ALTAREX CORP, 6-K, 1999-03-23

ALTAREX CORP
6-K, 1999-03-23
PHARMACEUTICAL PREPARATIONS

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<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16a, 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Month of March, 1999

ALTAREX CORP.
(Exact name of Registrant as specified in its charter)

CAMPUS TOWER
#300, 8625 - 112 STREET
EDMONTON, ALBERTA, CANADA T6G 1K8
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.

Form 20-F _X_ Form 40-F ___

Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ___ No _X_

<PAGE> 2

On March 2, 1999, March 10, 1999 and March 17, 1999, AltaRex Corp. (the
"Company") issued press releases announcing the following:

(i) MARCH 2 PRESS RELEASE. Announced that Biomira Inc.
("Biomira") commenced legal action against the Company
relating to the ownership of one of the Company's patents.

(ii) MARCH 10 PRESS RELEASE. Announced the Company's financial
results for the fourth quarter ended December 31, 1998.

(iii) MARCH 17 PRESS RELEASE. Announced that the Company filed
a lawsuit against Biomira with regard to the Company's License
and Asset Purchase Agreements with Biomira and that the
Company has filed a preliminary prospectus with regulatory
authorities in certain provinces of Canada relating to an
offering of up to C$17 million of its common shares.

A copy of each of the press releases and of the preliminary prospectus
relating to the Company's offering have been attached to this Report as
Exhibits.

INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION

99.1 Press Release dated March 2, 1999
99.2 Press Release dated March 10, 1999
99.3 Press Release dated March 17, 1999
99.4 Preliminary Prospectus dated March 16, 1999

<PAGE> 3

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

ALTAREX CORP.

By: /s/ Richard E. Bagley
-------------------------------------

Name: Richard E. Bagley

Title: President and Chief Executive Officer

Date: March 19, 1999

<PAGE> 1

EXHIBIT 99.1

CONTACT:
Edward M. Fitzgerald
Senior Vice President and Chief
Financial Officer
AltaRex Corp.
(781) 672-0138
[email protected]
WWW.ALTAREX.COM

ALTAREX ANNOUNCES COMMENCEMENT OF LEGAL ACTION BY BIOMIRA

WALTHAM, MA, USA, March 2, 1999 - ALTAREX CORP. (AXO:TSE) announced today that
Biomira Inc. had filed a lawsuit against AltaRex concerning the ownership of one
of the Company's patents. The Company had previously announced that Biomira had
indicated its intentions to commence this legal action.

In the lawsuit, Biomira claims ownership of a patent application entitled
"Method and Composition for Reconforming Multi-Epitopic Antigens to Initiate an
Immune Response." Biomira is seeking, among other things, a court order that it
is the sole owner of the invention and related patents and patent applications,
an injunction against use by AltaRex of the invention and damages in the amount
of CDN$200,000,000.

"We are disappointed that Biomira has chosen to pursue this litigation,"
commented Richard Bagley, President and CEO of AltaRex. "We had been engaged in
discussions with Biomira in an attempt to resolve this matter, and had provided
information to Biomira's lawyers which we believe makes it clear that this
invention was made at AltaRex. We intend to contest this lawsuit vigorously, as
announced previously, and are considering various options in responding to
Biomira's lawsuit in such a way as to bring about a timely resolution of this
matter."

As the Company previously announced, when Biomira advised AltaRex that it
intended to commence this legal action, the Company delayed the acceptance of
subscriptions for Common Shares pursuant to the proper exercise of Rights under
the Company's current CDN$2 million Rights Offering until 5:00 p.m. (Toronto
time) on Wednesday, March 3, 1999. In light of current circumstances, the
Company has decided not to accept subscriptions under its Rights Offering and
will refund all subscription proceeds received from investors, without any
interest or deduction.

Following the Company's first announcement of the Biomira complaint on February
24, 1999, prospective investors under the Company's proposed CDN$15 million
private placement indicated that they were unwilling to complete that
transaction until more details about the Biomira litigation are available. As a
consequence, the Company is currently discussing other financing alternatives,
which may include a public offering or a private placement, with its financial
advisors.

<PAGE> 2

AltaRex Corp. is an emerging biotechnology company focused on research,
development and commercialization of unique antibody-based immunotherapeutics
for the treatment of late-stage cancers. The Company's products are based on its
unique proprietary platform technology, Anti-idiotype Induction Therapy
("AIT(R)"). The Company believes that its AIT(R) technology enhances the ability
of the human immune system to produce its own anti-tumor response. AIT(R)
products are developed to target specific antigens that are associated with
various cancers.

The Company has four AIT(R)-based products in various stages of research and
development. These include OvaRex MAb for tumors expressing the CA 125 antigen,
BrevaRex MAb for tumors expressing the MUC1 antigen, GivaRex MAb for tumors
expressing the CA 19.9 antigen and ProstaRex MAb for tumors expressing the PSA
antigen. The Company's most advanced product, OvaRex MAb for ovarian cancer, is
in two potentially pivotal Phase IIb clinical trials, while BrevaRex MAb has
recently entered a Phase I study.

Additional information about AltaRex can be found on its web site at
WWW.ALTAREX.COM.

This news release contains forward-looking statements that involve risks and
uncertainties, which may cause actual results to differ materially from the
statements made. For this purpose, any statements that are contained herein that
are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes", "anticipates",
"plans", "intends", "expects" and similar expressions are intended to identify
forward-looking statements. Such factors include, but are not limited to
changing market conditions, completion of clinical trials, patient enrollment
rates, uncertainty of preclinical trial results, the establishment of new
corporate alliances, the timely development, regulatory approval and market
acceptance of the Company's products, and other risks detailed from time-to-time
in the Company's filings with the United States Securities and Exchange
Commission and Canadian securities authorities. There can be no assurance as to
the outcome of the litigation referenced above or that the Company will commence
or complete any financing referenced above.

THE TORONTO STOCK EXCHANGE HAS NEITHER APPROVED NOR DISAPPROVED OF THE
INFORMATION CONTAINED HEREIN.

<PAGE> 1
EXHIBIT 99.2

CONTACTS:
Glenn Neumann Gretchen L.P. Schweitzer

Manager, Investor Relations Director
AltaRex Corp. Feinstein Kean Partners
(781) 672-0138 (617) 577-8110
[email protected] www.fkpi.com

FOR IMMEDIATE RELEASE

ALTAREX ANNOUNCES FINANCIAL RESULTS FOR THE FOURTH QUARTER ENDED DECEMBER 31,
1998

WALTHAM, MASS., USA, MARCH 10, 1999 AltaRex Corp. (TSE: AXO) today announced its
financial results for the fourth quarter ended December 31, 1998. The following
results are in Canadian dollars. Revenues for the three months ended December
31, 1998 were $199,742 compared with $431,948 for the same period in 1997.
Revenues were 1.0 million for the year ended December 31, 1998 compared to 1.6
million for the prior year. The net decrease in both periods resulted mainly
from a reduction in research contract revenue in 1998 due to the completion of
non-core research contracts in late 1997 and early 1998.

The net loss for the three months ended December 31, 1998 was $4.2 million or
$0.25 per share compared to a net loss of $2.1 million or $0.13 per share for
the same period in 1997. For the year ended December 31, 1998, the net loss was
$13.1 million or $0.79 per share compared to a net loss of $4.7 million or $0.29
per share for the prior year. The increased net loss in both periods primarily
reflects the Company's increased investment in clinical and product development
activities and supporting efforts in product commercialization. The majority of
this increased investment is devoted to the Company's lead product, OvaRexTM
MAb, which is currently undergoing potentially pivotal phase IIb clinical
trials.

Cash and short-term investments as at December 31, 1998 was $12.8 million
compared with $25.0 million at December 31, 1997 and $16.8 million at September
30, 1998.

AltaRex Corp. is an emerging biotechnology company focused on research,
development and commercialization of immunotherapeutics for the treatment of
cancer. The Company's products are based on its unique proprietary platform
technology, Anti-idiotype Induction Therapy (AIT(R)). The Company believes that
AIT(R) enhances the ability of the human immune system to produce a highly
effective anti-tumor response. AIT(R) products are developed to target specific
antigens that are associated with various cancers. AltaRex has four AIT(R) based
products in various stages of research and development. These include OvaRex(TM)
MAb for tumors expressing the CA 125 antigen, BrevaRex(TM) MAb for tumors
expressing the MUC1 antigen, GivaRex(TM) MAb for tumors expressing the CA 19.9
antigen and ProstaRex(TM) (MAb) for tumors expressing the PSA antigen. The
Company's most advanced product, OvaRex(TM) MAb for ovarian cancer, is in two
potentially pivotal Phase IIb North American clinical trials, while BrevaRex(TM)
MAb has recently entered a Phase I study.

Additional information about AltaRex can be found on its web site at
WWW.ALTAREX.COM.

<PAGE> 2

This press release contains forward-looking statements that involve risks and
uncertainties, which may cause actual results to differ materially from the
statements made. For this purpose, any statements that are contained herein that
are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the forgoing, the words "believes", "anticipates",
"plans", "intends", "expects" and similar expressions are intended to identify
forward-looking statements. Such risks and uncertainties include, but are not
limited to changing market conditions, completion of clinical trials, patient
enrollment rates, uncertainty of preclinical trial results, the establishment of
new corporate alliances, the timely development, regulatory approval and market
acceptance of the Company's products, and other risks detailed from time-to-time
in the Company's filings with the United States Securities and Canadian
securities authorities.

THE TORONTO STOCK EXCHANGE HAS NEITHER APPROVED NOR DISAPPROVED OF THE
INFORMATION CONTAINED HEREIN.

<PAGE> 3

CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(In Canadian dollars, Unaudited)

<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31 DECEMBER 31
------------------------------ -------------------------------
1998 1997 1998 1997
------------------------------ -------------------------------

<S> <C> <C> <C> <C>
Revenue $ 199,742 $ 431,948 $ 1,013,742 $ 1,619,836
------------------------------ -------------------------------

Research and development 2,800,945 1,930,163 9,433,681 4,733,918
General and administration 1,575,815 584,258 4,695,990 1,563,555
------------------------------ -------------------------------
4,376,760 2,514,421 14,129,671 6,297,473
------------------------------ -------------------------------

Net loss for the period $(4,177,018) $(2,082,473) $(13,115,929) $(4,677,637)
============================== ===============================

Net loss per common share $ (0.25) $ (0.13) $ (0.79) $ (0.29)
============================== ===============================

Weighted average number of
common shares outstanding 16,512,613 16,473,555 16,503,764 15,894,880
============================== ===============================
</TABLE>

CONDENSED CONSOLIDATED
BALANCE SHEET
(In Canadian dollars, Unaudited)

<TABLE>
<CAPTION>
As at December 31,

1998 1997
----------- -----------
<S> <C> <C>

ASSETS
Cash and short-term investments $12,823,420 $25,002,106
Other current assets 252,909 529,129
Capital assets, net 1,654,419 1,582,768
Other assets 429,026 185,741
----------- -----------
$15,159,774 $27,299,744
=========== ===========

LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities $2,079,168 $1,035,299
Deferred lease credit 433,766 555,676
Shareholders' equity 12,646,840 25,708,769
----------- -----------
$15,159,774 $27,299,744
=========== ===========
</TABLE>

<PAGE> 1

EXHIBIT 99.3

CONTACT:

EDWARD M. FITZGERALD
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
ALTAREX CORP.
(781) 672-0138
[email protected]
WWW.ALTAREX.COM
FOR IMMEDIATE RELEASE

ALTAREX FILES LAWSUIT AGAINST BIOMIRA INC.

- - Announces Proposed Equity Offering of up to C$17MM -

WALTHAM, MA, USA, March 17, 1999 - AltaRex Corp. (AXO:TSE) announced today that
it has filed a lawsuit against Biomira Inc. concerning breaches by Biomira with
regard to the Company's License and Asset Purchase Agreements with Biomira. As a
result of Biomira's breaches, AltaRex claims it is entitled to an assignment of
all the rights granted to it by Biomira, and Biomira is disentitled to any
further rights, including the payment of royalties.

The Company also filed a demand for further particulars from Biomira with
respect to the allegations made in its legal action against AltaRex on the basis
that such action fails to disclose sufficient information to enable the Company
to properly defend the action.

The Company also announced the filing of a Preliminary Prospectus with
regulatory authorities in certain provinces of Canada relating to an offering up
to C$17 million of common shares. The Company has appointed First Marathon
Securities Limited as its lead agent for the Offering, with HSBC James Capel
Canada Inc. as co-agent. The closing of the Prospectus Offering is expected to
occur in late-April or early May.

"The events of the past few months have afforded us the opportunity to review in
greater detail the specifics of the history of our relationship with Biomira and
the attendant behavior exhibited by the principals of the other side," remarked
Richard Bagley, President and CEO of AltaRex. "As previously disclosed, we
intend to vigorously defend our rights and our independence from Biomira as
appropriately incorporated not only in our prior agreements with them but in our
conduct as a company since AltaRex was formed. In more formal legal language, we
believe Biomira has breached its License Agreement with AltaRex, has interfered
with our economic interests with an intent to cause deliberate damage, has
breached obligations of good faith arising from both the Asset Purchase and
License Agreements, and has sought to prevent us from practicing our rights
granted under the Agreements. We will seek a dismissal of their lawsuit under
the indemnification grant of the License Agreement, an assignment of rights
under the Agreements (including the exclusive right to develop, commercialize,
manufacture, use and sell all AIT(R) products and applications, including IRT ,
IPT and in-vivo imaging), a declaration that Biomira is not entitled to any
further rights (and in particular to royalty payments), damages to be proven at
trial, and an injunction, interest payments and other relief as may be awarded
by the

<PAGE> 2

court. In so doing, we are also affirming our inventorship and ownership of a
patent application entitled 'Method and Composition for Reconforming
Multi-Epitopic Antigens to Initiate an Immune Response'."

Additional information about AltaRex can be found on its web site at
WWW.ALTAREX.COM.

The Common Shares to be issued pursuant to the offering described herein have
not been and will not be registered under the United States Securities Act of
1933, as amended, and, subject to certain exceptions, may not be offered, sold
or delivered, directly or indirectly, in the United States of America, its
territories or possessions.

THE TORONTO STOCK EXCHANGE HAS NEITHER APPROVED NOR DISAPPROVED OF THE
INFORMATION CONTAINED HEREIN.

<PAGE> 1
EXHIBIT 99.4

THIS IS A PRELIMINARY PROSPECTUS RELATING TO THESE SECURITIES, A COPY OF WHICH
HAS BEEN FILED WITH SECURITIES COMMISSIONS IN THE PROVINCES OF BRITISH COLUMBIA,
ALBERTA, MANITOBA, ONTARIO AND QUEBEC, BUT WHICH HAS NOT YET BECOME FINAL FOR
THE PURPOSE OF A DISTRIBUTION TO THE PUBLIC. INFORMATION CONTAINED HEREIN IS
SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED IN SUCH PROVINCES PRIOR TO THE TIME RECEIPTS ARE
OBTAINED FOR THE FINAL PROSPECTUS FROM SECURITIES COMMISSIONS IN SUCH PROVINCES.

PRELIMINARY PROSPECTUS DATED MARCH 16, 1999

This prospectus constitutes a public offering of these securities only in those
jurisdictions where they may be lawfully offered for sale and therein only by
persons permitted to sell such securities. No securities commission or similar
authority in Canada has in any way passed upon the merits of the securities
offered hereunder and any representation to the contrary is an offence. The
securities offered hereby have not been and will not be registered under the
United States Securities Act of 1933, as amended, and, subject to certain
exceptions, may not be offered, sold or delivered, directly or indirectly, in
the United States of America, its territories or possessions. See "Plan of
Distribution".

[GRAPHIC OMITTED]

New Issue

ALTAREX CORP.

$*
* Common Shares

This offering consists of a new issue of up to * common shares ("Common Shares")
of AltaRex Corp. (the "Corporation" or "AltaRex") being issued and sold by the
Corporation at a price of $* per Common Share.

The offering price of the Common Shares was determined by negotiation between
First Marathon Securities Limited, HSBC James Capel Canada Inc. (together, the
"Agents") and the Corporation. The offering price of each Common Share exceeds
the net tangible book value thereof as at * , 1999, after giving effect to this
offering, by $*, representing dilution of *% ($* and *% on a fully diluted
basis). See "Dilution".

The Common Shares will not be precluded as investments under certain statutes as
set out under "Eligibility for Investment".
AN INVESTMENT IN THE COMMON SHARES INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE
REGARDED AS SPECULATIVE. SEE "RISK FACTORS".

The outstanding Common Shares are listed on The Toronto Stock Exchange. On *,
1999, the last trading day prior to the filing of this prospectus, the closing
price of the Common Shares on The Toronto Stock Exchange was $*.

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

PRICE: $* PER COMMON SHARE

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

<TABLE>
<CAPTION>
PRICE TO AGENTS' NET PROCEEDS TO
THE PUBLIC FEE(1) THE CORPORATION(2)
---------- ------- ------------------
<S> <C> <C> <C>
Per Common Share........................ $* $ * $ *
Total(3)................................ $* $ * $ *
</TABLE>

(1) In addition to the Agents' fee, AltaRex has agreed to grant to the
Agents options ("Compensation Options") equal to 5% of the total number
of Common Shares sold pursuant to this offering at an exercise price of
$*. This prospectus also qualifies the distribution of the Compensation
Options and the Common Shares issuable upon exercise of the
Compensation Options. See "Plan of Distribution".
(2) After deducting expenses of the offering, estimated at $* ,which will
be paid out of the proceeds of the offering.
(3) The Corporation has granted the Agents an option (the "Over-Allotment
Option") to purchase up to an additional * Common Shares at the
offering price for a period expiring 60 days following the date of
closing of this offering, to cover over-allotments, if any. This
prospectus also qualifies the distribution of the Over-Allotment Option
and the Common Shares issuable upon exercise of the Over-Allotment
Option.

<PAGE> 2

If the Over-Allotment Option is exercised in full, the total price to
the public, the Agents' fee and the net proceeds to the Corporation
will be $*, $* and $*, respectively. See "Plan of Distribution".

The Agents conditionally offer for sale the Common Shares offered hereunder on a
best efforts basis, if, as and when issued and delivered by the Corporation and
accepted by the Agents in accordance with the conditions contained in the agency
agreement between the Agents and the Corporation referred to under "Plan of
Distribution" and subject to the approval of certain legal matters on behalf of
the Corporation by McCarthy Tetrault and on behalf of the Agents by Fogler,
Rubinoff, Toronto.

Subscriptions will be received subject to rejection or allotment, in whole or in
part, and the right is reserved to close the subscription books at any time
without notice. Certificates for the Common Shares will be available for
delivery at the closing, which is expected to occur on or about *, 1999, or such
later date as the Corporation and the Agents may agree but, in any event, not
later than *, 1999.

<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C> <C> <C>
ELIGIBILITY FOR INVESTMENT......................... 1 Compensation of Executive Officers.......................... 39
GLOSSARY........................................... 2 Stock Options............................................... 40
SUMMARY............................................ 5 Employment Agreements....................................... 41
ALTAREX CORP....................................... 8 Compensation of Directors................................... 41
Corporate Structure................................ 8 INDEBTEDNESS OF DIRECTORS AND
History............................................ 8 OFFICERS................................................... 41
BUSINESS OF ALTAREX................................ 8 STOCK OPTIONS............................................... 42
Overview........................................... 8 DESCRIPTION OF SHARE CAPITAL................................ 43
Business Strategy.................................. 9 DIVIDEND POLICY............................................. 44
Plan of Operation For Fiscal 1999.................. 10 PRINCIPAL SHAREHOLDERS...................................... 44
Market for Cancer Therapeutics..................... 10 PRICE RANGE AND TRADING VOLUME OF
Approaches to Cancer Therapy....................... 11 THE COMMON SHARES.......................................... 45
The Corporation's AIT(R) Technology................ 13 CANADIAN FEDERAL INCOME TAX
The Corporation's Products......................... 14 CONSEQUENCES........................................... 45
Regulatory Approval Process........................ 20 Dividends................................................... 46
Strategic Alliances and License Agreements......... 22 Disposition of Common Shares................................ 46
Manufacturing...................................... 24 RISK FACTORS................................................ 47
Human Resources.................................... 24 Biomira Litigation.......................................... 47
Leased Properties.................................. 25 Possible Expiration or Termination of License
Competition........................................ 25 Agreement for MAb B43; Loss of Exclusivity............. 47
Proprietary Protection............................. 26 Reliance on Strategic Relationships......................... 48
Clinical Advisory Board............................ 27 Uncertainty Associated with Preclinical and
CONSOLIDATED CAPITALIZATION........................ 28 Clinical Testing....................................... 49
MANAGEMENT'S DISCUSSION AND Lack of Product Revenues; History of Losses................. 49
ANALYSIS OF FINANCIAL Capital Requirements........................................ 50
CONDITION AND RESULTS OF Key Personnel............................................... 50
OPERATIONS.................................... 29 Regulatory Environment; No Assurance of Product
Introduction....................................... 29 Approval............................................... 51
Selected Financial Information..................... 29 Competition................................................. 51
Overview........................................... 30 Proprietary Rights and Patent Protection.................... 52
Acquisition and Amalgamation....................... 30 Manufacturing and Marketing................................. 52
Results of Operations.............................. 30 Product Liability and Insurance............................. 53
Year ended December 31, 1998 compared Unstable Share Price........................................ 54
to year ended December 31, 1997............... 30 No Assurance of Successful Development...................... 54
Year ended December 31, 1997 compared INTERESTS OF MANAGEMENT AND
to year ended December 31, 1996............... 31 OTHERS IN MATERIAL TRANSACTIONS........................ 54
Foreign Currency Exposure.......................... 32 MATERIAL CONTRACTS.......................................... 55
Impact of the Year 2000 Issue...................... 32 ESCROWED SHARES............................................. 55
Liquidity and Capital Resources.................... 33 DILUTION.................................................... 56
PLAN OF DISTRIBUTION............................... 33 LEGAL MATTERS............................................... 56
USE OF PROCEEDS.................................... 35 LEGAL PROCEEDINGS........................................... 56
DIRECTORS AND OFFICERS............................. 35 AUDITORS, TRANSFER AGENT AND
Directors.......................................... 35 REGISTRAR.............................................. 57
Executive Officers................................. 36 PROMOTERS................................................... 57
Biographies of Directors and Executive PURCHASERS' STATUTORY RIGHTS................................ 57
Officers...................................... 36 CONSOLIDATED FINANCIAL STATEMENTS
Audit Committee.................................... 38 OF ALTAREX CORP...................................... F-1
EXECUTIVE COMPENSATION............................. 39 CERTIFICATE OF ALTAREX CORP................................. 80
CERTIFICATE OF AGENTS....................................... 81
</TABLE>

<PAGE> 4

ELIGIBILITY FOR INVESTMENT

In the opinion of McCarthy Tetrault, counsel to the Corporation, and Fogler,
Rubinoff, counsel to the Agents, subject to compliance with the prudent
investment standards and general investment provisions and restrictions of the
statutes referred to below (and, where applicable, the regulations thereunder)
and, in certain cases, subject to the satisfaction of additional requirements
relating to investment or lending policies, procedures or goals, the Common
Shares offered hereunder will not, as of the date of issuance, be precluded as
investments under the following statutes:

<TABLE>
<S> <C>
Insurance Companies Act (Canada) Pension Benefits Act (Ontario)
Pension Benefits Standards Act, 1985 (Canada) Loan and Trust Corporations Act (Ontario)
Trust and Loan Companies Act (Canada) An Act respecting trust companies and
Financial Institutions Act (British Columbia) savings companies (Quebec) (except trust
Pension Benefits Standards Act (British Columbia) companies with respect to funds, other than
Loan and Trust Corporations Act (Alberta) deposits, which are administered for other
Alberta Heritage Savings Trust Funds Act (Alberta) purposes)
Employment Pension Plans Act (Alberta) Supplemental Pension Plans Act (Quebec)
Insurance Act (Alberta) An Act respecting insurance (Quebec) (in
The Insurance Act (Manitoba) respect of insurers other than guarantee fund
The Trustee Act (Manitoba) corporations)
</TABLE>

In addition, in the opinion of such counsel, the Common Shares offered by this
prospectus, if listed on a prescribed stock exchange in Canada and if issued on
the date hereof, would be qualified investments under the Income Tax Act
(Canada) and the regulations under that Act for trusts governed by registered
retirement savings plans, registered retirement income funds or deferred profit
sharing plans (collectively "deferred income plans"). Assuming draft legislation
released by the Minister of Finance on October 27, 1998 is passed as proposed,
the Common Shares will also be qualified investments for registered education
savings plans. The Common Shares offered by this prospectus, if issued on the
date hereof, would not, on the date of this prospectus, be foreign property for
purposes of the provisions of the tax imposed under Part XI of the Income Tax
Act (Canada) on deferred income plans, registered investments and other tax
exempt entities, including most pension funds or plans.

<PAGE> 5

GLOSSARY

In this prospectus, the following terms have the following meanings unless the
context requires otherwise:

<TABLE>

<S> <C>
Adjuvant: An immunogenic substance administered with a vaccine to
increase the immune response.

Amino Acids: The basic molecules that form proteins.

Antibody: A protein agent developed in response to, and binding
specifically with, an antigen.

Anti-idiotype Induction Therapy or An immunotherapeutic antibody approach that induces the
AIT(R) Technology or AIT(R): human immune system to produce its own anti-tumor response
through several immune pathways.

Anti-idiotype Cascade or Network: An in vivo immune response characterized by antibodies to
antibodies resulting in antigen mimics and secondarily by native
antibodies reactive to the same antigen as the antibody inducing
the cascade.

Antigen: A substance which elicits a specific immune response.

Ascites-derived material: Obtained from the fluid of the abdominal cavity of mice that
have been implanted with cells that
secrete the desired substance
(antibody).

B-cell: A form of immune cell that produces antibodies and is a
precursor to a plasma cell.

Cell culture-derived material: Obtained from the secretion of cells grown in artificial media,
often in flasks or tanks.

Cellular response: An immune system response mediated by immune cells, often
cytotoxic and antigen specific.

current Good Manufacturing Government promulgated guidelines governing the manufacture
Practices or cGMP: of human and animal drugs and biologicals.

Chemotherapy or Generally, the use of drugs in the treatment of disease.
chemotherapeutic: Specifically the use of cytotoxic drugs to treat cancer.

Cytokine: Low molecular weight proteins that can either stimulate or
inhibit the proliferation or function of immune cells.

Cytotoxic T-cells: Immune system cells capable of killing other cells.

Epitope: Specific region on an antigen which is recognized by a specific
antibody or Tcell.

European Medicines Evaluation The agency responsible for drug product approval in the
Agency or EMEA: European Economic Community.

First line chemotherapy The administration of one or more of a combination of
(in ovarian cancer): chemotherapeutic agents usually consisting of a platinum-based
drug and paclitaxel.

Gene: The basic unit of heredity. Genes are nucleic acid sequences
encoding specific proteins that occupy a specific location on a
chromosome and are self-producing, submicroscopic structures
capable under certain circumstances of giving rise to a new
character.

Health Protection Branch or HPB: The government department responsible for supervising the drug
development and approval process in Canada.

Humoral response: An immune response mediated by antibodies in the blood.

Hybridoma cells: Any continuously growing cell line generated by the fusion of
a myeloma cell and a normal cell and
capable of producing antibodies.
</TABLE>

2
<PAGE> 6

<TABLE>
<S> <C>
Immunogenicity: The degree to which an antigen is capable of eliciting an
immune response.

Immunotherapy: A therapeutic approach to treat diseases by modifying the
immune response against the disease.

Immunological tolerance: Characteristic state in which the immune system is rendered
unresponsive to an antigen that, under other conditions, would
provoke an immune response.

Investigational New Drug An application to the FDA or other regulatory bodies, which is
Application or IND: submitted for approval prior to beginning clinical trials.

IV infusion: Administration of a medication directly into a vein.

In vitro: Studies or phenomena which take place outside the body.

In vivo: Studies or phenomena which take place in the body.

Master Cell Bank or MCB: A well characterized stock containing specific hybridoma cells
that are used in the manufacture of antibodies.

Master Working Cell Bank: "Manufacturer's" or "Master" Working Cell Bank, often referred
to as the "Working Cell Bank" (WCB): a bank derived from the
Master Cell Bank which acts as the starting source for (antibody)
bioproduction.

Monoclonal antibody or MAb: Antibody produced by hybridoma cells, which is
homogeneous in structure and specificity.

MUC1: A mucinous antigen associated with breast and other cancers.

Multi-epitopic response: Immune response to an antigen that is directed to multiple
regions on the antigen recognized by antibodies or Tcells.

Multiple myeloma: A haematologic malignancy or blood cancer related to leukemia
and lymphoma characterized by over-production of abnormal plasma
cells in the bone marrow.

Murine: Of mouse origin.

Myeloma cell: An immortal tumor cell originating or derived from the bone
marrow.

New Drug Application or NDA: A document submitted to the FDA or other
regulatory bodies containing all the pre-clinical and clinical data
collected on a drug to obtain approval for marketing.

New Drug Submission or NDS: A document submitted to the HPB which is the Canadian
counterpart to the NDA.

Peptide: A molecule containing several amino acids linked together.

Pharmacodynamic: The biological response to a drug.

Pharmacokinetic: The description of absorption, distribution, metabolism and
excretion of drugs by the body.

Plasma cell: A mature Bcell.

Potentially pivotal: A term used to describe clinical trials that would form the
basis for a submission seeking marketing approval from regulatory
authorities if the statistical goals of the trial are met.

Primary end point: The primary clinical outcome which forms the a priori basis of
the statistical hypothesis (including sample size estimation) of
a well controlled clinical trial. A fully successful study
confirms a treatment effect of the magnitude sufficient to
provide a statistically significant demonstration of the "primary
end point" for regulatory approval of a product.

Product License Application or The application submitted to the FDA to qualify biological drug
PLA: products for sale in the United States.

PSA: An antigen associated with prostate cancer.
</TABLE>

3
<PAGE> 7

<TABLE>
<S> <C>
Sera: The fluid component of blood after separation of cellular
components.

Secondary end point: Secondary clinical or biological outcomes that can be
assessed in analysis of a clinical trial. Although supportive and
potentially important, these endpoints are not the a priori
primary experimental question proposed for a clinical protocol.

Second-line chemotherapy Any one of a combination of drugs consisting of Paclitaxel,
(in ovarian cancer): Etoposide, CAP (cyclophosphamide, adriamycin, cis-platin) or
HCAP (hexamethylmelamine and CAP) or other drugs administered into
patients, who are either partial or non- responders to first line
chemotherapy.

Surrogate endpoint: A laboratory or physical sign that is used in clinical trials
as a substitute for a clinically meaningful endpoint that is a direct
measure of how a patient feels, functions, or survives and that is
reasonably likely to predict the effect of therapy.

Surrogate marker: A laboratory measurement of biological activity within the body
that indirectly indicates the effect of treatment on disease state.

T-cell: A form of immune cell that mediates humoral and cellular immune
responses.

Tumor: An abnormal proliferation of malignant cells.

Tumor antigen or tumor associated An antigen that is predominantly expressed in tumor tissues and
antigen or TAA: may be released into the blood stream in association with the
tumor.

Tumor marker: A biological product (protein or other) that is expressed
on tumor cells and secreted usually into the serum, such that presence
or activity of the tumor can be measured indirectly through
measurement of the marker.

United States Food and Drug The regulatory body that oversees the drug development and
Administration or FDA: approval process in the United States.
</TABLE>

4
<PAGE> 8

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

SUMMARY

The following is a summary only and is qualified in its entirety by the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this prospectus. All dollar references in this prospectus
are in Canadian dollars unless otherwise specifically indicated. This prospectus
includes product names and trademarks of the Corporation and of other
organizations.

THE OFFERING

<TABLE>
<S> <C>
ISSUE: * common shares ("Common Shares") of AltaRex Corp. (the
"Corporation" or "AltaRex")

PRICE: $* per Common Share

AMOUNT: $*

USE OF PROCEEDS: The estimated net proceeds of the offering to the Corporation,
after deducting the Agents' fee and the estimated expenses of
the offering of approximately $*, will be $*. The Corporation
intends to use the net proceeds of this offering as follows:

OvaRex(TM) MAb antibody and clinical trial costs $ * million
BrevaRex(TM) MAb antibody and clinical trial costs $ * million
Working capital requirements $ * million
Total $ * million

See "Use of Proceeds".
</TABLE>

BUSINESS OF ALTAREX

AltaRex is an emerging biotechnology company focused on the research,
development and commercialization of unique antibody-based immunotherapeutics
for the treatment of certain late- stage cancers. The Corporation's products are
based on its unique proprietary platform technology, Anti-idiotype Induction
Therapy or AIT(R) Technology. Based upon research and clinical studies to date,
AltaRex believes that its AIT(R) Technology enhances the ability of the human
immune system to produce its own anti-tumor response. The Corporation has filed
five patent applications under its AIT(R) Technology in the United States. Four
of these patents have been or will be the subject of international patent
applications. See "Business of AltaRex Proprietary Protection" and "Legal
Proceedings".

AltaRex's products are modified murine monoclonal antibodies or MAbs developed
by the Corporation's scientists or licensed to the Corporation. The Corporation
believes that these MAbs may be used effectively to complement and/or supplement
traditional cancer therapies. The Corporation's strategy is to focus its
antibody development expertise to produce unique, patent protected,
antibody-based immunotherapeutics based on its AIT(R) Technology platform for
commercialization primarily by pharmaceutical partners. The Corporation believes
this strategy will enable it to achieve patent protected commercialization of
antibody-based immunotherapeutics to treat various cancers and other disease
areas including autoimmune diseases and infectious diseases. See "Business of
AltaRex - Business Strategy".

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

5
<PAGE> 9

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

body's immune response against ovarian cancer. In the first quarter of 1997, the
Corporation initiated a potentially pivotal North American Phase IIb clinical
trial in Canada with time to disease progression as the primary end point.
Administration of the drug to patients in the United States under this trial
began in the second quarter of 1998. This placebo controlled trial will enroll
280 patients by late 1999 and is expected to be completed in 2001 for primary
analysis. A second potentially pivotal Phase IIb clinical trial was initiated in
December 1998 also with time to disease progression as its primary end point and
will address an ovarian cancer patient population with a more advanced stage of
disease than the initial Phase IIb trial. This placebo controlled trial will
enroll 102 patients in the United States and is also scheduled for completion by
2001. The Corporation has received Orphan Drug status and Fast Track designation
from the FDA for OvaRex(TM) MAb. Orphan Drug status and Fast Track designation,
as well as the applicability of certain provisions of the FDA Modernization Act
of 1997, form the Corporation's regulatory approval strategy in the United
States which centres on a surrogate measure of efficacy, being time to disease
progression, as a basis for regulatory approval. The Corporation's Phase IIb
trials have primary end points of time to disease progression as well as
secondary end points, including survival and quality of life, any of which can
form the basis for regulatory approval. See "Business of AltaRex - The
Corporation's Products - Overview".

The Corporation is developing additional antibody-based immunotherapeutics from
its AIT(R) Technology platform for the treatment of tumors expressing the MUC1
(BrevaRex(TM) MAb), PSA (ProstaRex(TM) MAb) and CA19.9 (GivaRex(TM) MAb) tumor
associated antigens. The Corporation commenced a Phase I clinical trial of
BrevaRex(TM) MAb in December 1998.

SELECTED FINANCIAL INFORMATION

The following selected financial information provided below has been taken from
the audited consolidated financial statements of AltaRex contained elsewhere in
this prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
----------- ---------- ----------

($) ($) ($)
INCOME STATEMENT DATA

<S> <C> <C> <C>
Revenues ..................... 1,013,742 1,619,836 88,257
Expenses
Research and development . 9,433,681 4,733,918 1,720,031
General and administration 4,695,990 1,563,555 540,285
----------- ---------- ----------
Net loss ..................... (13,115,929) (4,677,637) (2,172,059)
Net loss per common share .... (0.79) (0.29) (0.24)
</TABLE>

AS AT DECEMBER 31
1998 1997
---------- ----------

($) ($)
BALANCE SHEET DATA

Total assets ....... 15,159,774 27,299,744
Shareholders' equity 12,646,840 25,708,769

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

<PAGE> 10

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

RISK FACTORS

The acquisition of Common Shares offered hereunder entails certain risks and any
investment in Common Shares should be considered as being highly speculative.
See "Risk Factors" for a description of certain of the risks that should be
considered in assessing an investment in the Common Shares, including the
following: (i) litigation, including the Biomira litigation; (ii) the possible
expiration of the license agreement for MAb B43; loss of exclusivity; (iii)
reliance on strategic relationships; (iv) uncertainty associated with
preclinical and clinical testing; (v) lack of product revenues; history of
losses; (vi) capital requirements; (vii) dependence upon key personnel; (xiii)
regulatory environment; no assurance of product approval; (ix) competition; (x)
proprietary rights and patent protection; (xi) manufacturing and marketing;
(xii) product liability and insurance; (xiii) unstable share price; and (xiv) no
assurance of successful development. See "Risk Factors".

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

<PAGE> 11

ALTAREX CORP.

CORPORATE STRUCTURE

AltaRex Corp. ("AltaRex" or the "Corporation") was established on May 31, 1997
under the laws of the Province of Alberta by the amalgamation of AltaRex Corp.
(formerly known as Allrich Energy Group Inc. ("Allrich")) and AltaRex Inc. Prior
to such amalgamation, Allrich, an inactive public company, acquired all of the
outstanding shares of AltaRex Inc. resulting in AltaRex Inc.'s shareholders
holding a controlling interest in Allrich. On June 27, 1997 articles of
amendment were filed to provide that meetings of shareholders may be held at any
place within Canada and the United States. The registered office of AltaRex is
located at Campus Tower, Suite 300, 8625 - 112 Street, Edmonton, Alberta T6G
2E1. The executive offices of AltaRex are located at Suite 125, 303 Wyman
Street, Waltham, Massachusetts 02451.

AltaRex US, Corp. ("AltaRex US"), the Corporation's only subsidiary, was
incorporated under the laws of the State of Delaware and is wholly-owned by the
Corporation. With offices located in Waltham, Massachusetts, AltaRex US directs
the executive, business development, clinical, regulatory, development,
manufacturing and investor relations efforts of the Corporation.

HISTORY

AltaRex was founded in November 1995 by Dr. Antoine Noujaim and a team of
collaborators to commence a business engaged in the discovery and development of
anti-cancer immunotherapeutics. Prior to founding AltaRex, Dr. Noujaim was
President of Biomira Research Inc. ("Biomira Research"), a wholly-owned
subsidiary of Biomira Inc. ("Biomira"). In 1995, Biomira decided to discontinue
funding the operations of Biomira Research. Dr. Noujaim and other collaborators
believed that the B43 antibody research project undertaken by Biomira Research
(known as the OvaRex(TM) MAb Program) had the potential to be further developed
into a commercial product. As a result, in November 1995, AltaRex acquired
certain components of the OvaRex(TM) MAb Program and the OvaRex(TM) MAb
tradename and trademark from Biomira and Biomira Research and entered into an
exclusive licensing agreement with Biomira pursuant to which it acquired the
exclusive worldwide right to use, develop, manufacture and commercialize (for
anti-idiotype induction therapy applications) products based on the B43
antibody. See "Business of AltaRex - Strategic Alliances and License Agreements
- - Biomira License Agreement" and "Legal Proceedings".

BUSINESS OF ALTAREX

OVERVIEW

AltaRex is an emerging biotechnology company focused on the research,
development and commercialization of unique antibody-based immunotherapeutics
for the treatment of certain late- stage cancers. The Corporation's products are
based on its unique proprietary platform technology, Anti-idiotype Induction
Therapy or AIT(R) Technology. Based upon research and clinical studies to date,
AltaRex believes that its AIT(R) Technology enhances the ability of the human
immune system to produce its own anti-tumor response. The Corporation has filed
five patent applications for its AIT(R) Technology in the United States. Four of
these patents have been or will be the subject of international patent
applications. See "- Proprietary Protection" and "Legal Proceedings".

8
<PAGE> 12

OvaRex(TM) MAb, the Corporation's lead product, targets a tumor associated
antigen known as CA 125 which has been found to be over-expressed in the
majority of ovarian (and certain other) cancer patients. The Corporation
believes that when administered to patients in low dosages by IV infusion
OvaRex(TM) MAb acts by inducing or amplifying, through multiple mechanisms, the
body's immune response against ovarian cancer. In the first quarter of 1997, the
Corporation initiated a potentially pivotal North American Phase IIb clinical
trial with OvaRex(TM) MAb, in Canada with time to disease progression as the
primary end point. Administration of the drug to patients in the United States
under this trial began in the second quarter of 1998. This placebo controlled
trial will enroll 280 patients by late 1999 and is expected to be completed in
2001 for primary analysis. A second potentially pivotal Phase IIb clinical trial
was initiated in December 1998 also with time to disease progression as its
primary end point. Such trial will address an ovarian cancer patient population
with a more advanced stage of disease than the initial Phase IIb trial. This
placebo controlled trial will enroll 102 patients in the United States and is
also scheduled for completion by 2001. AltaRex is also conducting open Phase II
trials in the United States and Canada. In consultation with regulatory
authorities, the Corporation is generating cell culture-derived antibody which
will be studied in comparability trials with the Corporation's current
ascites-derived materials.

The Corporation has received Orphan Drug status and Fast Track designation from
the FDA for OvaRex(TM) MAb. Orphan Drug status and Fast Track designation, as
well as the applicability of certain provisions of the FDA Modernization Act of
1997 ("FDAMA") relating to surrogate measures of efficacy form the Corporation's
regulatory approval strategy in the United States. The Corporation's Phase IIb
trials each have primary end points of time to disease progression as well as
secondary end points, including survival and quality of life, any of which can
form the basis for regulatory approval. See "- The Corporation's Products".

AltaRex is also developing additional antibody-based immunotherapeutics from its
AIT(R) Technology platform for the treatment of tumors expressing the MUC1
(BrevaRex(TM) MAb), PSA (ProstaRex(TM) MAb) and CA19.9 (GivaRex(TM) MAb) tumor
associated antigens. The Corporation commenced a Phase I clinical trial of
BrevaRex(TM) MAb in December 1998.

BUSINESS STRATEGY

The Corporation's strategy is to focus its antibody development expertise to
produce unique, patent protected, antibody-based immunotherapeutics based on its
AIT(R) Technology platform for commercialization primarily by pharmaceutical
partners. The key elements of the Corporation's strategy are to:

* Focus exclusively on antibodies for immunotherapy;

* Access research regarding antibodies and disease targets from
key academic institutions, particularly in Canada and the
United States;

* Employ the AIT(R) Technology and related proprietary
technology of the Corporation to generate highly specific
immune responses to MAbs associated with TAAs;

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<PAGE> 13

* Coordinate further research and conduct preclinical and
clinical trials to enable the Corporation to pursue regulatory
approval for the products and to build value for strategic
partnering; and

* Realize value through strategic partnerships with
pharmaceutical companies.

The Corporation believes that this strategy will enable it to achieve the
patent-protected commercialization of antibody-based immunotherapeutics to treat
various cancers and other disease areas including autoimmune and infectious
diseases.

PLAN OF OPERATION FOR FISCAL 1999

AltaRex's plan of operation for the year ending December 31, 1999 is to continue
to develop and conduct clinical trials for antibody-based immunotherapy
products. During this period, the Corporation plans to complete enrollment in
the first OvaRex(TM) MAb Phase IIb clinical trial in North America and to
achieve significant progress in enrolling patients in the second Phase IIb
clinical trial. The Corporation also intends to substantially complete the
OvaRex(TM) MAb open Phase II trials in the United States and Canada and the
BrevaRex(TM) MAb Phase I clinical trial in the United States. Additionally, the
Corporation plans to continue product development programs for ProstaRex(TM) MAb
and GivaRex(TM) MAb by conducting further exploratory research. See "Regulatory
Approval Process".

In cooperation with Lonza Biologics plc ("Lonza Biologics"), the Corporation is
in the process of scaling-up commercial production of cell culture-derived
antibody to be used in comparability testing with the Corporation's current
ascites-derived material. The Corporation is also working with Lonza Biologics
to begin scaling-up its BrevaRex(TM) MAb cell culture material to a commercial
level. Scaling-up production of these antibodies will enable the Corporation to
further pursue regulatory approval and commercialization of the Corporation's
products. Such regulatory approval and commercialization is dependent upon the
ability of the Corporation to achieve such production. See "Risk Factors".

MARKET FOR CANCER THERAPEUTICS

Cancer is a disease characterized by uncontrolled growth and spread of abnormal
cells. The disease is believed to occur as a result of a number of factors such
as genetic predisposition and external (chemicals, radiation) and internal
(immune status, hormones) causes.

Overall, the annual costs for cancer in the Untied States are estimated at U.S.
$107 billion which includes U.S. $37 billion for direct medical costs, U.S. $11
billion for morbidity costs (loss of productivity) and U.S. $59 billion for
mortality cases. The world market for cancer therapeutics was U.S. $11.7 billion
in 1997 and is expected to reach U.S. $14.7 billion by 2000. (SCRIP Reports -
The Complete Guide to Cancer - Second Edition, 1998). North America
(predominantly the United States) represents 47% of the worldwide anti-cancer
drug market.

The majority of cancer patients are people over the age of 65 and it is
anticipated that as the population continues to age, cancer treatment will
likely become the single largest health care expenditure in the United States
and other industrialized nations (Frost and Sullivan, World Cancer Therapeutic
Markets, August 1996).

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<PAGE> 14

APPROACHES TO CANCER THERAPY

Conventional approaches for the treatment of cancer have been based on a
combination of surgery, radiation and chemotherapy. Despite increasing resources
to develop new therapies for cancer, survival rates for cancer patients have not
materially improved over the last 15 years (American Cancer Society, 1998 Cancer
Facts & Figures). This ongoing inability to significantly improve survival or
quality of life for cancer patients creates a compelling need for alternative
medical strategies.

The potential market for antibody-based therapies in the management of advanced
cancer has rapidly expanded, as evidenced by the acceptance of IDEC
Pharmaceuticals Corp.'s ("IDEC") Rituxan(R) (rituximab) for the treatment of
non-Hodgkin's lymphoma and the recent FDA approval of Genentech Inc.'s
("Genentech") Herceptin(R) (trastuzumab).

Immunotherapeutic Approaches to Cancer

The immunological approach to cancer therapy is based on the principle that the
human immune system is capable of recognizing and eliminating cancer cells. In
cancer patients, the immune system has failed, for unknown reasons, to respond
to the presence of cancer cells. Immunotherapeutic approaches attempt to
stimulate and enhance an anti-cancer response by the patient's own immune
system.

The immunotherapeutic approach has inherent advantages in comparison to current
conventional treatment practices, which are often radical in nature and
associated with severe side effects and toxicity, thereby compromising the
patient's quality of life. In addition, tumors treated conventionally often
re-emerge in more aggressive and treatment-resistant forms. Immunotherapy, which
can be utilized in combination with conventional treatments or as a single
treatment, can be substantially less toxic than chemotherapy and therefore may
improve the patient's quality of life.

There are currently four widely accepted immunological approaches to cancer
therapy. They can be classified as either tumor associated antigen dependent
(e.g., passive immunization or active specific immunization) or independent
(e.g., adoptive cell-based or non-specific). The primary difference between
immunotherapeutic approaches is the method in which the immune system is
stimulated and the nature of the subsequent immune responses.

Conventional Immunotherapeutic Approaches

INDEPENDENT IMMUNOLOGICAL APPROACHES

Adoptive Immunotherapy

This form of therapy consists of the separation and stimulation of T-cells, then
exposing those cells to immunostimulates in vitro in order to augment the immune
system's response to tumor cells. The treated cells are then expanded in numbers
and reinjected into patients. Each patient serves as the donor and recipient of
his or her own T-cells. While efforts are being conducted to make this therapy
more effective, wide application remains difficult due to the individual nature
of the treatment.

11
<PAGE> 15

Non-Specific Immunotherapy

In general, this approach may be described as a method by which the immune
system is non-specifically stimulated in order to destroy the tumor. The
principal approach has been through the use of cytokines; however, while
effective in some indications, side effects have limited their use.

TAA IMMUNOLOGICAL APPROACHES

Tumor associated antigens or TAAs are located on the surface of cancer cells,
circulate in a patient's blood or sera and are associated with the presence of
specific cancer types. The antigens have single or multiple binding sites or
epitopes. There are two types of TAA immunotherapy, passive and active specific.

Passive Immunization

This approach consists of the administration of certain immune molecules, such
as antibodies, to patients who do not produce them on their own. These
antibodies are generally administered in large quantities and, while targeting
the cancer cells, can also be designed to act on other cell types and molecules
which are necessary for tumor growth. For example, antibodies can be designed to
affect the tumor's blood supply, thereby inhibiting the tumor's expansion.
Alternatively, certain antibodies can act directly on the tumor by activating a
cellular system to attack the tumor after the antibody is attached to it. The
underlying assumption is that the antibody will recognize and bind to a
cancer-specific antigen which is not expressed on normal cells. Unfortunately,
some of the cancer antigens are also found on normal cells, which might also be
damaged at the same time.

Active Specific Immunization

Vaccines that are based on this therapeutic approach usually involve the
immunization of patients with irradiated tumor cells expressing a specific
antigen or by combining the antigen itself with an appropriate carrier molecule
and administering it together with an adjuvant. Modern variations to this
technique, include anti-idiotype antibody therapy, which consists of the
formation and selection of an antigen mimic in the form of an antibody that is
administered in the manner described above. While this technology holds promise,
the development of an effective vaccine is highly dependent on the accurate
pre-selection of the antigen or antigen mimic.

AltaRex's Anti-Idiotype Induction Therapy

The Corporation believes its AIT(R) approach to immunotherapy is fundamentally
different from the conventional approaches to immunotherapy described above.
AIT(R) Technology involves the development of a murine antibody specific to a
tumor associated antigen. This antibody is subsequently modified by a
proprietary technique and, after appropriate processing, is injected by IV
infusion into a patient. Multiple immunological pathways are then invoked. This
results in the formation of a complex between the antibody and the patient's own
circulating tumor antigens. The tumor antigen is thereby targeted for an immune
response. Mechanistic studies have demonstrated the induction of the
anti-idiotype network or cascade and, more particularly, of a reconformation of
the TAA presentation and humoral and cellular response to multiple epitopes of
the TAA. It is the Corporation's belief that this in turn results in an immune
response having

12
<PAGE> 16

unique characteristics, mobilizing both cellular and humoral pathways against
the TAA and the tumor cells, triggered by a tumor antigen specific modified
murine monoclonal antibody.

THE CORPORATION'S AIT(R) TECHNOLOGY

Overview

The development of the Corporation's AIT(R) Technology and related products has
been facilitated by advances in the field of oncology that have demonstrated the
existence of cellular components known as tumor associated antigens.

The AIT(R) Technology is the process by which the Corporation produces, selects,
modifies and administers unique murine MAbs that can selectively bind to TAAs
that are highly associated with certain types of cancers. The Corporation has
found that the selective binding of MAbs to TAAs can induce a number of specific
anti-tumor immune responses in a cancer patient.

The Corporation believes that it has developed a method to isolate groups of
TAAs associated with specific cancers. The Corporation develops murine MAbs
having a high degree of specificity to a particular TAA. The Corporation has
shown that the MAb B43, the primary component of OvaRex(TM) MAb, has a high
degree of specificity to the TAA CA 125, an antigen over-expressed by the
majority of ovarian cancer patients. The Corporation has developed murine MAbs
that have high specificity to TAAs associated with seven of the ten most lethal
forms of cancer in the United States.

The Corporation believes that its AIT(R) approach to immunotherapy may provide
the following advantages over conventional approaches to immunotherapy:

* The AIT(R) immunotherapeutic induction approach uses a foreign
(murine) antibody to a single epitope of a multi-epitopic TAA
that induces the immune system to mount its own generalized
anti-tumor response to multiple epitopes of the TAA. The
technology mobilizes an immune response that is not restricted
by selection of idiotype or vaccine fragment;

* The AIT(R) immunotherapeutic approach has demonstrated the
stimulation of both a humoral and cellular immune response;

* The AIT(R) immunotherapeutic approach utilizes low dose and
intravenous infusion of antibody, minimizing the risk of
toxicity and lowering the cost of the product and the
treatment; and

* The use of a murine MAb induces a potent immune response that
would not be seen with humanized antibodies.

The AIT(R) Technology is the subject of several patent applications filed by the
Corporation with the United States and other patent agencies around the world.
See "- Proprietary Protection". The Corporation's lead product, OvaRex(TM) MAb,
is based on a murine MAb that was licensed to the Corporation from Biomira. See
"- The Corporation's Products - OvaRex(TM) MAb", -"Strategic Alliances and
License Agreements - Biomira License Agreement" and "Legal Proceedings". AltaRex
may license or develop (as it has for BrevaRex(TM), GivaRex(TM), and
ProstaRex(TM) MAbs) other MAbs for future AIT(R) products.

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<PAGE> 17

The Corporation has not completed the clinical trials necessary to confirm the
efficacy of its AIT(R) Technology. As a result, while the preliminary results
from other trials on its OvaRex(TM) MAb product are encouraging, there can be no
assurance that the Corporation's products will demonstrate sufficient
therapeutic benefit in the treatment of cancer patients that would lead to
obtaining regulatory approval. See "Risk Factors - Uncertainty Associated with
Preclinical and Clinical Testing".

Mechanism of Action of the AIT(R) Technology

The mechanism of action of the Corporation's AIT(R) Technology is based on what
the Corporation believes is the ability of the human immune system to generate a
tumor specific immune response to MAbs associated with specific TAAs. The
Corporation believes that certain murine MAbs may, upon administration to a
cancer patient, induce both a humoral and a cellular response by the patient's
immune system.

There are four basic steps in the AIT(R) Technology process:

STEP 1 - IDENTIFICATION OF THE TUMOR ASSOCIATED ANTIGEN

AltaRex has isolated specific antigens that have a high association with
particular cancers. To date, TAAs have been identified and isolated for ovarian,
breast, prostate, lung, pancreatic, colorectal and stomach cancers.

STEP 2 - DEVELOPMENT OF THE MONOCLONAL ANTIBODY (Ab1)

AltaRex uses the identified antigens to develop a murine MAb known as Ab1. This
MAb is used to elicit an immune response.

STEP 3 - MODIFICATION OF Ab1 MONOCLONAL ANTIBODY

Using the Corporation's proprietary technology, antibodies from step two are
modified to increase the degree to which the antibody is capable of eliciting an
immune response. This process results in a modified murine MAb (Ab1) that is
ready for use.

STEP 4 - INITIATION OF THE AIT(R) INDUCED RESPONSE

The Corporation believes that administration of the modified murine MAb into the
patient initiates a cascade characterized by at least three major events. The
uniqueness of the AIT(R) Technology may be attributed, in part, to these three
different mechanisms by which the antibody may exert its influence on tumor
cells. These mechanisms have been elucidated by the Corporation's detailed
analysis of the anti-idiotype network or cascade. In the first instance, the Ab1
antibody induces the production of an anti-idiotype network or cascade of
antibodies. Second, the immunogenicity of the antibody leads to a cellular
immune response. Finally, and most importantly, administration of the antibody
results in the formation of a TAA antibody complex in the blood, and a novel
presentation of the TAA to the immune system inducing a multi-epitopic response
to the TAA. The result of this cascade of events is a tumor specific humoral and
cellular response capable of killing cancer cells.

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<PAGE> 18

THE CORPORATION'S PRODUCTS

AltaRex has selected four tumor associated antigens for its initial therapeutic
product development. The first and most advanced of these product candidates is
OvaRex(TM) MAb (MAb B43.13) for the treatment of patients with tumors expressing
CA 125. Other products in development include BrevaRex(TM) MAb (for tumors
expressing MUC1), ProstaRex(TM) MAb (for tumors expressing PSA) and GivaRex(TM)
MAb (for tumors expressing CA 19.9). The following chart sets forth the current
development status of the Corporation's products.

[CHART WHICH SETS FORTH THE CURRENT DEVELOPMENT STATUS OF THE CORPORATION'S
PRODUCTS]

OvaRex(TM) MAb

OVERVIEW

In the United States, Canada and Europe, ovarian cancer causes more deaths than
any other cancer of the female reproductive tract. It is estimated that in the
United States more than 25,400 new cases of ovarian cancer will be diagnosed and
more than 14,000 women will die from this disease annually (American Cancer
Society, 1998 Cancer Facts & Figures).

Although detection of ovarian cancer at an early stage is now associated with an
improved chance for curative treatment, survival figures have not changed
significantly over the past 15 years. This is partially due to a lack of
efficient diagnostic methods or markers for routine tests that could increase
the number of patients diagnosed at the early stage of their disease.
Consequently, in approximately three-quarters of diagnosed patients, the tumor
has already progressed to an advanced stage (Stage III or IV), making treatment
more difficult. Of these Stage III and IV patients, more than 80% express the
tumor associated antigen CA 125. Patients diagnosed with advanced ovarian cancer
usually demonstrate a survival time of less than two years (Hoskins et al.,
Journal of Clinical Oncology, October 1992).

Prior to 1995, a research program for OvaRex(TM) MAb was initiated at Biomira
Research. In November 1995, the Corporation acquired from Biomira certain assets
and licensed certain technologies, including the antibody B43, which is utilized
in OvaRex(TM) MAb. Under the terms of a license agreement with Biomira, the
Corporation has a license to, among other things, use the antibody B43 in
connection with the development of anti-idiotype induction therapy products and
applications. See "- Strategic Alliances and License Agreements - Biomira
License Agreement" and "Legal Proceedings".

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OvaRex(TM) MAb uses a murine MAb having a high degree of specificity to a TAA
(CA 125) over- expressed by the majority of ovarian cancer patients. The
Corporation believes that the product acts as an immunotherapeutic agent by
inducing or amplifying the human body's immune response against ovarian cancer.
This response is characterized by a cascade of events involving the production
of specific antibodies and cytotoxic T cells in the body which target the tumor
cells. The Corporation believes that this combination of a humoral and cellular
immune response accounts for the observed improvement in the clinical outcome of
patients receiving the OvaRex(TM) MAb. See "- Clinical Experience with
OvaRex(TM) MAb".

OVAREX(TM) MAb REGULATORY APPROVAL STRATEGY

AltaRex has received Orphan Drug status from the FDA for OvaRex(TM) MAb for the
treatment of ovarian cancer which may result in seven years of market
exclusivity provided that the Corporation continues to meet certain conditions
established by the FDA. See "- Regulatory Approval Process - Orphan Drug
Status".

Generally, the FDA approves the marketing of a drug based on adequate and
well-controlled trials. The FDA also has regulations which are intended to
expedite the development, evaluation and marketing of a new drug used for the
treatment of serious diseases for which there is no other satisfactory
treatment. In appropriate circumstances, the FDA may, in its discretion, approve
the marketing of a drug based on one adequate and well-controlled trial, if
supported by information from other related adequate and well-controlled studies
or if the trial is a single multi-centre trial. Fast Track designation makes a
product eligible for consideration for a number of programs, including meeting
with the FDA to discuss research protocol design and the possibility that the
marketing of the product may be approved immediately after the conclusion of
Phase II studies. As a result of FDAMA, obtaining Fast Track designation from
the FDA can result in approval based on a surrogate endpoint that is reasonably
likely to predict clinical benefit. Such approval may be subject to the
requirements that the sponsor conduct appropriate post approval studies and
submit all promotional materials related to the Fast Track product at several
different points in time.

The Corporation has received a letter from the FDA dated December 17, 1998
stating that its Request for Fast Track designation has been reviewed and,
subject to the Corporation continuing to meet certain criteria, the FDA has
designated OvaRex(TM) MAb as a Fast Track Development program (for the effect of
OvaRex(TM) MAb in delaying time to recurrence in patients with Stage III or IV
ovarian cancer who have undergone standard treatment, surgery and chemotherapy,
and have minimal or no evidence of disease).

As part of the Corporation's regulatory approval strategy, it is conducting two
potentially pivotal Phase IIb trials based on the surrogate endpoint of time to
disease relapse. The Corporation has also initiated open Phase II trials that
are underway in the United States and Canada with ovarian cancer patient
populations that have already experienced disease relapse. The Corporation
intends to treat 300-500 patients with OvaRex(TM) MAb (or an earlier
radiolabelled imaging product) prior to submission for approval by the FDA and
other regulatory agencies. The Corporation is also working with Lonza Biologics
to scale-up cell culture-based OvaRex(TM) MAb antibody that is expected to be
studied in comparability trials with the Corporation's current ascites-derived
antibody material. Scaling-up production of cell culture-derived materials will
enable the Corporation to further pursue regulatory approval and
commercialization of OvaRex(TM) MAb. See "Risk Factors - Reliance Upon Strategic
Relationships".

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CLINICAL EXPERIENCE WITH OVAREX(TM) MAb

An earlier formulation of OvaRex(TM) MAb was administered to more than 200
patients for imaging purposes. Of the patients that received the imaging
antibody, about 50% were evaluated for an immunological response to OvaRex(TM)
MAb. The principal investigators observed that following the administration of
the imaging antibody, particularly in those patients who received more than one
dose, the patients developed a clinical response to treatment characterized by
what appeared to be unusually long survival times.

A subsequent retrospective statistical analysis, initially prepared by an
independent statistician at the University of Dortmund in Germany, identified a
statistically significant treatment effect in the survival time of patients
receiving the earlier OvaRex(TM) MAb, when compared to a historical control
group treated with conventional chemotherapy. An additional independent analysis
by a statistician at the University of Western Ontario in Canada was undertaken
with almost identical results. The following graph illustrates the adjusted
survival curves. In this Cox Statistical Analysis, the median length of survival
was 30 months for the group treated with conventional chemotherapy and 59 months
for the group that received the earlier formulation of OvaRex(TM) MAb.
Additionally, the five year survival rates as determined by this analysis were
11.4% for the chemotherapy group and 40.7% for the group that received the
earlier formulation of OvaRex(TM) MAb.

Cox Statistical Analysis is a statistical method of comparing two different
populations with respect to the length of survival of patients who received a
drug with those who did not, while balancing the effect of other parameters that
can also affect survival.

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Adjusted Overall Survival Curves of Ovarian Cancer Patients
Treated with MAb B43 and with Chemotherapy

[GRAPHIC OMITTED]

CURRENT TRIALS WITH OVAREX(TM) MAb

Based on the encouraging results obtained in the early retrospective analysis
and a substantial body of evidence supporting the retrospective analysis based
on immunological laboratory research, the Corporation has initiated a
prospective multi-centre Phase IIb North American clinical trial with ovarian
cancer patients to definitively evaluate the clinical utility of OvaRex(TM) MAb.
In Canada, the Corporation received approval from the HPB on October 1, 1996 to
conduct the Phase IIb clinical trial. Patient enrollment commenced in a number
of major cancer centres in Canada in early 1997. In the United States, the
Corporation received Orphan Drug status for the OvaRex(TM) MAb drug on November
26, 1996 and received approval from the FDA on May 23, 1997 to proceed with the
Phase IIb trial. The first patient was treated in April 1998. In 1998, the FDA
approved the combination of the Canadian and United States clinical trials into
one combined, placebo controlled, and potentially pivotal, trial that will
recruit 280 patients. This trial is expected to be completed with respect to the
primary endpoint in 2001.

The Corporation has also initiated a second potentially pivotal Phase IIb trial
in the United States with an ovarian cancer patient population with more
advanced disease. In November 1998, the Corporation passed the 30 day FDA
Investigational New Drug Amendment waiting period and in December 1998 began
recruiting centres for this 102 patient, randomized, controlled and multi-
centre clinical trial. This trial is currently scheduled for completion in 2001.

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<PAGE> 22

The Corporation is also conducting additional open Phase II trials in relapsed
ovarian cancer patients in Canada and the U.S.

BrevaRex(TM) MAb

The Corporation is developing a cancer immunotherapeutic based on the AIT(R)
Technology for the treatment of MUC1 expressing cancers including multiple
myeloma, lung and prostate cancer. This tumor marker, also known as CA15.3, is
mutated in 100% of individuals with multiple myeloma (Treon et. al., Blood,
1999).

Multiple myeloma is a rarely curable disease that was previously considered to
be a bone cancer. It is actually a haematological malignancy related to
leukemias and lymphomas. It accounts for about 10% of all hematologic cancers.
It was estimated that approximately 14,000 new cases would be diagnosed in the
United States in 1998 with a total of about 11,300 deaths. (American Cancer
Society, 1998 Cancer Facts & Figures). A steady increase in incidence of the
disease has been noted over the past 30 years. Although multiple myeloma is
sensitive to chemotherapy, with a median survival of three to four years, most
patients are not cured and eventually succumb to their disease.

Multiple myeloma cells express tumor associated antigens that are ideal targets
for immunotherapy. One such antigen is the core protein of MUC1. The ability of
an antibody to bind to MUC1 is largely dependent on the extent of "mutation" of
the antigen. In contrast to breast and certain other more common cancers, MUC1
in multiple myeloma patients is highly mutated in virtually every patient,
thereby making antibody therapy targeting the core peptide more accessible.

The combination of MUC1 antigen target and the nature of the disease in question
(i.e. a discrete population for whom there is currently no curative alternative)
makes multiple myeloma ideally suited for AltaRex's development strategy. The
Corporation will apply for Orphan Drug status for BrevaRex(TM) MAb and should be
in a position to petition for Fast Track designation using time to disease
progression as a surrogate end point.

The Corporation filed an Investigational New Drug Application or IND in late
October 1998 to initiate a BrevaRex(TM) MAb Phase I clinical trial. In this
trial, the Corporation intends to monitor safety and surrogate markers of
immunological effect. The Corporation intends to initiate a safety/efficacy
trial in multiple myeloma patients in the first half of 2000.

Other AIT(R) Technology Indications and Products

In addition to ovarian cancer and multiple myeloma, OvaRex(TM) MAb and
BrevaRex(TM) MAb may have applicability to other tumors expressing the target
antigens. In the case of OvaRex(TM) MAb, this would include endometrial, breast
and non-small cell lung cancer and in respect of BrevaRex(TM) MAb would include
breast, prostate and non-small cell lung cancer. The Corporation believes that a
strategic partner may wish to pursue these other potentially more lucrative, but
difficult to study, disease targets. The Corporation has commenced further
exploratory research and early preclinical work on two additional antibodies
specific to the tumor associated antigens PSA and CA19.9 for two other potential
products, ProstaRex(TM) MAb and GivaRex(TM) MAb, respectively.

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<PAGE> 23

A component of the Corporation's strategy is to continue to engage in research
activities and to develop new technologies for antibody-based immunotherapeutics
to treat diseases in addition to cancer. The Corporation has early work under
way in autoimmune diseases and infectious diseases and the Corporation also
believes its AIT(R) approach could be applicable to other diseases.

REGULATORY APPROVAL PROCESS

Regulatory Requirements

Regulations imposed by governmental authorities in Canada and the United States,
as well as their counterparts in other countries, are a significant factor in
the conduct of the research, development, manufacturing and eventual marketing
activities for the Corporation's proposed products. In Canada, these activities
are regulated by the Food and Drug Act (Canada) and the rules and regulations
promulgated thereunder, which are enforced by the Therapeutic Products Programme
of the Health Protection Branch of Health Canada. Drugs and biological products
are subject to rigorous regulation by the FDA in the United States and by the
European Medicines Evaluation Agency or EMEA in Europe. The regulatory processes
in Canada, the United States and Europe follow similar essential steps although
timing and results may be different.

The regulatory process for the development and approval of a new drug includes
the conduct of pre-clinical and clinical trials. The duration of those trials
and number of subjects required to meet the requirements of the various
authorities may vary according to, among other things, the disease studied, the
seriousness of the side effects, whether there is any current or conventional
therapy, the size of the target population, and the nature of the proposed
treatment.

Pre-Clinical Evaluation

The purpose of pre-clinical evaluation is essentially to determine the safety,
pharmacokinetics and efficacy of a new drug in animals before it is administered
to humans. The data collected during pre-clinical studies must be presented in
the form of an IND application to the regulatory authorities in the country
where clinical trials will be conducted. In the United States, unless otherwise
notified, clinical trials may begin 30 days after the IND application is filed,
whereas in Canada, clinical trials may not begin until 60 days after the
application is submitted and upon receipt of a "no objection" letter.

Clinical Trials

PHASE I CLINICAL TRIALS

Phase I clinical trials are commonly performed in healthy human subjects or,
more rarely, in selected patients with the targeted disease or disorder. The
objective of these trials is to study the pharmacokinetics and pharmacodynamics
of the drug, as well as the toxicity of the treatment and the patient's
tolerance to it. Data regarding the absorption, distribution, metabolism and
excretion of the drug is also compiled in Phase I clinical trials.

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<PAGE> 24

PHASE II CLINICAL TRIALS

In Phase II clinical trials, preliminary evidence is sought regarding the
pharmacological effects of the drug and the desired therapeutic efficacy with a
small number of patients with the targeted disease. At this stage, efforts are
made to evaluate the effects of various dosages and to establish an optimal
dosage level and dosage schedule. Additional safety data may also be compiled
from these trials.

Phase IIb (sometimes called Phase II/III) trials can be undertaken for serious
or fatal diseases and consist of well-controlled trials to evaluate efficacy
(and safety) in patients with the disease or condition to be treated, diagnosed
or prevented which may be deemed to be pivotol. Phase IIb trials can lead to
expedited review and accelerated approval by the FDA of the product for
commercial sale conditional upon the completion of subsequent Phase III
post-market information studies. Phase IIb trials incorporate certain design and
control features of Phase III trials. If data collected from Phase IIb trials is
statistically significant, authorization for accelerated approval may be sought
from the FDA.

PHASE III CLINICAL TRIALS

The Phase III clinical development program generally consists of expanded,
large-scale studies of patients with the targeted disease or disorder so as to
obtain definitive statistical evidence of the efficacy and safety of the
proposed product and dosing regimen in comparison with standard therapy.

After an appropriate analysis, the HPB, FDA or EMEA may interrupt clinical
trials at any stage if the drug has a clear efficacy advantage or,
alternatively, if the health of the subjects is threatened or the side effects
are not compensated for by the drug's benefits.

Regulatory Approval

Once Phase III clinical trials have been completed, the applicant will compile
all results, as well as all information concerning the product and its
composition, synthesis, manufacture, packaging and labelling methods, for the
purpose of obtaining approval to market the product. This application is known
as a New Drug Application or NDA or either a Biologics License Application or
BLA for a well-characterized biologic, such as a monoclonal antibody, or a
combination of a Product License Application or PLA and an Establishment License
Application or ELA for all other biologicals in the United States and as a New
Drug Submission or NDS in Canada. Government authorities may require that
additional trials be performed after the product is marketed to assess its
long-term effects.

Since drug manufacturing is also regulated, the applicant is required to ensure
that it complies with cGMP's, which are quality standards that require the
control of production activities, raw-material procurement, complaint
management, product recalls, labelling and promotional material. In addition to
these standards, which are common to all drugs, certain biologicals are subject
to ELA's and lot by lot release agreed by FDA to ensure batch to batch
comparability.

In certain circumstances, the FDA may expedite the development, evaluation and
marketing of new drugs used for the treatment of serious diseases for which
there is no other satisfactory treatment by granting such programs a Fast Track
designation. See "- The Corporation's Products - OvaRex(TM) MAb".

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Orphan Drug Status

Orphan Drug designation is designed to facilitate the introduction of drugs into
the market in the United States for use in treating rare diseases or conditions.
The disease must affect fewer than 200,000 patients in the United States. Upon
obtaining marketing approval for the drug, the FDA will grant a period of seven
years during which no approval will be given to a subsequent sponsor of the same
drug product for the same indication. The only exception to this is if a
competitor can show superiority of a second product which generally requires a
head to head comparison. Written application for Orphan Drug status must be
submitted to the Office of Orphan Drug Products Development of the FDA and must
include documentation supporting the request for the particular indication.
Orphan Drug designation also allows the manufacturer to apply for grants from
the United States government to help defray the cost of the clinical testing of
the drug in the United States and may allow for faster review of pending United
States patent applications filed with the United States Patent and Trademark
Office.

AltaRex has received Orphan Drug status for OvaRex(TM) MAb for ovarian cancer
and expects to file similar applications for its other antibodies. See "- The
Corporation's Products - OvaRex(TM) MAb- OvaRex(TM) MAb Regulatory Approval
Strategy".

STRATEGIC ALLIANCES AND LICENSE AGREEMENTS

As part of its business strategy the Corporation plans to license the products
it develops to strategic partners. These partners would participate in the later
stage clinical development as required by the FDA, HPB, EMEA and other
international drug regulatory agencies. The partners would then have the
opportunity to market the Corporation's products in return for payment to the
Corporation of upfront licensing fees, milestone payments and royalties. The
major objectives in seeking to license products to corporate partners include:

* Minimizing development expenditures through cost sharing
programs;

* Arranging for access to the resources and experience of large
multinational pharmaceutical corporations; and

* Maximizing long term revenue streams from royalties on the
sale of the Corporation's products.

The Corporation has no current plans for developing in-house manufacturing
(beyond the pilot phase), marketing or sales capabilities. The Corporation
believes that the biopharmaceutical industry has adequate manufacturing,
marketing and sales capacity, which the Corporation believes it may access
through contractual or partnership arrangements.

The Corporation's current alliances and collaborative partnerships are described
below.

Draximage Inc.

The Corporation is a party to an alliance agreement with Frosst
Radiopharmaceuticals (a division of Merck Frosst Canada Inc.) dated February 20,
1996 and assigned to Draximage Inc. ("Draximage"), a wholly owned subsidiary of
Draxis Health Inc. ("Draxis Health"), by agreement dated August 1, 1997 (the
"Draxis Alliance Agreement"). Under the Draxis Alliance Agreement, the
Corporation and Draximage have agreed to collaborate on the manufacture of pilot
and scale-

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up batches of OvaRex(TM) MAb. Draximage has agreed to manufacture (fill/finish)
vials of OvaRex(TM) MAb for clinical trials at a fixed price per vial and may
have certain rights with respect to the manufacture and/or marketing of the
OvaRex(TM) MAb drug for commercial purposes. There are various conditions to be
fulfilled by the parties before such manufacturing and/or marketing can
commence.

University of Alberta & Noujaim Institute

In 1998, the Corporation entered into a three year collaborative research
agreement (the "NI Research Agreement") with the University of Alberta and its
Noujaim Institute for Pharmaceutical Oncology Research (the "Noujaim
Institute"). Under the NI Research Agreement the Noujaim Institute performs
research on behalf of and at the direction of the Corporation in the development
of tumor binding agents and therapeutic compositions. During the term of the NI
Research Agreement the Corporation compensates the University for services
rendered in an amount not to exceed $300,000 per year. The Corporation will also
owe to the University a royalty of one percent on any net sales (as defined in
the NI Research Agreement) derived from a prostate cancer immunotherapeutic
composition developed under the NI Research Agreement.

Alberta Heritage Foundation Agreement

The Alberta Heritage Foundation for Medical Research ("AHFMR") is a foundation
established by the Government of the Province of Alberta to support medical
research in the Province of Alberta. The AHFMR contributed $500,000 to the
funding of the current Canadian Phase IIb trial of OvaRex(TM) MAb pursuant to an
agreement dated March 1, 1997 (the "AHFMR Agreement"). Commencing upon 12 months
following the earlier of the regulatory approval of OvaRex(TM) MAb and March 1,
2001 the Corporation shall pay to AHFMR on an annual basis an amount equal to
the lesser of 5% of the gross product sales (as defined in the AHFMR Agreement)
received from commercialization of OvaRex(TM) MAb and $100,000. Total payments
by the Corporation under the AHFMR Agreement shall not exceed $1 million. In
addition, in connection with AHFMR Agreement the Corporation granted to the
AHFMR warrants to purchase 41,667 Common Shares at an exercise price of $12.00
per share which expire on March 1, 2000.

Biomira License Agreement

The Corporation holds an exclusive worldwide license from Biomira for the use of
the murine working hybridoma cell bank and murine antibody MAb B43 (the "B43
Technology") for all anti-idiotype induction applications and products, as well
as for the use of such related experimental and clinical data for anti-idiotype
induction applications and products until November 30, 2010. MAb B43 is the
functional component of the OvaRex(TM) MAb product.

The Corporation obtained the license from Biomira pursuant to a license
agreement dated November 24, 1995 (the "Biomira License Agreement"). Under the
terms of the Biomira License Agreement:

* The Corporation paid an up-front fee of $150,000;

* The Corporation agreed to use its best efforts to
commercialize the B43 Technology;

* The Corporation agreed to spend a minimum of $3,000,000 to
develop the B43 Technology from December 1, 1995 to December
1, 1999; and

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* The Corporation agreed to pay a royalty to Biomira on the sale
of any products developed using the B43 Technology at various
rates as set out in the Biomira License Agreement for a period
of ten years from December 1, 1995 to November 30, 2005.

The Biomira License Agreement only pertains to the products that will
potentially use MAb B43 or a derivative thereof. Products developed by the
Corporation which do not incorporate the B43 Technology are not subject to the
Biomira License Agreement.

Under certain funding arrangements (the "ISTC Funding Arrangements") between
Biomira and the Minister of Industry, Science and Technology Canada ("ISTC"),
Biomira is required to obtain the consent of ISTC to any license relating to
technology developed pursuant to the ISTC Funding Arrangements, including the
B43 Technology. The Corporation understands that Biomira has failed to obtain
such consent with respect to the license of the B43 Technology granted to the
Corporation under the Biomira License Agreement. In the past, the Corporation
has had discussions with ISTC and Biomira in this regard. In the event of a
breach of a term or condition of the ISTC Funding Arrangements, ISTC may direct
Biomira to transfer to ISTC clear title to, among other things, the B43
Technology. In such event, the Corporation may be required to obtain a license
from ISTC to use the B43 Technology which may affect the Corporation's rights
granted under the Biomira License Agreement. To the knowledge of the
Corporation, ISTC has not, to date, taken any such action. See "Risk Factors -
Reliance on Strategic Relationships" and "Risk Factors - Proprietary Rights and
Patent Protection".

Biomira has given the Corporation written notice alleging that the Corporation
is in default of certain reporting obligations under the Biomira License
Agreement and that Biomira will terminate such agreement on April 15, 1999
unless such alleged defaults are fully cured on or before such date. The
Corporation believes that it has taken all such actions to ensure that it is
currently in compliance with all of the terms of the Biomira License Agreement
and intends to take all such actions as may be necessary to prevent any attempt
by Biomira to terminate the Biomira License Agreement.

Biomira and the Corporation are currently engaged in respective legal actions
against each other, including an action by the Corporation relating to the
Biomira License Agreement. See "Legal Proceedings".

Canada-Israel Industrial Research and Development Foundation

The Corporation is a party to a co-operation and project funding agreement with
each of the Canada-Israel Industrial Research and Development Foundation and
Organics Ltd. (the "Canada- Israel Agreement") dated February 3, 1997. A total
of $300,000 in funding is available to the Corporation under the Canada-Israel
Agreement over the three year term. The Corporation has received $100,000 in
funding to date under the Canada-Israel Agreement, all in 1997. The funds are
payable pursuant to a royalty based upon gross sales (as defined in the
Canada-Israel Agreement) of products relating to research conducted thereunder.
The research conducted under the Canada-Israel Agreement does not relate to the
Corporation's AIT(R) Technology-related products.

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MANUFACTURING

The Corporation does not currently manufacture any of its products and it has no
immediate plans to establish manufacturing facilities for commercial production
of its therapeutic products. Instead, the Corporation's strategy, beyond the
pilot phase, is to manufacture and commercialize its products through strategic
alliances and licensing agreements with major pharmaceutical companies.

HUMAN RESOURCES

As at March 10, 1999, the Corporation had 35 employees, 20 of whom were located
at the Corporation's locations in Edmonton, Alberta and 15 of whom were located
at the Corporation's executive office in Waltham, Massachusetts. There were 20
employees working in research and development and 15 working in administration
and corporate affairs. Four of the research and development employees hold
Ph.D.s and two are M.D.s.

None of the employees are governed by a collective bargaining agreement. The
Corporation believes that working relationships with its employees are
excellent.

LEASED PROPERTIES

AltaRex's Canadian office is located at Campus Tower, Suite 300, 8625 - 112
Street, Edmonton, Alberta, Canada T6G 1K8. Its research and development facility
is located at 1134 Dentistry Pharmacy Building, University of Alberta, Edmonton,
Alberta T6G 2N8. The Corporation's U.S. office is located at Suite 125, 303
Wyman Street, Waltham, Massachusetts 02451. All of the above premises are leased
by AltaRex.

The Canadian leases are each for a term of five years, each terminating on
December 31, 2001 and the U.S. lease is for a three-year term, terminating on
March 31, 2001. The total lease costs under such leases for the Corporation were
approximately $280,000 for the fiscal year ended December 31, 1998 and are
expected to be approximately $280,000 for the fiscal years ending December 31,
1999 and 2000.

In January 1999, the Corporation entered into a letter of intent for the lease
of approximately 25,000 square feet of laboratory and office facilities in
Waltham, Massachusetts. The facilities are expected to be available on or about
December 1, 1999. If leased as proposed, the initial term would extend until
March 31, 2007 and the expected annual lease cost to the Corporation would be
approximately $1.3 million plus operating expenses.

COMPETITION

The biopharmaceutical industry is intensely competitive. Many companies,
including other biopharmaceutical companies and biotechnology companies, are
actively engaged in activities similar to those of the Corporation, including
research and development of drugs for the treatment of cancer. More
specifically, competitors for the development of new therapeutic products to
treat cancer focus on MAb based cancer therapeutics, cancer vaccines and other
approaches that are based on either stimulation of the body's own immune
response or on MAbs. Many of these companies have substantially greater
financial and other resources, larger research and development capabilities and
more extensive marketing and manufacturing organizations than the Corporation.
In addition, some such companies have considerable experience in pre-clinical

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testing, clinical trials and other regulatory approval procedures. There are
also academic institutions, governmental agencies and other research
organizations which are conducting research in areas in which the Corporation is
working; they may also market commercial products, either on their own or
through collaborative efforts.

The Corporation expects to encounter significant competition for the
pharmaceutical products it plans to develop. Companies that complete clinical
trials, obtain required regulatory approvals and commence commercial sales of
their products before their competitors may achieve a significant competitive
advantage. In addition, certain pharmaceutical and biotechnology firms,
including major pharmaceutical companies and specialized structure-based drug
design companies, have announced efforts in the field of immunological therapy
that exploit the presence of TAAs, and the Corporation is aware that other
companies or institutions are pursuing development of new drugs and technologies
directly targeted at applications for which the Corporation is developing its
biopharmaceutical products.

Based on its review of the industry, the Corporation is not aware of any other
company that is focusing on anti-idiotype induction therapy as practiced by the
Corporation. There are a number of companies however, that focus on the broader
use of antibodies to treat various diseases. These companies include Centocor
Inc., Coulter Pharmaceuticals Inc., Genentech, IDEC, Medarex Inc. and Immunex
Corp, among others. The Corporation expects that its platform AIT(R) Technology
will attract significant additional competitors over time. In order to compete
successfully, the Corporation's goal is to develop proprietary positions in
patented drugs for therapeutic markets which have not been satisfactorily
addressed by conventional research strategies and, in the process, extend its
expertise in biopharmaceutical products design. See "Risk Factors Competition".

PROPRIETARY PROTECTION

The Corporation vigorously pursues a policy of seeking patent protection to
preserve its proprietary technology and its right to capitalize on the results
of its research and development activities and, to the extent it may be
necessary or advisable, to exclude others from appropriating its proprietary
technology. The Corporation also relies upon trade secrets, know-how, continuing
technological innovations and licensing opportunities to develop and maintain
its competitive position. The Corporation plans to prosecute and defend its
intellectual property, including any patents that may issue, and proprietary
technology. The Corporation regularly searches for third-party patents in its
fields of endeavour, both to shape its own patent strategy as effectively as
possible and to identify licensing opportunities.

Patents

In general, the Corporation pursues a policy of obtaining patent protection both
in the United States and in selected foreign countries for subject matter
considered patentable and important to its business. In addition, a portion of
the Corporation's proprietary position is based upon technology and products the
Corporation has licensed from others, including MAb B43 that binds to an ovarian
cancer antigen. This license agreement generally requires the Corporation to pay
royalties upon commercialization of products covered by the licensed technology.

The Corporation owns five pending United States patent applications for its
therapeutic products and processes. Worldwide, the Corporation owns three
pending international applications and 15 pending national applications covering
the same technology. These patent applications cover

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various aspects of the Corporation's core technology, products, processes, and
the methods for their production and use. These patent applications include both
broad and specific claims to various tumor therapies. The Corporation will
continue to aggressively protect its technology with new patent filings with the
intent of further extending its patent coverage.

Biomira has recently commenced a legal action against, among others, the
Corporation seeking, among other things, an order stating that Biomira is the
sole owner of an invention disclosed in a PCT application filed by the
Corporation and an injunction prohibiting the Corporation from using the
invention referred to therein. See "Risk Factors-Biomira Litigation" and "Legal
Proceedings".

Trademarks and Trade Names

The Corporation also relies upon trademarks and tradenames to protect its
technology. The Corporation has a registered trademark for its AIT(R) mark in
the United States and Canada and owns a Canadian registration for the trade-mark
IRT(R) . As well, the Corporation has pending applications to register
trademarks in various countries for the AltaRex name as well as for the brand
names (OvaRex(TM), BrevaRex(TM), GivaRex(TM), and ProstaRex(TM) MAb) relating to
its developing products.

Trade Secrets

The Corporation also relies in part on trade secrets, unpatented know-how and
continuing technological advancements to maintain its competitive position. It
is the practice of the Corporation to enter into confidentiality agreements with
employees, consultants and corporate sponsors. There can be no assurance,
however, that these measures will prevent the unauthorized disclosure or use of
the Corporation's trade secrets and know-how.

CLINICAL ADVISORY BOARD

The Corporation maintains a Clinical Advisory Board (the "Advisory Board")
composed of outside internationally recognized clinicians and scientists. The
Advisory Board meets periodically to review the operational aspects of the
Corporation's clinical program and make appropriate recommendations with regard
to the perceived trends and direction of other companies. The members of the
Advisory Board have no rights to the Corporation's technology and each member
has signed a confidentiality agreement with the Corporation. Advisory Board
members receive an honorarium of $15,000 per year. The current composition of
the Advisory Board is:

<TABLE>
<CAPTION>
NAME INSTITUTION

<S> <C>
Robert Ozols, M.D., Ph. D. Fox Chase Cancer Center, United States
Roger Cohen, M.D. University of Virginia, United States
Richard Margolese, M.D. McGill University, Canada
Daniel Von Hoff, M.D. Cancer Therapy and Research Center, United States,
James Holland, M.D. Mount Sinai School of Medicine, New York, United States.
</TABLE>

ROBERT OZOLS, M.D. AND PH.D is Senior Vice President for Medical Science at Fox
Chase Cancer Center, Philadelphia. Dr. Ozol serves as Chairman of the Advisory
Board and is also Medical Director at the Hospital of the Fox Chase Cancer
Center and Professor of Medicine at Temple University. He is currently serving
on the Oncologic Drugs Advisory Committee of the FDA.

27
<PAGE> 31

The recipient of the 1990 Cancer Research Award from the Milken Medical
Foundation, Dr. Ozols has also been elected to the American Society for Clinical
Investigation. Dr. Ozols received his medical degree and a Ph.D. in Biochemistry
at the University of Rochester in New York.

ROGER COHEN, M.D. is Associate Professor at the University of Virginia,
Department of Medicine, Division of Haematology-Oncology and Director of the
Clinical Trials Office. Dr. Cohen is also currently an advisor and consultant to
the FDA at the Center for Biologics Evaluation and Research. Dr. Cohen received
his medical degree at Harvard Medical School and is the recipient of several
awards including the FDA Special Recognition Award.

RICHARD MARGOLESE, M.D. is a Professor in the Department of Oncology, and
Herbert Black Chair in Surgical Oncology, McGill University. Dr. Margolese is
also Associate Director of Research at Lady Davis Institute, past President of
the National Cancer Institute of Canada and past Co- Chairman of the Management
Committee of the Canadian Breast Cancer Research Initiative. Dr. Margolese
received his medical degree at McGill University and was awarded the Order of
Canada in 1997 - Canada's highest honour for lifetime achievement.

DANIEL VON HOFF, M.D. is Director of the Institute for Drug Development at the
Cancer Therapy and Research Center in San Antonio, Texas. Dr. Von Hoff is
President-Elect of the American Association for Cancer Research and recipient of
the Richard and Hinda Rosenthal Award for clinical investigation. He is also a
Professor for the Department of Cellular and Structural Biology and a Clinical
Professor in the Division of Medical Oncology at The University of Texas Health
Science Center. Dr. Von Hoff received his medical degree from Columbia College
of Physicians and Surgeons in New York.

JAMES HOLLAND, M.D. is Distinguished Professor of Neoplastic Diseases,
Department of Medicine, Mount Sinai School of Medicine, New York. Dr. Holland
holds both a Medical Doctorate degree from Columbia University and a Doctor of
Science degree from State University of New York. He is past-President of both
the American Society of Clinical Oncology and the American Association of Cancer
Research and has contributed to over 590 scientific publications.

28
<PAGE> 32

CONSOLIDATED CAPITALIZATION

The following table sets forth the consolidated capitalization of AltaRex as at
December 31, 1998, February 28, 1999, and as at February 28, 1999 after giving
effect to this offering. This table should be read in conjunction with the
audited consolidated financial statements and the notes thereto contained
elsewhere in this prospectus.

<TABLE>
<CAPTION>
As at As at February 28,
As at December 31, February 28, 1999 after giving
Authorized 1998 1999 effect to this
offering
---------- ------------------ ------------ ------------------
$ $ $

<S> <C> <C> <C> <C>
Common Shares............... unlimited 32,838,364 32,838,364 *
Accumulated deficit during
the development stage... (20,191,524) (22,619,499) *
----------- ----------- --
Total capitalization........ 12,646,840 10,218,865 *
=========== =========== ==

Number of Common Shares..... 16,512,613 16,512,613 *
=========== =========== ==
</TABLE>

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

INTRODUCTION

The following discussion and analysis explains trends in the Corporation's
financial condition and results of operation for the years ending December 31,
1998, 1997 and 1996. In each case, issues and risks that can be reasonably
expected to impact future operations are discussed. These issues and risks may
cause actual results to differ materially from those described in
forward-looking statements contained in this management's discussion and
analysis. Where used, the words "anticipate", "expect", "intend", "should", and
similar expressions are intended to identify forward looking statements. This
management' s discussion and analysis should be read in conjunction with the
consolidated financial statements and the related notes included elsewhere in
this prospectus. Such consolidated financial statements have been prepared by
management in accordance with accounting principles generally accepted in Canada
which conform in all material respects to accounting principles in the United
States, except as described in Note 8 to the audited consolidated financial
statements contained elsewhere in this prospectus.

SELECTED FINANCIAL INFORMATION

The selected financial information provided below has been taken from the
audited consolidated financial statements of the Corporation contained elsewhere
in this prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
---- ---- ----

($) ($) ($)
<S> <C> <C> <C>
INCOME STATEMENT DATA

Revenues..................................... 1,013,742 1,619,836 88,257
Expenses
Research and development................ 9,433,681 4,733,918 1,720,031
</TABLE>

29
<PAGE> 33

<TABLE>
<S> <C> <C> <C>
General and administrative............... 4,695,990 1,563,555 540,285
----------- ----------- ----------
Net loss..................................... (13,115,929) (4,677,637) (2,172,059)
Net loss per common share.................... (0.79) (0.29) (0.24)
</TABLE>

<TABLE>
<CAPTION>
AS AT DECEMBER 31
1998 1997
---- ----

($) ($)
<S> <C> <C>
BALANCE SHEET DATA

Total Assets................................. 15,159,774 27,229,744
Shareholders' equity......................... 12,646,840 25,708,769
</TABLE>

OVERVIEW

The Corporation's business is the research, development and commercialization of
unique antibody-based immunotherapeutics for the treatment of late-stage
cancers. Substantially all of the Corporation's products are subject to
regulation by the HPB in Canada, the FDA in the United States, the EMEA in
Europe and similar agencies in other countries. None of the Corporation's
products have been approved to date. Because the Corporation is in the
development stage of its products, the Corporation has not been profitable since
its inception and expects to continue to incur substantial losses in continuing
the research, development and clinical trials of its products. The Corporation
does not expect to generate significant revenues until such time as its cancer
therapeutic products are approved by the various regulatory agencies and become
commercially viable.

ACQUISITION AND AMALGAMATION

Effective July 17, 1996, the Corporation (at that time known as Allrich Energy
Group Inc.) acquired all of the outstanding shares of AltaRex Inc. for a
purchase price satisfied through the issue of 7,525,000 Common Shares of the
Corporation. These Common Shares gave AltaRex Inc.'s shareholders a controlling
interest in the Corporation and effectively constituted a reverse take-over of
the Corporation by the shareholders of AltaRex Inc. The Corporation, at the time
of acquisition, was an inactive public company. The purpose of the acquisition
was to realize funds associated with a private placement and special warrant
offering that were completed at that time and to provide future access to public
market funding. Effective May 31, 1997, the Corporation amalgamated with AltaRex
Inc. and continued under the name of AltaRex Corp.

RESULTS OF OPERATIONS

The Corporation, through its predecessor AltaRex Inc., commenced operations on
December 1, 1995 and completed its first full year of operations on December 31,
1996. As of December 31, 1998, the Corporation had incurred cumulative losses of
$20.2 million. This related to losses of $13.1 million, $4.7 million, and $2.2
million, respectively, for the years ended December 31, 1998, 1997 and 1996 and
a loss of $0.2 million for the one month ended December 31, 1995. These
increasing losses are due to the increased cost of clinical and product
development activities and supporting efforts in product commercialization.
Costs for research and development and supporting activities are expected to
increase as the Corporation pursues its development, clinical trials and
commercialization programs prior to receiving regulatory approvals and the
successful introduction of the Corporation's products.

30
<PAGE> 34

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Revenues

Revenues for the year ended December 31, 1998 decreased by $0.61 million, from
$1.62 million in 1997 to $1.01 million in 1998. Interest income increased by
$0.06 million, from $0.90 million in 1997 to $0.96 million in 1998, due to
higher effective interest rates on short-term investments in 1998. Research
contract revenue decreased by $0.63 million, from $0.68 million to $0.05 million
in 1998, due to the completion of government research contracts of the
Corporation in late 1997 and early 1998.

Expenses

Expenses for the year ended December 31, 1998 increased by $7.83 million, from
$6.30 million in 1997 to $14.13 million in 1998. Research and development
expenses increased by $4.70 million, from $4.73 million in 1997 to $9.43 in
1998. This increase is due to the expansion and progress of the Corporation's
clinical trial program for OvaRex(TM) MAb, which involved the consolidation of
the Corporation's Phase II clinical trial commenced in Canada in 1997 with its
United States Phase IIb clinical trial initiated in 1998 to form a potentially
pivotal Phase IIb North American trial. The increase is also due to the costs
related to production of antibody for clinical trial purposes.

General and administrative expenses increased by $3.13 million, from $1.56
million in 1997 to $4.69 million in 1998. This increase is due to the addition
of key management personnel in 1998, the establishment of an office in the
United States in May 1998 and the relocation of certain personnel to such
office, as well as the related support costs for increasing research and
development activities and patent and corporate development activities.

The Corporation anticipates that the level of spending in research and
development will continue to increase significantly in the near future as the
Corporation's OvaRex(TM) MAb, BrevaRex(TM) MAb and other programs enter into
further research and development activities, including but not limited to cell
culture-derived material production, clinical trials and submissions for
regulatory approvals. This will also result in an increase in general and
administrative expenses to support the growth in the Corporation's research,
clinical and business development programs. The actual levels of research and
development and general and administrative expenditures are dependent on the
cash resources available to the Corporation and the extent to which the
Corporation contracts with strategic partners to finance and commercialize its
products. See " - Liquidity and Capital Resources".

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Revenues

Revenues for the year ended December 31, 1997 increased by $1.53 million, from
$0.09 million in 1996 to $1.62 million in 1997. Interest income increased by
$0.84 million, from $0.06 million in 1996 to $0.90 million in 1997, due to
higher average balances in short-term investments resulting from funds raised in
the $27.7 million public share offering completed in December 1996. Research
contract revenue increased by $0.67 million, from $0.01 million in 1996 to $0.68
million in 1997, and relates to two government research contracts undertaken by
the Corporation.

31
<PAGE> 35

Expenses

Expenses for the year ended December 31, 1997 increased by $4.04 million, from
$2.26 million in 1996 to $6.30 million in 1997. Research and development
expenses increased by $3.01 million, from $1.72 million in 1996 to $4.73 million
in 1997. This increase reflects the cost of supporting a higher level of
activity in research, product development and clinical trials, including
increased staffing and research supplies and the costs of managing clinical
trials. Clinical trial activity included the commencement of a Phase II clinical
trial of the Corporation's lead product OvaRex(TM) MAb in Canada, as well as the
preparation for a Phase IIb clinical trial in the United States.

General and administrative expenses for the year ending December 31, 1997
increased by $1.02 million, from $0.54 million in 1996 to $1.56 million in 1997.
This increase is due to the support required of the Corporation's growth in its
research and development programs, its business development activities and the
costs related to the maintenance of a publicly-traded company, including
increased staffing.

FOREIGN CURRENCY EXPOSURE

To date, exposure to foreign currency fluctuations has not had a material effect
on the Corporation's operations. The Corporation does not currently engage in
hedging or other activities to control the risk of foreign currency exposure,
but will continue to monitor the situation and may do so in the future as
conditions warrant.

IMPACT OF THE YEAR 2000 ISSUE

The Year 2000 issue is the result of computer programs being written using two
rather than four digits to define the applicable year. Computer programs that
have time sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a major system failure or
miscalculations, causing disruptions in operations.

In 1998, the Corporation developed, and is in the process of completing, a
comprehensive plan for the assessment of the impact of, and the necessary
remediation plans related to, the Year 2000 issue. The Corporation's plan
includes the review, assessment and testing of internal systems and equipment,
the review of Year 2000 compliance and readiness of vendors and suppliers to the
Corporation and the development of contingency plans for all mission critical
systems and risks. The design and execution of the plan is the responsibility of
the Chief Financial Officer and involves personnel from throughout the
Corporation.

The Corporation has completed its inventory of all equipment and software
applications it uses throughout its offices and labs and is in the process of
testing such equipment and software. The Corporation has identified all key
vendors and suppliers and is currently in communication with them regarding Year
2000 readiness. Confirmation of Year 2000 compliance has been obtained from the
Corporation's payroll and accounting systems suppliers and banking and
investment management service providers. The Corporation is continuing its
review and assessment of Year 2000 readiness with contract research
organizations and other suppliers and service providers involved in the
Corporation's clinical development programs. Alternative suppliers and service
providers and appropriate back-up of data and information will be provided to
mitigate any potential losses or delays due to the Year 2000 issue. The
Corporation specifies the need for Year 2000 compliance in all significant new
contractual relationships.

32
<PAGE> 36

Management of the Corporation believes that the review, assessment and testing
and the completion of any necessary changes will be completed by September,
1999. The Corporation's expected aggregate expenditures related to the Year 2000
compliance is expected to be less than $100,000. These expenditures will be
incurred and paid in 1999 and the first half of 2000.

33
<PAGE> 37

LIQUIDITY AND CAPITAL RESOURCES

Cash and short-term investments totaled $12.8 million at December 31, 1998.
Since its inception, the Corporation has financed its operations primarily
through private placements and public offerings of equity securities, amounting
to $32.9 million, and interest income on invested balances, amounting to $1.9
million. The Corporation currently has no contributing cash flows from
operations. As a result, the Corporation relies on external sources of financing
such as the issue of equity or debt securities, the exercise of warrants and
investment income.

On March 2, 1999, the Corporation announced that it would not proceed with a
previously announced offering of rights to purchase up to 3,302,522 Common
Shares at a price of $0.62 per share.

The Corporation's net cash used in operating activities amounted to $11.4
million, $4.0 million and $2.2 million for the years ended December 31, 1998,
1997 and 1996, respectively, and resulted primarily from the Corporation's net
operating losses. The Corporation's net cash used in investing activities
amounted to $0.6 million, $1.5 million and $0.1 million for the years ended
December 31, 1998, 1997 and 1996, respectively, and resulted primarily from the
purchase of capital assets used in the Corporation's business.

The Corporation expects to incur substantial and increasing research and
development expenses, including expenses related to preclinical studies,
clinical trials, manufacturing and commercialization activities, and supporting
general and administrative expenses. The Corporation believes that the net
proceeds of this offering, together with its available cash, and interest earned
thereon, should be sufficient to finance its operations and capital needs
through 2000, while maintaining sufficient cash reserves. The Corporation's
funding needs may vary depending on a number of factors including progress of
the Corporation's research and development programs, the number and breadth of
these programs, the results of preclinical studies and clinical trials, the
cost, timing and outcome of the regulatory process, the establishment of
collaborations, the cost of preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims, the status of competitive products and
the availability of other financing.

The Corporation may need to raise substantial additional capital to fund its
operations in the future. The Corporation may seek such additional funding
through public or private equity or debt financings from time to time, as market
conditions permit, or through collaborative arrangements. The ability of the
Corporation to access the capital markets or to enlist strategic partners is
substantially dependent on the progress of its research and development programs
and regulatory approval of its products. There can be no assurance that
additional financing will be available on acceptable terms, if at all. If
adequate funds are not available, the Corporation may be required to delay,
reduce the scope of, or eliminate one or mare of its research and development
programs.

PLAN OF DISTRIBUTION

Under an agreement (the "Agency Agreement") between First Marathon Securities
Limited, HSBC James Capel Canada Inc. (together, the "Agents") and the
Corporation dated *, 1999, the Agents have agreed to offer for sale on a best
efforts basis, if, as and when issued by the Corporation in accordance with the
terms of the Agency Agreement, up to * Common Shares at a price of $* (the
"Issue Price"). It is expected that the closing of the issue of the Common
Shares will take place on or about * , 1999. In consideration for their services
on this offering, AltaRex has agreed to

34
<PAGE> 38

pay the Agents a fee of $* per Common Share sold. The Agents' fee will be paid
from the proceeds of this offering.

The Corporation reserves the right to accept or reject any subscription in whole
or in part. While the Agents have agreed to use their best efforts to sell the
Common Shares, they are not obligated to purchase any Common Shares which are
not sold. The obligations of the Agents under the Agency Agreement may be
terminated, and the Agents may withdraw all subscriptions for Common Shares on
behalf of subscribers, at the Agents' discretion, upon the occurrence of certain
stated events including any material change in the business, personnel or
financial condition of the Corporation.

The Corporation has granted to the Agents an option (the "Over-Allotment
Option") exercisable for 60 days following the date of the closing of the
offering to purchase up to * additional Common Shares at the Issue Price solely
to cover the over-allotments. This prospectus also qualifies the distribution of
the Over-Allotment Option and the Common Shares issued upon exercise of the
Over-Allotment Option.

In addition, the Corporation has entered into option agreements with each of the
Agents pursuant to which the Agents will be granted an option (the "Compensation
Options") to purchase that number of Common Shares equal to 5% of the Common
Shares subscribed for pursuant to this offering. The Compensation Options are
exercisable at the Issue Price and expire on the second anniversary of the date
of the closing of the offering. This prospectus also qualifies the distribution
of the Compensation Options and Common Shares issuable upon exercise of the
Compensation Options.

Pursuant to policy statements of the Ontario Securities Commission and the
Commission de valeurs mobilieres du Quebec, the Agents may not during the period
of distribution under this prospectus bid for or purchase Common Shares. The
foregoing restriction is subject to certain restrictions, as long as the bid or
purchase is not engaged in for the purpose of creating actual or apparent active
trading in, or raising the market price of the Common Shares. These exceptions
include a bid or purchase permitted under the rules and by-laws of The Toronto
Stock Exchange relating to market stabilization and passive market-making
activities and a bid or purchase made for or on behalf of a customer where the
order was not solicited during the period of distribution. Pursuant to the first
mentioned exception, in connection with this offering, the Agents may over allot
or affect transactions which stabilize or maintain the market price of the
Common Shares at a level other than those which otherwise might prevail on the
open market. Such transactions may commence or be interrupted at any time during
the period of distribution.

The securities offered under this prospectus have not been and will not be
registered under the United States Securities Act of 1933, as amended and,
subject to certain exceptions, may not be offered, sold or delivered directly or
indirectly, in the United States of America, its territories or possessions.

35
<PAGE> 39

USE OF PROCEEDS

The estimated net proceeds to AltaRex from this offering, after deducting the
Agents' fee and the estimated expenses of the offering of approximately $*
million, are $* million. The Corporation will use the net proceeds of this
offering to fund the Corporation's antibody and clinical trial costs of its lead
products, OvaRex(TM) MAb for ovarian cancer and BrevaRex(TM) MAb for multiple
myeloma, with any remaining net proceeds to be used for working capital
requirements.

The Corporation intends to use the aggregate of the net proceeds of this
offering as follows:

OvaRex(TM)MAb antibody and clinical trial costs................ $ * million
BrevaRex(TM)MAb antibody and clinical trial costs............. $ * million
Working capital requirements................................... $ * million
-----------
Total .................. $ * million

In each case, the amounts referred to above reflect estimated antibody and
clinical trial costs over a period of approximately 12 months. To the extent
that the aggregate net proceeds are less than as set forth above, such proceeds
will be applied to fund OvaRex(TM) MAb antibody and clinical trial costs in
priority to BrevaRex(TM) MAb antibody and clinical trial costs.

DIRECTORS AND OFFICERS

DIRECTORS

The following table sets forth, for each director of AltaRex, the name,
municipality of residence, the year in which he became a director, and his
principal occupation. Directors are elected until the next annual meeting of
shareholders or, in the case of a vacancy or resignation, until a successor is
elected or appointed.

<TABLE>
<CAPTION>
NAME AND
MUNICIPALITY OF RESIDENCE DIRECTOR SINCE PRINCIPAL OCCUPATION
- ------------------------- -------------- --------------------
<S> <C> <C>
DR. ANTOINE A. NOUJAIM December 1, 1995 Chairman of the Board and Chief
Edmonton, Alberta Scientific Officer of AltaRex
RICHARD E. BAGLEY February 23, 1998 President and Chief Executive Officer
Weston, Massachusetts of AltaRex
WILLIAM R. MCMAHAN July 15, 1996 President, Oxbow Capital Corporation
Calgary, Alberta
JEAN-CLAUDE GONNEAU January 29, 1997 Managing Director, Donaldson,
Paris, France Lufkin & Jenrette
GEORGES HIBON January 19, 1998 Former Chairman and Chief Executive
New York, New York Officer, Pasteur Merieux Connaught,
North America
</TABLE>

36
<PAGE> 40

<TABLE>
<CAPTION>
NAME AND
MUNICIPALITY OF RESIDENCE DIRECTOR SINCE PRINCIPAL OCCUPATION
- ------------------------- -------------- --------------------

<S> <C> <C>
THE HONOURABLE MONIQUE BEGIN May 14, 1998 Chairperson, Management Committee
Ottawa, Ontario of the Canadian Breast Cancer
Research Initiative. Former Canadian
Minister of National Health and
Welfare
DR. JIM A. WRIGHT May 14, 1998 President & Chief Scientific Officer,
Toronto, Ontario GeneSense Technologies, Inc.
</TABLE>

EXECUTIVE OFFICERS

The table below sets forth the name, municipality of residence, the first year
of employment with AltaRex and the position with AltaRex of each executive
officer of AltaRex on the date hereof.

<TABLE>
<CAPTION>
NAME AND
MUNICIPALITY OF RESIDENCE WITH ALTAREX SINCE POSITION
- ------------------------- ------------------ --------

<S> <C> <C>
DR. ANTOINE A. NOUJAIM December 1, 1995 Chairman of the Board and Chief
Edmonton, Alberta Scientific Officer
RICHARD E. BAGLEY February 23, 1998 President and Chief Executive
Weston, Massachusetts Officer
EDWARD M. FITZGERALD September 28, 1998 Senior Vice President, Chief
Dover, Massachusetts Financial Officer and Secretary
DR. CHRISTOPHER F. NICODEMUS January 25, 1999 Senior Vice President, Medical and
Charlestown, Massachusetts Regulatory Affairs
DR. THOMAS R. SYKES January 2, 1996 Vice President, Preclinical and
Acton, Massachusetts Support Operations
</TABLE>

BIOGRAPHIES OF DIRECTORS AND EXECUTIVE OFFICERS

Dr. Antoine A. Noujaim. Dr. Noujaim is the founder, Chairman and Chief
Scientific Officer of the Corporation. From inception of the Corporation to
February 22, 1998, Dr. Noujaim was also the President and Chief Executive
Officer of the Corporation. From 1985 to 1995, Dr. Noujaim was associated with
Biomira, a Canadian publicly-owned biotechnology company as an officer and a
director. From 1994 to 1995 he was President of Biomira's subsidiary, Biomira
Research. Prior to 1994 he was Senior Vice President of the Immunoconjugate
Division of Biomira. Dr. Noujaim is also Professor Emeritus of the University of
Alberta and a director of SYNSORB Biotech Inc. ("SYNSORB"), a Canadian
publicly-owned biotechnology company. Dr. Noujaim has served as an officer or
Chairman of various scientific organizations, editorial boards and national
scientific committees and has authored more than 200 publications.

Richard E. Bagley. Mr. Bagley has been the President and Chief Executive Officer
and a Director of the Corporation since February 23, 1998. Prior to joining the
Corporation, Mr. Bagley was Chairman and Chief Executive Officer of ProScript,
Inc., a Massachusetts based biotechnology

37
<PAGE> 41

company from 1995 to 1998 and prior to that he was President and Chief Executive
Officer of ImmuLogic Pharmaceutical Corporation ("ImmuLogic"), a Massachusetts
based publicly-owned biotechnology company. Mr. Bagley previously held several
executive positions with Britol- Myers Squibb Company from 1985 to 1990,
including President of E.R. Squibb & Sons, U.S. and President of SquibbMark.
Prior thereto, Mr. Bagley held executive positions with SmithKline Beecham
Corporation from 1968 to 1985, including President of SmithKline Consumer
Products.

William R. McMahan. Mr. McMahan has been a Director of the Corporation since
July 15, 1996. He has served as President of Oxbow Capital Corporation and Oxbow
Investments Inc. from 1993 to present and Director of International Marketing
for Oxbow Research Limited from 1992 to 1993. Mr. McMahan is also the President,
Chief Executive Officer and a Director of Oxbow Equities Corp., a mutual fund
listed on The Toronto Stock Exchange. Mr. McMahan is a Director of UltraVision,
Inc. (contact lenses), Abacus Accounting Systems Inc. (software) and SYNSORB
(biotechnology), all Canadian publicly traded companies.

Jean-Claude Gonneau. Mr. Gonneau has been a Director of the Corporation since
1996. He has been Managing Director of Donaldson, Lufkin & Jenrette, an
investment bank, in charge of capital market activity in Europe since 1991,
having served in London and Paris since 1985. Prior to that Mr. Gonneau held
various positions with First Boston Corporation in New York and London from 1981
to 1985 and with Banque Nationale de Paris, with a focus on cross-border
business, from 1977 to 1981.

Georges Hibon. Mr. Hibon has been a Director of the Corporation since February
1998. He is the former Chairman and Chief Executive Officer of Pasteur Merieux
Connaught ("PMC") NorthAmerica in charge of the United States, Canada and
Mexico. Mr. Hibon has over 30 years of experience in the pharmaceutical and
biotechnology industries in senior level positions with companies such as Merck
& Co. and Virogenetics as well as PMC.

The Honourable Monique Begin. Ms. Begin has been a Director of the Corporation
since May 1998. She is Professor Emerita at the University of Ottawa and has
served as the Dean of Faculty of Health Sciences at the same institution. She is
also Chair of the Management Committee of the Canadian Breast Cancer Research
Initiative. Ms. Begin is the former Minister of National Health and Welfare of
Canada (1980-1984) and, in that capacity, authored the Canada Health Act of
1984.

Dr. Jim A. Wright. Dr. Wright has been a Director of the Corporation since May
1998. He is the founder, Chairman, President and Chief Executive Officer of
GeneSense Technologies Inc. established in 1987. He has also served as the Terry
Fox Senior Research Scientist at the National Cancer Institute of Canada since
1990, Associate Director and Senior Scientist of the Manitoba Institute of Cell
Biology since 1989 and Professor of Microbiology, Biochemistry and Molecular
Biology at the University of Manitoba.

Edward M. Fitzgerald. Mr. Fitzgerald has been Senior Vice President, Chief
Financial Officer and Secretary of the Corporation since September 28, 1998.
Prior to joining the Corporation Mr. Fitzgerald was a consultant in private
practice. From 1992 to 1997, Mr. Fitzgerald was Director, Mergers & Acquisitions
and Director, Consumer Lending Group at BankBoston Corporation. From 1978 to
1992 Mr. Fitzgerald was with Arthur Andersen & Co. in Boston, holding the
position of Partner from 1989 to 1992. Mr. Fitzgerald is a licensed Certified
Public Accountant.

38
<PAGE> 42

Dr. Christopher F. Nicodemus. Dr. Nicodemus has been Senior Vice President,
Medical and Regulatory Affairs of the Corporation since January 25, 1999. Prior
to joining the Corporation, Dr. Nicodemus was Vice President, Medical Affairs
from 1998 to 1999 and Vice President, Clinical Operations from 1997 to 1998 of
Diatide Inc., a biotechnology company. From 1993 to 1997 Dr. Nicodemus was with
ImmuLogic, in the position of Vice President, Medical Affairs from 1994 to 1997
and Senior Director, Medical Affairs from 1993 to 1994. Prior to joining
ImmuLogic, he was Senior Associate Medical Director at Pfizer Labs from 1992 to
1993.

Dr. Thomas R. Sykes. Dr. Sykes has been with the Corporation since its inception
and is currently Vice President, Preclinical and Support Operations. He has
previously held other positions with the Corporation, including Vice President,
Product Development and Manufacturing Operations, Vice President, Operations and
Vice President, Pharmaceutical Development of the Corporation. Prior to joining
the Corporation Dr. Sykes held various positions with Biomira, including
Director, Pharmaceutical Research and Development at Biomira Research from 1993
to 1995 and Director, Product Development of Biomira from 1990 to 1993.

AUDIT COMMITTEE

The Board of Directors of AltaRex is required to elect annually from among its
members an audit committee comprised of not less than three members. At present,
the Audit Committee consists of Dr. Jim A. Wright, The Honourable Monique Begin
and Jean-Claude Gonneau. The Audit Committee must review the annual and interim
financial statements of AltaRex and report thereon to the Board of Directors
before such statements are approved by the Board of Directors.

39
<PAGE> 43

EXECUTIVE COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the compensation paid to Richard E. Bagley, Dr.
Antoine A. Noujaim, Dr. R. Madiyalakan, Dr. Thomas Sykes and Blaine Schamber
(the "Named Executive Officers") for each of the fiscal years ended December 31,
1998 and 1997 and the period from July 17, 1996 to December 31, 1996, being the
end of the first financial year of the Corporation.

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation

--------------------------------------------------- Long-Term
Compensa-
tion
Awards
-----------
Other Common
Annual Shares All Other
Compen- Under Compen-
Name and Salary Bonus sation Options sation
Principal Position Year ($) ($) ($) Granted (#) ($)(4)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard E. Bagley (1) 1998 315,179 Nil Nil 825,000 Nil
President and Chief -- -- -- -- -- --
Executive Officer -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Dr. Antoine A. Noujaim (1) 1998 220,000 Nil Nil Nil 6,880
Chairman of the Board, 1997 220,000 Nil Nil Nil 6,312
Chief Scientific Officer and 1996 78,602 Nil Nil 375,000 Nil
Former President and Chief
Executive Officer
- ----------------------------------------------------------------------------------------------------------------------------------
Dr. R. Madiyalakan (2) 1998 131,706 Nil Nil Nil 32,991
Vice-President, Planning 1997 105,000 5,771 Nil 10,000 3,997
and Chief Scientific Officer 1996 36,559 Nil Nil 25,000 465
- ----------------------------------------------------------------------------------------------------------------------------------
Dr. Thomas Sykes 1998 167,135 Nil Nil Nil 51,589
Vice-President, Operations 1997 105,000 Nil Nil 10,000 4.269
Preclinical and Support 1996 36,559 Nil Nil 25,000 465
- ----------------------------------------------------------------------------------------------------------------------------------
Blaine Schamber 1998 116,250 Nil Nil 40,000 11,021
Controller; previously 1997 105,000 Nil Nil 10,000 4,206
Vice-President, Finance 1996 35,941 Nil Nil 25,000 464
and Corporate
Development
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Notes:
(1) Dr. Noujaim became an officer of the Corporation on July 17, 1996 upon the
acquisition by the Corporation of all of the issued shares of AltaRex Inc.
Dr. Noujaim's salary was paid by AltaRex Inc. until May of 1997. Dr.
Noujaim ceased to be the President and Chief Executive Officer of the
Corporation on February 23, 1998. Mr. Richard E. Bagley was appointed
President and Chief Executive Officer of the Corporation on that date.

40
<PAGE> 44

(2) Dr. Madiyalakan ceased to be an officer of the Corporation in September
1998. He currently serves as a consultant to the Corporation under a
services agreement that expires on September 30, 1999 and the amounts which
appear on the table do not include compensation earned thereunder.
(3) Mr. Schamber ceased to be the Vice-President, Finance and Corporate
Development of the Corporation in July, 1998. He currently serves as
Controller of the Corporation.
(4) Compensation under the column "All Other Compensation" is with respect to
employee benefits such as health care, life insurance and a group
retirement savings plan. The aggregate amount of perquisites and other
personal benefits, securities and property did not exceed the lesser of
$50,000 and 10 percent of the total annual salary and bonus of the Named
Executive Officer.
(5) 1996 figures are for the period from July 17, 1996 to December 31, 1996.
1997 and 1998 figures are for the period from January 1 to December 31 of
those years.

STOCK OPTIONS

The following table details information with respect to the grant of options by
the Corporation to the Named Executive Officers during the financial year of the
Corporation ended December 31, 1998.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
- -------------------------------------------------------------------------------------------------------------------------------
MARKET VALUE OF
COMMON SHARES
COMMON SHARES % OF TOTAL OPTIONS UNDERLYING OPTIONS
UNDER OPTIONS GRANTED TO EXERCISE OR BASE ON THE
GRANTED EMPLOYEES IN PRICE DATE OF GRANT EXPIRATION
NAME # FINANCIAL YEAR ($/COMMON SHARE) ($/COMMON SHARE) DATE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard E. Bagley 825,000 59% $3.00 $3.00 March 4, 2003
- -------------------------------------------------------------------------------------------------------------------------------
Blaine J. Schamber 40,000 3% $2.18 $2.18 May 13, 2003
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table details information with respect to all options of the
Corporation exercised by the Named Executive Officers during the last financial
year of the Corporation and all options held by the Named Executive Officers and
outstanding on December 31, 1998.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED
FINANCIAL YEAR END AND FINANCIAL YEAR-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------------------
UNEXERCISED VALUE OF UNEXERCISED
COMMON SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON AGGREGATE FINANCIAL YEAR-END AT FINANCIAL YEAR-END
EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE(#) UNEXERCISABLE($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard E. Bagley Nil Nil Nil/825,000 Nil/Nil
- ----------------------------------------------------------------------------------------------------------------------
Dr. Antoine A. Noujaim Nil Nil 250,000/125,000 Nil/Nil
- ----------------------------------------------------------------------------------------------------------------------
Dr. Thomas R. Sykes Nil Nil 26,666/8,334 Nil/Nil
- ----------------------------------------------------------------------------------------------------------------------
Blaine J. Schamber Nil Nil 26,666/48,334 Nil/Nil
- ----------------------------------------------------------------------------------------------------------------------
Dr. R. Madiyalakan Nil Nil Nil/26,666 Nil/Nil
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

41
<PAGE> 45

EMPLOYMENT AGREEMENTS

The Corporation entered into a letter agreement with Mr. Bagley dated February
28, 1998 which provides that if Mr. Bagley's employment is terminated without
cause he will receive U.S. $250,000, equivalent to severance pay of one year's
salary.

The Corporation entered into a letter agreement with Dr. Sykes dated March 25,
1998 as amended on April 21, 1998 which provides that, if Dr. Sykes' employment
is terminated without cause prior to the year 2000, he will receive U.S.$150,000
equivalent to severance pay of one year's salary, and, thereafter, if terminated
without cause, he will receive U.S. $75,000 equivalent to severance pay of six
months salary.

The Corporation entered into an employment contract with Mr. Schamber dated
January 1, 1997. This agreement is for a three year term and is renewable on an
annual basis for additional and successive one year terms upon the expiration of
the initial three year term and each successive one year term at a salary
mutually agreeable by the Corporation and Mr. Schamber. If Mr. Schamber is
terminated at any time during the initial three year term of his employment
contract, then that he shall be entitled to the lesser of the balance of his
salary for the initial three year term of the employment contract and one year's
salary.

COMPENSATION OF DIRECTORS

Effective in 1998, each director, with the exception of Dr. Noujaim and Mr.
Bagley, receives a fee of U.S. $10,000 per annum. Further, all directors are
eligible to receive stock options and are entitled to receive reimbursement of
their reasonable out-of-pocket disbursements incurred on the business of the
Corporation. In the aggregate, a total of $71,501 in fees was paid to the board
of directors during the period from January 1, 1998 to December 31, 1998.

AltaRex provides liability insurance for directors and officers of AltaRex. The
policy does not distinguish between the liability insurance for its directors
and officers, the coverage being the same for both groups. The premium for the
12-month period ending December 31, 1998 was approximately $32,000 all of which
was borne by AltaRex. The policy limit is $5,000,000 per year with a corporate
deductible of $25,000 per loss. The individual directors and officers of AltaRex
are insured against losses arising from claims against them for certain of their
acts, errors or omissions in such capacity. AltaRex is insured against losses
arising out of any liability to indemnify a director or officer.

INDEBTEDNESS OF DIRECTORS AND OFFICERS

No individual who is, or at any time during the most recent completed financial
year of the Corporation was, a director, executive officer or senior officer of
the Corporation, nor any proposed nominee for election as a director of the
Corporation, nor any associate of any one of them is, or at any time since the
beginning of the most recent completed financial year of the Corporation has
been, indebted to the Corporation or any of its subsidiaries or was indebted to
another entity, which such indebtedness is, or was at any time during the most
recent completed financial year of the Corporation, the subject of a guarantee,
support agreement, letter of credit or other similar arrangement or
understanding provided by the Corporation or any of its subsidiaries, except for
Dr. Thomas Sykes.

42
<PAGE> 46

TABLE OF INDEBTEDNESS OF DIRECTORS,
EXECUTIVE OFFICERS AND SENIOR OFFICERS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL INVOLVEMENT OF LARGEST AMOUNT OUTSTANDING AMOUNT OUTSTANDING
POSITION ALTAREX DURING FISCAL YEAR ENDED AS OF THE DATE HEREOF
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dr. Thomas Sykes, Lender U.S. $25,000 U.S. $25,000
Vice-President, Pre-
Clinical and Support
Operations
- ------------------------------------------------------------------------------------------------------
</TABLE>

Dr. Sykes was granted a U.S. $25,000 loan in connection with his relocation from
Edmonton, Alberta to Waltham, Massachusetts. This loan bears no interest during
its stated term and is due in its entirety on May 14, 2003. Any overdue amounts
will bear interest at 9.5% per annum until paid.

STOCK OPTIONS

STOCK OPTION PLAN

At the special meeting of the shareholders of the Corporation held on November
15, 1996, shareholders, among other things, approved the adoption of a new Stock
Option Plan (the "Plan"). In connection with the listing of the Common Shares of
the Corporation on The Toronto Stock Exchange (the "TSE") in December of 1996,
the TSE required that certain amendments be made to the Plan to conform with
certain rules and regulations of the TSE including an amendment to section 4 of
the Plan whereunder the total number of Common Shares that may be issuable under
stock options granted under the Plan was changed from 10% of the issued and
outstanding common shares of the Corporation to a fixed number. At the May 29,
1997 meeting of the shareholders, that number was fixed at 1,544,206.

At the annual and special meeting of shareholders held on May 14, 1998 the
shareholders approved and adopted the following amendments to the Plan: (i)
Section 4 of the Plan was amended to increase the number of Common Shares
issuable under stock options granted under the Plan from 1,544,206 to 2,480,000,
such number being approximately 15% of the issued and outstanding common shares
of the Corporation as at March 31, 1998; and (ii) Section 5 of the Plan was
amended to provide the Board of Directors with the option of fixing the exercise
price of any stock options granted under the Plan at the weighted average of the
trading prices of the Common Shares of the Corporation as traded on the TSE on
the five days preceding the date of the grant of such stock options.

43
<PAGE> 47

As at the date of this prospectus there were outstanding options to purchase a
total of 2,255,499 Common Shares under the Plan and the following table sets out
in detail all stock options issued and outstanding under the Plan.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
GROUP NUMBER OF DATE OF GRANT EXERCISE PRICE EXPIRY DATE
SHARES UNDER PER SHARE
OPTION
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Directors (excluding 382,500 July 26, 1996 1.80 July 26, 2001
Executive Officers) 12,500 July 8, 1997 3.68 July 8, 2002
30,000 January 22, 1998 2.96 January 22, 2003
100,000 May 21, 1998 2.18 May 21, 2003
- -----------------------------------------------------------------------------------------------------
Executive Officers 25,000 July 26, 1996 1.80 July 26, 2001
10,000 February 11, 1997 5.90 February 11, 2002
824,130 March 4, 1998 3.00 March 4, 2003
870 July 6, 1998 3.00 July 6, 2003
175,000 September 15, 1998 0.91 September 15, 2003
175,000 December 23, 1998 0.53 December 23, 2003
- -----------------------------------------------------------------------------------------------------
Employees 108,500 July 26, 1996 1.80 July 26, 2001
13,333 February 4, 1997 6.00 February 4, 2002
10,000 February 11, 1997 5.90 February 11, 2002
14,000 July 8, 1997 3.68 July 8, 2002
3,000 November 7, 1997 3.30 November 7, 2002
10,000 February 1, 1998 2.84 February 1, 2003
105,000 May 21, 1998 2.18 May 21, 2003
50,000 August 4, 1998 1.15 August 4, 2003
50,000 November 30, 1998 0.80 November 30, 2003
- -----------------------------------------------------------------------------------------------------
Consultants 100,000 July 8, 1997 3.68 July 8, 2002
5,000 November 7, 1997 3.30 November 7, 2002
25,000 July 27, 1998 1.40 July 17, 2003
26,666 September 30, 1998 0.72 October 30, 1999
- -----------------------------------------------------------------------------------------------------
</TABLE>

DESCRIPTION OF SHARE CAPITAL

The authorized share capital of the Corporation consists of an unlimited number
of Common Shares and an unlimited number of Preferred Shares. As of the date
hereof, 16,512,613 Common Shares and no Preferred Shares were issued and
outstanding as fully paid and non-assessable. In addition, 2,480,000 Common
Shares are reserved for issuance under a stock option plan and 41,667 Common
Shares are reserved for issuance upon the exercise of a warrant granted to the
AHFMR.

The holders of Common Shares are entitled to dividends, if as and when declared
by the directors, to one vote per Common Share at meetings of the holders of
Common Shares of the Corporation and, upon liquidation, to receive such assets
of the Corporation as are distributable to the holders of the Common Shares. The
Preferred Shares may be issued in one or more series, and the directors are
authorized to fix the number of preferred shares in each series and to determine
the designation, rights, privileges, restrictions and conditions attached to the
Preferred Shares of each series. The Preferred Shares are entitled to a priority
over the Common Shares in respect of the payment of dividends and distribution
of assets upon liquidation of the Corporation.

44
<PAGE> 48

DIVIDEND POLICY

Since its incorporation, AltaRex has not paid any dividends on the outstanding
Common Shares. The future payment of dividends will be dependent upon the
financial requirements of the Corporation to fund future growth, the financial
condition of the Corporation and other factors which the Board of Directors may
consider appropriate in the circumstances. It is unlikely that dividends will be
paid in the foreseeable future.

PRINCIPAL SHAREHOLDERS

The following table sets forth the particulars, as at the date of this
prospectus, with respect to those persons who, to the knowledge of the directors
or officers of the Corporation, beneficially own or exercise control or
direction over more than 10% of the Common Shares (being the only class of
shares of the Corporation outstanding):

<TABLE>
<CAPTION>
PERCENTAGE OF
NAME NUMBER OF COMMON SHARES COMMON SHARES
- ---- ----------------------- -------------
<S> <C> <C>
DR. ANTOINE A. NOUJAIM 3,924,700 Common Shares (1) 23.8% (1)
</TABLE>

(1) This number does not include 375,000 Common Shares issuable upon the
exercise of stock options held by Dr. Noujaim which are exercisable at a
price of $1.80 per share until July 26, 2001.

As of the date hereof, to the knowledge of AltaRex's directors and officers,
there are no other persons who are holders of record or are beneficial owners,
directly or indirectly, of shares conferring over 10% of the voting rights
attached to the issued and outstanding Common Shares.

Except as disclosed above, as at the date hereof, the current directors and
officers of AltaRex as a group own directly or indirectly or exercise control or
direction over a total of 497,259 Common Shares representing approximately 3.0%
of the issued and outstanding Common Shares.

45
<PAGE> 49

PRICE RANGE AND TRADING VOLUME OF THE COMMON SHARES

The Common Shares are listed for trading on The Toronto Stock Exchange and have
been so listed since December 1996, prior to which the Common Shares were listed
for trading on The Alberta Stock Exchange. The following table summarizes the
reported high and low trading prices and volume of trading of the Common Shares
on The Toronto Stock Exchange for the periods indicated:

<TABLE>
<CAPTION>
HIGH LOW VOLUME
($) ($) ($)
<S> <C> <C> <C>
1997

First Quarter 7.00 5.00 1,189,686
Second Quarter 5.50 3.45 1,343,944
Third Quarter 4.30 2.50 1,958,491
Fourth Quarter 3.80 2.10 994,316

1998

First Quarter 3.25 2.25 537,211
Second Quarter 2.54 1.01 960,682
Third Quarter 1.92 0.71 2,359,806
Fourth Quarter 0.85 0.42 2,936,251

1999

January 0.74 0.47 1,179,319
February 0.67 0.48 581,986
March (to March 12) 0.64 0.45 239,966
</TABLE>

CANADIAN FEDERAL INCOME TAX CONSEQUENCES

In the opinion of McCarthy Tetrault, the following summary describes the
principal Canadian federal income tax considerations of acquiring, holding and
disposing of Common Shares offered under this prospectus. This summary is
applicable to an investor who acquires the Common Shares under this offering and
who for the purposes of the Income Tax Act (Canada) (the "Tax Act") deals at
arm's length with the Corporation, is a resident of Canada and holds Common
Shares as capital property. Securities generally will be capital property of the
holder unless the holder is a trader or dealer in securities or is engaged in an
adventure in the nature of trade in respect of them. This summary is not
applicable to holders of Compensation Options.

This summary is not applicable to any holder which is a "financial institution",
as defined in section 142.2 of the Tax Act or to any holder an interest in which
would be a "tax shelter investment".

This summary is based upon the facts set out in this prospectus, the current
provisions of the Tax Act and the regulations issued thereunder (the
"Regulations"), all specific proposals to amend the Tax Act and the Regulations
publicly announced by or on behalf of the Minister of Finance (Canada) prior to
the date hereof, and counsel's understanding of the current published
administrative practices of Revenue Canada. This summary is not exhaustive of
all possible Canadian federal income tax consequences and, except as noted
above, does not take into account or anticipate any changes in law, whether by
legislative, governmental or judicial action, and does not take into account tax
legislation or considerations of any province, territory or foreign
jurisdiction.

THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND
SHOULD NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PROSPECTIVE

46
<PAGE> 50

HOLDER OF COMMON SHARES, AND NO REPRESENTATIONS WITH RESPECT TO THE INCOME TAX
CONSEQUENCES TO ANY SUCH HOLDER ARE MADE. PROSPECTIVE HOLDERS SHOULD CONSULT
THEIR OWN TAX ADVISORS FOR ADVICE WITH RESPECT TO THE TAX CONSEQUENCES TO THEM
OF ACQUIRING, HOLDING AND DISPOSING OF COMMON SHARES, INCLUDING THE APPLICATION
AND EFFECT OF THE INCOME AND OTHER TAX LAWS OF ANY COUNTRY, PROVINCE, STATE OR
LOCAL TAX AUTHORITY.

DIVIDENDS

Dividends received or deemed to be received on the Common Shares by an investor
who is an individual will be included in computing the investor's income, and
will be subject to the gross-up and dividend tax credit rules normally
applicable to taxable dividends received from taxable Canadian corporations.

Dividends received or deemed to be received on the Common Shares by an investor
that is a corporation generally will be included in the investor's income. Such
an investor will, however, generally be entitled to deduct the amount of such
dividends in computing taxable income. Certain corporations may be liable under
Part IV of the Tax Act to pay a refundable tax of 331/3% on dividends received
or deemed to be received on the Common Shares to the extent that such dividends
are deductible in computing taxable income.

DISPOSITION OF COMMON SHARES

A disposition or a deemed disposition of a Common Share by an investor will
generally give rise to a capital gain (or a capital loss) equal to the amount by
which the actual or deemed proceeds of disposition, less reasonable costs of
disposition, exceed (or are exceeded by) the adjusted cost base of the Common
Share to the investor. Generally, three-quarters of any capital gain realized
will be included in computing the investor's income as a taxable capital gain
and three-quarters of any capital loss will be deductible, subject to certain
limitations, against net taxable capital gains of the year of disposition or the
three preceding years or any subsequent year. The full amount of capital gains
must be included in an individual's adjusted taxable income (as defined by the
Tax Act) for the purposes of computing such individual's liability under the Tax
Act for the alternative minimum tax. If the investor is a corporation (or a
partnership or trust of which a corporation is a member or beneficiary), any
such capital loss may in certain circumstances be reduced by the amount of any
dividends, including deemed dividends, which have been received by the investor
on the Common Share. Similar rules may apply where a corporation is a member of
a partnership or a beneficiary of a trust that owns Common Shares or where a
trust or partnership of which a corporation is a beneficiary or a member is a
member of a partnership or a beneficiary of a trust that owns Common Shares.

In the case of a disposition of a Common Share to the Corporation, a holder will
be deemed to receive a dividend to the extent the proceeds received exceed the
paid-up capital of the Common Share. The amount of such dividend will reduce the
proceeds of disposition to the holder for purposes of calculating the capital
gain (or loss) arising on the disposition.

Certain corporations may be liable to pay an additional refundable tax of 62/3%
on their "aggregate investment income" for the year, which is defined by the Tax
Act to include an amount in respect of taxable capital gains (but not dividends
or deemed dividends deductible in computing taxable income).

47
<PAGE> 51

RISK FACTORS

An investment in the securities of the Corporation should be considered highly
speculative due to the nature of the business of the Corporation and the present
stage of its development. In evaluating the securities of the Corporation, the
following should be considered:

BIOMIRA LITIGATION

On February 26, 1999, Biomira commenced legal action in the Province of Alberta
against AltaRex, the founder of AltaRex and certain other individuals affiliated
with AltaRex, claiming ownership of an invention disclosed in an international
patent application filed by AltaRex relating to certain aspects of AltaRex's
core technology, products, processes and their production. In the action,
Biomira is seeking, among other things, a court order declaring that it is the
sole owner of the invention and related intellectual property rights therein,
including the patent application, an injunction prohibiting AltaRex from using
the invention, and damages in the amount of $200,000,000. Although there can be
no assurance that Biomira's legal action will not be successful, AltaRex
believes that Biomira's claims are without merit and intends to defend against
such action and consider bringing such counterclaims in response to Biomira's
legal action as it deems appropriate. On March 16, 1999, the Corporation
demanded further particulars from Biomira with respect to the allegations made
in its legal action against the Corporation on the basis that such action fails
to disclose sufficient information with respect to the relief sought by Biomira
in its action so as to enable the Corporation to properly defend the action.

If Biomira is successful in its action against the Corporation, the ability of
the Corporation to develop and commercialize its existing products and future
products based upon the invention described in the patent application referred
to above will be materially and adversely affected.

POSSIBLE EXPIRATION OR TERMINATION OF LICENSE AGREEMENT FOR MAB B43; LOSS OF
EXCLUSIVITY

In 1995, the Corporation licensed the B43 Technology from Biomira, including the
antibody MAb B43, which is utilized in OvaRex(TM) MAb. The Biomira License
Agreement requires that the Corporation use its best efforts to commercialize
the B43 Technology and to spend certain minimum amounts to develop the B43
Technology between 1995 and 1999. Biomira provided the Corporation with written
notice alleging that the Corporation was in default of certain reporting
obligations under the Biomira License Agreement and that Biomira will terminate
such agreement on April 15, 1999 unless such alleged defaults are fully cured on
or before such date. Although the Corporation believes it is currently in
compliance with all of the terms of the Biomira License Agreement, there can be
no assurance that the Corporation will be able to continue to meet the
obligations of the Biomira License Agreement. Should the Corporation's rights
under the Biomira License Agreement be terminated or cease to be exclusive,
Biomira may elect to license the B43 Technology to competitors of the
Corporation. Although the Corporation believes that it would have a competitive
advantage over other potential competitors based on its lead time in the
regulatory process, the loss of exclusivity to the B43 Technology could have a
material adverse effect on the Corporation's business, its results of
operations, its financial condition and its ability to market and develop
commercially viable products based on the B43 Technology.

Pursuant to the ISTC Funding Arrangement (see "Strategic Alliances and License
Agreements - Biomira License Agreement"), Biomira is required to obtain the
consent of ISTC to any license relating to technology developed pursuant to the
ISTC Funding Arrangements, including the B43 Technology. The Corporation
understands that Biomira has failed to obtain such consent with respect

48
<PAGE> 52

to the license of the B43 Technology granted to the Corporation under the
Biomira License Agreement. In the past, in this regard, the Corporation has had
discussions with ISTC and Biomira In the event of a breach of a term or
condition of the ISTC Funding Arrangements, ISTC may direct Biomira to transfer
to ISTC clear title to the B43 Technology. In such event, the Corporation may be
required to obtain a license from ISTC to use the B43 Technology. To the
knowledge of the Corporation, ISTC has not, to date, taken any such action.

In addition, the Biomira License Agreement expires November 30, 2010, unless the
parties mutually agree in writing to renew the Biomira License Agreement. If at
that time the Corporation cannot successfully renew the Biomira License
Agreement on terms acceptable to the Corporation, the Corporation may be subject
to competition from others to whom Biomira Research would be free to license the
Technology. Consequently, the loss of such exclusive Biomira License Agreement
or renewal of the Biomira License Agreement on different terms may adversely
affect the revenues, if any, from the sale of products that use the Technology.
The loss of exclusivity of the Biomira License Agreement could have a material
adverse affect on the Corporation's business, results of operations and
financial condition. In light of the current litigation involving Biomira and
the Corporation, the Corporation considers the mutual agreement of the parties
to renew the Biomira License Agreement to be unlikely.

RELIANCE ON STRATEGIC RELATIONSHIPS

The Corporation's future success is dependent on the development and maintenance
of strategic relationships. The Corporation intends to seek to enter into
strategic relationships with strategic partners to participate in and finance
the later stage clinical development of products as required by the FDA, HPB,
EMEA and other international drug regulatory agencies. The Corporation expects
that its strategic partners would then have the opportunity to market the
Corporation's products in return for payment to the Corporation of up-front
licensing fees, milestone payments, royalties or previously agreed upon transfer
prices on the sale of such products.

The Corporation is seeking to enter into strategic relationships with strategic
partners to complete certain clinical trials required for registration and
regulatory approval of OvaRex(TM) MAb or BrevaRex(TM) MAb in world markets. If
the Corporation fails to enter into such strategic relationships on terms
favourable to the Corporation or if these strategic partners fail to effectively
complete the clinical trials, the regulatory approval of OvaRex(TM) MAb or
BrevaRex(TM) MAb may be delayed, and such delay may have a materially adverse
effect on the Company's results of operations and business. The Corporation also
intends to rely on strategic partners to market OvaRex(TM) MAb and BrevaRex(TM)
MAb. If the Corporation fails to enter such strategic partnerships or if these
strategic partners fail to effectively market OvaRex(TM) MAb or BrevaRex(TM)
MAb, the Corporation may lose the opportunity to successfully commercialize the
products. There can be no assurance that the Corporation will be able to enter
these strategic partnerships on terms that are acceptable to the Corporation.

The Corporation does not manufacture its own antibodies but has, and will seek
to enter into, agreements with third parties to manufacture its antibodies.
Pursuant to the Draximage Alliance Agreement. Draximage will fill/finish
OvaRex(TM) MAb vials for clinical trials and may have certain rights with
respect to the manufacture and/or marketing of the OvaRex(TM) MAb drug for
commercial purposes. In addition, the Corporation is working with other vendors
to fill/finish OvaRex(TM) MAb vials. The Corporation has an agreement with Lonza
Biologics to scale-up cell culture-derived material to the commercial level.
Similarly the Corporation is working with other vendors to begin the scale-up
processes for cell culture BrevaRex(TM) MAb and to fill/finish BrevaRex(TM) MAb
vials. If

49
<PAGE> 53

these contract suppliers fail to perform under the terms of the agreement, the
Corporation may incur significant costs and risks.

Scaling-up production of cell culture-derived materials will enable the
Corporation to further pursue regulatory approval and commercialization of
OvaRex(TM) MAb. Such regulatory approval and commercialization is dependant upon
the Corporation's ability to achieve such production.

The Corporation also relies on a number of alliances and collaborative
partnerships for the development of its products. There is no guarantee that
these relationships will continue or result in any successful developments.

UNCERTAINTY ASSOCIATED WITH PRECLINICAL AND CLINICAL TESTING

Before obtaining regulatory approvals for the commercial sale of any of the
Corporation's potential new products, the products will be subjected to
extensive preclinical and clinical testing to demonstrate their safety and
efficacy in humans. Results of the initial preclinical and clinical testing of
products under development by the Corporation are not necessarily indicative of
results that will be obtained from subsequent or more extensive preclinical and
clinical testing. Furthermore, there can be no assurance that clinical trials of
products under development will be completed or will demonstrate the safety and
efficacy of such products at all or to the extent necessary to obtain regulatory
approvals. Companies in the biotechnology industry have suffered significant
setbacks in advanced clinical trials, even after achieving promising results in
earlier trials. The failure to adequately demonstrate the safety and efficacy of
a therapeutic product under development could delay or prevent regulatory
approval of such product.

The rate of completion of clinical trials depends on, among other factors, the
enrollment of patients. Patient accrual is a function of many factors, including
the size of the patient population, the proximity of patients to clinical sites,
the eligibility criteria for the study and the existence of competitive clinical
trials. Delays in planned patient enrollment in the Corporation's current
clinical trials or future clinical trials may result in increased costs, program
delays, or both.

LACK OF PRODUCT REVENUES; HISTORY OF LOSSES

To date, the Corporation has not recorded any revenues from the sale of
biopharmaceutical products and there can be no assurance that significant
additional losses will not occur in the near future or that the Corporation will
be profitable in the future. The Corporation has accumulated net losses of
approximately $20.2 million to December 31, 1998. The Corporation anticipates
that its operating expenses and capital expenditures may increase significantly
in 1999 and in subsequent years as it adds the personnel and facilities
associated with advancing products throughout development, clinical trials and
commercialization. The amounts and timing of expenditures will depend on the
progress of ongoing research and development, the results of preclinical testing
and clinical trials, the rate at which operating losses are incurred, the
execution of any development and licensing agreements with strategic partners,
the Corporation's development of additional products, the FDA, HPB, EMEA and
other regulatory processes and other factors, many of which are beyond the
Corporation's control.

The Corporation does not expect to receive revenues from commercial sales of its
new products for several years, if at all. The Corporation expects to continue
to incur losses unless and until such time as strategic alliance payments,
product sales and royalty payments generate sufficient revenues to fund its
continuing operations. The ability of the Corporation to achieve profitability
in subsequent years depends upon, among other things, successfully completing
product development efforts and obtaining

50
<PAGE> 54

regulatory approval for its lead clinical products. The development of the
Corporation's products will require the commitment of substantial resources to
conduct the time-consuming development of products to meet market and regulatory
requirements and to establish strategic relationships for production
capabilities. There can be no assurance that the Corporation will generate any
revenues or achieve profitability.

The Corporation has two licensing agreements that require payments of royalties
based on the gross revenue of the OvaRex(TM) MAb. On the successful
commercialization of OvaRex(TM) MAb, the Corporation will be required to pay
royalties from the gross revenue received by the Corporation on the sale of this
product. There can be no assurance that the Corporation will generate sufficient
revenues from the sale of OvaRex(TM) MAb to achieve profitability.

The Corporation anticipates that, based on its current operating plan, its
current cash reserves are sufficient to its planned cash requirements into the
second half of 1999. Beyond that, the Corporation intends to rely on cash from
this offering and, if any, cash generated from operations, licensing revenues
and collaborative agreements, which will be highly dependent on the
Corporation's successful development and commercialization of its clinical
products. There can be no assurance that these products will be successfully
developed or commercialized or that the underlying assumed levels of expenses
will prove to be accurate. Further there can be no assurance that this offering
will be successful.

CAPITAL REQUIREMENTS

Based on its current operating plan, the Corporation estimates that its net
expenditures for 1999 will significantly exceed that of 1998. The Corporation's
future capital requirements, however, will depend on many factors, including
continued scientific progress in its product discovery and development program,
progress in its pre-clinical and clinical evaluation of product candidates, time
and expense associated with filing, prosecuting and enforcing its patent claims
and costs associated with obtaining regulatory approvals. In order to meet such
capital requirements, the Corporation will consider contract fees, collaborative
research and development arrangements, and additional public or private
financing (including the issuance of additional equity securities) to fund all
or a part of particular programs. There can be no assurance that additional
funding will be available or, if available, that it will be available on
acceptable terms. If adequate funds are not available, the Corporation may have
to reduce substantially or eliminate expenditures for research and development,
testing, production and marketing of its proposed products, or obtain funds
through arrangements with corporate partners that require the Corporation to
relinquish rights to certain of its technologies or products. There can be no
assurance that this offering will be successful. Further, there can be no
assurance that the Corporation will be able to raise additional capital if its
capital resources are exhausted. The ability of the Corporation to arrange such
financing in the future will depend in part upon the prevailing capital market
conditions as well as the business performance of the Corporation. There can be
no assurance that the Corporation will be successful in its efforts to arrange
additional financing if needed or that any such additional financing will be
available on terms satisfactory to the Corporation.

KEY PERSONNEL

The Corporation is highly dependent on its senior officers, scientific
personnel, consultants and management staff, the loss of whose services might
significantly delay or prevent the Corporation's achievement of its scientific
or business objectives. Competition among biotechnology and biopharmaceutical
companies for qualified employees is intense, and the ability to retain and
attract qualified individuals is critical to the Corporation's success. There
can be no assurance that the

51
<PAGE> 55

Corporation will be able to attract and retain such individuals currently or in
the future on acceptable terms, or at all, and the failure to do so would have a
material adverse effect on the Corporation's business, financial condition and
results of operations.

REGULATORY ENVIRONMENT; NO ASSURANCE OF PRODUCT APPROVAL

The FDA, HPB, EMEA and comparable agencies in foreign countries impose
substantial requirements on biotechnology and pharmaceutical companies prior to
the introduction of therapeutic products. These requirements include lengthy and
detailed laboratory and clinical testing procedures, sampling activities and
other costly and time-consuming procedures, together which involve the
expenditure of substantial resources. Satisfaction of these requirements
typically takes a number of years and varies substantially based on the type,
complexity and novelty of the pharmaceutical product.

Any future FDA, HPB, EMEA or other governmental approval of products developed
by the Corporation may entail limitations on the indicated uses for which such
product may be marketed. Approved products may be subject to additional testing
and surveillance programs as required by regulatory agencies. In addition,
product approvals may be withdrawn or limited for noncompliance with regulatory
standards or the occurrence of unforeseen problems following initial marketing.

The effect of governmental regulation may be to delay marketing the
Corporation's products for a considerable period of time, to impose costly
requirements on the Corporation's activities or to provide a competitive
advantage to other companies that compete with the Corporation. Adverse clinical
results could have a negative impact on the regulatory process and timing. A
delay in obtaining or failure to obtain regulatory approvals could adversely
affect the marketing of the Corporation's products and the Corporation's
liquidity and capital resources. In addition, future legislation or
administrative action may result in governmental regulations adverse to the
Corporation. The extent of potentially adverse governmental regulation that
might arise from future legislation or administrative action cannot be
predicted.

To date, the Corporation has submitted INDs to the HPB and FDA for OvaRex(TM)
MAb and BrevaRex(TM) MAb products, but has not submitted such documentation for
other products currently under development. There can be no assurance that the
Corporation will obtain regulatory approval to commercialize OvaRex(TM) MAb and
BrevaRex(TM) MAb, or that it will be in a position to file the regulatory
applications for its future products.

COMPETITION

Technological competition in the pharmaceutical industry is intense. There are
many companies and institutions, both public and private, including
pharmaceutical companies, chemical companies, specialized biotechnology
companies and research, government or academic institutions, that are engaged in
developing synthetic pharmaceuticals and biotechnological products for human
therapeutic applications, including the applications targeted by the
Corporation. The Corporation may have to compete with these competitors to
develop products aimed at treating similar conditions. Many of these competitors
have substantially greater resources than the Corporation. There can be no
assurance that developments by others will not render the Corporation's products
or technologies non-competitive or adversely affect the commitment of the
Corporation's commercial collaborators to the Corporation's programs.

The pharmaceutical industry is also characterized by extensive research efforts
and rapid technological change. Competition can be expected to increase as
technological advances are made and commercial

52
<PAGE> 56

applications for biopharmaceutical products increase. Competitors of the
Corporation may use different technologies or approaches to develop products
similar to products which the Corporation is seeking to develop, or may develop
new or enhanced products for processes that may be more effective, less
expensive, safer or more readily available before the Corporation obtains
approval of its products. There can be no assurance that the Corporation's
products will compete successfully or that research and development will not
render the Corporation's products obsolete or uneconomical.

PROPRIETARY RIGHTS AND PATENT PROTECTION

Due to the length of time and expense associated with bringing new products
through development and the governmental approval process to the marketplace,
the pharmaceutical industry has traditionally placed considerable importance on
obtaining and maintaining patent and trade secret protection for significant new
technologies, products and processes.

The patent protection afforded to biotechnology and pharmaceutical firms is
uncertain and involves many complex legal, scientific and factual questions.
There is no clear law or policy involving the breadth of claims allowed in such
cases, or the degree of protection afforded under patents. These issues are
further complicated in this field by the abundance of publications and/or prior
art, including publications by the Corporation. Thus, while the Corporation
believes that its proprietary information is protected to the fullest extent
practicable, there can be no assurance that (i) any patents will be issued to
the Corporation in any or all appropriate jurisdictions, (ii) litigation will
not be commenced seeking to challenge the Corporation's patent protection or
that such challenges will not be successful, (iii) processes or products of the
Corporation do not or will not infringe upon the patents of third parties, or
(iv) the scope of patents that may be issued to the Corporation will
successfully prevent third parties from developing similar and competitive
products. It is not possible to predict how any patent litigation will affect
the Corporation's efforts to develop, manufacture or market its products. The
cost of litigation to uphold the validity and prevent infringement of any
patents issued to the Corporation may be significant. See "- Biomira Litigation"
and "Legal Proceedings".

The products developed by the Corporation also incorporate technology and
processes that will not be protected by any patent and are capable of being
duplicated or improved upon by competitors. Accordingly, the Corporation may be
vulnerable to competitors, which develop competing technology, whether
independently or as a result of acquiring access to the proprietary products and
trade secrets of the Corporation. In addition, the Corporation may be required
to obtain licenses under patents or other proprietary rights of third parties.
No assurance can be given that any licenses required under such patents or
proprietary rights will be available on terms acceptable to the Corporation. If
the Corporation does not obtain such licenses, it could encounter delays in
introducing one or more of its products to the market while it attempts to
design around such patents, or could find that the development, manufacture or
sale of products requiring such licenses could be foreclosed.

There can be no assurance that the Corporation's patent applications will mature
into issued patents, or will afford legal protection against competitors, or
will provide significant proprietary protection or competitive advantage. In
addition, there can be no assurance that the Corporation's patents will not be
held invalid or unenforceable by a court, infringed or circumvented by others or
that others will not obtain patents that the Corporation would need to license
or circumvent. Competitors or potential competitors may have filed patent
applications or received patents, and may obtain additional patents and
proprietary rights relating to the products or processes competitive with those
of the Corporation.

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<PAGE> 57

MANUFACTURING AND MARKETING

The Corporation has limited experience in manufacturing pharmaceuticals. The
Corporation intends to rely primarily on contract manufacturers to produce
antibodies, adjuvants and other components of its products for research and
development, preclinical and clinical trial purposes. The Corporation's products
have never been manufactured on a commercial scale, and there can be no
assurance that such products can be manufactured at a cost or in quantities
necessary to make them commercially viable. There can be no assurance that third
party manufacturers will be able to meet the Corporation's needs with respect to
timing, quantity or quality. If the Corporation is unable to contract for a
sufficient supply of required products and substances on acceptable terms, or if
it should encounter delays or difficulties in its relationships with
manufacturers, the Corporation's preclinical and clinical testing would be
delayed, thereby delaying the submission of products for regulatory approval or
the market introduction and subsequent sales of such products. Any such delay
may have a material adverse effect on the Corporation's business, financial
condition and results of operations. Moreover, contract manufacturers that the
Corporation may use must continually adhere to current Good Manufacturing
Practices regulations enforced by the FDA through its facilities inspection
program. If the facilities of such manufacturers cannot pass a pre-approval
plant inspection, the FDA premarket approval of the Corporation's products will
not be granted.

The Corporation currently has no sales, marketing or distribution experience.
The Corporation intends to rely on its current and future strategic partners, to
market its products; however, there can be no assurance that such corporate
partners have effective sales forces and distribution systems. If the
Corporation is unable to maintain or establish such relationships and is
required to market any of its products directly, the Corporation will have to
develop a marketing and sales force with technical expertise and with supporting
distribution capabilities. There can be no assurance that the Corporation will
be able to maintain or establish such relationships with third parties or
develop in-house sales and distribution capabilities. To the extent that the
Corporation depends on its strategic partners or third parties for marketing and
distribution, any revenues received by the Corporation will depend upon the
efforts of such strategic partners or third parties, and there can be no
assurance that such efforts will be successful.

There can be no assurance that any products successfully developed by the
Corporation, if approved for marketing, will ever achieve market acceptance. The
Corporation's products, if successfully developed, will compete with a number of
traditional drugs and therapies manufactured and marketed by major
pharmaceutical and other biotechnology companies, as well as new products
currently under development by such companies and others. The degree of market
acceptance of any products developed by the Corporation will depend on the
clinical efficacy and safety of the product candidates, their potential
advantage over alternative treatment methods and reimbursement policies of
government and third-party payors. There can be no assurance that physicians,
patients or the medical community in general will accept and utilize any
products that may be developed by the Corporation, and the lack of such market
acceptance would have a material adverse effect on the Corporation's business,
financial condition and results of operations.

PRODUCT LIABILITY AND INSURANCE

The testing, marketing, sale and use of products under development by the
Corporation may entail risk of product liability. Such risk exists in human
clinical trials and even with respect to those products that receive regulatory
approval for commercial sale. There can be no assurance that the Corporation can
avoid significant product liability exposure. The Corporation currently has in
place product liability insurance for its biopharmaceutical products and expects
that as it expands, it will require

54
<PAGE> 58

additional insurance. There can be no assurance that it will be able to obtain
appropriate levels of product liability insurance prior to any sale of its
biopharmaceutical products. An inability to obtain insurance on economically
feasible terms or to otherwise protect against potential product liability
claims could inhibit or prevent the commercialization of products developed by
the Corporation. The obligation to pay any product liability claim or recall a
product could have a material adverse effect on the business, financial
condition and future prospects of the Corporation.

UNSTABLE SHARE PRICE

Market prices for securities of biotechnology companies generally, and of common
shares in particular, are volatile. Factors such as announcements (publicly made
or at scientific conferences) of technological innovations, new commercial
products, patents, the development of proprietary rights by the Corporation or
others, results of clinical trials, regulatory actions, publications, quarterly
financial results or public concern over the safety of biotechnological
products, future sales of Common Shares by the Corporation or by its current
shareholders and other factors could have a significant effect on the market
price of the Common Shares of the Corporation.

NO ASSURANCE OF SUCCESSFUL DEVELOPMENT

Prospects for companies in the biotechnology industry generally may be regarded
as uncertain given the nature of the industry and, accordingly, investments in
biotechnology companies should be regarded as highly speculative. The
Corporation's realization of its long-term potential will be dependent upon the
successful development and commercialization of products currently under
development. There can be no assurance that these products will be delivered
successfully or receive regulatory approval. The new products of the Corporation
are currently in the research and development stages, the riskiest stages for a
company in the biotechnology industry. There can be no assurance that the
research and development programs conducted by the Corporation will result in
commercially viable products. To achieve profitable operations the Corporation,
alone or with others, must successfully develop, introduce and market its
products. To obtain regulatory approvals for the products being developed and to
achieve commercial success, human clinical trials must demonstrate that the
products are safe for human use and that they show efficacy. Unsatisfactory
results obtained from a particular study relating to a program may cause the
Corporation to abandon its commitment to that program. No assurances can be
provided that any future animal or human test, if undertaken, will yield
favourable results.

INTERESTS OF MANAGEMENT AND OTHERS
IN MATERIAL TRANSACTIONS

The only transactions in which the directors or officers of AltaRex or any of
the principal shareholders of AltaRex mentioned under "Principal Shareholders",
or any associate or affiliate of any of the foregoing persons or companies has
had, since March 16, 1996, a material interest, direct or indirect, which has
materially affected or will materially affect AltaRex or any of its subsidiaries
are as follows:

1. On July 17, 1996 the Corporation acquired all of the issued and
outstanding shares of AltaRex Inc. for a purchase price satisfied by the
issuance by the Corporation of 7,525,000 Common Shares (the "AltaRex
Acquisition"). As a result, the former shareholders of AltaRex Inc. became
the controlling shareholders of the Corporation and AltaRex Inc. became a
wholly owned subsidiary of the Corporation. Each of the officers and
directors of the Corporation at that time,

55
<PAGE> 59

including Dr. Noujaim and Mr. McMahan directly or indirectly owned shares
of AltaRex Inc. prior to the AltaRex Acquisition and therefore received
Common Shares of the Corporation pursuant to the AltaRex Acquisition. The
numbers of Common Shares of the Corporation referred to in this paragraph
have been adjusted to reflect a consolidation of the Common Shares of the
Corporation which was effected in November of 1996.

2. AltaRex Inc. entered into loan agreements with several individuals between
January 1, 1996 and July 17, 1996 pursuant to which it borrowed $1,100,000
(the "Bridge Financing"). Dr. Antoine A. Noujaim and 668355 Alberta Ltd.
loaned $100,000 and $400,000 respectively to AltaRex Inc. pursuant to the
bridge financing. The loans from Dr. Noujaim and 668355 Alberta Ltd. were
unsecured loans bearing interest at 12% per annum. The bridge financing was
repaid in full by AltaRex Inc. on July 30, 1996. William R. McMahan, a
director of the Corporation, is a director of 668355 Alberta Ltd. and a
trust established for the benefit of his family is a major shareholder of
668355 Alberta Ltd.

MATERIAL CONTRACTS

Except for contracts entered into the normal course of its business, the only
material contract entered into by AltaRex during the past two years prior to the
date hereof is the Agency Agreement between the Agents and AltaRex referred to
in "Plan of Distribution". Copies of such agreement may be consulted at
AltaRex's offices at Campus Tower, Suite 300, 8625 - 112 Street, Edmonton,
Alberta T6G 1K8 or at 303 Wyman Street, Suite 125, Waltham, Massachusetts 02154
during normal business hours.

ESCROWED SHARES

As at the date of this prospectus, a total of 2,649,552 Common Shares are held
in escrow pursuant to two separate escrow agreements.

Pursuant to an escrow agreement dated November 24, 1993 among Montreal Trust,
the Corporation and certain initial shareholders of the Corporation (the
"Initial Escrow Agreement"), such initial shareholders deposited 644,330 Common
Shares with Montreal Trust, to be held in escrow pursuant to the terms and
conditions if the Initial Escrow Agreement. The Initial Escrow Agreement
provides that the Common Shares held thereunder may not be traded, released,
transferred or dealt with in any manner without the consent of the Executive
Director of the Alberta Securities Commission (the "ASC Director"). Two thirds
of such Common Shares have been released and the remaining one third may be
released on July 17, 1999 upon consent of the ASC Director.

As a condition of a share purchase agreement between two predecessor
corporations (which subsequently amalgamated to form AltaRex) and all of the
then shareholders of the Corporation, certain shareholders of the Corporation
also entered into an escrow agreement dated July 17, 1996 with the Corporation
and Montreal Trust (the "Voluntary Escrow Agreement"), pursuant to which such
shareholders agreed to deposit 7,190,000 Common Shares into escrow with Montreal
Trust. The Voluntary Escrow Agreement provides that the Common Shares held
thereunder may not be traded, released, transferred or dealt with in any manner.
Of the total escrowed shares, 719,000 were released in December of 1996. The
Voluntary Escrow Agreement allows for the remaining shares held thereunder to be
released from escrow on a basis pro rata to each shareholder of one common share
for each $1.20 of gross research and development costs incurred by the
Corporation, up to a maximum

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<PAGE> 60

of 2,396,667 Common Shares in any one year. A total of 2,434,773 Common Shares
remain held under the Voluntary Escrow Agreement.

DILUTION

After giving effect to this offering, the offering price of $* per Common Share
exceeds the net tangible book value per Common Share as at * , 1999 by $*
representing a dilution of * % as set forth in the following table:

<TABLE>
<CAPTION>
Dilution Calculation:
<S> <C>
Offering price per Common Share:...................................................... $*
Consolidated net tangible book value per Common Share as at * , 1999.................. $*
Increase in consolidated net tangible book value attributable to this
offering......................................................................... *
---
Dilution per Common Share to subscribers.............................................. $*
===
Percentage dilution in relation to the offering price................................. * %
===
</TABLE>

LEGAL MATTERS

Certain legal matters relating to this offering will be reviewed by McCarthy
Tetrault on behalf of AltaRex and by Fogler, Rubinoff on behalf of the Agents.

LEGAL PROCEEDINGS

On February 26, 1999, Biomira commenced legal action in the Province of Alberta
against the Corporation, the founder of the Corporation and certain other
individuals affiliated with AltaRex, claiming ownership of an invention
disclosed in an international patent application filed by AltaRex relating to
certain aspects of AltaRex's core technology, products, processes and their
production. In the action, Biomira is seeking, among other things, a court order
declaring that it is the sole owner of the invention and related intellectual
property rights therein, including the patent application, an injunction
prohibiting AltaRex from using the invention, and damages in the amount of
$200,000,000. Although there can be no assurance that Biomira's legal action
will not be successful, AltaRex believes that Biomira's claims are without merit
and intends to defend against such action and consider bringing such
counterclaims in response to Biomira's legal action as it deems appropriate. On
March 16, 1999, the Corporation demanded further particulars from Biomira with
respect to the allegations made in its legal action against the Corporation on
the basis that such action fails to disclose sufficient information with respect
to the relief sought by Biomira in its action so as to enable the Corporation to
properly defend the action. See "Risk Factors - Biomira Litigation".

On March 16, 1999, the Corporation commenced legal action in the Province of
Alberta against Biomira seeking a declaration of the court that, among other
things, (i) Biomira is in breach of the Biomira License Agreement and the Asset
Purchase Agreement, (ii) the Corporation has the exclusive worldwide right and
license to use the B43 Technology to develop, commercialize, manufacture, use
and sell products based upon such technology (including OvaRex(TM) MAb), (iii)
the Corporation has the exclusive right under the Biomira License Agreement to
develop, commercialize, use and sell all AIT(R) Technology applications, (iv) as
a result of its breaches of the Biomira License Agreement, Biomira is not
entitled to any rights under the Biomira License Agreement, and (v) the terms of
the

57
<PAGE> 61

Biomira License Agreement prohibit Biomira from bringing the legal action
described in the preceding paragraph. In addition, the Corporation is seeking an
injunction prohibiting Biomira from pursuing its legal action against the
Corporation and damages in an amount to be proven at trial.

Except for non-material legal proceedings against it in the normal course of its
operations, the Corporation is not aware of any other material existing or
pending legal proceedings against it.

AUDITORS, TRANSFER AGENT AND REGISTRAR

The auditors of AltaRex are Ernst & Young LLP, Chartered Accountants, located at
Suite 1800, Scotia 2, Scotia Place 10060 Jasper Avenue, Edmonton, Alberta T5J
3R8.

The transfer agent and registrar for the Common Shares is Montreal Trust Company
of Canada at its offices in Calgary.

PROMOTERS

Dr. Antoine A. Noujaim and William R. McMahan may each be considered promoters
under applicable securities laws by virtue of their role in founding and
organizing the business of the Corporation in 1996. Each of Messrs. Noujaim and
McMahan is a director and/or officer of the Corporation and as such receives a
fee for services provided to the Corporation in such capacity. See "Executive
Compensation - Compensation of Directors".

PURCHASERS' STATUTORY RIGHTS

Securities legislation in certain provinces provides purchasers with the right
to withdraw from an agreement to purchase securities within two business days
after receipt or deemed receipt of a prospectus or any amendment thereto. In
several of the provinces, applicable securities legislation further provides a
purchaser with remedies for rescission or, in some jurisdictions, damages where
the prospectus or any amendment thereto contains a misrepresentation or is not
delivered to the purchaser, provided that such remedies for rescission or
damages are exercised by the purchaser within the time limit prescribed by the
securities legislation of the purchaser's province. The purchaser should refer
to any applicable provisions of the securities legislation of their province for
the particulars of these rights or consult with a legal advisor.

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<PAGE> 62

CONSOLIDATED FINANCIAL STATEMENTS OF

ALTAREX CORP.

YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
AND THE PERIOD DECEMBER 1, 1995 TO DECEMBER 31, 1998

F-1

<PAGE> 63

AUDITORS' REPORT

To the Shareholders of
ALTAREX CORP.

We have audited the consolidated balance sheets of ALTAREX CORP. as at December
31, 1998 and 1997 and the consolidated statements of loss and accumulated
deficit, and the consolidated statements of cash flows for the years ended
December 31, 1998, 1997, 1996 and the period December 1, 1995 to December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1998
and 1997 and the results of its operations and the changes in its financial
position for the years ended December 31, 1998, 1997, 1996 and the period
December 1, 1995 to December 31, 1998 in accordance with accounting principles
generally accepted in Canada.

Edmonton, Canada
February 12, 1999 Chartered Accountants
(except as to note 11 which is
as of *, 1999)

F-2

<PAGE> 64

ALTAREX CORP.

CONSOLIDATED BALANCE SHEETS

As at December 31

<TABLE>
<CAPTION>
1998 1997
(In Canadian dollars) $ $
- ----------------------------------------------------------------------------------------------
<S> <C> <C>

ASSETS
CURRENT ASSETS
Cash and short-term investments 12,823,420 25,002,106
Accounts receivable 78,616 192,299
Investment tax credit receivable -- 247,734
Prepaid expenses 174,293 89,096
- ----------------------------------------------------------------------------------------------
13,076,329 25,531,235
DEPOSITS AND OTHER ASSETS [note 2] 322,840 185,741
NOTES RECEIVABLE FROM EMPLOYEES [note 3] 106,186 --
CAPITAL ASSETS [note 4] 1,654,419 1,582,768
- ----------------------------------------------------------------------------------------------
15,159,774 27,299,744
==============================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------

CURRENT LIABILITIES
Accounts payable and accrued liabilities 2,079,168 1,035,299
- ----------------------------------------------------------------------------------------------
2,079,168 1,035,299
DEFERRED LEASE CREDIT 433,766 555,676
- ----------------------------------------------------------------------------------------------
2,512,934 1,590,975
- ----------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES [notes 7, 10 and 11]

SHAREHOLDERS' EQUITY
Share capital [note 5] 32,838,364 32,784,364
Accumulated deficit during the development stage (20,191,524) (7,075,595)
- ----------------------------------------------------------------------------------------------
12,646,840 25,708,769
- ----------------------------------------------------------------------------------------------
15,159,774 27,299,744
==============================================================================================
</TABLE>

See accompanying notes

On behalf of the Board:

"Antoine A. Noujaim" "Richard J. Bagley"
Director Director

F-3

<PAGE> 65

ALTAREX CORP.

CONSOLIDATED STATEMENTS OF LOSS AND
ACCUMULATED DEFICIT

<TABLE>
<CAPTION>
YEARS ENDED DEC. 1, 1995
DECEMBER 31, - DEC. 31,
-------------------------------------------
1998 1997 1996 1998
(In Canadian dollars) $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------

REVENUES
<S> <C> <C> <C> <C>
Research contracts [note 7] 50,000 680,000 15,000 745,000
Sale of research materials - 39,760 8,589 71,869
Interest income 963,742 900,076 64,668 1,928,486
- ------------------------------------------------------------------------------------------------------------------------
1,013,742 1,619,836 88,257 2,745,355
- ------------------------------------------------------------------------------------------------------------------------

EXPENSES
Research and development [note 7] 9,433,681 4,733,918 1,720,031 16,095,431
General and administrative 4,695,990 1,563,555 540,285 6,841,448
- ------------------------------------------------------------------------------------------------------------------------
14,129,671 6,297,473 2,260,316 22,936,879
- ------------------------------------------------------------------------------------------------------------------------

NET LOSS FOR THE YEAR (13,115,929) (4,677,637) (2,172,059) (20,191,524)
Accumulated deficit, beginning of year (7,075,595) (2,397,958) (225,899)
- ------------------------------------------------------------------------------------------------------------------------
Accumulated deficit, end of year (20,191,524) (7,075,595) (2,397,958) (20,191,524)
========================================================================================================================

Net loss per common share ($0.79) ($0.29) ($0.24)
- -------------------------------------------------------------------------------------------------------

Weighted-average number of common 16,503,764 15,894,880 9,067,374
shares
=======================================================================================================
</TABLE>

See accompanying notes

F-4

<PAGE> 66

ALTAREX CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DEC. 1, 1995
DECEMBER 31, - DEC. 31,
-------------------------------------------------
1998 1997 1996 1998
(In Canadian dollars) $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH USED IN OPERATING
ACTIVITIES
Net loss (13,115,929) (4,677,637) (2,172,059) (20,191,524)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 548,687 366,268 127,816 1,052,488
Amortization of deferred lease credit (168,551) (64,324) -- (232,875)
Interest expense satisfied through
issuance of common shares -- -- 12,066 12,066
Net changes in non-cash working capital 1,301,468 374,431 (163,546) 1,621,897
balances
- ------------------------------------------------------------------------------------------------------------------------
(11,434,325) (4,001,262) (2,195,723) (17,737,948)
- ------------------------------------------------------------------------------------------------------------------------

CASH USED IN INVESTING
ACTIVITIES
Purchase of capital assets (620,339) (1,473,826) (45,473) (2,706,908)
Acquisition of AltaRex Corp. -- -- (30,250) (30,250)
- ------------------------------------------------------------------------------------------------------------------------
(620,339) (1,473,826) (75,723) (2,737,158)
- ------------------------------------------------------------------------------------------------------------------------

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Issue of common shares, net [note 6] 54,000 2,860,273 25,391,601 29,305,874
Issue of Private Placement Units, net [note 6] -- -- 2,340,674 2,340,674
Issues of Special Warrants, net [note 6] -- -- 1,210,000 1,210,000
Share subscription receivable -- -- 293,963 --
Deferred lease credit 46,641 620,000 -- 666,641
Deferred finance costs (118,477) -- -- (118,477)
Employee relocation loans (106,186) -- -- (106,186)
Net changes in non-cash financing balances (219,028) 219,028
- ------------------------------------------------------------------------------------------------------------------------
(124,022) 3,261,245 29,455,266 33,298,526
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS (12,178,686) (2,213,843) 27,183,820 12,823,420
Cash and short-term investments, beginning 25,002,106 28,215,949 32,129
of year
- ------------------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS,
END OF YEAR 12,823,420 25,002,106 27,215,949 12,823,420
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes

F-5

<PAGE> 67

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

1. BASIS OF PRESENTATION

DESCRIPTION OF BUSINESS

The Company, amalgamated under the Business Corporations Act (Alberta), is a
biotechnology company that is engaged in the research and development of
biopharmaceutical products for the therapy of cancer. The Company is in its
development stage.

The Company's ability to complete its research and development program and
commercialize its technology is dependent on the Company continuing to arrange
the necessary financing and the receipt of regulatory approvals to use its
products in the therapy of cancer.

ACQUISITION OF ALTAREX INC.

Effective July 17, 1996, AltaRex Corp. (formerly known as Allrich Energy Group
Inc.) acquired 100% of the issued and outstanding common shares of AltaRex Inc.
by issuing a total of 7,525,000 of AltaRex Corp.'s common shares. At the date of
acquisition, AltaRex Corp. was a non-operating company with net monetary
liabilities totalling $30,250, which amount approximated their net fair value.
AltaRex Inc. was incorporated on October 31, 1995 and commenced active
operations on December 1, 1995. By this transaction, sufficient common shares of
AltaRex Corp. were issued so that a controlling interest (approximately 74%) of
the corporate group passed to the former shareholders of AltaRex Inc.
Accordingly, for accounting purposes, AltaRex Inc. was treated as the purchaser,
and the acquisition was accounted for as a reverse take-over. The legal parent
company, AltaRex Corp., is deemed to be a continuation of AltaRex Inc., and
accordingly, these financial statements are a continuation of the financial
statements of AltaRex Inc., the legal subsidiary, and not the legal parent. In
these financial statements, the 1996 comparative figures presented are those of
AltaRex Inc. In making the acquisition, AltaRex Inc. acquired net liabilities of
approximately $30,250 which amount has been charged to share issue costs. The
acquisition has been accounted for using the purchase method with the cost of
the purchase being a nominal $1.

AMALGAMATION OF ALTAREX CORP. AND ALTAREX INC.

Effective May 31, 1997, AltaRex Corp. amalgamated with its wholly-owned
subsidiary, AltaRex Inc., to continue operations as AltaRex Corp. For accounting
purposes, the amalgamation has been accounted for based on the carrying amounts
of the assets and liabilities of AltaRex Corp.
and AltaRex Inc. prior to the amalgamation.

F-6

<PAGE> 68

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared by management in accordance with
accounting principles generally accepted in Canada, which do not differ
materially from those established in the United States, except as disclosed in
Note 8. The preparation of financial statements in conformity with such
principles requires management to make estimates and assumptions that affect the
reported assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting periods. Actual results could differ
from those estimates.

CONSOLIDATION OF SUBSIDIARIES

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, AltaRex US, Corp.

REVENUE RECOGNITION

Research material sales are recognized as materials are delivered.

Revenue from research contracts, which includes government funding of research
projects, is recognized as the services are performed based on costs incurred
or, for those contracts that provide for milestone payments, as milestones are
achieved. Amounts received under refundable research contracts are recorded as
revenue when repayment is conditional on the commercial success of the research
effort. Amounts received in advance of services to be performed are recorded as
unearned revenue.

CASH AND SHORT-TERM INVESTMENTS

The Company invests its surplus cash in highly liquid government and commercial
instruments with maturities not exceeding one year. The carrying cost of
short-term investments approximates their fair value. The short-term investments
held at December 31, 1998 have maturity periods averaging 2.5 months (1997 - 5
months) and average interest rates approximating 5.1% (1997 - 3.9%).

F-7

<PAGE> 69

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DEPOSITS AND OTHER ASSETS

Deposits and down payments on service contracts are deferred and expensed as
services are provided under the terms of the contract.

Included in deposits and other assets are amounts paid on deposit to an
underwriter in anticipation of a financing transaction and have been deferred
pending completion of a transaction. In the event of successful completion of
the financing these costs will be charged to capital. In the event the financing
is unsuccessful these costs will be expensed.

CAPITAL ASSETS

Capital assets are stated at cost net of investment tax credits, accumulated
amortization and depreciation. Depreciation and amortization is provided at
rates which are designed to allocate the cost of the assets, on a straight-line
basis, over their estimated useful lives as follows:
Scientific equipment 5 years
Computer software and equipment 3 years
Office equipment 5 years
Leasehold improvements 3-5 years, term of lease

DEFERRED LEASE CREDIT

The deferred lease credit relates to leasehold improvements provided to the
Company by the landlord for its leased office and research facilities. The
deferred lease credit is being amortized over the term of the lease agreements
which is three to five years (see note 7).

RESEARCH AND DEVELOPMENT COSTS

Research costs are expensed in the period incurred. Development costs are
expensed in the period incurred unless the Company believes a development
project meets generally accepted accounting principles for deferral and
amortization. No development costs have been deferred to date.

FOREIGN CURRENCY TRANSLATION

Monetary assets and liabilities in foreign currencies are translated into
Canadian dollars at the rate of exchange at the period end; transactions during
the period are translated at the rate of exchange in

F-8

<PAGE> 70

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

effect at the date of the transaction. Gains and losses arising from these
translation adjustments are included in income.

INVESTMENT TAX CREDITS

The Company is permitted to offset federal income taxes payable with unapplied
investment tax credits which are based on the cost of carrying on qualifying
research and development activities and the cost of qualifying new equipment
(see note 6).

Refundable investment tax credits received by the Company relating to the
acquisition of assets are deducted from the cost of the related asset.
Refundable investment tax credits received by the Company relating to current
expenses are included in the determination of net income as a reduction of
research and development costs.

INCOME TAXES

Income taxes have been provided on a deferred tax allocation basis whereby the
provision for income taxes is determined on the basis of income and expenses
included on the statement of income rather than the related amounts reported in
the income tax returns of the Company. Deferred income taxes relate primarily to
differences between the amount of depreciation and amortization recorded for
accounting purposes and capital cost allowance claimed for income tax purposes.

LOSS PER SHARE

In accordance with generally accepted accounting principles in Canada applicable
to reverse takeovers, the loss per share figures are calculated on the following
basis:

* The number of shares outstanding from the beginning of the
fiscal period to the date of the reverse take-over on July 17,
1996 are deemed to be the number of shares issued by AltaRex
Corp. to AltaRex Inc.

* The number of shares outstanding from the date of the reverse
take-over to the end of each of the fiscal periods are deemed to
be the actual number of shares of AltaRex Corp. outstanding in
each period.

F-9

<PAGE> 71

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The loss per share figure is calculated on the weighted-average number of shares
outstanding based on the numbers determined above, including shares held in
escrow.

3. NOTES RECEIVABLE

The note receivable balance is comprised of employee relocation loans. The notes
are unsecured, non-interest bearing (except on default of repayment),
denominated in U.S. dollars and have maturity dates ranging from May 2000 to
June 2003.

4. CAPITAL ASSETS

<TABLE>
<CAPTION>
1998 1997
----------------------------------------------------
ACCUMULATED ACCUMULATED
COST AMORTIZATION COST AMORTIZATION
$ $ $ $
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Scientific equipment 1,187,996 543,893 954,565 306,144
Computer software and equipment 301,968 150,688 174,658 74,763
Office equipment 416,559 117,151 244,346 50,820
Leasehold improvements 781,041 221,413 713,000 72,074
2,687,564 1,033,145 2,086,569 503,801
- -----------------------------------------------------------------------------------------------------
Net Book value 1,654,419 1,582,768
- -----------------------------------------------------------------------------------------------------
</TABLE>

5. SHARE CAPITAL

AUTHORIZED

The authorized share capital of the Company consists of an unlimited number of
common shares and an unlimited number of preferred shares.

F-10

<PAGE> 72

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

5. SHARE CAPITAL (CONTINUED)

The preferred shares may be issued in one or more series and the directors are
authorized to fix the number of shares in each series and to determine the
designation, rights, privileges, restrictions and conditions attached to the
shares of each series.

F-11

<PAGE> 73

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

5. SHARE CAPITAL (CONTINUED)

ISSUED AND OUTSTANDING COMMON SHARES

Summarized below is the issued and outstanding common shares of AltaRex Corp.:

<TABLE>
<CAPTION>
SHARE
NUMBER OF CAPITAL
SHARES $
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE AS AT DECEMBER 1, 1995 1,169,330
Issue of shares 25,000
Initial capitalization of Company 1,000,000
- ---------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 1,194,330 1,000,000
Private placement of shares of AltaRex Inc 175,200
Issue of shares of AltaRex Inc. in settlement of interest
payable 12,066
Shares issued in private placement of unit sales 1,497,500 2,310,424
Shares issued to acquire AltaRex Inc. 7,525,000 1
Issue of shares for cash from exercise of Special Warrants 797,500 1,210,000
Shares issued for cash in public offering 4,100,000 25,036,466
Issue of shares resulting from exercise of stock options 116,933 76,014
Issue of shares resulting from exercise of Warrants 43,300 103,920
- ---------------------------------------------------------------------------------------------
BALANCE AS AT DECEMBER 31, 1996 15,274,563 29,924,091
Issue of shares resulting from exercise of stock options,
net 95,000 170,931
Issue of shares resulting from exercise of Warrants 1,113,050 2,689,342
- ---------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 16,482,613 32,784,364
Issues of shares resulting from exercise of stock options 30,000 54,000
- ---------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 16,512,613 32,838,364
=============================================================================================
</TABLE>

Effective November 28, 1996, the shareholders approved a consolidation of the
Company's common shares, on the basis of one new common share for every four
existing common shares. These financial statements reflect the share
consolidation for all periods presented.

On July 17, 1996, the Company issued 1,497,500 common shares on the exercise of
Private Placement Units ("Units"). The Units were issued for gross proceeds of
$2,695,500 inclusive of Units issued for $175,000 in commission charges. The
Units consisted of 1,497,500 common shares and common share purchase warrants
("Warrants") that were exercisable into 1,497,500 common shares.

F-12

<PAGE> 74

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

5. SHARE CAPITAL (CONTINUED)

Also on July 17, 1996 Special Warrants were issued for gross proceeds of
$1,435,500 inclusive of Special Warrants issued for $130,500 in commission
charges. The Special Warrants consisted of 797,500 common shares and Warrants
that were exercisable into 797,500 common shares. On November 18, 1996 a total
of 797,500 common shares were issued on the exercise of Special Warrants.

As additional consideration for the services rendered by the underwriter related
to the Special Warrant issuance, a compensation option was granted. The
compensation option consisted of optioned units that if exercised would have
resulted in the issuance of 72,500 common shares and warrants that would have
been exercisable into 72,500 common shares.

On July 17, 1998 the right to exercise the outstanding Warrants and compensation
option related to the issuance of Units and Special Warrants expired.

On December 20, 1996, the Company issued 4,100,000 common shares in a public
offering for net proceeds of $25,036,466, after related issue expenses of
$2,638,534.

As at December 31, 1998, a total of 2,649,552 (December 31, 1997 - 5,260,994)
common shares of the Company are being held in escrow for regulatory purposes
and released on the following basis:

* An amount of 2,434,773 (December 31, 1997 - 4,831,440) common shares
will be released from escrow on a basis pro rata to each shareholder,
of one common share for each $1.20 of gross research and development
costs incurred by the Company to a maximum in any one year of 2,396,667
common shares. A total of 2,396,667 common shares were released in
1998.

* An additional 214,779 (December 31, 1997 - 429,554) common shares will
be released from escrow on a basis pro rata to each shareholder on July
17, 1999. A total of 214,775 common shares were released on July 15,
1998.

WARRANTS AND STOCK OPTION PLAN

In 1998, the Company amended its stock option plan for directors, officers,
employees and consultants. Pursuant to the amended plan, a total of 2,480,000
(December 31, 1997 - 1,544,206) common shares of the Company are reserved for
issue of stock options, of which 209,251 (December 31, 1997 - 565,373) are
available for grant at December 31, 1998. At December 31, 1998, there were
2,114,083 (December 31, 1997 - 683,833) stock options outstanding for directors,
officers and employees and 156,666 (December 31, 1997 - 295,000) options for
consultants.

F-13

<PAGE> 75

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

5. SHARE CAPITAL (CONTINUED)

The following schedule details the warrants and stock options granted,
exercised, expired and cancelled since December 1, 1995.

<TABLE>
<CAPTION>
SHARES ISSUABLE ON
EXERCISE OF
------------------------
EXERCISE PRICE
STOCK WARRANTS PER SHARE
OPTIONS $
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 1 AND Nil Nil
DECEMBER 31, 1995
Granted 858,500 2,440,000 1.80 - 3.00
Exercised (43,300) 2.40 - 3.00
- ---------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 858,500 2,396,700
Granted 217,833 41,667 3.30 - 12.00
Exercised (95,000) (1,113,050) 1.80 - 3.00
Cancelled (2,500) 3.68
- ---------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 978,833 1,325,317
Granted 1,723,666 0.53 - 3.00
Exercised (30,000) 1.80
Cancelled (401,750) 1.15 - 5.90
Expired (1,283,650) 1.80 - 3.00
- ---------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 2,270,749 41667
=========================================================================================================
</TABLE>

F-14

<PAGE> 76

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

5. SHARE CAPITAL (CONTINUED)

The following warrants and stock options to purchase common shares are
outstanding at December 31, 1998.

SHARES ISSUABLE ON
EXERCISE OF
- ---------------------------
STOCK OPTIONS WARRANTS EXERCISE PRICE
PER SHARE YEAR OF EXPIRY
$
- ----------------------------------------------------------------
26,666 0.72 1999
41,667 12.00 2000
522,250 1.80 2001
139,500 3.30 - 3.68 2002
33,333 5.90 - 6.00 2002
400,000 0.53 - 0.91 2003
75,000 1.15 - 1.40 2003
1,074,000 2.18 - 3.00 2003
- ----------------------------------------------------------------
2,270,749 41,667
- ----------------------------------------------------------------

F-15

<PAGE> 77

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

6. INCOME TAX

The Company is eligible for scientific research and development investment tax
credits which may be applied against federal taxes payable. The accumulated
non-refundable investment tax credits as at December 31, 1998 approximate
$1,923,000 (December 31, 1997 - $1,360,000).

As at December 31, 1998, the Company has scientific research and experimental
development expenditures for tax purposes of approximately $8,146,000 (December
31, 1997 - $5,208,000) which may be carried forward indefinitely and utilized by
reducing income for income tax purposes.

As at December 31, 1998, the Company has approximately $12,984,000 (December 31,
1997 - $2,900,000) of non-capital losses available to be applied to taxable
income of future years. These losses expire between 2001 and 2005.

No recognition has been given in these financial statements to the potential tax
benefits which may result from these carry forward amounts.

7. COMMITMENTS AND CONTINGENCIES (SEE NOTE 11)

The Company leases office and research facilities and is committed to annual
minimum basic rent payments as follows:

$
- --------------------------------------------------------------------------------
1999 279,919
2000 279,919
2001 156,077
2002 52,454

F-16

<PAGE> 78

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

7. COMMITMENTS AND CONTINGENCIES (CONTINUED)

On December 1, 1995, in an arm's-length transaction, AltaRex Inc. acquired a
fifteen year exclusive world-wide right and license to a certain antibody, its
cell bank, related data, records and proprietary rights (the "Technology") which
will be used for the therapy of cancer, for a non-refundable cash fee of
$150,000 from Biomira Inc. which, at the time of the acquisition, had a director
who was also a director of the Company. This license fee has been charged to
research and development expenses. In addition, certain equipment was purchased
for cash of $514,000, an amount approximating its fair value. The Company also
agreed to pay royalties associated with revenues from the Technology. The
Technology agreement requires that the Company use its best efforts to
commercialize the Technology and to commit to spending certain minimum amounts
to develop the Technology. Should these obligations not be met, the Company's
right under the Technology agreement ceases to be exclusive (see note 11).

The Company is party to a jointly-funded research contract with the
Canada-Israel Industrial Research and Development Foundation. Total funding of
$300,000 is available over a three year term commencing in 1997. During 1997,
$100,000 was received and recorded as revenue. No amounts were received in 1998.
This funding is conditionally repayable, on commercial success, at a rate of
2.5% of gross sales of the resulting products.

The Company is party to an agreement with the Alberta Heritage Foundation for
Medical Research to jointly fund clinical trials, with the Company controlling,
through ownership or licensing, all of the technology. Total funding available
of $500,000 was received and recorded as revenue in 1997. The Company is
required to repay this funding and a royalty equivalent to the amount actually
received, from the commercial success of the resulting products and technology,
at a rate of the lesser of 5% of gross sales or $100,000 per annum. In addition,
the Company granted Warrants in connection with this agreement which entitle the
holder to obtain 41,667 common shares (see note 5).

The Company has contracted certain research projects to a third party consultant
for a three year period ending March 2000. Fees will be paid to the consultant
to a maximum of $300,000 per annum.

F-17

<PAGE> 79

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

8. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES

These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada (Canadian GAAP) which conform in all
material respects to those accounting principles in the United States (U.S.
GAAP), except as follows:

(a) Cash and short-term investments
For Canadian GAAP purposes with regard to the statement of cash flows,
cash and cash equivalents include all short-term investments. For U.S.
GAAP purposes only those short-term investments with original
maturities of less than three months would be included in cash and cash
equivalents. Short-term investments with maturities greater than three
months amounted to $4,241,732 as at December 31, 1998 ($9,036,000 as at
December 31, 1997).

In addition, for Canadian GAAP purposes, the gross amount of non-cash
items are included in the respective operating, investing, or financing
activities as applicable. For U.S. GAAP purposes, non-cash items such
as leasehold improvements financed by the deferred lease credit would
be excluded from the statements of cash flows. Accordingly, for U.S.
GAAP purposes for the year ended December 31, 1998 cash used in
investing activities would decrease by $4,840,909 (1997 - increase by
$8,416,000), cash provided in financing activities would decrease by
$46,641 (1997 - $620,000) and cash and cash equivalents would decrease
by $4,241,732 (1997 - $9,036,000).

(b) Accounting for income taxes
For U.S. GAAP purposes, the Company would be required to account for
income taxes in accordance with the provisions of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes"
(SFAS 109). SFAS 109 requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under
this method, deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the year.
In addition, for U.S. GAAP purposes, a deferred tax asset, net of a
valuation allowance, would be recorded to recognize the future benefit
of loss carryforwards when the realization of the benefit is determined
to be more likely than not. For Canadian GAAP purposes, the benefits of
such losses may only be recorded in the period incurred if realization
is virtually certain. At December 31, 1998, the Company has determined
that the deferred tax asset net of a valuation allowance of $11,066,000
(December 31, 1997 - $5,005,000) would be nil (nil at December 31,
1997).

F-18

<PAGE> 80

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

8. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES (CONTINUED)

(c) Accounting for stock-based compensation
For U.S. GAAP purposes, the Company would account for stock-based
compensation to employees in accordance with Accounting Principles
Board (APB) Opinion No. 25. For U.S. GAAP purposes, no compensation
expense would be recognized on the Company's stock options and warrants
granted, since the exercise price of these instruments equal the fair
value of the Company's stock as at the date of the grant. Stock-based
compensation to non-employees would be recorded at the fair value of
the options and warrants granted. This compensation expense would be
amortized over the appropriate vesting periods. As at December 31,
1998, the unamortized compensation benefit that the Company would
record as additional compensation expense in future periods amounts to
$89,000 (December 31, 1997 - $181,000).

(d) Reverse take-over costs
For Canadian GAAP purposes, costs incurred in connection with the
Company's reverse take-over are presented as a charge against
shareholder's equity. For U.S. GAAP purposes, these costs totalling
$495,000 would be charged to expense. Accordingly, net loss for the
year ended December 31, 1996 and share capital for each of the periods
presented would increase by $495,000.

(e) Comprehensive income

For U.S. GAAP purposes, the Company would adopt the disclosure
requirements of Financial Accounting Standard No. 130 ('SFAS 130').
SFAS 130 requires the presentation of comprehensive income and its
components. Comprehensive income includes all changes in equity during
a period except shareholder transactions. For the periods presented,
comprehensive income would equal net loss determined for U.S. GAAP
purposes as set out in the following table.

F-19

<PAGE> 81

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

8. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES (CONTINUED)

The following table reconciles the net loss as reported on the statements of
loss to the net loss that would have been reported had the financial statements
been prepared in accordance with U.S.
GAAP.

<TABLE>
<CAPTION>
YEARS ENDED DEC. 1, 1995
DECEMBER 31, - DEC. 31,
--------------------------------------------------
1998 1997 1996 1998
$ $ $ $
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Net loss per Canadian GAAP 13,115,929 4,677,637 2,172,059 20,191,524

Adjustment for stock-based compensation 130,000 163,000 75,000 368,000

Adjustments of reverse take-over costs 495,000 495,000
- ----------------------------------------------------------------------------------------------------------------------
Net loss per U.S. GAAP 13,245,929 4,840,637 2,742,059 21,054,524
- ----------------------------------------------------------------------------------------------------------------------

Basic and diluted net loss
per share, U.S. GAAP (0.80) (0.30) (0.30)
- ----------------------------------------------------------------------------------------------------------------------

Weighted-average number of
common shares 16,503,764 15,894,880 9,067,374

Weighted-average number
of common shares and
dilutive share equivalents 16,503,764 15,894,880 9,067,374
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

The following summarizes balance sheet items with material variations under U.S.
GAAP

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31,
1998 1997
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Share capital 33,701,364 33,517,364
Accumulated deficit 21,054,524 7,808,595
</TABLE>

F-20

<PAGE> 82

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

9. SEGMENTED DISCLOSURE

The Company has considered the reporting requirements of the Canadian Institute
of Chartered Accountants on segment disclosures. The Company has determined that
it manages its operations as one reportable segment of a biotechnology company
engaged in the research and development of biopharmaceutical products for the
therapy of cancer. All of the Company's revenues are generated in Canada. The
Company's capital assets are located in Canada with the exception of $330,000
located in the United States.

10. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE

The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.

11. SUBSEQUENT EVENTS

On February 26, 1999, Biomira Inc. commenced legal action against the Company,
the founder of the Company and certain other individuals affiliated with the
Company, claiming ownership of an invention disclosed in a patent application
filed by the Company relating to certain aspects of the Company's core
technology, products, processes, and the methods for their production, including
the Technology. In the action, Biomira is seeking, among other things, a court
order declaring that it is the sole owner of the invention and related
intellectual property rights therein, including the patent application, an
injunction prohibiting the Company from using the invention, and damages in the
amount of $200,000,000. Although there can be no assurance that Biomira's legal
action will not be successful, the Company believes that Biomira's claims are
without merit and intends to defend against such action and consider bringing
such counterclaims and the Company has taken and will continue to take such
other actions in response to Biomira's legal action as it deems appropriate.
Given the early stage of the above action, it is not possible to estimate the
potential costs or losses, if any, related to this matter.

On March 16, 1999, the Company commenced legal action in the Province of Alberta
against Biomira seeking a declaration of the court that, among other things, (i)
Biomira is in breach of the Biomira License Agreement and the related asset
purchase agreement between the Company,

F-21

<PAGE> 83

ALTAREX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(In Canadian dollars)

11. SUBSEQUENT EVENTS (CONTINUED)

Biomira and Biomira Research, (ii) the Company has the exclusive worldwide right
and license to use the B43 Technology to develop, commercialize, manufacture,
use and sell products based upon such technology (including OvaRex(TM) MAb),
(iii) the Company has the exclusive right under the Biomira License Agreement to
develop, commercialize, use and sell all AIT(R) Technology applications, (iv) as
a result of its breaches of the Biomira License Agreement, Biomira is not
entitled to any rights under the Biomira License Agreement, and (v) the terms of
the Biomira License Agreement prohibit Biomira from bringing the legal action
described in the preceding paragraph. In addition, the Company is seeking an
injunction prohibiting Biomira from pursuing its legal action against the
Company and damages in an amount to be proven at trial.

Pursuant to an agency agreement dated *, 1999, the Company proposes to issue *
Common Shares for gross proceeds of $*. The agency fee and other expenses of the
issue payable by the Company are estimated at $* and will be deducted from the
gross proceeds. The Company has also given the Agents an option to acquire up to
an aggregate of * additional Common Shares at the offering price to cover over
allotments.

F-22

<PAGE> 84

CERTIFICATE OF ALTAREX CORP.

Dated: March 16, 1999

The foregoing constitutes full, true and plain disclosure of all material facts
relating to the securities offered by this prospectus as required by Part 7 of
the Securities Act (British Columbia), by Part 8 of the Securities Act
(Alberta), by Part VII of The Securities Act (Manitoba) and by Part XV of the
Securities Act (Ontario) and by the respective regulations thereunder. This
prospectus, as required by the Securities Act (Quebec) and the regulations
thereunder, does not contain any misrepresentation that is likely to affect the
value or the market price of the securities to be distributed.

<TABLE>
<S> <C>
"Richard J. Bagley" "Edward M. Fitzgerald"
(Signed)RICHARD J. BAGLEY (Signed) EDWARD M. FITZGERALD
President and Chief Executive Officer Senior Vice President, Chief Financial Officer
and Secretary
</TABLE>

On behalf of the Board of Directors

<TABLE>
<S> <C>
"Antoine A. Noujaim" "William R. McMahan"
(Signed) ANTOINE A. NOUJAIM (Signed) WILLIAM R. MCMAHAN
Director Director
</TABLE>

<PAGE> 85

CERTIFICATE OF AGENTS

Dated: March 16, 1999

To the best of our knowledge, information and belief, the foregoing constitutes
full, true and plain disclosure of all material facts relating to the securities
offered by this prospectus as required by Part 7 of the Securities Act (British
Columbia), by Part 8 of the Securities Act (Alberta), by Part VII of The
Securities Act (Manitoba) and by Part XV of the Securities Act (Ontario) and by
the respective regulations thereunder. To our knowledge, this prospectus, as
required by the Securities Act (Quebec) and the regulations thereunder, does not
contain any misrepresentation that is likely to affect the value or the market
price of the securities to be distributed.

FIRST MARATHON SECURITIES LIMITED HSBC JAMES CAPEL CANADA INC.

Per: "Andre Denis" (Signed) Per: "Rod N. Baker" (Signed)
ANDRE DENIS ROD N. BAKER

The following includes the name of every person or company having an interest,
either directly or indirectly, to the extent of not less than 5% in the capital
of:

FIRST MARATHON SECURITIES LIMITED: a wholly-owned subsidiary of First Marathon
Inc.; and

HSBC JAMES CAPEL CANADA INC.: a wholly-owned subsidiary of a Canadian chartered
bank.