is a chronic inflammatory disease of the joints. Although there
are many forms of arthritis, most patients suffer from either rheumatoid
arthritis or osteoarthritis. Rheumatoid arthritis is an autoimmune disease that
most often affects the joints of the hands, wrists or feet. It results in
thickening and inflammation of the synovial membranes, and causes progressive
damage to the joint capsule, cartilage and bone. The onset of rheumatoid
arthritis is usually gradual, typically beginning between the ages of 25 and
50. The progress of the disease is unpredictable, with up to 50% of patients
developing severe functional incapacity within ten years of initial diagnosis
of the disease. Osteoarthritis, the more pervasive form, is an age-associated
condition that results in joint pain and stiffness.

Most current arthritis medications, including aspirin and other nonsteroidal
anti-inflammatory drugs, decrease pain and swelling but do not prevent
cartilage and bone destruction. Four new anti-inflammatories have recently been
approved by the FDA. Two of these are members of a new family of drugs called
specific cyclooxygenase-2 inhibitors, which are reported to have fewer side
effects than earlier drugs. Other therapeutics for the treatment of joint
destruction in arthritis include compounds that suppress the body's immune
system, gold salts and compounds that block cell division, all of which can
produce significant side effects, such as

33
<PAGE>

reduced white blood cell count and kidney and stomach damage. Many
pharmaceutical and biotechnology firms have programs aimed at developing new
arthritis therapeutics. Several of the new therapeutics under development are
proteins intended to neutralize the effects of inflammatory cytokines such as
tumor necrosis factor.

Based on preclinical studies in established animal models of rheumatoid
arthritis, we believe that our NRTs could prove to be effective therapeutics
that reduce swelling and slow disease progression. Lead compounds have been
identified and research toward the selection of a clinical candidate is
underway.

It is estimated that approximately 2 million people in the United States
have rheumatoid arthritis and 16 million people in the United States, mostly
over 65 years old, have osteoarthritis.

Inflammatory Bowel Disease Program

Inflammatory bowel disease, or IBD, a term used to describe Crohn's disease
and ulcerative colitis, is a chronic inflammatory disorder of the
gastrointestinal tract. The cause of IBD is unknown. The onset of IBD can occur
at any age, but usually affects young adults, with women affected slightly more
often than men. Possible causes of IBD include infectious agents, autoimmunity
and inappropriate production of cytokines. The clinical symptoms of IBD include
diarrhea, bleeding, fever, cramping, abdominal pain, malaise and weight loss.
More severe symptoms may involve malnutrition, anemia, abscesses and other
extraintestinal lesions, in the case of Crohn's disease, and life threatening
complications such as acute dilatation of the colon, in the case of ulcerative
colitis. Up to 40% of patients with IBD are at increased risk for developing
gastrointestinal cancer.

IBD is a chronic illness with a clinical course characterized by intense
disease flares, periods of remission and then relapses. Therapeutically there
are only a few drugs capable of reducing the inflammatory processes in this
disorder, and most of these are severely limited by the frequency and severity
of side effects. Approximately 25% of patients with IBD will eventually require
surgical resection of the bowel. Even after surgery recurrence rates are high
and multiple surgeries, particularly in Crohn's disease, are common.

Based on preclinical efficacy studies in established animal models, we
believe that our NRT technology could provide therapeutics that will slow IBD
progression and promote healing. Lead compounds have been identified and our
scientists are in the process of optimizing these compounds to identify a
clinical candidate. Our program in IBD is currently supported by a grant from
the U.S. National Institutes of Health.

Approximately 1 million people in the United States suffer from IBD.

Research Program

We are also pursuing feasibility testing of proprietary NRTs as therapeutics
for other indications in which stress agents may be a factor. The most
extensive of these programs is for heart attack (myocardial infarction) and
associated conditions, where we are currently working to develop a lead
compound. Our research programs may receive increased government and
collaborative partner funding should promising data result from the research
underway at Centaur and in the laboratories of our sponsored academic
collaborators.

In addition to these research programs, we periodically evaluate other
potential commercial applications of our NRT technology. We believe that many
of the wide range of diseases involving blood supply interruption/restoration
and inflammation may be treatable with compounds developed using our
technology.

In evaluating new product opportunities, we often leverage the efforts of
our scientific staff with assistance from outside consultants, Scientific
Advisory Board members and contract research organizations. This enables us to
maintain a relatively small internal staff while evaluating a significant
number of product opportunities. We also utilize U.S. National Institutes of
Health Small Business Innovation Research grants to fund exploratory research.

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<PAGE>

AstraZeneca Alliance

In June 1995, we entered into an agreement with AstraZeneca for the
research, development and marketing of certain drugs to treat Alzheimer's
disease, stroke, traumatic brain injury and multi-infarct dementia. We are
primarily responsible for research work under the AstraZeneca agreement, and
AstraZeneca is primarily responsible for development work, including clinical
trials. For a description of AstraZeneca's payment obligations to us, see
"Management's Discussion and Analysis of Financial Condition and Operations--
Overview."

AstraZeneca was granted exclusive worldwide marketing rights to any products
resulting from the alliance. We retain worldwide manufacturing rights for the
active ingredient of the products. AstraZeneca has agreed to buy all of its
requirements of such substance from us so long as we meet specified
obligations, subject to specified exceptions intended to permit AstraZeneca to
maintain a second source of supply. We also have an option to obtain co-
promotion rights in the United States for five years for products covered by
the AstraZeneca agreement. We and AstraZeneca have agreed to work exclusively
with each other in the field of treating Alzheimer's disease, stroke, traumatic
brain injury and multi-infarct dementia using specified technology related to
ours, subject to limited exceptions. In addition, we have provided AstraZeneca
with a right of first negotiation to enter into agreements with us in other
diseases of the central nervous system and have agreed not to commercialize
certain compounds covered by the AstraZeneca agreement outside of the field of
Alzheimer's disease, stroke, traumatic brain injury and multi-infarct dementia.

Our agreement with AstraZeneca expires on the later of 15 years after the
first commercial sale of a licensed product, or the expiration of applicable
patents, on a country-by-country basis. Additionally, AstraZeneca can terminate
the agreement either in whole or in part, without cause, upon 12 months notice.
AstraZeneca may also terminate its research support obligations, and its
obligation to purchase products from us, upon the acquisition by a third party
engaged in the manufacture and/or sale of pharmaceutical products of more than
30% of our voting capital stock. In any event, AstraZeneca's research payment
obligations to us expire as of June 30, 2000.

The interests and motivations of AstraZeneca may not be, or may not remain,
aligned with ours, AstraZeneca may not successfully perform its development,
regulatory compliance or marketing functions, and its collaboration with us may
not continue.

Our strategy for the development, clinical trials and commercialization of
our products includes maintaining our collaborative arrangement with
AstraZeneca and establishing additional collaborations with partners,
licensors, licensees and others. To the extent that we are unable to maintain
or establish these collaborative arrangements, our research, development
efforts and business would be harmed.

Patents, Trade Secrets And Licenses

Protection of our proprietary rights is important for us to maintain our
competitive position. We actively seek, when appropriate, protection for our
products and proprietary information through United States and foreign patents.
In addition, we rely upon trade secrets and contractual arrangements to protect
proprietary information.

We own 10 United States patents, 26 United States patent applications, 11
foreign patents and 138 foreign patent applications related to NRTs and their
use as pharmaceuticals. We also hold exclusive license rights to 22 United
States patents, 9 United States patent applications, 42 foreign patents and 64
foreign patent applications related to NRTs and their use as pharmaceuticals.

Several of the patents and patent applications we license from the
University of Kentucky Research Foundation and the Oklahoma Medical Research
Foundation, and certain related technology, were licensed pursuant to an
agreement among us, the University of Kentucky Research Foundation and the
Oklahoma

35
<PAGE>

Medical Research Foundation in 1992. The underlying technology was primarily
developed by our founders, Dr. John Carney, at the Universities of Oklahoma and
Kentucky, and Dr. Robert Floyd, at the Oklahoma Medical Research Foundation.
This agreement grants us exclusive worldwide rights to the covered patents and
technology, subject to very limited exceptions. In exchange, we agreed to pay
royalties and sublicense fees to the licensors, as well as pay the patent costs
related to the subject technology. This agreement requires us to make minimum
payments of $25,000 per year until a New Drug Application, or an NDA, is
approved by the FDA, and $100,000 per year thereafter. In connection with this
agreement, Drs. Carney and Floyd transferred 200,000 shares of our common stock
to the University of Kentucky Research Foundation and the Oklahoma Medical
Research Foundation, respectively.

We are obligated by this agreement to use reasonable efforts to bring one or
more licensed products to market. The agreement expires on the later of July
2007 or the expiration of the last to expire patent. The University of Kentucky
Research Foundation and the Oklahoma Medical Research Foundation have entered
into a similar license with AstraZeneca that may be used only if this agreement
or our agreement with AstraZeneca is terminated under specified conditions,
including breach by us.

In January 1998, we entered into an additional license agreement with the
Oklahoma Medical Research Foundation pursuant to which we received an exclusive
worldwide license to specified additional patents and technology, subject to
very limited exceptions. In exchange, we paid a license initiation fee to the
Oklahoma Medical Research Foundation and agreed to pay certain royalties. The
agreement requires us to make minimum royalty payments of $10,000 per year, as
well as specified milestone payments. We are obligated to use reasonable
efforts to bring one or more licensed products to market. The agreement expires
on the later of January 1, 2013 or the expiration of the last to expire patent.

Much of our technology and many of our processes depend upon the knowledge,
experience and skills of our scientific and technical personnel. To protect our
rights to our proprietary know-how and technology, we require all employees,
consultants, advisors and collaborators to enter into confidentiality
agreements that prohibit the disclosure of confidential information to anyone
outside Centaur. These agreements also generally require disclosure and
assignment to us of ideas, developments, discoveries and inventions. These
agreements may not effectively prevent disclosure of our confidential
information or provide meaningful protection for our confidential information.
Furthermore, in the absence of patent protection, our business may be harmed by
competing technologies that others may independently develop.

Our success will also depend in part on our not infringing patents issued to
others. If our product candidates are found to infringe upon the patents of
others, our development, manufacture and sale of such potential products could
be severely restricted or prohibited. In this regard, we have received
correspondence from the lawyer for an individual that alleges that certain of
our compositions and methodologies may fall within the scope of patents owned
by this individual. Although we do not believe that these patents seriously
harm our ability to develop and commercialize our products, we cannot be
certain of this. See "Risk Factors--We may be subject to claims for
infringement of the intellectual property of third parties or for breach of the
technology licenses upon which our products are based which, with or without
merit, could be costly and time consuming to defend or settle, and if adversely
decided could materially harm us."

Cutanix--Skin Care Affiliate

Because of the anti-inflammatory properties of NRT compounds, we believe
that these compounds could be effective in treating various diseases and
disorders of the skin, including dermatitis, psoriasis and photoaging. In
January 1998, we exclusively licensed all of our current and future technology,
for use in the field of dermatology, cosmetics and other skin care
applications, to a newly formed company, Cutanix Corporation, which has
undertaken a research program to identify compounds which could be developed
into dermatological drugs or cosmetics. The license agreement provides that
either Centaur or Cutanix may obtain the exclusive right to use our compounds,
with some exceptions, by agreeing to take actions to develop the

36
<PAGE>

compound. Accordingly, Cutanix could obtain exclusive rights to a compound that
we might otherwise choose to develop. In addition, we and Cutanix agreed that
we would be the exclusive supplier of NRT active compounds to Cutanix at a
cost-based purchase price. Each party has rights to terminate the exclusivity
of this supply relationship.

As of September 30, 1999, we owned 48% of the outstanding stock of Cutanix.
We and two other principal stockholders of Cutanix have agreed to vote for one
representative of each on the Board, subject to certain limited exceptions, and
have also agreed that certain major corporate actions will require the approval
of 75% of the members of the Board of Directors, all for a period of ten years.
One of our directors, who is also our acting chief operating officer, is a
director and major stockholder, and the chief executive officer, of Cutanix.
See "Certain Transactions--Other Transactions".

Research Collaborations

We sponsor research at a number of institutions to augment our internal
resources. We have worked with scientists at the University of Kentucky and the
Oklahoma Medical Research Foundation through sponsored research contracts and
research collaborations since 1992. The research at the University of Kentucky
was conducted by Dr. Carney until he joined us as Chief Technical Officer in
June 1996. The ongoing research at the Oklahoma Medical Research Foundation is
conducted by Dr. Floyd, one of our directors, in the fields of free radical
chemistry and mechanisms of drug action.

We sponsor a research program with the Neuroscience Institute of The Queen's
Medical Center in Honolulu, Hawaii. The research program is conducted under the
direction of Professor Bo Siesjo, M.D., Ph.D., and is aimed at understanding
the role of stress agents in neurodegeneration and neuroinflammation and the
neuroprotective mechanisms of NRT action. We previously sponsored a similar
research program with Dr. Siesjo while he was at the University of Lund in
Sweden. In addition, we have research collaborations with the Universite d'Aix
Marseille (medicinal chemistry); the Department of Ophthalmology and
Neuroscience Center-Louisiana State University (preclinical studies in NRT
mechanisms of action in arthritis and myocardial ischemia); the Department of
Chemistry-University of Florida (medicinal chemistry); the Department of
Pharmacology-University of North Texas Health Science Center (preclinical
studies in brain aging and cognition) and other academic research institutions.

Manufacturing

We have completed the construction of a 30,000 square foot manufacturing
facility in Santa Clara, California. A portion of the facility is designed to
manufacture compounds for clinical trials and is licensed by the California
Department of Health Services and in production, while the remainder of the
facility is designed to manufacture compounds for commercial sale and is
currently undergoing the California licensing process. This facility is
expected to be sufficient to permit us to produce the volume of product needed
through the clinical trial process and for early commercial sales, and
positions us to realize manufacturing revenues. This facility also permits us
to gain the knowledge and insights about our products and technology that
result from developing and implementing the production methods, and affords us
the potential to enhance our proprietary position. In order to satisfy later
commercial needs, we will need to further expand our facilities, procure a
larger facility and/or enter into arrangements with third-party manufacturers.

Competition

The pharmaceutical industry is subject to intense competition and rapid and
significant technological change. Our competitors are numerous in the United
States and abroad and include pharmaceutical and biotechnology companies,
universities and other research institutions. Many of these companies and
institutions are actively engaged in activities similar to ours, including
research and development of products for stroke, Parkinson's disease, AIDS
dementia, Alzheimer's disease and arthritis. While we believe that our products
will

37
<PAGE>

offer significant advantages over available products, currently marketed
products often have a significant competitive advantage over new entrants. If
regulatory approvals are received, some of our potential products will compete
with well-established, FDA approved proprietary and generic therapies that have
generated substantial sales over a number of years and which are reimbursed
from government health administration authorities and private health insurers.
Our products under development may not be able to compete successfully with
existing therapies or with products under development by our competitors. Many
of these competitors have substantially greater financial and technical
resources and production and marketing capabilities than us, and some of these
competitors may compete with us in establishing development and marketing
agreements with pharmaceutical companies. In addition, many of our competitors
have greater experience than us in conducting preclinical testing and human
clinical trials and obtaining FDA and other regulatory approvals. Our
competitors may succeed in obtaining FDA approval for products sooner than us.

Government Regulation

The preclinical and clinical testing, manufacturing, labeling, distribution,
sales, marketing, promotion and advertising of our products and our research
and development activities are subject to extensive regulation by numerous
governmental authorities in the United States and other countries.
Pharmaceutical products intended for therapeutic use in humans are governed by
FDA and state regulations in the United States and by comparable requirements
in foreign countries. The process of completing clinical testing and obtaining
regulatory approval for a new human drug requires a number of years and the
expenditure of substantial resources.

The steps required before new human pharmaceutical products may be marketed
in the United States include:

. preclinical laboratory and animal tests;

. submission to the FDA of an Investigational New Drug, or IND,
application for clinical trials (i.e. testing in humans);

. successful completion of adequate and well-controlled human clinical
trials establishing safety and efficacy;

. the submission to the FDA of a New Drug Application, or NDA; and

. FDA approval of the NDA.

Pre-Clinical Studies. Preclinical studies are conducted in the laboratory
and in animal model systems to gain preliminary information on the drug's
efficacy and to identify safety issues. The results of these studies are
submitted to the FDA as part of the IND application.

Human Clinical Studies. Testing in humans may commence 30 days after filing
of the IND unless the FDA objects, although companies typically wait for
approval from the FDA before commencing clinical trials. Human clinical trials
are designed to collect data and information relating to drug activity, safety
and effectiveness for intended uses and proper dosing and other conditions of
use. Clinical studies are generally conducted in three sequential phases,
Phases I, II and III.

Phase I. Phase I clinical trials are typically not controlled and are
conducted with a small number of patients or healthy volunteers. Phase I trials
are designed to determine the metabolic and pharmacologic activities of the
product, to test its safety and, if possible, to gain early evidence of its
effectiveness.

Phase II. Phase II clinical trials generally involve controlled studies in a
limited number of patients to evaluate the efficacy of the product for specific
targeted indications, to determine dosage tolerance and optimal dosage, and to
determine the common short term side effects and risks associated with the
product.

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Phase III. Phase III clinical trials are controlled studies conducted to
more conclusively evaluate clinical efficacy and safety within an expanded
patient population. Phase III clinical trials often involve a substantial
number of patients in multiple study centers and may include chronic
administration of the product to assess the overall benefit-risk relationship
of the product.

A given clinical trial may combine the elements of more than one phase, and
typically two or more Phase III studies are required. The designation of a
clinical trial as being of a particular phase does not necessarily mean that
the trial will yield results sufficient to justify the continuation of clinical
testing. For example, a Phase III clinical trial may not be sufficient to
support an NDA without further clinical trials. The FDA monitors the progress
of each of the three phases of clinical testing and may alter, suspend or
terminate the trials based on the data that have been accumulated to that point
and its assessment of the risk-benefit ratio to the patient. Typical estimates
of the total time required to complete clinical testing under ordinary
circumstances vary between four and ten years.

NDA Submission. Upon completion of clinical testing which demonstrates that
the product is safe and effective for a specific indication, an NDA may be
filed with the FDA. This application includes detailed information pertaining
to product chemistry, manufacturing and quality control procedures, pre-
clinical and clinical safety and efficacy data and proposed labeling. FDA
approval of the NDA is required before the applicant may market the new
product. The FDA may or may not conclude that the NDA contains adequate data
and information pertaining to chemistry, manufacturing and quality control
procedures, and pre-clinical and clinical safety and efficacy data, to justify
approval of the NDA, and the FDA could require the generation and submission of
additional data and information prior to approving the NDA. The FDA could also
impose significant limitations on the approved conditions of use of a product
as a condition for approval. Applicants must pay substantial user fees to the
FDA at the time an NDA is filed, and the FDA is generally obligated to issue an
action letter pertaining to the NDA within 12 months after its receipt.

Post-Approval FDA Regulation. Even after initial FDA approval has been
obtained, further studies may be required to provide additional data on safety.
Further, separate approval in the form of a supplemental NDA or a new NDA is
required for the marketing of a product as a treatment in clinical indications
other than those for which the product was initially tested. Also, the FDA may
require post-marketing testing and surveillance programs to monitor the drug's
effects. Side effects resulting from the use of pharmaceutical products may
require the adoption of restrictive or precautionary labeling and could result
in the NDA being withdrawn according to established procedures. Further, the
FDA actively monitors and regulates the labeling and advertising of approved
prescription drugs to assure that the copy is consistent with the scope of the
approval and is not otherwise false or misleading.

Regulation of Manufacturing. In addition to obtaining FDA approval for each
product, each United States and foreign drug manufacturing establishment must
be registered with the FDA and, if applicable, licensed by the State of
California or other states. Manufacturing establishments providing drug for use
in the United States are subject to inspections by the FDA every two years, and
must comply with FDA-mandated Good Manufacturing Practices, or GMP. The failure
to adhere to GMP can result in suspension of manufacturing until substantial
compliance with GMP is achieved, the recall of previously distributed products,
the imposition of the equitable remedies of disgorgement or restitution in the
case of medically necessary products and, ultimately, in the withdrawal of the
NDA.

Other U.S. Regulation. In addition to regulations enforced by the FDA, we
are also subject to regulation under the Occupational Safety and Health Act,
federal environmental protection statutes, the Toxic Substances Control Act,
the Resource Conservation and Recovery Act and other present and future
federal, state and local regulations. Failure to comply with applicable
regulatory requirements can, among other things, result in fines, suspensions
and/or withdrawals of regulatory approvals, product recalls, prohibitions
against manufacture, distribution, sales and/or marketing and criminal
prosecution of a company and/or its officers and employees. We believe that we
are in compliance with applicable environmental regulations, and we do not
expect future

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costs associated with maintaining our current facilities in compliance to have
a significant impact on our financial position. However, the cost of
environmental compliance could significantly increase the cost of constructing
additional manufacturing capacity in the future.

Regulation Outside the U.S. For distribution outside the United States, we
will be subject to FDA export requirements and foreign regulatory requirements
governing human clinical trials and marketing approval for drugs. The
requirements relating to the conduct of clinical trials, product licensing,
pricing and reimbursement vary widely from country to country.

As noted above, Centaur and AstraZeneca have conducted Phase I and IIa
clinical trials of our stroke compound in Europe. These trials were not
conducted pursuant to an FDA IND. See "--Stroke Program." In general, the FDA
accepts foreign studies to support clinical investigations in the United States
or marketing approval so long as such studies are well designed, well-
conducted, performed by qualified investigators and conducted in accordance
with ethical principles acceptable to the world community. Foreign studies
would not typically be sufficient to form the sole basis for marketing approval
in the United States, and clinical studies would typically need to be conducted
in the United States as well. See "Risk Factors--Clinical studies for our
stroke drug candidate were conducted outside the United States and may not be
accepted to support regulatory filings in the United States."

If some of our proprietary compounds are eventually marketed in the United
States, we may be required to manufacture the drug substance for such sales in
the United States pursuant to the provisions of our NIH grants.

Scientific Advisory Board

We have established a Scientific Advisory Board composed of individuals with
expertise in free radical chemistry, drug discovery model development, drug
screening, clinical pharmacology and clinical medicine. Scientific Advisory
Board members assist us in identifying scientific and product development
opportunities, review with management the progress of our projects and assist
in the recruitment and evaluation of our scientific staff. Scientific Advisory
Board members receive compensation for the services they provide to us. Most
Scientific Advisory Board members have substantial commitments to third
parties, which commitments may conflict or compete with their obligation to us.
Accordingly, they devote only a small portion of their time to matters related
to us. Dr. Floyd, one of our directors, is Chairman of the Scientific Advisory
Board.

The following individuals are members of our Scientific Advisory Board:

General Advisors

Bruce Ames, Ph.D. Dr. Ames is Professor of Biochemistry and Molecular
Biology and Director of the National Institute of Environmental Health Sciences
Center at the University of California, Berkeley. Dr. Ames is a member of the
National Academy of Sciences and has published extensively on the detection of
free radical damage to DNA in biological tissue and the role of antioxidants,
vitamins and enzymes in aging. Dr. Ames consults with us in the areas of
oxidative stress agents biochemistry and the role of antioxidants in
mitochondrial function and aging.

Nicholas Bazan, M.D., Ph.D. Dr. Bazan is Professor of Ophthalmology,
Biochemistry and Molecular Biology, and Neurology and Director of the
Neurosciences Program at Louisiana University Medical School in New Orleans,
Louisiana. Dr. Bazan is an internationally recognized neuroscientist,
ophthalmologist and lipid biochemist and has published over 300 peer reviewed
papers in the area of inflammatory processes and the role of cyclooxygenase-2
and platelet activating factor. Dr. Bazan consults with us in the areas of
inflammatory mechanisms, ophthalmology and arthritis.

M. Flint Beal, M.D. Dr. Beal is Professor and Chair of Neurology at Cornell
University Medical School in New York, New York. Dr. Beal has published over
200 peer reviewed papers on the preclinical and clinical

40
<PAGE>

importance of metabolically derived oxidative stress agents in aging and
disease. Dr. Beal is recognized for his research in the roles of mitochondrial
dysfunction and free radical-induced damage in neurodegeneration. Dr. Beal
consults with us in the areas of neurodegeneration mechanisms and Parkinson's
disease therapeutics.

Ronald Mason, Ph.D. Dr. Mason is Head, Free Radical Metabolite Section,
Laboratory of Pharmacology and Chemistry, National Institute of Environmental
Health Sciences, National Institute of Health, Research Triangle Park, North
Carolina. Dr. Mason has published more than 200 peer reviewed articles on the
chemistry of free radicals and the mechanism of action of antioxidants. Dr.
Mason consults with us in the areas of disease mechanisms and the mechanism of
NRT action.

Bo Siesjo, M.D., Ph.D. Dr. Siesjo is Director of Research at the
Neuroscience Institute of the Queen's Medical Center, Honolulu, Hawaii. Dr.
Siesjo is the former Chairman of the Experimental Brain Research Center, Lund
University Hospital, University of Lund, Sweden. He has published over 500 peer
reviewed articles on the biochemistry of stroke and metabolic neurodegenerative
conditions. His research into the role of calcium in mitochondrial dysfunction
in stroke and epilepsy is internationally recognized. He consults with us in
the areas of neurodegenerative processes and stroke and trauma therapeutics.

Earl Stadtman, Ph.D. Dr. Stadtman is Chief, Section on Enzymes, Laboratory
of Biochemistry, National Heart, Blood and Lung Institute, at the National
Institutes of Health in Bethesda, Maryland. Dr. Stadtman is a member of the
National Academy of Science and has published over 200 peer reviewed articles
on the biochemistry of free radicals, free radical damage to proteins and
lipids and the mechanisms of action for antioxidants. Dr. Stadtman consults
with us in the areas of free radical biochemistry and NRT mechanism of action.

Specific Therapeutic Program Advisors

Stroke and Trauma

Lars Hillered, M.D., Ph.D. Dr. Hillered is Professor of Neuroscience at
Uppsala University Medical Center, Uppsala, Sweden. Dr. Hillered has published
more than 100 peer reviewed articles on the neurochemistry and treatment of
stroke and trauma. He consults with us in the areas of mechanisms of brain
damage and NRT mechanism of action in stroke.

Parkinson's Disease

J. William Langston, M.D. Dr. Langston is President of the Parkinson's
Institute in Sunnyvale, California. Previously, Dr. Langston was Senior
Scientist and Director of the Parkinson's Disease Research Program for the
Institute of Medical Research in San Jose, California. In addition to his
clinical research background in Parkinson's disease, Dr. Langston co-
discovered the toxin MPTP and its mechanism of producing Parkinson-like
neurodegeneration, which is used as a model of Parkinson's disease. Dr.
Langston consults with us in the area of preclinical and clinical Parkinson's
disease research.

C. Warren Olanow, M.D. Dr. Olanow is Professor and Chairman of the
Department of Neurology of Mount Sinai School of Medicine, Mount Sinai Medical
Center, New York, New York. Dr. Olanow has published extensively on the
biochemistry of Parkinson's disease development and progression. He consults
with us in the area of Parkinson's disease treatment.

Alzheimer's Disease

Konrad Beyreuther, Ph.D. Dr. Beyreuther is Professor of Molecular Biology at
the Zentrum fur Molekulare Biologie, Heidelberg University, Heidelberg,
Germany. Dr. Beyreuther has published extensively on the mechanism of amyloid
plaque formation and the etiology of Alzheimer's disease. Dr. Beyreuther
consults with us in the area of Alzheimer's disease therapeutics.

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<PAGE>

Albert Dresse, M.D., Ph.D. Dr. Dresse is Professor of Pharmacology at the
University of Liege Medical School, Liege, Belgium. Dr. Dresse's fields of
expertise include neurodegeneration, electrophysiology and molecular biology of
learning, memory and aging. Dr. Dresse consults with us in the area of
Alzheimer's disease.

Zaven Khachaturian, Ph.D. Dr. Khachaturian is Director of the Ronald and
Nancy Reagan Institute for Alzheimer's Research. He is the former Program
Director of the Neuroscience and Neurology of Aging Division of the National
Institute of Aging. He consults with us in the area of Alzheimer's disease
therapeutics.

William Markesbery, M.D. Dr. Markesbery is Professor of Pathology and
Neurology at the University of Kentucky College of Medicine and Director of the
Sanders-Brown Center on Aging. In addition, he is the Director and Principal
Investigator of the Alzheimer's Disease Research Center. Dr. Markesbery has
particular expertise in Alzheimer's disease and served on the U.S.
Congressional advisory panel on dementing illnesses. Dr. Markesbery has
published over 250 articles on brain pathology and Alzheimer's disease. He
consults with us in the area of Alzheimer's disease mechanisms and clinical
trial design.

Communication with many members of the Scientific Advisory Board takes place
on a regular basis. In accordance with consulting agreements we have with these
advisors, discoveries made as part of the consulting activity are generally our
property. Should scientific discoveries be made by a member of the Scientific
Advisory Board in conjunction with other research at another institution rather
than while acting as a consultant to us, that discovery would generally be
owned by the researcher or that institution. If such a discovery were deemed to
be helpful in our own research, we would have to enter into a license agreement
in order to utilize the discovery. We rely on our scientific advisors to assist
us in formulating our research and development strategy. Retaining and
attracting qualified advisors will be critical to our success.

Employees

As of September 30, 1999, we had 90 full-time employees of which 24 have
Ph.D. and/or M.D. degrees. Of our full time employees, 56 work in research and
development, 15 work in manufacturing, product development and quality
assurance/quality control and 19 work in finance and administration. We had 66
employees on December 31, 1996, 87 employees on December 31, 1997 and 86
employees on December 31, 1998. Our employees are not represented by any
collective bargaining unit, we have never experienced a work stoppage, and we
believe that our employee relations are good.

Properties

We lease approximately 31,000 square feet of laboratory and office space in
a facility in Sunnyvale, California. The lease expires in 2001. We also lease a
77,000 square foot facility in Santa Clara, California, in which we have
recently completed the construction of a 30,000 square foot manufacturing plant
that is designed to comply with GMP. A portion of the Santa Clara facility,
designed to manufacture compounds for clinical trials, is licensed by the
California Department of Health Services and in production, while the remainder
of the facility, which is designed to manufacture compounds for commercial
sale, is currently undergoing the California licensing process. This lease
expires in 2004. While we believe that our existing facilities are sufficient
to produce the volume of product needed for clinical trials and early
commercial sales, we expect that larger facilities will be needed for any later
stage commercial sales. We may not be able to obtain such space on commercially
reasonable terms.

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MANAGEMENT

Executive Officers, Directors and Key Employees

Our executive officers, directors and key employees are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Steinar J. Engelsen, M.Sc.,M.D.(2)(5).. 49 Acting Chief Executive Officer and
Chairman of the Board of Directors
Charles R. Engles(1)................... 52 Acting Chief Operating Officer and
Director
John M. Carney, Ph.D.(1)(2)............ 53 Chief Technical Officer and
Director
Lucy O. Day............................ 41 Vice President, Finance, Chief
Financial Officer, Treasurer and
Secretary
William A. Garland, Ph.D............... 55 Executive Vice President,
Pharmaceutical Development
Kirk R. Maples, Ph.D................... 41 Vice President, Pharmaceutical
Discovery
John J. Vajda.......................... 60 Vice President, Operations
Graham K. Crooke, MB.BS.(2)(3)(5)...... 41 Director
Robert A. Floyd, Ph.D.(5).............. 59 Director
Selvi Vescovi(3)(4)(5)................. 69 Director
</TABLE>
- --------
(1) Member of the Intellectual Property Oversight Committee.
(2) Member of the Regulatory Oversight Committee.
(3) Member of the Compensation Committee.
(4) Member of the Finance and Audit Committee.
(5) Member of the Nominating Committee.

Steinar J. Engelsen, M.Sc., M.D. Dr. Engelsen was appointed Acting Chief
Executive Officer effective January 1, 2000, and has been a director of Centaur
and member of the Regulatory Oversight Committee since June 1998 and a member
of the Nominating Committee since September 1999. He was elected Chairman of
the Board of Directors in February 1999. Dr. Engelsen has been a consultant to
Centaur since February 1999. Since November 1996, Dr. Engelsen has been a
partner of Teknoinvest Management AS, a venture capital firm based in Norway.
From 1989 until September 1996, Dr. Engelsen held various management positions
within Hafslund Nycomed AS, a pharmaceutical company based in Europe, and
affiliated companies. He was responsible for therapeutic research and
development, most recently serving as Senior Vice President, Research and
Development of Nycomed Pharma AS from January 1994 until September 1996. Dr.
Engelsen received an M.Sc. in nuclear chemistry and an M.D. from the University
of Oslo, and is a Certified European Financial Analyst. Dr. Engelsen is a
director of several privately-held companies.

Charles R. Engles. Mr.Engles was appointed Acting Chief Operating Officer
effective December 15, 1999, and has been a director of Centaur and a member of
the Intellectual Property Oversight Committee since June 1998. Since November
1997, Mr. Engles has been President and Chief Executive Officer of Cutanix, an
affiliate of Centaur engaged in development of products for dermatology,
cosmetics and other skin care applications. From October 1994 until March 1997,
Mr. Engles was Chairman and Chief Executive Officer of Stillwater Mining Co., a
platinum and palladium mining and processing company. From May 1989 until
October 1994, Mr. Engles was Senior Vice President of Johns Manville Corp., a
building materials company, where he was responsible for mining operations and
corporate development. Mr. Engles received a B.A. in electrical engineering
from Rice University, an M.Sc. in management from the University of Warwick and
a Ph.D. in operations research from Stanford University. Mr. Engles also
studied as a Rhodes scholar at Oxford University.

John M. Carney, Ph.D. Dr. Carney is a co-founder of Centaur and has been a
director since its inception in March 1992. Dr. Carney has been a member of the
Intellectual Property Oversight Committee since May 1998 and the management
representative to the Regulatory Oversight Committee since June 1998. Dr.
Carney

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was President of Centaur from March 1992 until October 1992 and Chairman of the
Board of Directors from October 1992 until July 1996. After four years as a
scientific consultant to Centaur, Dr. Carney joined Centaur as its full time
Chief Technical Officer in June 1996. From 1987 until June 1996, Dr. Carney was
an Associate Professor of Pharmacology at the University of Kentucky College of
Medicine. He has published over 100 papers in the fields of pharmacology and
neurophysiology. Dr. Carney received a B.S. in biology from St. Mary's College,
an M.S. in vertebrate zoology from San Diego State University, and a Ph.D. in
pharmacology from the University of Michigan at Ann Arbor.

Lucy O. Day, CPA. Ms. Day joined Centaur as Controller in February 1994. She
was appointed Director of Finance in February 1997, Director of Finance and
Administration in February 1998, Vice President, Finance, Chief Financial
Officer and Treasurer in February 1999, and Secretary in September 1999. Prior
to joining Centaur, Ms. Day worked at Bank of America NT&SA from 1990 to
January 1994, most recently as Vice President, Financial Consolidation and
Reporting from January 1993 to January 1994. Ms. Day received a B.A. in
political economies of industrial societies from the University of California
at Berkeley and is a Certified Public Accountant in the State of California.

William A. Garland, Ph.D. Dr. Garland joined Centaur as Vice President,
Pharmaceutical Development in August 1994 and became Executive Vice President,
Pharmaceutical Development in February 1997. Prior to joining Centaur, Dr.
Garland spent 20 years with Hoffmann-La Roche Inc., a pharmaceutical company,
most recently as Senior Director and U.S. Head of International Project
Management from March 1991 until July 1994. Dr. Garland received a B.S. in
chemistry from the University of San Francisco and a Ph.D. in medicinal
chemistry from the University of Washington School of Pharmacy.

Kirk R. Maples, Ph.D. Dr. Maples joined Centaur as Director of Biochemistry
in May 1993. He became Senior Director and Group Project Leader in February
1995 and Vice President, Pharmaceutical Discovery in February 1996. Prior to
joining Centaur, Dr. Maples was an Associate Scientist at the Inhalation
Toxicology Research Institute from 1989 to April 1993 and was a Clinical
Assistant Professor at the University of New Mexico College of Pharmacy from
August 1991 to April 1993. Dr. Maples received a B.S. in chemistry from the
University of Missouri at Kansas City and a Ph.D. in inorganic chemistry from
Duke University.

John J. Vajda. Mr. Vajda joined Centaur in January 1997 as Director of
Operations and became Vice President, Operations in charge of facilities,
manufacturing and process development in February 1998. Prior to joining
Centaur, Mr. Vajda was General Manager at Biostride, Inc., an in vitro
diagnostic product company, from October 1995 to October 1996. From February
1993 to October 1995, Mr. Vajda was Director of Operations of OCULEX
Pharmaceuticals, Inc., a manufacturer of pharmaceuticals for eye care. Mr.
Vajda has attended New York University in biology and chemistry.

Graham K. Crooke, MB.BS. Dr. Crooke has been a director of Centaur since
September 1995, a member of the Compensation Committee since November 1995 and
a member of the Regulatory Oversight Committee since June 1998 and a member of
the Nominating Committee since September 1999. Since September 1997, Dr. Crooke
has been a principal of Ticonderoga Capital, Inc., formerly Dillon Read Venture
Capital, a venture capital firm that provides management services to Concord
Partners II, L.P., a principal stockholder of Centaur, and also a general
partner of the general partner of Concord Partners II, L.P. From April 1992 to
September 1997, Dr. Crooke held various positions with Dillon Read Venture
Capital, most recently as Vice President. Dr. Crooke is a director of several
privately held companies. He earned his medical degree from the University of
Western Australia and an M.B.A. from the Stanford Graduate School of Business.

Robert A. Floyd, Ph.D. Dr. Floyd is a co-founder of Centaur and has been a
director of Centaur since March 1999 and a member of the Nominating Committee
since September 1999. Dr. Floyd has been head of the Free Radical Biology and
Aging Program at the Oklahoma Medical Research Foundation and Professor of
Biochemistry and Molecular Biology at the University of Oklahoma Medical School
in Oklahoma City, Oklahoma since 1987. Dr. Floyd has published over 200 peer-
reviewed papers on the identification and quantification of free radicals in
biological systems, their roles in aging and disease, and related subjects.

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Dr. Floyd received a B.S. and M.S. in agronomy and agriculture from the
University of Kentucky and a Ph.D. in agronomy from Purdue University. Dr.
Floyd is Chairman of our Scientific Advisory Board and a consultant to Centaur.

Selvi Vescovi. Mr. Vescovi has been a director of Centaur since May 1996 and
a member of the Finance and Audit Committee and Compensation Committee since
May 1998 and a member of the Nominating Committee since September 1999. Since
1988, Mr. Vescovi has been a consultant to the pharmaceutical industry. Prior
to 1988, Mr. Vescovi spent 35 years with Upjohn Company, a pharmaceutical
company, serving in a variety of senior positions, including President and
General Manager of the International Division. From May 1992 until June 1996,
Mr. Vescovi was Chairman of the Board of Carrington Laboratories, Inc., a
research-based pharmaceutical and medical device company. Mr. Vescovi currently
is a director of Carrington Laboratories, Inc. and one privately held company.
Mr. Vescovi received a B.S. in biology from the College of William and Mary.

Our current authorized Board size is six directors. Directors are elected at
each annual meeting of stockholders to serve until the next annual meeting of
stockholders, or until their successors are elected and qualified. A director's
term may end earlier if he or she dies, resigns or is removed.

Board Committees

Finance and Audit Committee. The Finance and Audit Committee of the Board
consists of Mr. Vescovi and one open position. The Finance and Audit Committee
reviews our financial statements and accounting practices, makes
recommendations to the Board regarding the selection of independent auditors
and reviews the results and scope of the audit and other services provided by
our independent auditors.

Compensation Committee. The Compensation Committee of the Board consists of
Dr. Crooke and Mr. Vescovi. The Compensation Committee makes recommendations to
the Board concerning salaries and incentive compensation for our officers and
employees and administers our employee benefit plans.

Regulatory Oversight Committee. The Regulatory Oversight Committee of the
Board consists of Drs. Engelsen and Crooke. The Regulatory Oversight Committee
oversees our regulatory compliance and clinical trial activities.

Intellectual Property Oversight Committee. The Intellectual Property
Oversight Committee consists of Dr. Carney and Mr. Engles. The Intellectual
Property Oversight Committee makes recommendations to the Board regarding our
intellectual property portfolio and reviews our policies and procedures for
protecting our intellectual property rights.

Nominating Committee. The Nominating Committee consists of Dr. Engelsen, Dr.
Crooke, Dr. Floyd and Mr. Vescovi. The Nominating Committee identifies, screens
and recommends to the Board qualified candidates for Board vacancies.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee of the Board was an
officer or employee of Centaur during 1998. No executive officer of Centaur
serves as a member of the board of directors or compensation committee of any
for-profit entity that has one or more executive officers serving on our Board
or Compensation Committee, except that Mr. Frenzel, a former executive officer,
served on the Board of Directors of Cutanix in 1999. The chief executive
officer and a director of Cutanix, Mr. Engles, is a director and acting chief
operating officer of Centaur.

Director Compensation

Effective January 1999, each of our outside directors (including the
Chairman of the Board of Directors) receives cash compensation for his services
and reimbursement for reasonable expenses in attending Board and

45
<PAGE>

Board committee meetings. Cash compensation consists of a $1,500 per quarter
retainer, $1,500 per Board meeting attended in person, $500 per Board meeting
attended by telephone, and $500 per Board committee meeting attended. In
addition, each year, each outside director receives options to purchase 5,000
shares of our common stock under the Directors Plan, as described below. New
outside directors receive prorated option grants under the Directors Plan when
they join the Board. The Chairman of the Board of Directors also receives
$1,500 per day for consulting services rendered on-site outside of Board
meetings and options to purchase 15,000 shares of our common stock per year at
fair market value under a consulting agreement.

Prior to 1999, our directors did not receive cash compensation for their
services as directors (other than Mr. Vescovi, who received a fee of $1,000 per
month). However, we did reimburse directors for their reasonable expenses in
attending Board meetings and grant them equity incentives. In February 1998,
Dr. Crooke and Mr. Vescovi each received a nonqualified stock option under our
1993 Equity Incentive Plan to purchase 5,000 shares of common stock at $4.00
per share, expiring in 2008. Also in February 1998, Dr. Engelsen, who became a
director of Centaur in June 1998, received a warrant to purchase 5,000 shares
of common stock at $4.00 per share. This warrant vests monthly over 36 months
as long as Dr. Engelsen is a consultant and/or director. In connection with his
June 1998 appointment as a director of Centaur, Mr. Engles received a
nonqualified stock option to purchase 5,000 shares of common stock at $6.50 per
share, expiring in 2008.

In June 1998, the Board adopted the Directors Plan, which became effective
on October 13, 1998. As of December 31, 1999, 125,000 shares of common stock
were reserved for issuance under the Directors Plan and options to purchase
41,111 shares of common stock at an exercise price of $11.00 per share were
outstanding. Only Board members who are not our employees are eligible to
participate in the Directors Plan. Each eligible director who first becomes a
member of the Board is automatically granted an initial option for a number of
shares equal to 417 shares multiplied by the number of full and partial
calendar months between the date he or she first becomes a director and the
following May 1. On May 1 of each year, each eligible director is automatically
granted an additional option to purchase 5,000 shares if the director has been
a member of the Board continuously since the date of grant of the director's
initial option, or if the director did not receive an initial option, he or she
has served continuously as a Board member since the prior May 1. All options
granted under the Directors Plan will vest monthly over a three-year period,
with one thirty-sixth of the shares vesting each month, provided that the
optionee continues to be a member of the Board or a consultant to Centaur. The
exercise price of all options granted under the Directors Plan will be the fair
market value of the common stock on the date of grant, as determined by our
Board.

46
<PAGE>

Executive Compensation

The following table shows all compensation awarded to, earned by or paid for
services rendered to us in all capacities during 1997, 1998 and 1999 by our
chief executive officer and our other executive officers or former executive
officers who earned at least $100,000 in 1999.

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Compensation
Awards Securities
Annual -----------------
Compensation Underlying
Name and Principal Positions Year Salary Options(#)
- ---------------------------- ---- ------------ -----------------
<S> <C> <C> <C>
Brian D. Frenzel*......................... 1999 $255,331 15,600
Former President and Chief Executive
Officer 1998 232,514 20,000
1997 218,877 15,000

John M. Carney, Ph.D...................... 1999 $202,732 10,125
Chief Technical Officer 1998 192,933 15,000
1997 157,219 6,250

Lucy O. Day............................... 1999 $125,792 25,075
Chief Financial Officer 1998 100,673 11,400
1997 90,305 6,000

William A. Garland, Ph.D.................. 1999 $210,934 25,280
Executive Vice President, 1998 198,711 20,000
Pharmaceutical Development 1997 187,056 20,000

Kirk R. Maples, Ph.D. .................... 1999 $130,729 7,605
Vice President, Pharmaceutical Discovery 1998 121,357 7,500
1997 126,403 10,000
</TABLE>
- --------
* Mr. Frenzel resigned from his positions as Centaur's President and Chief
Executive Officer, effective December 31, 1999. Steinar J. Engelsen was
appointed Acting Chief Executive Officer effective January 1, 2000 and his
annual compensation in the form of payment under a consulting agreement was
$39,500 in 1999.

47
<PAGE>

The following table shows information about each option grant during 1999 to
the executive officers named in the Summary Compensation Table above. According
to Securities and Exchange Commission rules, the table shows the hypothetical
gains or "option spreads" for each option at the end of its ten-year term.
These gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the option was granted to the end of
the option term.

Option Grants in 1999

<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Percent of Price
Number of Total Options Appreciation for
Securities Granted to Exercise Option Term
Underlying Employees in Price per Expiration -----------------
Name Options Granted 1999 Share Date 5% 10%
- ---- --------------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Brian D. Frenzel........ 15,600 5.0% $11.00 2/26/09 $107,918 $273,486
John M. Carney, Ph.D.... 10,125 3.2 11.00 2/26/09 70,043 177,503
Lucy O. Day............. 25,075 8.0 11.00 2/26/09 173,465 439,594
William A. Garland,
Ph.D................... 25,280 8.1 11.00 2/26/09 174,883 443,188
Kirk R. Maples, Ph.D.... 7,605 2.4 11.00 2/26/09 52,610 133,325
</TABLE>

The 5% and 10% assumed annual compound rates of stock price appreciation
in the table above are required by the rules of the Securities and Exchange
Commission and do not represent our estimates or projections of future common
stock prices.

All the options shown in the above table are incentive stock options to
purchase shares of common stock. Options vest monthly over a four-year period,
with one forty-eighth of the shares vesting each month, provided that the
optionee continues to render services to us. The options were granted at an
exercise price equal to the fair market value of our common stock on the date
of grant, as determined by our Board.

The following table provides information about stock options exercises by
each of the executive officers named in the Summary Compensation Table above
during the fiscal year ended December 31, 1999. It also provides information
about unexercised stock options held by these officers as of December 31, 1999,
and values of "in-the-money" options that represent the positive spread between
the respective exercise prices of outstanding stock options and the fair market
value of our common stock as of December 31, 1999. The value of in-the-money
options is based on a value of $11.00 per share, the fair market value of our
common stock as of December 31, 1999, as determined by our Board of Directors.

Aggregate Option Exercises in 1999
and Year-End Values

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- in-the-money Options
Shares End at Fiscal Year-End
Acquired on Value ------------------------- -------------------------
Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brian D. Frenzel........ 0 $ -- 137,115 27,235 $1,377,381 $115,120
John M. Carney, Ph.D.... 0 -- 23,855 17,520 191,899 71,276
Lucy O. Day............. 0 -- 80,103 27,372 770,726 55,374
William A. Garland,
Ph.D................... 0 -- 67,711 35,790 598,581 123,982
Kirk R. Maples, Ph.D.... 25,500 276,675 88,800 12,845 912,086 54,182
</TABLE>

48
<PAGE>

Employment Agreement

We entered into an employment agreement with Mr. Frenzel, effective as of
December 1, 1993, in connection with Mr. Frenzel's service as our President and
Chief Executive Officer. The employment agreement had an initial term of four
years and provided that Mr. Frenzel would receive an initial minimum salary of
$175,000 as a full-time employee. The employment agreement renewed
automatically for successive one-year terms on the same terms and conditions,
unless either party notified the other of its intention to terminate at least
90 days before the expiration of the applicable term. The employment agreement
provides that we may terminate Mr. Frenzel's employment with or without cause,
or that Mr. Frenzel may terminate his employment voluntarily. If we terminate
the employment agreement with cause, or if Mr. Frenzel terminates the
employment agreement voluntarily, we are only obligated to pay Mr. Frenzel
compensation and benefits he would otherwise have received through the
effective date of his termination. If we terminate the employment agreement
without cause, we must pay Mr. Frenzel a severance payment equal to six months'
salary, payable on our normal payroll dates during that period. However, if Mr.
Frenzel obtains other full-time employment during the six-month period, we will
pay him one half of the amount we would have been obligated to pay from the
date he obtains other employment until the end of the six-month period.

Under the terms of the employment agreement, we granted Mr. Frenzel an
incentive stock option to purchase up to 300,000 shares of common stock at a
price of $0.15 per share. This option was fully vested on July 1, 1998. To
date, Mr. Frenzel has purchased 221,250 shares of common stock upon exercise of
the option.

In connection with Mr. Frenzel's resignation as an officer and director of
Centaur effective December 31, 1999, we currently anticipate entering into a
transitional employment and consulting agreement with Mr. Frenzel. It is
expected that such agreement will have the following general terms:

. From January 1, 2000 to December 31, 2000, Mr. Frenzel will be a part-
time employee of Centaur reporting to the Chairman of the Board and/or
Chief Executive Officer.

. During this period, Mr. Frenzel will continue to receive his current
salary and benefits, and his options will continue to vest.

. From January 1, 2001 to December 31, 2003, Mr. Frenzel will be a part-
time consultant to Centaur reporting to the Chairman of the Board and/or
CEO.

. During this period Mr. Frenzel will be paid $125 per hour for his
consulting services, as requested by the Company, and his options would
continue to vest.

. Centaur and Mr. Frenzel would enter into a mutual release and
indemnification provisions.

The arrangements with Mr. Frenzel have not been finalized, and accordingly
there can be no assurance that the parties will enter into this agreement.

Employee Benefit Plans

1993 Equity Incentive Plan. As of December 31, 1999, under our 1993 Equity
Incentive Plan, options to purchase 1,403,678 shares of common stock at
exercise prices from $0.10 to $10.00 per share were outstanding and options to
purchase 734,935 shares of common stock had been exercised. No further options
may be granted under the 1993 Incentive Plan, which has been terminated and
replaced by our 1998 Equity Incentive Plan. Options granted under the 1993
Incentive Plan before its termination remain outstanding in accordance with
their terms. Generally, options granted under the 1993 Incentive Plan are
subject to the terms described below for options granted under the 1998
Incentive Plan.

1998 Equity Incentive Plan. Our 1998 Equity Incentive Plan became effective
on October 13, 1998 and is the successor equity incentive program to our 1993
Incentive Plan. As of December 31, 1999, under options granted pursuant to our
1998 Incentive Plan, to purchase 318,247 shares of common stock at an exercise
price of $11.00 were outstanding, 83 shares of common stock had been exercised,
and 817,788 shares of common

49
<PAGE>

stock were available for grant in connection with options, stock bonuses and
restricted stock awards. In addition, the following shares will be available
for grant and issuance in connection with future awards under the 1998
Incentive Plan:

. Shares subject to issuance upon exercise of an option granted under the
1993 Incentive Plan or the 1998 Incentive Plan that cease to be subject
to that option for any reason other than exercise of the option,

. Shares subject to an award granted under the 1998 Incentive Plan that are
subsequently repurchased by us at the original issue price, and

. Shares subject to an award that otherwise terminates without shares being
issued.

The 1998 Incentive Plan allows us to grant stock options and stock bonuses
and to issue restricted stock to our employees, officers, directors,
consultants, independent contractors and advisers. The 1998 Incentive Plan is
administered by the Compensation Committee of the Board, currently consisting
of Dr. Crooke and Mr. Vescovi. The Compensation Committee may grant options
that are either incentive stock options or nonqualified stock options, and may
determine the terms of the options, including vesting, subject to certain
limitations. The exercise price of incentive stock options must be 100% of the
fair market value of our common stock on the date of grant, and the exercise
price of nonqualified stock options may not be less than 85% of the fair market
value of our common stock on the date of grant. The Compensation Committee may
also grant participants stock bonus awards and restricted stock awards to
purchase common stock for not less than 85% of its fair market value at the
time of grant. The other terms of bonus and restricted stock awards may be
determined by the Compensation Committee. The 1998 Incentive Plan will
terminate in 2008, unless terminated earlier in accordance with its provisions.

1998 Employee Stock Purchase Plan. In June 1998, the Board adopted our 1998
Employee Stock Purchase Plan, although we have not yet begun offering shares of
common stock under this plan. As of December 31, 1999, 125,000 shares of common
stock were reserved for issuance under the Stock Purchase Plan. On each
subsequent January 1, the number of shares reserved for issuance under the
Stock Purchase Plan increases automatically by a number of shares equal to one
quarter of one percent of the total outstanding shares of common stock
outstanding on the immediately preceding December 31, limited to a maximum of
200,000 shares per year. Under the Stock Purchase Plan, once the first offering
period commence, eligible employees may acquire shares of our common stock
through payroll deductions. Except for the initial offering
under the Stock Purchase Plan, each offering under the Stock Purchase Plan will
be for a period of eighteen months, consisting of three six-month purchase
periods. Except for the first offering period, offering periods will begin on
February 1 and August 1 of each year. The Board has the authority to determine
the date the first offering period will begin and its length. The Board has the
power to set the beginning of any offering period, to terminate any offering
period under certain circumstances and to change the length of offering periods
without stockholder approval, provided that the change is announced at least 15
days before the scheduled beginning of the first offering period to be
affected. Eligible employees may select a payroll deduction rate of between
2.0% and 10.0% of their compensation, up to a maximum total payroll deduction
of $25,000 in any calendar year. The purchase price for common stock purchased
under the Stock Purchase Plan is 85% of the lesser of the fair market value of
our common stock on the first day of the offering period or on the last day of
the applicable purchase period.

50
<PAGE>

CERTAIN TRANSACTIONS

Since January 1, 1996, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we were or are to be
a party in which the amount involved exceeds $60,000 and in which any director,
executive officer or holder of more than five percent of our common stock or
will have a direct or indirect material interest other than compensation
arrangements, which are described where required under "Management," and the
transactions described below.

Securities Issuances

From February through October 1997, we sold 2,200,000 shares of our Series D
Preferred Stock to 60 individual and institutional investors at $7.50 per
share, for a total price of $16,500,000, paid in cash. The investors listed
below, who were our executive officers, directors or their affiliates, five
percent stockholders and/or members of a five percent stockholder group at the
time of the purchase, bought shares in the offering on the same terms as other
investors:

. Paul F. Glenn, Trustee, Paul F. Glenn Revocable Trust (66,667 shares),
and the Glenn Foundation (33,334 shares), members of a five percent
stockholder group;

. Brian D. Frenzel, Former President, Chief Executive Officer and director
and a five percent stockholder (10,000 shares);

. Selvi Vescovi, a director (5,000 shares);

. Charter Ventures II, L.P. (40,000 shares), member of a five percent
stockholder group;

. Menlo Ventures IV, L.P. (66,666 shares), a five percent stockholder; and

. Oklahoma Medical Research Foundation (20,000 shares), of which an
executive officer and trustee was then a director of Centaur.

In October 1998, we sold 1,500,000 shares of common stock in an underwritten
private offering, primarily to individual and institutional investors in
Europe. The price was 14.65 Swiss francs (CHF) per share, which, using the
exchange rate prevailing at the time of the transaction, approximated $11.00
per share. We received aggregate gross proceeds of $16,500,000 before deducting
underwriting discounts and commissions and other offering expenses. Eiken
Invest 98 AS, an investment fund, purchased 4,720 shares, and Charles R. Engles
purchased 10,000 shares, of common stock in this offering on the same terms as
other investors. Dr. Engelsen, one of our directors and our Acting Chief
Executive Officer, has shared voting and dispositive power over the shares
purchased by Invest 98 AS, but disclaims beneficial ownership.

From January 1, 1996 to December 31, 1999, we issued warrants to purchase
45,000 shares of common stock to our consultants as compensation. The exercise
prices of the warrants ranged from $3.00 to $11.00 per share. Of these, a
warrant to purchase 5,000 shares of common stock at $4.00 per share was issued
to Dr. Engelsen in February 1998. Dr. Engelsen was a consultant to Centaur
before joining our Board in September 1998.

From January 1, 1996 to December 31, 1999, we granted the following options
to purchase shares of common stock:

. options to purchase 1,207,229 shares to employees, officers, directors
and consultants, at exercise prices from $0.30 to $10.00, under the 1993
Incentive Plan;

. options to purchase 334,367 shares to employees, officers and
consultants, at an exercise price of $11.00, under the 1998 Incentive
Plan; and

. options to purchase 45,834 shares to directors, at an exercise price of
$11.00, under the Directors Plan.

From January 1, 1996 to December 31, 1999, we issued 735,018 shares of
common stock to employees, directors and consultants, at exercise prices from
$0.10 to $11.00, under the 1998 Stock Plan and, prior to October 13, 1998, the
1993 Incentive Plan.

51
<PAGE>

Indebtedness of Management

In January 1998, we made a short-term relocation loan to Joseph L. Turner,
who was then our Chief Financial Officer and Treasurer. The principal amount of
$371,322 accrued interest at an annual rate of 6%. Mr. Turner repaid the
balance of $342,679 (net of expenses we paid) and $1,997 in accrued interest in
February 1998. Mr. Turner resigned from his positions as Chief Financial
Officer and Treasurer, effective February 12, 1999.

Other Transactions

Mr. Engles, one of our directors and our acting chief operating officer, is
the chief executive officer and a director and major stockholder of Cutanix, a
corporation formed in November 1997 to develop dermatological drugs and
cosmetics. We currently own 48% of the outstanding stock of Cutanix, and Mr.
Engles currently owns 17.2% of its outstanding stock. In January 1998, we
exclusively licensed to Cutanix all of our current and future technology for
the fields of dermatology, cosmetics and other skin care applications. The
license agreement also provides that either we or Cutanix may obtain the
exclusive right to use our compounds, with some exceptions, by agreeing to take
specified actions to develop the compound. Accordingly, Cutanix could obtain
exclusive rights to a compound that we might otherwise choose to develop. We
and Cutanix also entered into a services and supply agreement in January 1998
under which we agreed to provide certain administrative and other services to
Cutanix at cost. In addition, we and Cutanix agreed that we would be the
exclusive supplier of NRT active compounds to Cutanix (subject to specified
rights of each party to terminate this exclusivity) at a cost-based purchase
price. We provided approximately $260,000 in cash and services to Cutanix under
this agreement. This amount was subsequently converted to stock. We, Mr. Engles
and another stockholder of Cutanix have agreed to vote for one representative
of each on the Board, subject to some limited exceptions, and have also agreed
that specified major corporate actions will require the approval of 75% of the
members of the Board of Directors, all for a period of ten years. In October
1998, a trust affiliated with Paul Glenn, and an investment fund managed by an
entity of which Steinar Engelsen is a partner, each invested $275,000 in
Cutanix. Paul Glenn is a significant stockholder of ours, and Steinar Engelsen
is our Chairman of the Board and our acting chief executive officer. See
"Business--Cutanix--Skin Care Affiliate" and note 2 of notes to financial
statements.

Dr. Floyd, who is the Chairman of our Scientific Advisory Board and a
director, also provides consulting services to us from time to time under a
consulting agreement. From January 1996 to September 30, 1999, we paid Dr.
Floyd $161,000 as compensation for consulting services. Separately, Dr. Floyd
received an option to purchase 10,000 shares of common stock at a purchase
price of $0.50 per share in May of 1996 in connection with his service as a
Scientific Advisory Board member and consultant. We also fund research in Dr.
Floyd's laboratory at the Oklahoma Medical Research Center on the evaluation of
NRTs that may be useful as pharmaceuticals. Since January 1, 1996, we paid the
Oklahoma Medical Research Center $336,000 under a research contract for work
done in Dr. Floyd's laboratory.

Dr. Engelsen, who is Chairman of our Board of Directors and our acting chief
executive officer, also provides consulting services to us under a consulting
agreement. The agreement provides for a fee of $1,500 per day for consulting
services rendered on site outside of Board meetings and options to purchase
15,000 shares of common stock per year at fair market value.

52
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table shows information about the beneficial ownership of our
common stock as of December 31, 1999, and as adjusted to reflect the sale of
common stock in this offering, by:

. each person we know to be the beneficial owner of more than five percent
of our common stock,

. each of our directors,

. each of our executive officers listed in the Summary Compensation Table
above, and

. all of our current executive officers and directors as a group.

Percentage ownership is based on 15,595,831 shares outstanding as of
December 31, 1999 and 16,675,831 shares outstanding after the offering. Unless
otherwise indicated below, the persons and entities named in the table have
sole voting and sole investment power for all shares beneficially owned,
subject to community property laws where applicable. Shares of common stock
subject to options or warrants that were exercisable as of December 31, 1999 or
would become exercisable within 60 days after December 31, 1999 are considered
outstanding and beneficially owned by the holder of the options or warrants to
compute that person's percentage ownership. However, they are not treated as
outstanding to compute the percentage ownership of any other person.

<TABLE>
<CAPTION>
Percentage of
Shares
Beneficially
Number of Owned
Shares -----------------
5% Stockholders, Directors and Named Executive Beneficially Before After
Officers Owned Offering Offering
- ---------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Graham K. Crooke, MB.BS. andConcord Partners
II, L.P.(1).................................. 1,611,939 10.3% 9.6%
535 Madison Avenue, 36th Floor
New York, New York 10022
Paul F. Glenn(2).............................. 1,389,979 8.9 8.3
c/o Glenn Foundation
1250 Coast Village Road, Suite K
Santa Barbara, California 93108
Menlo Ventures IV, L.P.(3).................... 1,290,692 8.3 7.7
3000 Sand Hill Road, Bldg. 4, Ste. 100
Menlo Park, California 94025
Bismuth Investments Limited(4)................ 1,142,857 7.3 6.8
Suite 922C
Europort, Gibraltar
Charter Ventures, a California limited
partnership(5)............................... 1,053,637 6.8 6.3
525 University Avenue, Suite 1500
Palo Alto, California 94301
Neuroscience Partners Limited Partnership(6).. 990,475 6.4 5.9
100 International Boulevard
Etobicoke, Ontario,
Canada M9W 6J6
Brian D. Frenzel(7)........................... 937,924 6.0 5.5
c/o Centaur Pharmaceuticals, Inc.
484 Oakmead Parkway
Sunnyvale, California 94086
</TABLE>

53
<PAGE>

John M. Carney, Ph.D.(9)....................... 615,173 3.9 3.6

William A. Garland, Ph.D.(10).................. 145,178 * *

Lucy O. Day(11)................................ 82,103 * *

Charles R. Engles(12).......................... 40,514 * *

Steinar J. Engelsen, M.D.(13).................. 24,973 * *

Selvi Vescovi(14).............................. 21,978 * *

All executive officers and directors as a group
(8 persons)(15)............................... 3,340,316 21.1 19.7
</TABLE>
- --------
* Less than 1% of our outstanding common stock
(1) Represents 10,208 shares of common stock that may be acquired upon
exercise of stock options held by Dr. Crooke that are exercisable within
60 days after December 31, 1999, 17,316 shares of common stock
beneficially owned by Dr. Crooke and 1,584,415 shares held of record by
Concord Partners II, L.P. Of the 17,316 shares beneficially owned by Dr.
Crooke, 10,129 shares are held by Dillon, Read & Co. Inc., as agent, which
shares investment control with respect to the shares with Dr. Crooke. The
investment policies and affairs of Concord Partners II, L.P. are managed
by its general partner, Venture Associates II, L.P. CPML Associates, Inc.
is the managing general partner of Venture Associates II, L.P. Dr. Crooke,
one of our directors, is a general partner of Venture Associates and one
of three principals of CPML.
(2) Represents 1,300,812 shares held of record by Paul F. Glenn, Trustee, Paul
F. Glenn Revocable Trust and 89,167 shares held of record by Glenn
Foundation. Mr. Glenn is President and a member of the Board of Directors
of Glenn Foundation.
(3) MV Management IV, L.P., a California limited partnership, is the sole
general partner of Menlo Ventures IV, L.P. and is deemed to have voting
and investment power with respect to the shares held by Menlo Ventures IV,
L.P.
(4) Bismuth Investments Limited is a British Virgin Islands corporation.
Bismuth's Board of Directors has voting and investment control of the
shares held by Bismuth.
(5) Represents 440,000 shares held of record by Charter Ventures II L.P. and
613,637 shares held of record by Charter Ventures, a California limited
partnership. Mr. A. Barr Dolan and Chavencap, Limited, a British Virgin
Islands corporation, are each general partners of Charter Ventures and
each may be deemed to have voting and investment power with respect to the
shares held by Charter Ventures. The Managing Director of Chavencap,
Limited is Mr. Johnson Cha.
(6) MDS Associes-Neuroscience Inc., a Canada corporation, is the sole general
partner of Neuroscience Partners Limited Partnership and is deemed to have
voting and investment power with respect to the shares held by
Neuroscience Partners Limited Partnership.
(7) Represents 797,971 shares held of record by Mr. Frenzel and his wife and
139,953 shares of common stock that may be acquired upon exercise of stock
options that are exercisable within 60 days after December 31, 1999. Does
not include 27,998 shares held of record by a former director on behalf of
the Frenzels' minor children. Also does not include 89,167 shares held of
record by Glenn Foundation, of which Mr. Frenzel serves as a member of the
Board of Directors. See footnote (2). Mr. Frenzel is a former President,
Chief Executive Officer and director.
(8) Represents 800,000 shares held of record by Dr. Floyd and/or Mrs. Floyd as
trustee(s) of certain trusts for the benefit of Dr. and Mrs. Floyd and
members of their family and 11,764 shares of common stock

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that may be acquired upon exercise of stock options that are exercisable
within 60 days after December 31, 1999. Dr. Floyd is Chairman of our
Scientific Advisory Board and a consultant to us.
(9) Represents 589,802 shares held of record by Dr. Carney and his wife as
joint tenants and 25,371 shares that may be acquired upon exercise of stock
options that are exercisable within 60 days after December 31, 1999. Does
not include 60,000 shares held of record by a former director as custodian
for the Carney's minor children. Dr. Carney is our Chief Technical Officer
and one of our directors.
(10) Represents 74,279 shares held of record by Dr. Garland and his wife and
70,899 shares of common stock that may be acquired upon exercise of stock
options that are exercisable within 60 days after December 31, 1999. Dr.
Garland is our Executive Vice President, Pharmaceutical Development.
(11) Represents shares of common stock that may be acquired upon exercise of
stock options that are exercisable within 60 days after December 31, 1999.
(12) Represents 26,514 shares held of record by Mr. Engles, 10,000 shares
beneficially owned by Mr. Engles and 4,027 shares that may be acquired
upon exercise of stock options that are exercisable within 60 days after
December 31, 1999. Mr. Engles is one of our directors and our acting chief
operating officer.
(13) Represents 3,333 shares of common stock that may be acquired upon exercise
of a warrant to the extent that such warrant is exercisable within 60 days
after December 31, 1999 and 5,000 shares that may be acquired upon
exercise of stock options that are exercisable within 60 days after
December 31, 1999. Also includes 11,920 shares owned of record by Eiken
Invest 97 and 4,720 shares held of record by Eiken Invest 98. Dr. Engelsen
shares voting and dispositive power with respect to shares held by Eiken
Invest '97 and Eiken Invest '98 but disclaims any beneficial ownership.
Does not include 254,747 shares held of record by Teknoinvest IV ANS, an
investment fund managed by Teknoinvest Management AS, of which Dr.
Engelsen is a partner. Dr. Engelsen is the Chairman of our Board of
Directors, our acting chief executive officer and a consultant.
(14) Represents 5,000 shares held of record by Mr. Vescovi and 16,978 shares of
common stock that may be acquired upon exercise of stock options that are
exercisable within 60 days after December 31, 1999. Mr. Vescovi is one of
our directors.
(15) Includes 229,683 shares of common stock that may be acquired upon exercise
of stock options and warrants that are exercisable within 60 days after
December 31, 1999, and 1,584,415 shares held of record by Concord Partners
II. L.P. See footnote (1). Excludes 937,924 shares of common stock, and
stock options that are exercisable within 60 days after December 31, 1999,
held by Brian D. Frenzel as Mr. Frenzel resigned from his positions as
Centaur's President and Chief Executive Officer, effective December 31,
1999. See footnote (7).

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DESCRIPTION OF CAPITAL STOCK

Immediately following the closing of this offering, our authorized capital
stock will consist of 33,000,000 shares of common stock, $0.001 par value per
share, and 3,000,000 shares of preferred stock, $0.001 par value per share. Of
those authorized shares, as of December 31, 1999, 15,595,831 shares of common
stock were outstanding and held of record by approximately 156 stockholders. In
addition, as of December 31, 1999, options to purchase 1,763,036 shares of
common stock and warrants to purchase 45,000 shares of common stock were
outstanding. We have agreed to restrictions on our ability to issue capital
stock prior to December 31, 2000 and to additional restrictions in our ability
to issue capital stock following any initial public offering and listing that
we may consummate. See "Underwriting."

Common Stock

After giving effect to this offering, and based on the shares of common
stock and options and warrants outstanding on December 31, 1999, we will have
16,324,169 authorized but unissued shares of common stock. Of these shares,
2,956,879 shares are reserved for issuance pursuant to warrants outstanding as
of December 31, 1999 and options outstanding as of December 31, 1999 pursuant
to our 1993 and 1998 Incentive Plans, Directors Plan and Purchase Plan. All of
our authorized and outstanding shares of common stock are "registered" shares,
which means that the holders of those shares are registered in our stock
register maintained by our transfer agent. In the following description, a
"stockholder" is the holder of a registered share of common stock.

Subject to preferences that may apply to any preferred stock outstanding at
the time, the holders of outstanding shares of common stock are entitled to
receive dividends out of legally available assets when and in the amounts the
Board of Directors determines.

Each stockholder is entitled to one vote for each share of common stock held
on all matters submitted to a vote of stockholders. Our Certificate of
Incorporation does not provide for cumulative voting for the election of
directors. This means that the holders of a majority of the shares voted can
elect all of the directors standing for election. The common stock is not
entitled to preemptive rights and is not subject to conversion or redemption.
Upon liquidation, dissolution or winding-up of Centaur, the assets legally
available for distribution to stockholders are distributable ratably among the
holders of the common stock outstanding at that time, after payment of
liquidation preferences, if any, on any outstanding preferred stock and payment
of other claims of creditors. Each outstanding share of common stock is, and
all shares of common stock to be outstanding upon completion of this offering
will be, fully paid and nonassessable.

Preferred Stock

No shares of preferred stock are outstanding. The Board of Directors is
authorized, subject to any limitations under Delaware law, to provide for the
issuance of up to 3,000,000 shares of new preferred stock in one or more
series, to establish from time to time the number of shares to be included in
those series, to fix the powers, designations, preferences and rights of the
shares of each wholly unissued series and any of its qualifications,
limitations or restrictions. The Board may also increase or decrease the number
of shares of any series, but not below the number of shares of a series already
outstanding, without any further vote or action by the stockholders. The Board
may authorize the issuance of preferred stock with voting or conversion rights
that could adversely affect the voting power or other rights of the holders of
common stock. Thus, the issuance of preferred stock may have the effect of
delaying, deferring or preventing a change in control. We have no current plan
to issue any shares of preferred stock.

Warrants

As of December 31, 1999, we had outstanding warrants to purchase 45,000
shares of common stock at a weighted average per share exercise price of $5.11
Currently outstanding warrants will remain outstanding after the closing of
this offering and will expire between May 2001 and February 2004.

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Anti-Takeover Provisions

Delaware Law

Although it does not apply to us now, we could become subject to the
provisions of Section 203 of the Delaware General Corporation Law regulating
corporate takeovers if, in the future, our stock were listed on a U.S. national
securities exchange, authorized for quotation on the Nasdaq National Market or
held of record by more than 2000 stockholders. Section 203 prevents certain
Delaware corporations from engaging, under limited circumstances, in a
"business combination," which includes a merger or sale of more than 10% of the
corporation's assets, with any "interested stockholder," or a stockholder who
owns 15% or more of the corporation's outstanding voting stock, as well as
affiliates and associates of such stockholder, for three years following the
date that stockholder became an "interested stockholder" unless:

. the transaction is approved by the board prior to the date the
"interested stockholder" attained that status;

. upon the closing of the transaction that resulted in the stockholder's
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced; or

. on or subsequent to such date the "business combination" is approved by
the board and authorized at an annual or special meeting of stockholders
by at least two-thirds of the outstanding voting stock that is not owned
by the "interested stockholder."

This provision, if it applied to us, could prohibit or delay mergers or
other takeover or change-in-control attempts and, accordingly, may discourage
attempts to acquire us.

Charter and Bylaw Provisions

Our Certificate of Incorporation and Bylaws contain provisions that could
discourage potential takeover attempts and make it harder for stockholders to
change management. Our Certificate of Incorporation provides that, effective
upon the earlier of the closing of an underwritten public offering of shares of
our common stock in which such shares are listed on the Swiss Exchange, the New
York Stock Exchange, the American Stock Exchange or the Nasdaq National Market,
and December 31, 2000, stockholders may not take action by written consent but
may only act at a stockholders' meeting. Our Bylaws provide that only the
Chairman of the Board, the Chief Executive Officer, the President, a majority
of the Board or the holders of a majority of our outstanding common stock may
call special meetings of stockholders.

Registration Rights

The holders of approximately 10,879,402 outstanding shares of common stock
have the right to require us to register their shares with the Securities and
Exchange Commission so that those shares may be publicly resold. These holders,
plus the holders of an additional 1,839,364 shares of outstanding common stock
and common stock issuable upon exercise of outstanding warrants, can also
require us to include their shares in specified registration statements that we
file.

Demand Registration Rights

At any time more than six months after the closing of this offering, the
holders of 40% of the 10,879,402 outstanding shares with demand registration
rights may require us to file a registration statement so that they can
publicly sell their shares, provided that holders request that at least 30% of
the outstanding shares with demand registration rights be included in the
registration or the value of shares to be sold in the registration exceeds
$3,000,000. Upon this request, we must, subject to restrictions and
limitations, use our best efforts to cause a registration statement covering
the requested number of shares to become effective. The holders may only
require us to effect two registrations in response to their demand registration
rights.

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If we are eligible to file a registration statement on Form S-3, the holders
of either at least 20% of the shares with demand registration rights or the
holders of a majority of the 2,156,667 shares of common stock issued upon
conversion of our previously outstanding Series D Preferred Stock can demand
that we file a registration statement on Form S-3, subject to limitations and
provided that the value of the securities to be sold in that registration
exceeds $500,000.

Piggyback Registration Rights

If we register any securities for public sale, other than in connection with
an employee benefit plan or a corporate reorganization, holders of the demand
registration rights referred to above and holders of approximately 1,839,364
outstanding shares and shares of common stock issuable upon exercise of
outstanding warrants have the right to include those shares in the registration
statement. The underwriters of any underwritten offering will have the right to
limit the number of shares included.

Expenses of Registration

We generally will pay all expenses of any demand or piggyback registration,
other than underwriters' or brokers' discounts and commissions. Participating
holders pay all expenses of S-3 registrations after the first S-3 registration.

Expiration of Registration Rights

These demand and piggyback registration rights expire in 2008. However,
registration rights terminate earlier with respect to a particular holder's
securities if that holder may sell them in a three-month period without
registration under Rule 144.

Transfer of Shares

Our common stock is issued only in registered form, which means that the
holders of our shares are registered in our stock register maintained by our
U.S. transfer agent and registrar. The U.S. transfer agent and registrar for
our common stock is ChaseMellon Shareholder Services LLC, 85 Challenger Road,
Ridgefield Park, New Jersey 07660, United States.

The shares of common stock offered hereby may be traded from time to time in
the Swiss over-the-counter market. This market consists of negotiated
transactions from time to time between investors, who may act through banks or
brokers. Trading of our common stock in the Swiss over-the-counter market is
expected to be very limited. While indications of the price at which investors
might be willing to buy or sell shares of common stock may be available from
time to time to banks, brokers and other financial institutions over electronic
media, and may be available through Bank Vontobel, this information will not
otherwise be available to the public. In addition, this information may not be
indicative of the price at which shares of common stock would actually be
purchased or sold. Information as to the price and volume of actual
transactions in the common stock in the Swiss over-the-counter market is not
publicly reported or available in any printed or electronic media. Furthermore,
the Swiss over-the-counter market is not subject to specific regulation or
regulatory oversight.

In general, the common stock will trade in the Swiss over-the-counter market
only through transfers of beneficial interests held through the Swiss Nominee
Company, or SNOC. Any investor who holds a certificate representing shares of
common stock, rather than these beneficial interests, and who desires to sell
such shares of common stock in the Swiss over-the-counter market, will be
required to deposit the certificate with the U.S. transfer agent. The U.S.
transfer agent will register the shares in the name of SNOC in order to make
the share certificates eligible for the Swiss Security Clearing System, called
SegaIntersettle, or SIS, and tradable over-the-counter in Switzerland through
Bank Vontobel and the investor would receive a beneficial interest therein.
Certificates representing shares of common stock held through SNOC will not be
issued unless the

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shares are withdrawn from SNOC, in which case the shares will not be eligible
to trade in the Swiss over-the-counter market unless redeposited as described
above. SNOC will be the registered owner of all shares of common stock that are
held by investors through SNOC.

Generally, all transfers of common stock traded in the Swiss over-the-
counter market will be registered by brokers and other financial institution
and SIS in SNOC's books. In this connection SIS is acting as a clearing house
for transactions involving more than one broker or other financial
institutions. The U.S. transfer agent will not know the beneficial owners of
the common stock that is held through SNOC. The brokers and other financial
institutions will be responsible for keeping account of the common stock
holdings on behalf of their customers.

Communications by us to our stockholders who hold their common stock through
SIS regarding stockholders' meeting and dividend payments will be transmitted
through the U.S. transfer agent to SNOC. SNOC will transmit these
communications to SIS, who will, upon request of brokers or other financial
institutions, make available such communications to brokers or other financial
institutions for the benefit of the investors.

SNOC will consent or vote with respect to such shares on behalf of
beneficial owners thereof provided it receives appropriate instruction from
brokers or other financial institutions acting on behalf of beneficial owners
in accordance with SNOC's standard rules and procedures and any laws or other
regulations applicable to us.

Any dividend or other payments on common stock held through SNOC will be
made by us to the U.S. transfer agent who upon receipt of such payments, will
credit SNOC for the amount of such payments. Payments by SNOC to the beneficial
owners of common stock will be governed by SNOC's and SIS's customary
practices, and will be the sole responsibility of SNOC subject to any statutory
or regulatory requirements as may be in effect from time to time. Any dividends
will be converted into Swiss Francs and distributed by SIS.

Persons purchasing shares of the common stock offered pursuant to this
prospectus will be required to enter into a market lock-up agreement in the
form attached as Appendix A to this prospectus. The market lock-up agreement
prohibits the sale of shares of the common stock issued in this offering for up
to 180 days after our initial public offering in which shares of common stock
are listed on an internationally recognized securities exchange or quotation
system. The lock-up agreement will not apply to any shares purchased in this
offering that are included in such future initial public offering. It is not
known at this time whether, and to what extent, shares purchased in this
offering will be permitted to be included in any such future initial public
offering. The share certificates issued in connection with this offering will
bear a legend reflecting this market lock-up agreement. See "Shares Eligible
for Future Sale".

Other than the legend and restrictions on transfer resulting from the market
lock-up agreement described above, the shares of common stock sold in this
offering will not bear any other restrictive legends or be subject to other
restrictions on transfer. However, any persons acting as "underwriters" (within
the meaning of the Securities Act) and, until the date 90 days after the date
of this prospectus, any dealers, will be required to deliver a current
prospectus in the form contained in the registration statement filed with the
U.S. Securities and Exchange Commission (or the most recent amendment, if any,
to such prospectus) in connection with any offers or sales in the United
States. See "Where You Can Find More Information." Under the Securities Act,
the term "underwriter" includes any person who directly or indirectly
participates in the distribution of the common stock. This term is not limited
to the manager of this offering and other banks, dealers and securities
professionals but would include investors who resell shares in transactions
that are part of the distribution. An offer or sale may be deemed to have been
made in the United States:

. if selling efforts are made in the United States by or on behalf of the
seller;

. if the shares are offered to a person in the United States;

. if the transaction has been prearranged with a buyer in the United
States; or

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. under certain circumstances if the seller or any person acting on its
behalf does not reasonably believe that the buyer is outside the United
States.

Since October 13, 1998, our common stock has been traded from time to time
in the Swiss over-the-counter market. This market consists of negotiated
transactions from time to time between investors, who may act through banks or
brokers. Trading of our common stock in the Swiss over-the-counter market has
been very limited. See "Risk Factors--There is currently only a very limited
trading market for our shares of common stock, and there is not expected to be
an active public market for our shares after this offering".

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MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS

General

The following is a general discussion of the material United States federal
income and estate tax consequences of the ownership and disposition of common
stock that may be relevant to you if you are a non-United States Holder. In
general, a "non-United States Holder" is any person or entity that is, for
United States federal income tax purposes, a foreign corporation, a nonresident
alien individual, a foreign partnership or a foreign estate or trust. This
discussion is based on current law, which is subject to change, possibly with
retroactive effect, or different interpretations. This discussion is limited to
non-United States Holders who hold shares of common stock as capital assets.
Moreover, this discussion is for general information only and does not address
all of the tax consequences that may be relevant to you in light of your
personal circumstances, nor does it discuss special tax provisions that may
apply to you if you relinquished United States citizenship or residence.

If you are an individual, you may, in many cases, be deemed to be a resident
alien, as opposed to a nonresident alien, by virtue of being present in the
United States for at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to United States federal income tax as if they were United States citizens.

EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT A TAX
ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF
PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY UNITED STATES STATE,
MUNICIPALITY OR OTHER TAXING JURISDICTION.

Dividends

If dividends are paid, as a non-United States Holder, you will be subject to
withholding of United States federal income tax at a 30% rate or a lower rate
as may be specified by an applicable income tax treaty. To claim the benefit of
a lower rate under an income tax treaty, you must properly file with the payor
an IRS Form 1001, or successor form, claiming an exemption from or reduction in
withholding under the applicable tax treaty.

If dividends are considered effectively connected with the conduct of a
trade or business by you within the United States and, where a tax treaty
applies, are attributable to a United states permanent establishment of yours,
those dividends will not be subject to withholding tax, but instead will be
subject to United States federal income tax on a net basis at applicable
graduated individual or corporate rates, provided an IRS Form 4224, or
successor form, is filed with the payor. If you are a foreign corporation, any
effectively connected dividends may, under certain circumstances, be subject to
an additional "branch profits tax" at a rate of 30% or a lower rate as may be
specified by an applicable income tax treaty.

Unless the payor has knowledge to the contrary, dividends paid prior to
January 1, 2001 to an address outside the United States are presumed to be paid
to a resident of such country for purposes of the withholding discussed above
and for purposes of determining the applicability of a tax treaty rate.
However, recently finalized Treasury Regulations pertaining to United States
federal withholding tax provide that you must comply with certification
procedures, or, in the case of payments made outside the United States with
respect to an offshore account, certain documentary evidence procedures,
directly or under certain circumstances through an intermediary, to obtain the
benefits of a reduced rate under an income tax treaty with respect to dividends
paid after December 31, 2000. In addition, these regulations will require you,
if you provide an IRS Form 1001 or 4224, or successor form, as discussed above,
to include your taxpayer identification number.

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If you are eligible for a reduced rate of United States withholding tax
pursuant to an income tax treaty, you may obtain a refund of any excess amounts
withhold by filing an appropriate claim for refund with the IRS.

Gain on Disposition of Common Stock

As a non-United States Holder, you generally will not be subject to United
States federal income tax on any gain recognized on the sale or other
disposition of common stock unless:

(1) the gain is considered effectively connected with the conduct of a
trade or business by you within the United States and, where a tax
treaty applies, is attributable to a United States permanent
establishment of yours (and, in which case, if you are a foreign
corporation, you may be subject to an additional branch profits tax
equal to 30% or a lower rate as may be specified by an applicable
income tax treaty);

(2) you are an individual who holds the common stock as a capital asset and
are present in the United States for 183 or more days in the taxable
year of the sale or other disposition and other conditions are met; or

(3) we are or have been a "United States real property holding
corporation", or a USRPHC, for United States federal income tax
purposes. We believe that we are not currently, and are likely not to
become, a USRPHC. If we were to become a USRPHC, then gain on the sale
or other disposition of common stock by you generally would not be
subject to United States federal income tax provided:

. the common stock was "regularly traded" on an established securities
market; and

. you do not actually or constructively own more than 5% of the common
stock during the shorter of the five-year period preceding the
disposition or your holding period.

Federal Estate Tax

If you are an individual, common stock held at the time of your death will
be included in your gross estate for United states federal estate tax purposes,
and may be subject to United States federal estate tax, unless an applicable
estate tax treaty provides otherwise.

Information Reporting and Backup Withholding Tax

We must report annually to the IRS and to each of you the amount of
dividends paid to you and the tax withheld with respect to those dividends,
regardless of whether withholding was required. Copies of the information
returns reporting those dividends and withholding may also be made available to
the tax authorities in the country in which you reside under the provisions of
an applicable income tax treaty or other applicable agreements.

Backup withholding is generally imposed at the rate of 31% on certain
payments to persons that fail to furnish the necessary identifying information
to the payor. Backup withholding generally will not apply to dividends paid
prior to January 1, 2001 to a Non-United States Holder at an address outside
the United States, unless the payor has knowledge that the payee is a United
States person. In the case of dividends paid after December 31, 2000, recently
finalized Treasury Regulations provide that you generally will be subject to
withholding tax at a 31% rate unless you certify your non-United States status.

The payment of proceeds of a sale of common stock effected by or through a
United States office of a broker is subject to both backup withholding and
information reporting unless you provide the payor with your name and address
and you certify your non-United States status or you otherwise establish an
exemption. In general, backup withholding and information reporting will not
apply to the payment of the proceeds of a sale of common stock by or through a
foreign office of a broker. If, however, such broker is, for United States

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federal income tax purposes, a United States person, a controlled foreign
corporation, or a foreign person that derives 50% or more of its gross income
for certain periods from the conduct of a trade or business in the United
States, or, in addition, for periods after December 31, 2000, a foreign
partnership that at any time during its tax year either is engaged in the
conduct of a trade or business in the United States or has as partners one or
more United States persons that, in the aggregate, hold more than 50% of the
income or capital interest in the partnership, such payments will be subject to
information reporting, but not backup withholding, unless such broker has
documentary evidence in its records that you are a non-United States Holder and
certain other conditions are met or you otherwise establish an exemption.

Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against your United States federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.

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SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there was only a very limited trading market for our
common stock and we do not anticipate that there will be an active trading
market for our stock as a result of this offering. Future sales of our common
stock could adversely affect the prevailing market price of our common stock,
if any, and our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding 16,675,831 shares
of common stock, based on shares outstanding at December 31, 1999 and assuming
no exercise of options and warrants outstanding as of December 31, 1999. Of
these shares, the 1,080,000 shares sold in this offering will be freely
tradable in the public market without restriction, subject to the market lock-
up agreement described below. In addition, the 1,500,000 shares sold in our
October 1998 offering of common stock will be freely tradable in the public
market without restriction and are not subject to any market lock-up agreement.
With respect to the shares issued in this offering, however, underwriters, and
for 90 days after the date of this prospectus, dealers, are required to deliver
a prospectus in connection with offers or sales in the United States. See
"Description of Capital Stock--Transfer of Shares."

The remaining 14,095,831 shares held by our existing stockholders as of
December 31, 1999 are also subject to lock-up agreements, which generally
prohibit the sale of shares of the common stock for up to 180 days after any
future initial public offering in which shares of our common stock are listed
on an internationally recognized securities exchange or quotation system. After
expiration or release of these lock-up agreements, 4,064,881 of these shares
will generally be immediately available for public sale without restriction. Of
the remaining shares, 10,004,575 shares are held by affiliates of Centaur and
are eligible for public sale subject to volume and other restrictions under
Rule 144, as described below. In addition, it is possible that under certain
circumstances, shares with resale restrictions could be sold outside of the
United States in reliance on Regulation S under the Securities Act. The
remaining 26,375 shares will be eligible for sale under Rule 144 upon the
expiration of various one-year holding periods.

Lock-up Agreements. Our executive officers and directors and other existing
stockholders holding an aggregate of 14,095,831 shares of our common stock have
agreed that they will not, for a period of up to 180 days after our initial
public offering in which shares of common stock are listed on an
internationally recognized securities exchange or quotation system, sell or
otherwise transfer or dispose of any shares of common stock. This lock-up
agreement will not apply to any shares purchased in this offering that are
included in such future initial public offering, if any. In addition,
purchasers of shares of common stock in this offering will be required to enter
into lock-up agreements, in the form of Appendix A to this prospectus, which
provide that they will not, for a period of up to 180 days after any future
initial public offering in which shares of common stock are listed on the
Nasdaq National Market, the Neuer Market of the Frankfurt Stock Exchange, the
Swiss New Market, a trading segment of the SWX Swiss Exchange, or other
similarly recognized securities exchange or quotation system, sell or otherwise
transfer or dispose of any shares of common stock. All such securities held by
such other stockholders will be released from the foregoing restrictions at the
end of their respective periods. In the event that substantially all of our
existing stockholders are released from these restrictions prior to the end of
their respective periods, purchasers of shares of common stock in this offering
will also be released from these restrictions on a pro rata basis. In addition,
in the event that shares of common stock held by stockholders who hold
registration rights are included in a registered offering of common stock
during the 180 day lock-up period, purchasers of shares of common stock in this
offering will be given an opportunity to include a pro rata portion of the
shares purchased in this offering or will be released from these restrictions
on a pro rata basis.

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Rule 144. Generally, under Rule 144 our stockholders that have beneficially
owned their shares for at least one year but less than two years, and our
affiliates that have beneficially owned their shares for any period of more
than one year, may sell within any three-month period a number of shares that
does not exceed the greater of:

. 1% of the number of shares of common stock then outstanding, equal to
approximately 166,758 shares immediately after this offering; or

. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.

Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about us.

Rule 144(k). Under Rule 144(k), a person who has not been our affiliate at
any time during the 90 days before a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, can sell those shares
without complying with the volume limitation or the manner of sale, public
information or notice provisions of Rule 144.

Rule 701. In general, under Rule 701, any shares issued to our employees,
officers, directors, consultants or advisors before January 1, 1999 upon
exercise of a stock option or other written agreement may be resold in the
public market.

Stock Options. On February 3, 1999, we filed a registration statement on
Form S-8 under the Securities Act registering approximately 2,941,047 shares of
common stock issued, subject to outstanding options or reserved for issuance
under our 1993 Incentive Plan, 1998 Incentive Plan and Directors Plan. Shares
registered under that registration statement may be resold in the public
market.

Warrants. Holders of 71,550 shares of common stock issued or issuable on
exercise of warrants are entitled to require us to include their shares in
certain registration statements that we file. If shares issued on exercise of a
warrant for cash are not registered for resale, then the shares generally must
be held for one year before they can be sold under Rule 144.

65
<PAGE>

UNDERWRITING

Bank Vontobel AG has agreed, subject to the terms and conditions of the
underwriting agreement with us, to purchase up to 1,080,000 shares of our
common stock.

Sales in the United States will be made by Vontobel Securities Ltd., a U.S.
broker-dealer affiliate of Bank Vontobel, to institutional investors only. No
dealer will make any sale of our common stock in any jurisdiction unless it is
registered to do so or it obtains an exemption from the registered dealer
requirements of the jurisdiction. The initial offers and sales of common stock
outside the United States are not being registered under the Securities Act.

Bank Vontobel has advised us that it proposes to offer the shares of common
stock offered hereby initially at the offering price set forth on the cover
page of this prospectus. After the initial offering of the common stock, the
offering price may be changed.

The following table shows the per share and total underwriting discounts and
commission to be paid to Bank Vontobel by us.

<TABLE>
<CAPTION>
Paid by
Centaur
--------
<S> <C>
Per Share........................................................... $ 0.63
Total............................................................... $683,100
</TABLE>

We have agreed to indemnify Bank Vontobel against specified liabilities
which may be incurred in connection with the offering of the common stock,
including liabilities under the Securities Act and other applicable securities
laws. In addition, we have agreed to reimburse Bank Vontobel for the fees and
expenses of its external advisors in connection with the offering.

Prior to this offering, there has been no public market for the common
stock. Accordingly, the offering price for the shares has been determined by
negotiation among us and Bank Vontobel. In determining the price, consideration
has been given to various factors, including:

. market conditions for similar offerings;

. the history of and prospects for our business;

. our past and present operations;

. the present state of our development;

. our financial information;

. an assessment of our management;

. the market for securities of companies in businesses similar to those of
ours;

. the general condition of the securities markets; and

. other factors we and Bank Vontobel deem relevant.

We cannot assure you that the offering price will correspond to any price at
which you may be able to resell the common stock subsequent to the offering.

We anticipate that most of the common stock offered hereby will be sold
outside of the United States to a limited number of institutional investors.
The shares of common stock offered by this prospectus are expected to be
eligible for trading over-the-counter in Switzerland by Bank Vontobel. Bank
Vontobel has advised us that it presently intends to make a market in the
common stock. Bank Vontobel is not obligated, however, to make a market in the
common stock and any such market making may be discontinued at any time at the
sole discretion of Bank Vontobel. In addition, we do not anticipate that this
market-making will result in an active

66
<PAGE>

trading market for the common stock. Accordingly, we can give you no assurance
as to the liquidity of, or trading market for, the shares of common stock
offered hereby. See "Risk Factors--There is currently only a very limited
trading market for our shares of common stock, and there is not expected to be
an active public market for our shares after this offering".

Bank Vontobel has warranted and undertaken that:

. it has not offered or sold and will not offer or sell in the United
Kingdom any shares of our common stock other than to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their business or who it is reasonable to expect will acquire, hold
manage or dispose of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public within the meaning of the Public Offer
or Securities Regulations 1996;

. it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to our common stock in, from or otherwise involving the Untied
Kingdom; and

. it has only issued or passed on, and will only issue or pass on, in the
United Kingdom, this prospectus or any other document received by it in
connection with the offering of our shares of common stock to a person
who is of a kind described in Article 11(3) of the Financial Services
Act of 1986 (Investments Advertisements) (Exemptions) order 1996 (as
amended) or is a person to whom this prospectus or the relevant document
may otherwise lawfully be issued or passed on.

We and Bank Vontobel have entered into an agreement in which we have
confirmed our mutual intent to undertake this offering and an underwritten
initial public offering and listing of our common stock, with Bank Vontobel
acting as global coordinator, on terms described in that agreement. In
addition, in that agreement, we have agreed that, subject to some exceptions,
we will not undertake any other financing whose primary purpose is to raise
capital prior to December 31, 2000 unless Bank Vontobel is the lead underwriter
or placement agent for the financing, or otherwise consents to the transaction.
We cannot assure you that any future public offering or listing will occur or
as to the terms of that offering.

Either we or Bank Vontobel can terminate this agreement with prior written
notice. However, in the event we terminate this engagement prior to signing the
underwriting agreement for either of these offerings, we have agreed to pay
Bank Vontobel a break-up fee of $250,000. We have also agree to reimburse Bank
Vontobel for its costs and expenses, including those of its external advisors,
whether or not the offerings are completed, and to reimburse Bank Vontobel for
certain other expenses related to the contemplated initial public offering and
listing. Our obligation to reimburse Bank Vontobel for expenses relating to the
contemplated initial public offering and listing are subject to a maximum of
600,000 Swiss Francs.

We have agreed with Bank Vontobel that if we raise at least US $40 million
in our contemplated future initial public offering, we will not issue equity
securities for a period of two years thereafter, other than:

. pursuant to the exercise of currently outstanding options and warrants
and conversion of currently outstanding convertible securities,

. pursuant to the exercise of options granted, or the purchase of shares,
under our 1998 Incentive Plan, Director Plan or Purchase Plan,

. in connection with any acquisition of a company, technology or product,
or any research, development, manufacturing or marketing collaboration,
or any other transaction where the primary consideration for the
issuance of the share is other than cash, or

. up to 100,000 shares for miscellaneous purpose, unless

. the issuance is approved by Bank Vontobel, such approval not to be
unreasonably withheld,

67
<PAGE>

. the issuance is approved by a majority or our stockholders present, in
person or by proxy, at a stockholder meeting at which a quorum is
present, or by the written consent of holders of a majority of our
outstanding common stock,

. our common stock is then listed, or designated for listing on notice of
issuance, on the Nasdaq National Market, the Swiss New market or the
Neuer Market, or

. our stockholders are provided with the right to purchase their pro rata
share of the issuance.

We have also agreed with Bank Vontobel that if we should be acquired prior
to the signing of an underwriting agreement for our contemplated initial public
offering and listing or, if earlier, within six months after the termination of
the agreement, we will pay Bank Vontobel a fee equal to 1.5% of the
consideration received in the transaction. Finally, in this agreement we agreed
to engage Bank Vontobel as our investment bank and advisor in the event of any
such acquisition, on terms to be mutually agreed.

68
<PAGE>

LEGAL MATTERS

Fenwick & West LLP, Palo Alto, California will pass upon the validity of the
issuance of the shares of common stock offered by this prospectus. Shearman &
Sterling, Frankfurt, Germany will pass upon specified legal matters in
connection with this offering for the manager. An investment partnership
comprised of certain partners of Fenwick & West LLP owns 50,000 shares of
common stock.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our financial
statements and schedule at December 31, 1996, 1997 and 1998, and for each of
the three years in the period ended December 31, 1998 presented in their
report. We have included our financial statements and schedule in this
prospectus and elsewhere in the registration statement in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.

WHERE YOU CAN FIND MORE INFORMATION

This prospectus constitutes a part of a registration statement on Form S-1
we filed with the Securities and Exchange Commission under the Securities Act.
This prospectus does not contain all of the information in the registration
statement and the exhibits and schedules to the registration statement. For
more information about us and our common stock, we refer you to the
registration statement and the exhibits and schedules filed as a part of the
registration statement. Statements contained in this prospectus concerning the
contents of any contract or any other document are not necessarily complete. If
a contract or document has been filed as an exhibit to the registration
statement, we refer you to the copy of the contract or document that has been
filed. Each statement in this prospectus relating to a contract or document
filed as an exhibit is qualified in all respects by the filed exhibit. You may
inspect the registration statement, including exhibits and schedules, without
charge at the Security and Exchange Commission's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549 or at the Commissions' regional
offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor., New York, New
York 10048. You may obtain copies of all or any part of the document after
paying fees set by the Commission. Please call the Commission at 1-800-SEC-0330
for more information on the operation of the Public Reference Rooms.

We file annual, quarterly and special reports with the Securities and
Exchange Commission. You may read any document we file without charge, or copy
it after paying the prescribed fees, at the Commission's Public Reference
Rooms. You can also access information we file with the Commission via the
Internet, at the Commission's website at http://www.sec.gov. The website
contains reports, proxy and information statements and other information about
companies that file electronically with the Securities and Exchange Commission.

We intend to provide our stockholders with annual reports containing
financial statements audited by an independent public accounting firm and to
make available to our stockholders quarterly reports containing unaudited
financial data for the first three quarters of each year.

69
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........................... F-2
Financial Statements
Balance Sheets.............................................................. F-3
Statements of Operations.................................................... F-4
Statements of Stockholders' Equity (Net Capital Deficiency)................. F-5
Statements of Cash Flows.................................................... F-6
Notes to Financial Statements............................................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

ERNST & YOUNG LLP
1451 CALIFORNIA AVENUE
PALO ALTO, CALIFORNIA U.S.A. 94304

The Board of Directors and Stockholders
Centaur Pharmaceuticals, Inc.

We have audited the accompanying balance sheets of Centaur Pharmaceuticals,
Inc. as of December 31, 1996, 1997 and 1998, and the related statements of
operations, stockholders' equity (net capital deficiency), and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Centaur Pharmaceuticals,
Inc. at December 31, 1996, 1997 and 1998, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles of the United
States of America.

/s/ Ernst & Young LLP

Palo Alto, California, U.S.A.
January 27, 1999

F-2
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

BALANCE SHEETS
(in thousands, except share data)

<TABLE>
<CAPTION>
December 31,
-------------------------- September 30,
1996 1997 1998 1999
------- ------- -------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......... $ 5,699 $ 1,469 $ 5,628 $ 4,660
Short-term investments............. 5,267 12,164 12,906 10,679
Contract revenue receivable........ 976 84 7 25
Prepaid expenses................... 31 343 128 540
Other current assets............... 217 329 444 346
------- ------- -------- --------
Total current assets............. 12,190 14,389 19,113 16,250
Long-term investments................ -- -- 5,579 --
Property and equipment, net.......... 3,140 9,635 11,665 9,986
Investment in affiliates............. -- -- 695 503
Other assets, net of accumulated
amortization of $34, $47 and none as
of December 31, 1996, 1997 and 1998,
respectively, and none as of
September 30, 1999.................. 77 219 181 180
------- ------- -------- --------
$15,407 $24,243 $ 37,233 $ 26,919
======= ======= ======== ========
Liabilities and stockholders' equity
(net capital deficiency)
Current liabilities:
Accounts payable................... $ 375 $ 1,675 $ 568 $ 569
Accrued compensation............... 99 169 203 297
Other accrued liabilities.......... 1,364 1,062 1,126 1,155
Short-term portion of obligations
under capital lease............... 118 183 89 --
Current portion of long-term debt.. -- -- 1,967 2,224
------- ------- -------- --------
Total current liabilities........ 1,956 3,089 3,953 4,245
Deferred revenue..................... 1,788 84 1,500 1,625
Long-term portion of obligations
under capital lease................. 210 -- -- --
Long-term debt....................... -- -- 5,802 4,079

Commitments and contingencies

Redeemable convertible preferred
stock, $0.001 par value; 10,922,735
shares authorized; issuable in
series; 8,722,735 and 10,922,735
shares issued and outstanding at
December 31, 1996 and 1997,
respectively, and none outstanding
at December 31, 1998 and September
30, 1999, aggregate redemption value
of $11,810,242 at December 31, 1996
and $28,310,242 at December 31, 1997
and none at December 31, 1998 and
September 30, 1999.................. 11,698 28,105 -- --
Stockholders' equity (net capital
deficiency):
Preferred stock, $0.001 par value,
none authorized, issued and
outstanding at December 31, 1996
and 1997 and 3,000,000 shares
authorized, none issued and
outstanding at December 31, 1998
and September 30, 1999............ -- -- -- --
Common stock, $0.001 par value;
18,200,000 shares authorized;
2,649,303 and 2,901,336 shares
issued and outstanding at December
31, 1996 and 1997, respectively,
and 33,000,000 shares authorized,
15,441,663 and 15,585,558 issued
and outstanding at December 31,
1998 and September 30, 1999,
respectively...................... 3 3 15 16
Additional paid-in capital......... 114 2,457 47,221 46,511
Deferred compensation.............. (42) (1,945) (2,970) (1,443)
Accumulated other comprehensive
income............................ (1) 1 (52) (13)
Accumulated deficit................ (319) (7,551) (18,236) (28,101)
------- ------- -------- --------
Total stockholders' equity (net
capital deficiency)............. (245) (7,035) 25,978 16,970
------- ------- -------- --------
$15,407 $24,243 $ 37,233 $ 26,919
======= ======= ======== ========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

STATEMENTS OF OPERATIONS
(in thousands, except share data)

<TABLE>
<CAPTION>
Nine months
ended
Years ended December 31, September 30,
-------------------------- ----------------
1996 1997 1998 1998 1999
------- ------- -------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net revenue from collaborative
agreements and grants.......... $12,743 $ 9,573 $ 6,663 $ 5,194 $ 5,609
Operating expenses:
Research and development...... 7,854 15,646 13,629 9,965 12,101
General and administrative.... 2,306 2,266 3,494 2,493 3,097
------- ------- -------- ------- -------
Total operating expenses.... 10,160 17,912 17,123 12,458 15,198
------- ------- -------- ------- -------
Income (loss) from operations... 2,583 (8,339) (10,460) (7,264) (9,589)
Share of losses in affiliate.... -- -- (305) (220) (191)
Interest and other income....... 438 1,145 939 597 735
Interest and other expense...... (76) (38) (859) (550) (820)
------- ------- -------- ------- -------
Net income (loss)............... $ 2,945 $(7,232) $(10,685) $(7,437) $(9,865)
======= ======= ======== ======= =======
Net income (loss) per share:
Basic......................... $ 1.15 $ (2.64) $ (1.90) $ (2.54) $ (0.64)
======= ======= ======== ======= =======
Diluted....................... $ 0.24 $ (2.64) $ (1.90) $ (2.54) $ (0.64)
======= ======= ======== ======= =======
Shares used in computing net
income (loss) per share:
Basic......................... 2,551 2,742 5,614 2,928 15,535
======= ======= ======== ======= =======
Diluted....................... 12,514 2,742 5,614 2,928 15,535
======= ======= ======== ======= =======
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

STATEMENT OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
(in thousands, except share data)

<TABLE>
<CAPTION>
Total
Accumulated Stockholders'
Common Stock Additional Other Equity (Net
----------------- Paid-In Deferred Comprehensive Accumulated Capital
Shares Amount Capital Compensation Income Deficit Deficiency)
---------- ------ ---------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... 2,403,103 $ 2 $ 29 $ -- $ 37 $ (3,264) $ (3,196)
Unrealized loss on
available-for-sale
securities of $13, net
of reclassification
adjustment for gains
included in net income
of $25................. -- -- -- -- (38) -- (38)
Net income for the year
ended December 31,
1996................... -- -- -- -- -- 2,945 2,945
--------
Comprehensive income.... 2,907
--------
Issuance of common stock
on exercise of stock
options by employees,
former employees and a
board of directors
member................. 243,470 1 34 -- -- -- 35
Issuance of common stock
for services rendered.. 2,730 -- 1 -- -- -- 1
Deferred compensation
related to certain
options granted to
employees and
consultants............ -- -- 50 (50) -- -- --
Amortization of deferred
compensation........... -- -- -- 8 -- -- 8
---------- ---- ------- ------- ---- -------- --------
Balance at December 31,
1996................... 2,649,303 3 114 (42) (1) (319) (245)
Unrealized gain on
available-for-sale
securities of $1, net
of reclassification
adjustment for gains
included in net loss of
$1..................... -- -- -- -- 2 -- 2
Net loss for the year
ended December 31,
1997................... -- -- -- -- -- (7,232) (7,232)
---------- ---- ---- --------
Comprehensive loss...... -- -- -- (7,230)
---------- ---- ---- --------
Issuance of common stock
on exercise of stock
options by employees,
former employees and a
board of directors
member................. 252,033 50 -- -- -- 50
Deferred compensation
related to certain
options and warrants
granted to employees
and consultants........ -- -- 2,293 (2,293) -- -- --
Amortization of deferred
compensation........... -- -- -- 390 -- -- 390
---------- ---- ------- ------- ---- -------- --------
Balance at December 31,
1997................... 2,901,336 3 2,457 (1,945) 1 (7,551) (7,035)
Unrealized loss on
available for sale
securities of $53, net
of $0 reclassification
adjustment for gains
included in net
income................. -- -- -- -- (53) -- (53)
Net loss for the year
ended December 31,
1998................... -- -- -- -- -- (10,685) (10,685)
--------
Comprehensive loss...... -- -- -- -- -- -- (10,738)
--------
Conversion of redeemable
convertible preferred
stock to common stock
immediately prior to
the underwritten
offering............... 10,922,735 11 28,094 -- -- -- 28,105
Sale of common stock,
net of issuance costs.. 1,500,000 1 13,621 -- -- -- 13,622
Issuance of common stock
on exercise of stock
options................ 85,347 -- 37 -- -- -- 37
Issuance of common stock
on exercise of
warrants............... 32,245 -- 62 -- -- -- 62
Gain on issuance of
stock by affiliate..... -- -- 739 -- -- -- 739
Deferred compensation
related to certain
options and warrants
granted to employees
and consultants........ -- -- 2,211 (2,211) -- -- --
Amortization of deferred
compensation........... -- -- -- 1,186 -- -- 1,186
---------- ---- ------- ------- ---- -------- --------
Balance at December 31,
1998................... 15,441,663 15 47,221 (2,970) (52) (18,236) 25,978
Unrealized gain on
available-for-sale
securities of $39, net
of reclassification
adjustment for gains/
losses included in at
loss of $0
(unaudited)............ -- -- -- -- 39 -- 39
---------- ---- ------- ------- ---- -------- --------
Net loss for the period
ended September 30,
1999 (unaudited)....... -- -- -- -- -- (9,865) (9,865)
--------
Comprehensive loss
(unaudited)............ -- -- -- -- -- -- (9,826)
--------
Issuances of common
stock on exercise of
stock options
(unaudited)............ 143,895 1 165 -- -- -- 166
Adjustment to deferred
compensation for
cancellation of options
(unaudited)............ -- -- (875) 875 -- -- --
Amortization of deferred
compensation
(unaudited)............ -- -- -- 652 -- -- 652
---------- ---- ------- ------- ---- -------- --------
Balance at September 30,
1999 (unaudited)....... 15,585,558 $ 16 $46,511 $(1,443) $(13) $(28,101) $ 16,970
========== ==== ======= ======= ==== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(in thousands)

<TABLE>
<CAPTION>
Nine months
ended
Years ended December 31, September 30,
---------------------------- ----------------
1996 1997 1998 1998 1999
-------- -------- -------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss)............. $ 2,945 $ (7,232) $(10,685) $(7,437) $(9,865)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization............... 724 1,060 1,446 899 2,209
Amortization of deferred
compensation............... 8 390 1,186 967 652
Share of losses in
affiliate.................. -- -- 305 220 191
Changes in assets and
liabilities:
Contract revenue
receivable, net of
allowance................ (144) 892 77 (196) (18)
Prepaid expenses and other
current assets........... 47 (424) 100 (882) (314)
Other assets.............. (15) (154) 32 (83) 1
Accounts payable.......... 21 1,300 (1,107) (1,128) 1
Accrued compensation...... 41 70 34 58 94
Other accrued
liabilities.............. 261 (302) 64 90 29
Deferred revenue.......... 1,202 (1,704) 1,416 1,575 125
Long-term liabilities..... 6 (69) -- -- --
-------- -------- -------- ------- -------
Net cash provided by (used in)
operating activities......... 5,096 (6,173) (7,132) (5,917) (6,895)
-------- -------- -------- ------- -------
Investing activities
Purchase of property and
equipment.................... (2,731) (7,542) (3,471) (3,374) (529)
Purchase of available-for-sale
securities................... (12,403) (34,219) (21,439) (8,355) (2,055)
Maturity and sale of
available-for-sale
securities................... 13,034 27,322 15,065 12,119 9,900
Cash contributions to
affiliate.................... -- -- (260) (145) --
-------- -------- -------- ------- -------
Net cash (used in) provided by
investing activities......... (2,100) (14,439) (10,105) 245 7,316
-------- -------- -------- ------- -------
Financing activities
Proceeds from issuances of
common stock................. 36 50 13,721 12 166
Net proceeds from issuance of
preferred stock.............. -- 16,407 -- -- --
Principal payments on asset
financing arrangements....... (134) (75) (94) (77) (89)
Proceeds from debt financing.. -- -- 9,159 9,159 --
Principal repayments on debt
financing.................... -- -- (1,390) (937) (1,466)
-------- -------- -------- ------- -------
Net cash (used in) provided by
financing activities......... (98) 16,382 21,396 8,157 (1,389)
-------- -------- -------- ------- -------
Net (decrease) increase in
cash and cash equivalents.... 2,898 (4,230) 4,159 2,485 (968)
Cash and cash equivalents at
beginning of period.......... 2,801 5,699 1,469 1,469 5,628
-------- -------- -------- ------- -------
Cash and cash equivalents at
end of period................ $ 5,699 $ 1,469 $ 5,628 $ 3,954 $ 4,660
======== ======== ======== ======= =======
Supplemental disclosure of
cash flow information
Interest paid............... $ 59 $ 38 $ 848 $ 550 $ 797
======== ======== ======== ======= =======
Income taxes paid (refund).. $ 56 $ 515 $ (498) $ (498) $ --
======== ======== ======== ======= =======
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

1. Summary of Significant Accounting Policies

Organization and Basis of Presentation

Centaur Pharmaceuticals, Inc. (the "Company") was incorporated in the State
of Delaware on March 17, 1992. The Company was founded to commercialize
proprietary pharmaceutical technology with broad potential applications in
neurodegenerative diseases and other disorders.

The financial statements have been prepared in accordance with generally
accepted accounting principles of the United States of America ("U.S.") and are
stated in U.S. dollars ("$").

Interim Financial Information

The financial information at September 30, 1999 and for the nine months
ended September 30, 1998 and 1999 is unaudited but, in the opinion of
management, has been prepared on the same basis as the annual financial
statements and includes all adjustments (consisting only of normal recurring
adjustments) that management considers necessary for a fair presentation of the
financial position at such date and the operating results and cash flows for
such periods. Results for the interim period are not necessarily indicative of
the results to be expected for any subsequent period nor for the entire year.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with remaining
maturities of three months or less at the date of purchase to be cash
equivalents. Investments with maturities of less than one year from the balance
sheet date and with remaining maturities greater than three months at the date
of purchase are considered short-term investments. At December 31, 1996, 1997,
1998 and September 30, 1999, cash equivalents consisted of money market
accounts. The Company invests its excess cash balances in marketable securities
with maturities of two years or less. These investments primarily consist of
corporate debt securities.

Management determines the appropriate classification of debt securities in
accordance with Statement of Financial Accounting Standard No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," at the time of purchase
and reevaluates such designation as of each balance sheet date. In the periods
presented, all investments were classified as available-for-sale securities and
are carried at fair value, with the unrealized gains and losses reported as a
component of accumulated other comprehensive income in stockholders' equity. At
December 31, 1996, 1997, 1998 and September 30, 1999, the fair value of
investments approximates cost. The amortized cost of debt securities in this
category is adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization is included in interest income. Realized gains and
losses and declines in value judged to be other-than-temporary on available-
for-sale securities are included in interest income or expense and have been
immaterial in all periods presented. The cost of securities sold is based on
the specific identification method. Interest and dividends on securities
classified as available-for-sale are included in interest.

F-7
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

Concentrations of Credit Risk

Cash, cash equivalents and short-term investments are financial instruments
which potentially subject the Company to concentrations of risk. Company policy
limits, among other things, the amount of credit exposure to any one issuer and
to any one type of investment, other than securities issued or guaranteed by
the U.S. government.

The net revenue from collaborative agreements and the related contract
revenue receivable at December 31, 1996, 1997 and 1998 and September 30, 1999
are earned primarily under two collaborative arrangements the Company has
entered into. One of these collaborations was terminated in March 1998. The
Company has no collateral as security for these receivables.

Revenue Recognition

Revenue under research collaborations is recorded as earned based on the
performance requirements of the contracts. All payments received under the
collaborations are nonrefundable and no payments are reimbursable if the
research effort is unsuccessful. Signing and milestone payments that are not
dependent on future performance are recognized when the funding party agrees
the contract requirements have been met. Research and development support
payments are recognized ratably as the work is performed. Deferred revenue
represents amounts received in advance of recognition.

Research and Development Costs

Research and development costs are charged to operations as incurred.

Stock-Based Compensation

As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has elected
to continue to account for stock issued or options granted to employees under
its option plans in accordance with the provisions of Accounting Principles
Board No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations. For issuances or grants to all others, stock-based
compensation expense is measured using the fair value method described in SFAS
123 and recorded in the accompanying financial statements. Pro forma
disclosures as required by SFAS 123 are included in Note 9.

Investment in Affiliates

Investment in affiliates in which the Company has a 20%-50% ownership
interest and exercises significant influence are accounted for using the equity
method. Gains and losses arising from stock issuances by affiliates are
accounted for as capital transactions and recorded in stockholders' equity.

At December 31, 1998, the Company had a 48% interest in Cutanix Corporation
("Cutanix").

Property and Equipment

Property and equipment is stated at cost. Depreciation is calculated using
the straight-line method over the five year estimated useful lives of the
assets. Equipment held under capital leases is amortized using the straight-
line method over the shorter of the lease term or estimated useful life of the
asset. Leasehold improvements are amortized using the straight-line method over
the estimated useful lives of the assets or the term of the lease, whichever is
shorter.

F-8
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

Income (Loss) Per Share

Basic earnings per share has been calculated using the weighted-average
common shares outstanding during the periods. Diluted earnings per share gives
effect to the dilutive effect of common stock equivalents consisting of stock
options and warrants calculated using the treasury stock method.

A reconciliation of shares used in the calculation is as follows (in
thousands):

<TABLE>
<CAPTION>
Nine months
Years ended ended
December 31, September 30,
------------------ --------------
1996 1997 1998 1998 1999
------ ----- ----- ------ -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Basic:
Weighted-average shares outstanding........ 2,551 2,742 5,614 2,928 15,535
Diluted:
Dilutive effect of stock options and
warrants.................................. 1,240 -- -- -- --
Dilutive effect of redeemable convertible
preferred stock........................... 8,723 -- -- -- --
------ ----- ----- ------ -------
12,514 2,742 5,614 2,928 15,535
====== ===== ===== ====== =======
</TABLE>

The following outstanding options and warrants (prior to the application of
the treasury stock method), and convertible redeemable preferred stock (on an
as converted basis) were excluded from the computation of diluted net loss per
share as they had an anti-dilutive effect (in thousands):

<TABLE>
<CAPTION>
Years ended Nine months ended
December 31, September 30,
----------------- ------------------
1996 1997 1998 1998 1999
---- ------ ----- --------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Options and warrants...................... -- 1,584 1,736 1,787 1,793
Convertible redeemable preferred stock.... -- 10,923 -- 10,923 --
</TABLE>

Impairment of Long-Lived Assets

In accordance with the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"), the Company reviews long-
lived assets, including property and equipment, for impairment whenever events
or changes in business circumstances indicate that the carrying amount of the
assets may not be fully recoverable. Under SFAS 121, an impairment loss would
be recognized when estimated undiscounted future cash flows expected to result
from the use of the asset and its eventual disposition is less than its
carrying amount. Impairment, if any, is assessed using discounted cash flows.
Through September 30, 1999, there have been no such losses.

Comprehensive Income

As of January 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes new rules
for the reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's results
of operations or financial condition. SFAS 130 requires unrealized gains or
losses on the Company's available-for-sale securities to be included in other
comprehensive income. Prior year financial statements have been reclassified to
conform to the requirements of SFAS 130.

F-9
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

Segmental Reporting

Effective in January 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas and major customers.
The Company has determined that it operates in only one segment. Accordingly,
the adoption of this Statement had no impact on the Company's financial
statements.

Recent Accounting Pronouncements

In March 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits" ("SFAS 132"). SFAS 132 does not change the
recognition or measurement of pension or postretirement benefit plans, but
revises and standardizes disclosure requirements for pensions and other
postretirement benefits. The adoption of SFAS 132 has no impact on the
Company's results of operations or financial condition.

In September 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" ("SFAS 133") which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. SFAS 133 is effective for years beginning
after September 15, 1999 and is not anticipated to have an impact on the
Company's results of operations or financial condition when adopted.

2. Investment in Cutanix

Cutanix was founded to commercialize novel chemical entities for the
treatment and prevention of dysfunctions and diseases of the skin. Since its
incorporation in 1997, Cutanix's activities have consisted principally of
raising capital, acquiring licensing rights, recruiting personnel and
commencing research and development efforts. In January 1998, the Company
entered into a License Agreement and a Services and Supply Agreement with
Cutanix. The License Agreement provided that Cutanix may obtain the exclusive
rights to use Company compounds, with certain exceptions, by agreeing to take
certain actions to develop the compound for use in the field of dermatology,
cosmetics and other skin care applications. Under the terms of the Service and
Supply Agreement, the Company agrees to provide certain administrative services
to Cutanix at cost and to supply certain compounds at a specified percentage
above costs.

In October 1998, Cutanix completed a private placement of 399,600 shares of
convertible preferred stock at $5.00 per share, resulting in gross proceeds of
$1,998,000, of which $1,555,000 was received in cash while the remainder was
used to satisfy outstanding obligations. The Company participated in the
private placement through the conversion of amounts due from Cutanix of
approximately $260,000 into 52,000 shares of the preferred stock. The private
placement reduced the Company's interest in Cutanix from 63% to 48% and the
Company recorded the gain from the issue of Cutanix equity securities through
its stockholders' equity.

The Company's transactions with Cutanix have not been material through
September 30, 1999. The Company's share of losses in Cutanix were $305,000 for
the year ended December 31, 1998 and $191,000 for the nine months ended
September 30, 1999.

F-10
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

3. Research and Development Arrangements

In September 1995, the Company entered into a research and development
collaboration with AstraZeneca PLC ("AstraZeneca") to develop new drugs to
treat Alzheimer's disease, stroke, traumatic brain injury and multi-infarct
dementia. Under the terms of the agreement, AstraZeneca provides funding of up
to $6,000,000 per year for five years for research and development work,
subject to certain limitations and for AstraZeneca to bear the costs of its
development work. In addition, payments are made to the Company based on
achievement of certain drug development milestones. In return, AstraZeneca was
granted exclusive worldwide marketing rights to any products resulting from
this collaboration. The agreement also provides for the Company to receive a
royalty on sales under the collaboration. During the years ended December 31,
1996, 1997 and 1998 and the nine months ended September 30, 1998 and 1999, the
Company recognized net revenue of $8,301,000, $7,113,000, $6,439,000 and
$4,948,000 and $4,656,000, respectively, in connection with this collaboration.
Costs associated with this contract, including allocated general and
administrative costs, approximate the revenue recorded (exclusive of signing
and milestone fees). This agreement expires on the later of 15 years after the
first commercial sale of a licensed product or the expiration of applicable
patents. The $6 million annual research funding is due to expire in June 2000.
AstraZeneca has the right to terminate all or certain portions of this
agreement upon 12 month's notice. AstraZeneca can also terminate the research
funding and manufacturing rights if more than 30% of the Company's voting
capital stock is acquired by a company engaged in the manufacture and/or sale
of pharmaceutical products.

In October 1996, the Company entered into a four-year research and
development collaboration with H. Lundbeck A/S ("Lundbeck") to jointly
commercialize the Company's proprietary drug compound for Parkinson's disease.
This collaboration was terminated in March 1998. Under the terms of this
agreement, Lundbeck jointly funded research, development, regulatory, and other
nonresearch activities with the Company. In addition, nonrefundable payments
were made to the Company based on achievement of certain drug development
milestones. During the years ended December 31, 1996, 1997 and 1998, the
Company recognized net revenue of $3,740,000, $2,090,000 and none,
respectively, in connection with this collaboration. During the nine months
ended September 30, 1998 and 1999, the Company recognized net revenue of
$163,000 and none, respectively, in connection with this collaboration. Costs
associated with this contract including allocated general and administrative
costs approximate the revenue recorded (exclusive of signing and milestone
fees). In July 1998, the Company and Lundbeck entered into an agreement
releasing each party from any further obligations or claims under the research
and development collaboration and providing the Company with an option to use
certain production processes and other intellectual property of Lundbeck in
exchange for certain limited royalty payments in the event Centaur exercises
such option.

During the years ended December 31, 1996, 1997 and 1998, the Company was
awarded several National Institutes of Health grants to further its research
efforts related to its proprietary technology. In 1998, $217,000 was recognized
as revenue for work completed under these grants. Costs associated with these
grants approximate the revenues recorded.

Contract revenue receivable is net of allowances for doubtful accounts of
$1,600,000 at December 31, 1997 (none at December 31, 1996 and 1998).

In 1992, the Company entered into a license agreement with the University of
Kentucky Research Foundation and the Oklahoma Medical Research Foundation.
Under the agreement, the Company is required to make minimum payments of
$25,000 per year until a new Drug Application is approved by the FDA, and
$100,000 per year thereafter. The Company is obligated to use reasonable
efforts to bring one or more licensed products to market. The agreement expires
on the later of July 2007 or the expiration of the last to expire patent.

F-11
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

In January 1998, the Company entered into an additional license agreement
with the Oklahoma Medical Research Foundation pursuant to which it received an
exclusive worldwide license to specified additional patents and technology,
subject to very limited exceptions. In exchange, the Company paid a license
initiation fee to the Oklahoma Medical Research Foundation and agreed to pay
certain royalties. The agreement requires us to make minimum royalty payments
of $10,000 per year, as well as specified milestone payments. The Company is
obligated to use reasonable efforts to bring one or more licensed products to
market. The agreement expires on the later of January 1, 2013 or the expiration
of the last to expire patent.

4. Investments

The following is a summary of available-for-sale securities at December 31,
1996, 1997 and 1998 (in thousands):

<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Losses Gains Value
------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. corporate securities........... $ 5,268 $ (3) $ 2 $ 5,267
------- ---- --- -------
Total as of December 31, 1996....... $ 5,268 $ (3) $ 2 $ 5,267
======= ==== === =======
U.S. corporate securities........... $11,163 $ (2) $ 3 $11,164
U.S. government securities.......... 1,000 -- -- 1,000
------- ---- --- -------
Total as of December 31, 1997....... $12,163 $ (2) $ 3 $12,164
======= ==== === =======
U.S. corporate securities........... $18,537 $(56) $ 4 $18,485
------- ---- --- -------
Total as of December 31, 1998....... $18,537 $(56) $ 4 $18,485
======= ==== === =======
</TABLE>

All of the above securities are included in the balance sheet as short-term
investments at December 31, 1996 and 1997. At December 31, 1998, $12,906,000 of
the above securities were classified as short-term investments, and the balance
of $5,579,000 was classified as long-term investments.

There were no material gross realized gains or losses in 1996, 1997 and
1998.

As of December 31, 1998, the average remaining maturity of the portfolio was
approximately 7 months, and the longest individual contractual maturity was 15
months.

5. Property and Equipment

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Laboratory and office equipment.................. $ 3,199 $ 4,430 $ 6,506
Leasehold improvements........................... 1,096 1,065 8,802
Construction in-process.......................... -- 6,342 --
------- ------- -------
4,295 11,837 15,308
Less accumulated depreciation and amortization... (1,155) (2,202) (3,643)
------- ------- -------
Property and equipment, net...................... $ 3,140 $ 9,635 $11,665
======= ======= =======
</TABLE>

As of December 31, 1996, 1997 and 1998, laboratory and office equipment held
under capital leases totaled $593,000, with related accumulated amortization of
$364,000, $512,000, $593,000, respectively.

F-12
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

6. Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
-------------------- September 30,
1996 1997 1998 1999
------ ------ ------ -------------
(Unaudited)
<S> <C> <C> <C> <C>
Clinical trials........................... $ 480 $ 250 $ 450 $ 550
Patent accruals........................... 375 289 150 200
Professional fees......................... 340 340 300 350
Other..................................... 169 183 226 55
------ ------ ------ ------
$1,364 $1,062 $1,126 $1,155
====== ====== ====== ======
</TABLE>

7. Commitments

In September 1994, the Company entered into a $750,000 capital lease
agreement. As of December 31, 1996, 1997, 1998, and September 30, 1998 and
1999, lease obligations under this agreement totaled $328,000, $183,000 and
$89,000, respectively. The lease obligations bore interest at 15.2%, were
secured by the related equipment and the final installment of $89,000 was paid
in January 1999.

The Company leases certain research and manufacturing facilities under
operating leases that expire in 2001 and 2004. Future minimum lease payments
under such noncancelable operating leases are as follows (in thousands):

<TABLE>
<CAPTION>
Operating Leases
----------------
<S> <C>
Year ended December 31,
1999........................................................ $ 855
2000........................................................ 892
2001........................................................ 541
2002........................................................ 437
2003........................................................ 387
Thereafter.................................................. 156
------
Total minimum payment required............................ $3,268
======
</TABLE>

Rent expense was approximately $385,000, $640,000 and $844,000 in 1996, 1997
and 1998, respectively.

In connection with the Company's research and development activities,
primarily clinical studies and sponsored research and development agreements,
the Company has total noncancelable commitments of approximately $967,000 at
December 31, 1998 payable over the next 12 months.

8. Debt Financing

In March 1998, the Company entered into a debt financing arrangement for up
to $10,000,000. At December 31, 1998, the total obligation due under this
arrangement was $7,769,000. The debt bears interest at 14.8% per annum and is
secured by certain equipment and leasehold rights and improvements. The debt is
repayable in 48 monthly installments through 2002. The annual maturities at
December 31, 1998 were $1,967,000 in 1999, $2,127,000 in 2000, $2,489,000 in
2001 and $1,186,000 in 2002.

F-13
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

9. Common Stock and Stockholders' Equity

Redeemable Convertible Preferred Stock

Through December 31, 1997, the Company had sold a total of 10,922,735 shares
of Series A, B, C and D redeemable convertible preferred stock ("preferred
stock") for total net proceeds of $28,105,000.

The authorized and outstanding shares of Series A, B, C and D preferred
stock were as follows at December 31, 1997:

<TABLE>
<CAPTION>
Authorized Aggregate Redemption
Shares Shares Outstanding Value
---------- ------------------ --------------------
<S> <C> <C> <C>
Series A..................... 2,000,000 2,000,000 $ 1,000,000
Series B..................... 2,545,454 2,545,454 3,500,000
Series C..................... 4,177,281 4,177,281 7,310,242
Series D..................... 2,200,000 2,200,000 16,500,000
---------- ---------- -----------
10,922,735 10,922,735 $28,310,242
========== ========== ===========
</TABLE>

On October 13, 1998, the Company closed an underwritten offering of
1,500,000 shares of its common stock at a price of $11.00 per share. The net
proceeds to the Company after deduction of underwriting discounts and
commissions and offering expenses was approximately $13.6 million. In
connection with such offering all 10,992,735 outstanding shares of the
Company's preferred stock were converted into shares of common stock on a one-
to-one basis.

1993 Equity Incentive Stock Option Plan ("1993 Stock Plan")

The 1993 Stock Plan was in effect from the Company's inception to October
1998, whereby the 1998 Stock Plan became effective. Under the 1993 Stock Plan,
options, restricted stock, or stock bonuses may be granted by a committee of
the board of directors to employees, officers, directors, consultants, and
independent contractors. Options granted may be either incentive stock options
or nonstatutory stock options. Incentive stock options may be granted to
employees at exercise prices of no less than the fair market value and
nonstatutory options may be granted to employees or consultants at exercise
prices of no less than 85% of the fair market value of the common stock on the
grant date as determined by the board of directors. Options become exercisable
as determined by the board of directors (or a committee of the board of
directors), generally monthly over four years. Restricted stock awards shall be
subject to restrictions as determined by a committee of the board of directors.
Stock bonuses are awarded by a committee of the board of directors for services
rendered to the Company. A total of 1,679,929 common shares were reserved for
issuance under the 1993 Stock Plan at December 31, 1998. At October 13, 1998,
the 1993 Stock Plan was succeeded by the 1998 Stock Plan, and 136,118 remaining
available shares were rolled over into the 1998 Stock Plan for future option
grants.

1998 Equity Incentive Plan ("1998 Stock Plan")

The 1998 Stock Plan was effective in October 1998. Under the 1998 Stock
Plan, options, restricted stock, or stock bonuses may be granted by a committee
of the board of directors to employees, officers, employees, consultants, and
independent contractors. Options granted may be either incentive stock options
or nonstatutory stock options. Incentive stock options may be granted to
employees at exercise prices of no less than the fair market value and
nonstatutory options may be granted to employees or consultants at exercise
prices of no less

F-14
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

than 85% of the fair market value of the common stock on the grant date as
determined by the board of directors. Options become exercisable as determined
by the board of directors (or a committee of the board of directors), generally
monthly over four years. Restricted stock awards shall be subject to
restrictions as determined by a committee of the board of directors. Stock
bonuses are awarded by a committee of the board of directors for services
rendered to the Company. A total of 1,136,118 common shares were reserved for
issuance under the 1998 Stock Plan at December 31, 1998, of which 1,114,818
remained available for future option grants.

1998 Director's Stock Option Plan ("Director's Plan")

The Directors Plan became effective on October 13, 1998 (the "Effective
Date"). Under the Directors Plan, only nonqualified stock option will be
granted to each outside board of director member. Each outside director who
first becomes a member of the board after the Effective Date will automatically
be granted an option for a number of shares equal to 417 shares multiplied by
the number of full and partial calendar months between (a) the date such
outside director becomes a member of the board and (b) the next succeeding May
1. On May 1 of each year following the Effective Date, each outside director
will automatically be granted an option for 5,000 shares, provided the outside
director is a member of the Board on such date and has served continuously as a
member of the board since the date of such outside director's initial grant or,
if such outside director was ineligible to receive an initial grant, since the
Effective Date. Each option granted under the Directors Plan is exercisable as
it vests over a period of ten years. The options vest generally monthly over
three years. A total of 125,000 common shares were reserved for issuance under
the Directors Plan at December 31, 1998, of which all 125,000 remained
available for future option grants. At September 30, 1999, options to purchase
30,834 shares were granted under the Directors Plan.

1998 Employee Stock Purchase Plan

The 1998 Employee Stock Purchase Plan permits eligible employees to purchase
common stock through payroll deductions at a price equal to 85% of the fair
value of the Company's common stock at the beginning and end of the applicable
offering period. A total of 125,000 shares of common stock were reserved for
issuance under this plan.

F-15
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

A summary of the activities under the Company's stock option plans is as
follows:

<TABLE>
<CAPTION>
Weighted-
Shares Average
Available Options Price Per Exercise
for Grant Outstanding Share Price
--------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1995.... 701,231 1,295,666 $0.15-$ 0.20 $ 0.17
Additional shares authorized.. 250,000 -- -- --
Options granted............... (334,610) 334,610 $0.30-$ 2.00 $ 0.47
Options exercised............. -- (243,470) $0.10-$ 1.00 $ 0.15
Options canceled.............. 46,710 (46,710) $0.15-$ 2.00 $ 0.35
--------- ---------
Balance at December 31, 1996.... 663,331 1,340,096 $0.10-$ 2.00 $ 0.24
Options granted............... (530,000) 530,000 $2.50-$ 3.00 $ 2.55
Options exercised............. -- (252,033) $0.15-$ 2.50 $ 0.20
Options canceled.............. 87,626 (87,626) $0.15-$ 2.50 $ 0.73
--------- ---------
Balance at December 31, 1997.... 220,957 1,530,437 $0.15-$ 3.00 $ 1.00
Additional shares authorized.. 1,275,000 -- -- --
Options granted............... (363,919) 363,919 $4.00-$11.00 $ 5.32
Options exercised............. -- (85,347) $0.10-$ 4.00 $ 0.44
Options canceled.............. 107,780 (107,780) $0.10-$ 4.00 $ 2.43
--------- ---------
Balance at December 31, 1998.... 1,239,818 1,701,229 $0.10-$11.00 $ 1.88
Options granted (unaudited)... (330,901) 330,901 $ 11.00 $11.00
Options exercised
(unaudited).................. -- (143,895) $0.15-$11.00 $ 1.15
Options canceled (unaudited).. 140,575 (140,575) $0.30-$11.00 $ 3.91
--------- ---------
Balance at September 30, 1999
(unaudited).................... 1,049,492 1,747,660 $0.10-$11.00 $ 3.50
========= =========
</TABLE>

The weighted-average fair value per share of the options granted during the
years ended December 31, 1996, 1997 and 1998 were $0.40, $1.46, and $1.19,
respectively, and for options granted during the nine months ended September
30, 1999, the weighted-average fair value per share was $2.46.

F-16
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

Exercise prices of options outstanding and options exercisable were as
follows:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------- -------------------
Weighted- Weighted- Weighted-
Average Average Average
Remaining Exercise Exercise
Number of Contractual Price Number of Price
Options Life Per Share Options Per Share
--------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1998
$0.10-$ 0.50............ 894,190 5.88 $ 0.22 808,288 $0.20
$1.00-$ 2.50............ 428,494 8.31 $ 2.45 188,144 $2.43
$3.00-$ 4.00............ 273,245 9.09 $ 3.84 71,764 $3.78
$6.50-$11.00............ 105,300 9.54 $ 8.56 12,207 $7.62
--------- ---------
1,701,229 7.24 $ 1.88 1,080,403 $0.91
========= =========
September 30, 1999
(unaudited)
$0.10-$ 0.50............ 794,758 5.14 $ 0.22 774,937 $0.22
$1.00-$ 2.50............ 290,525 7.38 $ 2.42 192,907 $2.41
$3.00-$ 4.00............ 252,284 8.34 $ 3.83 111,689 $3.79
$6.50-$11.00............ 410,093 9.34 $10.42 72,265 $9.83
--------- ---------
1,747,660 6.96 $ 3.50 1,151,798 $1.53
========= =========
</TABLE>

At December 31, 1996 and 1997, 630,072 and 792,232 options were exercisable
with weighted-average exercise prices of $0.18 and $0.40, respectively.

Pro forma information regarding net income (loss) is required by SFAS 123,
which also requires that the pro forma information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1996 under the fair value method of that Statement. The fair value
of these options in 1996 and 1997 was estimated at the date of grant using the
minimum value method option pricing model with the following weighted-average
assumptions: risk-free interest rate of 5.2%; a dividend yield of 0%; and a
weighted-average expected life of the option of five years. The value of
options granted after the underwritten offering and registration was determined
using the Black- Scholes method and the following weighted-average assumptions
were used in 1998 and 1999: volatility factor of 0.01; risk-free interest rate
of 5.2%; a dividend yield of 0%; and a weighted-average expected life of the
option of five years.

F-17
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

Had the Company valued its stock options according to the fair value
provisions of SFAS 123, pro forma net income (loss) and pro forma net income
(loss) per share would have been as follows (in thousands):

<TABLE>
<CAPTION>
Nine months
Years ended December ended
31, September 30,
------------------------ -----------------
1996 1997 1998 1998 1999
------ ------- -------- ------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net income (loss):
As reported.................... $2,945 $(7,232) $(10,685) $(7,437) $ (9,865)
====== ======= ======== ======= ========
Pro forma for SFAS 123......... $2,912 $(7,379) $(10,843) $(7,559) $(10,105)
====== ======= ======== ======= ========
Basic net income (loss) per
share:
As reported.................... $ 1.15 $ (2.64) $ (1.90) $ (2.54) $ (0.64)
====== ======= ======== ======= ========
Pro forma for SFAS 123......... $ 1.14 $ (2.69) $ (1.93) $ (2.58) $ (0.65)
====== ======= ======== ======= ========
Diluted net income (loss) per
share:
As reported.................... $ 0.24 $ (2.64) $ (1.90) $ (2.54) $ (0.64)
====== ======= ======== ======= ========
Pro forma for SFAS 123......... $ 0.23 $ (2.69) $ (1.93) $ (2.58) $ (0.65)
====== ======= ======== ======= ========
</TABLE>

Deferred Compensation

During the year ended December 31, 1998, the Company recorded deferred
compensation of $2,211,000 for the excess of the deemed fair value of the
Company's common stock over the exercise price for certain options and warrants
granted in 1998. This deferred compensation will be amortized to compensation
expense over the related vesting period, generally four years.

Warrants

The Company has issued warrants to consultants to purchase shares of the
Company's common stock. At September 30, 1999, the following warrants were
unexercised:

<TABLE>
<CAPTION>
Number Exercise
Issue Date of Shares Price Vesting Term
---------- --------- -------- ------------
<S> <C> <C> <C>
August 1996............. 10,000 $ 3.00 3 years
September 1997.......... 10,000 $ 3.00 3 years
February 1998........... 5,000 $ 4.00 3 years
February 1998........... 10,000 $ 4.00 5,000 upon completion of the sale of
1,500,000 shares of common stock in
October 1998; remaining 5,000 over 3
years
February 1999........... 10,000 $11.00 3 years
</TABLE>

F-18
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)

Reserved Shares

The Company has reserved shares of common stock as of September 30, 1999 for
future issuance as follows:

<TABLE>
<CAPTION>
<S> <C>
Warrants........................................................... 45,000
Stock Option Plans................................................. 2,797,152
Stock Purchase Plan................................................ 125,000
---------
2,967,152
=========
</TABLE>

10. Income Taxes

As of December 31, 1998, the Company had federal net operating loss
carryforwards of approximately $15,500,000. The Company also had federal
research and development tax credit carryforwards of approximately $300,000.
The federal net operating loss and credit carryforwards will expire on various
dates beginning in 2012 through 2018, if not utilized.

Utilization of the net operating losses and credit carryforwards may be
subject to substantial annual limitation due to ownership change provisions of
the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.

Significant components of the Company's deferred tax assets are as follows
(in thousands):

<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1997 1998
----- ------- -------
<S> <C> <C> <C>
Net operating loss carryforwards....................... $ -- $ 1,400 $ 5,800
Research credit carryforwards.......................... -- 100 400
Capitalized research and development................... 200 200 200
Deferred revenue....................................... 200 -- --
Other accruals and reserves............................ 300 400 200
----- ------- -------
Total deferred tax assets.............................. 700 2,100 6,600
Valuation allowance for deferred tax assets............ (700) (2,100) (6,600)
----- ------- -------
Net deferred tax assets................................ $ -- $ -- $ --
===== ======= =======
</TABLE>

The valuation allowance increased by $300,000 during the year ended December
31, 1996. Approximately $200,000 of the valuation allowance for deferred tax
assets related to benefits of stock option deductions which, when recognized,
will be allocated directly to contributed capital.

F-19
<PAGE>

Appendix A

, 2000
Centaur Pharmaceuticals
484 Oakmead Parkway
Sunnyvale, California 94086

Re: Centaur Pharmaceuticals, Inc.

This Letter Agreement is being entered into by the undersigned (the
"Holder") in connection with the offering of Common Stock (the "Purchased
Shares") by Centaur Pharmaceuticals, Inc., a Delaware corporation (the
"Company") pursuant to a prospectus, dated , 2000, covering the sale of up
to 1,080,000 shares of common stock of the Company.

Holder hereby agrees that Holder shall not, to the extent requested by the
Company or an underwriter of securities of the Company, sell or otherwise
transfer or dispose of any Purchased Shares or other shares of stock of the
Company then beneficially owned by such Holder (other than to donees or
partners of the Holder who agree to be similarly bound) for up to one hundred
eighty (180) days (the "Lock-up Period") following the effective date of a
registration statement of the Company filed under the United States Securities
Act of 1993, as amended (the "Securities Act"); provided, however, that:

(a) such agreement shall be applicable only to the first registration
statement of the Company which covers securities to be sold on its behalf
to the public in an underwritten offering in which shares are listed on the
Nasdaq National Market, the Neuer Market of the Frankfurt Stock Exchange,
the Swiss New Market, a trading segment of the SWX Swiss Exchange, or other
similarly recognized securities exchange or quotation system, but not to
Purchased Shares of Holder sold pursuant to any such registration
statement; and

(b) all executive officers and directors of the Company then holding
Common Stock of the Company enter into similar agreements.

Notwithstanding the foregoing, in the event that substantially all other
holders of Common Stock of the Company who have entered into similar agreements
relating to restrictions on sale, transfer or other disposition are hereafter
released from their obligations thereunder, then Holder shall be released from
the restrictions on sale, transfer or other disposition of the Purchased Shares
hereunder to the same extent (on a pro-rata basis based on the ratio of the
number of shares of Common Stock of other holders so released to the aggregate
number of shares of Common Stock that are subject to similar agreements).

Furthermore, in the event that, during the Lock-up Period, other holders of
the Company's Common Stock that have contractual rights to the registration of
their shares with the U.S. Securities and Exchange Commission are permitted to
include shares of the Company's Common Stock held by such holders in a public
offering by the Company pursuant to the exercise of such holders' registration
rights, then, at the discretion of the Company, Holder shall either be (i)
offered an opportunity to include a pro-rata portion of the Purchased Shares in
such public offering (based on the ratio of the number of shares of Common
Stock of such holders so included to the aggregate number of shares of Common
Stock that are then entitled to registration rights), on the same terms and
conditions as such other included shares, or (ii) permitted to sell, transfer
and dispose of the same pro rata portion of the Purchased Shares without regard
to the foregoing restrictions.

In order to enforce the foregoing covenant, the Company shall have the right
to place restrictive legends on the certificates representing the shares
subject to this agreement and to impose stop transfer instructions with respect
to the Purchased Shares and such other shares of stock of each Holder (and the
shares or securities of every other person subject to the foregoing
restriction) until the end of such period.

Very truly yours,

By: ____________________________________

Name: __________________________________

Title: _________________________________
<PAGE>

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

No dealer, salesperson or other person has been authorized to give any infor-
mation or to represent anything not contained in this prospectus in connection
with this offering. You must not rely on any unauthorized information or rep-
resentations. This prospectus is an offer to sell only the shares offered
hereby, but only under circumstances and in jurisdictions where it is lawful
to do so. The information contained in this prospectus is current only as of
its date.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 6
Centaur.................................................................. 16
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 27
Management............................................................... 43
Certain Transactions..................................................... 51
Principal Stockholders................................................... 53
Description of Capital Stock............................................. 56
Material United States Federal Tax Consequences to Non-United States
Holders................................................................. 61
Shares Eligible for Future Sale.......................................... 64
Underwriting............................................................. 66
Legal Matters............................................................ 69
Experts.................................................................. 69
Where You Can Find More Information...................................... 69
Index to Financial Statements............................................ F-1
</TABLE>

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

Until , 2000 (90 days after the date of this Prospectus), all dealers
effecting transactions in the common stock, whether or not participating in
this distribution, may be required to deliver a prospectus. This is in addi-
tion to the obligation of dealers to deliver a prospectus when acting as un-
derwriters and with respect to their unsold allotments or subscriptions.

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

1,080,000 Shares

LOGO

Common Stock

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

PROSPECTUS

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

Bank Vontobel AG

, 2000

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses to be paid by the
Registrant in connection with the sale of the shares of common stock being
registered hereby. All amounts are estimates except for the Securities and
Exchange Commission registration fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 3,279
Reimbursement of manager's expenses(*).......................... 250,000
Accounting fees and expenses.................................... 150,000
Legal fees and expenses......................................... 200,000
Road show expenses.............................................. 25,000
Transfer agent and registrar fees and expenses.................. 4,000
Miscellaneous................................................... 2,721
--------
Total........................................................... $635,000
========
</TABLE>
- --------
* Pursuant to the underwriting agreement, the manager has agreed to pay
certain costs and expenses of this offering, including advisors' fees and
blue sky fees and expenses. The Company has agreed to reimburse the manager
for these and certain other expenses estimated to be $250,000.

Item 14. Indemnification of Directors and Officers.

As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty as
a director except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.

As permitted by Section 145 of the Delaware General Corporation Law, the
Bylaws of the Registrant provide that (i) the Registrant is required to
indemnify its directors and executive officers to the fullest extent permitted
by the Delaware General Corporation Law, (ii) the Registrant may indemnify its
other officers, employees and agents as set forth in the Delaware General
Corporation Law, (iii) to the fullest extent permitted by the Delaware General
Corporation Law, the Registrant is required to advance expenses, as incurred,
to its directors and executive officers in connection with a legal proceeding
(subject to certain exceptions), (iv) the rights conferred in the Bylaws are
not exclusive, (v) the Registrant is authorized to enter into indemnification
agreements with its directors, officers, employees and agents, and (vi) the
Registrant may not retroactively amend its Bylaws provisions relating to
indemnity.

The Registrant's policy is to enter into indemnity agreements with each of
its directors and executive officers. The indemnity agreements provide that
directors and executive officers will be indemnified and held harmless to the
fullest possible extent permitted by law including against all expenses
(including attorneys' fees), judgments, fines and settlement amounts paid or
reasonably incurred by them in any action, suit or proceeding, including any
derivative action by or in the right of the Registrant, on account of their
services as directors, officers, employees or agents of the Registrant or as
directors, officers, employees or agents of any other company or enterprise
when they are serving in such capacities at the request of the Registrant. The
Registrant will not be obligated pursuant to the agreements to indemnify or
advance expenses to an indemnified party with respect to proceedings or claims
(i) initiated by the indemnified party and not by way of defense, except with
respect to a proceeding authorized by the Board of Directors and successful
proceedings brought to enforce a right to indemnification under an indemnity
agreement, (ii) for any amounts paid in settlement of a

II-1
<PAGE>

proceeding unless the Registrant consents to such settlement, (iii) on account
of any suit in which judgment is rendered against the indemnified party for an
accounting of profits made from the purchase or sale by the indemnified party
of securities of the Registrant pursuant to the provisions of Section 16(b) of
the Securities Exchange Act of 1934 and related laws, (iv) on account of
conduct by a director which is finally adjudged to have been in bad faith or
conduct that the director did not reasonably believe to be in, or not opposed
to, the best interests of the Registrant, (v) on account of any criminal action
or proceeding arising out of conduct that the director had reasonable cause to
believe was unlawful, or (vi) if a final decision by a court having
jurisdiction in the matter shall determine that such indemnification is not
lawful.

The indemnity agreement also provides for contribution in certain situations
in which the Registrant and a director or executive officer are jointly liable
but indemnification is unavailable, such contribution to be based on the
relative benefits received and the relative fault of the Registrant and the
director or executive officer. Contribution is not allowed in connection with a
Section 16(b) judgment, an adjudication of bad faith or conduct that a director
or executive officer did not reasonably believe to be in, or not opposed to,
the best interests of the Registrant or a proceeding arising out of conduct a
director or executive officer had reasonable cause to believe was unlawful.

The indemnity agreement requires a director or executive officer to
reimburse the Registrant for all expenses advanced only to the extent it is
ultimately determined that the director or executive officer is not entitled,
under Delaware law, the Bylaws, the indemnity agreement or otherwise, to be
indemnified for such expenses. The indemnity agreement provides that it is not
exclusive of any rights a director or executive officer may have under the
Certificate of Incorporation, Bylaws, other agreements, any majority-in-
interest vote of the stockholders or vote of disinterested directors, the
Delaware law or otherwise.

The indemnification provision in the Bylaws, and the indemnity agreements
entered into between the Registrant and its directors and executive officers,
may be sufficiently broad to permit indemnification of the Registrant's
executive officers and directors for liabilities arising under the Securities
Act.

As authorized by the Registrant's Bylaws, the Registrant, with approval by
the Board, has purchased director and officer liability insurance.

See also the undertakings set out in response to Item 17.

Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:

<TABLE>
<CAPTION>
Document Exhibit Number
-------- --------------
<S> <C>
Underwriting Agreement...................................... 1.01
Registrant's Amended and Restated Certificate of
Incorporation.............................................. 3.01
Registrant's Bylaws......................................... 3.02
Form of Indemnification Agreement........................... 10.05
</TABLE>

II-2
<PAGE>

Item 15. Recent Sales of Unregistered Securities.

The following table sets forth information regarding all securities sold by
the Registrant since November 1, 1996.

<TABLE>
<CAPTION>
Aggregate
Purchase Price
Date of Title of Number of and Form of
Class of Purchasers Sale(s) Securities(1) Securities Consideration
------------------- --------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
129 Officers, directors,
employees
and/or consultants...... 2/7/97 to Options to 872,619 Options granted
7/17/98 purchase common for no cash
stock under the consideration
1993 Incentive
Plan. Exercise
prices range
from $2.50 to
$10.00 per
share.(2)
45 Current and former
officers, directors,
employees and/or
consultants............. 11/13/96 common stock(3) 499,634 $270,571.85 cash
to (upon exercise
12/28/99 of stock options
under the 1993
Incentive Plan,
with exercise
prices ranging
from $0.10 to
$10.00 per
share)
52 unaffiliated
investors and the
following investors that
were then officers,
directors and their
affiliates, and greater
than 5% stockholders:
Paul F. Glenn, Trustee,
Paul F. Glenn Revocable
Trust; Glenn Foundation
for Medical Research;
Brian D. Frenzel; Selvi
Vescovi; Charter
Ventures II, L.P.; Menlo
Ventures IV, L.P.;
Oklahoma Medical
Research Foundation; and
Dillon, Read & Co.
Inc., as agent.......... 2/14/97 Series D 2,200,000 $16,500,000 cash
to Preferred Stock
10/3/97
1 Consultant............ 9/19/97 Warrant to 10,000 Issued in
purchase common connection with
stock at $3.00 consulting
per share services
rendered
1 Consultant............ 2/14/98 Warrant to 10,000 Issued in
purchase common connection with
stock at $4.00 consulting
per share services
rendered
Steinar Engelsen........ 2/14/98 Warrant to 5,000 Issued in
purchase common connection with
stock at $4.00 consulting
per share services
rendered
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
Aggregate
Purchase Price
Date of Title of Number of and Form of
Class of Purchasers Sale(s) Securities(1) Securities Consideration
------------------- --------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
1 Institutional 7/13/98 common stock 26,550 $51,109 cash
investor................ (upon exercise
of a warrant
with exercise
price of $1,925
per share)
Equipment lessor. ...... 7/23/98 common stock 5,695 $10,963 in
Centaur common
stock (upon net
exercise of a
warrant with
exercise price
of $1.925 per
share)
Institutional and 10/13/98 common stock 1,500,000 $16,500,000 cash
individual investors....
100 officers, employees
and/or
consultants............. 12/15/98 Options to 334,367 Options granted
to purchase common for no cash
12/14/99 stock under the consideration
1998 Incentive
Plan at an
exercise price
of $11.00 per
share.(2)
1 Consultant............ 2/26/99 Warrant to 10,000 Issued in
purchase common connection with
stock at $11.00 consulting
per share services
rendered
1 Outside director...... 3/1/99 Options to 834 Initial option
purchase common grant to new
stock under the director
Directors Plan
at $11.00 per
share.(2)
6 Outside directors..... 5/1/99 Options to 45,000 Annual option
purchase common granted in
stock under the consideration
Directors Plan for services
at $11.00 per rendered as a
share.(2) Centaur director
1 Former employee....... 9/16/99 Common Stock (3) 83 $913 cash (upon
exercise of a
stock option
under the 1998
Incentive Plan,
with an exercise
price of $11.00
per share)
</TABLE>
- --------
(1) Unless otherwise noted, all sales were made in reliance on Section 4(2) of
the Securities Act and/or Regulation D promulgated under the Securities
Act. The securities were sold to a limited number of people with no
general solicitation or advertising. The purchasers were sophisticated
investors with access to all relevant information necessary to evaluate
the investment who represented to the Registrant that the shares were
being acquired for investment.

II-4
<PAGE>

(2) With respect to the grant of stock options, exemptions from registration
under the Securities Act were unnecessary in that none of such
transactions involved a "sale" of securities as such term is used in
Section 2(3) of the Securities Act.

(3) All sales of common stock before January 1, 1999 pursuant to the exercise
of stock options granted under the Registrant's stock option plans were
made pursuant to the exemption from the registration requirements of the
Securities Act afforded by Rule 701 promulgated under the Securities Act
as transactions pursuant to a compensatory benefit plan or a written
contract relating to compensation. Sales on or after January 1, 1999 were
made pursuant to the Registrant's Registration Statement on Form S-8 filed
with the Securities and Exchange Commission on February 3, 1999.

Item 16. Exhibits and Financial Statement Schedules.

(a) The following exhibits are filed herewith:

<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S>
1.01 --Underwriting Agreement.*
1.02 --Form of Letter Agreement between Registrant and Bank J. Vontobel.*
3.01 --Registrant's Amended and Restated Certificate of Incorporation.
Incorporated by reference to Exhibit 3.02 to the Registrant's
Registration Statement on Form S-1 (File No. 333-57165) declared
effective by the Securities and Exchange Commission on October 13,
1998 (the "1998 S-1").
3.02 --Registrant's Bylaws. Incorporated by reference to Exhibit 3.03 to
the 1998 S-1.
4.01 --Form of Specimen Certificate for Registrant's Common Stock.
Incorporated by reference to Exhibit 4.01 to the 1998 S-1.
4.02 --Third Amended and Restated Investors' Rights Agreement, dated as of
February 14, 1997. Incorporated by reference to Exhibit 4.02 to the
1998 S-1.
4.03 --Amendment to Third Amended and Restated Investors' Rights Agreement
and Third Amended and Restated Voting Agreement and Approval of
Election of Director, dated as of September 9, 1998. Incorporated by
reference to Exhibit 4.03 to the 1998 S-1.
5.01 --Opinion of Fenwick & West LLP regarding legality of the securities
being registered.*
10.01 --Registrant's 1993 Equity Incentive Plan, as amended. Incorporated by
reference to Exhibit 10.01 to the 1998 S-1.
10.02 --Registrant's 1998 Equity Incentive Plan. Incorporated by reference
to Exhibit 10.02 to the 1998 S-1.
10.03 --Registrant's 1998 Directors Stock Option Plan. Incorporated by
reference to Exhibit 10.03 to the 1998 S-1.
10.04 --Registrant's 1998 Employee Stock Purchase Plan. Incorporated by
reference to Exhibit 10.04 to the 1998 S-1.
10.05 --Form of Indemnification Agreement entered into by Registrant with
each of its directors and executive officers. Incorporated by
reference to Exhibit 10.05 to the 1998 S-1.
10.06 --Master Loan and Security Agreement between the Registrant and Finova
Technology Finance, Inc., dated as of November 3, 1997; Loan and
Security Agreement No. 1 dated April 22, 1998 between the Registrant
and Finova Technology Finance, Inc.; Commitment Letter between the
Registrant and Finova Technology Finance, Inc., dated as of October
7, 1997 (as revised on December 23, 1997), as amended April 20, 1998;
Leasehold Deeds of Trust dated November 3, 1997 executed by the
Registrant; Promissory Note dated April 22, 1998 executed by
Registrant. Incorporated by reference to Exhibit 10.06 to the 1998 S-
1.
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S>
10.07 --Lease for 484 Oakmead Parkway, Sunnyvale, CA dated February 25,
1993, as amended August 18, 1995. Incorporated by reference to
Exhibit 10.07 to the 1998 S-1.
10.08 --Sublease for additional space at 484 Oakmead Parkway, Sunnyvale, CA
dated March 22, 1995. Incorporated by reference to Exhibit 10.08 to
the 1998 S-1.
10.09 --Lease for 1220 Memorex Drive, Suite 100, Santa Clara, CA dated
February 12, 1997. Incorporated by reference to Exhibit 10.09 to the
1998 S-1.
10.10 --Lease for 1220 Memorex Drive, Suites 200 and 300, Santa Clara, CA
dated September 12, 1997. Incorporated by reference to Exhibit 10.10
to the 1998 S-1.
10.11 --License with UKRF and OMRF dated July 15, 1992. Incorporated by
reference to Exhibit 10.11 to the 1998 S-1.+
10.12 --First Amendment to License with UKRF and OMRF dated September 29,
1995. Incorporated by reference to Exhibit 10.12 to the 1998 S-1.+
10.13 --Development, License and Marketing Agreement with Astra AB dated
September 26, 1995. Incorporated by reference to Exhibit 10.13 to the
1998 S-1.+
10.14 --Supply Agreement with Astra AB dated September 26, 1995.
Incorporated by reference to Exhibit 10.14 to the 1998 S-1.+
10.15 --Amendments to Development, License and Marketing Agreement with
Astra AB dated July 8, 1997 and October 7, 1997. Incorporated by
reference to Exhibit 10.15 to the 1998 S-1.
10.16 --Development, Patent and Trademark/Know-How Licensing and Supply
Agreement--CPI-1189 with H. Lundbeck A/S dated October 31, 1996, as
amended as of October 31, 1996. Incorporated by reference to Exhibit
10.16 to the 1998 S-1.+
10.17 --Employment Agreement with Brian D. Frenzel dated December 1, 1993,
and associated Stock Option Agreements. Incorporated by reference to
Exhibit 10.17 to the 1998 S-1.
10.18 --License Agreement dated January 15, 1998 between Registrant and
Cutanix Corporation. Incorporated by reference to Exhibit 10.18 to
the 1998 S-1.+
10.19 --Services and Supply Agreement dated January 15, 1998 between
Registrant and Cutanix Corporation. Incorporated by reference to
Exhibit 10.19 to the 1998 S-1.+
10.20 --Stockholders' Agreement dated January 15, 1998 by and among Cutanix
Corporation and certain stockholders of Cutanix Corporation.
Incorporated by reference to Exhibit 10.20 to the 1998 S-1.
10.21 --License Agreement dated January 1, 1998 by and among OMRF and
Registrant. Incorporated by reference to Exhibit 10.21 to the 1998 S-
1.+
10.22 --Separation Agreement and General Release effective January 15, 1999
between the Registrant and Joseph L. Turner. Incorporated by
reference to Exhibit 10.22 of the Registrant's Annual Report on Form
10-K405 filed with the Securities and Exchange Commission on March
31, 1999.
23.01 --Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 --Consent of Ernst & Young LLP, independent auditors.
24.01 --Power of Attorney. See page II-8.
27.01 --Financial Data Schedule. Incorporated by reference to Exhibit 27.01
to the Registrant's Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on November 15, 1999.
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment has been granted for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission.

II-6
<PAGE>

(b) The following financial statement schedule is filed herewith:

Schedule II--Valuation and Qualifying Accounts

Other financial statement schedules are omitted because the information
called for is not required or is shown either in the financial statements or
the notes thereto.

Item 17. Undertakings.

The undersigned Registrant hereby undertakes to provide to the manager at
the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the manager to permit
prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, 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 Securities 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 the Securities Act and will be governed by the final adjudication
of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each 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.

II-7
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Sunnyvale, State of
California, on the 2nd day of February, 2000.

Centaur Pharmaceuticals, Inc.

/s/ Lucy O. Day
By: _________________________________
Lucy O. Day
Chief Financial Officer,
Treasurer and Secretary

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Steinar J. Engelsen, Charles R. Engles
and Lucy O. Day, and each of them, his or her true and lawful attorneys-in-fact
and agents with full power of substitution, for him and her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering covered
by the Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes and he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his,
her or their substitute or substitutes, may lawfully do or cause to be done or
by virtue hereof.

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons on behalf of the Registrant
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Name Title Date
---- ----- ----

<S> <C> <C>
Principal Executive Officer:

/s/ Steinar J. Engelsen Acting Chief Executive February 2, 2000
______________________________________ Officer and a Director
Steinar J. Engelsen

Principal Financial Officer and
Principal Accounting Officer:

/s/ Lucy O. Day Chief Financial Officer, February 2, 2000
______________________________________ Treasurer and Secretary
Lucy O. Day

Additional Directors:

/s/ John M. Carney Director February 2, 2000
______________________________________
John M. Carney

/s/ Graham K. Crooke Director February 2, 2000
______________________________________
Graham K. Crooke
</TABLE>

II-8
<PAGE>

<TABLE>
<CAPTION>
Name Title Date
---- ----- ----

<S> <C> <C>
/s/ Charles R. Engles Director February 2, 2000
______________________________________
Charles R. Engles

/s/ Robert A. Floyd Director February 2, 2000
______________________________________
Robert A. Floyd

/s/ Selvi Vescovi Director February 2, 2000
______________________________________
Selvi Vescovi
</TABLE>

II-9
<PAGE>

CENTAUR PHARMACEUTICALS, INC.

Schedule II--Valuation and Qualifying Accounts
(in thousands)

<TABLE>
<CAPTION>
Additions
----------------------------------------
Balance at Charged to Charged Balance at
Beginning Costs and Against End of
of Year Expenses Revenue Deductions Year
---------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Period ended September 30,
1999 deducted from asset
account:
Allowance for doubtful
accounts............... $ 0 $ -- $ -- $ -- $ 0
====== ===== ====== ====== ======
Year ended December 31,
1998 deducted from asset
account:
Allowance for doubtful
accounts............... $1,600 $ -- $ -- $1,600 $ 0
====== ===== ====== ====== ======
Year ended December 31,
1997 deducted from asset
account:
Allowance for doubtful
accounts............... $ 0 $ -- $1,600 $ -- $1,600
====== ===== ====== ====== ======
Year ended December 31,
1996 deducted from asset
account:
Allowance for doubtful
accounts............... $ 0 $ -- $ -- $ -- $ 0
====== ===== ====== ====== ======
</TABLE>

<PAGE>

CENTAUR PHARMACEUTICALS, INC.

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S>
1.01 --Underwriting Agreement.*
1.02 --Form of Letter Agreement between Registrant and Bank J. Vontobel.*
5.01 --Opinion of Fenwick & West LLP regarding legality of the securities
being registered.*
23.01 --Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 --Consent of Ernst & Young LLP, independent auditors.
24.01 --Power of Attorney. See page II-8.
</TABLE>
- --------
* To be filed by amendment.

<PAGE>

EXHIBIT 23.02

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated January 27,
1999, in the Registration Statement (Form S-1) and related Prospectus of
Centaur Pharmaceuticals, Inc. for the registration of its common stock.

Ernst & Young LLP

Palo Alto, California
February 1, 2000