ALTAREX CORP, 6-K, 1999-04-23

ALTAREX CORP
6-K, 1999-04-23
PHARMACEUTICAL PREPARATIONS

Previous: SEAGATE SOFTWARE INC, DEFM14A, 1999-04-23

Next: MPW INDUSTRIAL SERVICES GROUP INC, 4, 1999-04-23

<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 April, 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

Altarex Corp. (the "Company") is hereby filing its i) Notice of Annual and
Special Meeting of Shareholders and Management Information Circular, ii) Proxy,
and iii) 1998 Annual Report, all of which the Company distributed to its
security holders. Copies of these documents are attached hereto as Exhibits
99.1, 99.2 and 99.3.

EXHIBITS

99.1 Notice of Annual and Special Meeting of Shareholders and Management
Information Circular

99.2 Proxy

99.3 1998 Annual Report

<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/ Edward M. Fitzgerald
________________________

Name: Edward M. Fitzgerald

Title: Senior Vice President and Chief Financial Officer

Date: April 23, 1999

<PAGE> 1

EXHIBIT 99.1

[ALTAREX LOGO]

ALTAREX CORP.

Notice of Annual and Special Meeting of Shareholders

and

Management Information Circular

April 13, 1999

<PAGE> 2

[ALTAREX LOGO]

ALTAREX CORP.

Registered Office: Executive Office:
Campus Tower, Suite 300 Suite 125, 303 Wyman Street
8625 - 112 Street Waltham, Massachusetts
Edmonton, Alberta T6G 2E1 02451

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

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

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

NOTICE IS HEREBY GIVEN that the annual and special meeting (the "Meeting")
of holders of common shares ("Shareholders") of AltaRex Corp. (the
"Corporation") will be held in the Angus Shaw Room at the Sheraton Grand Hotel,
10235 -101 Street, Edmonton, Alberta on May 19, 1999 at 2:30 p.m. (Edmonton
time), for the following purposes:

1. to receive the annual report of the directors to the shareholders and the
financial statements of the Corporation for the year ended December 31,
1998 and the auditors' report thereon;

2. to elect directors;

3. to appoint Ernst & Young LLP, Chartered Accountants, as auditors of the
Corporation and to authorize the directors to fix their remuneration;

4. to consider and, if deemed advisable, pass, with or without variation, a
resolution approving an amendment to the stock option plan of the
Corporation (the "Plan") increasing the number of common shares of the
Corporation reserved for issuance thereunder from 2,480,000 to 4,180,000,
the full text of which is set out in Schedule "A" to the accompanying
Management Information Circular of the Corporation (the "Circular"), all as
more particularly described in the Circular;

5. to consider and, if deemed advisable, pass, with or without variation, a
resolution approving an amendment to the Plan increasing the maximum
exercise period of options granted under the Plan from five years to ten
years, the full text of which is set out in Schedule "B" to the Circular,
all as more particularly described in the Circular;

6. to consider and, if deemed advisable, pass, with or without variation, a
resolution approving an amendment to the terms of certain options granted
under the Plan extending the exercise period of such options from five
years to ten years, the full text of which resolution is set out in
Schedule "C" to the accompanying Circular, all as more particularly
described in the Circular; and

7. to consider such other matters as may properly come before the Meeting or
any adjournment thereof.

<PAGE> 3

- 2 -

The Board of Directors of the Corporation has fixed the close of business
on April 12, 1999 as the record date (the "Record Date") for the purpose of
determining Shareholders entitled to receive notice of the Meeting, but the
failure of any Shareholder to receive notice of the Meeting does not deprive
such Shareholder of the right to vote at the Meeting. If a person has acquired
Common Shares of the Corporation after the Record Date, that person is entitled
to vote those shares at the Meeting upon establishing share ownership and
demanding the inclusion of his or her name on the list of shareholders of the
Corporation not later than ten days before the date of the Meeting.

By Order of the Board of Directors

(Signed) Edward M. Fitzgerald
Secretary

Waltham, Massachusetts
April 13, 1999

Shareholders who are unable to be present at the Meeting are requested to
complete and return the enclosed form of proxy in the envelope provided for that
purpose. The Board of Directors has specified that proxies must be received at
the Calgary office of the Corporation's transfer agent, Montreal Trust Company
of Canada, before 5:00 p.m. (Calgary time), on the last business day prior to
the Meeting or, if such meeting is adjourned, such time on the business day
immediately prior to the date to which such meeting is adjourned at the
following address, or may be deposited with the Chairman of the Meeting prior to
the commencement thereof:

AltaRex Corp.
c/o Montreal Trust Company of Canada
Suite 600
530 - 8th Avenue S.W.
Calgary, Alberta T2P 3S8

<PAGE> 4

ALTAREX CORP.
ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
To be held on May 19, 1999

MANAGEMENT INFORMATION CIRCULAR

This Management Information Circular is furnished in connection with the
solicitation of proxies by the management of AltaRex Corp. (the "Corporation")
for use at the Annual and Special Meeting of the holders (the "Shareholders") of
common shares (the "Common Shares") of the Corporation to be held in the Angus
Shaw Room of the Sheraton Grand Hotel, 10235 - 101 Street, Edmonton, Alberta, at
2:30 p.m. (Edmonton time) on May 19, 1999 (the "Meeting"), for the purposes set
forth in the notice of meeting which accompanies this Circular. The information
contained herein is given as of April 13, 1999, except where otherwise
indicated. There is enclosed herewith a form of proxy for use at the Meeting.
Each Shareholder who is entitled to attend at meetings of Shareholders is
encouraged to participate in the Meeting and Shareholders are urged to vote on
matters to be considered in person or by proxy.

APPOINTMENT AND REVOCATION OF PROXIES

Those Shareholders desiring to be represented by proxy must deposit their
respective forms of proxy with Montreal Trust Company of Canada ("Montreal
Trust"), Attention: Corporate Trust Department, 6th Floor, 530 - 8th Avenue
S.W., Calgary, Alberta T2P 3S8 by no later than 5:00 p.m. (Calgary time) on the
last business day preceding the date of the Meeting, or any adjournment thereof.
A proxy must be executed by the Shareholder or by his attorney authorized in
writing, or if the Shareholder is a corporation, under its seal or by an officer
or attorney thereof duly authorized. A proxy is valid only at the Meeting in
respect of which it is given or any adjournment of the Meeting.

The persons named in the enclosed form of proxy are directors and/or
officers of the Corporation and will represent management of the Corporation at
the Meeting. Each Shareholder submitting a proxy has the right to appoint a
person to represent him, her or it at the Meeting other than the persons
designated in the form of proxy furnished by the Corporation. The Shareholder
may exercise this right by striking out the names of the persons so designated
and inserting the name of the desired representative in the blank space
provided, and depositing the proxy with Montreal Trust at the place and within
the time specified above for the deposit of proxies.

An instrument of proxy may be revoked by the person giving it at any time
prior to the exercise thereof. If a person who has given a proxy attends
personally at the Meeting at which such proxy is to be voted, such person may
revoke the proxy and vote in person. In addition to revocation in any other
manner permitted by law, a proxy may be revoked by instrument in writing
executed by the Shareholder or his or her attorney duly authorized in writing,
or if the Shareholder is a corporation, under its seal or by an officer or
attorney thereof duly authorized, and deposited either with Montreal Trust at
any time up to and including 5:00 p.m. (Calgary time) on the last business day
preceding the Meeting or any adjournment thereof, at which the proxy is to be
used, or with the Chairman of the Meeting, on the day of the Meeting or any
adjourned meeting prior to the commencement thereof. Such revocation shall be
deemed effective upon such deposit in either manner.

<PAGE> 5

- 2 -

EXERCISE OF DISCRETION

The Common Shares represented by properly executed proxies designated in
the printed portion of the accompanying form of proxy will be voted or withheld
from voting on any ballot that may be called for, and, where the Shareholder
specifies a choice with respect to any matter to be acted upon, such Common
Shares will be voted in accordance with any specification so made. The persons
appointed under the enclosed form of proxy are conferred with discretionary
authority with respect to amendments or variations of those matters specified in
the proxy and with respect to any other matters which may properly be brought
before the Meeting or any adjournment thereof in accordance with their best
judgement. As at the date of this Circular, the management of the Corporation
know of no such amendment, variation, or other matter.

<PAGE> 6

- 3 -

Unless otherwise specified, proxies in the accompanying form will be voted
in favour of: (a) the election of the nominees, hereinafter set forth, as
directors of the Corporation; (b) the appointment of Ernst & Young LLP,
Chartered Accountants, as auditors of the Corporation; (c) the resolution
approving an amendment to the stock option plan of the Corporation (the "Plan")
increasing the number of Common Shares reserved for issuance thereunder, the
full text of which is set out in Schedule "A" hereto; (d) the resolution
approving an amendment to the Plan increasing the maximum exercise period of
options granted thereunder, the full text of which is set out in Schedule "B"
hereto; and (e) the resolution approving the amendment to the expiry date of
certain options granted under the Plan, the full text of which is set out in
Schedule "C" hereto.

QUORUM AND VOTING

Shareholders present in person or represented by proxy representing not
less than 10% of the outstanding Common Shares are necessary to provide a quorum
at the Meeting. Voting at the Meeting will be by a show of hands, each
Shareholder having one vote, unless a poll is requested or required, in which
each Shareholder is entitled to one vote for each share held. Unless otherwise
indicated herein, in order to approve a resolution proposed at the Meeting a
majority of greater than 50% of the votes cast will be required.

PERSONS MAKING THE SOLICITATION

This solicitation is made on behalf of the management of the Corporation.
The cost incurred in the preparation and mailing of this Circular and the
accompanying proxy will be borne by the Corporation. In addition to the use of
mail, proxies may be solicited by personal delivery, telephone or any form of
electronic communication or by directors, officers and employees of the
Corporation who will not be directly compensated therefor.

RECORD DATE

The Board of Directors has fixed the close of business on April 12, 1999 as
the record date (the "Record Date") for the purpose of determining Shareholders
entitled to receive notice of the Meeting. The failure of any Shareholder to
receive notice of the Meeting does not deprive such Shareholder of the right to
vote at the Meeting. If a person has acquired Common Shares after the Record
Date, that person is entitled to vote those Common Shares at the Meeting upon
establishing ownership of the Common Shares and demanding the inclusion of his,
her or its name on the list of holders of Common Shares maintained by the
Corporation not later than ten days before the date of the Meeting.

PRINCIPAL HOLDERS OF VOTING SECURITIES

As at April 13, 1999, the Corporation had outstanding 16,512,613 Common
Shares. The following table sets forth the particulars, as at the date of this
Circular, 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):

<PAGE> 7

- 4 -

Percentage of Common
Name Number of Common Shares Shares
- ---- ----------------------- ------
DR. ANTOINE A. NOUJAIM 3,924,700 Common Shares (1) 23.8% (1)

(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 the directors and officers of
the Corporation, 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 the Corporation as a group own directly or indirectly or exercise
control or direction over a total of 508,159 Common Shares representing
approximately 3.1% of the issued and outstanding Common Shares.

PARTICULARS OF MATTERS TO BE ACTED UPON

Election Of Directors

At the Meeting, it is proposed that six directors be elected and hold
office until the next annual meeting of Shareholders or until their successors
are elected or appointed. There are currently seven directors of the
Corporation. In accordance with the Business Corporations Act (Alberta) and
pursuant to the by-laws of the Corporation, the current directors of the
Corporation cease to hold office at the close of the Meeting.

The following table sets forth, in respect of each nominee, all positions
currently held with the Corporation, principal occupation or employment within
the preceding five years, and the approximate number of Common Shares of the
Corporation beneficially owned, directly or indirectly, or over which voting
control is exercised as of April 13, 1999. The information contained below is
based upon information furnished by the respective nominee and by the
Corporation, other than the information provided below with respect to the
Common Shares which was provided to the Corporation by the respective nominee.
The Corporation has not received notice of, and management is not aware of, any
proposed nominees in addition to those named.

Each of the nominees is currently a director of the Corporation. Mr.
Georges Hibon, currently a director of the Corporation, has decided not to stand
for election as a director for the ensuing year. Management extends its
appreciation to Mr. Hibon for his contribution to the Corporation.

<PAGE> 8

- 5 -

Number of Common
Office or Position in the Corporation, if any, Shares Owned
Name, Municipality of Residence and Principal Occupation within the Last Beneficially or Subject
and Director Since Five Years to Control or Direction

Dr. Antoine A. Noujaim Chairman of the Board of Directors and 3,924,700(1)
Edmonton, Alberta Chief Scientific Officer. President and
December 1, 1995 Chief Executive Officer of the Corporation
from November 1995 to February 22, 1998;
President of Biomira Research Inc., from
1994 to 1995; Senior Vice President of the
Immunoconjugate Division of Biomira Inc.
from 1989 to 1994; Director of Biomira Inc.
from 1985 to 1995.

Richard E. Bagley President, Chief Executive Officer and 50,000
Weston, Massachusetts Director of the Corporation since February
February 23, 1998 23, 1998. Chairman and Chief Executive
Officer of ProScript Inc. from September,
1995 to February, 1998. President and
Chief Executive Officer of ImmuLogic
Pharmaceutical Corporation from 1990 to 1994.

William R. McMahan Director of the Corporation. President of 197,159(2)
Calgary, Alberta Oxbow Capital Corporation and Oxbox
July 15, 1996 Investments Inc. from October, 1993 to
present. Prior thereto, he was Director of
International Marketing, Oxbow Resources
Limited from January, 1992 to October,
1993. Mr. McMahan is also the President,
Chief Executive Officer and Director of
Oxbow Equities Corp., a mutual fund
company listed on The Toronto Stock Exchange.

Jean-Claude Gonneau Director of the Corporation. Managing 11,000
Paris, France Director, Donaldson, Lufkin & Jenrette (an
January 29, 1997 investment dealer).

The Honourable Monique Begin Director of the Corporation. Professor Nil
Ottawa, Ontario Emeritus, University of Ottawa. Dean,
May 14, 1998 Faculty of Health Sciences, University of
Ottawa from 1990 to 1997. Minister
of National Health and Welfare for the
Government of Canada from September 1977 to
September 1984.
</TABLE>

<PAGE> 9

- 6 -

<TABLE>
<S> <C> <C>
Number of Common
Office or Position in the Corporation, if any, Shares Owned
Name, Municipality of Residence and Principal Occupation within the Last Beneficially or Subject
and Director Since Five Years to Control or Direction

Dr. Jim A. Wright Director of the Corporation. Founder Nil
Toronto, Ontario Chairman, President and Chief Scientific
May 14, 1998 Officer of GeneSense Technologies Inc.
since 1987. Terry Fox Senior Research
Scientist of the National Cancer Institute of
Canada since 1990. Associate Director,
Manitoba Institute of Cell Biology since
1989. Professor of Microbiology,
Biochemistry and Moleculer Biology at the
University of Manitoba.
</TABLE>

Note:
(1) Also see "Principal Shareholders".
(2) These shares are directly held by 668355 Alberta Ltd. Mr. McMahan 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.

The Corporation is required, pursuant to the Business Corporations Act
(Alberta), to appoint 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.

Appointment Of Auditors

It is proposed that Ernst & Young LLP, Chartered Accountants be appointed
as the auditors of the Corporation to hold office until the next annual meeting
of Shareholders at a remuneration to be fixed by the Board of Directors of the
Corporation. Ernst & Young was initially appointed as auditor of the Corporation
on July 15, 1996 and has served continuously as auditors since that date.

Amendment of Share Option Plan

The Corporation has approved, subject to approval by the Shareholders and
any necessary regulatory approval, an amendment to the Corporation's share
option plan (the "Plan"). The amendment to the Plan would, upon approval by
Shareholders, (i) increase the maximum number of Common Shares reserved for
issuance under the Plan from 2,480,000 to 4,180,000 Common Shares, and (ii)
increase the maximum exercise period of options granted under the Plan from five
years from the date of grant to ten years from the date of grant. As at April
13, 1999, an aggregate of 2,255,499 options to acquire Common Shares were
currently outstanding under the Plan. See "Stock Options".

In accordance with the rules of The Toronto Stock Exchange (the "TSE"), the
proposed amendment to the Plan must be approved by the affirmative vote of a
majority of the votes cast in person or by proxy at the Meeting, other than by
insiders of the Corporation to whom shares may be issued pursuant to the Plan or
by associates of such persons. To the best of the Corporation's knowledge there
were, as at April 13, 1999, 4,933,859 Common Shares held by insiders of the
Corporation and their associates which will not be counted for purposes of
determining such approval.

<PAGE> 10

- 7 -

The Board of Directors has determined that the proposed amendments to the
Plan are in the best interests of the Corporation and the Shareholders. The
Board of Directors recommends that Shareholders vote in favour of the
resolutions in this regard, the full text of which are set out in Schedule "A"
and Schedule "B" to this Circular, respectively. Unless specified in the
enclosed form of proxy that Common Shares represented by the form of proxy shall
be voted against these resolutions, the persons designated in the enclosed form
of proxy intend to vote "For" each of these resolutions.

Amendment to the Term of Certain Outstanding Options

The Corporation has approved, subject to approval by Shareholders and any
necessary regulatory approval, an amendment to the terms of certain outstanding
options granted under the Plan extending the exercise period of such options
from five years from the original date of grant to ten years from the original
date of grant. The outstanding options which will be so amended are listed in
Exhibit "1" to Schedule "C" to this Circular.

In accordance with the rules of the TSE, the proposed amendment to such
options must be approved by the affirmative vote of a majority of the votes cast
in person or by proxy at the Meeting, other than by the holders of such options
or by their associates. To the best of the Corporation's knowledge there were as
of April 13, 1999 4,933,859 Common Shares held by persons to whom such options
were granted and their associates, which will not be counted for purposes of
determining such approval.

The Board of Directors has determined that the proposed amendment to such
options, as listed in Exhibit "1" to Schedule "C" to the Circular, is in the
best interests of the Corporation and the Shareholders. The Board of Directors
recommends that Shareholders vote in favour of the resolution in this regard,
the full text of which is set out in Schedule "C" to this Circular. Unless
specified in the enclosed form of proxy that Common Shares represented by the
form of proxy shall be voted against this resolution, the persons designated in
the enclosed form of proxy intend to vote "For" the resolution.

<PAGE> 11

- 8 -

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.

- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------

Annual Compensation Long-Term
------------------- Compensa-
tion Awards
-----------
Common
Other Annual Shares All Other
Compen- Under Compen-
Name and Salary Bonus sation Options sation
Principal Position Year (5) ($) ($) ($) Granted (#) ($)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <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
Former Vice-President, 1997 105,000 5,771 Nil 10,000 3,997
Planning and Chief 1996 36,559 Nil Nil 25,000 465
Scientific Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Dr. Thomas Sykes 1998 167,135 Nil Nil Nil 51,589
Vice-President, Preclinical 1997 105,000 Nil Nil 10,000 4.269
and Support Operations 1996 36,559 Nil Nil 25,000 465
- ------------------------------------------------------------------------------------------------------------------------------------
Blaine Schamber(3) 1998 116,250 Nil Nil 40,000 11,021
Controller; previously Vice- 1997 105,000 Nil Nil 10,000 4,206
President, Finance and 1996 35,941 Nil Nil 25,000 464
Corporate Development
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Notes:
(1) Dr. Noujaim became an officer of the Corporation on July 17, 1996. Dr.
Noujaim ceased to be the President and Chief Executive Officer of the
Corporation on February 23, 1998 and Mr. Richard E. Bagley was appointed
President and Chief Executive Officer of the Corporation on that date.
(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.

<PAGE> 12

- 9 -

(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 Granted to Named Executive Officers

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.

- --------------------------------------------------------------------------------
OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

MARKET VALUE OF
COMMON SHARES
COMMON % OF TOTAL UNDERLYING
SHARES UNDER OPTIONS EXERCISE OR BASE OPTIONS ON THE
OPTIONS GRANTED TO PRICE DATE OF GRANT
GRANTED EMPLOYEES IN ($/COMMON ($/COMMON EXPIRATION
NAME # FINANCIAL YEAR SHARE) SHARE) DATE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard E. Bagley 825,000 57% $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.

AGGREGATED OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED
FINANCIAL YEAR END AND FINANCIAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>

VALUE OF UNEXERCISED
COMMON SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON AGGREGATE AT DECEMBER 31, AT DECEMBER 31, 1998
EXERCISE VALUE REALIZED 1998 EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE(#) UNEXERCISABLE($)(1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard E. Bagley Nil Nil Nil/825,000 NA/NA
- ------------------------------------------------------------------------------------------------------------------------
Dr. Antoine A. Noujaim Nil Nil 250,000/125,000 NA/NA
- ------------------------------------------------------------------------------------------------------------------------
Dr. Thomas R. Sykes Nil Nil 26,666/8,334 NA/NA
- ------------------------------------------------------------------------------------------------------------------------
Blaine J. Schamber Nil Nil 26,666/48,334 NA/NA
- ------------------------------------------------------------------------------------------------------------------------
Dr. R. Madiyalakan Nil Nil Nil/26,666 NA/NA
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note:
(1) None of the unexercised options were in-the-money as at December 31, 1998.

<PAGE> 13

- 10 -

Employment Agreements

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

The Corporation entered into a letter agreement with Dr. Thomas 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. 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 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.

Composition of Compensation Committee

The composition of the Compensation Committee of the Board of Directors of
the Corporation (the "Compensation Committee") consists of William R. McMahan,
Dr. Anthony A. Noujaim and Richard E. Bagley. Mr. McMahan is the Chairman of
the Compensation Committee.

Each of the members of the Compensation Committee, as a director of the
Corporation, has received options to purchase Common Shares pursuant to the
Corporation's stock option plan. See "Stock Options". As a director of the
Corporation, Mr. McMahan receives an annual fee. See "Executive Compensation -
Compensation of Directors". As officers of the Corporation, Messrs. Noujaim and
Bagley receive certain compensation. See "Executive Compensation - Compensation
of Executive Officers".

Report on Executive Compensation

It is the task of the Compensation Committee to periodically review the
compensation structure of the Corporation with respect to its executive officers
to ensure that the Corporation continues to attract and retain quality and
experienced individuals to its management team and to motivate these individuals
to perform to the best of their ability and in the best interests of the
Corporation. The Compensation Committee makes recommendations with respect to
the compensation of the Corporation's executive officers to the Board of
Directors, which gives final approval with respect to any executive compensation
matters and issues.

The primary objectives of the Corporation's executive compensation program
are to enable the Corporation to attract, motivate and retain outstanding
individuals and to align their success with that of the Corporation's
shareholders through the achievement of strategic corporate objectives and
creation of shareholder value. The level of compensation paid to an individual
is based on the individual's overall experience, responsibility and performance.
Factors also to be considered are the compensation levels of similarly situated
positions in the biopharmaceutical industry and other labour markets in which
the Corporation competes for employees. The Compensation Committee compares
remuneration for executive officers of the Corporation to the remuneration for
similar executives in the relevant labour markets. In

<PAGE> 14

- 11 -

the case of newly hired employees, the individual's performance and compensation
level in his or her prior positions will also be a determining factor.

The key components for the compensation of the executive officers of the
Corporation are base salaries, bonuses and stock options. It is the policy of
the Corporation that the base salaries paid to its executive officers, in
addition to the criteria set out above, reflect the individual responsibility
and experience of the executive officer and the contribution that is expected
from the executive officer. Base salaries and bonuses are reviewed by the
Compensation Committee on an annual basis to ensure that these criteria are
satisfied. Stock options under the Corporation's stock option plan are granted
by the Board of Directors to executive officers from time to time as a long-term
performance incentive.

This report submitted on behalf of the Compensation Committee: Messrs.
McMahan, Noujaim and Bagley.

Compensation of Directors

Effective in 1998, each director of the Corporation, 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 members of the Board of Directors during the period from January 1, 1998
to December 31, 1998.

Directors and Officers Liability Insurance

The Corporation provides liability insurance for directors and officers of
the Corporation. 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 ended December 31, 1998 was approximately
$32,000 all of which was borne by the Corporation. The policy limit is
$5,000,000 per year with a corporate deductible of $25,000 per loss. The
individual directors and officers of the Corporation are insured against losses
arising from claims against them for certain of their acts, errors or omissions
in such capacity. The Corporation is insured against losses arising out of any
liability to indemnify a director or officer.

Performance Graph

The following performance graph compares the yearly increase in the
Corporation's cumulative total shareholder return on the Common Shares since
August 2, 1996 (the first trading day on the TSE for the Common Shares following
July 17, 1996), with the cumulative total shareholder return on the TSE 300
Index and the TSE Biotech/Pharmaceutical Index, assuming the reinvestment of
dividends, where applicable, for a comparable period.

[Graph which compares yearly increase in the Corporation's
cumulative total shareholder return on its Common
Shares Since August 2, 1996]

<PAGE> 15

- 12 -

- -----------------------------------------------------------------------------------------------------------------------
INDEX AUGUST 2, DECEMBER 31, DECEMBER 31, 1997 DECEMBER 31, 1998
1996 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AltaRex $100 $107.1 $51.0 $7.8
- -----------------------------------------------------------------------------------------------------------------------
TSE 300 Index $100 $118.2 $133.6 $129.3
- -----------------------------------------------------------------------------------------------------------------------
TSE Biotech/ $100 $132.3 $125.6 $168.7
Pharmaceutical Index
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

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.

Table Of Indebtedness Of Directors,
Executive Officers And Senior Officers
<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------
LARGEST AMOUNT OUTSTANDING
NAME AND INVOLVEMENT DURING FISCAL YEAR ENDED AMOUNT OUTSTANDING AS
PRINCIPAL POSITION OF ALTAREX DECEMBER 31, 1998 OF THE DATE HEREOF
- -----------------------------------------------------------------------------------------------------------------------
<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

The Plan is designed to develop the interest of the directors, officers,
employees and other persons who provide ongoing services to the Corporation and
its subsidiaries in the growth and development of the Corporation by providing
such persons with the opportunity to acquire an increased proprietary interest
in the Corporation and to better enable the Corporation and its Subsidiaries to
attract and retain persons of desired experience and ability. An amendment to
the terms of the Plan has been approved by the Board of Directors and
Shareholders are being asked to approve such amendment at the Meeting. See
"Particulars of Matters to be Acted Upon - Amendment to Stock Option Plan".

<PAGE> 16

- 13 -

The maximum number of Common Shares which may be reserved for issuance to
any person under the Plan or any other previously established or proposed share
compensation arrangement of the Corporation in respect of all options granted to
any one person at any one time may not exceed 5% of the issued and outstanding
Common Shares. The maximum number of Common Shares reserved for issuance at any
time pursuant to the Plan is currently 2,480,000 but will be increased to
4,180,000, subject to the approval of Shareholders at the Meeting and applicable
regulatory approval. The vesting and expiry date of options granted under the
Plan are determined by the Board of Directors at the time the options are
granted provided that the expiry date shall not be later than 5 years from the
date of grant of such option. Subject to the approval of Shareholders at the
Meeting and applicable regulatory approval, the maximum expiry date of options
granted under the Plan will be increased to 10 years from the date of grant of
such option and the expiry date of certain outstanding options will be extended.
See "Particulars of Matters to be Acted Upon". The exercise price of options
granted under the Plan is fixed by the Board of Directors and shall either be
the closing price of the Common Shares on the TSE on the first date preceeding
the date of grant or alternatively the weighted average of the trading prices of
the Common Shares for the five days proceeding the date of grant.

As at April 13, 1999, 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 SHARES DATE OF GRANT EXERCISE PRICE EXPIRY DATE
UNDER OPTION PER SHARE
- -----------------------------------------------------------------------------------------------------------------
<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
(six in total) 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
(four in total) 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
(28 in total) 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
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE> 17

- 14 -

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Group Number of Shares Date of Grant Exercise Price Expiry Date
- -----------------------------------------------------------------------------------------------------------------------
CONSULTANTS
- -----------
<S> <C> <C> <C> <C>
Dr. Terry Allen 5,000 July 8, 1997 3.68 July 8, 2002
Dr. Richard Baum 10,000 July 8, 1997 3.68 July 8, 2002
Dr. Beatrice Leveugle 5,000 July 8, 1997 3.68 July 8, 2002
Dr. Gerry Miller 5,000 July 8, 1997 3.68 July 8, 2002
Dr. John Samuels 5,000 July 8, 1997 3.68 July 8, 2002
Dr. Constantine Bona 10,000 July 8, 1997 3.68 July 8, 2002
Dr. Jean-Francois Chatal 10,000 July 8, 1997 3.68 July 8, 2002
Dr. David Goodwin 10,000 July 8, 1997 3.68 July 8, 2002
Dr. James Lown 10,000 July 8, 1997 3.68 July 8, 2002
Dr. Dean Mann 10,000 July 8, 1997 3.68 July 8, 2002
Dr. Paul Muller 10,000 July 8, 1997 3.68 July 8, 2002
Dr. Aldo Serafini 10,000 July 8, 1997 3.68 July 8, 2002
Dr. David Wishart 5,000 November 7, 1997 3.30 November 7, 2002
Dr. R. Madiyalakan 26,666 September 30, 1998 0.72 October 30, 1999
Genome Securities Inc. 25,000 July 17, 1998 1.40 July 17, 2003

- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

INTERESTS OF INSIDERS IN MATERIAL TRANSACTIONS

Except as described elsewhere herein, none of the Corporation's insiders,
proposed nominees for election as directors of the Corporation or their
associates and affiliates, has any material interest in any transaction with the
Corporation since the commencement of the Corporation's last financial year.

BOARD APPROVAL

The contents and the sending of this Circular have been approved by the
Board of Directors of the Corporation.

By Order of the
Board Of Directors

/s/ Edward M. Fitzgerald
Senior Vice President, Chief Financial
Officer and Secretary

<PAGE> 18

- 15 -

CERTIFICATE

The foregoing contains no untrue statement of a material fact and does not
omit to state a material fact that is required to be stated or that is necessary
to make a statement not misleading in light of the circumstances in which it was
made.
<TABLE>
<S> <C>
/s/ Richard E. Bagley /s/ Edward M. Fitzgerald
President and Chief Executive Officer Senior Vice President, Chief Financial Officer
and Secretary
</TABLE>

Waltham, Massachusetts
April 13, 1999

<PAGE> 19

SCHEDULE "A"

Amendment to Stock Option Plan

BE IT RESOLVED THAT:

1. The stock option plan of the Corporation (the "Plan") be and is hereby
amended such that the maximum number of Common Shares which may be reserved
for issuance for all purposes at any time pursuant to the Plan shall be
increased from 2,480,000 to 4,180,000.

2. Any officer or director of the Corporation is hereby authorized, for and on
behalf of the Corporation, to execute and deliver such documents and
instruments and to take such other actions as such officer or director may
determine to be necessary or advisable to implement this resolution and the
matters authorized hereby, such determination to be conclusively evidenced
by the execution and delivery of such documents or instruments and the
taking of any such actions.

<PAGE> 20

SCHEDULE "B"

Amendment to Stock Option Plan

BE IT RESOLVED THAT:

1. The stock option plan of the Corporation (the "Plan") be and is hereby
amended such that the maximum date after which an option granted under the
Plan shall expire is extended from five years from the date of grant to ten
years from the date of grant.

<PAGE> 21

SCHEDULE "C"

Amendment to Certain Outstanding Option Grants

1. The terms of the outstanding options granted under the stock option plan of
the Corporation which are listed in Exhibit "1" to this resolution are
hereby amended in each case such that the current expiry date of such
option grant is extended to the new expiry date specified in such Exhibit
in respect thereof.

2. Any officer or director of the Corporation is hereby authorized for and on
behalf of the Corporation, to execute and deliver such documents and
instruments and to take such other actions as such officer or director may
determine to be necessary or advisable to implement this resolution and the
matters authorized hereby, such determination to be conclusively evidenced
by the execution and delivery of such documents and instruments and the
taking of actions.

<PAGE> 22

EXHIBIT "1" to SCHEDULE "C"
<TABLE>
<CAPTION>

NUMBER
OPTION GRANTEE OF OPTIONS CURRENT EXPIRY DATE NEW EXPIRY DATE
- -------------- ---------- ------------------- ---------------
<S> <C> <C> <C>
William R. McMahan 7,500 July 26, 2001 July 26, 2006
Jean-Claude Gonneau 10,000 July 8, 2002 July 8, 2007
William R. McMahan 2,500 July 8, 2002 July 8, 2007
Kate Agopsowicz 2,000 July 26, 2001 July 26, 2006
Donna Bortnick 1,250 July 26, 2001 July 26, 2006
Trudy Chimko 3,750 July 26, 2001 July 26, 2006
Sue Edwards 2,000 July 26, 2001 July 26, 2006
Xiaomei Geng 3,750 July 26, 2001 July 26, 2006
Walter Korz 5,000 July 26, 2001 July 26, 2006
Michelle Kuzma 3,750 July 26, 2001 July 26, 2006
Corlaine Legge 3,750 July 26, 2001 July 26, 2006
Celia Lo 2,000 July 26, 2001 July 26, 2006
Birgit Schultes 6,250 July 26, 2001 July 26, 2006
Connie Sykes 25,000 July 26, 2001 July 26, 2006
James Tasker 12,500 July 26, 2001 July 26, 2006
Thomas Woo 12,500 July 26, 2001 July 26, 2006
Thomas R. Sykes 25,000 July 26, 2001 July 26, 2006
Blaine Schamber 25,000 July 26, 2001 July 26, 2006
Antoine Noujaim 375,000 July 26, 2001 July 26, 2006
Blaine Schamber 10,000 February 11, 2002 February 11, 2007
Thomas R. Sykes 10,000 February 11, 2002 February 11, 2007
Robert Anthony Newman 13,333 February 4, 2002 February 4, 2007
Dr. Terry Allen 5,000 July 8, 2002 July 8, 2007
Dr. Richard Baum 10,000 July 8, 2002 July 8, 2007
Dr. Beatrice Leveugle 5,000 July 8, 2002 July 8, 2007
Dr. Gerry Miller 5,000 July 8, 2002 July 8, 2007
Dr. John Samuels 5,000 July 8, 2002 July 8, 2007
Dr. Constantin Bona 10,000 July 8, 2002 July 8, 2007
Dr. Jean-Francois Chatal 10,000 July 8, 2002 July 8, 2007
Dr. David Goodwin 10,000 July 8, 2002 July 8, 2007
Dr. James Lown 10,000 July 8, 2002 July 8, 2007
Dr. Dean Mann 10,000 July 8, 2002 July 8, 2007
Dr. Paul Muller 10,000 July 8, 2002 July 8, 2007
Dr. Aldo Serafini 10,000 July 8, 2002 July 8, 2007
Jim Pankovich 4,000 July 8, 2002 July 8, 2007
Dr. Weimin Qi 5,000 July 8, 2002 July 8, 2007
Dr. Ting Wang 5,000 July 8, 2002 July 8, 2007
Dr. David Wishart 5,000 November 7, 2002 November 7, 2007
Christian Hanson 3,000 November 7, 2002 November 7, 2007
George Hibon 30,000 January 22, 2003 January 22, 2008
Glenn Neumann 10,000 February 1, 2003 February 1, 2008
Richard E. Bagley 824,130 March 4, 2003 March 4, 2008
Richard E. Bagley 870 March 4, 2003 March 4, 2008
Monique Begin 30,000 May 21, 2003 May 21, 2008
Jean-Claude Gonneau 20,000 May 21, 2003 May 21, 2008
William R. McMahan 20,000 May 21, 2003 May 21, 2008
Jim Wright 30,000 May 21, 2003 May 21, 2008
Donna Bortnick 1,000 May 21, 2003 May 21, 2008
Trudy Chimko 5,000 May 21, 2003 May 21, 2008
</TABLE>

<PAGE> 23

- 2 -

NUMBER
OPTION GRANTEE OF OPTIONS CURRENT EXPIRY DATE NEW EXPIRY DATE
- -------------- ---------- ------------------- ---------------
<S> <C> <C> <C>
Wendy Garinther 1,500 May 21, 2003 May 21, 2008
Walter Korz 5,000 May 21, 2003 May 21, 2008
Marc Legault 4,000 May 21, 2003 May 21, 2008
Dan Liu 1,500 May 21, 2003 May 21, 2008
Robert Anthony Newman 12,000 May 21, 2003 May 21, 2008
Heather Schramm 2,000 May 21, 2003 May 21, 2008
Birgit Schultes 25,000 May 21, 2003 May 21, 2008
Louise Tan 5,000 May 21, 2003 May 21, 2008
Haiyan Xia 1,500 May 21, 2003 May 21, 2008
Denzhu Xu 1,500 May 21, 2003 May 21, 2008
Blaine Schamber 40,000 May 21, 2003 May 21, 2008
Genome Securities Inc. 25,000 July 17, 2003 July 17, 2008
Robert Anthony Newman 25,000 August 4, 2003 August 4, 2008
Birgit Schultes 25,000 August 4, 2003 August 4, 2008
Edward Fitzgerald 175,000 September 15, 2003 September 15, 2008
Joseph McPherson 50,000 November 30, 2003 November 30, 2008
Christopher Nicodemus 175,000 December 23, 2003 December 23, 2008
</TABLE>

<PAGE> 1
EXHIBIT 99.2

ALTAREX CORP.

PROXY

SOLICITED BY MANAGEMENT FOR THE ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON MAY 19, 1999

The undersigned holder of common shares ("Common Shares") in the capital of
AltaRex Corp. (the "Corporation") hereby appoints Richard E. Bagley, President
and Chief Executive Officer of the Corporation, or failing him, Edward M.
Fitzgerald, Senior Vice President, Chief Financial Officer and Secretary of the
Corporation, or instead of either of the foregoing,____________________________
as proxyholder, with full power of substitution, to attend, to act and to vote
for and on behalf of the undersigned at the Annual and Special Meeting of
Shareholders (the "Meeting") to be held on May 19, 1999 at 2:30 p.m. (Edmonton
time), and at any adjournment thereof, and the undersigned hereby revokes any
proxy previously given to attend, act and vote at the Meeting for the
undersigned at the Meeting for any adjournment thereof. The said proxyholder is
instructed to vote as specified below:

1. FOR [ ] or WITHHOLD FROM VOTING FOR [ ] the election as directors of the
Corporation each of the nominees, each of whom is described in more detail
in the Management Information Circular of the Corporation dated April 13,
1999 (the "Circular") prepared in connection with the Meeting.

2. FOR [ ] or WITHHOLD FROM VOTING FOR [ ] the appointment of Ernst & Young
LLP as the auditors of the Corporation for the ensuing year and to
authorize the board of directors to determine their remuneration.

3. FOR [ ] or AGAINST [ ] the resolution, with or without variation, approving
an amendment to the stock option plan of the Corporation (the "Plan")
increasing the maximum number of Common Shares reserved for issuance
thereunder from 2,480,000 to 4,180,000, the full text of which is set out
in Schedule "A" to the Circular.

4. FOR [ ] or AGAINST [ ] the resolution, with or without variation, approving
an amendment to the Plan increasing the maximum date after which an option
granted under the Plan shall expire from five years from the date of grant
to ten years from the date of the grant, the full text of which is set out
in Schedule "B" to the Circular.

5. FOR [ ] or AGAINST [ ] the resolution, with or without variation, approving
amendments to the terms of certain options granted under the Plan,
extending the expiry date of such options, the full text of which
resolution is set out in Schedule "C" to the Circular.

6. On any amendments or variations to matters identified in the notice of the
Meeting and on any other matters that may properly come before the Meeting,
in such manner as the said proxyholder may see fit.

The Common Shares represented by this proxy will be voted or withheld from
voting on any motion, by ballot or otherwise, in accordance with any indicated
instructions. IN THE ABSENCE OF ANY INSTRUCTIONS ABOVE, THIS PROXY WILL BE VOTED
AT THE MEETING FOR THE RESOLUTIONS REFERRED TO IN ITEMS 1, 2, 3, 4 AND 5 ABOVE.
IF ANY AMENDMENT OR VARIATION TO THE MATTERS IDENTIFIED IN THE NOTICE OF MEETING
WHICH ACCOMPANIES THIS PROXY IS PROPOSED AT THE MEETING OR AT ANY ADJOURNMENT
THEREOF, OR IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF, THIS PROXY CONFERS DISCRETIONARY AUTHORITY TO VOTE ON ANY
SUCH

<PAGE> 2

AMENDMENT OR VARIATION OR SUCH OTHER MATTERS ACCORDING TO THE BEST JUDGEMENT OF
THE APPOINTED PROXYHOLDER.

DATED this day of , 1999.*
---- --------------

----------------------------------------
Signature of Shareholder**

----------------------------------------
Signature of jointholder (if any)

----------------------------------------
Please Print Name(s)

* If this proxy is not dated, it shall be deemed to bear the date on which it
is mailed by management.

** This proxy must be signed by the shareholder or his or her attorney duly
authorized in writing or, if the shareholder is a body corporate, it must
be executed under its corporate seal or by an officer or attorney thereof
duly authorized. Persons signing as attorneys, executors, administrators,
trustees, etc., should so indicate and provide satisfactory evidence of
such authority.

NOTE: A SHAREHOLDER HAS THE RIGHT TO APPOINT A PROXYHOLDER OTHER THAN THE
PERSONS DESIGNATED IN THIS PROXY AS HIS OR HER NOMINEE TO ATTEND AND ACT FOR HIM
OR HER BEHALF AT THE MEETING. TO EXERCISE SUCH RIGHT, THE SHAREHOLDER SHOULD
INSERT THE NAME OF HIS NOMINEE IN THE BLANK SPACE PROVIDED FOR THAT PURPOSE
ABOVE OR COMPLETE ANOTHER PROXY.

Shareholders who are unable to attend the Meeting are requested to complete
this proxy and return it to the Corporation's transfer agent, Montreal Trust
Company of Canada, 6th Floor, 530 - 8th Avenue S.W., Calgary, Alberta, T2P 3S8,
Attention: Corporate Trust Department.

In order to be valid, proxies must be received by Montreal Trust Company of
Canada on or before 5:00 p.m. (Calgary time) on the last business day preceding
the date of the Meeting or any adjournment thereof or deposited with the
Chairman of the Meeting before the commencement of the Meeting.

<PAGE> 1

[GRAPHIC OMITTED]

[ALTAREX LOGO]

1998 Annual Report
In recognition of the many women and men suffering from cancer worldwide.

[GRAPHIC OMITTED]

<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.

- --------------------------------------------------------------------------------
ALTAREX'S MISSION IS TO BE AN INNOVATOR IN DEVELOPING PROPRIETARY ANTIBODY
IMMUNOTHERAPEUTICS TO PROLONG LIFE AND REDUCE THE SUFFERING ASSOCIATED WITH
LATE-STAGE CANCERS.
- --------------------------------------------------------------------------------

This annual report contains forward-looking statements. Refer to Management's
Discussion and Analysis for further information.

<PAGE> 3

- -----------------------
Significant Events
- -----------------------

- ----------
1998
- ----------

- --------------------------------------------------------------------------------
* Establishes executive offices in the U.S.

* Establishes five member Clinical Advisory Board comprised of North American
leaders in oncology research.

* Consolidates OvaRex[TM] MAb U.S. and Canadian phase IIb trials into one
280-patient North American trial.

* Achieves significant patient enrollment progress in OvaRex[TM] MAb North
American Phase IIb trial.

* Receives positive International Preliminary Examination Report from
European Patent Office for AIT[R] platform technology.

* Initiates Phase I clinical trial of second product based on AIT[TM]
platform technology - BrevaRex[TM] MAb.

* Initiates second potentially pivotal Phase IIb clinical trial of
OvaRex[TM] MAb for late-stage ovarian cancer.

* Initiates two open-label Phase II clinical trials of OvaRex[TM] MAb in
relapsed ovarian cancer patients.

* Contracts with Lonza Biologics for the production of commercial
OvaRex[TM] antibody.

* Receives FDA Fast Track Designation for OvaRex[TM] MAb for women with
late-stage ovarian cancer. 1998

The Company met its aggressive goals for 1998 and looks to continue its track
record for delivering on its promises through 1999 and beyond.

- ----------
1997
- ----------

* Initiates first phase IIb trial of OvaRex[TM] MAb for ovarian cancer
patients.

* Announces FDA Orphan Drug status for OvaRex[TM] MAb.

- ----------
1996
- ----------

* Completes Public Offering (TSE), raising C$27.7MM.

<PAGE> 4

MESSAGE TO SHAREHOLDERS

The Company set aggressive targets for 1998 and we are very pleased to report on
our activities and progress. As our lead product, OvaRex[TM] MAb, is in
late-stage clinical evaluation for ovarian cancer, we will also focus our
message on the needs of those women who now suffer, or will in the future
suffer, the effects of this devastating disease.

Known as the "Disease that Whispers", ovarian cancer will develop in an
estimated 1 in every 55 women. It is the fifth leading cause of new cancers in
women and more than half of the women diagnosed with the disease will die within
5 years. While an early diagnosis can be the key to survival, the mild nature of
the initial symptoms makes this difficult. In fact, only about one in five women
with the disease are diagnosed in the beginning stages. For those who are
diagnosed in the later stages, the prognos is is much worse. The estimated
five-year survival for these women is only 20-25 percent. The first-line
treatment, which includes surgery and chemotherapy, can often be more
devastating than the disease itself. For ALL women who suffer the effects of
late-stage ovarian cancer, the physical and emotional toll is unimaginable.

There is an undeniable and unmet medical need for effective methods to keep
women free of recurrent disease following their first-line therapy. It is
estimated that 85 percent of women deemed to be disease free following
first-line therapy will relapse. Yet while the certainty of relapse is high,
there is no approved therapy that would delay the recurrence or relapse of the
disease. It is for these patients that we hope to provide the greatest benefit.

The American Cancer Society estimates that each year in the U.S. about 25,500
new cases of ovarian cancer are diagnosed and 14,500 women will die from the
disease. In Canada this disease claims over 1,400 lives each year.

At the beginning of the year we made a strategic decision to streamline the
activities of AltaRex and to focus singularly on the development of
antibody-based immunotherapeutics for the treatment of cancer. This included a
principal commitment to the OvaRex[TM] MAb and BrevaRex[TM] MAb products. Also,
in recognition of the fact that the largest cancer therapeutics market in the
world lies south of the Canadian border, the Company relocated its corporate
executive operations to the U.S. while still maintaining its research
capabilities in Canada.

CLINICAL ADVISORY BOARD

The Company was able to assemble an exemplary, five-member Clinical Advisory
Board comprised of leading North American experts in the field of oncology. The
Board is chaired by Dr. Robert Ozols of the Fox Chase Cancer Center who is
recognized as a world leader in ovarian cancer research and treatment. Together
with the rest of the Board, Dr. Ozols will help ensure the appropriateness of
clinical programs and strategy for OvaRex[TM] MAb and our other products.

OVAREX[TM] MAB

With the guidance of the Clinical Advisory Board, AltaRex designed and
initiated a comprehensive clinical program for OvaRex[TM] MAb. Early in
the year, the Company consolidated its Canadian and U.S. Phase IIb trials
into one North American potentially pivotal Phase IIb trial. The Company
achieved important milestones by initiating one additional potentially
pivotal Phase IIb and two open-label Phase II trials of OvaRex[TM] MAb
with ovarian cancer patients experiencing slightly

<PAGE> 5

different stages of advanced disease. The Company also continues to successfully
enroll patients into its ongoing North American Phase IIb trial and, as of March
24, 1999, the Company had 48 centers that had enrolled 213 of the required 280
patients. These trials are generally designed to test the overall efficacy of
OvaRex[TM] MAb in women who have completed standard first-line therapy. The
open-label Phase II trials will provide the Company with important preliminary
data in 1999 and, together with the Phase IIb trials, will form the basis of the
OvaRex[TM] MAb U.S. registration strategy.

FAST TRACK DESIGNATION

At the end of 1998, the Company accomplished a major strategic milestone by
receiving FDA Fast Track Designation for the OvaRex[TM] MAb program for
treating women with late-stage ovarian cancer. Fast Track Designation is a
result of the FDA Modernization Act of 1997 (FDAMA) and is intended to
facilitate development and expedite review of drugs to treat serious and
life-threatening conditions which fill an unmet medical need. It allows the FDA
to approve a marketing application for a product that shows efficacy on either a
defined clinical endpoint or a reasonably predictive surrogate endpoint (for
OvaRex[TM] MAb, time to disease progression for survival). It also allows
the FDA to review the marketing submission on a rolling basis, thereby
shortening the review time. FDAMA also specifies the FDA's ability to approve
marketing applications based on one, well-controlled trial if sufficient
supporting data is available.

BREVAREX[TM] MAB

Another milestone achieved during the year was the initiation of a Phase I
clinical trial of our second product, BrevaRex[TM] MAb. This trial is a
safety and dose comparison study and will be studied with cancer patients who
are expressing

[PHOTOGRAPH OMITTED]

EDWARD M. FITZGERALD,

SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER

Mr. Fitzgerald joins the Company with over twenty years of experience in the
management of strategy, finance, operations and acquisitions. Ed most recently
held the position of Director, Consumer Lending, and Director, Mergers and
Acquisitions, for BankBoston Corporation. Ed previously was a Partner at Arthur
Andersen & Co., a major international accounting firm. He is a licensed CPA and
received his BS and MBA from Babson College. Ed is responsible for management of
the Company's finance, administration, investor relations, intellectual
property, human resources, and facilities functions.

[PHOTOGRAPH OMITTED]

CHRISTOPHER F. NICODEMUS M.D.,

Senior Vice President, Medical and Regulatory Affairs Dr. Nicodemus brings to
AltaRex thirteen years of clinical research and drug development experience.
Chris has held senior management positions at Pfizer, ImmuLogic, and, Diatide
Inc., and is an Associate Physician at the Brigham and Women's Hospital in
Boston. Chris received an undergraduate degree from Harvard College and his M.D.
from the State University New York. His specialty certification is in internal
medicine and clinical immunology. Chris is responsible for management of the
Company's preclinical and clinical development programs, support operations and
regulatory affairs.

<PAGE> 6

the MUC1 tumor associated antigen. The trial will generate important human
immunology data supporting the Company's AIT[R] technology
platform. It is anticipated that this trial will be completed during 1999. It
is expected that subsequent Phase II efficacy studies will be initiated in a
setting similar to the OvaRex[TM] MAb program where the possibility
exists to seek FDA Orphan Drug status and Fast Track Designation.

AIT[R] TECHNOLOGY

AltaRex received a positive International Preliminary Examination Report from
the European Patent Office with respect to the claims contained in a Patent
Cooperation Treaty (PCT) application filed by the Company covering AIT[R]
Technology. This report added further credence to the novelty of AltaRex's
technology platform. The Company will continue to aggressively strengthen and
protect its technology position.

SHARE OFFERING

Late in December 1998, AltaRex announced its intention to raise up to $17
million by way of both a $2 million rights offering and a $15 million private
placement. Subsequently, we were disappointed to report that Biomira instituted
litigation with a claim that the above referenced patent was for technology
developed at Biomira. As a result, the Company cancelled its pending rights
offering. AltaRex announced its filing of a lawsuit against Biomira concerning
breaches by Biomira with regard to our License and Asset Purchase Agreements and
seeking an assignment to the Company of all rights under these agreements. The
Company has also strongly affirmed its inventorship and ownership of the patent
claimed by Biomira.

Finally, we are pleased to report the filing of a Preliminary Prospectus with
Canadian regulatory authorities related to an offering of up to $17 million of
Common Shares. The closing of this offering is expected to occur in late April
or early May of 1999.

MANAGEMENT TEAM

AltaRex also added significant strength to its senior management team. The
Company recruited Edward M. Fitzgerald as Senior Vice President and Chief
Financial Officer and Dr. Christopher F. Nicodemus to the position of Senior
Vice President, Medical and Regulatory Affairs. Both individuals add
significantly to the talents of AltaRex's senior management team (see preceding
page).

The Company continues to make substantial progress with its partnering
initiatives. There is genuine interest in our technology that is being expressed
not only by large and small pharmaceutical companies but also by some large,
well-established biopharmaceutical companies.

We are proud of AltaRex's progress and milestone achievements during 1998 and we
will continue our aggressive pace throughout 1999. These are exciting times for
our employees and shareholders and we would like to thank both groups for their
loyal support. Our Company's vision is to be among the few companies able to
offer a new era of hope for the millions who suffer from the effects of cancer
as we continue to build long-term shareholder value.

/s/ Dr. Antoine A. Noujaim /s/ Richard E. Bagley
Dr. Antoine A. Noujaim Richard E. Bagley
Chairman of the Board President and C.E.O.

<PAGE> 7

INNOVATION

AIT[R] TECHNOLOGY
- --------------------------------------------------------------------------------
AltaRex's cancer therapeutics are based on its proprietary platform technology,
Anti-idiotype Induction Therapy (AIT[R]), which has the potential
to address major unmet clinical needs in the treatment of cancer. AltaRex
believes that its AIT[R] Technology will enhance the ability of
the patient's own immune system to specifically attack cancer cells, achieving
therapeutic effect while maintaining the patient's quality of life.

AIT[R] Technology impacts late-stage cancer via multiple mechanisms. The
process begins with the identification of a relevant tumor associated antigen
(TAA), a substance expressed by cancer cells. To date, specific TAAs have been
identified for a variety of cancers, including ovarian, breast, pancreatic,
colorectal, stomach, lung and prostate cancers. The TAA is then used to develop
a specific murine antibody. The Company modifies the antibody using a
proprietary photoactivation procedure to increase the degree to which the
antibody is capable of eliciting the desired immune response in the patient.
Upon administration, this modified antibody triggers a cascade of events,
inducing a tumor-specific humoral and cellular immune response capable of
killing cancer cells. The Company's AIT[R] Technology can be
broadly applied to the development of products which may effectively impact
seven of the ten most lethal forms of cancer in North America.

OVAREX[TM] MAB
- --------------------------------------------------------------------------------
AltaRex is developing OvaRex[TM] MAb for the treatment of ovarian cancer,
referred to as the "Disease that Whispers" because it is rarely discovered early
enough to cure. Ovarian cancer remains the fifth most common cause of cancer
deaths in women, with the number of new cases being diagnosed rising rapidly.
Currently, there are an estimated 63,000 new cases of ovarian cancer diagnosed
annually worldwide, including over 27,000 in the U.S. and Canada. From 1985 to
1995 new cases of ovarian cancer rose 30%. It is estimated that in the U.S. and
Canada nearly 16,000 women die every year from ovarian cancer.

There is a critical need for new, more effective methods to treat this disease.
First-line treatment, consisting of surgery followed by chemotherapy, has a
debilitating effect on the patient both physically and emotionally. While this
regimen results initially in "remission", most patients will experience a
relapse of the disease within eighteen months.

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

OVARIAN CANCER -
THE DISEASE THAT WHISPERS

Known as the "Disease that Whispers", ovarian cancer is characterized by mild
symptoms in the early stages of disease that, for the most part, will go
undetected. The disease is categorized into stages depending on the extent of
metastasis, or spreading. Only an estimated 1 in 5 women will be diagnosed with
early stage ovarian cancer and over 90% of these women will survive beyond five
years. However, the vast majority of women will be diagnosed with late stage
disease where five-year survival will fall to 24% (Souhami & Tobias, 1995).

Standard treatment for ovarian cancer begins with the removal of the ovary and
all other visible disease within the abdomen. After surgery, most patients will
require chemotherapy in an attempt to eradicate any remaining disease. If large
amounts of cancer remain following surgery, survival will be short when compared
to the apparent remission that is achieved after a complete surgical resection.

After initial treatment, the majority of women will not exhibit any sign of
disease, often giving the false impression that they have been cured. However,
it is estimated that over 85% of these women will relapse and die within 5
years. The interval following this initial treatment is often referred to as
'watchful waiting'. Currently there is no approved therapy during 'watchful
waiting' that would offer these women the hope of extended survival. AltaRex
believes that OvaRex[TM] MAb has the potential to address this need.

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

<PAGE> 8

OVAREX[TM] MAB IN THE CLINIC

With the aid of its Clinical Advisory Board, AltaRex has developed a
comprehensive clinical program to test the utility of OvaR[TM] MAb in late-stage
ovarian cancer patients.

[GRAPHIC DEMONSTRATING PROGRESS OF OVAREX[TM] CLINICAL PROGRAMS]

There is a real need for products that can prolong this period of "remission",
thereby delaying the need for additional courses of toxic chemotherapy. AltaRex
believes that OvaRex[TM] MAb may offer hope to these women whose treatment
options are so limited while at the same time allowing for a good quality of
life.

AltaRex is currently conducting two potentially pivotal Phase IIb and two open
Phase II clinical trials of OvaRex[TM] MAb in women with late-stage ovarian
cancer. These trials have enrolled over 200 patients at 64 trial sites across
North America. In the first Phase IIb study, OvaRex[TM] MAb is given following
first-line therapy to patients who have had a complete clinical response to the
treatment. The study is a placebo-controlled, double-blind, randomized study
designed to measure the time to disease progression. This multi-center study
will enroll 280 patients. The second Phase IIb study, being conducted in the
United States, is enrolling women with a more advanced stage of ovarian cancer.
These patients have completed first-line therapy, but have developed an elevated
serum CA 125, which is an early indication of impending disease progression.
This second Phase IIb study is also placebo-controlled, double-blind and
randomized, and will also test safety and the ability of OvaRex[TM] MAb to delay
disease progression. AltaRex expects to enroll 102 patients in the study. These
two Phase IIb trials are expected to be completed in the first half of 2001.

AltaRex also has two ongoing open-label Phase II studies for OvaRex[TM] MAb in
patients who have recurrent ovarian cancer. These studies are primarily designed
to determine the extent to which OvaRex[TM] MAb induces immunological responses
and to generate safety data from relapsed ovarian cancer patients. AltaRex will
have preliminary immunological and safety data from these trials during 1999.

The data from all four ongoing studies, along with retrospective data and data
from prospective comparability trials, will serve as the basis of the Company's
submission to the FDA for approval to

<PAGE> 9

market OvaRex[TM] MAb in the U.S. AltaRex has already received Fast Track
Designation from the FDA for OvaRex[TM] MAb for ovarian cancer, which will allow
for an accelerated review process. AltaRex intends to license OvaRex[TM] MAb to
a pharmaceutical or well-established biotechnology partner for
commercialization.

BREVAREX[TM] MAB
- --------------------------------

AltaRex is developing a second AIT[R]- based antibody for the treatment of MUC1
expressing cancers including multiple myeloma, lung and prostate cancer.
Multiple myeloma is a rarely curable haematological malignancy that is related
to leukemias and lymphomas. It is estimated that approximately 14,000 new cases
were diagnosed in the U.S. in 1998 with a total of about 11,300 deaths. 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
the disease.

[PHOTGRAPH OMITTED]

The combination of MUC1 antigen target and the nature of multiple myeloma (i.e.
a discrete population for whom there is currently no curative alternative) makes
the disease ideally suited for AltaRex's development strategy. The Company 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 endpoint for survival.

AltaRex is conducting a U.S. Phase I safety and dose ranging study of
BrevaRex[TM] MAb in patients with metastatic cancers expressing the MUC1
antigen. The trial will enroll up to 15 patients in a single center and is
expected to be completed in 1999.

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 could include
endometrial, breast and non-small cell lung cancers and, with respect to
BrevaRex[TM] MAb, could include breast, prostate and non-small cell lung
cancers. The Company believes that a strategic partner may wish to pursue
these other potentially more lucrative, but difficult to study, disease
targets. The Company has commenced further exploratory research on two
additional antibodies, ProstaRex(TM) MAb and GivaRex(TM) MAb. These antibodies
target the tumor associated antigens PSA, expressed in prostate cancer patients,
and CA 19.9, expressed in pancreatic, stomach and colorectal cancer patients.

THE AIT[R] PRODUCT PIPELINE

Currently AltaRex has four AIT[R] - based products in various
stages of development. The first and most advanced of these product
candidates is OvaRex[TM] MAb for the treatment of ovarian cancer.

[GRAPH DEMONSTRATING STAGES OF DEVELOPMENT OF ALTAREX PRODUCTS]

<PAGE> 10

INTRODUCING THE CLINICAL ADVISORY BOARD

Early in the year, AltaRex formed a Clinical Advisory Board (CAB) comprised of
leading North American experts in the field of oncology. Dr. Robert Ozols of the
Fox Chase Cancer Center, who is recognized as a world leader in ovarian cancer
research, chairs the Board. AltaRex actively engages its Clinical Advisory Board
when developing its overall clinical strategy and specific trial designs. The
Board meets regularly to review the appropriateness of the Company's trials and
to plan for the future with the goal of helping to ensure an optimal trial
strategy.

ROBERT OZOLS, M.D. AND PH.D. is Senior Vice President for Medical Science at Fox
Chase Cancer Center in Philadelphia. Dr. Ozols, who serves as Chairman of the
AltaRex Clinical Advisory Board, is also Medical Director at the Hospital of the
Fox Chase Cancer Center, Professor of Medicine at Temple University and is
currently serving on the Oncologic Drugs Advisory Committee of the U.S. FDA. 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 an Associate Professor at the University of Virginia,
Department of Medicine, Division of Hematology-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. He received his
medical degree at Harvard Medical School and is the recipient of several awards
including the FDA Special Recognition Award.

JAMES HOLLAND, M.D. is Distinguished Professor of Neoplastic Diseases,
Department of Medicine, Mount Sinai School of Medicine in 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.

RICHARD MARGOLESE, M.D. is Professor of the Department of Oncology, and Herbert
Black Chair in Surgical Oncology at 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 civilian honor 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.

<PAGE> 11

GAINING GROUND

AltaRex has dramatically expanded its clinical trial program throughout North
America during the year. This expansion is part of the Company's overall
strategy to complete development programs in an expedited manner. Clinical trial
sites, which include many Comprehensive Cancer Care Centers, are located in the
following cities:

* Albany, NY
* Albuquerque, NM
* Baltimore, MD
* Berkeley, CA
* Boston, MA
* Calgary, AB
* Charlottesville, VA
* Chicago, IL

* Columbia, MO
* Dallas, TX
* Denver, CO
* Detroit, MI [GRAPHIC OMITTED]
* Edmonton, AB
* Fort Myers, FL
* Fullerton, CA
* Halifax, NS
* Hamilton, ON
* Iowa City, IA
* Irvine, CA

* Jacksonville, FL
* Knoxville, TN
* London, ON
* Los Angeles, CA
* Madison, WI
* Manhasset, NY
* Miami, FL

* Miami Beach, FL
* Minneapolis, MN
* Mississauga, ON
* Montreal, PQ
* New Orleans, LA
* Oklahoma City, OK
* Orlando, FL
* Ottawa, ON

* Palo Alto, CA
* Philadelphia, PA
* Pittsburgh, PA
* Pomona, CA
* Quebec City, PQ
* San Antonio, TX
* San Diego, CA
* Seattle, WA
* Sherbrooke, PQ
* Spartanburg, SC
* Saint John, NB

* St. Louis, MO
* St. John's, NF
* Sudbury, ON
* Surrey, BC
* Syracuse, NY
* Toronto, ON
* Vancouver, BC
* Winnipeg, MB

AltaRex continues to focus aggressively on patient enrollment strategies to
further develop its antibody immunotherapeutics in an effort to ultimately
prolong life and reduce the suffering associated with late-stage cancers.

Information about patient entry criteria for the Company's ongoing clinical
trials can be found on its web site at WWW.ALTAREX.COM or on the CenterWatch web
site at WWW.CENTERWATCH.COM. Additional information about ovarian cancer can be
found on the Corrine Boyer Fund web site at WWW.CORRINEBOYERFUND.ORG and at the
National Ovarian Cancer Coalition web site at WWW.OVARIAN.ORG.

<PAGE> 12

MANAGEMENT'S DISCUSSION AND ANALYSIS

INTRODUCTION

The following discussion and analysis explains trends in the Company's financial
condition and results of operations for the years ended 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 and throughout this
Annual Report. 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
herein. 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.

OVERVIEW

The Company's business is the research, development and commercialization of
unique antibody-based immunotherapeutics for the treatment of late-stage
cancers. Substantially all of the Company'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 Company's products have been
approved to date. Because the Company is in the development stage with its
products, the Company 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 Company 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 Company (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 Company.
These Common Shares gave AltaRex Inc.'s shareholders a controlling interest in
the Company and effectively constituted a reverse take-over of the Company by
the shareholders of AltaRex Inc. The Company, 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 Company amalgamated with AltaRex Inc. and continued
under the name of AltaRex Corp.

RESULTS OF OPERATIONS

The Company, 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 Company 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

<PAGE> 13

activities and supporting efforts in product commercialization. Costs for
research and development and supporting activities are expected to increase
as the Company pursues its development, clinical trials and commercialization
programs prior to receiving regulatory approvals and the successful
introduction of the Company's products.

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 in late 1997 and
early 1998.

[PHOTGRAPH OMITTED]

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 Company's
clinical trial program for OvaRex[TM] MAb, which involved the consolidation of
the Company'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 Company anticipates that the level of spending in research and development
will continue to increase significantly in the near future as the Company's
OvaRexTM MAb, BrevaRexTM 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 Company'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
Company and the extent to which the Company 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

<PAGE> 14

Management's Discussion and Analysis

to $0.68 million in 1997, and relates to two government research contracts
undertaken by the Company.

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 clinic
al trial of the Company's lead product OvaRexTM MAb in Canada, as well as the
preparation for a Phase IIb clinical trial in the United States.

[GRAPHIC OMITTED]

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 Company'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 Company's operations. The Company 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 Company 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 Company'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 Company
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 Company.

The Company 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 Company 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
Company's payroll and accounting systems suppliers and banking and investment
management service providers. The Company is continuing its review and
assessment of Year 2000 readiness with contract research organizations and other
suppliers and service providers involved in the Company's clinical development
programs. Alternative suppliers and service providers and appropriate back-up of
data and information will be provided to mitigate any

<PAGE> 15

potential losses or delays due to the Year 2000 issue. The Company specifies the
need for Year 2000 compliance in all significant new contractual relationships.

Management of the Company believes that the review, assessment and testing and
the completion of any necessary changes will be completed by September 1999. The
Company'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.

LIQUIDITY AND CAPITAL RESOURCES

Cash and short-term investments totalled $12.8 million at December 31, 1998.
Since its inception, the Company 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 Company currently has no contributing cash flows from operations. As a
result, the Company 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 Company 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.

On March 16, 1999, the Company filed a Preliminary Prospectus with Canadian
regulatory authorities related to an offering of up to $17 million of Common
Shares. The closing of this offering is expected to occur in late April or early
May of 1999. The net proceeds of this offering, estimated to be $15.4 million,
will be used to fund additional clinical trial and antibody costs for OvaRex[TM]
MAb and BrevaRex[TM] MAb.

The Company'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 Company's net operating
losses. The Company'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 Company's business.

The Company 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 Company believes that the net proceeds of the above
referenced $17 million 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 Company's funding
needs may vary depending on a number of f actors including progress of the
Company'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 Company may need to raise substantial additional capital to fund its
operations in the future. The Company 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
Company 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 Company may be required to delay, reduce
the scope of, or eliminate one or more of its research and development programs.

<PAGE> 16

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.

/s/ ERNST & YOUNG
- ---------------------
Chartered Accountants
Edmonton, Canada

February 12, 1999
(except as to note 11 which is as of March 16, 1999)

<PAGE> 17

STATEMENT OF MANAGEMENT'S RESPONSIBILITY

The accompanying consolidated financial statements of the Company and all
information in this Annual Report are the responsibility of management and have
been approved by the Board of Directors. The consolidated financial statements
have been prepared by management in accordance with Canadian generally accepted
accounting principles. Financial information contained elsewhere in this Annual
Report is consistent with that in the consolidated financial statements.

The management of the Company, in furtherance of the integrity and objectivity
of the consolidated financial statements, has developed and maintains a system
of internal controls to provide reasonable assurance as to the reliability of
financial information and the safeguarding of assets. The consolidated financial
statements include amounts which are based on the best estimates and judgements
of management.

The Board of Directors is responsible for ensuring that management fulfills its
responsibilities for financial reporting and internal control. The Board
primarily exercises this responsibility through the Audit Committee of the
Board. The Audit Committee meets with management and the external auditors to
satisfy itself that management's responsibilities are properly discharged and to
review the consolidated financial statements prior to their presentation to the
Board of Directors for approval.

The consolidated financial statements have been examined by the shareholders'
auditors, Ernst & Young LLP, Chartered Accountants and their report is presented
separately herein.

/s/ Richard E. Bagley /s/ Edward M. Fitzgerald
- ------------------------- -------------------------------
Richard E. Bagley Edward M. Fitzgerald
President and Chief Senior Vice President
Executive Officer and Chief Financial Officer

<PAGE> 18

CONSOLIDATED BALANCE SHEETS

As at December 31,
---------------------------
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:

/s/ Edward M. Fitzgerald /s/ Richard E. Bagley
------------------------ ---------------------
Director Director

<PAGE> 19

CONSOLIDATED STATEMENTS OF LOSS AND
ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Years ended December 31, DEC. 1, 1995
------------------------------------------------- - DEC. 31,
1998 1997 1996 1998
(In Canadian dollars) $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
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 shares 16,503,764 15,894,880 9,067,374
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes

<PAGE> 20

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

Years ended December 31, DEC. 1, 1995
- 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
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 balances 1,301,468 374,431 (163,546) 1,621,897
- -------------------------------------------------------------------------------------------------------------------------------
(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
Issue 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 of year 25,002,106 27,215,949 32,129
- --------------------------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS,
END OF YEAR 12,823,420 25,002,106 27,215,949 12,823,420
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes

<PAGE> 21

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.

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%).

<PAGE> 22

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 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 take-overs, 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.

<PAGE> 23

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

* 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.

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, 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>

<PAGE> 24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1998 AND 1997 (IN CANADIAN DOLLARS)

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.

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.

ISSUED AND OUTSTANDING COMMON SHARES

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

Number of Share
Shares Capital ($)
- ---------------------------------------------------------------------------------------------------------------

<S> <C> <C>
BALANCE 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 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>

<PAGE> 25

5. SHARE CAPITAL (CONTINUED)

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.

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.

<PAGE> 26

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 1995.
<TABLE>
<CAPTION>

Shares issuable on exercise of
------------------------------------------ Exercise price
Stock options Warrants per share ($)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 1 and December 31, 1995 Nil Nil

<S> <C> <C> <C>
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 41,667
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

Share issuable on exercise of
------------------------------------- Exercise price
Stock options Warrants per share($) Year of expiry
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- ------------------------------------------------------------------------------
</TABLE>

<PAGE> 27

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

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 (the "Biomira License Agreement"), 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
and the Company is not currently conducting research pursuant to the contract.
The funding received 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.

<PAGE> 28

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 carry
forwards 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).

(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.

<PAGE> 29

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.

Years ended December 31, DEC. 1, 1995
-------------------------------------- - 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.

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>

<PAGE> 30

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 25, 1999 Biomira Inc. provided the Company with written notice
alleging that the Company is in default of certain reporting obligations under
the Biomira License Agreement and that Biomira Inc. will terminate such
agreement on April 15, 1999 unless such alleged defaults are fully cured on or
before such date. The Company believes that it is currently in compliance with
all of the terms of the Biomira License Agreement and intends to take such
actions as may be necessary to prevent any attempt by Biomira to terminate the
Biomira License Agreement.

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 methods for their production, including the
technology. In the action, Biomira is seeking, among other things, a court order
stating that it is the sole owner of the invention and related intellectual
property rights therein, including the patent application, an inj unction
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 and losses, if any, related to this matter.

On March 16, 1999, the Company commenced legal action in the Province of Alberta
against Biomira Inc. 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, Biomira Inc. and Biomira
Research Inc., (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 Inc. 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.

On March 16, 1999 the Company filed a preliminary prospectus for the purposes of
a public offering of up to $17,000,000 of common shares. As at March 16, 1999
the number of shares to be offered, the offering price per share, and the
resulting net proceeds of the offering had not been determined.

<PAGE> 31

CORPORATE GOVERNANCE

Corporate governance refers to the structures and processes employed by the
Company to direct and manage its business and affairs, so as to best achieve the
Company's objectives. The Board of Directors of the Company believes that these
practices should be reviewed regularly to ensure they are appropriate. The
following is a description of the Company's corporate governance practices
approved by the Board and which are in accordance with the Guidelines
established under the by-laws of the Toronto Stock Exchange.

MANDATE OF THE BOARD OF DIRECTORS

The shareholders elect the Directors who in turn are responsible for overseeing
all aspects of the operation of the Company, including appointing management and
ensuring that the business is managed properly, taking into account the
interests of the shareholders.

The Board of Directors meets regularly to review operational performance and
financial results and to approve the budget, strategic plan, investment
strategies, executive appointments and performance, stock issuance, and major
financial transactions. The Board of Directors will also act to protect the
Company from undue risk by assuring appropriate safeguards including compliance
with all governmental regulations and obtaining necessary insurance.

The Board is responsible for the stewardship of the Company. Specific
responsibilities of the Board of Directors include:

* overseeing and evaluating the strategic planning process;

* identifying and implementing appropriate systems to manage the Company's
principal risks;

* ensuring that the Company operates within all applicable laws and
regulations, and to the highest ethical and moral standards;

* appointing and evaluating senior management;

* developing the Company's communications policy;

* ensuring adequate and timely reporting of financial results and other
significant developments and matters to the Company's shareholders; and

* ensuring the integrity of the Company's internal controls and management
information systems.

In addition, any responsibility not delegated to senior management or a
committee of the Board, remains with the full Board which meets at least four
times a year. During the period ended December 31, 1998, there were five
meetings of the Board of Directors.

COMPOSITION OF THE BOARD

The Guidelines require that a majority of the Board be composed of "unrelated
directors". An "unrelated director" is defined in the Guidelines as one who is
independent of management and is free from any interest and any business or
other relationship which could, or could be reasonably be perceived to,
materially interfere with that director's ability to act with a view to the best
interests of the Company, other than interests and relationships arising from
shareholdings. A related director is one who is not an unrelated director.

In accordance with the Guidelines, the Board has reviewed the status of each of
the directors and determined that five of the seven directors are unrelated and
two are related.

COMPOSITION OF COMMITTEES OF THE BOARD

The Board currently has four standing committees: an Audit Committee, a
Compensation Committee, a Corporate Governance Committee and an Enviromental
Committee.

AUDIT COMMITTEE

The Audit Committee is responsible for the engagement of the Company's
independent auditors and reviews with them the scope and timing of their
audit services and any other services they are asked to perform, their report
on the Company's financial statements following completion of the audit and
the Company's policies and procedures with respect to internal accounting and
financial controls. During 1998 there was one meeting of this committee.

COMPENSATION COMMITTEE

The Compensation Committee makes recommendations to the Board on, among other
things, the compensation of senior executive and Board members. The committee
also reviews and makes recommendations with respect to succession plans. During
1998 there were two meetings of this committee.

<PAGE> 32

CORPORATE GOVERNANCE COMMITTEE

The Corporate Governance Committee mandate is as set forth above. During
1998, there was one meeting of this committee.

ENVIROMENTAL COMMITTEE

The Enviromental Committee reviews the process and controls of the Company
relative to compliance with enviromental laws, statistics, rules and
regulations particular to the operation of the Company. During 1998, there
was one meeting of this committee.

DECISIONS REQUIRING BOARD APPROVAL

In addition to those matters which must by law be approved by the Board,
management is also required to seek Board approval of any material
expenditure. Management is also required to consult with the Board before
pursuing capital projects or strategic ventures which are beyond the
Company's existing business. The Company's collaborative arrangements with
third parties are also reviewed by the Board. The Board approves all changes
in senior management.

BOARD PERFORMANCE

It is the responsibility of the Chairman to ensure
the effective operation of the Board. The Chairman is responsible for
ensuring the effectiveness of
the process the Board follows and the quality of information provided to
directors by management. The Chairman also meets at least once each year on
an individual basis with every member of the Board to discuss that director's
contributions to the Board and committee deliberations and any other matters
which the individual directors wish to raise with the Chairman. The Chairman
also oversees the orientation of new directors.

SHAREHOLDER FEEDBACK

The Company maintains an investor relations capability which the Board
believes is important and highly effective. Every shareholder inquiry
receives a prompt response from an appropriate representative of the Company.

EXPECTATIONS OF MANAGEMENT

The Board expects management to operate the Company in accordance with approved
annual business and strategic plans, to do everything possible to enhance
shareholder value and manage the Company in a prudent manner. Management is
expected to provide regular financial and operating reports to the Board and to
make the Board aware of all important issues and major business developments,
particularly those which had not been previously anticipated. Management is
expected to find opportunities for new business and to make appropriate
recommendations to the Board.

The information which management provides to the Board is highly important to
the ability of the Board to function effectively. Directors must have confidence
in the data gathering, analysis and reporting functions of management. The
Chairman of the Board monitors the nature of the information requested by and
provided to the Board.

From time to time, the Board may engage outside advisers at the Company's
expense to provide advice to the Board on matters relevant to the Company's
activities.

The Company's corporate governance practices comply with the fundamental
principles underlying the guidance outlined by the Toronto Stock Exchange.

<PAGE> 33

GLOSSARY

AMINO ACID: The basic molecules that form proteins.

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

AIT[R] TECHNOLOGY: An immunotherapeutic antibody approach that enhances the
ability of the human immune system to produce its own anti-tumor response.

ANTIGEN: A substance which elicits a specific immune response.

CELL CULTURE-DERIVED MATERIAL: Obtained from the secretion of cells grown in
artificial media, often in flasks or tanks.

CHEMOTHERAPY OR CHEMOTHERAPEUTIC: Generally, the use of drugs in the treatment
of disease. Specifically the use of cytotoxic drugs to treat cancer.

CYTOTOXIC CELLS: Immune system cells capable of killing other cells.

DOUBLE-BLIND: Neither the patient nor the physician is aware of which treatment
(placebo or active drug) the patient is receiving.

EUROPEAN MEDICINES EVALUATION AGENCY OR EMEA: The agency responsible for drug
product approval in the European Economic Community.

HEALTH PROTECTION BRANCH OR HPB: The government department responsible for
supervising the drug development and approval process in Canada.

HEMATOLOGICAL MALIGNANCY: A cancer with its origins in the blood or blood
forming tissues.

HYBRIDOMA CELLS: Any continuously growing cell line generated by the fusion of a
myeloma cell and a normal cell and capable of producing antibodies. IN VIVO:
Studies or phenomenon which take place in the body.

MONOCLONAL ANTIBODIES OR MAB: Antibodies produce by hybridoma cells.

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

MULTI-EPITOPIC RESPONSE: Some antigens, e.g., tumor-associated antigens such as
ovarian cancer or breast cancer antigens, have multiple antibody binding sites.
These antigens are termed "multi-epitopic" antigens. A multi-epitopic response
is when an immune response is generated to these multiple epitopes on the
antigen.

MULTIPLE MYELOMA: An early curable 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.

PHASE IIB: Well-controlled trials to evaluate efficacy (and safety) in patients
with the disease or condition to be treated, diagnosed or prevented. Sometimes
referred to as pivotal trials.

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.

PSA: An antigen associated with prostrate cancer.

SECOND-LINE CHEMOTHERAPY (IN OVARIAN CANCER): Any one of a combination of drugs
consisting of Paclitaxel, 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.

TUMOR: An abnormal proliferation of malignant cells.

TUMOR ANTIGEN OR TUMOR ASSOCIATED ANTIGEN OR TAA: An antigen that is
predominantly expressed in tumor tissues.

UNITED STATES FOOD AND DRUG ADMINISTRATION OR FDA: The regulatory body that
oversees the drug development and approval process in the United States.

<PAGE> 34

DIRECTORS, OFFICERS AND ADVISORS

BOARD OF DIRECTORS:

Dr. Antoine A. Noujaim
Chairman of the Board and
Chief Scientific Officer

Richard E. Bagley
President and Chief Executive Officer

The Honourable Monique Begin
Former Minister of Health Canada

Jean-Claude Gonneau
Managing Director
Donaldson, Lufkin & Jenrette

Georges Hibon
Former Chairman and CEO
Pasteur Merieux Connaught
North America

William R. McMahan
President
Oxbow Capital Corporation

Dr. Jim A. Wright
GeneSense Technologies Inc.
President, CSO and Director

OFFICERS AND CORPORATE MANAGEMENT:

Richard E. Bagley
President and Chief Executive Officer

Dr. Christopher F. Nicodemus
Senior Vice President
Medical & Regulatory Affairs

Edward M. Fitzgerald
Senior Vice President and
Chief Financial Officer

Dr. Thomas R. Sykes
Vice President, Preclinical &
Support Operations

CLINICAL ADVISORY BOARD:

Dr. Robert Ozols
Senior Vice President for Medical Science
Fox Chase Cancer Center
Philadelphia, PA

Dr. Roger Cohen
Associate Professor
University of Virginia Department of Medicine, VA

Dr. James Holland
Distinguished Professor of Neoplastic Diseases
Mount Sinai School of Medicine, NY

Dr. Richard Margolese
Professor and Herbert Black Chair in
Surgical Oncology
McGill University, Montreal, PQ

Dr. Daniel Von Hoff
Director, Institute for Drug Development
Cancer Therapy and Research Center
San Antonio, TX

<PAGE> 35

INVESTOR INFORMATION

LEGAL COUNSEL:
McCarthy Tetrault
Toronto, Ontario

Hale & Dorr LLP
Boston, Massachusetts

AUDITORS:
Ernst & Young LLP
Edmonton, Alberta

STOCK EXCHANGE LISTING:
Shares of the Company are listed on the
Toronto Stock Exchange under the
Trading Symbol AXO

SHAREHOLDERS INQUIRES:
For information about the Company,
Shareholders or prospective Shareholders
are invited to contact

Glenn Neumann
Manager, Investor Relations
Phone: (781) 672-0138
Fax: (781) 672-0142
Email: [email protected]