SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Year Ended December 31, 1996, or:
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from to

Commission File Number 0-24320

NaPRO BIOTHERAPEUTICS, INC.

Incorporated in Delaware IRS ID No. 84-1187753
6304 Spine Road, Unit A
Boulder, Colorado 80301
(303) 530-3891

Securities registered pursuant to Section 12(b) of the Act: none
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0075 par value; Preferred Stock Purchase Rights

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

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant was $93,507,156 as of March 21, 1997.

The number of shares outstanding of each of the registrant's classes of common
stock, as of March 21, 1997:

Common Stock 11,767,251
Nonvoting Common Stock 595,000

Incorporated by reference in Part III of this report is the information
contained in the NaPro Proxy Statement for the 1997 annual meeting of
stockholders, which will be filed with the SEC within 120 days after
December 31, 1996.

Part I

Item 1. Business

General

NaPro BioTherapeutics, Inc. ("NaPro" or "the Company") is a natural product
pharmaceutical company which is focusing primarily on the development,
manufacture and commercialization of paclitaxel, a naturally-occurring anti-
cancer agent found in certain species of yew (Taxus) trees. The Company's
paclitaxel is referred to herein as "NBT Paclitaxel."

The market for paclitaxel is dominated by Bristol-Myers Squibb Company
("BMS"). BMS has publicly announced that worldwide sales of their formulation
of paclitaxel were approximately $580 million in 1995 and $813 million in 1996.
BMS's paclitaxel is the only United States Food and Drug Administration ("FDA")
approved formulation of paclitaxel, which approval is for the treatment of
refractory (non-responsive) breast and ovarian cancers. NaPro believes that by
combining its proprietary extraction, isolation and purification ("EIP/TM")
manufacturing technology, the renewable sources of Taxus biomass being
developed by NaPro, and its long-term, exclusive agreements with two major
international pharmaceutical companies, NaPro will be positioned to participate
significantly in the worldwide paclitaxel market. There can be no assurance,
however, that NBT Paclitaxel will prove safe and effective, meet applicable
standards necessary for regulatory approvals, or be successfully marketed.

To advance the development and commercialization of NBT Paclitaxel, NaPro has
entered into 20-year, exclusive agreements with each of F.H. Faulding & Co.,
Ltd. ("Faulding") and Baker Norton Pharmaceuticals, a subsidiary of IVAX
Corporation ("IVAX" and together with Faulding, the "Strategic Partners") for
the clinical development, sales, marketing and distribution of NBT Paclitaxel.
Under the agreements, Faulding's territory includes Australia, New Zealand and
much of southeast Asia, and IVAX's territory includes much of the rest of the
world including North America, Europe and Japan. Faulding, Australia's largest
domestic pharmaceutical company, had 1996 sales of approximately $1.2 billion,
and IVAX, a diversified international healthcare company, also had 1996 sales of
approximately $1.2 billion.

The Strategic Partners have agreed to fund and undertake the clinical trials
required in order to obtain regulatory approvals for the commercialization of
NBT Paclitaxel in their respective territories. NaPro is responsible for
supplying the Strategic Partners with NBT Paclitaxel for all of their clinical
and

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commercial requirements. Under the terms of each agreement, IVAX and Faulding
pay a fixed price for NBT Paclitaxel for non-commercial sales. For NBT
Paclitaxel sold commercially, Faulding pays NaPro a substantial share of gross
revenue. For IVAX's commercial sales, IVAX has agreed to pay NaPro on a cost
plus basis for NaPro's manufacture of NBT Paclitaxel and in addition to pay
NaPro a substantial share of IVAX's NBT Paclitaxel profit.

Faulding obtained regulatory approval and began marketing NBT Paclitaxel as a
generic pharmaceutical in Australia in January 1995 for the treatment of
refractory breast and ovarian cancers and is seeking approval to sell NBT
Paclitaxel in other countries in its defined territory. IVAX filed an
investigational new drug exemption ("IND") application for NBT Paclitaxel with
the FDA in June 1994. IVAX has completed the treatment phase of the Phase
II/III clinical trials with NBT Paclitaxel for three therapeutic indications
including refractory breast and ovarian cancers and Kaposi's Sarcoma and
submitted a new drug application ("NDA") to the FDA for Kaposi's Sarcoma on
March 31, 1997. There can be no assurance, however, as to whether IVAX will be
successful in obtaining any necessary regulatory approvals or successfully
market NBT Paclitaxel even if approval is obtained.

NaPro's EIP/TM technology is designed to allow the extraction, isolation and
purification of paclitaxel and other taxanes (compounds structurally similar to
paclitaxel that can be synthesized into paclitaxel) from renewable sources of
biomass such as needles and limbstock harvested from ornamental yew bushes. In
order to have access to a more stable and reliable source of Taxus biomass for
use in the production of NBT Paclitaxel, NaPro has entered into agreements with
Pacific Biotechnologies, Inc. ("PBI"), a subsidiary of Pacific Regeneration
Technologies, Inc., one of Canada's largest reforestation companies (the "PBI
Agreement"), and Zelenka Nursery, Inc. ("Zelenka"), one of the largest
horticulture companies in the United States (the "Zelenka Agreement"), each to
grow cloned ornamental yew bushes on a large scale. NaPro intends to supplement
its supply of biomass obtained from PBI and Zelenka by entering into additional
agreements with commercial growers of ornamental yew bushes. NaPro is currently
constructing a large scale commercial EIP/TM manufacturing facility with planned
capacity to meet the forecasted commercial needs of the Strategic Partners
through 1999. In addition, in order to increase production yields of NBT
Paclitaxel and lower its cost of manufacture, NaPro is developing a semi-
synthetic process for manufacturing NBT Paclitaxel from certain other taxanes
contained in renewable biomass sources.

Paclitaxel Overview

Cancer is the second leading cause of death in the United States with over one
million new cases diagnosed each year. Cancer is generally treated by surgery,
radiation or chemotherapy or a combination of these therapies. Paclitaxel,
approved less than four years ago, has become the largest selling of the class
of cancer chemotherapy drugs known as cytotoxic agents.

Paclitaxel is a natural product that was recognized by the National Cancer
Institute (the "NCI") in 1963 as showing cytotoxic activity against leukemia
cells and inhibitory activity against a variety of tumors. Over the next two
decades, researchers working under grants from the NCI conducted studies to
determine paclitaxel's structure and its mechanism of action. The NCI studies
indicated that paclitaxel inhibits the normal action of microtubules in cancer
cell division. Microtubules, located in the cytoplasm of cells, play a vital
role in cellular division. Paclitaxel promotes microtubule assembly and blocks
normal microtubule disassembly in cells, thereby inhibiting cell division and
inducing death of cancer cells. This cytoplasmic mechanism of action contrasts
with the nuclear mechanism of action of the majority of cytotoxic drugs which
kill the cell by attacking nuclear components such as DNA or RNA.

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In June 1991, the NCI formalized a Collaborative Research and Development
Agreement for development of paclitaxel with BMS, the world's largest oncology
company. BMS assumed development of paclitaxel which included completion of the
necessary clinical trials and manufacturing scale-up. In June 1992, BMS
submitted an NDA to the FDA. BMS received approval for the sale of paclitaxel
as a treatment for refractory ovarian cancer in December 1992 and approval for
the sale of paclitaxel as a treatment for refractory breast cancer in April
1994. BMS has publicly announced that their formulation of paclitaxel has
achieved world-wide commercial sales of approximately $813 million in 1996.

Paclitaxel is one of a family of compounds, commonly referred to as taxanes,
which share a hydrocarbon ring (diterpene) structure. Taxanes are found
naturally in many parts of various species of yew trees and bushes. The
concentration of taxanes in yew trees and bushes is very small, generally much
less than 500 parts per million, and accordingly, the process of extracting
taxanes from yew biomass is complicated and challenging. To arrive at a final
stage paclitaxel product for use in clinical trials and for commercialization,
several production approaches can be utilized. NaPro believes the two most
prevalent processes used today are conventional extraction and semi-synthesis.

In extraction, the manufacturing process must be designed to extract, isolate
and purify paclitaxel from yew biomass leaving behind other components,
including non-paclitaxel taxanes. The extraction, isolation and purification
processes, however, are complicated since there are over 100 different taxanes
present in yew biomass. In a semi-synthesis process, the initial extraction,
isolation and purification is similar to that of the conventional extraction
process, except that the process not only isolates paclitaxel, but also isolates
and subsequently converts through chemical synthesis certain other taxanes
(which are otherwise considered waste byproducts) into paclitaxel, thereby
increasing the yield of paclitaxel from the same biomass source. The final
product of either method must have levels of impurity at or below acceptable
regulatory standards.

Historically, the wild Pacific yew tree has been the primary source of yew
biomass. Most species of Taxus, including the wild Pacific yew, grow slowly,
requiring a number of years to reach harvestable size. As a result of its slow
growing pattern, wild Taxus is generally found in old growth forests, frequently
the habitat of endangered species, including the spotted owl. Biomass from the
wild Pacific yew tree has historically been obtained from the bark, which
generally requires destroying the tree. As a result, there has been a
considerable amount of public debate and controversy in the United States and
other countries by environmental groups and others regarding the harvesting of
bark from the wild tree. NaPro halted harvesting bark from wild Pacific yew
trees in 1994. See "Corporate Strategy" and "Biomass; Manufacturing."

Other companies have developed taxane analogues which are similar, but not
chemically identical, to paclitaxel. For example, Rhone-Poulenc Rorer, Inc.,
("RPR"), a large international pharmaceutical company, has developed docetaxel,
one such taxane analog, which is being marketed in various parts of the world
under the trademark Taxotere/R. Taxotere/R has a different toxicity profile
from paclitaxel and has side effects not observed with paclitaxel. In May 1996,
the FDA approved Taxotere/R for treatment of anthracycline-resistant breast
cancer in patients without impaired liver function.

Clinical Status of NBT Paclitaxel

Pursuant to the agreements between NaPro and the Strategic Partners, the
Strategic Partners have primary responsibility for designing and conducting
clinical trials and for pursuing regulatory approval of NBT Paclitaxel
throughout the world. NaPro has primary responsibility for carrying out the
procedures for regulatory approval relating to NaPro's manufacturing processes.
NaPro has filed confidential Drug Master Files ("DMF") and other information
containing certain of NaPro's proprietary manufacturing processes relating

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to the manufacture of NBT Paclitaxel with regulatory agencies in the United
States, Australia, Canada and Europe. In addition, NaPro performed the
toxicological and preclinical characterization necessary for an IND for
extracted paclitaxel.

Existing regulatory approvals and statutes have a direct impact on the clinical
and marketing strategy being pursued by NaPro and its Strategic Partners. In
December 1992, BMS obtained NDA approval in the United States for its paclitaxel
compound. Under the Waxman-Hatch Act, a non-patented drug such as paclitaxel
which first gains approval through an NDA process is granted a five year period
of marketing exclusivity which prevents submission by another party of an
Abbreviated New Drug Application ("ANDA") for generic substitutes until such
period of exclusivity expires. The exclusivity period in the United States
expires in December 1997. The FDA will accept and review, however, an NDA
submitted by another party during this period of exclusivity. A comparable
statute to the Waxman-Hatch Act exists in Europe, although the related period of
exclusivity is generally ten years. For these reasons, IVAX has submitted an
NDA for NBT Paclitaxel. See "Government Regulation and Product Approvals."

IVAX. IVAX is currently pursuing a strategy to obtain NDA approval of NBT
Paclitaxel in the United States for the treatment of refractory breast and
ovarian cancers and Kaposi's Sarkoma. IVAX filed an IND with the FDA in
June 1994. In October 1994, IVAX initiated its Phase I clinical trials of NBT
Paclitaxel in the United States and in May 1995 initiated Phase II/III clinical
trials. IVAX has substantially completed Phase II/III studies using NBT
Paclitaxel in three indications, including refractory breast and ovarian
cancers. IVAX submitted an NDA for NBT Paclitaxel for Kaposi's Sarkoma on March
31, 1997. There can be no assurance that NBT Paclitaxel will prove safe and
effective, meet applicable regulatory standards or be successfully marketed.

Faulding. In January 1995, Faulding received regulatory approval from the
Australian Therapeutic Goods Administration ("TGA") to market ANZATAX/TM
(Faulding's brand name for NBT Paclitaxel) in Australia for the treatment of
refractory breast and ovarian cancers. Under Australian law there is no
exclusivity period comparable to that provided by the Waxman-Hatch Act, and,
therefore, approval of a generic substitute was possible without the need for
additional clinical trials. Faulding did, however, conduct clinical
investigations with ANZATAX/TM (Faulding's brand name for NBT paclitaxel) in
order to support marketing in Australia and to support applications for
regulatory approval in other countries. NaPro and Faulding have obtained
regulatory approval from the TGA for NaPro to supply NBT Paclitaxel to Faulding
from either its Canadian or United States manufacturing facilities. Faulding is
also engaged in ongoing clinical research with NBT Paclitaxel with the goal of
improving the effectiveness of combination therapies utilizing NBT Paclitaxel
and expanding the number of disease indications treatable with NBT Paclitaxel.
Faulding has filed dossiers with certificates of free sale and requested
marketing approval in various territories including Hong Kong, Cyprus, Egypt,
Oman, Turkey, Kuwait, Saudi Arabia, Malaysia, Thailand, Indonesia and the
Philippines. There can be no assurance, however, that Faulding will receive
approval in any of these territories or will successfully market NBT Paclitaxel,
even if such approvals are received.

NaPro plans to submit a DMF in support of a Supplemental NDA "SNDA" for NBT
Paclitaxel manufactured through a semi-synthesis process. An SNDA cannot be
filed until such time, if ever, as an NDA is approved for NBT Paclitaxel. Based
on the SNDA approval process for BMS, NaPro believes additional toxicological
and stability data may be required prior to submission of an SNDA for
manufacturing NBT Paclitaxel through a semi-synthesis process. It is not
anticipated that an SNDA could be filed before 1999, since an approved NDA will
need to exist before an SNDA can be submitted. The requirements for an SNDA
have not been discussed with the FDA and, therefore, are uncertain. As such,

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there can be no assurance that the semi-synthetic process being developed by
NaPro will receive regulatory approval. See "Government Regulation and Product
Approvals."

Biomass; Manufacturing

Biomass. Paclitaxel and other taxanes necessary for the production of NBT
Paclitaxel are present in many parts of various species of yew trees and bushes.
NaPro's EIP/TM technology is designed to allow extraction and purification of
paclitaxel and other taxanes, which can be synthesized into paclitaxel, from
renewable sources of biomass such as needles and limbstock harvested from
ornamental yew trees and bushes.

In order to have access to a stable long-term supply of biomass for use in the
production of NBT Paclitaxel, NaPro entered into the PBI Agreement in 1993 and
the Zelenka Agreement in 1996 and may enter into additional agreements to
purchase biomass and mature yew bushes from commercial growers. NaPro believes
that the plantations being developed under these agreements will produce
adequate biomass to support the commercial requirements of the Strategic
Partners for the foreseeable future. By planting and propagating a reliable and
renewable homogeneous biomass source, NaPro believes that it may be able to
reduce its raw material cost, while at the same time allowing it to increase the
yield of NBT Paclitaxel. NaPro made its first small scale harvest pursuant to
the PBI Agreement in the first quarter of 1996 and pursuant to the Zelenka
Agreement in the second quarter of 1996. There can be no assurance that the use
of the ornamental yew bushes and the use of needles and limbstock of such bushes
will be approved by the FDA for use in manufacturing NBT Paclitaxel or that
current sources of biomass will be sufficient to meet NaPro's needs.

Manufacturing. Crude paclitaxel is extracted from cultivated yew bushes by third
party extractors and delivered to NaPro's manufacturing facilities in Boulder,
Colorado and British Columbia, Canada. At these two facilities, the impure
paclitaxel is isolated and purified and the resulting active drug substance is
delivered to Faulding's final fill and finish facility in Australia where NBT
Paclitaxel is formulated by Faulding for final packaging for the Strategic
Partners. On a combined basis, NaPro believes these facilities would have
adequate capacity to meet clinical and commercial demand through the launch of
commercial sales of NBT Paclitaxel in the United States. Each of NaPro's small
scale manufacturing facilities has been inspected by the TGA and approved for
the commercial production of NBT Paclitaxel for sale in Australia. NaPro plans
to seek FDA approval of its manufacturing processes, which utilize non-bark
sources of biomass obtained from the needles and limbstock of ornamental yew
trees and bushes. NaPro has manufactured a number of lots of paclitaxel using
its new process including the use of needles and limbstock from its plantations,
and has submitted data from these lots in the initial NDA filing. There can be
no assurance that such regulatory approval will be obtained.

NaPro is currently constructing a large scale commercial manufacturing facility,
which is being built in Boulder, Colorado. NaPro expects to substantially
complete construction and validation of this facility in 1997. The NDA
submission established NaPro's pilot scale facility as the initial manufacturing
site. The large scale commercial facility has been submitted in the NDA as an
alternate facility, requiring NaPro to prepare two manufacturing facilities for
inspection and inclusion in the NDA. NaPro anticipates the large scale
commercial facility and processes intended to be used for commercial launch of
NBT Paclitaxel in the United States will be inspected by the FDA upon completion
of validation, but prior to approval of the NDA for NBT Paclitaxel .

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There can be no assurance that NaPro will succeed in adapting its EIP/TM
technology for large scale commercial manufacturing, that the facility will be
completed or validated within the time periods indicated, that such facility and
manufacturing processes will receive necessary regulatory approvals or, even if
approved, will be capable of producing NBT Paclitaxel in the quantities
necessary to satisfy the requirements of the Strategic Partners.

NaPro currently contracts with a third party for small-to-mid-scale extraction
of paclitaxel. In order for NaPro to meet the expected increase in demand for
NBT Paclitaxel once commercialized, NaPro must either contract out part of its
extraction requirements or build a large scale commercial extraction facility.
There can be no assurance that a third party contract for such large scale
extraction can be obtained on commercially reasonable terms or that a large
scale extraction facility can be constructed in a timely fashion and receive the
necessary regulatory approvals. The failure of NaPro to secure a large scale
commercial extraction contract or to construct a regulatory-approved large scale
commercial extraction facility on a timely basis may have a material adverse
effect on NaPro.

In order to increase its manufacturing capacity, NaPro is also developing, and
has applied for patent protection for, a semi-synthesis process for
manufacturing NBT Paclitaxel from certain other taxanes contained in renewable
biomass sources. Semi-synthesis manufacturing initially involves extraction of
paclitaxel and other taxanes from yew sources. Unlike extraction, however,
which attempts to isolate and purify only paclitaxel, semi-synthesis isolates
and purifies certain additional taxanes. Through a chemical synthesis process,
these other taxanes are converted into paclitaxel. Accordingly, since both
paclitaxel and other taxanes are used in semi-synthesis, NaPro expects to be
able to increase the paclitaxel yield from its biomass sources using a semi-
synthesis process. The use of semi-synthesis will require receipt of additional
regulatory approvals, of which there can be no assurance.

Strategic Alliances

NaPro has formed strategic alliances through long-term exclusive agreements with
each of Faulding and IVAX. Pursuant to such arrangements, each Strategic
Partner has agreed to fund and, with NaPro's input, undertake the clinical
trials required to obtain regulatory approvals for commercializing NBT
Paclitaxel in their respective territories. NaPro is responsible for supplying
the Strategic Partners with NBT Paclitaxel for clinical trials and commercial
purposes and each Strategic Partner is required to purchase all of its
paclitaxel requirements from NaPro. Under the terms of each agreement, IVAX and
Faulding pay a fixed price for NBT Paclitaxel for non-commercial sales. For NBT
Paclitaxel sold commercially, Faulding pays NaPro a substantial share of gross
revenue. For IVAX's commercial sales, IVAX will pay NaPro on a cost plus basis
for NaPro's manufacture of NBT Paclitaxel and in addition will pay NaPro a
substantial share of IVAX's NBT Paclitaxel profit (as determined in accordance
with the IVAX Agreement (as defined herein)). NaPro believes that through its
agreements with Faulding and IVAX, it will be able to take advantage of their
resources, including expertise in clinical testing and sales, marketing and
distribution. As a result of these strategic alliances, NaPro believes it may be
able to compete more effectively with BMS, RPR, generic drug manufacturers and
other companies, research organizations and academic institutions that are
developing paclitaxel and are attempting to develop new and advanced forms of
anti-cancer drugs. There can be no assurance, however, that the Strategic
Partners will succeed in obtaining the necessary regulatory approvals to market
NBT Paclitaxel in the United States or elsewhere or that they will market NBT
Paclitaxel successfully.

Faulding. Faulding, Australia's largest domestic pharmaceutical company with
1996 sales of approximately $1.2 billion, actively markets anti-cancer
pharmaceuticals and other health care products in Australia, Southeast Asia and
other countries throughout the world. In 1992, NaPro originally entered into a
development and marketing agreement (the "Faulding Agreement") with Faulding.
The Faulding

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Agreement, as amended and restated, has an initial term of 20 years and will
continue thereafter from year to year unless terminated in writing by either
party.

The Faulding Agreement grants Faulding the exclusive right to develop and market
NBT Paclitaxel in ten countries, including Australia, New Zealand and much of
Southeast Asia (the "Faulding Territory"). The Faulding Agreement also grants
Faulding the non-exclusive right to sell NBT Paclitaxel in certain countries in
the Middle East. Pursuant to the Faulding Agreement, Faulding is required to
purchase all of its requirements of paclitaxel from NaPro, except in certain
circumstances where NaPro is unable to supply Faulding's requirements.

In a March 1995 amendment to the Faulding Agreement, Faulding agreed to convert
certain prepaid product sales and deferred revenue aggregating $1.1 million,
which would have become due in 1995 and 1996, into a note in the aggregate
principal amount of $1.2 million, which matures in 1997. The terms of the note
provide that NaPro will pay interest quarterly on amounts which would have been
payable to Faulding had the conversion not occurred, at an annual rate of 9%.

Faulding may terminate the Faulding Agreement: (i) upon the reorganization or
insolvency of NaPro; (ii) if Faulding becomes controlled by a pharmaceutical
company that sells paclitaxel in the Faulding territory; (iii) if NaPro becomes
controlled by IVAX or BMS; (iv) if NaPro is purchased by a pharmaceutical
company which sells paclitaxel in the Faulding territory and that company
refuses to be bound by the terms of the Faulding Agreement; or (v) if NaPro is
unable to meet the paclitaxel supply requirements of Faulding. NaPro may
terminate the Faulding Agreement: (i) upon the reorganization or insolvency of
Faulding; or (ii) in certain circumstances, upon a change in control of
Faulding.

NaPro is required to indemnify Faulding pursuant to the Faulding Agreement for
any defect in the NBT Paclitaxel that is shipped to Faulding and for uncured
breaches of NaPro's warranties or obligations under the Faulding Agreement.
Faulding is required to indemnify NaPro against all losses (i) resulting from a
defect in a product containing NBT Paclitaxel manufactured by Faulding except
where such defect is the fault of NaPro, (ii) resulting from a product
containing NBT Paclitaxel formulated, stored, handled, promoted, distributed,
registered or sold by Faulding and (iii) for uncured breaches of Faulding's
representations and warranties under the Faulding Agreement.

In connection with NaPro's initial public offering, completed August 1,
1994, Faulding purchased 400,000 shares of NaPro's Nonvoting Common Stock and
400,000 warrants to purchase Nonvoting Common Stock. In 1996 Faulding exercised
200,000 of the warrants.

IVAX. IVAX, a diversified international health care company with 1996 sales of
approximately $1.2 billion, is engaged in the research, development, manufacture
and sale of branded and generic pharmaceuticals and other related health care
and personal products and specialty chemicals. In 1993, NaPro entered into a
development and marketing agreement (the "IVAX Agreement") with IVAX, through
IVAX's subsidiary, Baker Norton Pharmaceuticals ("BNP"). The IVAX Agreement has
an initial term of 20 years and will continue thereafter from year to year
unless terminated in writing by either party.

The IVAX Agreement grants IVAX the exclusive right to develop and market NBT
Paclitaxel in the United States and in every country outside the Faulding
Territory except for the Vatican City, China, the former Soviet Union and the
Middle East where such right is non-exclusive. Pursuant to the IVAX Agreement,
IVAX is required to purchase all of its requirements of paclitaxel from NaPro
except in certain circumstances where NaPro is unable to supply IVAX's
requirements.

Either IVAX or NaPro may terminate the IVAX Agreement if the other party
materially breaches the

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agreement under certain circumstances. In addition, IVAX may terminate the IVAX
Agreement if NaPro fails to meet the paclitaxel supply requirements of IVAX for
a continuing three year period. Under certain circumstances, IVAX may obtain
certain manufacturing information from NaPro and have NBT Paclitaxel
manufactured by third parties.

NaPro is required to indemnify IVAX pursuant to the IVAX Agreement for any
defect in the NBT Paclitaxel that is shipped to IVAX, for certain claims of
patent or trade secret infringement relating to the manufacture, composition, or
sale of NBT Paclitaxel supplied to IVAX and for uncured breaches of certain of
NaPro's representations and warranties under the IVAX Agreement. IVAX is
required to indemnify NaPro against all losses (i) resulting from a defect in a
product containing NBT Paclitaxel manufactured by IVAX, (ii) resulting from a
product containing NBT Paclitaxel formulated, stored, handled, promoted,
distributed, registered or sold by IVAX, to the extent the defect is caused by
IVAX, and (iii) for uncured breaches of IVAX's representations and warranties
under the IVAX agreement.

IVAX, through its subsidiary D&N Holding Company ("D&N"), currently owns
1,126,398 shares of NaPro's common stock (the "Common Stock"). See "Security
Ownership of Certain Beneficial Owners and Management."

Marketing and Sales

Marketing and sales of NBT Paclitaxel will be conducted by the Strategic
Partners. NaPro has no sales force and has only limited marketing capabilities
and has no present intention to establish a sales or marketing force. NaPro
expects that sales to the Strategic Partners will account for substantially all
of NaPro's revenue for the foreseeable future. As a result, the loss of either
Strategic Partner as a customer, in the absence of a comparable alternative
strategic alliance arrangement, may have a material adverse effect on NaPro.
See "Strategic Alliances."

Competition

The biopharmaceutical industry is an expanding and rapidly changing industry
characterized by intense competition for financing, executive talent,
intellectual property and product sales. NaPro competes with all entities
developing and producing therapeutic agents for cancer treatment. The success
of competitors in entering the market for paclitaxel may reduce NaPro's
potential market share and reduce the price of NBT Paclitaxel, each of which
could have a material adverse effect on NaPro. In addition, regulatory approval
and marketing are being handled exclusively by the Strategic Partners. Although
NaPro believes the Strategic Partners have capable clinical and marketing
abilities, there can be no assurance that the Strategic Partners will be capable
or effective in gaining regulatory approval on a timely basis, if at all, or
competing on a global basis with existing or new competitors.

BMS, the world's largest oncology company, is already marketing paclitaxel
commercially in the United States, Australia, Canada, Europe and certain other
territories. In addition, RPR has developed a proprietary analog of paclitaxel,
docetaxel, which is marketed under the trademark Taxotere/R. Taxotere/R has a
microtubule binding mechanism of action similar to that of paclitaxel.
Taxotere/R is approved in the United States, European Community, Australia,
Canada and a number of other countries. Taxotere/R is approved in the United
States for treatment of anthracycline-resistant breast cancer in patients
without impaired liver function. Treatment with Taxotere/R, however, may cause
certain side effects not observed with paclitaxel. It is anticipated, however,
that Taxotere/R may compete with paclitaxel, and thereby reduce overall
paclitaxel sales.

Furthermore, upon expiration in December 1997 of the five-year marketing
protection from generic competition currently provided to BMS's formulation of
paclitaxel by the Waxman-Hatch Act, NaPro may

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be subject to competition from generic paclitaxel manufacturers. In Europe, a
similar exclusivity period will end in most cases 10 years after BMS' initial
approval. NaPro is aware of several pharmaceutical companies which have stated
that they are in the process of developing generic paclitaxel in the United
States, Canada, Mexico and Europe. Finally, academic and research
organizations and pharmaceutical and biotechnology companies are pursuing, among
other things, genetically engineered drugs, chemical synthesis and cell-tissue
culture which may compete with NaPro's products or technology. In addition,
certain companies are pursuing the production of paclitaxel and other taxanes
from natural product extraction techniques.

Many of NaPro's competitors, most notably BMS and RPR, have substantially
greater capital resources, research and development capabilities, manufacturing
and marketing resources, and experience than NaPro. NaPro expects BMS to
compete intensely to maintain its dominance of the paclitaxel market, including
through pursuit of an aggressive patent strategy. NaPro's competitors may
succeed in developing products that are more effective or less costly than any
that may be developed by NaPro, or that gain regulatory approval prior to
NaPro's products. Many companies and research institutions are also seeking
means to obtain paclitaxel and taxanes from non-bark renewable biomass
components of yew trees and other sources in order to increase paclitaxel
yields, avoid environmental concerns and reduce the cost of biomass. In
addition, NaPro is aware of several potential competitors that have developed
and patented or are developing various processes for producing paclitaxel and
paclitaxel-related substances semi-synthetically, which may result in a low-
cost, pure paclitaxel. The discovery by a third party of a cost-effective
means to fully synthesize paclitaxel in commercial quantities or the manufacture
of taxane derivatives or analogs that are more efficacious than paclitaxel in
treating cancer could have a material adverse effect on NaPro.

Patents and Proprietary Technology

NaPro's success depends, in part, on its ability to obtain patents, maintain
trade secret protection and operate without infringing on the proprietary rights
of third parties. Where appropriate, NaPro seeks protection of its proprietary
technology by applying for patents in the United States and abroad. NaPro owns
three issued United States patents and has several United States patent
applications pending. NaPro has filed patent applications in certain other
areas of the world and expects to make additional filings as it believes
appropriate. In addition, NaPro has obtained licenses from third parties to use
their proprietary technology, for which patent applications have been filed in
the United States and in certain other areas of the world. There can be no
assurance that either NaPro's or its licensors' existing patent applications
will become issued patents or that, if issued, the coverage claimed in the
applications will not be significantly reduced prior to issuance or, that NaPro
will be able to obtain any necessary or desired additional licenses to patents
or technologies of others or that NaPro will be able to develop its own
additional patentable technologies. In addition, there can be no assurance that
any future patents issued to NaPro, if any, will provide it with competitive
advantages or that products or processes covered by such patents will not be
challenged as infringing upon the patents or proprietary rights of others or
that any such patents will not be invalidated, or that the patents or
proprietary rights of others will not have a material adverse effect on the
ability of NaPro to do business. Patent applications in the United States are
maintained in secrecy until patents are issued and patent applications in
certain other countries generally are not published until more than 18 months
after they are filed. In addition, publication of scientific or patent
literature often lags behind actual discoveries. As a result, NaPro cannot be
certain it or any of its licensors was the first creator of inventions covered
by NaPro's or its licensors' pending patent applications or that NaPro or its
licensors were the first to file such applications. Furthermore, there can be
no assurance that others will not independently develop similar technology or,
if patents are issued to NaPro, that others will not design technology to
circumvent NaPro's patents or proprietary rights.

-10-

Much of NaPro's proprietary technology, including much of its EIP/TM technology,
is not protected by patents and is held by NaPro as trade secrets. NaPro's
success will depend in part on its ability to protect the trade secrets relating
to extracting, isolating and purifying paclitaxel as well as to other
technology. NaPro relies on proprietary know-how and confidential information
and employs various methods, such as entering into confidentiality and non-
compete agreements with its current employees and with third parties to whom it
divulges proprietary information, to protect the processes, concepts, ideas and
documentation associated with its technologies, including its paclitaxel
production process. Such methods may afford incomplete protection and there can
be no assurance that NaPro will be able to adequately protect its trade secrets
or that other companies will not acquire information which NaPro considers to be
proprietary. In addition, if NaPro is unable to fulfill its contractual
obligations to IVAX relating to its supply of NBT Paclitaxel, NaPro may, under
certain circumstances, be contractually obligated to disclose proprietary
manufacturing information to IVAX. The inability to maintain its trade secrets
for its exclusive use could have a material adverse effect on NaPro.

The patent position of pharmaceutical companies generally is highly uncertain
and involves complex legal and factual questions. Paclitaxel is an
unpatentable, naturally-occurring compound. Various compositions containing
paclitaxel, and also various processes and other technologies, however,
including those relating to extracting paclitaxel and preparing the drug for
finished formulation, are or may be patented. In addition, certain methods of
administering paclitaxel are or may be patented. Certain of these patents are
owned or controlled by BMS and RPR, two of NaPro's primary competitors. NaPro
is aware of competitors and potential competitors who are pursuing patent
protection for various aspects of the extraction, preparation, administration
and production of natural and semi-synthetic paclitaxel. In the event that
NaPro's technology, products or activities are deemed to infringe upon the
rights of others, NaPro could be subject to damages or enjoined from using such
technology, or NaPro could be required to obtain licenses to utilize such
technology. No assurance can be given that any such licenses would be made
available on terms acceptable to NaPro, or at all. If NaPro were unable to
obtain such licenses or was enjoined from using its technology, it could
encounter significant delays in product market introductions while it attempted
to design around the patents or rights infringed upon, or could find the
development, manufacture or sale of products to be foreclosed, any of which may
have a material adverse effect on NaPro. In addition, NaPro could experience a
loss of revenue and may incur substantial cost in defending itself and
indemnifying the Strategic Partners in patent infringement or proprietary rights
violation actions brought against it or either of the Strategic Partners. NaPro
could also incur substantial cost in the event it finds it necessary to assert
claims against third parties to prevent the infringement of its patents and
proprietary rights by others. Participation in such infringement proceedings
could have a material adverse effect on NaPro, even if the eventual outcome were
favorable. See "Strategic Alliances," and "Australian Petty Patents."

Australian Petty Patents

In September 1993 and August 1994, BMS received two Australian petty patents
claiming certain methods of administering paclitaxel. Australian petty patents
have a maximum term of six years, are allowed to contain only three claims (one
independent and two dependent) and are granted on the basis of a prior art
search which is significantly more limited in scope than the searches done prior
to issuance of standard patents. Following publication of these patents,
Faulding instituted legal action to revoke these patents on the grounds that the
patent claims are invalid and that the subject matter claimed in the patents was
already known prior to the claimed date of invention. In February 1995, BMS
brought legal action against Faulding, based upon these patent claims, seeking
an injunction against Faulding to prevent Faulding from marketing NBT Paclitaxel
pursuant to Faulding's generic approval. In March 1995, the Australian court
denied BMS's request to enjoin Faulding from marketing NBT Paclitaxel. NaPro
believes, based on communications with Faulding, that BMS's claims will likely
be resolved in conjunction with Faulding's

-11-

revocation action in 1997. No assurance can be given, however, that BMS will
not obtain an injunction against Faulding which could prevent Faulding from
marketing NBT Paclitaxel in Australia. If Faulding were prevented from
marketing NBT Paclitaxel in Australia pursuant to its generic approval, Faulding
would be unable to market NBT Paclitaxel for commercial sale in Australia until
such time as Faulding obtains its own non-generic approval which will require
substantial clinical trials and regulatory approval. There can be no assurances,
however, that Faulding would be able to obtain its own non-generic approval in
such circumstances. If BMS is successful in enforcing its patent claims against
Faulding such that Faulding is unable to sell NBT Paclitaxel in Australia,
NaPro's business, financial condition and results of operations could be
materially and adversely affected. See "Patents and Proprietary Technology,"
and "Strategic Alliances."

Government Regulation and Product Approvals

The production and marketing of NBT Paclitaxel and NaPro's research and
development activities are subject to extensive regulation by numerous
governmental authorities in the United States and other countries. In the
United States, drugs are subject to FDA regulation. The Federal Food, Drug and
Cosmetic Act ("FDC Act"), and the regulations promulgated thereunder, and other
federal and state statutes and regulations govern, among other things, the
testing, manufacture, quality, safety, efficacy, labeling, storage, advertising
and promotion of pharmaceutical products. Product development within this
regulatory framework takes a number of years and involves the expenditure of
substantial resources. The marketing of drugs in the United States may not
begin without FDA approval.

The steps required before a pharmaceutical product may be marketed in the United
States include: (i) preclinical laboratory tests, animal pharmacology,
toxicology studies and formulation studies; (ii) the submission to the FDA of an
IND for human clinical testing, which must become effective before human
clinical trials commence; (iii) adequate and well-controlled human clinical
trials to establish the safety and efficacy of the drug; (iv) the submission of
an NDA to the FDA; and (v) FDA approval of the NDA prior to any commercial sale
or shipment of the drug. In addition to safety and efficacy requirements, the
FDA requires the applicant to demonstrate to the FDA's satisfaction that it can
manufacture the drug in compliance with the FDA's current Good Manufacturing
Practices ("cGMP") regulations. In addition to obtaining FDA approval for each
product, each domestic drug manufacturing establishment must be registered with
the FDA. Domestic drug manufacturing establishments are subject to regular
inspections by the FDA and must comply with cGMP regulations. To supply
products for use in the United States, foreign manufacturing establishments must
comply with cGMP regulations and are subject to periodic inspection by the FDA
or by corresponding regulatory agencies in their home countries under reciprocal
agreements with the FDA.

Preclinical studies include the laboratory evaluation of in vitro and in vivo
cytotoxicity, pharmacology, product chemistry and formulation, as well as animal
studies to assess the potential safety and activity of the product. Compounds
must be formulated according to cGMP, and preclinical safety tests must be
conducted by laboratories that comply with FDA regulations regarding good
laboratory practices. The results of the preclinical tests are submitted to the
FDA as part of an IND and are reviewed by the FDA prior to the commencement of
human clinical trials. The data in an IND consists of animal data on safety,
possibly human data from a related use, and chemistry, formulation and
manufacturing data. If the FDA objects, the study may not commence. There can
be no assurance that submission of an IND will result in FDA authorization to
commence clinical trials.

Clinical trials involve the administration of the investigational new drug to
patients under the supervision of a qualified principal investigator. Clinical
trials must be conducted in accordance with good clinical practices under
protocols that detail the objectives of the study, the parameters to be used to
monitor safety

-12-

and the efficacy criteria to be evaluated. Each protocol must be submitted to
the FDA as part of the IND. Each clinical study must be conducted under the
auspices of an Institutional Review Board ("IRB") at the institution at which
the study will be conducted. The IRB will consider, among other things, the
safety of human subjects and the possible liability of the institution. The
company sponsoring the trials is required to select qualified investigators to
supervise the administration of the drug and to ensure that the trials are
adequately monitored in accordance with FDA regulations.

Clinical trials typically are conducted in three sequential phases, which may
overlap. In Phase I, the initial introduction of the drug into healthy
subjects, the drug is tested for safety (adverse effects), dosage tolerance,
metabolism, distribution, excretion and pharmacodynamics (clinical
pharmacology). Phase II involves studies in a limited patient population to:
(i) determine the efficacy of the drug for specific, targeted indications; (ii)
determine dosage tolerance and optimal dosage; and (iii) identify possible
adverse effects and safety risks. When a compound is found likely to be
effective and to have an acceptable safety profile in Phase II evaluations,
Phase III trials are undertaken to evaluate further clinical efficacy and to
test further for safety within an expanded patient population at geographically
dispersed clinical study sites. Clinical trials require substantial time and
effort. There can be no assurance that Phase I, Phase II or Phase III testing
will be completed successfully within any specific time period, if at all.
Furthermore, although certain clinical trials have been completed to date,
NaPro, the Strategic Partners or the FDA may modify, suspend or terminate
clinical trials at any time if they feel that the subjects or patients are being
exposed to an unacceptable health risk.

The results of the pharmaceutical development, preclinical studies and clinical
studies are submitted to the FDA in the form of an NDA for approval of the
marketing and commercial shipment of the drug. An NDA is a systematic
compilation of data, analysis and conclusions on a new drug product based on
studies conducted under an IND. The NDA testing and approval process requires
substantial time and effort, and there can be no assurance that approval will be
granted on a timely basis, if at all. The FDA may refuse to approve an NDA if
the FDA does not view the NDA as containing adequate evidence of the safety and
efficacy of the drug, or if other applicable regulatory criteria are not
satisfied. In addition, the FDA may require additional testing or information,
or require post-marketing testing and surveillance. Notwithstanding the
submission of complete data, the FDA may ultimately decide that the application
does not satisfy its criteria for approval. Moreover, if regulatory approval of
a drug is granted, such approval may entail limitations on the indicated uses
for which the drug may be marketed. Finally, product approvals may be withdrawn
if compliance with regulatory standards is not maintained or if problems occur
following initial marketing or if previously unknown information demonstrates a
lack of safety or effectiveness. Following an approved NDA, an SNDA may be
submitted to the FDA which requests a change in the existing approval. An SNDA
can be for changes in manufacturing, quality control or clinical data or for
changes in product labeling such as indications or warnings.

Manufacturers of drugs sold in the United States are required to satisfy the FDA
that their manufacturing facilities and processes adhere to applicable standards
for cGMP and to engage in extensive record keeping and reporting. Thus, even if
regulatory approval for NBT Paclitaxel is granted, NaPro's current and any
future facilities will be subject to periodic review and inspections by the FDA
or the analogous regulatory authorities of other countries for compliance with
cGMP or similar foreign regulatory standards. Compliance with cGMP regulations
requires substantial time, attention and financial resources. Following
inspections of NaPro's United States and Canadian manufacturing facilities by a
cGMP Auditor of the Australian TGA, the TGA issued approvals to NaPro as an
Australian cGMP compliant paclitaxel manufacturer. NaPro's facilities, however,
have not been inspected by the FDA for regulatory compliance purposes. There
can be no assurance that the FDA or foreign regulatory authorities other than
the TGA will find NaPro's current facilities or facilities being constructed to
be in compliance with United States cGMP regulations or analogous foreign
standards. Subsequent discovery of previously unknown problems

-13-

with a product or NaPro's manufacturing facilities may result in restrictions,
including withdrawal of the product from the market. Failure to comply with the
applicable regulatory requirements by either NaPro or its Strategic Partners
could, among other things, result in criminal prosecution and fines, product
recalls, product seizures and operating restrictions.

NaPro has met with the FDA to discuss technical issues associated with the its
DMF in support of the approval of its bulk drug product as part of IVAX's NDA.
In these meetings, NaPro learned that the pilot scale facility, which
manufactured the drug used in the IVAX clinical trials, needed to be inspected
for approval in the initial NDA. The scaled-up commercial facility will be
submitted in the NDA as an alternate facility. This has resulted in requiring
NaPro to prepare two "commercial" facilities for FDA approval, which was not
anticipated and requires the expenditure of more resources than originally
planned. The biomass strategy employing plantation-grown ornamental yews was
also discussed with the FDA. NaPro believes that the necessary technical and
environmental requirements for approval will be met in the DMF in support of the
NDA.

NaPro is also subject to United States laws and regulations applicable to
exporting drugs. On April 26, 1996, the export provisions in the FDC Act were
amended in Chapter 1A of Title II, Supplemental Appropriations For The Fiscal
Year Ending September 30, 1996, in the "FDA Export Reform and Enhancement Act of
1996" to authorize the export of a drug before marketing approval is obtained in
the United States, to any country, if the drug (a) complies with the laws of the
importing country, and (b) has valid marketing authorization by the appropriate
authority in a country listed by the statute, one of which is Australia. NaPro
has received valid marketing authorization from Australia. Thus, if the other
statutory conditions are met, NaPro believes that future exports from the United
States of NBT Paclitaxel labeled in accordance with the laws of Australia and,
for countries other than Australia, of the importing country, should be
permissible without an FDA permit or other FDA approval although no assurance
can be given.

NaPro is also subject to, among others, the regulations of Canada, the Province
of British Columbia, the United States Environmental Protection Agency, the
Department of Interior (United States Fish and Wildlife Services and the Bureau
of Land Management), the Department of Agriculture (United States Forest
Service) and other countries and regulatory agencies. Pursuant to the National
Environmental Policy Act, certain United States agencies have prepared an
Environmental Impact Statement that addresses the impact of harvesting wild
Pacific yew trees, including cutting down wild Pacific yew trees on federally-
managed land. NaPro is also subject to federal, state and local laws and
regulations governing the use and disposal of hazardous materials as well as
regulations imposed by the Occupational Safety and Health Administration
governing worker safety. There can be no assurance that NaPro is at all times
in complete compliance with all such requirements. NaPro has made and will
continue to make expenditures to comply with environmental requirements.
Compliance with these regulations is time-consuming and expensive. The failure
to comply with these regulations, however, could have a material adverse effect
on NaPro's business, financial condition and results of operations.

The adoption by federal, state or local governments of significant new laws or
regulations or a change in the interpretation or implementation of existing laws
or regulations relating to environmental or other regulatory matters could
increase the cost of producing products, delay regulatory approval or otherwise
adversely affect NaPro's ability to produce or sell NBT Paclitaxel or other
products. Adverse governmental regulations which might arise from future
legislative or administrative regulations or other actions cannot be predicted.
In addition, NaPro's activities have been opposed by the Oregon Natural
Resources Council ("ONRC") because of their concern over wild Pacific yew in old
growth forests. The ONRC and the FDA have reached an agreement on the National
Environmental Policy Act ("NEPA") requirements for NDAs, ANDAs and INDs
involving more than 200 patients involving paclitaxel from Pacific yew trees.
The agreement provides that an applicant shall include an Environmental
Assessment

-14-

("EA") which will identify all sources of Pacific yew which are expected to be
harvested in connection with the manufacture of paclitaxel relating to the
application. The FDA is to subject such EAs to the NEPA process and shall
complete and issue a Finding of No Significant Impact ("FONSI"), or an
Environmental Impact Statement ("EIS") and Record of Decision (ROD) as required
by NEPA before approving any NDA or ANDA involving paclitaxel derived from or
otherwise involving the Pacific yew tree. Because NaPro relies on plantation-
grown ornamental yews, and it will not harvest any Pacific yew trees to
manufacture paclitaxel for a marketed product, it believes that the ONRC-FDA
agreement requirements will be met in the NDA and DMF and that these
requirements will not jeopardize the NDA approval. Even though NaPro no longer
harvests biomass from the bark of the wild Pacific yew, there can be no
assurance that the ONRC and other environmental activist groups will not oppose
other activities of NaPro, which may have the effect of delaying or halting
production of NBT Paclitaxel, each of which could have a material adverse effect
on NaPro's business, financial condition and results of operations.

Outside the United States, NaPro's ability to market a product is contingent
upon receiving a marketing authorization from the appropriate regulatory
authority. This foreign regulatory approval process includes all of the risks
associated with FDA approval set forth above.

NaPro has filed confidential DMFs and other documents containing certain of
NaPro's proprietary manufacturing processes with regulatory agencies in the
United States, Australia, Canada and Europe, relating to NaPro's manufacture of
NBT Paclitaxel. Faulding, referring to NaPro's Australian DMF, has received
marketing approval in Australia for NBT Paclitaxel for treating refractory
ovarian and breast cancers. Additionally, Faulding has completed clinical
trials with NBT Paclitaxel in Australia, which may form the basis for
applications for further marketing approvals in Australia and other countries
where Faulding has the right to market NBT Paclitaxel. Faulding is also engaged
in ongoing clinical research with NBT Paclitaxel with the goal of improving the
effectiveness of paclitaxel treatment in combination therapies and expanding the
number of disease indications treatable with paclitaxel. There can be no
assurance that Faulding's efforts to expand the use of NBT Paclitaxel will be
successful.

IVAX, using NaPro's United States DMF, filed an IND with the FDA in June 1994
relating to NBT Paclitaxel and began its Phase I clinical trials relating to NBT
Paclitaxel in the United States in October 1994. IVAX began Phase II/III
clinical trials in May 1995. Based upon communications from IVAX, it is
estimated that IVAX will file a NDA seeking commercial approval to sell NBT
Paclitaxel in the United States in 1997. No assurance can be given, however,
that NBT Paclitaxel will prove to be safe and effective in clinical trials, that
IVAX will file the NDA within the time period indicated, or that IVAX will
complete any clinical trials or obtain regulatory approvals for NBT Paclitaxel
in a timely manner, or at all, to market NBT Paclitaxel in the United States or
other countries.

Research and Development

During the years ended December 31, 1994, 1995 and 1996, NaPro spent
approximately $3.9 million, $4.6 million and $6.8 million, respectively, on
Company sponsored research and development activities and to produce NBT
Paclitaxel sold to its Strategic Partners. Research and development is expected
to remain a significant cost component of NaPro's business. In the short term,
research and development is expected to concentrate primarily on: (i) improving
paclitaxel yield and reducing production cost; (ii) developing NaPro's semi-
synthesis process for paclitaxel production; and (iii) improving the yields of
NaPro's production methodology for processing needles and limbstock. NaPro will
focus its internal efforts on process development and plans to contract out
research considered essential but for which it lacks facilities or staff. NaPro
also intends to engage in early stage research and development to identify other
potential natural product pharmaceuticals.

-15-

Foreign and Domestic Operations; Export Sales

The following table sets forth, for the past three fiscal years revenue,
profitability (operating loss),and identifiable assets attributable to NaPro's
U.S. and foreign operations (amounts in thousand dollars):

Year Ended December 31
---------------------------
1994 1995 1996
------- ------- -------

Sales to Unaffiliated Customers
United States $ 854 $ 2,054 $ 1,692
Foreign 148 569 1,781
------- ------- -------
Total Sales (1) 1,002 2,623 3,473

Operating Loss
United States (5,914) (3,851) (6,719)
Foreign (68) (433) (384)

Identifiable Assets
United States 4,304 5,133 20,198
Foreign 672 6,820 4,823

- --------------------
(1) Includes export sales of $1,392 in 1995 and $2,509 in 1996. There were no
export sales in 1994.

Foreign sales include sales of product manufactured and shipped from NaPro
Canada, NaPro's Canadian subsidiary. Such products sold by NaPro Canada to
NaPro are then re-sold to Faulding for use outside the United States. Such
"exported" products never physically enter the United States.

Sales of NBT Paclitaxel into foreign markets accounted for approximately 75% of
NaPro's revenue for the year ended December 31, 1995 and 72% of NaPro's revenue
for the year ended December 31, 1996. NaPro anticipates that a significant
portion of its revenue will continue to be derived from sales of its products in
foreign markets until such time, if ever, as IVAX receives approval for
commercial sale of NBT Paclitaxel in the United States.

A substantial portion of NaPro's revenues and operations will thus continue to
be subject to the risks associated with foreign business, including economic or
political instability, shipping delays, fluctuations in foreign currency
exchange rates and various trade restrictions, all of which could have a
significant impact on NaPro's ability to deliver products on a competitive and
timely basis. Future imposition of, or significant increases in, the level of
customs duties, export quotas, drug regulatory restrictions or other regulatory
or trade restrictions could have an adverse effect on NaPro.

Employees

As of March 21, 1997, NaPro had 114 full-time and three part-time employees, of
whom nine hold Ph.D. or M.D. degrees. Three employees were engaged in
biological and clinical research, 18 in chemical research, 21 in quality
control/quality assurance, 51 in manufacturing and 21 in general administration
and finance. NaPro believes that its relations with its employees are good.

Special Note Regarding Forward-looking Statements

Certain statements under the captions "Business" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and elsewhere in
this report constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
NaPro, or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among other things, the following: general
economic and business conditions; competition; technological advances; ability
to obtain rights to technology; ability to obtain and enforce patents; ability
to commercialize and manufacture products; ability to obtain raw materials;
results of clinical studies; results of research and development activities;
business abilities and judgment of personnel; availability of qualified
personnel; changes in, or failure to comply with, governmental regulations;
ability to obtain adequate financing in the future; the ability of NaPro's
strategic partners to perform their obligations under existing agreements with
NaPro; and other factors referenced in this Report and in NaPro's August 1, 1996
Prospectus.

-16-

Item 2. Properties

NaPro leases approximately 54,000 square feet of space in Boulder, Colorado,
which is used for research and development and will be used for commercial-scale
manufacturing upon completion of improvements and installation and validation of
equipment. This facility is also used for NaPro's executive offices and
warehousing of raw materials and equipment. NaPro leases an additional 5,900
square feet of space in Boulder which is used for research and development and
small scale manufacturing. NaPro leases a facility of approximately 3,400 square
feet in British Columbia, Canada which is used for manufacturing. NaPro leases
an additional 10,090 square foot facility in British Columbia, Canada which the
Company intends to sublease to a third party. NaPro has an option to purchase
7.3 acres of land in Longmont, Colorado as a potential site on which to build a
manufacturing facility and has until May 6, 1997, to exercise this option.

Item 3. Legal Proceedings

NaPro is not currently engaged in any material legal proceedings. See
"Patents and Proprietary Technology" and "Australian Petty Patents."

Item 4. Matters Submitted to Stockholders' Vote

No matters were submitted to a vote of NaPro's security holders during the
quarter ended December 1996.

-17-

Part II

Item 5. Market Information and Related Stockholder Matters

Market Information

NaPro's Common Stock is traded in the Nasdaq National Market under the symbol
"NPRO." The following table sets forth, for the fiscal periods indicated, the
high and low sale prices for the Common Stock.

High Low

1995
First Quarter $ 6 5/8 $ 6
Second Quarter 10 1/8 6 1/8
Third Quarter 12 3/4 9 3/8
Fourth Quarter 12 1/8 8 7/8
1996
First Quarter $13 3/8 $ 8 7/8
Second Quarter 17 1/4 11 1/8
Third Quarter 15 1/4 8 5/8
Fourth Quarter 11 3/4 7 1/8

Stockholders

As of December 31, 1996 there were approximately 138 stockholders of record of
NaPro's Common Stock.

Dividends

To date, NaPro has not paid any dividends on the Common Stock. NaPro intends to
retain future earnings, if any, to finance the operation and expansion of its
business and, therefore, does not anticipate paying any cash dividends in the
foreseeable future, if at all.

-18-

Item 6. Selected Financial Data

The selected financial data presented below for each year in the five years
ended December 31, 1996, are derived from NaPro's financial statements, which
have been audited by Ernst & Young LLP, independent auditors, and are qualified
by reference to such Financial Statements and Notes thereto. The data presented
below should be read in conjunction with the consolidated financial statements
at December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996, the related Notes thereto, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and other financial
information included elsewhere in this Report.

(In thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------------------
Statement of Operations Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue:
- ------------------------------------------------------------------------------------------------------------------------------------
Sales of products $ 363 $ 1,248 $ 1,002 $ 2,623 $ 3,473
- ------------------------------------------------------------------------------------------------------------------------------------
Other 202 1 5 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenue 565 1,249 1,007 2,623 3,473
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Expense:
- ------------------------------------------------------------------------------------------------------------------------------------
Research, development and cost of products sold 1,670 3,505 2,707 4,325 6,837
- ------------------------------------------------------------------------------------------------------------------------------------
General and administrative 1,215 2,690 2,044 2,310 3,739
- ------------------------------------------------------------------------------------------------------------------------------------
Faulding royalty - - 1,000 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Plantation cost - 7 1,238 272 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating expense 2,885 6,202 6,989 6,907 10,576
- ------------------------------------------------------------------------------------------------------------------------------------
Operating loss (2,320) (4,953) (5,982) (4,284) (7,103)
- ------------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Income 24 79 188 373 651
- ------------------------------------------------------------------------------------------------------------------------------------
Interest and other expense - (34) (340) (160) (373)
- ------------------------------------------------------------------------------------------------------------------------------------
Loss before extraordinary item (2,296) (4,908) (6,134) (4,071) (6,825)
- ------------------------------------------------------------------------------------------------------------------------------------
Loss on early extinguishment of debt - - (512) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss $(2,296) $(4,908) $(6,646) $(4,071) $(6,825)
- ------------------------------------------------------------------------------------------------------------------------------------
Loss per share:
- ------------------------------------------------------------------------------------------------------------------------------------
Before extraordinary item $(0.38) $(0.79) $(0.91) $(0.51) $(0.68)
- ------------------------------------------------------------------------------------------------------------------------------------
Extraordinary item - - (0.08) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss $(0.38) $(0.79) $(0.99) $(0.51) $(0.68)
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 6,103 6,201 6,761 7,973 9,973
- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Cash, cash equivalents and short-term securities $ 86 $ 18 $1,400 $7,800 $14,767
- ------------------------------------------------------------------------------------------------------------------------------------
Working capital (26) (435) 3,169 8,453 14,224
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 918 2,120 4,976 11,953 25,021
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term obligations, net of current maturities 709 1,435 1,273 1,618 751
- ------------------------------------------------------------------------------------------------------------------------------------
Minority interest - - - 3,715 3,715
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated deficit (3,075) (7,983) (14,629) (18,700) (25,525)
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholder's equity (deficit) (190) (944) 3,037 5,424 16,569
- ------------------------------------------------------------------------------------------------------------------------------------

-19-

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

The following discussion and analysis provides information which NaPro's
management believes is relevant to an assessment and understanding of NaPro's
results of operations. This discussion should be read in conjunction with the
Financial Statements and Notes included elsewhere in this Report. Special Note:
Certain statements set forth below constitute "forward-looking statements"
within the meaning of the Reform Act. See "Business--Special Note Regarding
Forward-Looking Statements" for additional factors relating to such statements.

General

NaPro has devoted its efforts primarily to the development and implementation of
its EIP/TM/ technology for producing NBT paclitaxel. NaPro is currently
dependent exclusively on sales of NBT paclitaxel for revenue. Through December
31, 1996, NaPro's production of NBT paclitaxel was limited primarily to research
and pilot-scale production, and much of NaPro's product sales were for use in
clinical trials and for research and development purposes. Accordingly, NaPro
has generated only limited revenue from such activities and has incurred
significant operating losses, including operating losses of approximately $6
million, $4.3 million and $7.1 million for the years ended December 31, 1994,
1995 and 1996, respectively, resulting in an accumulated deficit of $25.5
million as of December 31, 1996. NaPro expects that it will continue to have a
high level of operating expense and will be required to make significant up-
front expenditures in connection with its biomass procurement, product
development and research-and-development activities. NaPro anticipates that
operating losses will continue until such time, if ever, as NaPro is able to
generate sufficient revenue to support its operations. NaPro believes that its
ability to generate such revenue depends primarily on the ability of its
Strategic Partners to obtain regulatory approval in the U.S. for the commercial
sale of NBT paclitaxel, on NaPro's ability to obtain regulatory approval for its
manufacturing facilities and on NaPro's ability to construct manufacturing
facilities that produce quantities of NBT Paclitaxel sufficient to supply the
Strategic Partners' requirements for commercial sales. Moreover, NaPro's future
growth and profitability will depend on the success of the Strategic Partners in
fostering acceptance in the oncological market for NBT paclitaxel as a preferred
form of chemotherapy to be used alone or in combination with other
chemotherapeutic agents.

In January 1995, Faulding received approval to market NBT paclitaxel
commercially in Australia under their trade name ANZATAX/TM. Although NaPro's
revenue has increased as a result of this approval, NaPro does not currently
expect to reach profitability for the year ending December 31, 1997. The
ability of Faulding to continue to market NBT paclitaxel in Australia pursuant
to Faulding's marketing approval and the success of these marketing efforts will
continue to have a significant effect on NaPro's revenue and profitability.

In June 1996 NaPro completed the call of 2,070,000 redeemable warrants,
issuing 630,620 shares of Common Stock with the receipt of cash in the amount of
$3.1 million pursuant to cash exercise elections of 630,620 redeemable warrants,
and issuing 1,007,102 shares of Common Stock pursuant to Cash-less exercise
elections of 1,438,720 redeemable warrants.

In August 1996, NaPro closed a public offering of 1.79 million shares of its
Common Stock, which resulted in net proceeds of $13.8 million to the Company.
The proceeds of this offering are being used to establish and upgrade
manufacturing facilities and to fund NaPro's operations, capital expenditures,
additional plantation development and general corporate purposes.

Results of Operations

NaPro was in the development stage through December 31, 1994. Comparison of
operations between years and historical trends does not necessarily indicate
future trends and operating results of NaPro.

-20-

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 Revenue.
- ---------------------------------------------------------------------
Revenue increased $900,000 to $3.5 million for 1996 from $2.6 million for 1995.
Through December 31, 1995, the majority of product sales had been for use in
clinical trials and for research and development purposes. Such sales are
unpredictable by nature. Although initial commercial sales commenced in January
1995, and increased in 1996, NaPro expects these sales to be unpredictable until
such time as the markets of the Strategic Partners have been established and
proven.

Research, Development and Cost of Products Sold. Research, development and cost
of products sold increased $2.5 million to $6.8 million for 1996 from $4.3
million for 1995. The increase was due primarily to an increase in the level of
process development and research, including higher production cost due to higher
production volume. NaPro's production process is not distinct from its
research and development processes. Accordingly, the cost of products sold is
included with NaPro's research and development expense.

General and Administrative Expense. General and administrative expense (G&A)
increased $1.4 million to $3.7 million for 1996 from $2.3 million for 1995.
This increase was due primarily to an increase in facility cost and an increase
in administrative and support staff.

Plantation Fees. Plantation fees decreased from $300,000 in 1995 to zero,
reflecting the completion of research related to plantation development as of
December 31, 1995. In 1996, NaPro began capitalizing plantation expenditures
incurred prior to the first commercial harvest and depletes such cost over the
remaining life of the plantation contract using the units-of-production method.

Interest Income. Interest income increased $300,000 to $700,000 for 1996 from
$400,000 for 1995. This increase was the result of larger free cash balances
associated with the completion of NaPro's offering of Common Stock in August
1996 and its warrant call completed in June 1996 (see Liquidity and Capital
Resources).

Interest and Other Expense. Interest and other expense increased $300,000 to
$400,000 for 1996 from $100,000 for 1995. The increase was attributable to
interest on increased borrowings on the equipment lease line and note payable to
Faulding (see Liquidity and Capital Resources).

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 Revenue.
- ---------------------------------------------------------------------
Revenue increased $1.6 million to $2.6 million for 1995 from $1 million for
1994. The increase was attributable primarily to the timing of product
deliveries to the Strategic Partners, as well as changes in pricing associated
with commercial sales of NBT paclitaxel in Australia.

Research, Development and Cost of Products Sold. Research, development and cost
of products sold increased $1.6 million to $4.3 million for 1995 from $2.7
million for 1994. The increase was due primarily to an increase in the level of
process development and research, including higher production cost due to higher
production volume.

General and Administrative Expense. G&A increased $300,000 to $2.3 million for
1995 from $2 million for 1994. The increase was due primarily to an increase in
administrative and related support staff.

Faulding Royalty Expense and Plantation Fees. Plantation fees decreased
$900,000 to $300,000 for 1995 from $1.2 million for 1994. Higher fees during
1994 reflected the additional expense of establishing the plantation as opposed
to ongoing maintenance in 1995 (see Note 8 to the Financial Statements). The $1

-21-

million 1994 Faulding royalty expense was a one-time charge.

Interest Income. Interest income increased $200,000 to $400,000 for 1995 from
$200,000 for 1994. This increase was the result of larger free cash
balances.

Interest and Other Expense. Interest and other expense decreased $200,000 to
$100,000 for 1995 from $300,000 for 1994. The decrease was the result of the
absence of interest on bridge loans which were paid off in 1994.

Liquidity and Capital Resources

NaPro's capital requirements have been and will continue to be significant. As
of December 31, 1996, NaPro had a working capital balance of $14.2 million.
This compared to a working capital balance of $8.5 million as of December 31,
1995. To date, the funding of NaPro's capital requirements has been dependent
primarily on net proceeds of public offerings of its common stock of
approximately $21.1 million, on private placements of its equity securities of
approximately $22.8 million, on the exercise of warrants and options of $4.3
million, and on capital leases, loans and advances from its stockholders and the
Strategic Partners.

Working Capital and Cash Flow Cash and cash equivalents increased $2.4 million
- -----------------------------
to $9.5 million for the year ended December 31, 1996 from $7.1 million at
December 31, 1995. Net cash provided by 1996 financing activity was partially
offset by $6.5 million used in operating activities, by capital expenditures of
$4.9 million and net purchases of investments of $4.9 million. Cash and cash
equivalents increased $6.2 million to $7.1 million at December 31, 1995 from
$900,000 at December 31, 1994. Net cash provided by 1995 financing activity was
partially offset by cash used in operations of $3 million, by capital
expenditures of $ 1.2 million and net purchases of investments of $100,000.

Inventory increased $1.1 million to $2.3 million in the year ended December 31,
1996 from $1.2 million at December 31, 1995. The amount of product held as
finished goods equivalents in work-in-progress inventories as well as finished
goods inventories is dependent on a number of factors, including the shipping
requirements of the Strategic Partners and NaPro's production planning for
meeting those needs. Inventory balances may vary significantly during product
development and launch periods. NaPro may make significant biomass investments
during 1997.

Capital Expenditures NaPro expended $4.9 million and $1.2 million,
- --------------------
respectively, during 1996 and 1995 for capital projects. These expenditures
primarily included plantation cost, initial work on a new large scale commercial
EIP/TM/ manufacturing facility in Boulder, and expansion and improvement to
NaPro's Boulder laboratories and facilities. In 1997, NaPro expects to invest
capital in property, plant and equipment, primarily to expand its plantation
operations, to complete the large scale commercial EIP/TM/ manufacturing
facility in Boulder and to upgrade and expand its extraction manufacturing
capabilities.

NaPro anticipates a significant increase in capital expenditures and operations
in 1997 in anticipation of possible NDA approval. Therefore, NaPro plans to
obtain additional capital during the year. If NaPro is not successful in
attracting capital, it will need to significantly reduce the scope of capital
expenditures and operations.

The amount and timing of future capital expenditures will depend upon numerous
factors, including the progress of NaPro's research and development programs,
the magnitude and scope of these activities, the cost of preparing, filing,
prosecuting, maintaining and enforcing patent claims and other intellectual
property rights, competing technological and marketing developments, changes in
or terminations of

-22-

existing strategic partnerships, the establishment of additional strategic
relationships and the cost of manufacturing scale-up. NaPro may seek additional
long-term financing to fund capital expenditures should such financing become
available on terms acceptable to NaPro.

Net Operating Loss Carryforwards As of December 31, 1996, NaPro had net
- --------------------------------
operating loss carryforwards for income tax purposes of approximately $22
million to offset future taxable income. Under Section 382 of the Internal
Revenue Code of 1986, as amended, the utilization of net operating loss
carryforwards is limited after an ownership change, as defined in such Section
382, to an annual amount equal to the value of the loss corporation's
outstanding stock immediately before the date of the ownership change multiplied
by the federal long-term tax-exempt rate in effect during the month the
ownership change occurred. Such an ownership change occurred in September 1993.
As a result, NaPro will be subject to an annual limitation on the use of its net
operating losses. This limitation only affects net operating losses incurred up
to the ownership change and does not reduce the total amount of net operating
loss which may be taken, but rather limits the amount which may be used during a
particular year. Therefore, in the event NaPro achieves profitability, such
limitation would have the effect of increasing NaPro's tax liability and
reducing the net income and available cash resources of NaPro if the taxable
income during a year exceeded the allowable loss carried forward to that year.

-23-

Item 8. Financial Statements and Supplementary Data

The information required by this item begins at Page F-1.

Item 9. Changes in and Disagreements with Accountants

None

Part III

Item 10. Directors and Executive Officers

The information concerning NaPro's directors and executive officers is
incorporated by reference to the section entitled "Election of Directors" in the
Company's definition Proxy Statement with respect to the Company's 1997 Annual
Meeting of Stockholders (the "Proxy Statement").

Item 11. Executive Compensation

The section labeled "Executive Compensation" appearing in NaPro's Proxy
Statement is incorporated herein by reference, except for such information as
need not be incorporated by reference under rules promulgated by the Securities
and Exchange Commission.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The section labeled "Security Ownership of Directors and Executive Officers and
Certain Beneficial Owners" appearing in NaPro's Proxy Statement is incorporated
herein by reference.

Item 13. Certain Relationships and Related Transactions

The section labeled "Certain Relationships and related Transactions" appearing
in NaPro's Proxy Statement is incorporated herein by reference.

-24-

Part IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

Financial Statements

The Financial Statement Index is found on Page F-1.

Financial Statement Schedules

All schedules are omitted because they are not applicable or not required or
because the information is included in the consolidated financial statements or
the notes thereto.

Exhibits and Reports on Form 8-K

NaPro filed a November 8, 1996, Current Report Form 8-K reporting the adoption
of a Stockholder Rights Plan.

Exhibit
Number Description of Exhibit
- ----- ----------------------

3.1 Amended and Restated Certificate of Incorporation of the Company, as
amended August 2, 1996.
3.2 Certificate of Designation for Convertible Preferred Stock, Series A.
Incorporated herein by reference from the Company's Quarterly Report on Form
10-Q filed with the Commission for the quarter ended June 30, 1995 (File No.
0-24320).
3.3 Certificate of Designation for Series B Junior Participating Preferred
Stock. Incorporated herein by reference from the Company's November 8, 1996
Current Report Form 8-K (File No. 0-24320).
3.4 Bylaws of the Company. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the Commission on
July 24, 1994 (File No. 33-78016).
4.1 Common Stock Certificate. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the Commission on
July 24, 1994 (File No. 33-78016).
4.2 Underwriter's Warrant Agreement. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the Commission on
July 24, 1994 (File No. 33-78016).
4.3 Warrant Agreement. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
4.4 Warrant Certificate. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the Commission on
July 24, 1994 (File No. 33-78016).
4.5 The Certificate of Incorporation and Bylaws of the Company are included as
Exhibits 3.1 through 3.4.
10.1* Company's 1993 Stock Option Plan. Incorporated herein by reference from
the Registration Statement on Form S-1 of the Company, filed with the Commission
on July 24, 1994 (File No. 33-78016).
10.2* Company's 1994 Long-Term Performance Incentive Plan, as amended July 30,
1996.
10.3 Common Stock Warrant dated as of June 7, 1993 between the Company and
Broadmark Capital Corporation. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the Commission on
July 24, 1994 (File No. 33-78016).
10.4 Stock Purchase Warrant dated as of June 7, 1993 between the Company and
Arthur D. Harrison. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
10.5 Stock Purchase Warrant dated as of June 7, 1993 between the Company and
D&N Holding Company. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company,

-25-

filed with the Commission on July 24, 1994 (File No. 33-78016).
10.6 Stock Purchase Warrant dated as of June 7, 1993 between the Company and
Kirkland & Ellis. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
10.7 Stock Purchase Warrant dated as of December 15, 1992 between the Company
and Kirkland & Ellis. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
10.8 Stock Purchase Warrant dated as of June 3, 1992 between the Company and
Herbert L Lucas. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
10.9 Stock Purchase Warrant dated as of June 3, 1992 between the Company and
H.J. Meyers & Co., Inc. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
10.10 Stock Purchase Warrant dated as of June 3, 1992 between the Company and
Freshman, Marantz, Orlanski, Cooper, and Klein 1993 Investments. Incorporated
herein by reference from the Registration Statement on Form S-1 of the Company,
filed with the Commission on July 24, 1994 (File No. 33-78016).
10.11 Stock Purchase Warrant dated as of April 30, 1993 between the Company and
Pacific Regeneration Technologies, Inc. Incorporated herein by reference from
the Registration Statement on Form S-1 of the Company, filed with the Commission
on July 24, 1994 (File No. 33-78016).
10.12 Registration Agreement dated as of June 7, 1993 by and among the Company,
D&N Holding Company, Sterling K. Ainsworth, Patricia A. Pilia, Leonard P.
Shaykin, and Lawrence Helson. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the Commission on
July 24, 1994 (File No. 33-78016).
10.13 Amended and Restated Stockholders Agreement dated as of May 31, 1994 by
and among the Company, D&N Holding Company, Sterling K. Ainsworth, Patricia A.
Pilia, Leonard P. Shaykin, and Lawrence Helson. Incorporated herein by
reference from the Registration Statement on Form S-1 of the Company, filed with
the Commission on July 24, 1994 (File No. 33-78016).
10.14 Amended and Restated Employment and Executive Stock Agreement dated as of
June 7, 1993 and amended and restated as of May 31, 1994 between the Company
and Leonard P. Shaykin. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
10.15* Amended and Restated Employment and Executive Stock Agreement dated as
of June 7, 1993 and amended and restated as of May 31, 1994 between the Company
and Sterling K. Ainsworth. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the Commission on
July 24, 1994 (File No. 33-78016).
10.16* Amended and Restated Employment and Executive Stock Agreement dated as
of June 7, 1993 and amended and restated as of May 31, 1994 between the Company
and Patricia A. Pilia. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July 24,
1994 (File No. 33-78016).
10.17* Amended and Restated Employment and Executive Stock Agreement dated as
of June 7, 1993 and amended and restated as of May 31, 1994 between the Company
and Lawrence Helson. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
10.18* Company's Stock Option Agreement with Sterling K. Ainsworth.
Incorporated herein by reference from the Registration Statement on Form S-1 of
the Company, filed with the Commission on July 24, 1994 (File No. 33-78016).
10.19* Company's Stock Option Agreement with Patricia A. Pilia. Incorporated
herein by reference from the Registration Statement on Form S-1 of the Company,
filed with the Commission on July 24, 1994 (File No. 33-78016).
10.20 Services and Supply Agreement dated as of December 1, 1993 between the
Company and Pacific

-26-

BioTechnologies Inc. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
10.21 Subscription Agreement dated as of April 29, 1993 between the Company and
Pacific Regeneration Technologies. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the Commission on
July 24, 1994 (File No. 33-78016).
10.22 Amended and Restated Master Agreement dated as of January 19, 1994
between the Company and F.H. Faulding & Co., Ltd. Incorporated herein by
reference from the Registration Statement on Form S-1 of the Company, filed
with the Commission on July 24, 1994 (File No. 33-78016).
10.23 Amendment No. 1 To Amended and Restated Master Agreement Dated January
19, 1994, executed as of March 23, 1995. Incorporated herein by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1994
(File No. 0-24320).
10.24 Agreement dated as of June 7, 1993 between the Company and Baker Norton
Pharmaceuticals, Inc. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July 24,
1994 (File No. 33-78016).
10.25 Lease dated February 28, 1995 between the Company and the Mutual Life of
Canada. Incorporated herein by reference from the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995 (File No. 0-24320).
10.26 Subscription Agreement and Investment Letter between the Company and
NaPro BioTherapeutics (Canada), Inc. Incorporated herein by reference from the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995
(File No. 0-24320).
10.27 Put/Call Agreement dated July 12, 1995 between the Company and the
Purchasers of Series A Preferred Shares of NaPro BioTherapeutics (Canada) Inc.
Incorporated herein by reference from the Company's Quarterly Report on Form 10-
Q for the quarter ended June 30, 1995 (File No. 0-24320).
10.28 Side Letter dated July 21, 1995 to Put/Call Agreement. Incorporated
herein by reference from the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 (File No. 0-24320).
10.29 Engagement Letter dated February 16, 1995 between the Company and Capital
West Partners. Incorporated herein by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995 (File No. 0-24320).
10.30 Subscription Agreement between the Company and the purchasers of
Convertible Preferred Stock, Series A, of the Company. Incorporated herein by
reference from the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995 (File No. 0-24320).
10.31 Purchase Agreement between the Company and certain purchasers of
Preferred Shares of NaPro BioTherapeutics (Canada) Inc. Incorporated herein by
reference from the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995 (File No. 0-24320).
10.32 Purchase Agreement between the Company and BPI Capital Management
Corporation as to Preferred Shares of NaPro BioTherapeutics (Canada) Inc.
Incorporated herein by reference from the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 (File No. 0-24320).
10.33 Lease between the Company and Gunbarrel Facility L.L.C. dated October 16,
1995. Incorporated herein by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1995 (File No. 0-24320).
10.34 First Amendment to Lease November 27, 1995, between the Company and
Gunbarrel Facility L.L.C. Incorporated herein by reference from the Company's
Annual Report on Form 10-K for the year ended December 31, 1995 (File No.
0-24320).
10.35 Agreement between the Company and Pacific BioTechnologies Inc. dated
March 29, 1996. Incorporated herein by reference from the Company's Annual
Report on Form10-K for the year ended December 31, 1995 (File No. 0-24320).
10.36 Culture Agreement dated March 1, 1996 between Zelenka Nursey, Inc.
("Zelenka") and the Company. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company filed with the Commission on
August 1, 1996 (File No. 333-3051).
10.37 Agreement for Sale, Harvest and Storage of Nursey Stock dated May 1, 1996
between Zelenka

-27-

and the Company. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company filed with the Commission on August 1, 1996
(File No. 333-3051).
10.38 Culture Agreement dated as of March 1, 1997 between Zelenka and the
Company. The Company is filing with the Commission a Confidential Treatment
Request with respect to this agreement, and accordingly, certain language has
been redacted.
10.39 Lease Agreement dated as of March 1, 1997 between Zelenka and the
Company. The Company is filing with the Commission a Confidential Treatment
Request with respect to this agreement, and accordingly, certain language has
been redacted.
10.40 Agreement for Sale, Harvest and Storage of Nursey Stock dated as of March
1, 1997 between Zelenka and the Company. The Company is filling with the
Commission a Confidential Treatment Request with respect to this agreement, and
accordingly, certain language has been redacted.
21.1 List of Subsidiaries. Incorporated herein by reference from the
Registration Statement of the Company on Form S-1, filed with the Commission on
May 20, 1996 (File No. 33-78016).
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Powers of Attorney
27.1 Financial Data Schedule.
*A management compensation plan.

-28-

Signatures

Pursuant to Section 13 of the Securities Exchange Act of 1934, NaPro caused this
report to be signed on its behalf.

NAPRO BIOTHERAPEUTICS, INC.

/s/ Sterling K. Ainsworth
Sterling K. Ainsworth, Ph.D President, Chief March 31, 1997
Executive Officer;
Director

Pursuant to the Exchange Act, this report has been signed on behalf of NaPro and
in the capacities indicated.

* Chairman of the Board of March 31, 1997
Leonard P. Shaykin Directors

/s/ Sterling K. Ainsworth President, Chief March 31, 1997
Sterling K. Ainsworth, Ph.D Executive Officer;
Director

/s/ Gordon H. Link, Jr. Vice President, Chief March 31, 1997
Gordon H. Link, Jr Financial Officer
(Principal Financial Officer)

/s/ Robert L. Poley Controller March 31, 1997
Robert L. Poley (Principal Accounting Officer)

* Director March 31, 1997
E. Garrett Bewkes, Jr.

* Director March 31, 1997
Vaughn D. Bryson

* Director March 31, 1997
Philip Frost, M.D.

* Director March 31, 1997
Arthur H. Hayes, Jr., M.D.

* Director March 31, 1997
Mark B. Hacken

* Director March 31, 1997
Richard C. Pfenniger, Jr.

/s/ Patricia A. Pilia Director March 31, 1997
Patricia A. Pilia, Ph.D

*By:/s/ Gordon H. Link, Jr
Gordon H. Link, Jr., Attorney in Fact

-29-

NaPro BioTherapeutics, Inc. and Subsidiaries

Financial Statements

Years ended December 31, 1994, 1995 and 1996

Index to Financial Statements

Report of Independent Auditors......................................... F-2

Audited Consolidated Financial Statements

Consolidated Balance Sheet............................................. F-3
Consolidated Statement of Operations................................... F-5
Consolidated Statement of Stockholders' Equity......................... F-6
Consolidated Statement of Cash Flows................................... F-8
Notes to Consolidated Financial Statements............................ F-10

Report of Independent Auditors

The Board of Directors and Stockholders
NaPro BioTherapeutics, Inc.

We have audited the accompanying consolidated balance sheet of NaPro
BioTherapeutics, Inc. and subsidiaries 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of NaPro
BioTherapeutics, Inc. and subsidiary at December 31, 1995 and 1996, and the
consolidated 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.

ERNST & YOUNG LLP

Denver, Colorado
January 26, 1997

F-2

NaPro BioTherapeutics, Inc. and Subsidiaries

Consolidated Balance Sheet

December 31
1995 1996
----------- ------------

Assets
Current assets:
Cash and cash equivalents $ 7,133,000 $9,531,000
Securities available for sale - 2,669,000
Securities held to maturity 667,000 2,567,000
Accounts receivable 326,000 662,000
Inventory:
Raw materials 287,000 495,000
Work-in-process 433,000 449,000
Finished goods 492,000 1,337,000
----------- ------------
1,212,000 2,281,000
Prepaid expenses and other 311,000 500,000
----------- ------------
Total current assets 9,649,000 18,210,000

Property and equipment, at cost (Note 4):
Plantation cost - 1,923,000
Laboratory equipment 1,359,000 2,086,000
Leasehold improvements 508,000 1,151,000
Office equipment and other 230,000 559,000
Construction in progress 407,000 1,645,000
----------- ------------
2,504,000 7,364,000
Accumulated depreciation 722,000 1,352,000
----------- ------------
Property and equipment, net 1,782,000 6,012,000

Restricted cash 124,000 415,000
Receivable from related parties 18,000 18,000
Other assets 380,000 366,000
----------- ------------
Total assets $11,953,000 $ 25,021,000
=========== ============

F-3

NaPro BioTherapeutics, Inc. and Subsidiaries

Consolidated Balance Sheet (continued)

December 31
1995 1996
---- ----

Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 663,000 $ 1,763,000
Accrued payroll and payroll taxes 338,000 519,000
Capital lease obligations--current (Note 4) 105,000 444,000
Notes payable--current (Note 3) 39,000 1,225,000
Deferred revenue 51,000 35,000
------------ ------------
Total current liabilities 1,196,000 3,986,000

Capital lease obligations--long term (Note 4) 299,000 751,000
Notes payable--long term (Note 3) 1,150,000 -
Compensation due to officers and directors 169,000 -

Commitments and contingencies (Notes 1 and 9)

Minority interest (Note 6) 3,715,000 3,715,000

Stockholders' equity (Note 6):
Preferred stock, $.001 par value:
Authorized shares - 2,000,000
Series A:
Issued and outstanding shares - 125,000 in
1995 and 1996 (preference in
liquidation $1,000,000) - -
Nonvoting common stock, convertible on disposi-
tion into voting common stock, $.0075 par
value:
Authorized shares - 1,000,000
Issued and outstanding shares - 400,000 in
1995 and 595,000 in 1996 3,000 4,000
Common stock, $.0075 par value:
Authorized shares - 19,000,000
Issued shares - 8,525,265 in 1995 and
11,986,089 in 1996 64,000 89,000
Additional paid-in capital 26,675,000 44,670,000
Unearned compensation (9,000) -
Notes receivable from stockholders (925,000) (985,000)
Deficit (18,700,000) (25,525,000)
Treasury stock - 144,288 shares in 1995 and 1996 (1,684,000) (1,684,000)
------------ ------------
Total stockholders' equity 5,424,000 16,569,000
------------ ------------
Total liabilities and stockholders' equity $ 11,953,000 $ 25,021,000
============ ============

See accompanying notes.
F-4

Napro BioTherapeutics, Inc. and Subsidiaries

Consolidated Statement of Operations

Year ended December 31
1994 1995 1996
---- ---- ----

Revenue:
Sales of products $ 1,002,000 $ 2,623,000 $ 3,473,000
Other 5,000 - -
----------- ----------- ------------
1,007,000 2,623,000 3,473,000

Expense:
Research, development and cost of
products sold 2,707,000 4,325,000 6,837,000
General and administrative 2,044,000 2,310,000 3,739,000
Faulding royalty (Note 6) 1,000,000 - -
Plantation fees (Note 8) 1,238,000 272,000 -
----------- ----------- ------------
6,989,000 6,907,000 10,576,000
----------- ----------- ------------
Operating loss (5,982,000) (4,284,000) ( 7,103,000)

Other income (expense):
Interest income 188,000 373,000 651,000
Interest and other expense (340,000) (160,000) (373,000)
----------- ----------- ------------
Loss before extraordinary item (6,134,000) (4,071,000) (6,825,000)

Loss on early extinguishment of debt
(Note 6) (512,000) - -
----------- ----------- ------------
Net loss $(6,646,000) $(4,071,000) $ (6,825,000)
=========== =========== ============
Net loss per share:
Before extraordinary item $ (0.91) $(0.51) $(0.68)
Extraordinary item (0.08) - -
----------- ----------- ------------
Net loss $ (0.99) $(0.51) $(0.68)
=========== =========== ============
Weighted average shares outstanding 6,761,081 7,972,537 9,973,325
=========== =========== ============

See accompanying notes.

F-5

NaPro BioTherapeutics, Inc. and Subsidiaries

Consolidated Statement of Stockholders' Equity

Years ended December 31, 1994, 1995 and 1996

Series A Nonvoting Additional
Preferred Common Common Paid-in Unearned
Stock Stock Stock Capital Compensation
------------------------------------------------------------------------

Balance at December 31, 1993 $ -- $ -- $42,000 $ 9,942,000 $(589,000)
Issuance of 265,000 shares of common stock at
$2.40 per share in exchange for cash, net of
offering cost of $87,000 -- -- 2,000 547,000 --

Issuance of 16,667 common stock warrants at $.01
per share in exchange for consulting services -- -- -- 42,000 --

Issuance of 33,333 common stock warrants at
$1.125 per share in exchange for employment services -- -- -- 40,000 --

Issuance of 1,800,000 shares of common stock at
$5.00 per share and 2,070,000 warrants at $0.10
per warrant for cash, net of offering cost of
$1,184,000 -- -- 14,000 7,339,000 --

Issuance of 400,000 shares of nonvoting common
stock at $5.00 per share for cash and warrants to
purchase 400,000 shares of nonvoting common
stock at $.10 per warrant -- 3,000 -- 2,037,000 --

Exercise of 30,667 common stock warrants for
cash, at prices ranging from $.10 to $2.40 per share -- -- -- 34,000 --

Issuance of 28,615 shares of common stock at $5.00
per share in exchange for notes payable -- -- -- 143,000 --

Amortization of unearned compensation -- -- -- -- 559,000

Interest receivable on officers' notes -- -- -- -- --

Net loss -- -- -- -- --
------------------------------------------------------------------------

Balance as of December 31, 1994 -- 3,000 58,000 20,124,000 (30,000)

Issuance of 1,364,263 shares of preferred stock at
$8.00 per share, net of offering cost of
$846,000 (725,513 shares in minority interest) 1,000 -- -- 4,267,000 --

Notes
Receivable
From Treasury
Stockholders Deficit Stock Total
------------------------------------------------------------------------

Balance at December 31, 1993 $(2,356,000) $ (7,983,000) $ - $ (944,000)
Issuance of 265,000 shares of common stock at
$2.40 per share in exchange for cash, net of
offering cost of $87,000 -- -- - 549,000

Issuance of 16,667 common stock warrants at $.01
per share in exchange for consulting services -- -- - 42,000

Issuance of 33,333 common stock warrants at
$1.125 per share in exchange for employment services -- -- - 40,000

Issuance of 1,800,000 shares of common stock at
$5.00 per share and 2,070,000 warrants at $0.10
per warrant for cash, net of offering cost of
$1,184,000 -- -- - 7,353,000

Issuance of 400,000 shares of nonvoting common
stock at $5.00 per share for cash and warrants to
purchase 400,000 shares of nonvoting common
stock at $.10 per warrant -- -- - 2,040,000

Exercise of 30,667 common stock warrants for
cash, at prices ranging from $.10 to $2.40 per share -- -- - 34,000

Issuance of 28,615 shares of common stock at $5.00
per share in exchange for notes payable -- -- - 143,000

Amortization of unearned compensation -- -- - 559,000

Interest receivable on officers' notes (133,000) -- - (133,000)

Net loss -- (6,646,000) - (6,646,000)
------------------------------------------------------------------------

Balance as of December 31, 1994 (2,489,000) (14,629,000) - 3,037,000

Issuance of 1,364,263 shares of preferred stock at
$8.00 per share, net of offering cost of
$846,000 (725,513 shares in minority interest) -- -- - 4,268,000

F-6

NaPro BioTherapeutics, Inc. and Subsidiaries
Consolidated Statement of Stockholders, Equity
Years ended December 31, 1994, 1995 and 1996 (continued)

Series A Nonvoting Additional
Preferred Common Common Paid-in Unearned
Stock Stock Stock Capital Compensation
------------------------------------------------------------------------

Conversion of 513,750 shares of preferred stock
into 513,750 shares of common stock and
exchange of 266,421 shares of subsidiary's
preferred stock for 266,421 shares of common stock $(1,000) $ -- $ 6,000 $ 2,238,000 $ --

Exercise of 31,651 stock options at prices ranging
from $.75 per share to $2.40 per share -- -- -- 46,000 --

Repurchase of 144,288 shares of common stock at
$11.675 per share in exchange for cancellation
of indebtedness -- -- -- -- --

Interest receivable on officers' notes -- -- -- -- --

Amortization of unearned compensation -- -- -- -- 21,000

Net loss -- -- -- -- --
------------------------------------------------------------------------

Balance at December 31, 1995 -- 3,000 64,000 26,675,000 (9,000)

Exercise of warrants for 200,000 shares of nonvoting
common stock -- 1,000 -- 999,000 --

Exercise of 21,418 stock options at prices ranging from
$ .75 per share to $6.57 per share -- -- -- 66,000 --

Exercise of warrants for 1,640,389 shares of common
stock at prices ranging from $5.00 per share to $9.37
per share net of offering cost of $ 37,000 -- -- 12,000 3,129,000 --

Issuance of 1,790,000 shares of common stock at
$8.75 per share net of offering cost of $1,876,000 -- -- 13,000 13,773,000 --

Contribution of 4,017 shares of common stock at $7.00
per share to retirement plan -- -- -- 28,000 --

Interest receivable on officers' notes -- -- -- -- --

Amortization of unearned compensation -- -- -- -- 9,000

Conversion of 5,000 shares of nonvoting common stock
to 5,000 shares of common stock -- -- -- -- --

Net loss -- -- -- -- --
------------------------------------------------------------------------

Balance at December 31, 1996 $ -- $4,000 $89,000 $44,670,000 $ --
========================================================================

Notes
Receivable
From Treasury
Stockholders Deficit Stock Total
------------------------------------------------------------------------

Exercise of 31,651 stock options at prices ranging
from $.75 per share to $2.40 per share -- -- -- 46,000

Repurchase of 144,288 shares of common stock at
$11.675 per share in exchange for cancellation
of indebtedness 1,684,000 -- (1,684,000) --

Interest receivable on officers' notes (120,000) -- -- (120,000)

Amortization of unearned compensation -- -- -- 21,000

Net loss -- (4,071,000) -- (4,071,000)
------------------------------------------------------------------------

Balance at December 31, 1995 (925,000) (18,700,000) (1,684,000) 5,424,000

Exercise of warrants for 200,000 shares of nonvoting
common stock -- -- -- 1,000,000

Exercise of 21,418 stock options at prices ranging from
$ .75 per share to $6.57 per share -- -- -- 66,000

Exercise of warrants for 1,640,389 shares of common
stock at prices ranging from $5.00 per share to $9.37
per share net of offering cost of $ 37,000 -- -- -- 3,141,000

Issuance of 1,790,000 shares of common stock at
$8.75 per share net of offering cost of $1,876,000 -- -- -- 13,786,000

Contribution of 4,017 shares of common stock at $7.00
per share to retirement plan -- -- -- 28,000

Interest receivable on officers' notes (60,000) -- -- (60,000)

Amortization of unearned compensation -- -- -- 9,000

Conversion of 5,000 shares of nonvoting common stock
to 5,000 shares of common stock -- -- -- --

Net loss -- (6,825,000) -- (6,825,000)
------------------------------------------------------------------------

Balance at December 31, 1996 $ (985,000) $(25,525,000) $(1,684,000) $ 16,569,000
========================================================================

See accompanying notes.

F-7

NaPro BioTherapeutics, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

Year ended December 31
1994 1995 1996
---- ---- ----

Operating activities
Net loss $(6,646,000) $(4,071,000) $(6,825,000)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 474,000 270,000 669,000
Employee termination expense 82,000 - -
Compensation for common stock
and options 555,000 21,000 37,000
Loss on retirement of assets 335,000 163,000 28,000
Loss on early extinguishment of
debt 512,000 - -
Changes in operating assets and
liabilities:
Accounts receivable 115,000 (177,000) (336,000)
Inventory (706,000) 216,000 (1,069,000)
Prepaid expenses and other
current assets (887,000) 116,000 (235,000)
Accounts payable (736,000) 245,000 1,100,000
Accrued liabilities (48,000) 226,000 181,000
Deferred revenue (300,000) 15,000 (16,000)
----------- ---------- ----------
Net cash used by operating
activities (7,250,000) (2,976,000) (6,466,000)
Investing activities
Additions to property and
equipment (573,000) (1,209,000) (4,894,000)
Purchase of securities -
available for sale (2,932,000) (5,895,000) (3,439,000)
Purchase of securities - held
to maturity - (667,000) (2,462,000)
Proceeds from securities
available for sale 2,436,000 6,451,000 750,000
Proceeds from securities held
to maturity - - 167,000
Transfer of restricted cash - (124,000) 124,000
----------- ----------- -----------
Net cash used by investing
activities (1,069,000) (1,444,000) (9,754,000)
Financing activities
Increase in deferred
revenue--long term 350,000 - -
Proceeds from notes payable and
capital lease 1,571,000 640,000 1,349,000
Payments under notes payable
and capital leases (2,155,000) (251,000) (555,000)
Payment for compensation due
officers - - (169,000)
Proceeds from sale of common
and preferred stock 10,698,000 5,156,000 19,906,000
Proceeds from sale of preferred
stock by subsidiary - 5,959,000 -
Offering cost of common and
preferred stock (1,271,000) (843,000) (1,913,000)
----------- ----------- -----------
Net cash provided by financing
activities 9,193,000 10,661,000 18,618,000
----------- ----------- -----------
Net increase in cash and cash
equivalents 874,000 6,241,000 2,398,000
Cash and cash equivalents at
beginning of year 18,000 892,000 7,133,000
----------- ----------- -----------
Cash and cash equivalents at end
of year $ 892,000 $ 7,133,000 $ 9,531,000
=========== =========== ===========

F-8

NaPro BioTherapeutics, Inc. and Subsidiaries

Consolidated Statement of Cash Flows (continued)

Year ended December 31
1994 1995 1996
---- ---- ----

Supplemental schedule of noncash investing and
financing activities
Notes and related interest receivable from
stockholders $133,000 $ 120,000 $ 60,000
Repayment of notes receivable from stockholders
through transfer of treasury stock to the Company - 1,684,000 -
Conversion of deferred revenue to long-term debt - 1,100,000 -
Conversion of preferred shares of subsidiary to
common shares of Parent - 2,243,000 -
Reclassification of securities held to maturity,
to restricted cash - - 415,000

See accompanying notes.

F-9

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

December 31, 1996

1. Basis of Presentation and Summary of Significant Accounting Policies

Organization

NaPro BioTherapeutics, Inc. ("NaPro" or "the Company") was originally
incorporated in 1991 as a Washington corporation. In September 1993, NaPro
merged into a wholly-owned subsidiary, a Delaware corporation.

In November 1994, NaPro formed a subsidiary, NaPro BioTherapeutics (Canada),
Inc., of which the Company owns 87.3% of the voting rights. In February 1996
NaPro formed a wholly owned subsidiary, NaPro BioTherapeutics (Ireland) Limited.

Basis of Presentation

The accompanying financial statements include the consolidated financial
position, consolidated results of operations and consolidated cash flows of the
Company and its subsidiaries. All transactions have been accounted for at
historical cost. All balances and transactions between these entities have been
eliminated in the accompanying financial statements.

Description of Business

NaPro focuses on the development, manufacture and commercialization of natural
product pharmaceuticals, particularly paclitaxel (referred to in some scientific
and medical literature as "taxol"*), a naturally occurring cancer-fighting
compound found in certain species of yew (Taxus) trees.

NaPro anticipates a significant increase in capital expenditures and operations
in 1997. To fund such activity, it plans to obtain significant amounts of new
capital during the year. If NaPro is not successful in attracting capital, it
will need to significantly reduce the scope of such activity.

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

*TAXOL(R) is a registered trademark of Bristol-Myers Squibb Company
(Bristol- Myers Squibb) for an anticancer pharmaceutical preparation containing
paclitaxel.

F-10

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

1. Basis of Presentation and Summary of Significant Accounting Policies
(continued)

Cash Equivalents, Securities Available for Sale and Securities Held to Maturity

NaPro considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents. Securities available for sale are
investment-grade securities and are carried at fair value. Such securities
available for sale include $1,311,000 which mature in 1998. The remainder mature
in 1997. Securities held to maturity are investment grade securities and are
carried at amortized cost.

Revenue Recognition

Revenue from product sales is recognized at the time of shipment. NaPro's
production process is not distinct from its research and development processes.
Accordingly, the cost of products sold is included with NaPro's research and
development expense. Licensing fees and other revenue are recognized in
accordance with the terms of the applicable agreements. Payments received in
advance under these agreements are recorded as deferred revenue until earned.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, securities, accounts
receivable and payable, notes payable and capital lease obligations approximate
fair value.

Inventory

Inventory is stated at the lower of cost (first-in, first-out method) or market.

Research and Development

NaPro expenses research and development cost as it is incurred.

Plantation Cost

In 1996 NaPro determined the cultivation of renewable sources of biomass to be
used in the manufacture of paclitaxel is a technically feasible business
strategy. Prior to 1996 plantation expenditures were expensed as research and
development and were separately reported on the statement of operations. In 1996
NaPro began capitalizing plantation expenditures incurred prior to the first
commercial harvest and depletes such cost over the remaining life of the
plantation contract using the units-of-production method. Plantation
expenditures include the acquisition cost of trees and bushes and the related
cost of planting and growing.

F-11

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

1. Basis of Presentation and Summary of Significant Accounting Policies
(continued)

Depreciation and Amortization

Depreciation of property and equipment, including that recorded under capital
leases, is computed on the straight-line method over estimated useful lives
generally between three and seven years. Leasehold improvements are amortized
over the lesser of estimated useful lives or the lease term. Depreciation and
amortization expense is allocated to either general and administrative or
research and development expense, depending on the use of the related property
and equipment.

Net Loss Per Share

Net loss per share is computed using the weighted average number of shares of
common stock outstanding. Common equivalent shares from stock options and
warrants are excluded from the computation as their effect is antidilutive.

Long-Lived Assets

Effective January 1996, NaPro adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
("Statement 121"), which requires impairment losses to be recorded on long-lived
assets used in operations when indications of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. The adoption of Statement 121 had no significant
impact on the financial statements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of management's estimates and
assumptions. Actual results could vary from the estimates used.

Reclassifications

Certain reclassifications have been made to the 1994 and 1995 financial
statements to conform with the 1996 financial statement presentation.

F-12

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

1. Basis of Presentation and Summary of Significant Accounting Policies
(continued)

Foreign and Domestic Operations and Export Sales; Significant Customers

Domestic and foreign financial information is as follows:

United Total
Year States Canada Eliminations Company
---- ------ ------ ------------ -------

Net sales to affiliated and
unaffiliated customers 1994 $1,002,000 $ 148,000 $ (148,000) $1,002,000
1995 2,623,000 569,000 (569,000) 2,623,000
1996 3,473,000 1,781,000 (1,781,000) 3,473,000

Operating loss 1994 5,914,000 68,000 -- 5,982,000
1995 3,851,000 433,000 -- 4,284,000
1996 6,719,000 384,000 -- 7,103,000

Identifiable assets
December 31, 1995 9,226,000 6,820,000 (4,093,000) 11,953,000
1996 22,587,000 4,823,000 (2,389,000) 25,021,000

Substantially all of NaPro's accounts receivable at December 31, 1995 and 1996
were from F.H. Faulding & Co., Limited ("Faulding") (see Note 8). NaPro is
dependent on sales to its two development and marketing partners, Faulding and
the Baker Norton subsidiary of IVAX Corporation ("IVAX") (see Note 8), and does
not require collateral to secure accounts receivable from these partners. Sales
to these partners as a percent of total sales were as follows:

1994 1995 1996
---- ---- ----

Faulding 15% 75% 72%
IVAX 71% 22% 25%

2. Other Related Party Transactions

In conjunction with employment, NaPro agreed to loan an officer up to $20,000.
In January 1994, $18,000 was advanced under this agreement and remains
outstanding at December 31, 1996.

NaPro recorded $707,000, $589,000 and $882,000 in 1994, 1995 and 1996,
respectively, in sales to IVAX, a marketing and development partner which owned
14.3%, 13.2% and 9.4% of NaPro's outstanding shares of common stock (see Notes 1
and 8) at December 31, 1994, 1995 and 1996, respectively.

F-13

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2. Other Related Party Transactions (continued)

In August 1995, NaPro repurchased 144,288 shares of its common stock from
executive officers in exchange for the cancellation of certain indebtedness owed
by such officers of $1,684,000 to NaPro. Included in the canceled indebtedness
was $193,000 of accrued interest (see Notes 6 and 11).

3. Notes Payable

In 1992, 1993 and 1994, Faulding made advance payments to NaPro totaling
$1,100,000. In March 1995, NaPro and Faulding finalized an agreement to convert
the advance payments into a note payable with a face value of $1,200,000, due in
June 1997. The $100,000 original issue discount is being amortized over the life
of the note and has a remaining balance of $16,000 at December 31, 1996. The
portion of the note on which interest accrues at the rate of 9% increases over
time as deliveries of product are made to Faulding. At December 31, 1996,
interest accrued on $1,000,000 of the principal balance.

Notes payable consist of the following:

December 31
1995 1996
---- ----

Note payable to Faulding, net of unamortized original
issue discount, due in June 1997, interest at 9%
accruing on $1,000,000, payable quarterly $1,150,000 $1,184,000
Note payable, due in March 1997, interest at 5.74%,
accruing monthly - 41,000
Note payable, paid in March 1996. 39,000 -
---------- ----------
1,189,000 1,225,000

Less amounts currently payable 39,000 1,225,000
---------- ----------
Notes payable-long term $1,150,000 $ -
========== ==========

Interest paid approximated interest expense for the year ended December 31,
1994. For the years ended December 31, 1995 and 1996, interest paid was $70,000
and $197,000 respectively.

F-14

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

4. Capital Lease Obligations

NaPro's property held under capital leases consisted of the following, which is
included in property and equipment:

December 31
1995 1996
---- ----

Office equipment $ 73,000 $ 321,000
Laboratory equipment 356,000 792,000
--------- ----------
429,000 1,113,000
Less accumulated depreciation 96,000 287,000
--------- ----------
$ 333,000 $ 826,000
========= ==========

At December 31, 1996, minimum payments under capital lease obligations were:

1997 $ 618,000
1998 580,000
1999 185,000
----------
Net minimum lease payments 1,383,000
Less amount representing interest 188,000
----------
Present value of minimum lease payments 1,195,000
Less current portion 444,000
----------
$ 751,000
==========

NaPro has entered into an irrevocable standby letter of credit agreement with a
financial institution to support a capital lease agreement for up to $500,000 at
an interest rate of prime plus 2%. As of December 31, 1996, no funds have been
drawn on the letter of credit.

NaPro is required to maintain certificates of deposit for 33% of the remaining
principal outstanding under capital lease obligations ($415,000 at December 31,
1996) as collateral as long as a letter of credit is outstanding. Such pledged
amounts are classified as restricted cash in the accompanying consolidated
balance sheet.

F-15

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

5. Income Taxes

As of December 31, 1996, NaPro had net operating loss carryforwards for income
tax purposes of $21,968,000 and research and development credits of $209,000 to
offset future taxable income in the United States, expiring as follows:

Net Research and
Operating Development
Losses Credits
--------- ------------

2006 $ 282,000 $ -
2007 1,826,000 52,000
2008 3,328,000 54,000
2009 4,600,000 38,000
2010 5,144,000 15,000
2011 6,788,000 50,000
----------- --------
$21,968,000 $209,000
=========== ========

The Tax Reform Act of 1986 contains provisions that limit the utilization of net
operating loss and tax credit carryforwards if there has been a "change of
ownership" as described in Section 382 of the Internal Revenue Code. Such a
change of ownership may limit the Company's utilization of its net operating
loss and tax credit carryforwards, and could be triggered by sales of securities
by the Company or its stockholders.

In Canada, NaPro has net operating loss carryforwards of approximately
US$354,000, expiring in 2002 and 2003.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
NaPro's deferred tax liabilities and assets with respect to United States taxing
authorities are as follows:

F-16

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

5. Income Taxes (continued)

December 31
1995 1996
---- ----

Deferred tax liabilities:
Stock option compensation $ - $ 97,000
Other 42,000 47,000
----------- ----------
Total deferred tax liabilities 42,000 144,000

Deferred tax assets:
Tax net operating loss carryforward 5,735,000 8,238,000
Deferred compensation 64,000 -
Amortization 262,000 248,000
Research and development credits 159,000 209,000
Excess of book over tax depreciation 72,000 64,000
Other 133,000 124,000
----------- ----------
Total deferred tax assets 6,425,000 8,883,000
Valuation allowance (6,383,000) 8,739,000
----------- ----------
Net deferred tax assets 42,000 144,000
----------- ----------
$ - $ -
=========== ==========

Significant components of NaPro's deferred tax assets with respect to Canadian
taxing authorities are as follows:

December 31
1995 1996
---- ----

Deferred tax assets:
Excess of book over tax depreciation $ 26,000 $ 54,000
Valuation allowance (26,000) (54,000)
-------- --------
$ - $ -
======== ========

6. Stockholders' Equity

In March 1994, NaPro effected a 1-for-7.5 reverse stock split by exchanging each
7.5 shares of common stock for 1 share of $.0075 par value common stock, and
adjusted its authorized capital stock to 20,000,000 shares of $.0075 par value
common stock, and 2,000,000 shares of $.001 par value preferred stock. In July
1994, NaPro adjusted its authorized capital stock to 19,000,000 shares of $.0075
par value common stock, 1,000,000 shares of $.0075 par value nonvoting common
stock, and 2,000,000 shares of $.001 par value preferred stock.

The Subscription Agreement and Executive Agreements

In June 1993, NaPro entered into a Subscription Agreement (the "Subscription
Agreement") with IVAX pursuant to which the Company sold 1,106,398 shares of

F-17

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

6. Stockholders' Equity (continued)

NaPro's common stock and a warrant to acquire an additional 111,111 shares of
common stock for $3,000,000 in cash. The warrant was exercisable immediately at
a nominal price, and expires in June 2003 (see Note 8).

In connection with the Subscription Agreement, NaPro entered into Employment and
Executive Stock Agreements (the "Executive Agreements"), pursuant to which the
Company sold 1,526,814 shares of the Company's common stock at $1.50 per share
to certain officers in exchange for cash and promissory notes in the aggregate
amount of $2,289,000. The notes are secured by the common stock and accrue
interest at the greater of the prime rate minus 1% and the applicable federal
rate. The initial term of the Executive Agreements is five years. If an
officer's employment is terminated during the initial term of the Executive
Agreement, the shares held by that officer are subject to repurchase by NaPro at
its election. The repurchase price is defined by the Executive Agreements, but
in no case will be less than the original cost of the shares. The notes
receivable and related accrued interest are recorded as a separate reduction of
stockholders' equity. In August 1995, NaPro repurchased 144,288 shares of common
stock from certain of these officers in cancellation of $1,684,000 of this
indebtedness (see Notes 2 and 11).

The Subscription Agreement and Executive Agreements are subject to a
Stockholders Agreement which includes provisions regarding certain matters
including the composition of the Board of Directors, restrictions on the sale,
transfer or other disposition of shares sold in connection with these
agreements, and NaPro's first offer right for voluntary election to purchase all
of the shares held by these stockholders.

Bridge Financing and Extraordinary Loss Resulting from Extinguishment

In April 1994, NaPro completed the sale (the "Bridge Financing") to private
investors of 26.5 units (the "Units"), each Unit consisting of: (i) 10,000
shares of common stock and (ii) an unsecured 9% nonnegotiable convertible
promissory note in the principal amount of $50,000, due on the earlier of the
consummation of NaPro's initial public offering or March 31, 1995, unless
converted, at the option of the holder, into shares of common stock upon the
consummation of the NaPro's initial public offering, at a rate equal to $5.00
per share of common stock (a "Bridge Note"). The purchase price per Unit was
$50,000. NaPro received gross proceeds of $1,325,000 with respect to the sale of
such Units. After the payment of $133,000 in placement fees to the underwriter
who acted as placement agent for NaPro with respect to the sale of such Units,
and other offering expenses of approximately $75,000, NaPro received net
proceeds of approximately $1,117,000 from the sale of the Units. The Bridge
Financing resulted in NaPro's issuance of a total of $1,325,000 principal amount
of Bridge Notes and 265,000 shares of common stock. Upon closing of NaPro's
initial public offering, $1,185,000 in principal amount of Bridge Notes was paid
in cash and $140,000 was converted to 28,615 shares of common stock. The
repayment of the Bridge Notes prior to their one-year stated maturity resulted
in a $512,000 extraordinary loss.

F-18

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

6. Stockholders' Equity (continued)

Initial Public Offering of Common Stock and Redeemable Warrants

In August 1994, NaPro completed an initial public offering of its common stock
and redeemable warrants to purchase common stock (the "IPO"). The offering
consisted of 1,800,000 shares of common stock and redeemable warrants to
purchase 2,070,000 shares of common stock (including 270,000 redeemable warrants
to purchase common stock issued in connection with the underwriter's
overallotment). The common stock and warrants were purchased separately and were
separately transferable. Each warrant entitled the registered holder thereof to
purchase one share of common stock at a price of $5.00, subject to adjustment in
certain circumstances, for a period of three years, commencing February 1, 1995.
The net proceeds of the offering to NaPro were $7,353,000 (after deduction of
the underwriting discount and expenses of the offering). In connection with the
completion of the IPO, the Bridge Notes and certain notes payable to IVAX
Corporation and another shareholder, as well as certain officer salaries which
had been deferred since September 1993 in order to preserve cash, were paid. In
addition, the normal vesting of stock sold in conjunction with the Executive
Agreements was accelerated as a result of completion of the IPO, resulting in a
charge, during 1994, of $308,000 to general and administrative expense. In June
1996 NaPro completed the call of the 2,070,000 redeemable warrants, issuing
630,620 shares of common stock with the receipt of cash in the amount of
$3,116,000 (net of offering cost of $37,000) pursuant to Cash exercise elections
of redeemable warrants, and issuing 1,007,102 shares of common stock pursuant to
Cash-less exercise elections of 1,438,720 redeemable warrants.

Faulding Private Placement and Elimination of the Faulding Royalty

Contemporaneously with consummation of the IPO, NaPro sold to Faulding in a
private transaction (the "Faulding Private Placement") 400,000 shares of NaPro's
nonvoting common stock (the "Nonvoting Common") at a price of $5.00 per share,
the initial public offering price per share in the IPO, and 400,000 warrants
(the "Faulding Warrants") to purchase an additional 400,000 shares of Nonvoting
Common at a price of $.10 per warrant, the initial public offering price per
warrant. In 1996 Faulding exercised 200,000 of the warrants. Shares of Nonvoting
Common will automatically convert to common stock (with full voting rights), on
a share-for-share basis, upon Faulding's disposition thereof. The Nonvoting
Common and the Faulding Warrants are identical in all respects to the common
stock and warrants which were sold in the IPO, except that, other than in
limited circumstances, Faulding, as the holder, has no voting rights with
respect to the Nonvoting Common, and the Faulding Warrants are exercisable for
Nonvoting Common instead of common stock until Faulding's disposition thereof.
The proceeds from issuance of the Nonvoting Common and Faulding Warrants were as
follows: $1,000,000 was applied directly to eliminate NaPro's liability to
Faulding resulting from Faulding's royalty rights under the Faulding Agreement
(the "Faulding Royalty") and cash of $1,040,000 was

F-19

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

6. Stockholders' Equity (continued)

received by NaPro. Under the Faulding Royalty, NaPro would have been obligated
to pay Faulding 4% of NaPro's sales price on the first 100,000 grams of
paclitaxel it sold to third parties for commercial use. The cost of eliminating
the Faulding Royalty was expensed, and was separately reflected in the statement
of operations for the year ended December 31, 1994.

Preferred Stock Private Placement

In July 1995, NaPro closed a private placement of 638,750 shares of Convertible
Preferred Stock, Series A (the "US Preferred") of NaPro BioTherapeutics, Inc.,
for net proceeds of $4,268,000.

In July and August 1995, NaPro closed a private placement of 725,513 shares of
Exchangeable Preferred Stock, Series A (the "Canadian Preferred") of NaPro's
Canadian subsidiary, NaPro BioTherapeutics (Canada), Inc. ("NaPro Canada"), for
net proceeds of $5,959,000.

The U.S. Preferred has a liquidation preference of $8.00 per share and is
immediately convertible into common stock of NaPro on a share-for-share basis at
the option of the holder. The U.S. Preferred may be redeemed by NaPro at its
liquidation value beginning one year after issuance if the average trading price
for the NaPro common stock over a 20 trading day period has equaled or exceeded
$16.00 and beginning three years after issuance if such trading price has
equaled or exceeded $10.00. Holders may elect to convert their U.S. Preferred
into common stock of NaPro at any time prior to 15 business days before the date
fixed for redemption. The U.S. Preferred also may be redeemed at any time after
September 30, 2000 at the option of the holder. NaPro may elect to pay the
redemption price by issuing its common stock valued at 95% of its then market
price. The U.S. Preferred has one vote per share.

The Canadian Preferred has a liquidation preference of CD$11.00 per share and
may be exchanged for common stock of NaPro on a share-for-share basis at any
time after December 1, 1995. NaPro has the option to acquire the Canadian
Preferred at its liquidation value beginning one year after issuance if the
average trading price for the NaPro common stock over a 20 trading day period
has equaled or exceeded the equivalent of CD$22.00 and beginning three years
after issuance if such trading price has equaled or exceeded the equivalent of
CD$13.75. Holders may elect to exchange their Canadian Preferred for common
stock of NaPro at any time prior to 15 business days prior to the date fixed for
NaPro to acquire the shares under the foregoing option. Holders have the option
to require NaPro to purchase the Canadian Preferred for its liquidation
preference at any time after September 30, 2000. NaPro may elect to pay the
purchase price of the Canadian Preferred by issuing its common stock valued at
95% of its then market price. The Canadian Preferred is entitled to one vote per
share in NaPro Canada.

F-20

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

6. Stockholders' Equity (continued)

At December 31, 1996, a total of 513,750 shares of the U.S. Preferred had been
converted into 513,750 shares of common stock of NaPro and 266,421 shares of the
Canadian Preferred had been exchanged for 266,421 shares of common stock of
NaPro.

NaPro registered under the Securities Act of 1933 the resale of shares of its
common stock issued upon conversion of the U.S. Preferred or exchange of the
Canadian Preferred. Neither the U.S. Preferred nor the Canadian Preferred has
any dividend requirement.

Public Offering of Common Stock

In August 1996 NaPro closed a public offering of 1,790,000 shares of its common
stock, including 190,000 shares issued to cover over allotments, which resulted
in net proceeds of $13,786,000 to the Company.

Stockholder Rights Plan

In November 1996, NaPro adopted a Stockholder Rights Plan and distributed a
dividend of one Right to purchase one one-hundredth of a share of a new series
of junior participating preferred stock for each share of NaPro common stock.
The objective of the Rights Plan is to secure for stockholders the long term
value of their investment and to protect stockholders from coercive takeover
attempts by strongly encouraging anyone seeking to acquire NaPro to negotiate
with its Board of Directors. The adoption of the Rights Plan was not in response
to any hostile takeover proposal or any other recent events.

The Rights trade with common stock as a unit unless the Rights become
exercisable upon the occurrence of certain triggering events relating to the
acquisition of 20% or more of common stock. In certain events after the Rights
become exercisable they will entitle each holder, other than the acquiror, to
purchase, at the Rights' then current exercise price (currently set at $60), a
number of shares of common stock having market value of twice the Right's
exercise price or a number of the acquiring company's common shares having a
market value at the time of twice the Rights' exercise price. For example, in
the event of an acquisition of greater than 20% of the Company's stock without
approval of the NaPro Board of Directors, the Company's stockholders (other than
the 20% acquiror) would have the right to purchase $120 worth of stock for $60.
A stockholder would have one such right for each share of stock held at the time
the rights become exercisable.

NaPro may amend the Rights except in certain limited respects or redeem the
Rights at $0.01 per Right, in each case at any time prior to the Rights becoming
exercisable. The Rights will expire on November 8, 2006.

F-21

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

7. Common Stock Warrants and Options

Common Stock Warrants

NaPro has granted warrants to purchase shares of its common stock. The following
summarizes warrant activity:

Exercise Expiration
Warrants Price Dates
-------- ----- -----

Outstanding at December 31, 1994 2,610,446 $0.075-$9.37 1996-2004
Granted -
Exercised
---------
Outstanding at December 31, 1995 2,610,446 $0.075-$9.37 1997-2004
Granted -
Exercised 2,072,007 $5.00-$9.37 1996-1998
---------
Outstanding at December 31, 1996 538,439 $0.075-$7.50 1997-2004
=========

Nonplan Stock Options

In November 1990, Pacific Biotechnology, Inc. ("PB"), one of the Company's
predecessors, granted options to purchase 613,333 shares (reduced to 199,233.6
shares in September 1991) of its common stock to two officers. The exercise
price is $.1875 per share and the options are fully exercisable during the
period from January 1, 1992 to December 31, 1999. In December 1991, when NaPro
acquired all of the outstanding common stock of PB, all options to purchase PB
common stock were exchanged for options to purchase 159,467 shares of NaPro's
common stock under the same terms as the PB options. In January 1994, the
Company granted to the four outside directors of the Company 27,000 nonplan
options to purchase shares of common stock which are immediately exercisable at
a price of $2.40 and which expire in January 2004.

The 1993 Stock Option Plan

During 1993, the Board of Directors adopted the NaPro BioTherapeutics, Inc. 1993
Stock Option Plan (the "Plan") to provide stock options to employees and other
individuals as determined by the Board of Directors. The Plan provides for
option grants designated as either nonqualified or incentive stock options. The
Plan provides for the issuance of up to 146,667 shares of NaPro's common stock.
The initial term of the Plan is ten years, and the maximum option exercise
period shall be no more than ten years from the date of grant. The term of
options for 667 or more shares is eight years, and the term of options for fewer
than 667 shares is five years. Options for 667 shares or more vest 25% after
each anniversary date of the grant, and options for fewer than 667 shares vest
50% after each anniversary date of the grant. The exercise price for stock
options issued under the Plan is equal to the fair market value of NaPro's
common stock.

F-22

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

7. Common Stock Warrants and Options (continued)

1994 Long-Term Performance Incentive Plan

In July 1994, NaPro's stockholders approved the 1994 Long-Term Performance
Incentive Plan (the "Incentive Plan"). An aggregate of 375,000 shares were
authorized for issuance under the Incentive Plan, increased to 875,000 shares
with stockholders' approval in July 1996. The Incentive Plan provides for
granting to employees and other key individuals who perform services for NaPro
("Participants") the following types of incentive awards: stock options, stock
appreciation rights ("SARs"), restricted stock, performance units, performance
grants and other types of awards that the Compensation Committee deems to be
consistent with the purposes of the Incentive Plan. In addition, each person who
is not an employee of NaPro or one of its subsidiaries and who is elected or
re-elected as a director of NaPro by the stockholders at any annual meeting of
stockholders commencing with the 1994 annual meeting, and, if first elected or
appointed other than at an annual meeting, upon such election or appointment,
will receive, as of the business day following the date of each such election or
appointment, a nonqualified option to purchase 5,000 shares of the Company's
common stock. In July 1996 the stockholders increased this option provision from
5,000 to 10,000 shares.

The following summarizes stock option activity and balances:

Weighted
Average
Stock Exercise Exercise
Options Price Price
------- ----- -----

Outstanding at December 31, 1994 364,134 $.19 - 6.00
Granted 241,792 6.25 - 11.75
Canceled (6,667) 2.40
Exercised (31,652) .75 - 2.40
--------
Outstanding at December 31, 1995 567,607 .19 - 11.75
Granted 440,700 7.13 - 11.13 $8.28
Canceled (5,500) 6.00 - 10.13 8.57
Exercised (21,418) .75 - 6.57 3.11
--------

Outstanding at December 31, 1996 981,389 .19 - 11.75 6.55
========

The weighted-average fair value of options granted during 1996 was $4.94.
Exercisable shares at December 31, 1996 were 353,613 with a weighted-average
exercise price of $3.56. The weighted-average remaining contractual life of the
outstanding options was 8.2 years.

F-23

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

7. Common Stock Warrants and Options (continued)

In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting and Disclosure of Stock-Based
Compensation ("Statement 123"). Statement 123 is applicable to fiscal years
beginning after December 15, 1995 and gives the option to either follow fair
value accounting or to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB No. 25"), and related
interpretations. NaPro has elected to continue to follow APB No. 25 and related
interpretations in accounting for its employee stock options.

Pro forma information regarding net income and earnings per share is required by
Statement 123, which also requires that the information be determined as if the
Company had accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of that statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1995
and 1996 respectively: risk-free interest rate range of 5.64% to 6.89%; no
expected dividend; volatility factor of .58; and an estimated expected life
range of four to six years.

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

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

1995 1996
---- ----

Pro forma net loss $(4,183,000) $(7,610,000)
============ ============

Pro forma loss per share $ (0.52) $ (0.76)
============ ============

Statement 123 is applicable only to options granted subsequent to December 31,
1994. Because options vest over periods of up to four years, the pro forma
effect of the Statement will not be fully reflected until 1998.

F-24

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

8. Strategic Alliances

NaPro has entered into strategic alliances with two pharmaceutical companies,
Faulding and IVAX, that have the capabilities to obtain commercial approval for
NaPro's paclitaxel and to establish NaPro's paclitaxel as a major product in the
market. These strategic partners have assumed responsibility for funding the
cost of all aspects of the required clinical and regulatory processes in their
respective markets, procedures that would be too costly for NaPro to undertake.

The Faulding Agreement

In 1992, NaPro entered into an initial 20 year exclusive agreement with
Faulding, which was amended in June 1993, January 1994 and March 1995 (the
"Faulding Agreement"), to develop and market paclitaxel in ten countries,
including Australia, New Zealand, and much of Southeast Asia. The Faulding
Agreement also grants Faulding the nonexclusive right to sell paclitaxel
supplied by NaPro in certain countries in the Middle East. Pursuant to the
Faulding Agreement, Faulding paid NaPro a $200,000 licensing fee and also
provided NaPro $1,100,000 of advances. These amounts were converted into notes
payable upon the delivery by NaPro of the corresponding value of paclitaxel (see
Note 3).

The Faulding Agreement provides that NaPro shall supply all of Faulding's
requirements for paclitaxel. NaPro is paid a fixed sum for paclitaxel supplied
for noncommercial uses, and a fixed percentage of Faulding's original sales
price for paclitaxel supplied for commercial use. In addition, pursuant to the
original Faulding Agreement, NaPro would have been obligated to pay Faulding a
royalty of up to 4% on the first 100,000 grams of paclitaxel sold to third
parties for commercial use. However, in 1994, NaPro exercised its right to
eliminate this royalty under the Faulding Agreement by paying Faulding $1
million (see Notes 3 and 6).

The IVAX Agreement

In June 1993, NaPro entered into an initial 20 year exclusive agreement with
IVAX to develop and market paclitaxel in the United States, Europe, Japan and
the rest of the world not covered by the Faulding Agreement, with the exception
of the former Soviet Union countries, China, certain countries in the Middle
East, and the Vatican, territories to which IVAX has nonexclusive rights.
Simultaneously with entering into the IVAX Agreement, IVAX made a $3 million
equity investment in NaPro for 19.8% of NaPro's then outstanding common stock
(see Note 6).

The IVAX Agreement provides that NaPro shall supply all of IVAX's requirements
for paclitaxel. NaPro is paid a fixed sum for paclitaxel supplied for
noncommercial uses, and a manufacturing payment plus a percentage of IVAX's
sales profit (as defined by the agreement) for paclitaxel sold for commercial
uses.

F-25

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

8. Strategic Alliances (continued)

The PBI Agreement

In March 1994, NaPro entered into a ten-year initial-term contract with Pacific
Biotechnol ogies, Inc. ("PBI"), a subsidiary of PRT, one of the largest
reforestation companies in Canada (the "PBI Agreement"). Under the PBI
Agreement, PBI is planting and maintaining a plantation of yew trees and bushes
designed to provide NaPro with a long-term renewable supply of Taxus biomass.
Pursuant to such agreement, NaPro is obligated to pay PBI an annual fee equal to
its cost in performing its obligations under the agreement plus overhead and a
specified profit.

NaPro applied $1,500,000 of the net proceeds of its August 1994 initial public
offering to prepay in full, at a discount, all fees, interest thereon, and all
other amounts accrued through December 31, 1995.

9. Commitments and Contingencies

Operating Leases

NaPro has executed noncancelable operating lease agreements for office, research
and production facilities. As of December 31, 1996, future minimum lease
payments under noncancelable operating lease agreements are as follows:

1997 $ 554,000
1998 499,000
1999 511,000
2000 438,000
----------
Total $2,002,000
==========

Rent expense for the years ended December 31, 1994, 1995 and 1996 amounted to
$146,000, $262,000 and $564,000, respectively.

Intellectual Property Contingency

NaPro's intellectual property is a key asset. NaPro's intellectual property
rights are subject to legal challenge. Such rights are uncertain and involve
complex legal and factual questions for which important legal principles are
largely unresolved. A number of other entities have developed technologies that
may be related to NaPro's technology. Many of these entities are larger and have
significantly greater resources than NaPro. Some of the technologies may
conflict with NaPro's technologies, and therefore increase the potential of
legal challenge.

F-26

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

9. Commitments and Contingencies (continued)

NaPro relies on trade secret protection for its confidential and proprietary
information. There can be no assurance that competitors or potential competitors
of NaPro will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to NaPro's trade secrets or
disclose such technology, or that NaPro can meaningfully protect its trade
secrets.

Faulding - Bristol-Myers Squibb Litigation

NaPro's customer, Faulding, distributes a paclitaxel-based drug in Australia.
Faulding's main competitor in the Australian market, Bristol-Myers Squibb, has
brought legal action against Faulding on the basis of infringement of certain
Bristol-Myers Squibb patents, which Faulding is claiming are invalid in a
separate suit. Based upon its review of the prior art and its discussions with
Faulding, NaPro management believes the Bristol-Myers Squibb action will be
successfully resisted.

Uncertainty Over the Selling Price Under the Faulding Agreement

Under the Faulding Agreement (see Note 8), NaPro is paid a fixed sum for
paclitaxel supplied for noncommercial uses, and a fixed percentage of Faulding's
sales price for paclitaxel supplied for commercial use. NaPro recognizes the
corresponding revenue at the time of shipment of paclitaxel to Faulding, based
upon the intended use indicated by Faulding on its purchase orders. However,
Faulding may or may not use the paclitaxel in accordance with the original
intent indicated on its purchase orders. Additionally, Faulding's actual selling
price may differ from the amounts originally budgeted and indicated to NaPro. On
or about April 30, 1997, Faulding will communicate to NaPro the final amount of
sales, and an adjustment will be calculated, which may either increase or
decrease NaPro's revenue from sales of products to Faulding for 1996 and 1997.

Raw Materials Purchase Commitments

NaPro has committed to purchase approximately $1,500,000 of raw materials in
1997.

10. Retirement Plan

During 1996 NaPro adopted a defined contribution retirement plan for its
employees established in accordance with the provisions of Internal Revenue Code
section 401(k) (the "Plan"). Employees over the age of 17 are eligible to
participate in the Plan on the first day of the month immediately following the
completion of six months of continuous service or 1,000 hours of service during
a 12 continuous month period.

Participants may contribute up to 15% of their pay to the Plan. NaPro may make
additional contributions to the Plan on behalf of the participants in the form
of cash or in shares of

F-27

NaPro BioTherapeutics, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

10. Retirement Plan (continued)

NaPro's common stock. In 1996, NaPro elected to match 50% of the first $2,000 in
contributions of each participating employee as of December 31, 1996 with NaPro
common stock totaling $28,000.

11. Subsequent Event

Related Party Transaction

In January 1997 NaPro repurchased 74,550 shares of its common stock from a NaPro
executive officer in exchange for the cancellation of indebtedness (including
accrued interest of $192,000) owed by the officer to NaPro of $990,000.

F-28

Exhibit Index

Exhibit
Number Description of Exhibit
- ----- ----------------------

3.1 Amended and Restated Certificate of Incorporation of the Company, as
amended August 2, 1996.
3.2 Certificate of Designation for Convertible Preferred Stock, Series A.
Incorporated herein by reference from the Company's Quarterly Report on
Form10-Q filed with the Commission for the quarter ended June 30, 1995
(File No. 0-24320).
3.3 Certificate of Designation for Series B Junior Participating Preferred
Stock. Incorporated herein by reference from the Company's November 8,
1996 Current Report Form 8-K (File No. 0-24320).
3.4 Bylaws of the Company. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
4.1 Common Stock Certificate. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
4.2 Underwriter's Warrant Agreement. Incorporated herein by reference from
the Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
4.3 Warrant Agreement. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
4.4 Warrant Certificate. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
4.5 The Certificate of Incorporation and Bylaws of the Company are included
as Exhibits 3.1 through 3.4.
10.1* Company's 1993 Stock Option Plan. Incorporated herein by reference from
the Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
10.2* Company's 1994 Long-Term Performance Incentive Plan, as amended July 30,
1996.
10.3 Common Stock Warrant dated as of June 7, 1993 between the Company and
Broadmark Capital Corporation. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
10.4 Stock Purchase Warrant dated as of June 7, 1993 between the Company and
Arthur D. Harrison. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
10.5 Stock Purchase Warrant dated as of June 7, 1993 between the Company and
D&N Holding Company. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company,

filed with the Commission on July 24, 1994 (File No. 33-78016).
10.6 Stock Purchase Warrant dated as of June 7, 1993 between the Company and
Kirkland & Ellis. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
10.7 Stock Purchase Warrant dated as of December 15, 1992 between the
Company and Kirkland & Ellis. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
10.8 Stock Purchase Warrant dated as of June 3, 1992 between the Company and
Herbert L Lucas. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company, filed with the Commission on July
24, 1994 (File No. 33-78016).
10.9 Stock Purchase Warrant dated as of June 3, 1992 between the Company and
H.J. Meyers & Co., Inc. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
10.10 Stock Purchase Warrant dated as of June 3, 1992 between the Company and
Freshman, Marantz, Orlanski, Cooper, and Klein 1993 Investments.
Incorporated herein by reference from the Registration Statement on
Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
10.11 Stock Purchase Warrant dated as of April 30, 1993 between the Company
and Pacific Regeneration Technologies, Inc. Incorporated herein by
reference from the Registration Statement on Form S-1 of the Company,
filed with the Commission on July 24, 1994 (File No. 33-78016).
10.12 Registration Agreement dated as of June 7, 1993 by and among the
Company, D&N Holding Company, Sterling K. Ainsworth, Patricia A. Pilia,
Leonard P. Shaykin, and Lawrence Helson. Incorporated herein by
reference from the Registration Statement on Form S-1 of the Company,
filed with the Commission on July 24, 1994 (File No. 33-78016).
10.13 Amended and Restated Stockholders Agreement dated as of May 31, 1994 by
and among the Company, D&N Holding Company, Sterling K. Ainsworth,
Patricia A. Pilia, Leonard P. Shaykin, and Lawrence Helson.
Incorporated herein by reference from the Registration Statement on
Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
10.14 Amended and Restated Employment and Executive Stock Agreement dated as
of June 7, 1993 and amended and restated as of May 31, 1994 between the
Company and Leonard P. Shaykin. Incorporated herein by reference from
the Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
10.15* Amended and Restated Employment and Executive Stock Agreement dated as
of June 7, 1993 and amended and restated as of May 31, 1994 between the
Company and Sterling K. Ainsworth. Incorporated herein by reference
from the Registration Statement on Form S-1 of the Company, filed with
the Commission on July 24, 1994 (File No. 33-78016).
10.16* Amended and Restated Employment and Executive Stock Agreement dated as
of June 7, 1993 and amended and restated as of May 31, 1994 between the
Company and Patricia A. Pilia. Incorporated herein by reference from
the Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
10.17* Amended and Restated Employment and Executive Stock Agreement dated as
of June 7, 1993 and amended and restated as of May 31, 1994 between the
Company and Lawrence Helson. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
10.18* Company's Stock Option Agreement with Sterling K. Ainsworth.
Incorporated herein by reference from the Registration Statement on
Form S-1 of the Company, filed with the Commission on July 24, 1994
(File No. 33-78016).
10.19* Company's Stock Option Agreement with Patricia A. Pilia. Incorporated
herein by reference from the Registration Statement on Form S-1 of the
Company, filed with the Commission on July 24, 1994 (File No. 33-
78016).
10.20 Services and Supply Agreement dated as of December 1, 1993 between the
Company and Pacific

BioTechnologies Inc. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
10.21 Subscription Agreement dated as of April 29, 1993 between the Company
and Pacific Regeneration Technologies. Incorporated herein by reference
from the Registration Statement on Form S-1 of the Company, filed with
the Commission on July 24, 1994 (File No. 33-78016).
10.22 Amended and Restated Master Agreement dated as of January 19, 1994
between the Company and F.H. Faulding & Co., Ltd. Incorporated herein
by reference from the Registration Statement on Form S-1 of the
Company, filed with the Commission on July 24, 1994 (File No. 33-
78016).
10.23 Amendment No. 1 To Amended and Restated Master Agreement Dated January
19, 1994, executed as of March 23, 1995. Incorporated herein by
reference from the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 0-24320).
10.24 Agreement dated as of June 7, 1993 between the Company and Baker Norton
Pharmaceuticals, Inc. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company, filed with the
Commission on July 24, 1994 (File No. 33-78016).
10.25 Lease dated February 28, 1995 between the Company and the Mutual Life
of Canada. Incorporated herein by reference from the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (File
No. 0-24320).
10.26 Subscription Agreement and Investment Letter between the Company and
NaPro BioTherapeutics (Canada), Inc. Incorporated herein by reference
from the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995 (File No. 0-24320).
10.27 Put/Call Agreement dated July 12, 1995 between the Company and the
Purchasers of Series A Preferred Shares of NaPro BioTherapeutics
(Canada) Inc. Incorporated herein by reference from the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (File
No. 0-24320).
10.28 Side Letter dated July 21, 1995 to Put/Call Agreement. Incorporated
herein by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 (File No. 0-24320).
10.29 Engagement Letter dated February 16, 1995 between the Company and
Capital West Partners. Incorporated herein by reference from the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995 (File No. 0-24320).
10.30 Subscription Agreement between the Company and the purchasers of
Convertible Preferred Stock, Series A, of the Company. Incorporated
herein by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 (File No. 0-24320).
10.31 Purchase Agreement between the Company and certain purchasers of
Preferred Shares of NaPro BioTherapeutics (Canada) Inc. Incorporated
herein by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 (File No. 0-24320).
10.32 Purchase Agreement between the Company and BPI Capital Management
Corporation as to Preferred Shares of NaPro BioTherapeutics (Canada)
Inc. Incorporated herein by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995 (File No. 0-
24320).
10.33 Lease between the Company and Gunbarrel Facility L.L.C. dated October
16, 1995. Incorporated herein by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 (File No. 0-
24320).
10.34 First Amendment to Lease November 27, 1995, between the Company and
Gunbarrel Facility L.L.C. Incorporated herein by reference from the
Company's Annual Report on Form 10-K for the year ended December 31,
1995 (File No. 0-24320).
10.35 Agreement between the Company and Pacific BioTechnologies Inc. dated
March 29, 1996. Incorporated herein by reference from the Company's
Annual Report on Form10-K for the year ended December 31, 1995 (File
No. 0-24320).
10.36 Culture Agreement dated March 1, 1996 between Zelenka Nursey, Inc.
("Zelenka") and the Company. Incorporated herein by reference from the
Registration Statement on Form S-1 of the Company filed with the
Commission on August 1, 1996 (File No. 333-3051).
10.37 Agreement for Sale, Harvest and Storage of Nursey Stock dated May 1,
1996 between Zelenka

and the Company. Incorporated herein by reference from the Registration
Statement on Form S-1 of the Company filed with the Commission on
August 1, 1996 (File No. 333-3051).
10.38 Culture Agreement dated as of March 1, 1997 between Zelenka and the
Company. The Company is filing with the Commission a Confidential
Treatment Request with respect to this agreement, and accordingly,
certain language has been redacted.
10.39 Lease Agreement dated as of March 1, 1997 between Zelenka and the
Company. The Company is filing with the Commission a Confidential
Treatment Request with respect to this agreement, and accordingly,
certain language has been redacted.
10.40 Agreement for Sale, Harvest and Storage of Nursey Stock dated as of
March 1, 1997 between Zelenka and the Company. The Company is filling
with the Commission a Confidential Treatment Request with respect to
this agreement, and accordingly, certain language has been redacted.
21.1 List of Subsidiaries. Incorporated herein by reference from the
Registration Statement of the Company on Form S-1, filed with the
Commission on May 20, 1996 (File No. 33-78016).
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Powers of Attorney
27.1 Financial Data Schedule.
*A management compensation plan.