SANGSTAT MEDICAL CORP, S-3/A, 1997-02-28

SANGSTAT MEDICAL CORP
S-3/A, 1997-02-28
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1997

REGISTRATION NO. 333-20301

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

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SANGSTAT MEDICAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------

<TABLE>
<S> <C> <C>
DELAWARE 2834 94-3076-069
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

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1505 ADAMS DRIVE
MENLO PARK, CALIFORNIA 94025
(415) 328-0300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------

PHILIPPE POULETTY, M.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SANGSTAT MEDICAL CORPORATION
1505 ADAMS DRIVE
MENLO PARK, CALIFORNIA 94025
(415) 328-0300
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
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COPIES TO:

<TABLE>
<S> <C>
EDWARD M. LEONARD ALAN K. AUSTIN
JEFFREY P. HIGGINS ELIZABETH R. FLINT
BROBECK, PHLEGER & HARRISON LLP WILSON, SONSINI, GOODRICH & ROSATI
TWO EMBARCADERO PLACE PROFESSIONAL CORPORATION
2200 GENG ROAD 650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94303 PALO ALTO, CALIFORNIA 94304
(415) 424-0160 (415) 493-9300
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

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

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

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 THAT 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> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED FEBRUARY 28, 1997

PROSPECTUS

2,000,000 SHARES

LOGO
COMMON STOCK

All of the 2,000,000 shares of Common Stock offered hereby are being
sold by SangStat Medical Corporation ("SangStat" or the "Company"). The
Company's Common Stock is quoted on the Nasdaq National Market under the symbol
SANG. On February 27, 1997, the last reported sale price of the Common Stock was
$32.375 per share. See "Price Range of Common Stock".

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

THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.

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

<TABLE>
<CAPTION>
===============================================================================================
PRICE TO PROCEEDS TO
PUBLIC UNDERWRITING COMPANY(2)
DISCOUNT(1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........... $ $ $
- -----------------------------------------------------------------------------------------------
Total(3)............ $ $ $
===============================================================================================
</TABLE>

(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.

(2) Before deducting expenses payable by the Company estimated at $550,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."

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

The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1997, at the office of the agent of
Hambrecht & Quist LLC in New York, New York.

HAMBRECHT & QUIST

MONTGOMERY SECURITIES

ROBERTSON, STEPHENS & COMPANY

, 1997
<PAGE> 3

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facility maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Regional Offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048 and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained in
person at prescribed rates from the Public Reference Section of the Commission
at its principal office located at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a World Wide Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the Commission's
web site is http://www.sec.gov. The Common Stock of the Company is quoted on the
Nasdaq National Market. Reports and other information concerning the Company may
be inspected at the National Association of Securities Dealers, Inc. located at
1735 K Street, N.W. Washington, D.C. 20006.

This Prospectus, which constitutes a part of a Registration Statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), omits certain of the
information set forth in the Registration Statement in accordance with the rules
and regulations of the Commission. Reference is hereby made to the Registration
Statement and to the exhibits thereto for further information with respect to
the Company and the securities offered hereby. Copies of the Registration
Statement and the exhibits thereto are on file at the offices of the Commission
and may be obtained upon payment of the prescribed fee or may be examined
without charge at the public reference facilities of the Commission described
above.
------------------

INFORMATION INCORPORATED BY REFERENCE

The following documents or portions of documents filed by the Company with
the Commission (File No. 0-22890) are incorporated herein by reference: (a)
Annual Report on Form 10-K for the fiscal year ended December 31, 1995; (b)
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996 as amended by the Form 10-Q/A filed on
November 29, 1996; (c) the description of the Company's Common Stock which is
contained in its Registration Statement on Form 8-B filed under the Exchange Act
on December 4, 1995 including any amendment or reports filed for the purpose of
updating such description; and (d) all reports and other documents filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering. Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a statement
contained or incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus. The
Company will provide without charge to each person to whom this Prospectus is
delivered a copy of any or all of such documents which are incorporated herein
by reference (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the documents that this Prospectus
incorporates). Written requests for copies should be directed to Maree Wall,
Vice President, Corporate Communications at the principal executive offices of
SangStat Medical Corporation, 1505 Adams Drive, Menlo Park, California 94025.

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

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE
COVERING TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

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

ALLOTRAP(R), PRA-STAT(R), CROSS-STAT(R), THE TRANSPLANT PHARMACY(TM) and
THE TRANSPLANT COMPANY(TM) are trademarks of the Company. Additionally, this
Prospectus contains trademarks of other companies.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. The Common Stock offered hereby involves
a high degree of risk. See "Risk Factors."

THE COMPANY

SangStat, The Transplant Company, is a specialty pharmaceutical company
applying a disease management approach to improve the outcome of organ
transplantation. The Company's products and product candidates are designed to
prevent and treat graft rejection and monitor transplant patients throughout
their lifetimes. SangStat's lead drug candidates are THYMOGLOBULIN for the
treatment of acute graft rejection episodes, and CYCLOSPORINE, for chronic daily
immunosuppression to prevent graft rejection. In January 1997, the Company filed
a Product License Application ("PLA") with the FDA for marketing approval of
THYMOGLOBULIN. This application was accepted for review by the FDA in February
1997. In November 1996, the Company filed an Abbreviated Antibiotic Drug
Application ("AADA"), which the FDA accepted for review in January 1997, for
marketing approval of its proprietary CYCLOSPORINE formulation. Cyclosporine,
which to date has only been marketed by Novartis AG ("Novartis"), is the leading
immunosuppressive drug used by transplant patients, with reported worldwide
sales of $1.2 billion in 1995. SangStat is also conducting clinical trials for a
generic AZATHIOPRINE product candidate for use as an adjunct therapy in chronic
immunosuppression. ALLOTRAP 2702, a proprietary HLA peptide designed to promote
graft acceptance, is in Phase II clinical trials in Europe. To further the
Company's goal of providing comprehensive disease management, the Company has
established THE TRANSPLANT PHARMACY, a pilot program designed to provide mail
order distribution of drugs and transplant patient management services.

Approximately 80,000 transplant candidates are registered on organ
transplant waiting lists in 500 transplant centers throughout North America and
Europe. Each year approximately 50,000 new patients receive donated organs. More
than 200,000 post-transplant patients require daily, lifelong immunosuppressive
therapy to prevent graft rejection and graft loss. SangStat's broad portfolio of
complementary drugs, monitoring products, product candidates and services is
designed to serve the needs of transplant patients at each key phase of
transplantation.

<TABLE>
<CAPTION>
TRANSPLANT PHASE PRODUCT/SERVICE POTENTIAL CLINICAL USE STATUS
- ------------------ ---------------------- ----------------------------------------- ------------------------
<S> <C> <C> <C>
Pre-Transplant PRA-STAT Detects anti-HLA antibodies in candidates Marketed
Monitoring
CROSS-STAT Detects candidate antibodies Marketed
against a specific donor
Transplant THYMOGLOBULIN Treats acute kidney rejection episodes PLA under review in
Acute Care U.S.; NDS filed in
Canada
ALLOTRAP 2702 Promotes graft acceptance Phase II trials (Europe)

CELSIOR Preserves organs prior to transplantation Clinical trials
Lifetime Post- CYCLOSPORINE Chronic immunosuppression AADA under review in
Transplant Care U.S.
AZATHIOPRINE Chronic immunosuppression Bioequivalence trials

MONITORING PRODUCTS Patient management Clinical trials

THE TRANSPLANT Mail order and patient management Piloting at selected
PHARMACY program centers
</TABLE>

THYMOGLOBULIN is an anti-T-cell polyclonal antibody approved for use in 39
countries for the treatment of acute graft rejection episodes. The Company has
an exclusive license from Pasteur

3
<PAGE> 5

Merieux Connaught ("PMC"), a subsidiary of Rhone Poulenc S.A., to market this
drug in the United States and Canada. Following its successful Phase III trial,
the Company filed a PLA with the FDA in January 1997 for treatment of graft
rejection episodes following kidney transplantation. This application was
accepted for review by the FDA in February 1997. SangStat has also filed a New
Drug Submission ("NDS") and is generating revenues through the distribution of
THYMOGLOBULIN in Canada under the Emergency Drug Release ("EDR") program, which
permits the distribution of certain products before final regulatory approval.

SangStat has developed a proprietary CYCLOSPORINE formulation for chronic
immunosuppression. Cyclosporine is the leading immunosuppressive drug used by
transplant patients, with reported worldwide sales of $1.2 billion in 1995.
Therapy is usually initiated shortly after transplantation and is continued
daily for the patient's lifetime. Cyclosporine is marketed by Novartis in
different formulations as Sandimmune and Neoral. Although Novartis' composition
of matter patent for cyclosporine expired in September 1995 in the United
States, Novartis' patents relating to their formulations are expected to
continue to present significant barriers to entry to potential competitors.
Based on human trial results, the Company believes its CYCLOSPORINE formulation
is a bioequivalent to Novartis' newest formulation, Neoral. Since its
introduction in 1994, Neoral has become the most commonly used cyclosporine
formulation. To seek marketing approval, the Company filed an AADA with the FDA
in November 1996, which the FDA accepted for review in January 1997. See "Risk
Factors -- Risks Associated With CYCLOSPORINE."

Azathioprine is used as an adjunct daily therapy to cyclosporine for
chronic immunosuppression in the majority of transplant recipients. SangStat has
developed a generic AZATHIOPRINE and is currently conducting human
bioequivalence trials. Upon successful completion of these trials, the Company
intends to seek marketing approval for AZATHIOPRINE.

ALLOTRAP peptides are based on the Company's soluble Human Leukocyte
Antigen ("sHLA") technology. SangStat believes that its sHLA technology
represents a novel approach to the prevention of transplant rejection. ALLOTRAP
peptides are small HLA peptides designed to target the initial phase of the
transplant recipient's immune response without suppressing the immune system as
a whole. The first ALLOTRAP peptide, ALLOTRAP 2702, is in early stage Phase II
clinical trials in Europe.

SangStat's monitoring products and product candidates are intended to
improve the organ allocation process and the management of rejection episodes.
PRA-STAT and CROSS-STAT are designed to improve pre-transplant donor-recipient
matching. To guide the management of transplant patients, SangStat is developing
additional monitoring products. Furthermore, the Company is developing CELSIOR,
an organ preservation solution for which it expects to seek 510(k) market
clearance from the FDA subject to successful clinical trials. In the
longer-term, XE-9 is a drug candidate for xenotransplantation (i.e.
transplantation of organs or cells from one species to another) and XENOJECT is
a proprietary platform technology (i.e. a technology upon which future product
development may be based) that may result in additional drug candidates for
transplant and non-transplant applications.

SangStat intends to develop a dedicated sales force to market its
transplant products directly to transplant centers and patients. To further this
goal and to provide comprehensive disease management, SangStat established in
September 1996 THE TRANSPLANT PHARMACY, a pilot program dedicated to providing
direct distribution by mail order of drugs and transplant patient management
services. This service will promote medication compliance, measure clinical and
economic outcomes, and provide feedback directly to clinicians. Patients
electing to enroll will be able to have all of their medications filled through
the program's central pharmacy. THE TRANSPLANT PHARMACY will also place a key
individual, such as a pharmacist, in each transplant center that joins the
program to interact directly with physicians, nurses and patients. THE
TRANSPLANT PHARMACY program seeks to provide a singular and integrated approach
to the management of transplantation, in which the Company's drugs, monitoring
products, and services can be supplied to meet the needs of individual
transplant centers and their patients.

4
<PAGE> 6

THE OFFERING

Common Stock offered...................... 2,000,000 shares

Common Stock to be outstanding after the
offering.................................. 15,129,560 shares(1)

Use of proceeds........................... Commercial infrastructure, sales
and marketing, clinical testing,
research and development, and
other general corporate purposes

Nasdaq National Market symbol............. SANG
- ------------------------------

(1) Based on shares outstanding on December 31, 1996. Excludes 1,169,592 shares
of Common Stock issuable upon exercise of options outstanding as of December
31, 1996 at a weighted average exercise price of $6.58 per share.

SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Net product sales.............................................. $ 674 $ 2,698 $ 2,399
Collaborative agreement and government grants.................. 3,000 1,125 --
------- ------- -------
Total revenues.............................................. 3,674 3,823 2,399
------- ------- -------
Operating expenses:
Cost of sales and manufacturing................................ 1,503 2,753 2,846
Research and development....................................... 4,845 6,647 8,330
Selling, general and administrative............................ 3,157 3,773 6,120
------- ------- -------
Total operating expenses.................................... 9,505 13,173 17,296
------- ------- -------
Loss from operations............................................. (5,831) (9,350) (14,897)
Other income (expense) -- net.................................... 284 672 2,123
------- ------- -------
Net loss.................................................... $(5,547) $(8,678) $(12,774)
======= ======= =======
Net loss per common share(1)..................................... $ (0.79) $ (0.92) $ (1.03)
======= ======= =======
Shares used in per share computations(1)......................... 7,049 9,385 12,405
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments................. $41,321 $ 98,095
Working capital................................................... 40,724 97,498
Total assets...................................................... 44,750 101,524
Total stockholders' equity........................................ 40,955 97,729
</TABLE>

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

(1) For a description of the computation of net loss per common share, see Note
1 of Notes to Consolidated Financial Statements.

(2) Adjusted to give effect to the sale of 2,000,000 shares of Common Stock
offered hereby at an assumed public offering price of $30.25 per share after
deducting estimated underwriting discounts, commissions and offering
expenses. See "Use of Proceeds" and "Capitalization."

Except as otherwise noted, all information contained in this Prospectus
assumes no exercise of the Underwriters' over-allotment option.

5
<PAGE> 7

RISK FACTORS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements, including those set forth below and elsewhere in
this Prospectus. The following risk factors should be considered carefully in
addition to the other information contained in this Prospectus before purchasing
the Common Stock offered hereby.

HISTORY OF OPERATING LOSSES; FUTURE PROFITABILITY UNCERTAIN. SangStat was
incorporated in 1988 and has experienced significant operating losses since that
date. As of December 31, 1996, the Company's accumulated deficit was
$40,826,000. The Company's operating expenses have increased from approximately
$9.5 million to $13.2 million to $17.3 million over the last three fiscal years.
Total revenues increased from approximately $3.7 million to $3.8 million and
then decreased to $2.4 million and net losses from operations increased from
approximately $5.8 million to $9.4 million to $14.9 million over the last three
fiscal years. The Company expects to incur significant operating losses over the
next several years. There can be no assurance that the Company will ever achieve
significant revenues from product sales or profitable operations. To date, the
Company's product revenues have been substantially dependent on sales of certain
organ transplantation products, including a limited number of monitoring
products and sales of THYMOGLOBULIN in Canada under Canada's Emergency Drug
Release (EDR) program.

NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT. To achieve profitable
operations, the Company, alone or with others, must successfully develop, obtain
regulatory approval for, manufacture, introduce and market its potential
products. Much of the development work for SangStat's potential products remains
to be completed. There can be no assurance that the Company's product
development efforts will be successfully completed, that required regulatory
approvals will be obtained, or that any products if developed and introduced
will be successfully marketed. To date, the Company has no drug products
approved for commercial sale in any country.

The Company's product candidates will require extensive development,
testing and investment, as well as regulatory approval prior to
commercialization. Cost overruns due to unanticipated regulatory delays or
demands, unexpected adverse side effects or insufficient therapeutic efficacy
will prevent or substantially slow the development effort and ultimately would
have a material adverse effect on the Company. Furthermore, there can be no
assurance that the Company's research and development efforts will be successful
and that any given product will be approved by appropriate regulatory
authorities or that any product candidate under development will be safe,
effective or capable of being manufactured in commercial quantities at an
economical cost, will not infringe the proprietary rights of others or will
achieve market acceptance.

The Company's first drug candidate, THYMOGLOBULIN, for which the Company
has licensed the rights from PMC in the United States and Canada, has not been
approved for commercial sale in these territories. The Company completed a
single multi-center Phase III clinical trial in the United States in August 1996
and filed an Establishment License Application ("ELA") with PMC and PLA with the
FDA in August 1996 and January 1997, respectively. The PLA for THYMOGLOBULIN was
accepted for review by the FDA in February 1997. The Company has also filed an
NDS for marketing approval in Canada. However, there can be no assurance that
the results of this Phase III clinical trial, in combination with existing
European safety and efficacy data, will be sufficient to support an ELA, PLA, or
any necessary future ELA supplement needed for commercial marketing. In
addition, there can be no assurance that THYMOGLOBULIN will be demonstrated to
have the manufacturing or quality control specifications and requisite safety
and efficacy so that an ELA/PLA or NDS will be obtained from either the United
States or Canada, respectively, or that THYMOGLOBULIN will become a viable
commercial product.

The Company's other principal pharmaceutical product candidates, including
the Company's formulations of CYCLOSPORINE and AZATHIOPRINE, as well as CELSIOR
and ALLOTRAP 2702, have not been approved for commercial sale in any country.
The Company commenced human bioequivalence trials with respect to AZATHIOPRINE
in October 1996. The Company recently

6
<PAGE> 8

voluntarily withdrew its 510(k) for a two-component CELSIOR product and is now
conducting a clinical trial for a redesigned one-component, ready-to-use CELSIOR
product candidate. The Company has completed a Phase I clinical trial and an
initial Phase II pharmacokinetic and safety clinical trial for ALLOTRAP 2702,
both of which took place in France. The Company designed both clinical trials to
comply with regulatory standards in France as well as in the United States, so
that it may use the data to support its NDA to the FDA. There can be no
assurance that such data will be accepted by the FDA. The use of ALLOTRAP
peptides to promote graft acceptance in humans is novel and unproven and there
can be no assurance that such peptides will prove to be safe or effective in
humans for any clinical indication, including for any transplant type or at any
dosage. The Company has no clinical evidence in humans that ALLOTRAP peptides
will be effective in promoting graft acceptance or safety in transplant patients
and there can be no assurance that ALLOTRAP 2702 or any other product candidates
based on ALLOTRAP peptides will receive marketing approval or become viable
commercial products. Certain of the Company's monitoring product candidates are
in development and have not been approved for commercial sale. There can be no
assurance that these product candidates will be successfully developed, receive
regulatory approval or be marketed on a profitable basis. See
"Business--Products and Product Candidates."

RISKS ASSOCIATED WITH CYCLOSPORINE. The Company is developing a generic
CYCLOSPORINE for chronic immunosuppression. Commercialization of the Company's
CYCLOSPORINE drug candidate may be several years away and successful development
and commercialization is subject to numerous risks, including failure to obtain
regulatory approvals and potential intellectual property claims of third
parties, including those of Novartis and its manufacturing contractors. In
addition, if the Company is unable to demonstrate to the FDA that its
formulation is bioequivalent to Neoral, a currently approved Novartis
formulation, the Company would be required to undertake additional development
work and seek regulatory approval through the potentially longer NDA process if
it wished to continue to pursue this product candidate. There can be no
assurance that the proposed label, dosage form or manufacturing process of the
Company's CYCLOSPORINE, or the results of the Company's CYCLOSPORINE
bioequivalence study, will be accepted by the FDA. Furthermore, there can be no
assurance that the current FDA policies and regulations pertaining to the
Company's products or product candidates will not change in the future.

There can be no assurance that Novartis will not seek to protect its market
share through litigation, or other actions, against SangStat, its affiliates and
partners, or the FDA, or take actions which could adversely affect the
regulatory approval process. To date, no litigation has been commenced by
Novartis nor has Novartis threatened the Company with litigation. In November
1996, however, Novartis filed a citizens' petition with the FDA, as described
below, seeking to prohibit the use of Neoral as a reference drug for
demonstration of bioequivalence. There also can be no assurance that SangStat's
formulation will not be found to infringe on Novartis' proprietary rights. If
Novartis brings suit against SangStat in the United States or elsewhere,
SangStat could be greatly delayed in obtaining regulatory approval of any
CYCLOSPORINE product, in bringing any CYCLOSPORINE product candidate to market,
or could be enjoined from selling the product for a significant period of time
or ultimately be prevented from selling its CYCLOSPORINE product candidate
entirely. A number of key employees were previously employed at Novartis and it
is possible a claim could be asserted against SangStat based on such prior
employment. While the Company believes that such a claim would be without merit,
in part because such employees have informed the Company that they did not have
any non-competition agreements with Novartis and that they have not violated any
confidentiality agreements with Novartis, such a claim could nonetheless result
in litigation. Any litigation, whether or not resolved in favor of the Company,
is likely to be expensive, lengthy and time consuming and could have a material
adverse effect on the Company's business, financial condition, cash flows and
results of operations. To date no litigation has been threatened, but there can
be no assurance that Novartis will not commence litigation or otherwise attempt
to delay the marketing of CYCLOSPORINE in the future.

Novartis filed a citizens' petition with the FDA to remove the designation
of its Neoral cyclosporine product as a reference listed drug in the FDA's
Approved Drug Products with Therapeutic

7
<PAGE> 9

Equivalence Evaluations (the "Orange Book"). A "reference listed drug" is an
approved drug against which generic drug candidates can be measured to determine
bioequivalence. The FDA has accepted for review SangStat's CYCLOSPORINE AADA
submitted for approval based on bioequivalence to Neoral. Neoral was listed as a
reference drug in the Orange Book published in February 1997. However, should
the FDA remove Neoral as a reference listed drug in the Orange Book, SangStat
may be required to submit a full application rather than an AADA for any generic
cyclosporine product submitted for approval based on bioequivalence to Neoral.
If the FDA requires SangStat to file a full application rather than an AADA for
CYCLOSPORINE the time required for agency review of the application could be
materially lengthened and adversely affect the likelihood of agency approval of
the application. Novartis may submit additional citizens' petitions and other
documents and information to the FDA that may raise other issues related to
procedural and substantive requirements for approval of any SangStat
CYCLOSPORINE application. The submission of such petitions, documents, and/or
information could materially lengthen the time required for agency review of the
application and adversely affect the likelihood of agency approval of the
application.

Cyclosporine is particularly difficult to manufacture and there can be no
assurance that SangStat's CYCLOSPORINE drug candidate can be manufactured in
commercial quantities at an economical cost. There can be no assurance that
SangStat can manufacture, or have manufactured, formulate or commercialize its
CYCLOSPORINE product without infringing patent or other proprietary rights of
Novartis or other third parties. Although Novartis' composition of matter patent
for cyclosporine expired in September 1995 in the United States, Novartis'
patents relating to cyclosporine formulations are expected to continue to
present significant barriers to entry to potential competitors.

The Company has contracted for commercial scale production of cyclosporine
bulk material (i.e. the active ingredient of CYCLOSPORINE) for its CYCLOSPORINE
drug candidate from an established third-party manufacturing source. The Company
has also separately contracted for the manufacture of the finished commercial
supply of its CYCLOSPORINE product candidate from an established third-party
source. There can be no assurance that such third parties will perform
satisfactorily and any such failure may delay regulatory approval, product
launch, impair the Company's ability to deliver products on a timely basis, or
otherwise impair the Company's competitive position, which would have a material
adverse effect on the Company's business, financial condition, cash flows and
results of operations.

UNCERTAINTY OF MARKET ACCEPTANCE. Even if regulatory approvals are
obtained, uncertainty exists as to whether the Company's products will be
accepted by the market. In addition, there can be no assurance that the Company
will receive an "AB" rating (i.e. designation by the FDA that a generic drug is
bioequivalent to an FDA approved reference listed drug, allowing substitution of
one for the other) on CYCLOSPORINE or AZATHIOPRINE which in certain cases would
require substitution of the Company's CYCLOSPORINE for Neoral and AZATHIOPRINE
for Imuran, respectively. In particular, there can be no assurance that the
Company's product candidates would obtain significant market share. Factors that
may affect the willingness of patients, physicians, pharmacists and third-party
payors to convert to SangStat products, if approved, include price, perception
of bioequivalence, perceived clinical benefits and risks, ease of use, other
product features and brand loyalty. In addition, other factors may limit the
market acceptance of products developed by the Company, including the timing of
regulatory approval and market entry relative to competitive products, the
availability of alternative therapies, the price of the Company's products
relative to alternative therapies, the availability of third-party reimbursement
and the extent of marketing efforts by the Company or third-party distributors
or agents retained by the Company. There can be no assurance that patients,
physicians, pharmacists, or third-party payors will accept the Company's
products. In particular, with respect to CYCLOSPORINE, there can be no assurance
that even if product approval is obtained, the Company will be successful in
taking significant market share away from Novartis.

UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS. The Company's
success depends in part on its ability to obtain and enforce patent protection
for its products and to preserve its trade secrets. The Company holds patents
and pending patent applications in the United States and abroad. The

8
<PAGE> 10

Company's patents involve specific claims and thus do not provide broad
coverage. There can be no assurance that the Company's patent applications or
any claims of these patent applications will be allowed, or found to be valid or
enforceable, that any patents or any claims of these patents will provide the
Company with competitive advantages for its products or that such issued patents
and any patents issued under pending patent applications will not be
successfully challenged or circumvented by the Company's competitors. The
Company has not conducted extensive patent and prior art searches with respect
to many of its product candidates and technologies, and there can be no
assurance that third-party patents or patent applications do not exist or could
not be filed in the United States, Europe or other countries which would have an
adverse effect on the Company's ability to market its products. There can be no
assurance that any claims in the Company's patent applications would be allowed,
or found to be valid or enforceable, or that any of the Company's products would
not infringe on others' patents or proprietary rights in the United States or
abroad. The ALLOTRAP peptide family is being developed under an exclusive,
worldwide license from Stanford University. Although Stanford has filed patent
applications with respect to such technology, there can be no assurance that,
other than the patent application that has issued, any of the claims of such
patent applications will be allowed, or found to be valid or enforceable and as
to the issued patent, that the claims will be found to be valid or enforceable.

Patent applications in the United States are maintained in secrecy until
patents issue. Since publication of discoveries in the scientific or patent
literature tends to lag behind actual discoveries by several months, SangStat
cannot be certain that it was the first to discover compositions covered by its
pending patent applications or the first to file patent applications on such
compositions. There can be no assurance that the Company's pending patent
applications will result in issued patents or that any of its issued patents
will afford protection against a competitor.

There can be no assurance that SangStat can manufacture, or have
manufactured, formulate or commercialize CYCLOSPORINE without infringing
third-party patents. Although Novartis' composition of matter patent for
cyclosporine expired in September 1995 in the United States, Novartis' patents
relating to cyclosporine are expected to continue to present significant
barriers to entry to potential competitors because of the large number and scope
of Novartis' patents, and the difficulty of solubilizing cyclosporine bulk
material into a formulated drug product. There can be no assurance that Novartis
or its contract manufacturers will not seek to protect its market share through
litigation, or otherwise, or that SangStat's CYCLOSPORINE will not be found to
infringe Novartis' or others' proprietary rights. Any litigation, brought by
Novartis or other parties, whether or not resolved in favor of the Company, is
likely to be expensive and time-consuming and could have a material adverse
effect on the Company's business, financial condition, cash flows and results of
operations. No assurance can be given that Novartis will not commence litigation
or otherwise attempt to affect the regulatory approval or marketing of
CYCLOSPORINE in the future. If Novartis or other companies were to successfully
bring legal actions against the Company claiming patent or other intellectual
property right infringements, in addition to any liability for damages, the
Company could be enjoined by a court from selling such products or processes and
might be required to obtain a license to manufacture or sell the affected
product or process. There can be no assurance that the Company would prevail in
any such action or that the Company could obtain any license required under any
such patent on acceptable terms. In particular, in the case of CYCLOSPORINE, the
Company believes that no license would be available on acceptable terms. The
biotechnology and pharmaceutical industries have experienced significant
litigation regarding patent and other intellectual property rights. If the
Company becomes involved in such litigation with respect to CYCLOSPORINE or any
other product, it could consume a substantial portion of the Company's financial
and human resources, regardless of the outcome of such litigation. See
"Business--Patents and Proprietary Technology" and "Risk Factors -- Risks
Associated with CYCLOSPORINE."

9
<PAGE> 11

breach or that the Company's trade secrets will not otherwise become known or
independently developed by competitors. The Company has registered or applied
for registration of the names of most of its products under development or
commercialized for research and development use. However, there can be no
assurance that any trademark registration will be granted or not challenged by
competitors. See "Business--Patents and Proprietary Technology."

SUBSTANTIAL COMPETITION. The drugs being developed by the Company compete
with existing and new drugs being created by pharmaceutical, biopharmaceutical,
biotechnology and diagnostics companies and universities. Many of these entities
have significantly greater research and development capabilities, as well as
substantial marketing, manufacturing, financial and managerial resources and
represent significant competition for the Company. With respect to
THYMOGLOBULIN, CYCLOSPORINE and AZATHIOPRINE, the Company will be competing
against large companies that have significantly greater financial resources and
established marketing and distribution channels for competing products. The drug
industry is characterized by intense price competition and the Company
anticipates that it will face this and other forms of competition. There can be
no assurance that developments by others will not render the Company's products
or technologies obsolete or noncompetitive or that the Company will be able to
keep pace with technological developments. Many of the competitors have
developed or are in the process of developing technologies that are, or in the
future may be, the basis for competitive products. Some of these products may
have an entirely different approach or means of accomplishing the desired
therapeutic effect than products being developed by the Company and may be more
effective and less costly. In addition, many of these competitors have
significantly greater experience than the Company in undertaking preclinical
testing and human clinical trials of pharmaceutical products and obtaining
regulatory approvals of such products. Accordingly, the Company's competitors
may succeed in commercializing products more rapidly than the Company. For
example, the Company believes that the degree of market penetration of its
CYCLOSPORINE drug candidate is dependent in part on whether the Company is the
first company to market a bioequivalent formulation of cyclosporine. The Company
believes that other companies may be developing cyclosporine formulations that
may be marketed as generic equivalents. Were these competitors to develop their
products more rapidly and complete the regulatory process sooner, it could have
a material adverse effect on the Company's business, financial condition, cash
flows and results of operations.

LIMITED MANUFACTURING CAPABILITY. The Company lacks facilities to
manufacture any of its drug candidates in accordance with current good
manufacturing practices prescribed and strictly enforced by the FDA. The Company
generally relies on third parties to manufacture its compounds for clinical
trials, including THYMOGLOBULIN, CYCLOSPORINE, AZATHIOPRINE, CELSIOR and
ALLOTRAP 2702 and has contracted or expects to contract for commercial
production of these compounds. The Company has an agreement with PMC under which
it intends to obtain THYMOGLOBULIN for clinical trials and commercial use. There
can be no assurance that PMC or other manufacturers will meet FDA standards
governing Good Manufacturing Practices ("GMP") or other regulatory guidelines,
that any ELA's required for manufacturing will be filed, reviewed and approved,
or that any third-party manufacturer will pass a preapproval inspection. The
Company is currently purchasing

10
<PAGE> 12

ALLOTRAP 2702 for clinical trials from UCB bioproducts S.A. ("UCB") located in
Belgium, and intends to contract with UCB for commercial production. The Company
is currently purchasing CYCLOSPORINE for clinical trials from an established
fermentation manufacturing source under a contract which also provides for the
production of commercial scale quantities. The Company has also entered into an
agreement with Eli Lilly and Company ("Lilly") under which Lilly has agreed to
fill and finish bulk CYCLOSPORINE, provided by the Company, for subsequent
commercial sale and distribution worldwide by the Company. There can be no
assurance that the Company will be able to enter into secondary bulk material
source contracts or successful secondary commercial scale manufacturing
contracts or that any other third-party arrangements can be established on a
timely or commercially reasonable basis, or at all. The Company will depend on
all such third parties to perform their obligations effectively and on a timely
basis. There can be no assurance that such parties will perform and any failures
by third parties may delay clinical development or submission of products for
regulatory approval, or otherwise impair the Company's competitive position
which could have a material adverse effect on the Company's business, financial
condition, cash flows and results of operations. In addition, the manufacturing
of drug candidates involves a number of technical steps and requires meeting
stringent quality control specifications imposed by government regulatory bodies
and by the Company itself. Additionally, such products can only be manufactured
in facilities approved by the applicable regulatory authorities. Because of
these and other factors, the Company may not be able to replace its
manufacturing capacity quickly or efficiently in the event that its
manufacturers are unable to manufacture their products at one or more of their
facilities. For certain of its potential products, the Company will need to
develop its production technologies further for use on a larger scale in order
to conduct human clinical trials and produce such products for commercial scale
at an acceptable cost.

To date, the Company is manufacturing only two monitoring products in
commercial quantities, PRA-STAT and CROSS-STAT, which are being marketed by
SangStat's direct sales force in Europe and North America. To be successful, the
Company's products must be manufactured in commercial quantities in compliance
with regulatory requirements and at acceptable cost. The Company has limited
experience in manufacturing its monitoring products, and there can be no
assurance that the Company will be able to continue production of its existing
products and scale-up production of future monitoring products to commercial
levels. In addition, some materials used in the Company's products may be
available only from sole suppliers. There can be no assurance that interruptions
in supplies will not occur in the future, which could have a material adverse
effect on the Company's ability to manufacture its products or to conduct
clinical trials.

LIMITED MARKETING CAPABILITY. The Company has a limited marketing and
sales staff. To the extent that the Company itself undertakes to market a
substantial portion of its products, or is unable to enter into co-promotion
agreements or to arrange for third-party distribution of its products,
additional expenditures, management resources and time will be required to
develop a sales force. Currently, the Company intends to develop a sales force
both in North America and Europe to market its products. However, there can be
no assurance that the Company will be able to establish a sales force or enter
into co-promotion or distribution agreements on terms favorable to the Company
or on a timely basis. In addition, if the Company succeeds in bringing products
to market, it will compete with many other companies that currently have
extensive and well-funded marketing and sales operations. There can be no
assurance that the Company's marketing and sales operations would compete
successfully against such other companies. The Company has recently established
THE TRANSPLANT PHARMACY for the direct distribution by mail order of the
Company's products and services, as well as products and services of third
parties. Establishing THE TRANSPLANT PHARMACY as a viable distribution system
entails a number of risks including the Company's ability to enter into
agreements with transplant centers to utilize THE TRANSPLANT PHARMACY's
services, compliance with state regulations regarding pharmacy licensing and
compliance with federal and state laws regulating payments for referrals for
health care services. There can be no assurance that the Company will be
successful in establishing THE TRANSPLANT PHARMACY as a viable distribution
method for the Company's products and services. See "Business--Marketing."

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<PAGE> 13

NO ASSURANCE OF FDA, CANADIAN OR EUROPEAN REGULATORY APPROVAL; GOVERNMENT
REGULATION. The Company's research, preclinical development, clinical trials,
manufacturing, marketing and distribution of its products in the United States
and other countries are subject to extensive regulation by numerous governmental
authorities including, but not limited to, the FDA. In order to obtain
regulatory approval of a drug product, the Company must demonstrate to the
satisfaction of the applicable regulatory agency, among other things, that such
product is safe and effective for its intended uses and that the manufacturing
facilities are in compliance with GMP requirements. The Company must also
demonstrate the approvability of a PLA and ELA for its biological products. The
approval of the Company's generic product candidates is dependent on
demonstrating bioequivalence with reference products in addition to assurance of
the compliance with GMP regulations. In order to market its monitoring products,
which are considered to be medical devices, the Company or its licensees will be
required either to receive 510(k) marketing clearance or Premarket Approval
Application ("PMA") approvals from the FDA for such products among other
regulatory requirements. To obtain a 510(k) marketing clearance, the Company
must show that a monitoring product is "substantially equivalent" to a legally
marketed product not requiring FDA approval. In addition, the Company must
demonstrate that it is capable of manufacturing the product to the relevant
standards. To obtain PMA approval, the Company must submit extensive data,
including pre-clinical and clinical trial data to prove the safety and efficacy
of the device. Additionally, the Company is currently distributing several
monitoring products for research or investigational use. Although the Company
believes it is complying with FDA regulations regarding such distribution, there
can be no assurance that the FDA will not determine that the Company is
violating FDA regulations with respect to the distribution of these products.
The process of obtaining FDA and other required regulatory approvals is lengthy
and will require the expenditure of substantial resources, and there can be no
assurance that the Company will be able to obtain the necessary approvals.
Moreover, if and when such approval is obtained, the marketing, distribution and
manufacture of the Company's products would remain subject to extensive
regulatory requirements administered by the FDA and other regulatory bodies.
Failure to comply with applicable regulatory requirements can result in, among
other things, warning letters, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of production, refusal of the
government to grant pre-market clearance or pre-market approval, withdrawal of
approvals and criminal prosecution of the Company and employees. Additionally,
the Company intends to pursue commercialization of its products in European
countries. Both the Company's pre-transplant and post-transplant monitoring
products should be subject to regulation as in vitro medical devices for which
regulations are being presently formulated under harmonized European Directives.
This new Directive is likely to impose additional requirements on the pre-
transplant donor/recipient matching products and the post-transplant monitoring
products. This legislation may include, among other things, requirements with
respect to the design, safety and performance of the products as well as impose
premarket approval procedures such as product type certification and quality
systems certification of manufacturing. The Company's therapeutic products are
subject to foreign regulatory requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement, which vary from country to
country. The process of obtaining foreign regulatory approvals can be lengthy
and require the expenditure of substantial resources, and there can be no
assurance that the Company will be able to obtain the necessary approvals or the
approvals for the proposed indications. See "Business--Government Regulation."

DEPENDENCE ON COLLABORATIVE RELATIONSHIPS. The Company has in the past
relied on collaborative relationships to finance certain of its research and
development programs. The Company may enter into collaborative relationships
with corporate and other partners to develop and commercialize certain of its
potential products. There can be no assurance that the Company will be able to
negotiate acceptable collaborative arrangements in the future, that such
collaborations will be available to the Company on acceptable terms or that any
such relationships, if established, will be scientifically or commercially
successful. See "Business--Strategic Relationships."

DEPENDENCE UPON KEY PERSONNEL. The Company's ability to develop its
business depends in part upon its attracting and retaining qualified management
and scientific personnel, including consultants

12
<PAGE> 14

and members of its Scientific, Medical and Regulatory Advisory Board. As the
number of qualified personnel is limited, competition for such personnel is
intense. There can be no assurance that the Company will be able to continue to
attract or retain such people. The loss of key personnel or the failure to
recruit additional key personnel could significantly impede attainment of the
Company's objectives and have a material adverse effect on the Company's
financial condition and results of operations. The Company's planned activities
will require the addition of new personnel, including management, and the
development of additional expertise by existing management personnel, in areas
such as research, product development, preclinical testing, clinical trial
management, regulatory affairs, finance, manufacturing, pharmacy affairs and
marketing and sales. The inability to acquire such services or to develop such
expertise could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Scientific,
Medical, Pharmacy and Regulatory Advisory Board" and "Management."

UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT. SangStat's
ability to commercialize its products may depend in part on the extent to which
reimbursement for the cost of such products and related treatment will be
available from government health administration authorities, private health
coverage insurers and other organizations. Significant uncertainty exists as to
the pricing, availability of distribution channels and reimbursement status of
newly approved healthcare products and there can be no assurance that adequate
third party coverage will be available for the Company to maintain price levels
sufficient for realization of an appropriate return on its investment in product
development. In certain foreign markets, pricing or profitability of healthcare
products is subject to government control. In the United States, there have
been, and the Company expects that there will continue to be, a number of
federal and state proposals to implement similar government control. In
addition, an increasing emphasis on managed care in the United States has and
will continue to increase the pressure on pharmaceutical pricing. While the
Company cannot predict whether any such legislative or regulatory proposals will
be adopted or the effect such proposals or managed care efforts may have on its
business, the announcement of such proposals or efforts could have a material
adverse effect on the Company's ability to raise capital, and the adoption of
such proposals or efforts could have a material adverse effect on the Company's
business, financial condition and results of operations. Further, to the extent
that such proposals or efforts have a material adverse effect on other
pharmaceutical companies that are prospective corporate partners for the
Company, the Company's ability to establish corporate collaborations may be
adversely affected. In addition, third-party payors are increasingly challenging
the prices charged for medical products and services. If the Company succeeds in
bringing one or more products to the market, there can be no assurance that
these products will be considered cost effective or that reimbursement to the
consumer will be available or will be sufficient to allow the Company to sell
its products on a competitive basis. See "Business--Products, Product Candidates
and Services."

FLUCTUATIONS IN OPERATING RESULTS. The Company's operating losses have
increased each year since inception and losses are expected to continue in the
future as a result of a number of factors including the uncertainty in the
timing and the amount of revenue earned upon product sales and achievement of
research and development milestones, funding under collaborative research
agreements and expenses required for product development, clinical trials and
marketing operations. The Company's operating results may fluctuate
significantly depending on other factors, including the introduction of new
products by the Company's competition, regulatory actions, market acceptance of
the Company's products, adoption of new technologies, manufacturing
capabilities, legal actions and third-party reimbursement policies.

PRODUCT LIABILITY EXPOSURE; LIMITED INSURANCE COVERAGE. The Company faces
an inherent business risk of exposure to product liability claims in the event
that the use of products manufactured by the Company results in adverse effects
during research, clinical development or commercial use. While the Company will
attempt to take appropriate precautions, there can be no assurance that it will
avoid significant product liability exposure. The Company's product liability
insurance coverage is currently limited to $3,000,000 which may not be adequate
insurance coverage to cover potential

13
<PAGE> 15

liability exposures. Moreover, there can be no assurance adequate insurance
coverage will be available at acceptable cost, if at all, or that a product
liability claim would not materially adversely affect the business, financial
condition, cash flows and results of operations of the Company.

HAZARDOUS MATERIALS. In connection with its research and development
activities and operations, the Company is subject to federal, state and local
laws, rules, regulations and policies governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling and disposal of
certain materials, biological specimens and wastes. There can be no assurance
that the Company will not incur significant costs to comply with environmental
and health and safety regulations. The Company's research and development
involves the controlled use of hazardous materials, including but not limited to
certain hazardous chemicals and infectious biological specimens. Although the
Company believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by state and federal regulations,
the risk of accidental contamination or injury from these materials cannot be
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could exceed the resources of
the Company. "See Business--Government Regulation."

VOLATILITY OF STOCK PRICE. The market prices for securities of
biotechnology companies, including the Company's, have historically been highly
volatile, and the market has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. Factors such as fluctuations in the Company's operating
results, announcements of technological innovations or new therapeutic products
by the Company or its competitors, regulatory developments, disputes or
developments related to patent or other proprietary rights, public concern as to
the safety of products developed by the Company or others and general market
conditions may have a significant effect on the market price of the Common
Stock. See "Price Range of Common Stock."

EFFECT OF CERTAIN PROVISIONS; ANTITAKEOVER EFFECTS OF CERTIFICATE OF
INCORPORATION, BYLAWS, STOCKHOLDER RIGHTS PLAN AND DELAWARE LAW. Certain
provisions of the Company's Certificate of Incorporation and Bylaws could delay
or make more difficult a merger, tender offer or proxy contest involving the
Company, which could adversely affect the market price of the Company's Common
Stock. The Company's Board of Directors has the authority to issue up to
5,000,000 shares of Preferred Stock and to determine the price, rights
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. Further, the Company has adopted a stockholder rights
plan. The plan allows for the issuance of a dividend to stockholders of rights
to acquire shares of the Company or, under certain circumstances, an acquiring
corporation, at less than half their fair market value. The plan could have the
effect of delaying, deferring or preventing a change in control of the Company.
In addition, the Company is subject to the antitakeover provisions of Section
203 of the Delaware General Corporation Law, which will prohibit the Company
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. The application of Section 203 also could have the effect
of delaying or preventing a change of control of the Company.

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<PAGE> 16

THE COMPANY

SangStat was incorporated in California in July 1988 and reincorporated in
Delaware in August 1995. SangStat's principal offices are located at 1505 Adams
Drive, Menlo Park, California 94025, and its telephone number is (415) 328-0300.
Unless the context otherwise requires, references to SangStat or the Company
include its subsidiaries, SangStat Atlantique S.A., France, SangStat Canada Ltd.
and XenoStat, Inc.

USE OF PROCEEDS

The net proceeds from the sale of the 2,000,000 shares of Common Stock
offered hereby at an assumed public offering price of $30.25 per share are
estimated to be $56,774,000 ($65,372,000 if the Underwriters' over-allotment
option is exercised in full).

The Company anticipates that, combined with its existing resources, the net
proceeds of this offering will enable it to more effectively compete in the
transplant market on a global level. Specifically, the Company anticipates
spending a portion of the net proceeds of this offering over the next several
years on the following: (i) approximately $12 million for additional clinical
trials of its product candidates, including THYMOGLOBULIN, CYCLOSPORINE, and
AZATHIOPRINE, to study their application in additional populations and
indications; (ii) approximately $8 million for purchases of inventory; (iii)
approximately $5 million for preclinical development of product candidates and
expansion of research and development programs; (iv) approximately $2 million
for expansion of the Company's commercial infrastructure, including the
establishment of a dedicated sales force to market the Company's current and
future products in North America and Europe and the expansion of THE TRANSPLANT
PHARMACY in the United States; (v) approximately $1 million for purchases of
capital equipment; and (vi) the remainder will be reserved for acquisition of
products or technologies complementary to the Company's business, should
favorable opportunities arise and other general corporate purposes. Pending such
uses, the Company intends to invest the net proceeds in short-term,
interest-bearing obligations, primarily in government and other investment-grade
securities. The Company will have broad discretion over the remaining proceeds.
The Company may also use a portion of the net proceeds to acquire technologies
or products complementary to its business, although no material expenditures in
connection with any such acquisitions currently are anticipated.

The exact allocation of the proceeds for the purposes set forth above and
timing of the expenditures may vary significantly depending upon numerous
factors, including research and development programs, the scope and results of
clinical trials, the time and costs involved in obtaining regulatory approvals,
the costs involved in obtaining and enforcing patents or any litigation by third
parties regarding intellectual property, the status of competitive products, the
establishment of manufacturing capacity or third-party manufacturing
arrangements, the establishment of sales and marketing capabilities, the
establishment of collaborative relationships with other parties, and the costs
of manufacturing scale-up. If adequate funds are not available, the Company may
be required to delay, scale back or eliminate one or more of its development
programs or obtain funds through arrangements with collaborative partners or
others that may require the Company to relinquish rights to certain
technologies, product candidates or products that the Company would not
otherwise relinquish.

The Company anticipates that its existing capital resources, including the
net proceeds of this offering and the interest earned thereon will be sufficient
to fund its operations through at least the next several years. However, there
can be no assurance that the Company will not be required to seek additional
financing sooner or that such financing, if required, will be available on terms
satisfactory to the Company. See "Risk Factors--History of Operating Losses;
Future Profitability Uncertain" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."

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<PAGE> 17

PRICE RANGE OF COMMON STOCK

The Company's Common Stock commenced trading publicly on the Nasdaq
National Market on December 14, 1993 and is traded under the symbol SANG. The
following table sets forth for the periods indicated the high and low daily
closing prices for the Common Stock:

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1995
First Quarter.................................................... $ 7.125 $ 4.500
Second Quarter................................................... 6.375 4.375
Third Quarter.................................................... 8.875 5.125
Fourth Quarter................................................... 10.750 6.875

FISCAL YEAR ENDED DECEMBER 31, 1996
First Quarter.................................................... 19.125 10.250
Second Quarter................................................... 21.250 15.750
Third Quarter.................................................... 26.750 10.500
Fourth Quarter................................................... 30.750 20.375

FISCAL YEAR ENDED DECEMBER 31, 1997
First Quarter (through February 27).............................. 35.000 25.380
</TABLE>

On February 27, 1997 the closing sale price of the Common Stock as reported
on the Nasdaq National Market was $32.375 per share. As of February 27, 1997
there were approximately 110 holders of record of the Common Stock.

DIVIDEND POLICY

The Company has not declared or paid any cash dividends since its
inception. The Company currently intends to retain all earnings, if any, for use
in the expansion of its business and therefore does not anticipate paying any
dividends in the foreseeable future.

16
<PAGE> 18

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1996, (i) on an actual basis and (ii) as adjusted to give effect to
the receipt by the Company of the net proceeds from the sale of 2,000,000 shares
of Common Stock offered hereby at an assumed public offering price of $30.25 per
share. This table should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations, the Consolidated
Financial Statements of the Company and the Notes thereto included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt........................................................ $ 725 $ 725
Long-term debt......................................................... 1,100 1,100
Stockholders' equity
Preferred Stock: $0.001 par value per share; 5,000,000 shares
authorized, no shares issued and outstanding...................... --
Common Stock: $0.001 par value per share; 25,000,000 shares
authorized, 13,129,560 shares issued and outstanding, actual;
15,129,560 shares, as adjusted(1)................................. 81,657 138,431
Accumulated deficit.................................................. (40,826) (40,826)
Accumulated translation adjustment................................... 21 21
Unrealized gain on investments....................................... 103 103
-------- --------
Total stockholders' equity......................... 40,955 97,729
-------- --------
Total capitalization.......................... $42,780 $ 99,554
======== ========
</TABLE>

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

(1) Excludes 1,169,592 shares of Common Stock issuable upon exercise of options
outstanding as of December 31, 1996, at a weighted average exercise price of
$6.58 per share.

17
<PAGE> 19

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below with respect to
the Company's statements of operations for each of the three years in the period
ended December 31, 1996, and with respect to the balance sheets as of December
31, 1995 and 1996, are derived from the Consolidated Financial Statements that
have been audited by Deloitte & Touche LLP, independent auditors, which are
included elsewhere in this Prospectus. The statement of operations data for the
years ended December 31, 1992 and 1993 and the balance sheet data as of December
31, 1992, 1993 and 1994, are derived from audited consolidated financial
statements not included herein. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of the
Company and the Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Net product sales.................. $ 445 $ 518 $ 674 $ 2,698 $ 2,399
Collaborative agreement............ -- 2,625 3,000 1,125 --
Government grants.................. 90 51 -- -- --
------- ------- ------- ------- -------
Total revenues................ 535 3,194 3,674 3,823 2,399
------- ------- ------- ------- -------
Operating expenses:
Cost of sales and manufacturing.... 1,047 955 1,503 2,753 2,846
Research and development........... 2,303 3,679 4,845 6,647 8,330
Selling, general and
administrative................... 2,116 2,202 3,157 3,773 6,120
------- ------- ------- ------- -------
Total operating expenses...... 5,466 6,836 9,505 13,173 17,296
------- ------- ------- ------- -------
Loss from operations.................... (4,931) (3,642) (5,831) (9,350) (14,897)
Other income (expense)--net............. 2 (78) 284 672 2,123
------- ------- ------- ------- -------
Net loss...................... $(4,929) $(3,720) $(5,547) $(8,678) $(12,774)
======= ======= ======= ======= =======
Net loss per common share(1)............ $ (0.79) $ (0.92) $ (1.03)
======= ======= =======
Pro forma net loss per common and
equivalent share(1)................... $ (1.00) $ (0.70)
======= =======
Shares used in per share
computations(1)....................... 4,950 5,309 7,049 9,385 12,405
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments........................... $ 622 $10,641 $12,378 $ 9,222 $ 41,321
Working capital......................... 305 9,859 11,367 8,451 40,724
Total assets............................ 1,502 12,499 14,450 11,560 44,750
Long-term obligations, excluding current
portion............................... 1,522 1,346 1,153 1,091 1,100
Foreign subsidiary capital converted to
capital stock in 1993................. 363 -- -- -- --
Accumulated deficit..................... (10,107) (13,827) (19,374) (28,052) (40,826)
Total stockholders' equity.............. (1,125) 9,497 11,328 8,281 40,955
</TABLE>

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

(1) For a description of the computation of net loss per common share see Note 1
of Notes to Consolidated Financial Statements. Pro forma net loss per common
and equivalent share includes convertible preferred stock as well as common
shares issued and options and warrants to purchase shares of common or
preferred stock granted by the Company at less than the initial public
offering (IPO) price during the twelve months preceding the IPO.

18
<PAGE> 20

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

The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Company's Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus. Except for
the historical information contained herein, the discussion in this Prospectus
contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere herein.

OVERVIEW

Since its inception in 1988, SangStat has focused on the development of
products to improve the outcome of organ transplantation. The Company's revenue
is primarily derived from the distribution of the Company's therapeutic
transplantation product candidate, THYMOGLOBULIN in Canada and from sales of its
pre-transplant monitoring products PRA-STAT and CROSS-STAT (the "Monitoring
Products") in the United States, Canada and Europe. These organ transplantation
products comprised 46%, 78% and 82% of the Company's net product sales in 1994,
1995 and 1996, respectively.

The Company has also from time to time sold other monitoring products for
laboratory research and investigational use and various devices and services.
These other revenue sources comprised 54%, 22% and 18% of total product revenues
in 1994, 1995 and 1996, respectively. These other revenue sources are not
central to the Company's current or future strategy or operating objectives.

The Company's accumulated deficit from inception through December 31, 1996
was $40,826,000. The Company expects losses to continue for the next several
years due to the expansion of clinical trials, research and development programs
and sales and marketing activities. The Company's operating loss has increased
each year since inception and losses are expected to continue in the future may
as a result of a number of factors including the uncertainty in the timing and
the amount of revenue to be earned upon product sales, expenses required for
product development, clinical trials and marketing operations. In addition, the
Company's business is subject to significant risks, including but not limited
to, the success of its research and development efforts, litigation by third
parties regarding intellectual property, in particular, potential litigation
with Novartis regarding the Company's CYCLOSPORINE product candidate, obtaining
and enforcing patents important to the Company's business, the lengthy and
expensive regulatory approval process, reliance on third parties to manufacture
products or product candidates, competition from other products and
uncertainties associated with health care reform measures. Even if the Company's
products appear promising at various stages of development, they may not reach
the market for a number of reasons. Such reasons include, but are not limited
to, the possibilities that the product candidates will be found to be
ineffective or unsafe to manufacture on a large scale, be uneconomical to
market, be precluded from commercialization by proprietary rights of third
parties or be unacceptable to providers, payors or patients. Additional
expenses, delays and losses of opportunities that may arise out of these and
other risks could have a material adverse impact on the Company's business,
financial condition, cash flows and results of operations.

RESULTS OF OPERATIONS

Net loss. Net loss increased from $5,547,000 in 1994 to $8,678,000 in 1995
and further to $12,774,000 in 1996, primarily reflecting increases in research
and development, including clinical trials and regulatory affairs, and selling,
general and administrative expenses.

19
<PAGE> 21

Total revenues. Net product sales increased by $2,024,000 or 300% from
$674,000 in 1994 to $2,698,000 in 1995 and decreased by $299,000 or 11% to
$2,399,000 in 1996. The increase in sales from 1994 to 1995 resulted primarily
from the commencement of distribution of the Company's first therapeutic
product, THYMOGLOBULIN, in Canada in January 1995 under that country's Emergency
Drug Release ("EDR") program, and to a lesser extent, increased sales of
Monitoring Products. The decrease in sales from 1995 to 1996 primarily reflects
a decline in revenues for THYMOGLOBULIN due to a decrease in the number of
compassionate use cases which qualified for THYMOGLOBULIN under Canada's EDR
program. The decrease in THYMOGLOBULIN sales was partially offset by increased
sales of Monitoring Products.

As expected, no collaborative agreement milestone payments were received
from Baxter in 1996, reflecting completion of the final milestones for PRA-STAT
and CROSS-STAT in 1995. The final payments of $1,125,000 in the first six months
of 1995 represented the completion of $10.0 million received by SangStat for
milestones, license fees and equity in 1993 through 1995 under its collaborative
agreement with Baxter. The Company reacquired commercial rights for Monitoring
Products from Baxter in July 1996, and now directly markets such products
through its own sales and marketing staff in the United States and Europe to
directly market its Monitoring Products.

Cost of sales and manufacturing. Cost of sales and manufacturing expenses
increased by $1,250,000 or 83% from $1,503,000 in 1994 to $2,753,000 in 1995 and
increased further by $93,000 or 3% to $2,846,000 in 1996. The increase from 1994
to 1995 was due primarily to direct costs associated with THYMOGLOBULIN sales
and to a lesser extent from headcount increases associated with expansion of
manufacturing and quality assurance capabilities for Monitoring Products. The
increase from 1995 to 1996 primarily represents additional costs associated with
increased sales of Monitoring Products. This increase was partially offset by a
decrease in sales of THYMOGLOBULIN and the associated decrease in direct costs.
The Company's Monitoring Products business does not currently generate a profit
because the Company has not achieved a scale of production that allows it to
cover fixed manufacturing costs.

Research and development. Research and development expenses increased by
$1,802,000 or 37% from $4,845,000 in 1994 to $6,647,000 in 1995, and increased
further by $1,683,000 or 25% to $8,330,000 in 1996. The increase from 1994 to
1995 occurred primarily as a result of expanded clinical and regulatory
activities associated with the Company's pharmaceutical product candidates,
including THYMOGLOBULIN, ALLOTRAP 2702, CYCLOSPORINE, AZATHIOPRINE and CELSIOR
and to a lesser extent development of Monitoring Products. The increase from
1995 to 1996 was primarily associated with further expansion of clinical and
regulatory activities associated with the Company's pharmaceutical product
candidates including the filing of an Abbreviated Antibiotic Drug Application
(AADA) for marketing clearance of its proprietary Neoral-bioequivalent
CYCLOSPORINE product candidate with the FDA in November 1996.

Selling, general and administrative. Selling, general and administrative
expenses increased by $616,000 or 20% from $3,157,000 in 1994 to $3,773,000 in
1995, and increased further by $2,347,000 or 62% to $6,120,000 in 1996. The
increase from 1994 to 1995 primarily reflected personnel additions for support
of THYMOGLOBULIN sales through SangStat Canada, Ltd., and to a lesser extent,
increased patent expenses. The increase from 1995 to 1996 was due primarily to
the expansion of the Company's sales staff for its Monitoring Products in the
United States and Europe, and to a lesser extent establishment of a pilot
facility for THE TRANSPLANT PHARMACY, and expanded general and administrative
activities.

Other income and expenses. Interest income increased by $348,000 or 90%
from $427,000 in 1994 to $811,000 in 1995 and increased by $1,450,000 or 179% to
$2,261,000 in 1996. These increases are due primarily to the increase in average
cash balances available for investment as a result of the sale of equity
securities during 1995 and 1996. The Company conducts its European operations
through its wholly-owned French subsidiary, SangStat Atlantique S.A. and its
Canadian operations through its

20
<PAGE> 22

wholly-owned subsidiary SangStat Canada, Ltd. and does not currently engage in
any foreign currency hedging activities. The Company's operations in Europe are
primarily related to research and development, including clinical trial
activities, for its pharmaceutical product candidates. The Company's loss
generated from its European operations have increased $202,000 or 23% from
$865,000 in 1994 to $1,067,000 in 1995 and $246,000 or 23% to $1,313,000 in
1996, primarily due to expansion of such research and development activities.
The Company has not historically experienced significant gains or losses
associated with foreign currency rate fluctuations and does not believe it has
significant exposure to risks associated therewith. See Notes 1, 7 and 13 of
Notes to Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

From inception through December 31, 1996, the Company has financed its
operations primarily from proceeds of approximately $21,236,000 from private
placements, $6,750,000 in licensing fees and milestone payments from Baxter, and
$61,342,000 from public offerings of its Common Stock.

During the years ended December 31, 1994, 1995 and 1996, the Company's net
cash used in operating activities was approximately $5,210,000, $8,591,000 and
$12,526,000, respectively. The increase in net cash used in operating activities
in each year above is primarily due to the increased amount of net loss incurred
in each year. As of December 31, 1996, the Company had cash, cash equivalents
and short-term investments of $41,321,000 and total assets of $44,750,000.

Net cash provided by financing activities totalled $7,177,000, $5,213,000
and $44,811,000 during the years ended December 31, 1994, 1995 and 1996. Such
amounts were primarily from proceeds received from the sale of Common Stock
during the respective periods of $7,402,000, $5,581,000 and $45,159,000 offset
in part by net repayments of notes payable and capital lease obligations.

Net cash used in investing activities totalled $2,835,000, $1,873,000 and
$17,048,000 during the years ended December 31, 1994, 1995 and 1996, and
resulted primarily from the Company's net purchases of short-term investments.

Although the Company has no current contractual obligations relating to
capital expenditures, it anticipates that capital expenditures, primarily for
its United States operations, will aggregate approximately $1 million during
1997.

At December 31, 1996, the Company had Federal, state and foreign net
operating loss ("NOL") carryforwards of approximately $37,200,000, $13,600,000
and $1,000,000, respectively, available to reduce future taxable income. In
addition, the Company had available research and experimentation credit
carryforwards of approximately $734,000 and $393,000 for federal and state tax
purposes. The Company's ability to realize the benefits of the NOL and credit
carryforwards is dependent upon the generation of sufficient taxable income in
the respective taxing jurisdiction prior to their expiration. There can be no
assurance that the Company will be able to generate sufficient taxable income to
avail itself of such benefits.

The Company expects to incur significant costs related to, among other
things, continued clinical and preclinical testing, regulatory approval
activities and research and development programs in the future, and
establishment of larger sales staffs in the United States and Europe. If and
when the Company receives FDA approval of its therapeutic drug candidates, the
Company expects to have additional working capital requirements for expansion of
sales, increased inventory levels and payment of certain license obligations. If
the Company receives FDA approval for THYMOGLOBULIN, it would be obligated to
make a final milestone payment under a related license agreement totalling $1.5
million.

The Company may need to raise additional funds through additional
financings, including private or public equity offerings and collaborative
research and development arrangements with corporate partners. There can be no
assurance that adequate funds will be raised on favorable terms, if at all, or

21
<PAGE> 23

that discussions with potential collaborative partners will result in any
agreements. The Company anticipates that its existing capital resources,
including the net proceeds from this offering and the interest earned thereon,
will be sufficient to fund its operations for at least the next several years.
The Company's future capital requirements will depend on many factors, including
its research and development programs, the scope and results of clinical trials,
the time and costs involved in obtaining regulatory approvals, the costs
involved in obtaining and enforcing patents or any litigation by third parties
regarding intellectual property, the status of competitive products, the
establishment of manufacturing capacity or third-party manufacturing
arrangements, the establishment of sales and marketing capabilities, the
establishment of collaborative relationships with other parties, and the costs
of manufacturing scale-up and working capital requirements for inventory and
financing of accounts receivable. If adequate funds are not available, the
Company may be required to delay, scale back or eliminate one or more of its
development programs or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
technologies, product candidates or products that the Company would not
otherwise relinquish.

22
<PAGE> 24

BUSINESS

OVERVIEW

SangStat's strategy is to provide a comprehensive disease management
approach to the organ transplantation market by developing a family of products
that address the needs of patients at each stage of transplant care from
pre-transplant monitoring to the lifetime post-transplant phase. The Company
plans to capitalize on this broad product pipeline by developing relationships
with key providers and managed care organizations to better integrate the
management of the transplant patients' care and improve outcomes and lower
costs.

ORGAN TRANSPLANTATION

Organ transplantation can save or improve the lives of patients with organ
failures for whom there are few alternative treatments. Transplantation involves
surgically replacing the failed organ of a transplant recipient with a viable
organ from a donor. Because the success of a transplant depends on the degree of
compatibility between the organ donor and the recipient, a typical transplant
candidate must wait on a national computerized waiting list until a compatible
organ can be found. Currently, there are approximately 80,000 transplant
candidates registered on waiting lists in approximately 500 transplant centers
throughout North America and Europe. At any given time, approximately 70% of
these patients are waiting for kidney transplants. The other patients are
waiting for liver, heart, heart-lung, bowel or pancreas transplants. Each year
approximately 50,000 new patients receive donated organs. In order to prevent
rejection of implanted organs, recipients must begin a life-long regimen of
immunosuppressive therapy immediately upon receiving a donated organ. There are
more than 200,000 patients in North America and Europe that need daily
immunosuppressive therapy to prevent graft rejection and graft loss.

In addition to being a life-saving and life-enhancing procedure,
transplantation can be cost-effective as well. For example, the cost over a
10-year period of a kidney transplant is generally less than the cost of
dialysis. However, transplantation is still very costly, due in substantial part
to the costs of lifetime immunosuppressive therapy and associated side effects
as well as the costs of treating rejection and infection episodes. Therefore,
products that limit the need for immunosuppression and reduce the frequency and
severity of rejection and infection episodes could significantly improve the
cost-effectiveness of transplantation.

The Transplant Immune Response

The function of the immune system is to protect the body from damage caused
by invading microorganisms or other foreign matter, including donor organs. This
defensive function is performed

23
<PAGE> 25

by the humoral (B-cell) and cell-mediated (T-cell) arms of the immune system.
When challenged, the humoral and cell-mediated systems interact and generate a
coordinated immune response to recognize, target and eliminate the pathogen or,
in the case of transplantation, the donor organ, thereby resulting in graft
rejection. Specifically, the donor organ antigens (HLA molecules) are recognized
by the immune system of the graft recipient as being "non-self."

The immune response to a transplant depends on the level of compatibility
between donor and recipient HLA molecules. The HLA system consists of a complex
array of molecules playing a key role in the normal immune response as well as
in graft acceptance or rejection. HLAs were originally discovered by Dr. Jean
Dausset, a scientific advisor to SangStat, and Nobel Prize laureate for this
pioneering discovery.

Molecular differences between an organ donor's and a recipient's HLAs lead
to the recognition of the donor's HLAs as non-self by the recipient's immune
system. Graft rejection results when the recipient's immune system T-cell
progenitors recognize the donor's HLAs as non-self, activate against the graft
and proliferate into numerous cytotoxic T-cells. When these cytotoxic T-cells
invade and attack the graft, rejection and loss of the organ often occur. In
addition to T-cells, anti-HLA antibodies can play an active role in the
anti-graft immune response. The presence of anti-HLA antibodies in the
recipient's blood may indicate a high risk of accelerated rejection. Maximizing
HLA compatibility by selecting, for a given recipient, the donor whose HLAs are
as similar as possible to the recipient's HLAs and not recognized by antibodies
preexisting in the recipient's blood, is key to reducing the risk of rejection.

However, because it is extremely difficult to get a perfect HLA match
except in identical twins, rejection episodes occur frequently. Current
therapies used to reduce the occurrence of rejection episodes involve the
chronic use of immunosuppressants, which impair the entire immune system of the
recipient. Even with the use of immunosuppressants, graft rejection remains
frequent, and their chronic use can lead to serious side effects, including
life-threatening infections, kidney or liver toxicity and cancers.

The Transplant Process

A typical transplant patient progresses through three clinical phases: the
pre-transplant phase; the acute phase (surgery and first year post-transplant);
and the lifetime post-transplant phase.

The Pre-Transplant Phase. A transplant candidate is registered on a
national computerized waiting list, which ranks candidates according to the
urgency of the need for a transplant and maintains the data necessary to
determine if a compatible organ becomes available. A kidney transplant candidate
usually waits months or even years for a compatible organ and continues to
undergo dialysis several times per week to substitute for the failed kidneys.
Typically, a blood sample is collected as frequently as monthly and evaluated to
estimate the candidate's level of immune sensitization against a panel of HLA
molecules representative of the population of prospective organ donors. This
procedure, called Panel Reactive Antibody (PRA) testing utilizes
microlymphocytotoxicity, a complex and subjective laboratory method developed in
the 1960s. Traditional HLA compatibility testing lacks accuracy and
standardization and therefore often results in poor matching of donors and
recipients.

The Acute Phase (Surgery and First Year Post-Transplant). Most organs are
retrieved from trauma victims who are declared brain-dead but maintain cardiac
function until their organs are removed. The harvested organs are stored in a
preservation solution to prevent deterioration and then tissue typed to
determine the level of HLA antigens. Each organ is cross matched with
approximately 100 potential recipients on the transplant waiting lists. Once the
best candidate for each organ has been chosen, the organ is shipped in an organ
preservation solution to the recipient's transplant center. The length of
storage time allowed before transplant varies among organ types and can severely
limit the distance an organ can be shipped. The quality of organ preservation is
therefore an important factor contributing to the viability of the transplant.

24
<PAGE> 26

Transplant surgery has become a relatively safe and standardized procedure.
After the transplant, the challenge for physicians is to prevent graft rejection
by suppressing the activity of T-cells. Consequently, the success of the
transplant is highly dependent on the immunosuppressive regimen which is
initiated the day of transplantation and continued daily for the rest of the
patient's life. In addition, organ recipients must be regularly monitored to
measure the body's immune response and blood drug levels and to identify acute
rejection episodes.

Despite the use of immunosuppressants, during the first year following
transplantation many transplant patients (estimates range from 15% in certain
populations to more than 60% in others, depending on risk factors and therapy)
undergo one or more graft rejection episodes. During a rejection episode, the
body mounts an immune attack on the graft, resulting in impaired function of the
transplanted organ. Because rejection, infection and drug toxicity produce
similar symptoms, diagnosis of rejection may be difficult until it reaches an
advanced stage and is confirmed by an invasive graft biopsy. The only way to
stop the rejection process is by administering additional immunosuppressive
therapy, such as high doses of steroids, and/or anti-T-cell monoclonal and/or
polyclonal antibodies. In many cases, rejection can be arrested and organ damage
reversed. However, at the end of the first year, about 20% of kidney transplant
patients (and a higher percentage for other organs) have lost their grafts.
Surgery is typically required to remove the rejected kidney and the patient must
return to chronic dialysis and possibly receive a second transplant, which has a
lower probability of success than the first. Failure to reverse rejection of
other organs often results in the death of the patient.

The Lifetime Post-Transplant Phase. The use of immunosuppressants,
initiated during the acute phase, is continued daily throughout the patient's
lifetime to minimize or prevent the loss of the graft by acute or chronic
rejection. Conventional therapy typically combines several drugs, most commonly
cyclosporine, azathioprine and steroids, or alternative combinations for certain
patients using tacrolimus and/or mycophenolate mofetil. These drugs act
nonspecifically and broadly impair the recipient's immune system in order to
reduce the immune response against the graft. Cyclosporine is the leading
immunosuppressive drug used in the post-transplant phase. In 1995, worldwide
sales of Novartis' cyclosporines, Sandimmune and Neoral, were reported at $1.2
billion. Even with the use of immunosuppressants, patients have an approximate
5% to 20% risk of losing grafts per year during the first three years following
transplantation, and less than 50% of patients have functioning grafts after
approximately ten years.

25
<PAGE> 27

PRODUCTS, PRODUCT CANDIDATES AND SERVICES

SangStat's portfolio of complementary drugs, monitoring products, product
candidates and services are designed to prevent and treat graft rejection and
monitor patients throughout the patient's lifetime. The following table
summarizes SangStat's products, product candidates and services.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
POTENTIAL CLINICAL
TRANSPLANT PHASE PRODUCT/SERVICE USE STATUS(1)
- ----------------- ----------------- ------------------ -------------------------
<S> <C> <C> <C>
Pre-Transplant PRA-STAT Detects anti-HLA Marketed
Monitoring antibodies in
candidates
CROSS-STAT Detects candidate Marketed
antibodies against
a specific donor

Transplant THYMOGLOBULIN(2) Treats acute PLA under review in U.S.;
Acute Care kidney rejection NDS filed in Canada
episodes
ALLOTRAP 2702 Promotes graft Phase II trials (Europe)
acceptance
CELSIOR(3) Preserves organs Clinical trials
prior to
transplantation

Lifetime Post- CYCLOSPORINE Chronic AADA under review in U.S.
Transplant Care immunosuppression
AZATHIOPRINE Chronic Bioequivalence trials
immunosuppression
MONITORING Patient management Clinical trials
PRODUCTS

THE TRANSPLANT Mail order and Piloting at selected
PHARMACY patient management centers
program
</TABLE>

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

(1) "Phase I, II or III" indicates that the product candidate is in a
certain stage of clinical trials. "Bioequivalence Trials" are clinical
studies in healthy volunteers which assess pharmacokinetic parameters
of the drug candidate against the reference drug to support an
application for the approval of a generic drug without the need for
safety and efficacy trials. "AADA under review" means that an
Abbreviated Antibiotic Drug Application has been accepted for filing
by the FDA and is now under review for approval in the U.S. on the
basis that the product may be bioequivalent to an existing reference
listed drug and may conform with AADA regulations. "NDS Filed" means
that a New Drug Submission has been filed with the Health Protection
Board. "PLA under review" means that a Product License Application for
approval of a biological product has been accepted for filing by the
FDA and is now under review for approval in the U.S. "Marketed" means
that commercial sales of the product have commenced. See "--Government
Regulation."

(2) THYMOGLOBULIN is licensed exclusively from PMC for the United States
and Canada and commercialized by PMC in many European countries. See
"--Strategic Relationships."

(3) CELSIOR was licensed from PMC and the Company has the exclusive rights
to market the product in the United States and Canada. See
"--Strategic Relationships."
- --------------------------------------------------------------------------------

THYMOGLOBULIN

Thymoglobulin is a pasteurized, rabbit anti-human thymocyte immunoglobulin
(polyclonal antibody preparation) which induces immunosuppression as a result of
T-cell depletion. The Company filed a PLA with the FDA for market approval in
January 1997 which was accepted for review by the FDA in February 1997. SangStat
has an exclusive license from PMC to market THYMOGLOBULIN in the United States
and Canada. Thymoglobulin is commercially available in many European countries

26
<PAGE> 28

where it is a market leader in its category. Approved for use in 39 countries,
thymoglobulin has been commercialized and used to treat more than 30,000
patients principally in Europe by PMC since 1985.

SangStat completed a pivotal Phase III human clinical trial in the United
States in August 1996. The trial was designed to demonstrate safety and efficacy
equivalent to current anti-T-cell therapy for the treatment of acute kidney
rejection episodes. The trial was a double-blinded, randomized, multi-center
Phase III clinical trial of THYMOGLOBULIN versus ATGAM (marketed by Pharmacia &
Upjohn Inc.) in the treatment of acute rejection episodes following renal
transplantation in adults. The 163 adult patients enrolled in the trial were
kidney transplant recipients with biopsy-proven acute graft rejection. Patients
randomized into the treatment groups were to receive either 1.5 mg/kg per day of
THYMOGLOBULIN or 15 mg/kg per day of ATGAM for 7 to 14 days and were followed
for three months following enrollment. Patients were stratified into groups
according to the degree of rejection severity (steroid resistant mild, moderate
or severe rejection). The severity of rejection was based on the kidney biopsy
using the standardized international Banff criteria. Of the 162 evaluable
patients in the trial, 82 received THYMOGLOBULIN and 80 received ATGAM. The
trial was conducted at 28 leading transplant centers around the United States.

An intent-to-treat analysis of the data (primary endpoint, i.e. the major
variable in the trial) indicated that the observed overall success rate in the
reversal of acute rejection for THYMOGLOBULIN was 87.8% compared to an observed
overall rate of 76.3% for ATGAM. These results, which have not yet been reviewed
by the FDA, were statistically significant and demonstrated that THYMOGLOBULIN
was not just equivalent to ATGAM, but reversed rejection in a higher number of
cases (p = 0.027). However, because the study was designed to show equivalence,
there can be no assurance that the FDA will allow a claim of superiority.
Success, according to the primary endpoint, was the post-therapy return of serum
creatinine level (a measure of kidney function) to, or below, baseline level. A
preliminary intent-to-treat analysis of the secondary endpoints (i.e. secondary
variables in the trial) showed that the two therapies were equivalent for these
secondary endpoints. Secondary endpoints were (i) graft survival at Day 30, (ii)
Day 30 creatinine to baseline creatinine ratio and (iii) histological
improvement between enrollment and post-therapy biopsies. Patients on both
therapies experienced similar side effects and there was no difference in the
safety profile between the two therapies.

SangStat believes that, because of the preclinical and clinical data
available on THYMOGLOBULIN from PMC, only the single completed Phase III trial
will be required in the United States to support FDA approval. However, there
can be no assurance that the results of a single Phase III clinical trial, in
combination with existing European safety and efficacy data, will be sufficient
to support an ELA, PLA, or any future ELA supplements needed for commercial
marketing. The Company filed an ELA and a PLA with the FDA in August 1996 and
January 1997, respectively. Both applications have been accepted for filing and
are now under review by the FDA. The Company intends to file an additional ELA
supplement for a new facility. SangStat has filed an NDS and is generating
revenues through the distribution of THYMOGLOBULIN in Canada under the EDR
program, which permits the distribution of certain products before final
regulatory approval. In the United States, SangStat has provided THYMOGLOBULIN
for compassionate use for over 50 patients. Data in support of the PLA
submission were derived from extensive European clinical trials and post-
marketing surveys, as well as experience in Canada under the EDR program.
SangStat is developing THYMOSTAT, a monitoring assay for THYMOGLOBULIN to assist
in optimal definition of the therapeutic regimen (i.e. monitoring blood levels
of a product to determine which blood levels lead to the best results for
patients using the product).

CYCLOSPORINE

In North America and Europe there are more than 200,000 transplant
recipients requiring expensive daily immunosuppressive therapy for the rest of
their lives. The majority of these patients use cyclosporine. The Company
estimates that the current cyclosporine cost per patient is $7,000 to $8,000 per
year. Cyclosporine is a small, cyclic peptide that works by inhibiting T-cell
activation and

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preventing T-cells from attacking a transplanted organ. The development of
cyclosporine for the prevention of graft rejection was a medical breakthrough in
the early 1980's and resulted in the rapid growth of organ transplantation.
Sandimmune, the original formulation of cyclosporine was introduced by Novartis,
formerly Sandoz, in the United States in 1983. Neoral, an improved formulation
of cyclosporine with increased bioavailability, was launched first in Europe in
1994 and then in the United States in September 1995. Currently, the majority of
all new transplant recipients are started on Neoral, and, as of the end of 1996,
the Company estimates, based on information released by Novartis, that more than
70% of European and 50% of the United States transplant recipients have been
initiated on, or converted to, Neoral. In November 1996, SangStat filed an AADA
with the FDA, which the FDA accepted for review in January 1997, for marketing
approval of its proprietary formulation of CYCLOSPORINE. The Company believes
its formulation of CYCLOSPORINE is bioequivalent to Novartis' newest
formulation, Neoral. Worldwide sales of Novartis' cyclosporine in 1995 are
reported at $1.2 billion.

Two different formulations of the same drug are considered bioequivalent if
the drug's absorption rate, blood concentration and persistence in the
bloodstream are demonstrated to be equivalent in healthy volunteers in
controlled, crossover trials according to defined regulatory policy. Two key
pharmacokinetic parameters, area under the blood concentration vs. time curve
(AUC) and the maximum drug concentration (Cmax) are measured in human
bioequivalence trials. These parameters are calculated from drug levels measured
in the blood over a defined time period following dosing. AUC to a defined time
point (AUC (0-t)) and AUC to infinity (AUC (0-()) are calculated separately.
Among other factors, if the 90% confidence intervals (for the ratio of the log
transformed parameters of SangStat's CYCLOSPORINE and Neoral) are contained
within the range of 80% to 125%, the formulations are considered bioequivalent
under current FDA policy.

SangStat's pivotal trial was a single-dose, randomized, cross over
bioequivalence trial in 36 healthy human volunteers comparing, under fasting
conditions, SangStat's CYCLOSPORINE with Neoral. Subjects had blood samples
taken at defined time points over a 36-hour period and the cyclosporine blood
levels were analyzed using a standardized, validated cyclosporine assay.

Statistical comparison of the key pharmacokinetic parameters for SangStat's
CYCLOSPORINE and Neoral yielded the following results which the Company believes
demonstrate bioequivalence; however, the FDA has not yet reviewed any of these
data:

<TABLE>
<CAPTION>
SANGSTAT/NEORAL 90% CONFIDENCE
PARAMETER LEAST SQUARES MEAN RATIO INTERVAL(1) POWER(2)
- ---------- ------------------------ -------------- --------
<S> <C> <C> <C>
Cmax 99.6% 96.9 - 104% 99.99%
AUC(0-t) 99.8% 97.3 - 103% 99.99%
AUC(0-() 99.4% 97.0 - 103% 99.99%
</TABLE>

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

(1) Based on log transformed parameters.

(2) Power = Power (%) to detect 20% differences between treatments (a=0.05). For
the study to be statistically significant, the power should be at least 80%.

SangStat has now completed five human trials with its proprietary
CYCLOSPORINE formulation in a total of 119 healthy volunteers and patients. In
addition to the pivotal trial, a supporting trial in 21 subjects designed to
assess food effect on cyclosporine bioavailability also demonstrated
statistically significant bioequivalence between SangStat's CYCLOSPORINE and
Neoral under fed conditions. The Company subsequently confirmed bioequivalence
in two additional healthy volunteer trials in 38 subjects (African Americans and
females) and its first patient trial in 24 kidney transplant recipients. In each
of the pivotal and additional trials, the incidence, severity or frequency of
side effects was similar between the two products. The Company continues to
expand its global regulatory clinical trial

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program with trials ongoing and planned for different populations of organ
transplant recipients, and expects to present the results of these trials at
upcoming transplant and regulatory meetings.

Under current FDA regulations and policy, a generic cyclosporine that is
shown to be bioequivalent to Neoral may be approved without the need to
duplicate safety and efficacy trials. If the FDA approves SangStat's
CYCLOSPORINE based on bioequivalence to Neoral, SangStat intends to market its
formulation as a branded therapeutic substitute for Neoral.

The Company has entered into an agreement for commercial scale production
of CYCLOSPORINE bulk material (i.e. the active ingredient of CYCLOSPORINE) from
an established fermentation manufacturing source. The agreement has an initial
term of ten years following the first regulatory approval of CYCLOSPORINE for
commercial sale in North America and Europe, subject to earlier termination upon
120 days notice in the event of a substantial breach by either party of its
material obligations under the agreement. The Company has also separately
contracted for the manufacture of the finished commercial supply (i.e. product
in completed dosage form) of its CYCLOSPORINE product candidate from an
established third-party source who will prepare bulk CYCLOSPORINE, provided by
the Company, for subsequent commercial sale and distribution worldwide by the
Company. The Company retains the exclusive commercial rights worldwide. There
can be no assurance that the Company's third-party manufacturers will perform
satisfactorily and any such failure may delay clinical trial development or the
submission of product for regulatory approval, impair the Company's ability to
deliver products on a timely basis, or otherwise impair the Company's
competitive position, which would have a material adverse effect on the
Company's business, financial condition, cash flows and results of operations.
See "Risk Factors -- Limited Manufacturing Capability."

Commercialization of the Company's CYCLOSPORINE drug candidate may be
several years away and successful development and commercialization is subject
to numerous risks, including failure to obtain regulatory approvals and
potential intellectual property claims of third parties, including those of
Novartis and its manufacturing contractors. In addition, if the Company is
unable to demonstrate to the FDA that its formulation is bioequivalent to
Neoral, a currently approved Novartis formulation, the Company would be required
to undertake additional development work and seek regulatory approval through
the potentially longer NDA process if it wished to continue to pursue this
product candidate.

Cyclosporine is particularly difficult to manufacture since it must be
extracted from whole cells and carefully purified. There can be no assurance
that SangStat's CYCLOSPORINE drug candidate can be manufactured in commercial
quantities at an economical cost. There can be no assurance that SangStat can
manufacture, or have manufactured, formulate or commercialize its CYCLOSPORINE
product without infringing patent or other proprietary rights of Novartis or
other third parties, due in part to the large number and scope of these patents
and the difficulty of solubilizing cyclosporine into a formulated drug product.
Although Novartis' composition of matter patent for cyclosporine expired in
September 1995 in the United States, Novartis' patents relating to formulations
are expected to continue to present significant barriers to entry to potential
competitors.

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acceptable terms because the Company believes cyclosporine is an important
product for Novartis and that Novartis would not want to diminish its profits
from this product by licensing it on acceptable terms to the Company. Failure to
obtain any such required license could prevent the Company from selling
CYCLOSPORINE entirely, which would have a material adverse effect on the
Company's future results of operations. A number of key employees were
previously employed at Novartis and it is possible a claim could be asserted
against SangStat based on such prior employment. While the Company believes that
such a claim would be without merit in part because such employees have informed
the Company that they did not have any non-competition agreements with Novartis
and that they have not violated any confidentiality agreements with Novartis,
such a claim could nonetheless result in litigation. Any litigation, whether or
not resolved in favor of the Company, is likely to be expensive, lengthy and
time consuming and could have a material adverse effect on the Company's
business, financial condition, cash flows and results of operations. To date no
litigation has been threatened, but there can be no assurance that Novartis will
not commence litigation or otherwise attempt to delay the marketing of
CYCLOSPORINE in the future. See "Risk Factors -- Risks Associated with
CYCLOSPORINE."

AZATHIOPRINE

Azathioprine is an immunosuppressant that inhibits the development of
T-cells by interfering with the differentiation and proliferation of activated
lymphocytes. It is used as an adjunct for the prevention of rejection in renal
organ transplantation. The patent for azathioprine composition of matter has
expired. Therapy is usually initiated shortly after transplantation and
continued daily for the patient's lifetime. It is used in conjunction with
cyclosporine and steroids in the standard "triple therapy" regimen used by the
majority of U.S. transplant centers. It is currently marketed as Imuran by Glaxo
Wellcome Ltd. and as generic azathioprine by Roxane Laboratories. United States
sales of Imuran and Azathioprine in 1996 were estimated to be $80 million.

SangStat has developed a generic AZATHIOPRINE for use in transplantation as
an adjunct therapy in chronic immunosuppression and is currently conducting
human bioequivalency trials. Pending successful completion of these trials, the
Company intends to seek market approval by filing an Abbreviated New Drug
Application ("ANDA") with the FDA and to market the product as a branded
therapeutic substitute for Imuran.

ALLOTRAP PEPTIDES

ALLOTRAP 2702 is a small peptide derived from the Company's proprietary
sHLA technology that is designed to promote graft acceptance. SangStat believes
that the ALLOTRAP family of peptides may enable the body to accept a graft as
self without otherwise limiting the normal operation of the immune system, thus
possibly reducing the need for chronic immunosuppressive therapy. The Company
believes that if an ALLOTRAP peptide is exposed to the recipient's T-cell
progenitors simultaneously with the donor's HLAs, the T-cell progenitors are
deactivated. As a result, the T-cells are not activated against the donor's HLA
and do not reject the graft.

The results of an initial Phase II study in Europe showed that ALLOTRAP
2702 was safe and well-tolerated in the study. A key finding, with respect to
biological activity, was the statistically significant in vivo inhibition of
cell-mediated cytotoxicity by ALLOTRAP 2702. Such inhibition had previously been
identified as a key endpoint in preclinical studies. The trial was conducted at
the Center of Transplantation at Nantes, the largest kidney/pancreas transplant
center in France, and was a double-blinded, randomized, placebo-controlled
safety and pharmacokinetic study of ALLOTRAP 2702 in 28 renal transplant
recipients. The results showed that there were no adverse effects attributed to
ALLOTRAP 2702 therapy, and no anti-peptide antibodies, which would lower the
peptide's potential immunosuppressive efficacy, could be detected. Furthermore,
renal function, as assessed by serum creatinine levels at one and three months
post-transplant, was similar between the high dose peptide group and placebo
group. In this study, the investigators also found that ALLOTRAP 2702 resulted
in a statistically significant difference in cell-mediated ("Natural Killer" or
"NK" cells) cytotoxicity in the

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group receiving ten days' therapy as compared to controls (p = 0.001). This
effect on NK cell activity was previously demonstrated in preclinical studies to
be a key marker of efficacy whereby NK cell inhibition correlated with the
prolongation of graft survival without the need for continuous
immunosuppression. These results indicate that ALLOTRAP 2702 had a biological
effect in humans and that NK cell activity may serve as a surrogate endpoint in
future trials. Additional human studies are ongoing or planned. Additional
ALLOTRAP peptides are in preclinical research.

Although the Company believes it conducted its clinical trials taking into
account both European and U.S. regulatory standards, there can be no assurance
that such data will be accepted by the FDA. The Company expects to conduct
several additional Phase II clinical studies to assess product efficacy and
optimize dosage before potentially conducting large-scale Phase III trials. The
use of ALLOTRAP peptides to promote graft acceptance in humans is novel and
unproven and there can be no assurance that such peptides will prove to be safe
or effective in humans for any clinical indication for any transplant type or at
any dosage.

Pre-transplant HLA Monitoring Products and Product Candidates

SangStat's pre-transplant monitoring products and product candidates are
intended to improve HLA compatibility between organ donors and recipients by
providing accurate, rapid, efficient and standardized testing. Current HLA
testing mainly involves a complex procedure, microlymphocytotoxicity, which is
run in specialized transplant laboratories by highly-trained technicians. These
tests require viable cells and multiple reagents. Results obtained from visual
reading using a microscope are often subjective. This method of HLA testing is
labor intensive and lacks accuracy and standardization, often causing
inconsistent results.

sHLA constitutes a convenient biological material for testing transplant
candidates to guide HLA compatible donor selection. Found in whole blood and
plasma of all individuals, sHLA molecules are similar to cell HLAs: (i) they
have the same basic structure, (ii) they bind to anti-HLA antibodies and (iii)
they are polymorphic. SangStat has observed that sHLA molecules can be
accurately measured using immunoassay technology and substituted for cell HLAs
for detection of anti-HLA antibodies and HLA typing. SangStat's scientists
showed that sHLA molecules circulating in blood could be used for accurate and
rapid HLA typing and detection of anti-HLA antibodies. These assays form the
basis of the technology used to develop PRA-STAT and CROSS-STAT. The Company is
currently manufacturing and selling PRA-STAT and CROSS-STAT through its direct
sales force. These pre-transplant monitoring products and product candidates
together are expected to improve donor/recipient matching and post-transplant
monitoring.

PRA-STAT is designed for Panel Reactive Antibody (PRA) testing to track the
appearance and disappearance of anti-HLA antibodies in transplant candidates,
and to analyze such antibodies. This guides the selection criteria of the
prospective donor for each transplant candidate. PRA testing is often performed
every month on patients waiting for transplants. PRA-STAT was introduced in
March 1994 and is currently being marketed.

CROSS-STAT is designed to assess which candidate reacts the least to the
donor's HLAs, thus determining the best recipient for the available organ (cross
matching). If the candidate had antibodies against the donor's HLAs, the HLA
compatibility would be poor, and the candidate would not receive the transplant.
Crossmatching is the final step in determining the best donor/recipient
compatibility. The Company received FDA clearance for CROSS-STAT in May 1995 and
the product is currently being marketed. The Company believes that such
monitoring products could contribute to better management of transplant patients
and immunosuppressive therapy.

In July 1996, the Company completed an agreement with Baxter Healthcare
Corporation ("Baxter") to reacquire marketing rights to PRA-STAT and CROSS-STAT
pre-transplant monitoring products. The Company reacquired these products in
order to market these monitoring products directly and to better establish its
own product distribution capabilities. The terms of this reacquisition

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<PAGE> 33

included the acceptance of salable inventory returns and the purchase of certain
equipment from Baxter aggregating approximately $350,000, as well as the
obligation to pay Baxter royalties on future sales of the reacquired products.

Organ Preservation Product Candidate

The quality of organ preservation is an important factor contributing to
the viability of the transplant. Most organs are retrieved from trauma victims
who are declared brain-dead but maintain cardiac function until their organs are
removed. The harvested organs are stored in a preservation solution to prevent
deterioration and tissue typed to determine the HLA antigens. Following this,
each donor must be crossmatched with the patients on the transplant waiting
lists, each organ being crossmatched with approximately 100 potential
recipients. Once the best candidate for each organ has been chosen, the organs
are shipped to the recipient's transplant center. The amount of storage time
allowed before transplant varies between organ types and can severely limit the
distance an organ can be shipped. SangStat has acquired from PMC an exclusive
license to commercial rights for CELSIOR in the United States and Canada.
CELSIOR is a formulated solution to store and extend viability of organs between
organ recovery and transplantation. SangStat intends to assess the effect of
CELSIOR on organ viability and speed of post-transplant organ function recovery.
After consultation with the FDA, the Company recently voluntarily withdrew its
510(k) for a two-component CELSIOR product in favor of a one component product.
The Company is now conducting a clinical trial for a redesigned, one-component,
ready-to-use CELSIOR product candidate and intends to submit a new 510(k).

Post-transplant Monitoring Product Candidates

The efficacy and safety of a transplant depends on individual
susceptibility to graft rejection and immunosuppressive therapy. Few tools exist
for post-transplant surveillance to assist physicians in prescribing each
patient's immunosuppressive drug regimen. SangStat is developing several
monitoring products to assist the physician in customizing drug therapy for each
patient, such as THYMOSTAT to monitor patients treated with THYMOGLOBULIN.

THE TRANSPLANT PHARMACY

To further the Company's goal to provide comprehensive disease management,
in September 1996 SangStat established THE TRANSPLANT PHARMACY, a pilot program
designed to provide mail order distribution of drugs and other services for
transplant patients. Its first site of operation opened in September 1996 at the
University of Tennessee Bowld Hospital Organ Transplant Center in Memphis,
Tennessee. The Company has also established a central mail order facility in
Menlo Park, California.

SangStat intends to develop a dedicated sales force to market its
transplant products directly to transplant centers and patients. To further this
goal and to provide comprehensive disease management, SangStat established THE
TRANSPLANT PHARMACY, a pilot program dedicated to providing direct distribution
by mail order of drugs and transplant patient management services in September
1996. This service will promote medication compliance, measure clinical and
economic outcomes, and provide feedback directly to clinicians. Patients
electing to enroll will be able to have all of their medications filled through
the program's central pharmacy. THE TRANSPLANT PHARMACY will also place a key
individual, such as a pharmacist, in each transplant center that joins the
program to interact directly with physicians, nurses and patients. THE
TRANSPLANT PHARMACY program seeks to provide a singular and integrated approach
to the management of transplantation, in which the Company's drugs, monitoring
products, and services can be supplied to meet the needs of individual
transplant centers and their patients.

Xenotransplantation

SangStat is working on a xenotransplantation technology (XE-9) through its
wholly-owned subsidiary, XenoStat, Inc. ("XenoStat"). Xenotransplantation is the
transplantation of an organ from

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one species to a different species. If successful in humans, it could partly
overcome the current limited availability of organs. SangStat does not expect
any application of the XenoStat technology in humans for the next several years,
if at all. Such applications will require extensive clinical trials and
regulatory approvals.

XENOJECT Technology

SangStat is developing a new platform technology called XENOJECT. The
Company believes XENOJECT will promote the elimination of undesirable cells by
halting the acceptance process of the immune system. XENOJECT specifically
redirects a graft immune response from its natural target to an undesirable
target by adding incompatible transplantation antigens to the surface of the
undesirable cell. XENOJECT may become an enabling technology which offers major
potential advantages over other specific immunotherapy technologies, such as
therapeutic monoclonal antibodies (murine or humanized) or immunotoxins.
Potential benefits include increased potency, decreased immunogenicity, easier
manufacturing (small molecule) and potential for oral administration. Potential
clinical applications include cancer and infectious disease therapy. Currently,
the Company conducts discovery research in the field of cancer and immune
disorders.

STRATEGIC RELATIONSHIPS

The Company evaluates on an ongoing basis potential collaborative
relationships with corporate and other partners where such relationships may
complement and expand SangStat's research, development, sales and marketing
capabilities. There can be no assurance that the Company will be interested in
or able to negotiate any additional collaborative arrangements or that, if
established, such relationships will be successful.

Pasteur Merieux Connaught

In October 1993, SangStat entered into an exclusive licensing agreement
with PMC for the clinical development, marketing and sale of THYMOGLOBULIN and
CELSIOR in the United States and Canada. The agreement provides, among other
things, that (i) SangStat will use commercially reasonable efforts to obtain
regulatory approval through a Phase III clinical trial for THYMOGLOBULIN for
treatment of kidney rejection episodes; (ii) PMC will manufacture and supply
products for clinical and commercial use; and (iii) SangStat will pay a fee upon
achievement of milestones as well as royalties based upon commercial sales.
Although THYMOGLOBULIN has been approved and is sold on a commercial basis in
several European countries, there can be no assurance that regulatory approval
will be obtained in the United States or Canada. The agreement has an initial
term of fifteen years, subject to earlier termination upon 120 days notice of a
substantial breach by either party of its material obligations under the
agreement.

Center of Transplantation of Nantes, France

SangStat's subsidiary, SangStat Atlantique S.A., leases approximately 2,500
square feet of office space within the Center of Transplantation of Nantes,
France (Centre Hospitalier Universitaire de Nantes). The Center of
Transplantation is the largest kidney transplant center in France and has
provided equipment and personnel to perform development work for SangStat in the
area of immunointervention. Work projects are funded by SangStat on a project by
project basis. Although it is not obligated to do so, the Center of
Transplantation has provided limited funding for certain expenses incurred as
part of the clinical development of ALLOTRAP peptides.

Stanford University

SangStat has a worldwide, exclusive license from Stanford University to
make, sell or otherwise distribute products covered by patents and patent
applications on certain HLA peptides, including the ALLOTRAP peptides. Stanford
University has no obligation to conduct any further research with

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respect to such ALLOTRAP peptides. The exclusivity of SangStat's rights under
the license agreement with Stanford University expire after the earlier of
October 2007, or 10 years from the date of first commercial sale of any product
covered by the patent application licensed from Stanford University.
Additionally, under the terms of this agreement, SangStat must pay to Stanford
University annual license fees and a royalty on products covered by the license
agreement.

COMPETITION

The drugs being developed by the Company compete with existing and new
drugs being created by pharmaceutical, biopharmaceutical, biotechnology
companies and universities. Many of these entities have significantly greater
research and development capabilities, as well as substantial marketing,
manufacturing, financial and managerial resources and represent significant
competition for the Company. With respect to THYMOGLOBULIN, CYCLOSPORINE and
AZATHIOPRINE, the Company will be competing against large companies that have
significantly greater financial resources and established marketing and
distribution channels for equivalent products. The generic drug industry is
characterized by intense price competition and the Company anticipates that it
will face this and other forms of competition. There can be no assurance that
developments by others will not render the Company's products or technologies
obsolete or noncompetitive or that the Company will be able to keep pace with
technological developments. Many of the competitors have developed or are in the
process of developing technologies that are, or in the future may be, the basis
for competitive products. Some of these products may have an entirely different
approach or means of accomplishing the desired therapeutic effect than products
being developed by the Company and may be more effective and less costly. In
addition, many of these competitors have significantly greater experience than
the Company in undertaking preclinical testing and human clinical trials of
pharmaceutical products and obtaining regulatory approvals of such products.
Accordingly, the Company's competitors may succeed in commercializing products
more rapidly than the Company. For example, the Company believes that the degree
of market penetration of its CYCLOSPORINE drug candidate is dependent in part on
whether the Company is the first company to market a generic formulation of
cyclosporine. The Company believes that other companies are developing
cyclosporine formulations that may be marketed as generic equivalents. Were
these competitors to develop their products more rapidly and complete the
regulatory process sooner, it could have a material adverse effect on the
Company's business, financial condition, cash flows and results of operations.

Treatments for the problems associated with transplantation that the
Company's products seek to address are currently available. For example,
Sandimmune and Neoral, marketed by Novartis, would compete with CYCLOSPORINE,
and Orthoclone OKT3, marketed by Johnson & Johnson and ATGAM, marketed by
Pharmacia & Upjohn Inc., would be competitive with THYMOGLOBULIN. Prograf
marketed by Fujisawa Pharmaceutical Co. Ltd, CellCept, marketed by Roche Ltd.
and Imuran, marketed by Glaxo Wellcome Ltd. would be competitive with
CYCLOSPORINE and AZATHIOPRINE. All of such products are commercially available
for use as immunosuppressive drugs and are widely prescribed. In addition, One
Lambda Inc., Pel Freez, Biotest Diagnostics Corp., and Genetic Therapy, Inc.
market products for pre-transplant HLA monitoring and Abbott Laboratories
markets a cyclosporine level post-transplant monitoring device, all of which are
widely used. Additional therapeutics and monitoring products are available or
are under development by these and other parties including, but not limited to:
Roche (mycophenolate mofetil), Glaxo-Wellcome and Roxane (azathioprine) American
Home Products Corp. (rapamycin), Fujisawa Pharmaceutical Co. Ltd. (tacrolimus),
Bristol Myers Squibb (CTLA4), and DuPont Merck (ViaSpan), and other companies
including, but not limited to Abbott, MedImmune Inc., Novartis, BioTransplant,
Inc., PMC, and Ivax Corp. In addition, THE TRANSPLANT PHARMACY also competes
with other drug distribution companies, such as Chronimed Inc., HMI and
Stadtlander Drug Company. To the extent these companies' therapeutics,
monitoring products and services address the problems associated with
transplantation on which the Company has focused, they may represent significant
competition.

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PATENTS AND PROPRIETARY TECHNOLOGY

The Company's policy is to seek patent protection and to enforce its
intellectual property rights. The Company has ten issued patents which cover
several different test formats for sHLA-based and allied assays, including
PRA-STAT and CROSS-STAT. Such patents expire approximately 10 years from the
date of this Prospectus. SangStat has patent applications pending in the United
States in the pretransplant and post-transplant monitoring, CYCLOSPORINE,
XENOJECT and xenotransplantation areas. The Company has also filed patent
applications with respect to several product candidates in many other countries,
including Japan, Canada and the countries regulated by the European Patent
Office.

There can be no assurance that SangStat can manufacture, or have
manufactured, formulate or commercialize its CYCLOSPORINE product without
infringing patent or other proprietary rights of Novartis or other third
parties. Although Novartis' composition of matter patent for cyclosporine
expired in September 1995 in the United States, Novartis' patents relating to
cyclosporine are expected to continue to present significant barriers to entry
to potential competitors. There can be no assurance that Novartis or others will
not seek to protect their market share through litigation or otherwise against
SangStat, its affiliates and partners or the FDA, or actions which adversely
affect the regulatory approval process, such as citizens' petitions, or that
SangStat's formulation will not be found to infringe Novartis' or others'
proprietary rights. If Novartis or others bring suit against SangStat, the
Company could be greatly delayed in bringing its CYCLOSPORINE product to market,
enjoined from selling the product for a significant period of time or ultimately
be prevented from selling its CYCLOSPORINE product candidate entirely. See "Risk
Factors -- Risks Associated with CYCLOSPORINE."

The Company's family of ALLOTRAP peptides is being developed under an
exclusive, worldwide, license from Stanford University. Although Stanford has
filed patent applications with respect to such technology, no assurance can be
given that the patent application or any of its claims will be allowed, valid,
or enforceable or that the Company's products will not infringe on other
patents.

There can be no assurance that any patent issued to, or licensed by, the
Company will provide protection that has commercial significance. The Company's
patents involve specific claims and thus do not provide broad coverage. There
can be no assurance that the Company's patent applications or any claims of
these patent applications will be allowed, valid or enforceable, that any
patents or any claims of these patents will provide the Company with competitive
advantages for its products or that they will not be successfully challenged or
circumvented by the Company's competitors.

The Company also relies on trade secrets and proprietary know-how which it
seeks to protect, in part, by confidentiality agreements with its employees and
consultants. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or independently
developed by competitors. The Company has registered or applied for registration
of the names of most of its products under development or commercialized for
research and development use. However, there can be no assurance that any
trademark registration will be granted or not challenged by competitors.

MANUFACTURING

The Company lacks facilities to manufacture any of its drug candidates in
accordance with current GMP prescribed by the FDA. The Company generally relies
on third parties to manufacture its

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compounds for clinical trials, including THYMOGLOBULIN, CYCLOSPORINE, ALLOTRAP,
AZATHIOPRINE and CELSIOR and has contracted or expects to contract for
commercial production of these compounds. There can be no assurance that it will
be able to enter into commercial scale manufacturing contracts or that any other
third-party arrangements can be established on a timely or commercially
reasonable basis, or at all. If such arrangements are established, the Company
will depend on such third parties to perform their obligations effectively and
on a timely basis. There can be no assurance that such parties will perform and
any such failure may delay clinical development or submission of products for
regulatory approval, or otherwise impair the Company's competitive position
which could have a material adverse effect on the Company's business, financial
condition, cash flows and results of operations. In addition, the manufacturing
of drug candidates involves a number of technical steps and requires meeting
stringent quality control specifications imposed by government regulatory bodies
and by the Company itself. Additionally, such products can only be manufactured
in facilities approved by the applicable regulatory authorities. Because of
these and other factors, the Company may not be able to quickly and efficiently
replace its manufacturing capacity in the event that its manufacturers are
unable to manufacture their products at one or more of their facilities. If
these manufacturers were affected for any reason, the Company's ability to ship
its products could be impaired, which could have a material adverse effect on
the Company's business, financial condition, cash flows and results of
operations.

For certain of its potential products, the Company will need to develop
further its production technologies for use on a larger scale in order to
conduct human clinical trials and produce such potential products for commercial
sale at an acceptable cost. The Company intends to rely on its third-party
manufacturers to meet FDA required GMP. However, the Company is ultimately
responsible for any failure of such manufacturers to meet such requirements.

The Company intends to obtain quantities of THYMOGLOBULIN for clinical
trials and commercial use under an agreement with PMC. There can be no assurance
that PMC or any other manufacturer will meet FDA standards governing GMP or that
any ELAs or ELA supplements required for manufacturing will be filed, reviewed
and approved or that PMC will fulfill its obligations to SangStat.

The Company has contracted for commercial scale production of cyclosporine
and azathioprine bulk material for its CYCLOSPORINE and AZATHIOPRINE drug
candidates from established third-party manufacturing sources. The Company has
also separately contracted for the manufacture of the finished commercial supply
of its CYCLOSPORINE product candidate from an established third-party source.
There can be no assurance that such third parties will perform satisfactorily
and any such failure may delay clinical trial development or the submission of
the product for regulatory approval, impair the Company's ability to deliver
products on a timely basis, or otherwise impair the Company's competitive
position, which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Risk Factors--Risks
Associated with CYCLOSPORINE."

The Company is currently purchasing ALLOTRAP peptides for its clinical
trials under a supply agreement with UCB. The Company believes that UCB adheres
to established GMP production methods and complies with the Company's quality
control and quality assurance standards. More than 10 lots of clinical amounts
of ALLOTRAP peptides have been manufactured by UCB to date. The Company expects
to purchase ALLOTRAP peptides from UCB for commercial sale. However, there can
be no assurance that UCB will be able to scale up its manufacturing to support
the commercial sale of ALLOTRAP peptides or that supply of ALLOTRAP peptides to
the Company will be uninterrupted. The Company does not expect to establish any
significant manufacturing capacity with respect to therapeutic products in the
near future.

With respect to its monitoring products including PRA-STAT and CROSS-STAT
the Company currently has in-house manufacturing capabilities and believes it
operates in compliance with GMP. However, there can be no assurance that
SangStat would pass a regulatory inspection from the FDA or other agencies. The
raw materials required for the majority of the Company's products and product

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candidates are currently available from several suppliers in quantities
sufficient to conduct the Company's research, development and clinical
development activities. However, there can be no assurance that the raw
materials necessary for the manufacture of the Company's products and product
candidates will be available in sufficient quantities or at a reasonable cost.
Complications or delays in obtaining raw materials or in product manufacturing
could delay the submission of products for regulatory approval, product launch
and the initiation of new development programs, which could materially impair
the Company's business, financial condition, cash flows and results of
operations. See "Risk Factors--Limited Manufacturing Capability."

MARKETING

SangStat currently retains all commercial rights to its products and plans
to market directly those products for which it obtains regulatory approval.
However, for certain territories, the Company may also enter into co-promotion
arrangements or other licensing arrangements with pharmaceutical, diagnostic or
biotechnology companies. SangStat intends to expand its direct sales force to
market all of its transplant products, including THYMOGLOBULIN, CYCLOSPORINE,
AZATHIOPRINE, CELSIOR, ALLOTRAP 2702, PRA-STAT, CROSS-STAT and other monitoring
products. Implementation of this strategy will depend on many factors, including
the market potential of any products the Company develops as well as on the
Company's financial resources. The Company sells certain of its monitoring
products for research or investigational use through a small, direct sales
operation. SangStat has also established THE TRANSPLANT PHARMACY, a pilot
program furthering the Company's approach of comprehensive disease management,
which will directly dispense all needed medications by mail to transplant
recipients enrolled in the program. See "Business--THE TRANSPLANT PHARMACY." To
the extent the Company enters into co-promotion or other licensing arrangements,
any revenues received by the Company will be dependent on the efforts of third
parties and there can be no assurance that such efforts will be successful. To
the extent that the Company itself undertakes to market a substantial portion of
its products, or is unable to enter into co-promotion agreements or to arrange
for third party distribution of its products, additional expenditures,
management resources and time will be required to develop a sales force.

GOVERNMENT REGULATION

SangStat's research and development activities, preclinical studies and
clinical trials, and ultimately the manufacturing, marketing and labeling of its
products, are subject to extensive regulation by the FDA and other regulatory
authorities in the United States and other countries. The United States Federal
Food, Drug, and Cosmetic Act (the "Act") and the regulations promulgated
thereunder and other federal and state statutes and regulations govern, among
other things, the testing, manufacture, safety, efficacy, labeling, storage,
record keeping, approval, advertising, promotion, import and export of the
Company's products. Preclinical study and clinical trial requirements and the
regulatory approval process typically take years and require the expenditure of
substantial resources. Additional government regulation may be established that
could prevent or delay regulatory approval of the Company's product candidates.
Delays or rejections in obtaining regulatory approvals would adversely affect
the Company's ability to commercialize any product candidates the Company
develops and the Company's ability to receive product revenues or royalties. If
regulatory approval of a product candidate is granted, the approval may include
significant limitations on the indicated uses for which the product may be
marketed.

The FDA and other regulatory authorities require that the safety and
efficacy of certain of the Company's product candidates be supported through
adequate and well-controlled clinical trials. If the results of pivotal clinical
trials submitted by the Company in applications for approval do not establish
the safety and efficacy of the Company's product candidates to the satisfaction
of the FDA and other regulatory authorities, the Company will not receive the
approvals necessary to market its product candidates, which would have a
material adverse effect on the Company's business, financial condition, cash
flows and results of operations.

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FDA Regulation--Approval of Therapeutic Products

The Company's therapeutic products are regulated as drugs and, in the case
of THYMOGLOBULIN, as biological products. The steps ordinarily required before a
drug or biological product may be marketed in the United States include (a)
preclinical and clinical studies, (b) the submission to the FDA of an
Investigational New Drug application ("IND"), which must become effective before
human clinical trials may commence, (c) adequate and well-controlled human
clinical trials to establish the safety and efficacy of the drug, (d) the
submission to the FDA of New Drug Application ("NDA"), or Product License
Application ("PLA") together with an Establishment License Application ("ELA"),
if applicable, and (e) FDA approval of the application, including approval of
all product labeling.

Preclinical tests include laboratory evaluation of product chemistry,
formulation and stability, as well as animal studies to assess the potential
safety and efficacy of each product. Preclinical safety tests must be conducted
by laboratories that comply with FDA regulations regarding Good Laboratory
Practice. The results of the preclinical tests are submitted to the FDA as part
of an IND and are reviewed by the FDA before the commencement of human clinical
trials. Unless the FDA objects to an IND, the IND will become effective 30 days
following its receipt by the FDA. There can be no assurance that submission of
an IND will result in FDA authorization to commence clinical trials or that the
lack of an objection means that the FDA will ultimately approve an application
for marketing approval.

Clinical trials involve the administration of the investigational product
to humans under the supervision of a qualified principal investigator. Clinical
trials must be conducted in accordance with Good Clinical Practices ("GCP")
under protocols submitted to the FDA as part of the IND. Also, each clinical
trial must be approved and conducted under the auspices of an Institutional
Review Board ("IRB") and with patient informed consent. The IRB will consider,
among other things, ethical factors, the safety of human subjects and the
possible liability of the institution conducting the clinical trials.

Clinical trials are typically conducted in three sequential phases, but the
phases may overlap. Phase I clinical trials involve the initial introduction of
the drug into healthy human volunteers. In Phase I clinical trials, the drug is
tested for safety (adverse effects), dosage tolerance, metabolism, distribution,
excretion and pharmacodynamics (clinical Pharmacology). Phase II clinical trials
are conducted in a target patient population to gather evidence about the
pharmacokinetics, safety and biological or clinical efficacy of the drug for
specific indications; to determine dosage tolerance and optimal dosage; and to
identify possible adverse effects and safety risks. When a compound has shown
evidence of efficacy and an acceptable safety profile in Phase II evaluations,
Phase III clinical trials are undertaken to evaluate clinical efficacy and to
test for safety in an expanded patient population. There can be no assurance
that any of the Company's clinical trials will be completed successfully or
within any specified time period. The Company or the FDA may suspend clinical
trials at any time, if either entity concludes that clinical subjects are being
exposed to an unacceptable health risk, or for other reasons.

There can be no assurance that, after the results of the Phase III clinical
trials have been announced, the FDA will not disagree with the design of the
Phase III clinical trial protocols. In addition, the FDA inspects and reviews
clinical trial sites, informed consent forms, data from the clinical trial
sites, including case report forms and record keeping procedures, and the
performance of the protocols by clinical trial personnel to determine compliance
with good clinical practice. The FDA also examines whether there was bias in the
conduct of clinical trials. The conduct of clinical trials is complex and
difficult, especially in Phase III. There can be no assurance that the design or
the performance of the Phase III clinical trial protocols will be successful.

The results of preclinical studies and clinical trials, if successful, are
submitted in an application to seek the FDA approval to market the drug or
biological product for a specified use. The testing and approval process
requires substantial time and effort, and there can be no assurance that any
approval will be granted for any product or that approval will be granted
according to any schedule. The FDA may refuse to approve an application if it
believes that applicable regulatory criteria are not satisfied.

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The FDA may also require additional testing for safety and efficacy of the drug.
Moreover, if regulatory approval of a drug product is granted, the approval will
be limited to specific indications. There can be no assurance that any of the
Company's product candidates will receive regulatory approvals for marketing, or
if approved, that approval will be for the indications requested by the Company.

The FDA has implemented an accelerated review process for drugs that treat
serious or life threatening diseases and conditions. Such approval is subject to
the additional requirement that, following product launch, a Company continue to
study the drug to verify and describe its clinical benefit. Under these FDA
Accelerated Approval Procedures, the FDA may withdraw approval if the Company
fails to show due diligence in conducting post-marketing clinical trials or if
these clinical trials fail to demonstrate clinical benefit to the FDA's
satisfaction. When appropriate, the Company intends to pursue opportunities for
accelerated review of its products. The Company cannot predict the ultimate
opportunities for accelerated review of its products. The Company cannot predict
the ultimate effect of the accelerated review process on the timing or
likelihood of FDA review of any of its product candidates.

For certain drugs that are generic versions of previously approved
products, there is an abbreviated FDA approval process. A sponsor may submit an
Abbreviated Application for: (1) a drug product that is the "same" as the drug
product listed in the approved drug product list published by the FDA (the
"listed drug") with respect to active ingredient(s), route of administration,
dosage form, strength and conditions of use recommended in the labeling; (2) a
drug product that differs with regard to certain changes from a listed drug if
the FDA has approved a petition from a prospective applicant permitting the
submission of an Abbreviated Application for the changed product; and (3) a drug
that is a duplicate of, or meets the monograph for, an approved antibiotic drug.
While the Company believes that CYCLOSPORINE and AZATHIOPRINE will qualify for
this abbreviated format, there can be no assurance that the FDA will not require
additional information or that these products will be approved for marketing.

An Abbreviated Application need not contain the clinical and preclinical
data supporting the safety and effectiveness of the product. The applicant must
instead demonstrate that the product is bioequivalent to the listed drug. FDA
regulations define bioequivalence as the absence of a significant difference in
the rate and the extent to which the active ingredient moiety becomes available
at the site of drug action when administered at the same molar dose under
similar conditions in an appropriately designed study. If the approved generic
drug is both bioequivalent and pharmaceutically equivalent to the listed drug,
the agency may assign a code to the product in an FDA publication that will
represent a determination by the agency that the product is therapeutically
equivalent to the listed drug. This designation will be considered by third
parties in determining whether the generic drug will be utilized as an
alternative to the listed drug. There can be no assurance that the Company will
receive an "AB" rating on CYCLOSPORINE and AZATHIOPRINE, which in certain cases
would require substitution of the Company's CYCLOSPORINE for Neoral and
AZATHIOPRINE for Immuran.

FDA Regulation--Approval of Monitoring Products

The Company's monitoring products are regulated as medical devices by the
FDA and as such require regulatory clearance prior to commercial distribution.
New medical devices are generally introduced to the market based on a premarket
notification or "510(k)" submission to the FDA in which the sponsor establishes
that the proposed device is "substantially equivalent" to a legally marketed
Class I or Class II medical device or to a Class III medical device for which
the FDA has not required premarket approval. The claim of substantial
equivalence will generally have to be supported by various types of data and
materials including, in some instances, preclinical and/or clinical test
results.

Following submission of the 510(k), the sponsor may not place the device
into U.S. commercial distribution until a substantial equivalence order is
issued by the FDA. The order may be sent within

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90 days of submission but could take significantly longer. The order may declare
the FDA's determination that the device is "substantially equivalent" to another
legally marketed device and allow the proposed device to be marketed in the
United States. The FDA may, however, determine that the proposed device is not
substantially equivalent, or may require further information, such as additional
test data, before the FDA is able to make a determination regarding substantial
equivalence. Such determination or request for additional information could
delay the Company's market introduction of its products by several quarters or
more and could have a material adverse effect on the Company's business,
financial condition and results of operations. There is no assurance that a
510(k) marketing clearance will be granted for these products. Additional
regulatory barriers may be encountered by not meeting performance requirements
of American Society of Histocompatability and Immunogenetics ("ASHI") and the
labeling requirements of Clinical Laboratory Improvements Amendment ("CLIA").

If the sponsor of a 510(k) cannot obtain an FDA order declaring substantial
equivalence, the sponsor will have to submit a premarket approval application
("PMA"). A PMA will generally have to be supported by extensive data, including
preclinical and clinical trial data, to prove the safety and efficacy of the
device. Although, by statute, the FDA has 180 days to review a PMA once it has
been accepted for filing. PMA reviews more often involve a significantly longer
time period, usually 12 to 24 months or longer from the date of filing. There
also can be no assurance that the data collected by the sponsor would support a
PMA marketing approval.

The sponsor may be required to obtain an Investigational Device Exemption
("IDE") before it commences clinical testing to support a 510(k) submission or
PMA. Each clinical trial must be approved and conducted under the auspices of an
IRB and with patient informed consent. The IRB will consider, among other
things, ethical factors, the safety of human subjects, and the possible
liability of the institution conducting the clinical trials. For some products,
the sponsor must also submit the protocol to the FDA. The sponsor of the IDE may
be able to distribute limited amounts of these products for research use only if
certain FDA requirements are met. Some of these requirements may also apply to
distribution for clinical investigational use only. The FDA monitors and
oversees the use and distribution of all "research use only" and
"investigational use only" devices. There can be no assurances that the FDA will
determine that the Company's product candidates are substantially equivalent to
other legally marketed devices. The FDA may require the submission of a PMA,
which would delay the Company's market introduction of its products and could
have a material adverse effect on the Company's business, financial condition
and results of operations. The testing and approval process will require
substantial time and effort, and there can be no assurance that any approval
will be granted for any product or that approval will be granted according to
any schedule. The FDA may refuse to approve a PMA if it believes that applicable
regulatory criteria are not satisfied. The FDA may also require additional
testing for safety and efficacy of the device. Moreover, if the PMA is approved,
the approval will be limited to specific indications or uses. There can be no
assurance that any of the Company's product candidates will receive regulatory
approvals for commercial distribution, or if approved that approval will be for
the indications requested by the Company.

Prior to any approval of the Company's products for marketing, all
manufacturing facilities must pass the FDA preapproval inspections.

FDA Regulation--Post-Approval Requirements

Even if regulatory approvals for the Company's product candidates are
obtained, the Company, its products and the facilities manufacturing the
Company's products are subject to continual review and periodic inspection. Each
U.S. drug and device manufacturing establishment must be registered with the
FDA. Domestic manufacturing establishments are subject to biennial inspections
by the FDA and must comply with the FDA's GMP regulations. To supply device
products for use in the United States, foreign manufacturing establishments must
comply with the FDA's GMP regulations and are subject to periodic inspection by
the FDA or by regulatory authorities in those countries under reciprocal

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agreements with the FDA. In complying with GMP regulations, manufacturers must
expend funds, time and effort in the area of production and quality control to
ensure full technical compliance. The FDA stringently applies regulatory
standards for manufacturing.

Labeling and promotional activities are regulated by the FDA and, in
certain instances, by the Federal Trade Commission. The Company must also report
certain adverse events involving its drugs and devices to the agency under
regulations issued by the FDA. The FDA can impose other post-marketing controls
on the Company and its products, and has expanded authority in this regard for
certain products, such as devices approved under PMAs.

Failure to comply with applicable regulatory requirements, can result in,
among other things, warning letters, fines, injunctions, civil penalties recall
or seizure of products, total or partial suspension of production, refusal of
the government to grant approvals, premarket clearance or pre-market approval,
withdrawal of approvals and criminal prosecution of the Company and employees.

European Regulation

The Company's activities in Europe are regulated by both the law of the
European Union ("EU") and by the national law of the EU Member States. There are
a number of EU Regulations and Directives in force governing the authorization
and the marketing of medicinal products. The purpose of such Regulations and
Directives is to harmonize the legal framework regulating medicinal products in
the EU. In the event of a conflict between EU legislation and national law, EU
legislation takes precedence over national law. Once adopted, Regulations apply
immediately in Member States, Directives must be implemented into national law
by Member States. Failure to implement Directives by national governments either
properly or in a timely fashion still leaves significant areas of regulation to
national law. Efforts to harmonize regulation of medicines within the EU began
in 1965 with the adoption of Directive 65/65 which required Member States to
establish premarket approval requirements and prescribed the criteria for
approval. Since then, the EU has issued a series of measures aimed at making
regulation of medicinal products more uniform.

European Regulation--Approval of Therapeutic Products

In addition to Regulations and Directives, the EU has formulated
non-binding guidelines (the "Guidelines") which set out detailed EU requirements
relating to the quality, safety and efficacy of medicinal products. Such
Guidelines have been formulated by the European Commission in consultation with
the Committee for Proprietary Medicinal Products ("CPMP"). Although these
Guidelines are not legally binding, failure to comply with them makes it less
likely that product research work submitted in support of an application for
marketing authorizations will be acceptable to the competent authorities
throughout the EU. In European countries which are not EU Member States,
national laws apply which are frequently divergent from the EU framework. The
following paragraphs relate only to regulation in EU Member States.

When adequate preclinical data are available, an application normally will
be made either to the relevant national regulatory authority and/or to an ethics
committee for approval to carry out a clinical trial with the unlicensed
medicinal product. While marketing authorizations must be supported by clinical
trials of a type and extent set out in the Directives and Guidelines, the actual
approval process for commencement of clinical trials is not currently harmonized
by EU law and varies from state to state.

Clinical trials are typically conducted in three sequential phases which
may overlap. In Phase I, the product is tested in humans to determine certain
parameters relating to safety, potential adverse effects and/or
pharmacokinetics. Phase II involves studies in a target patient population to
collect additional pharmacokinetic clinical data demonstrating safety and,
subsequently, to determine the preliminary biological or clinical efficacy and
optional dosage of the product. Phase III trials are then undertaken to collect
further data to demonstrate quality, safety and efficacy within an expanded
target patient population. The various European regulatory authorities may
require multiple Phase III

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trials to support the quality, safety and efficacy of the product. This process
may take three to six or more years to complete.

When appropriate clinical trial data supporting quality, safety and
efficacy are available, an application for a marketing authorization may be
submitted. In 1993, legislation was adopted which established a very new and
amended system for the registration of medicinal products in the EU. The main
purpose of this system is to prevent the existence of essentially separate
national approval systems which have been a major obstacle to harmonization. One
of the most significant features of this new system is the establishment of a
new European Agency for the Evaluation of Medicinal Products ("EMEA"). Under the
new system, marketing authorizations, broadly speaking, may be submitted at
either a centralized, a decentralized or a national level.

The centralized procedure is administered by the EMEA; this procedure is
mandatory for the approval of biotechnology and high technology products and
available at the applicant's option for other products. The centralized
procedure provides for the first time in the EU for the grant of a single
marketing authorization which is valid in all EU Member States.

As of January 1995, a mutual recognition procedure is available at the
request of the applicant for all medicinal products which are not subject to the
centralized procedure under the so-called "decentralized procedure". The
decentralized procedure will be mandatory beginning January 1, 1998. The
decentralized procedure creates a new system for mutual recognition of national
approval decisions, makes changes in existing procedures for national approvals
and establishes procedures for co-ordinated EU action on product suspensions and
withdrawals. Under this procedure, the holder of a national marketing
authorization for which mutual recognition is sought may submit an application
to one or more Member States, certify that the dossier is identical to that on
which the first approval was based or explain any differences and certify that
identical dossiers are being submitted to all Member States from which
recognition is sought. Within 90 days of receiving the application and
assessment report, each Member State must decide whether to recognize the
approval. The procedure encourages Member States to work with applicants and
other regulatory authorities to resolve disputes concerning mutual recognition.
If such disputes cannot be resolved within the 90-day period provided for
review, the application will be subject to a binding arbitration procedure.

The Company will choose the appropriate route of European regulatory filing
to accomplish the most rapid regulatory approvals. However, there can be no
assurance that the chosen regulatory strategy will secure regulatory approvals
or approvals of the Company's chosen products indications.

Under all procedures approval of an application must be refused if, after
review, it appears that the quality, safety or efficacy of a medicinal product
has not been adequately demonstrated by the applicant. In practice, requirements
for specific post-marketing surveillance, or Phase IV studies, are increasingly
imposed as de facto conditions of the grant of a marketing authorization.

In some Member States, before a product is marketed, it is also necessary
to obtain approval for the price to be charged for the product. However, this is
not, the position in the United Kingdom, for example, where the initial price is
set by the Company (subject to the constraints of the Pharmaceutical Price
Regulation System, which controls the profitability of a Company's business with
the National Health Service). The European Commission is presently reviewing
various matters relating to the pricing of medicinal products within the EU.
Currently EU regulation does not harmonize the pricing measures Member States
may enact, but only seeks to guarantee the transparency of these measures. The
Company believes it is unlikely the EU will regulate in the area of health care
financing. The Company believes that determination of prices and reimbursement
of health care products is therefore likely to remain a prerogative to the
Member States for the foreseeable future. There can be no assurance that Member
States will not adopt new cost containment policies that will limit marketing
opportunities in the EU.

The passage of a product through the approval system is likely to take a
considerable period of time. However, it is hoped that the new authorization
system will limit the length of time the review

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process will take. Generally under the scheme the review process is intended to
take a maximum of 210 days after the receipt of a valid application.

It should also be noted that each national regulatory authority has the
power to suspend or revoke a marketing authorization any time if it is no longer
satisfied as to the product's safety, quality and efficacy. Increasing
harmonization of decision-making by national authorities through the CPMP and/or
the new European Agency, and the existence of a mechanism by which any EU
distribution could compel a Member State to act in accordance with a CPMP
opinion, should result in more efficiency and importantly, future market
authorization process.

EU law requires that companies manufacturing products must hold a
manufacturer's authorization and must comply with EU requirements as to GMP.
These standards are enforced by inspection. Primary responsibility for ensuring
that manufacturing procedures conform to marketing authorizations and good
manufacturing practice requirements will rest with the authorities in the Member
States where the product is manufactured or first imported into the EU.

A procedure for abridged applications for generic products also exists in
the EU. The general effect of the abridged application procedure is to give
scope for the emergence of generic competition once patent protection has
expired and the original product has been on the market for at least six years
or ten years. Independent of any patent protection, under the abridged
procedure, new products benefit in principle from a basic six-year period of
protection (commencing with the data of first authorization in the EU) from
abridged applications for a marketing authorization. Abridged applications can
be made principally for medicinal products which are essentially similar to
medicinal products which have been authorized for either six or ten years. Under
the abridged application procedure, the applicant is not required to provide the
results of pharmacological and toxicological tests or the results of clinical
trials. For such abridged applications, all data concerning manufacturing,
quality and bioavailability are required. The applicant submitting the abridged
application generally must provide evidence or information that the drug product
subject to this application is essentially similar to that of the listed drug
product: (1) it has the same qualitative and quantitative composition with
respect to the active ingredient; (2) the dosage form; and (3) similarity in
bioavailability between the new drug product and the reference listed drug. This
period of protection is extended to ten years in respect of products derived
from certain biotechnological processes or other high-technology medicinal
products viewed by the competent authorities as representing a significant
innovation. Further, each Member State may have a discretion to extend the basic
six-year period of protection to a ten-year period, to all products marketed in
its territory. Most Member States have exercised such discretion. This
protection does not prevent another Company from making a full application
supported by all necessary pharmacological, toxicological and clinical data
within the period of protection. The application of the rules of marketing
exclusivity to various product situations remains uncertain, and divergent views
are taken by some of the EU regulatory authorities on the availability of the
period of protection where new products are different from existing products
only in terms of, for instance, strength or dosage form.

European Regulations--Monitoring Products

The Commission of the European Communities proposed a draft of new
directives to govern approvals of in vitro diagnostic medical devices in late
1995, amending the existing Directive. Future approvals of the Company's
monitoring products may therefore be dependent on meeting the conditions of the
proposed Directive. The compliance with this proposed Directive must be in place
no later than April 1, 1998. The Company's monitoring products will likely have
to meet the essential requirements of the Directive. Once deemed acceptable such
monitoring products will have CE markings of conformity.

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Environmental Regulation

In connection with its research and development activities and its
manufacturing materials and products, the Company is subject to federal, state
and local laws, rules, regulations and policies governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling and disposal of
certain materials, biological specimens, and wastes. Although the Company
believes that it has complied with these laws, regulations and policies in all
material respects and has not been required to take any action to correct any
noncompliance, there can be no assurance that the Company will not be required
to incur significant costs to comply with environmental and health and safety
regulations in the future. The Company's research and development involves the
controlled use of hazardous materials, including but not limited to certain
hazardous chemicals and infectious biological specimens. Although the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by state and federal regulations, the risk
of accidental contamination or injury from these materials cannot be eliminated.
In the event of such an accident, the Company could be held liable for any
damages that result and any such liability could exceed the resources of the
Company.

SCIENTIFIC, MEDICAL, PHARMACY AND REGULATORY ADVISORY BOARD

The Company's Scientific, Medical, Pharmacy and Regulatory Advisory Boards
consist of individuals with recognized expertise in immunology, transplantation
or regulatory affairs. The Scientific, Medical, Pharmacy and Regulatory Advisory
Boards' members advise the Company about present and long-term scientific
planning, research and development. Members meet individually or as a group with
the management of the Company from time to time. Each member of the Scientific,
Medical, Pharmacy and Regulatory Advisory Boards has entered into a consulting
agreement with the Company.

The following persons are members of one or more of the Company's
Scientific, Medical, Pharmacy and Regulatory Advisory Boards:

RITA ALLOWAY, PHARM.D., is an Associate Professor in the Department of
Clinical Pharmacy at the University of Tennessee, Memphis, Tennessee. Dr.
Alloway is a Board Certified Pharmacotherapy Specialist practicing at the UT
William F. Bowld Hospital. Her current research is focused on individualizing
and optimizing immune suppressive regimes for the transplant recipient. Dr.
Alloway is the Past President of the Mid South College of Clinical Pharmacy.

CAROL CLAYBERGER, PH.D., is an Assistant Professor of Immunology in the
Department of Cardiothoracic Surgery of Stanford University School of Medicine,
Stanford, California. Dr. Clayberger's current research is centered on an
understanding of the effect of synthetic peptides on the immune response and the
development of novel immunomodulatory agents. Dr. Clayberger holds a Ph.D. in
Cell Biology from Yale University.

JEAN DAUSSET, M.D., received a Nobel Prize in Medicine in 1980 for work
that led to the discovery of HLA. In 1984, he founded and is currently serving
as President of the Human Polymorphism Study Center (CEPH) which is currently
engaged in research directed toward mapping the human genome. Professor Dausset
is a member of the French Academy of Sciences, a foreign member of the American
Academy of Arts and Sciences and of the National Academy of Sciences.

ROY FIRST, M.D., is a Professor of Internal Medicine at the University of
Cincinnati Medical Center, and Director of the Section of Transplantation in the
Division of Nephrology and Hypertension. He is a Past President of the American
Society of Transplant Physicians (ASTP), and is current Chairman of the Ad Hoc
Committee for Organ Donation of the United Network for Organ Sharing (UNOS). Dr.
First obtained his medical degree at the University of Witwatersrand in
Johannesburg, South Africa in 1966.

A. OSAMA GABER, M.D., is Associate Professor, Department of Surgery,
University of Tennessee and President of the Medical Staff at UT William F.
Bowld Hospital. He was President of the Tennessee Transplant Society and is
Co-Chair SEOPF Pancreas Transplant Committee.

44
<PAGE> 46

F. CARL GRUMET, M.D., is a Professor of Pathology at Stanford University,
Stanford, California. He is the Director of both the Transfusion Service and the
Histocompatibility Laboratory at Stanford University Medical Center, the
Director of the Stanford Specialized Center for Research in Transfusion Medicine
and Associate Medical Director of the Stanford University Medical School Blood
Center.

RONALD D. GUTTMANN, M.D., FRCPC, is Director of the McGill Center for
Clinical Immunobiology and Transplantation, and a Professor of Medicine at the
McGill University Faculty of Medicine, Montreal, Quebec, Canada. Dr. Guttmann
was previously affiliated with the Peter Bent Brigham Hospital and Harvard
Medical School.

ANDREW J. PERLMAN, M.D., PH.D., has been the Vice President of Medical
Research at Tularik, Inc., a private biotechnology company, since January 1993.
From 1987 to 1993, Dr. Perlman served in various positions at Genentech, Inc.,
most recently as Senior Director, Clinical Research. Dr. Perlman has a M.D. and
a Ph.D. in Physiology from New York University.

ROGER RATOUIS, PH.D., is a consultant for regulatory affairs. From 1959 to
1990, Dr. Ratouis was employed by Roussel Uclaf where he held various positions,
first in research, then in pharmaceutical development, before heading the
Regulatory Affairs and Planning Department in the Health Care Division.

JEAN-PAUL SOULILLOU, M.D., is a Professor of Immunology at the University
of Nantes, Nantes, France. He is the Director of the kidney transplant program,
which in 1992 performed the largest number of kidney transplants in France and
is one of the largest programs in Europe. He is the Director of INSERM-U211
research laboratory and the founder and scientific director of Fondation
Transvie, a non-profit research organization for xenotransplantation. Dr.
Soulillou is also on the editorial boards of Transplantation and The New England
Journal of Medicine.

EMPLOYEES

As of December 31, 1996, the Company employed 75 people. Of these
employees, 58 were dedicated to research, development, manufacturing, quality
assurance and quality control, regulatory affairs or preclinical testing. In
addition, 13 people comprised the Company's staff for sales of its monitoring
products in the United States, Canada and Europe and sale of THYMOGLOBULIN in
Canada. The Company is the beneficiary of key person life insurance policy
covering Dr. Pouletty in the amount of $1,000,000. None of the Company's current
employees is represented by a labor union or is the subject of a collective
bargaining agreement. The Company believes that it maintains good relations with
its employees.

PROPERTIES

The Company headquarters are located in Menlo Park, California. Floor space
in California is approximately 19,500 square feet, including offices, laboratory
space, manufacturing space, storage area and specialized areas for pilot
production and preclinical testing. The Menlo Park facility serves as the
principal site for preclinical research, clinical trial management, process
development, monitoring product manufacturing, quality assurance and quality
control, and regulatory affairs. The lease for this building space expires in
1999 and may be renewed for subsequent years.

In addition, the Company leases approximately 1,500 square feet in Menlo
Park for its central mail order pharmacy. This facility's lease contains an
option to lease another 1,500 square feet.

The Company also leases approximately 2,500 square feet from the Center of
Transplantation in Nantes, France, which is the primary site for preclinical
development of therapeutics. This lease expires in December 1998 and the Company
has the option to renew its lease for use of these facilities for additional
five-year periods.

The Company leases approximately 2,000 square feet in Missassauga, Ontario,
Canada. The lease for this facility expires in August 1999, and the Company has
the option to renew its lease for subsequent five-year periods. This site is
used as headquarters for marketing and sales activities of SangStat Canada, Ltd.

45
<PAGE> 47

MANAGEMENT

Executive officers, directors and key employees of the Company, and their
ages are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- --------------------------------------------------
<S> <C> <C>
Philippe Pouletty, M.D............. 38 Chief Executive Officer and Chairman
David Winter, M.D.................. 61 President, Chief Operating Officer
Timothy J. Schroeder............... 37 Executive Vice President, Clinical Development
Ralph Levy......................... 47 Senior Vice President, Operations, and Secretary
Hana Berger Moran, Ph.D............ 50 Senior Vice President, Regulatory Affairs
Roland Buelow, Ph.D................ 39 Vice President, Research and Development
Randell J. Correia, Pharm.D........ 38 Vice President, The Transplant Pharmacy
Henry N. Edmunds, Ph.D............. 51 Vice President, Chief Financial Officer
Robert Floc'h, Ph.D................ 46 Vice President, Pharmaceutical Development and
General Manager, SangStat Atlantique
Gilles des Gachons, M.D............ 35 Vice President, SangStat Canada, Ltd.
Maree Wall......................... 32 Vice President, Corporate Communications
Gordon Russell(2).................. 62 Director
Fredric J. Feldman, Ph.D........... 57 Director
Elizabeth Greetham................. 47 Director
Richard D. Murdock................. 49 Director
Andrew J. Perlman, M.D., Ph.D.(1).. 46 Director
Vincent R. Worms(1)(2)............. 42 Director
</TABLE>

- ------------------------------
(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

Philippe Pouletty, M.D., founded SangStat in 1988 and has served as Chief
Executive Officer since then. Dr. Pouletty has also been a Director since 1988,
and has served as Chairman since February 1995. Dr. Pouletty was a founder and,
from 1984 to 1988, a Director of Research at Clonatec, a French diagnostics
company. Dr. Pouletty has a M.D. degree from the University of Paris VI. He
holds a M.S. in immunology and a M.S. in virology from Institut Pasteur. Dr.
Pouletty conducted research as a post-doctoral fellow at Stanford University. He
serves as Vice-President of Fondation Transvie, a non-profit foundation for
xenotransplantation.

David Winter, M.D., joined SangStat in February 1995 as President and Chief
Operating Officer. From October 1992 to February 1995 he was President and Chief
Operating Officer at GenPharm International, Inc. He was formerly Vice
President, Clinical Research & Development, and Vice President, Scientific and
External Affairs for Sandoz Pharmaceuticals Corporation (now Novartis) from 1985
to 1992. Dr. Winter received his M.D. from Washington University of St. Louis.

Timothy J. Schroeder joined SangStat in October 1993 as its Executive Vice
President, Clinical Development. From 1987 to 1993, he was the Director of
Transplant Laboratory Services at the University of Cincinnati Hospital and from
1990 to 1993, he was an Assistant Professor of Pathology and Laboratory Medicine
at the University of Cincinnati. Mr. Schroeder has been a consultant to several
pharmaceutical companies. He is a member of the American Society of Transplant
Physicians, of the Transplantation Society and of the International Liver
Transplant Society. His graduate degree is from the University of Cincinnati
College of Medicine.

Ralph Levy joined the Company in July 1990 as Vice President of Operations.
In December 1995 Mr. Levy was promoted to Senior Vice President, Operations.
From 1988 to 1989, he was the Director

46
<PAGE> 48

of Operations for Syva Company. From 1987 to 1988, he was the Director of
Manufacturing and Materials Management at Gen-Probe, Inc. Mr. Levy has an B.S.
in Chemistry from City College of New York and a M.S. in Chemistry from Seton
Hall University.

Hana Berger Moran, Ph.D., joined SangStat in April 1994 as Vice President,
Regulatory Affairs. In January 1997 she was promoted to Senior Vice President,
Regulatory Affairs. From 1991 to 1994 she was Director of Regulatory Affairs at
Athena Neurosciences, Inc., and from 1990 to 1991 was Associate Director of
Regulatory Affairs at Fujisawa Pharmaceutical Co. Dr. Berger Moran holds an M.S.
degree in chemical engineering in pharmaceutical sciences and technology from
Slovak Institute of Technology and a Ph.D. in organic chemistry of natural
products from Feinberg Graduate School at the Weizmann Institute of Science in
Rehovoth, Israel.

Roland Buelow, Ph.D., joined the Company in February 1993 as Vice
President, Research. From 1989 to January 1993 he was Project Leader at
Immulogic Pharmaceutical Corporation. From 1987 to 1989, Dr. Buelow was Research
Scientist at Stanford University. Dr. Buelow received his Ph.D. from the
Max-Planck Institute for Biology in Tuebingen, Germany.

Randell J. Correia, Pharm.D., joined SangStat in October 1995 as Vice
President of Pharmacy Affairs. From 1988 to 1994 he was the Chief Executive
Officer of California Infusion Services, a subsidiary of California Healthcare
System. In 1995 he served as Program Manager for Stanford Health Systems Home
Pharmacy. Dr. Correia is an Assistant Clinical Professor for the University of
California at San Francisco and the University of the Pacific Schools of
Pharmacy. Dr. Correia has a Doctor of Pharmacy Degree from the University of the
Pacific, Stockton, California.

Henry N. Edmunds, Ph.D., joined SangStat in June 1992 as Vice President,
Chief Financial Officer. From 1984 to 1992, Dr. Edmunds was the Director of
Business Development and Business Manager of Genencor, Inc. Dr. Edmunds has a
Ph.D. in Biochemistry from the University of California at Berkeley and an
M.B.A. from the Stanford Graduate School of Business.

Robert Floc'h, Ph.D., joined SangStat Atlantique in November 1992 as
General Manager and Vice President, Pharmaceutical Development. From 1991 to
1992 he was General Manager of Departmental Laboratories at the Department of
Loire Atlantique. From 1980 to 1991, Dr. Floc'h was with Rhone Poulenc S.A.,
where he held various positions of increasing responsibility most recently as
head of the Department of Chemical and Biopharmaceutical Development of Rhone
Merieux since 1986. Dr. Floc'h is a pharmacist and holds a Ph.D. in Medicinal
Chemistry from the University at Nantes.

Gilles des Gachons, M.D., joined the Company in June 1994 as the General
Manager, SangStat Canada Ltd. In June 1996 he was promoted to Vice President,
SangStat Canada Ltd. From 1992 to 1994, he was Product Director for Ortho
Biotech, Inc., becoming also Clinical Director in 1993. He joined Johnson &
Johnson, International as Product Manager in 1989. Dr. des Gachons earned two
post-graduate degrees in Health Economics, and Medical and Odontological
Evaluation, from the University of Paris, and graduated in the Political Science
Program in Public Administration at the Institut d'Etudes Politiques de Paris.
He has an M.D. from the University of Paris and an M.P.H. from Harvard
University.

Maree Wall joined SangStat in January 1996 as Vice President, Corporate
Communications. From 1986 to 1992 she was a sales representative and Product
Manager at Sandoz Australia Pty. Ltd. (now Novartis). She transferred to Sandoz'
U.S. affiliate in 1992 and was assigned to the Immunology Product Marketing
Group and worked on both Transplantation and Autoimmune Disease indications.
Most recently, she was an Associate Director in the Transplant Business Unit at
Sandoz Pharmaceutical Corporation (now Novartis). Ms. Wall holds a B.S. degree
in Microbiology and Physiology from the University of Western Australia.

Gordon Russell has served as Chairman of the Board from January 1992 until
February 1995, and as a Director of the Company continuously since February
1990. In February 1995, Mr. Russell resigned from his post as Chairman of the
Board. Mr. Russell serves on the Board of ChemTrak Incorporated and has been a
General Partner of Sequoia Capital since 1979. Mr. Russell is Chairman of the
Board of

47
<PAGE> 49

Overseers of the Dartmouth Medical School and the C. Everett Koop Institute at
Dartmouth. He also serves as Chairman of the Board of Trustees of the Palo Alto
Medical Foundation. Mr. Russell has an A.B. in History from Dartmouth College.

Fredric J. Feldman, Ph.D., has been a Director of the Company since March
1992. He is currently CEO and a Director of Biex, Inc., a women's healthcare
company, and a Director of OrthoLogic Corporation and Oncogenetics, Inc. From
1992 to 1995 he was Chairman and CEO of Oncogenetics, Inc. From 1988 to 1992, he
was President and CEO of Microgenics Corporation, a medical diagnostics product
manufacturer. From 1984 to 1988, Dr. Feldman served as the President of
Instrumentation Laboratory, a diagnostic instrument company. Dr. Feldman has a
Ph.D. in Analytical Chemistry from the University of Maryland and a B.S. in
Chemistry from Brooklyn College of City University of New York.

Elizabeth Greetham has been a Director of the Company since September 1996.
She is currently Portfolio Manager of Life Sciences L.P. Funds and handles
analytical responsibilities for all healthcare investments for the
institutional, Mutual and High Individual Net Worth Accounts at Weiss, Peck &
Greer Investments, where she has been employed since 1990. Ms. Greetham also
serves as a Director of various pharmaceutical companies, including Medco
Research, Chemex Pharmaceutical, Progenics Pharmaceutical, Repligen, Guilford
Pharmaceutical and ChiRex. Ms. Greetham has a M.A. in Economics from Edinburgh
University.

Richard D. Murdock has been a Director of the Company since October 1993.
He is also a Director of Matrix Pharmaceutical, a public biotechnology company.
Mr. Murdock has been the CEO and a Director of CellPro, Incorporated, a public
biotechnology company, since June 1992. From August to December 1991, he was
CellPro's Vice President of Marketing and Corporate Development and in December
1991 he was appointed President. From 1989 to 1991, he was European Vice
President of the Fenwal Division of Baxter, which specializes in automated
blood-processing equipment. From 1986 to 1989, he was Vice President of
Marketing for Fenwal Automated Systems Inc. Mr. Murdock received a B.S. in
Zoology from the University of California at Berkeley in 1969.

Andrew J. Perlman, M.D., Ph.D., has been a Director of the Company since
December 1992. Dr. Perlman has been the Vice President of Medical Research at
Tularik, Inc., a private biotechnology company, since January 1993. From 1987 to
1993, Dr. Perlman served in various positions at Genentech, Inc., most recently
as Senior Director, Clinical Research. Dr. Perlman has an M.D. and a Ph.D. in
Physiology from New York University.

Vincent R. Worms has been a Director of the Company since October 1991. Mr.
Worms has been a General Partner of Partech International since 1982. He has an
engineering degree from Ecole Polytechnique in Paris, and an M.S. degree from
the Massachusetts Institute of Technology. Mr. Worms is presently a Director of
Visioneer and Business Objects.

The Company's bylaws authorize the Board of Directors to fix the number of
directors. The number is currently fixed at seven. All Directors hold office
until the next annual meeting of stockholders and until their successors have
been elected and qualified. Officers are appointed to serve at the discretion of
the Board of Directors. There are no family relationships among executive
officers or Directors of the Company.

48
<PAGE> 50

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
December 31, 1996 by (i) all persons who are beneficial owners of five percent
(5%) or more of the Company's Common Stock, (ii) each director, (iii) certain
executive officers and (iv) all directors and executive officers as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER BENEFICIALLY OWNED
OF SHARES ---------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS (AS REQUIRED) OF BENEFICIAL OWNER OWNED (#) OFFERING OFFERING
- ------------------------------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Partech International(1)..................................... 967,976 7.4% 6.4%
101 California Street
Suite 3150
San Francisco, CA 94111
David Rammler(2)............................................. 753,321 5.7% 5.0%
3000 Sand Hill Road
Suite 280, Bldg. 4
Menlo Park, CA 94025
Sequoia Capital(3)........................................... 722,034 5.5% 4.8%
3000 Sand Hill Road
Suite 280, Bldg. 4
Menlo Park, CA 94025
Philippe Pouletty, M.D.(4)................................... 576,153 4.3% 3.7%
SangStat Medical Corporation
1505 Adams Drive
Menlo Park, California 94025
David Winter, M.D.(5)........................................ 135,700 1.0% *
Timothy J. Schroeder(6)...................................... 68,700 * *
Ralph Levy(7)................................................ 75,500 * *
Hana Berger Moran, Ph.D.(8).................................. 53,500 * *
Roland Buelow, Ph.D.(9)...................................... 67,500 * *
Henry N. Edmunds, Ph.D.(10).................................. 43,500 * *
Robert Floc'h, Ph.D.(11)..................................... 45,500 * *
Gordon Russell(3)............................................ 767,277 5.8% 5.1%
Fredric J. Feldman, Ph.D.(12)................................ 36,525 * *
Elizabeth Greetham(13)....................................... 274,000 2.1% 1.8%
Richard D. Murdock(14)....................................... 18,600 * *
Andrew J. Perlman, M.D., Ph.D.(15)........................... 23,400 * *
Vincent R. Worms(1).......................................... 981,976 7.5% 6.5%
All directors and officers as a group (14 persons)........... 3,080,024 22.3% 20.4%
</TABLE>

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

* Does not exceed one percent.

(#) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally includes
voting or investment power with respect to securities. Shares of Common
Stock subject to options which are currently exercisable or convertible or
which will become exercisable or convertible within sixty (60) days after
December 31, 1996 are deemed outstanding for computing the beneficial
ownership of the person holding such option but are not outstanding for
computing the beneficial ownership of any other person. Except as indicated
by footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.

(1) Includes 102,774 shares held by Parvest Europe Investment II, C.V. Includes
285,001 shares held by Parvest U.S. Growth Fund Partners, C.V. Includes
333,646 shares held by Parvest U.S.

49
<PAGE> 51

Partners II, C.V. Includes 246,555 shares held by entities which are
affiliates of Partech International. Mr. Worms, a director of the Company,
is a general partner of Parvest Europe Investment II, C.V., Parvest U.S.
Growth Fund Partners, C.V. and Parvest U.S. Partners II, C.V. and either a
general partner or a director of the affiliates referred to in the
preceding sentence, and may be deemed to share voting and investment power
with respect to such shares. The shares beneficially owned by Mr. Worms
include options to purchase 14,000 shares granted in July 1996, subject to
stockholder approval.

(2) Includes 8,000 shares Common Stock held by Christine Rammler, Mr. Rammler's
wife. Includes options to purchase 12,000 shares granted to David Rammler
under the Option Plan.

(3) Includes 663,434 shares held by Sequoia Capital Growth Fund. Includes
42,347 shares held by Sequoia Technology Partners III. Includes 323 shares
held by Sequoia XX. Includes 12,470 shares held by Sequoia XXI. Includes
2,894 shares held by Sequoia XXII. Includes 566 shares held by Sequoia
XXIII. Mr. Russell, a director of the Company, is a general partner of
Sequoia Capital, and may be deemed to share voting and investment power
with respect to such shares. Mr. Russell disclaims beneficial ownership of
such shares, except to the extent of his interest in such shares arising
from his interests in the entities referred to above. The shares
beneficially owned by Mr. Russell include 45,243 shares owned by Mr.
Russell and options to purchase 14,000 shares granted in July 1996, subject
to stockholder approval.

(4) Includes options to purchase 301,160 shares of Common Stock.

(5) Includes options to purchase 125,000 shares granted under the Option Plan.

(6) Includes options to purchase 64,700 shares granted under the Option Plan.

(7) Includes options to purchase 62,120 shares granted under the Option Plan.

(8) Represents options to purchase 53,500 shares granted under the Option Plan.

(9) Includes options to purchase 49,500 shares granted under the Option Plan.

(10) Includes options to purchase 19,479 shares granted under the Option Plan.

(11) Represents options to purchase 20,000 shares granted under the Company's
1993 Stock Option Plan (France) and options to purchase 25,500 shares
granted under the Option Plan.

(12) Represents 13,125 shares held by the Feldman family trust, options to
purchase 14,400 shares granted under the Option Plan, and options to
purchase 9,000 shares granted in July 1996, subject to stockholder
approval.

(13) Includes 255,000 shares held by Weiss, Peck & Greer Investments. Ms.
Greetham, a Director of the Company, handles all healthcare investments for
the institutional, Mutual and High Individual Net Worth Accounts at Weiss,
Peck & Greer Investments, and may be deemed to have share voting and
investment power in such shares arising from her interest in the entity
above. Ms. Greetham disclaims beneficial ownership of such shares, except
to the extent of her interest in the entity referred to above. The shares
beneficially owned by Ms. Greetham include options to purchase 19,000
shares granted in September 1996, subject to stockholder approval.

(14) Represents options to purchase 9,600 shares granted under the Option Plan
and options to purchase 9,000 shares granted in July 1996, subject to
stockholder approval.

(15) Represents options to purchase 14,400 shares granted under the Option Plan
and options to purchase 9,000 shares granted in July 1996, subject to
stockholder approval.

50
<PAGE> 52

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement,
Hambrecht & Quist LLC, Montgomery Securities and Robertson, Stephens & Company
LLC have severally agreed to purchase from the Company the following respective
number of shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Hambrecht & Quist LLC.....................................................
Montgomery Securities.....................................................
Robertson, Stephens & Company LLC.........................................

---------
Total..................................................................... 2,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.

The Underwriters propose to offer the shares of Common Stock directly to
the public at the public offering price set forth on the cover of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow and such dealers may reallow a
concession not in excess of $ per share to certain other dealers. After the
public offering of the shares, the offering price and other selling terms may be
changed by the Underwriters.

The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock at the public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise such option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
above table bears to the total number of shares of Common Stock offered hereby.
The Company will be obligated, pursuant to the option, to sell such shares to
the Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the shares of Common Stock offered hereby.

The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.

The officers, directors and certain stockholders of the Company who will
own or have the right to acquire within 60 days after January 23, 1997 in the
aggregate 3,931,597 shares of Common Stock after the offering, have agreed that
they will not, without the prior written consent of Hambrecht & Quist LLC,
directly or indirectly sell, offer, contract to sell, make any short sale,
pledge or otherwise transfer or dispose of any shares of Common Stock or any
securities convertible into or exchangeable or

51
<PAGE> 53

exercisable for or any other rights to purchase or acquire Common Stock during
the 90-day period following the date of this Prospectus, except that such
individuals may transfer shares to members of their immediate families or to
trusts the beneficiaries of which are such individuals and/or members of their
immediate families, so long as such transferees agree not to dispose of such
shares as provided above. Hambrecht & Quist LLC may release such officers,
directors and stockholders from such obligations from time to time without
notice.

Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock of the Company at levels above those which might otherwise
prevail in the open market, including by entering stabilizing bids or effecting
syndicate covering transactions. A stabilizing bid means the placing of any bid
or effecting of any purchase, for the purpose of pegging, fixing or maintaining
the price of the Common Stock of the Company. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. Such transactions may be effected on the Nasdaq Stock Market, in
the over-the-counter market, or otherwise. Such stabilizing, if commenced, may
be discontinued at any time.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, Palo Alto, California. As of the
date of this Prospectus, a partner of Brobeck, Phleger & Harrison LLP
beneficially owned 71,515 shares of the Company's Common Stock. Wilson Sonsini
Goodrich & Rosati, Professional Corporation, is acting as legal counsel for the
Underwriters in connection with certain legal matters related to the shares of
Common Stock offered hereby.

EXPERTS

The consolidated financial statements of SangStat Medical Corporation at
December 31, 1995 and 1996 and for each of the three years in the period ended
December 31, 1996, included in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein,
and are included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

The statements included in the Prospectus under the captions "Risk
Factors--Uncertainty Regarding Patents and Proprietary Rights and--Risks
Associated With CYCLOSPORINE" and "Business--Patents and Proprietary
Technology," and other references herein to intellectual property matters have
been reviewed and approved by Flehr, Hohbach, Test, Albritton & Herbert, patent
counsel for the Company, as experts on such matters, and are included herein in
reliance upon that review and approval.

52
<PAGE> 54

SANGSTAT MEDICAL CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets at December 31, 1995 and 1996............................. F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996................................................................................ F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994,
1995 and 1996....................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996................................................................................ F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 55

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
of SangStat Medical Corporation:

We have audited the accompanying consolidated balance sheets of SangStat Medical
Corporation and subsidiaries (the Company) as of December 31, 1995 and 1996, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. 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. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of SangStat Medical Corporation and
subsidiaries at December 31, 1995 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

San Jose, California
January 29, 1997

F-2
<PAGE> 56

SANGSTAT MEDICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 4,609,186 $ 19,818,940
Short-term investments........................................ 4,612,565 21,501,961
Accounts receivable........................................... 406,153 399,437
Other receivables............................................. 170,118 483,252
Inventories................................................... 766,124 802,137
Prepaid expenses.............................................. 73,531 413,181
------------ ------------
Total current assets.................................. 10,637,677 43,418,908
PROPERTY AND EQUIPMENT--Net..................................... 528,962 993,995
OTHER ASSETS.................................................... 393,238 337,213
------------ ------------
TOTAL................................................. $ 11,559,877 $ 44,750,116
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.............................................. $ 1,041,389 $ 1,094,104
Accrued liabilities........................................... 652,742 875,602
Capital lease obligations--current portion.................... 238,651 262,339
Notes payable--current portion................................ 254,249 462,743
------------ ------------
Total current liabilities............................. 2,187,031 2,694,788
------------ ------------
CAPITAL LEASE OBLIGATIONS....................................... 286,558 296,715
------------ ------------
NOTES PAYABLE................................................... 804,811 803,631
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.001 par value 5,000,000 shares
authorized; none outstanding............................... -- --
Common stock, $.001 par value, 25,000,000 shares authorized;
outstanding: 1995, 9,598,083 shares; 1996, 13,129,560
shares..................................................... 36,275,765 81,657,313
Accumulated deficit........................................... (28,051,991) (40,825,826)
Accumulated translation adjustment............................ 46,811 20,634
Unrealized gain on investments................................ 10,892 102,861
------------ ------------
Total stockholders' equity............................ 8,281,477 40,954,982
------------ ------------
TOTAL................................................. $ 11,559,877 $ 44,750,116
============ ============
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 57

SANGSTAT MEDICAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
REVENUES:
Net product sales................................ $ 674,253 $ 2,697,759 $ 2,398,979
Revenue from collaborative agreement (Note 6).... 3,000,000 1,125,000 --
------------ ------------ -------------
Total revenues........................... 3,674,253 3,822,759 2,398,979
------------ ------------ -------------

COSTS AND OPERATING EXPENSES:
Cost of sales and manufacturing expenses......... 1,503,307 2,753,173 2,845,802
Research and development......................... 4,845,382 6,647,232 8,330,129
Selling, general and administrative.............. 3,157,015 3,772,289 6,120,489
------------ ------------ -------------
Total operating expenses................. 9,505,704 13,172,694 17,296,420
------------ ------------ -------------
Loss from operations.......................... (5,831,451) (9,349,935) (14,897,441)

OTHER INCOME (EXPENSE):
Interest income.................................. 427,253 811,056 2,261,450
Interest expense................................. (143,222) (139,118) (137,844)
------------ ------------ -------------
Other income--net........................ 284,031 671,938 2,123,606
------------ ------------ -------------
NET LOSS........................................... $(5,547,420) $(8,677,997) $(12,773,835)
============ ============ =============
NET LOSS PER COMMON SHARE (Note 1)................. $ (0.79) $ (0.92) $ (1.03)
============ ============ =============
WEIGHTED AVERAGE COMMON SHARES..................... 7,049,032 9,384,726 12,405,081
============ ============ =============
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 58

SANGSTAT MEDICAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED UNREALIZED
------------------------ ACCUMULATED TRANSLATION GAIN (LOSS) ON
SHARES AMOUNT DEFICIT ADJUSTMENT INVESTMENTS TOTAL
---------- ----------- ------------ ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, January 1, 1994............ 6,707,626 $23,293,638 $(13,826,574) $ 30,423 $ -- $ 9,497,487
Sale of common stock (net of issuance
costs of $6,000)................... 244,314 1,576,823 1,576,823
Sale of common stock upon private
placement offering (net of issuance
costs of $40,000).................. 1,400,000 5,560,000 5,560,000
Exercise of stock options and
warrants........................... 116,451 264,694 264,694
Accumulated translation adjustment... 28,019 28,019
Unrealized loss on investments....... (51,958) (51,958)
Net loss............................. (5,547,420) (5,547,420)
---------- ----------- ------------ -------- -------- ------------
BALANCES, December 31, 1994.......... 8,468,391 30,695,155 (19,373,994) 58,442 (51,958) 11,327,645
Sale of common stock (net of issuance
costs of $317,818)................. 1,000,000 5,182,182 5,182,182
Exercise of stock options and
warrants........................... 129,692 398,428 398,428
Accumulated translation adjustment... (11,631) (11,631)
Unrealized gain on investments....... 62,850 62,850
Net loss............................. (8,677,997) (8,677,997)
---------- ----------- ------------ -------- -------- ------------
BALANCES, December 31, 1995.......... 9,598,083 36,275,765 (28,051,991) 46,811 10,892 8,281,477
Sale of common stock (net of issuance
costs of $408,729)................. 3,450,000 45,062,271 45,062,271
Exercise of stock options............ 81,117 96,817 96,817
Issuance of stock for services....... 360 8,460 8,460
Stock option compensation expense.... 214,000 214,000
Accumulated translation adjustment... (26,177) (26,177)
Unrealized gain on investments....... 91,969 91,969
Net loss............................. (12,773,835) (12,773,835)
---------- ----------- ------------ -------- -------- ------------
BALANCES, December 31, 1996.......... 13,129,560 $81,657,313 $(40,825,826) $ 20,634 $102,861 $ 40,954,982
========== =========== ============ ======== ======== ============
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 59

SANGSTAT MEDICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(5,547,420) $ (8,677,997) $(12,773,835)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 323,171 349,420 421,261
Stock compensation expense.............................. -- -- 222,460
Changes in assets and liabilities:
Accounts receivable................................... (80,124) (222,518) 5,167
Other receivables..................................... 24,994 (46,503) (316,123)
Inventories........................................... (298,149) (157,992) (37,016)
Prepaid expenses...................................... 276,357 (23,357) (344,110)
Accounts payable...................................... (111,325) 77,110 63,502
Accrued liabilities................................... 202,443 110,547 232,860
----------- ------------ ------------
Net cash used in operating activities.............. (5,210,053) (8,591,290) (12,525,834)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock...................................... 7,401,517 5,580,610 45,159,088
Note payable borrowings................................... -- 252,033 383,000
Notes payable repayments.................................. -- (333,650) (446,481)
Repayment of capital lease obligations.................... (224,475) (285,627) (285,018)
----------- ------------ ------------
Net cash provided by financing activities.......... 7,177,042 5,213,366 44,810,589
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (107,580) (20,262) (279,888)
Maturities of short-term investments...................... 2,017,189 20,401,597 16,560,957
Purchase of short-term investments........................ (4,615,020) (22,392,910) (33,362,727)
Other assets.............................................. (129,230) 138,994 33,444
----------- ------------ ------------
Net cash used in investing activities.............. (2,834,641) (1,872,581) (17,048,214)
----------- ------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... 55,093 30,763 (26,787)
----------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (812,559) (5,219,742) 15,209,754
CASH AND CASH EQUIVALENTS, Beginning of year................ 10,641,487 9,828,928 4,609,186
----------- ------------ ------------
CASH AND CASH EQUIVALENTS, End of year...................... $ 9,828,928 $ 4,609,186 $ 19,818,940
=========== ============ ============
NONCASH INVESTING AND FINANCING ACTIVITIES:
Property acquired under capital leases.................... $ 196,346 $ 273,532 $ 318,863
=========== ============ ============
Property acquired under notes payable..................... $ -- $ -- $ 290,050
=========== ============ ============
Unrealized gain (loss) on investments..................... $ (51,958) $ 62,580 $ 91,969
=========== ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION--
Cash paid during the year for interest.................... $ 92,757 $ 143,950 $ 149,295
=========== ============ ============
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 60

SANGSTAT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION--SangStat Medical Corporation and subsidiaries (the Company)
is a specialty pharmaceutical company applying a disease management approach to
improve the outcome of organ transplantation. The Company's products and product
candidates are designed to prevent and treat graft rejection and monitor
patients throughout the lifelong transplantation process.

PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. Intercompany
accounts and transactions are eliminated.

REVENUE RECOGNITION--Revenue from product sales is recognized upon
shipment, net of estimated sales allowances. Revenue from collaborative
agreements is recognized in accordance with the contract terms, generally as
milestones are met and no significant obligation for future services exists (see
Note 6).

RESEARCH AND DEVELOPMENT--Research and development costs are expensed as
incurred and include expenses associated with new product research, clinical
trials of existing technologies and regulatory affairs activities associated
with product candidates.

CASH AND CASH EQUIVALENTS--The Company considers all highly liquid debt
instruments purchased with an original maturity date of three months or less to
be cash equivalents.

SHORT-TERM INVESTMENTS--Short-term investments consist primarily of highly
liquid debt instruments purchased with a remaining maturity date of greater than
three months. The Company has classified all of its short-term investments as
"available-for-sale securities." The carrying value of such securities is
adjusted to fair market value, with unrealized gains and losses being recorded
as a separate component of stockholders' equity (see Note 2).

INVENTORIES--Inventories are stated at the lower of cost (first-in,
first-out) or market.

PROPERTY AND EQUIPMENT--Property and equipment are stated at cost.
Depreciation is calculated using the straight-line method over estimated useful
lives of three to five years. Leasehold improvements and assets under capital
leases are amortized over their estimated useful lives or the lease term,
whichever is appropriate.

INCOME TAXES--The Company records income taxes using the asset and
liability approach, whereby deferred tax assets and liabilities, net of
valuation allowances, are recorded for the future tax consequences of temporary
differences between financial statement and tax bases of assets and liabilities
and for the benefit of net operating loss carryforwards.

FOREIGN CURRENCY TRANSLATION--Operations of the Company's foreign
subsidiaries are measured using local currency as the functional currency for
each subsidiary. Assets and liabilities of the foreign subsidiaries are
translated into U.S. dollars at the exchange rates in effect as of the balance
sheet dates, and results of operations for each subsidiary are translated using
average rates in effect for the periods presented. Foreign currency transaction
gains and losses are included in the consolidated statements of operations.

STOCK COMPENSATION--The Company accounts for stock-based awards granted to
employees based on the intrinsic value method in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees" (see Note 8).

NET LOSS PER COMMON SHARE--Net loss per common share is based on the
weighted average number of common shares outstanding during the periods. Common
equivalent shares, including stock

F-7
<PAGE> 61

SANGSTAT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

options and warrants, have been excluded in the calculation of common shares
since they are antidilutive.

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

The Company sells its products to organizations in the healthcare industry
in the United States, Canada and Europe, and does not require its customers to
provide collateral or other security to support accounts receivable. While the
Company maintains allowances for potential bad debt losses, such losses to date
have not been material.

The Company participates in the very dynamic biotechnology industry. The
Company believes that changes in any of the following areas could have a
negative impact on the Company in terms of its future financial position and
results of operations: ability to obtain additional financing; successful
product development; manufacturing and marketing capabilities; ability to
negotiate acceptable collaborative relationships; obtaining necessary FDA and
foreign regulatory approvals; ability to attract and retain key personnel;
litigation and other claims against the Company, including, but not limited to,
patent claims; increased competition; uncertainty regarding health care
reimbursement and reform; and potential exposure for product liability and
hazardous materials.

2. SHORT-TERM INVESTMENTS

Short-term investments consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------------------
UNREALIZED UNREALIZED
AMORTIZED GAIN ON LOSS ON MARKET
COST INVESTMENTS INVESTMENTS VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Corporate bonds................. $ 3,005,790 $ 7,115 $ (10,130) $ 3,002,775
U.S. Treasury notes............. 1,492,847 13,907 -- 1,506,754
Foreign issues.................. 103,036 -- -- 103,036
----------- -------- -------- -----------
Total................. $ 4,601,673 $ 21,022 $ (10,130) $ 4,612,565
=========== ======== ======== ===========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------------------------
UNREALIZED UNREALIZED
AMORTIZED GAIN ON LOSS ON MARKET
COST INVESTMENTS INVESTMENTS VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Corporate bonds................. $21,399,100 $ 106,836 $ (3,975) $21,501,961
=========== ======== ======== ===========
</TABLE>

At December 31, 1995 and 1996, all short-term investments had maturities of
less than one year.

F-8
<PAGE> 62

SANGSTAT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

3. INVENTORIES

Inventories consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
<S> <C> <C>
Raw materials.................................................. $432,549 $265,537
Work in process................................................ 213,863 275,503
Finished goods................................................. 119,712 261,097
-------- --------
Total................................................ $766,124 $802,137
======== ========
</TABLE>

4. PROPERTY AND EQUIPMENT

Property and equipment consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
Machinery and equipment................................... $ 1,677,929 $ 2,491,647
Furniture and fixtures.................................... 23,323 50,296
Leasehold improvements.................................... 83,760 122,104
----------- -----------
Total..................................................... 1,785,012 2,664,047
Accumulated depreciation and amortization................. (1,256,050) (1,670,052)
----------- -----------
Property and equipment--net............................... $ 528,962 $ 993,995
=========== ===========
</TABLE>

Included in machinery and equipment at December 31, 1995 and 1996 are
assets leased under capital leases of $441,837 and $456,083 (net of accumulated
amortization of $460,287 and $496,831), respectively.

5. ACCRUED LIABILITIES

Accrued liabilities consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
<S> <C> <C>
Salaries and related benefits.................................. $545,803 $713,447
Other.......................................................... 106,939 162,155
-------- --------
Total................................................ $652,742 $875,602
======== ========
</TABLE>

6. COLLABORATIVE AGREEMENTS

In April 1993, the Company entered into a collaborative licensing,
marketing and development agreement (the Agreement) with Baxter Healthcare
Corporation (Baxter). The Agreement provides to Baxter exclusive marketing
rights to certain products. In addition, the Agreement specifies that the
Company develop certain products pursuant to specifications and milestones as
outlined in the Agreement. In 1994 and 1995, $3,000,000 and $1,125,000,
respectively, was earned as milestones were attained. The final payments of
$1,125,000 in 1995 represented the completion of $10.0 million received by
SangStat for milestones, license fees and equity in 1993 through 1995 under its
collaborative agreement with Baxter. The costs associated with the development
of the products encompassed under the Agreement and achievement of related
milestones were approximately $1,400,000 in both 1994 and

F-9
<PAGE> 63

SANGSTAT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

1995; such costs have been included in research and development expenses in the
Consolidated Statements of Operations. The agreement was amended upon written
consent of the parties such that, effective July 1, 1996, the Company reacquired
exclusive commercial rights for the monitoring products from Baxter. Since that
date, the Company has been marketing these monitoring products through its own
sales staff in the United States and Europe.

In October 1993, the Company entered into an agreement with Pasteur Merieux
Serums et Vaccins (the Merieux Agreement). The Merieux Agreement specifies that
the Company will have exclusive rights to market certain Merieux products in the
United States and Canada upon approval of the FDA or similar agencies. The
Company must use reasonable commercial efforts to obtain FDA approval. The
Merieux Agreement provides for payments by the Company upon completion of
certain milestones totaling $2,000,000 and royalties on sales of products,
subject to minimum amounts. In 1994, $500,000 was expensed under the Merieux
Agreement as the first milestone was attained by Pasteur Merieux Serums et
Vaccins (none in 1995 or 1996).

7. NOTES PAYABLE

Notes payable consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
---------- ----------
<S> <C> <C>
Notes due to former Series E preferred stockholders......... $ 666,804 $ 555,485
Baxter equipment note....................................... -- 260,419
Research and development loan............................... 295,156 217,291
Other loans................................................. 97,100 233,179
---------- ----------
Total....................................................... 1,059,060 1,266,374
Less current portion........................................ (254,249) (462,743)
---------- ----------
Long-term................................................... $ 804,811 $ 803,631
========== ==========
</TABLE>

Upon the Company's initial public offering in 1993, notes payable of
$1,240,897 were issued to Series E preferred stockholders in accordance with
certain antidilution provisions of the Series E preferred stock purchase
agreement. The remaining balance of $555,485 at December 31, 1996 is payable in
eight equal annual installments and bears interest at 6.06%.

The Baxter equipment note bears interest at 8.25% over a seven-year period
in equal quarterly installments beginning in 1996.

The research and development loan provided by the French government is
denominated in French Francs, does not bear interest and is payable (based on
the exchange rate at December 31, 1996) in the amounts of $92,871 and $124,420
in 1997 and 1998, respectively. The other loans consist primarily of a note
payable for insurance and a noninterest bearing loan denominated in French
Francs provided by a French government agency.

F-10
<PAGE> 64

SANGSTAT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

As of December 31, 1996, future principal payments of notes payable are as
follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------------------------------------------------------
<S> <C>
1997..................................................................... $ 462,743
1998..................................................................... 247,688
1999..................................................................... 126,340
2000..................................................................... 111,948
2001..................................................................... 113,718
Thereafter............................................................... 203,937
----------
Total.......................................................... $1,266,374
==========
</TABLE>

8. STOCKHOLDERS' EQUITY

COMMON STOCK--In December 1994, the Company issued 1,400,000 shares of
common stock in a private placement for aggregate consideration of $5,600,000,
in February 1995 issued 1,000,000 shares of common stock in a public offering
for aggregate consideration of $5,500,000, and in March 1996 issued 3,450,000
shares of common stock in a public offering for aggregate consideration of
$45,471,000.

STOCKHOLDER RIGHTS PLAN--In August 1995, the Company's Board of Directors
approved a plan to protect stockholders' rights in the event of a proposed
takeover of the Company. Under the plan, a preferred share purchase right
(Right) is attached to each share of common stock. The Rights are exercisable
only if a person or group acquires 15% or more of the Company's common stock or
announces a tender offer, the consummation of which would result in ownership by
a person or group of 15% or more of the Company's common stock. Each Right will
entitle stockholders to buy one one-hundredth of a share of a new series of
junior participating preferred stock at an exercise price of $45 upon certain
events. If, after the Rights become exercisable, the Company is acquired in a
merger or other business combination transaction, or sells 50% or more of its
assets or earnings power, each Right will entitle its holder to purchase, at the
Right's then-current price, a number of the acquiring company's common shares
having a market value at the time of twice the Right's exercise price. If a
person or group acquires 15% or more of the Company's outstanding common stock,
each Right will entitle its holder (other than such person or members of such
group) to purchase, at the Right's then-current exercise price, a number of the
Company's common shares (or cash, other securities or property) having a market
value twice the Right's exercise price. At any time within ten days after a
person or group has acquired beneficial ownership of 15% or more of the
Company's common stock, the Rights are redeemable for $.01 per Right at the
option of the Board of Directors. The Rights expire on August 25, 2005, unless
earlier redeemed or exchanged.

COMMON STOCK WARRANTS--In 1991, the Company issued warrants to purchase
259,268 shares of common stock at $4.075 per share. All of these warrants were
exercised from 1993 through 1995.

STOCK OPTION PLAN--Under the Company's stock option plans, incentive or
nonstatutory stock options to purchase up to 1,590,200 shares of common stock
may be granted to employees, directors, and consultants. Incentive stock options
must be granted at not less than fair market value at the date of grant.
Nonstatutory options must be granted at not less than 85% of fair market value
at the date of the grant.

F-11
<PAGE> 65

SANGSTAT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Balances, January 1, 1994.................................. 575,715 $ 1.18
Options granted............................................ 71,600 7.00
Options exercised.......................................... (57,190) 0.41
Options cancelled.......................................... (32,850) 1.33
---------
Balances, December 31, 1994 (200,700 vested at a weighted
average price of $0.74).................................. 557,275 2.00
Options granted (weighted average fair value of $3.28)..... 501,080 5.73
Options exercised.......................................... (37,460) 0.55
Options cancelled.......................................... (6,682) 0.41
---------
Balances, December 31, 1995 (255,798 vested at a weighted
average price of $1.50).................................. 1,014,213 3.85
Options granted (weighted average fair value of $8.16)..... 243,700 15.02
Options exercised.......................................... (81,117) 1.19
Options cancelled.......................................... (7,204) 6.47
---------
Balances, December 31, 1996................................ 1,169,592 $ 6.61
=========
</TABLE>

Options to purchase common stock generally vest over a period of four
years, are exercisable immediately and expire ten years from the date of grant.
Unvested common shares acquired under the plan are subject to repurchase by the
Company at the original issuance price. At December 31, 1996, 402,036
outstanding shares were subject to such repurchase rights at prices ranging from
$0.41 to $26.38 per share. As of December 31, 1996, options for 48,720 shares,
which were granted outside of the stock option plan, were outstanding and are
included in the above table. As of December 31, 1996, 268,059 shares were
available under the plan for future grant.

During 1996, the Board of Directors, subject to shareholder approval,
approved the 1996 Directors Option Plan and in accordance with the Plan granted
options to purchase a total of 74,000 shares of common stock at $13.50 - $23.50
per share to the outside Directors. Such grants are included in the above table,
however, until shareholder approval has been received, a measurement date for
these grants will not be established. Consequently, the difference between fair
market value and the exercise price is being amortized to expense over the
vesting period of the options.

Additional information regarding options outstanding as of December 31,
1996 is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
--------------------------------------------- VESTED OPTIONS
WEIGHTED AVE. -------------------------
REMAINING WEIGHTED AVE. WEIGHTED AVE.
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE(YRS) PRICE VESTED PRICE
- --------------- --------- ------------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C>
$ 0.19 - $ 2.50 310,733 6.5 $ 1.06 303,548 $ 1.03
2.51 - 5.00 226,580 8.1 4.67 181,376 4.69
5.10 - 8.25 360,579 8.2 6.29 146,132 6.27
8.26 - 13.50 236,700 9.5 13.50 5,760 13.50
13.51 - 26.38 35,000 9.7 24.34 0 0.00
--------- --- ------ ------- ------
1,169,592 8.0 $ 6.58 636,816 $ 3.39
========= === ====== ======= ======
</TABLE>

F-12
<PAGE> 66

SANGSTAT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

ADDITIONAL STOCK PLAN INFORMATION--Effective for 1996, the Company was
required to adopt the disclosure requirements of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123). SFAS 123 defines a fair value method of accounting for stock-based
compensation awards to employees. The Company has elected to continue to follow
the provisions of Accounting Principals Board No. 25, "Accounting for Stock
Issued to Employees," and its related interpretations; accordingly, no
compensation expense has been recognized in the financial statements for
employee stock arrangements.

SFAS 123 requires that the fair value of stock-based awards to employees be
calculated through the use of option pricing models, even though such models
were developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which significantly differ from the
Company's stock option awards. These models also require subjective assumptions,
including future stock price volatility and expected time to exercise, which
greatly affect the calculated values. The Company's calculations were made using
the Black-Scholes option pricing model with the following weighted average
assumptions: expected life, five and a half years; stock volatility, 54% in 1996
and 1995; risk free interest rate, approximately 6% in 1996 and 7% in 1995; and
no dividend payments during the expected term. Forfeitures are recognized as
they occur. If the computed fair values of the 1995 and 1996 awards had been
amortized to expense over the vesting period of the awards, pro forma net loss
would have been approximately $8,903,000 ($0.95 per share) in 1995 and
$13,378,000 ($1.08 per share) in 1996. However, the impact of outstanding
non-vested stock options granted prior to 1995 has been excluded from the pro
forma calculation; accordingly, the 1995 and 1996 pro forma adjustments are not
indicative of future period pro forma adjustments, when the calculation will
apply to all applicable stock options.

9. LEASING ARRANGEMENTS

The Company leases administrative facilities under operating leases and
machinery and equipment under capital leases expiring through 2000.

As of December 31, 1996, future minimum annual payments under capital and
operating leases are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDING DECEMBER 31, LEASES LEASES
--------------------------------------------------------------- -------- ---------
<S> <C> <C>
1997........................................................... $315,293 $ 284,300
1998........................................................... 189,452 291,711
1999........................................................... 133,861 163,169
2000........................................................... 8,363 18,949
--------- --------
Total minimum lease payments................................... 646,969 $ 758,129
========
Less amounts representing interest............................. (87,915)
---------
Present value of minimum lease payments........................ 559,054
Less current portion........................................... (262,339)
---------
Capital lease obligations...................................... $296,715
=========
</TABLE>

Rent expense for the years ended December 31, 1994, 1995 and 1996 was
$225,687, $267,312 and $289,007 respectively.

F-13
<PAGE> 67

SANGSTAT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

10. INCOME TAXES

Loss before income taxes consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic................................. $(5,475,695) $(8,856,483) $(12,634,970)
Foreign.................................. (71,725) 178,486 (138,865)
----------- ----------- ------------
$(5,547,420) $(8,677,997) $(12,773,835)
=========== =========== ============
</TABLE>

No income tax provision (benefit) has been provided due to the Company's
continuing losses.

F-14
<PAGE> 68

SANGSTAT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, as well as operating loss
and tax credit carryforwards. Significant components of the Company's deferred
income tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating losses.................................. $ 9,701,724 $ 14,222,632
General business credits.............................. 1,127,395 1,127,395
Accruals deductible in different periods.............. 380,695 743,564
Depreciation.......................................... 115,809 141,335
------------ ------------
11,325,623 16,234,926
Valuation allowance..................................... (11,325,623) (16,234,926)
------------ ------------
Total......................................... $ -- $ --
============ ============
</TABLE>

Based on its history of operating losses, the Company has placed a
valuation allowance of $11,325,623 and $16,234,926 against its otherwise
recognizable net deferred tax assets at December 31, 1995 and 1996,
respectively, due to the uncertainty surrounding the realizability of these
benefits.

At December 31, 1996, the Company had federal, California and foreign net
operating loss carryforwards of approximately $37,200,000, $13,600,000, and
$1,000,000, respectively, available to reduce future taxable income. Such
carryforwards expire beginning in 1997 through 2011.

Utilization of the net operating losses and credits may be subject to an
annual limitation due to ownership change limitations provided by 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.

Also at December 31, 1996, the Company had research and experimentation
credit carryforwards available of approximately $734,000 and $393,000 for
federal and state tax purposes, respectively. The federal tax credit
carryforwards expire beginning in 2004 and the state tax credit carryforwards
have no expiration date.

11. EMPLOYEE BENEFIT PLAN

In May 1995, the Company established a 401(k) tax-deferred savings plan,
whereby eligible employees may contribute up to 20% of their eligible
compensation (to a maximum of approximately $9,500 per year). Company
contributions are discretionary and as of December 31, 1996 the Company had not
made any contributions.

12. MAJOR CUSTOMERS

Baxter accounted for approximately 90%, 49% and 16% of total revenues in
1994, 1995 and 1996, respectively (see Note 6). Another customer accounted for
approximately 10% of total revenues in 1996.

13. FOREIGN OPERATIONS

The Company is engaged in one business segment: the development and
marketing of products for use in transplantation, including monitoring test
products and therapeutic products. The Company's operations in Europe are
conducted primarily in France and primarily relate to research and development
and clinical trials for therapeutic products.

F-15
<PAGE> 69

SANGSTAT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

Summarized data for the Company's domestic and foreign operations are as
follows:

<TABLE>
<CAPTION>
UNITED
STATES EUROPE CANADA CONSOLIDATED
------------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Sales to unaffiliated $ 3,656,051 $ 18,202 $ -- $ 3,674,253
customers...............
============ ============ ============
Loss from operations....... $ (4,920,839) $ (864,517) $ (46,095) $ (5,831,451)
============ ============ ============
Total assets............... $ 13,818,654 $ 605,148 $ 26,238 $ 14,450,040
============ ============ ============
Year ended December 31, 1995:
Sales to unaffiliated $ 2,356,211 $ -- $1,466,548 $ 3,822,759
customers...............
============ ============ ============
Loss from operations....... $ (8,193,698) $(1,066,847) $ (89,390) $ (9,349,935)
============ ============ ============
Total assets............... $ 10,348,129 $ 610,015 $ 601,733 $ 11,559,877
============ ============ ============
Year ended December 31, 1996:
Sales to unaffiliated $ 931,706 $ 275,154 $1,192,119 $ 2,398,979
customers...............
============ ============ ============
Loss from operations....... $(13,431,697) $(1,312,577) $ (153,167) $(14,897,441)
============ ============ ============
Total assets............... $ 43,005,162 $ 953,026 $ 791,928 $ 44,750,116
============ ============ ============
</TABLE>

F-16
<PAGE> 70

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
AN OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................... 2
Incorporation of Certain Documents by
Reference............................... 2
Prospectus Summary........................ 3
Risk Factors.............................. 6
The Company............................... 15
Use of Proceeds........................... 15
Price Range of Common Stock............... 16
Dividend Policy........................... 16
Capitalization............................ 17
Selected Consolidated Financial Data...... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 19
Business.................................. 23
Management................................ 46
Principal Stockholders.................... 49
Underwriting.............................. 51
Legal Matters............................. 52
Experts................................... 52
</TABLE>

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

2,000,000 SHARES

LOGO

COMMON STOCK
------------------------

PROSPECTUS
------------------------
HAMBRECHT & QUIST

MONTGOMERY SECURITIES

ROBERTSON, STEPHENS & COMPANY
, 1997

============================================================
<PAGE> 71

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All of the amounts shown are
estimates except the registration fee and the NASD filing fees.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC Registration fee..................................................... $ 21,000
NASD fee................................................................. 7,500
Nasdaq Additional Listing fee............................................ 17,500
Accounting fees and expenses............................................. 90,000
Printing and engraving................................................... 80,000
Transfer agent fees...................................................... 8,000
Blue Sky fees and expenses............................................... 5,000
Legal fees and Company expenses.......................................... 250,000
Miscellaneous............................................................ 71,000
----------
Total.......................................................... $ 550,000
==========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law, as amended (the
"DGCL"), provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any such
person serving in any such capacity who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor, against expenses
actually and reasonably incurred in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery or
such other court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.

Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director (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 which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL

II-1
<PAGE> 72

(relating to unlawful payment of dividends and unlawful stock purchase and
redemption) or (iv) for any transaction from which the director derived an
improper personal benefit.

The Registrant's Restated Certificate of Incorporation provides that the
Registrant's directors shall not be liable to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except to the
extent that exculpation from liabilities is not permitted under the DGCL as in
effect at the time such liability is determined. The Registrant has entered into
indemnification agreements with all of its officers and directors, as permitted
by the DGCL. Reference is also made to Section of the Underwriting Agreement
contained in Exhibit 1.1 hereto, indemnifying officers and directors of the
Registrant against certain liabilities.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TABLE
- ------------ -------------------------------------------------------------------------------
<S> <C>
1.1(7) Form of Underwriting Agreement.
2.1(6) Agreement and Plan of Merger dated as of July 24, 1995 between the Registrant
and SangStat Medical Corporation, a California corporation, as filed with the
Delaware Secretary of State on August 11, 1995.
3.1(6) Amended and Restated Articles of Incorporation of the Registrant filed November
29, 1993.
3.3(6) Bylaws of Registrant.
3.4(5) Certificate of Designation for the Series A Junior Participating Preferred
Stock, filed with the Delaware Secretary of State on August 16, 1995.
4.1(2) Form of Warrant to purchase Series D Preferred Stock issued by Registrant on
July 15, 1991.
4.2(2) Form of Warrant to Purchase Series E Preferred Stock issued by Registrant on
April 19, 1993.
4.5(2) Specimen Common Stock Certificate of Registrant.
5.1(7) Opinion of Brobeck, Phleger & Harrison LLP.
20.1(3) Press Release of the Registrant, dated December 27, 1994.
21.1(4) Subsidiaries of Registrant.
23.1 Independent Auditors' Consent.
23.2(7) Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
23.3 Consent of Flehr, Hohbach, Test Albritton & Herbert.
24.1(7) Power of Attorney. (Reference is made to page II-5)
</TABLE>

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

(1) Management contract or compensatory plan or arrangement.

(2) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-1 (No. 33-70436).

(3) Previously filed as an Exhibit to the Registrant's Form 8-K filed January 6,
1994.

(4) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-1 (No. 33-88432).

(5) Previously filed as an Exhibit to Registrant's Form 8-K filed August 14,
1995.

(6) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form 8-B filed December 4, 1995.

(7) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-3 (No. 333-20301).

II-2
<PAGE> 73

ITEM 17. UNDERTAKINGS.

The undersigned hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.

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 Delaware General Corporation Law, the Certificate of
Incorporation or the Bylaws of Registrant, indemnification agreements entered
into between Registrant and its officers and directors, the Underwriting
Agreement, or otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer or controlling
person of 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, 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 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 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 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 hereof.

II-3
<PAGE> 74

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Menlo Park, State of California on
this 28th day of February, 1997.

SANGSTAT MEDICAL CORPORATION

By: /s/ HENRY N. EDMUNDS
Henry N. Edmunds, Ph.D.
Vice President, Chief Financial
Officer

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------------- ------------------
<C> <S> <C>

* Chief Executive Officer and February 28, 1997
- ------------------------------------- Chairman of the Board of Directors
(Philippe Pouletty) (Principal Executive Officer)

* Vice President and Chief Financial February 28, 1997
- ------------------------------------- Officer (Principal Financial and
(Henry N. Edmunds) Accounting Officer)

* Director February 28, 1997
- -------------------------------------
(Gordon Russell)

* Director February 28, 1997
- -------------------------------------
(Fredric J. Feldman)

* Director February 28, 1997
- -------------------------------------
(Elizabeth Greetham)

* Director February 28, 1997
- -------------------------------------
(Richard D. Murdock)

* Director February 28, 1997
- -------------------------------------
(Andrew Perlman)

* Director February 28, 1997
- -------------------------------------
(Vincent Worms)
</TABLE>

*By: /s/ HENRY N. EDMUNDS

Henry N. Edmunds,

Attorney-in-fact

II-4
<PAGE> 75

SANGSTAT MEDICAL CORPORATION

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
- -------- ------------------------------------------------------------------- ------------
<C> <S> <C>
1.1 (7) Form of Underwriting Agreement.
2.1 (6) Agreement and Plan of Merger dated as of July 24, 1995 between the
Registrant and SangStat Medical Corporation, a California
corporation, as filed with the Delaware Secretary of State on
August 11, 1995.
3.1 (6) Amended and Restated Articles of Incorporation of the Registrant
filed November 29, 1993.
3.3 (6) Bylaws of Registrant.
3.4 (5) Certificate of Designation for the Series A Junior Participating
Preferred Stock, filed with the Delaware Secretary of State on
August 16, 1995.
4.1 (2) Form of Warrant to purchase Series D Preferred Stock issued by
Registrant on July 15, 1991.
4.2 (2) Form of Warrant to Purchase Series E Preferred Stock issued by
Registrant on April 19, 1993.
4.5 (2) Specimen Common Stock Certificate of Registrant.
5.1 (7) Opinion of Brobeck, Phleger & Harrison LLP.
20.1 (3) Press Release of the Registrant, dated December 27, 1994.
21.1 (4) Subsidiaries of Registrant.
23.1 Independent Auditors' Consent.
23.2 (7) Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit
5.1).
23.3 Consent of Flehr, Hohbach, Test Albritton & Herbert.
24.1 (7) Power of Attorney. (Reference is made to page II-5)
</TABLE>

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

(1) Management contract or compensatory plan or arrangement.

(2) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-1 (No. 33-70436).

(3) Previously filed as an Exhibit to the Registrant's Form 8-K filed January 6,
1994.

(4) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-1 (No. 33-88432).

(5) Previously filed as an Exhibit to Registrant's Form 8-K filed August 14,
1995.

(6) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form 8-B filed December 4, 1995.

(7) Previously filed as an Exhibit to the Registrant's Registration Statement on

Form S-3 (No. 333-20301).

<PAGE> 1

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

SangStat Medical Corporation:

We consent to the use in this Amendment No. 1 to Registration Statement No.
333-20301 of SangStat Medical Corporation of our report dated January 29, 1997
appearing in the Prospectus, which is a part of such Registration Statement, and
to the references to us under the headings "Selected Consolidated Financial
Data" and "Experts" in such Prospectus.

DELOITTE & TOUCHE LLP
San Jose, California

February 26, 1997

<PAGE> 1
CONSENT OF INDEPENDENT PATENT COUNSEL

To the Board of Directors
and Stockholders of SangStat Medical Corporation

We consent to the reference to our firm's name under the caption
"Experts" as contained in this Registration Form S-3 of SangStat Medical
Corporation.

FLEHR, HOHBACH, TEST, ALBRITTON & HERBERT

By: /s/ Bert Rowland
----------------------------

Dated: January 23, 1997