NEORX CORP
10-Q, 1995-11-13
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES
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                    SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549

                                 FORM 10-Q


(Mark One)

     Quarterly Report pursuant to Section 13 or 15(d)
     of the Securities Exchange Act of 1934 for the Quarterly
     Period ended September 30, 1995 or

     Transition Report pursuant to Section 13 or 15(d)
     of the Securities Exchange Act of 1934 for the transition
     period from _____________ to _______________.
 

Commission File Number 0-16614

                             NeoRx Corporation
          (Exact Name of Registrant as Specified in its Charter)

      WASHINGTON                                              91-1261311    
(State or other jurisdiction of                             (IRS Employer      
 incorporation or organization)                           Identification No.)   

           410 West Harrison Street,  Seattle, Washington 98119
          (Address of Principal Executive Offices)     (Zip Code)

    Registrant's telephone number, including area code: (206) 281-7001



Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                          Yes    X     No        

Applicable only to corporate issuers:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.

As of November 1, 1995 there were outstanding 14.1 million shares of the
Company's common stock, $.02 par value.

<PAGE 2>
                             TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                      PAGE
                                                                      ----
<S>                                                                     <C>
PART I              FINANCIAL INFORMATION                        
       
Item 1.             Financial Statements:
                    Balance Sheets                                      3
                    Statements of Operations                            4
                    Statements of Cash Flows                            5
                    Notes to Financial Statements                       6
Item 2.             Management's Discussion and Analysis
                    of Results of Operations and
                    Financial Condition, Capital 
                    Resources and Liquidity                             8


PART II             OTHER INFORMATION

Item 1.             Legal Proceedings                                   10
                    
</TABLE>
<PAGE 3>
                            
                                NEORX CORPORATION
                          (a development stage company)


BALANCE SHEETS
(in thousands)                                   
<TABLE>
<CAPTION>
                                              September 30,   December 31,    
                                                  1995            1994    
                                              -------------   ------------
                                               (unaudited)

                                      ASSETS
<S>                                              <C>            <C>
CURRENT ASSETS:
  Cash and cash equivalents                      $  1,609       $  2,428
  Short-term investments                           15,400         14,723
  Inventories                                         550            393
  Prepaids and other                                1,572          1,430
                                                  -------        -------
    Total current assets                           19,131         18,974
                                                  -------        -------
FACILITIES AND EQUIPMENT, at cost:
  Equipment and furniture                           3,464          3,298
  Leasehold improvements                            3,223          3,204
                                                  -------        -------
                                                    6,687          6,502
  Less: accumulated depreciation and amortization  (5,816)        (5,555)
                                                  -------        -------
    Facilities and equipment, net                     871            947
                                                  -------        -------      
OTHER ASSETS                                          113            114
                                                  -------        -------
                                                 $ 20,115       $ 20,035
                                                  =======        =======

                       LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                               $    793       $    603
  Accrued liabilities                               2,130          2,115
  Deferred revenue                                    250            250
  Current portion of capital leases                    39             14
                                                  -------        -------
    Total current liabilities                       3,212          2,982
                                                  -------        -------
NON-CURRENT LIABILITIES:
  Convertible subordinated debentures,9 3/4%        1,195          1,195
  Capital leases, less current portion                 74             17
                                                  -------        -------
    Total non-current liabilities                   1,269          1,212
                                                  -------        -------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
  Convertible exchangeable preferred stock,
    Series 1, $.02 par value, 3,000,000 shares
    authorized, 208,000 and 298,000 shares 
    issued and outstanding, respectively                4              6
  Common stock, $.02 par value, 60,000,000
    shares authorized, 13,815,000 and
    11,865,000 shares issued and 
    outstanding, respectively                         276            237
  Additional paid-in capital                      125,127        115,614
  Deferred compensation                              (162)          (232)
  Accumulated deficit since inception            (109,611)       (99,784)
                                                  -------        -------
    Total shareholders' equity                     15,634         15,841
                                                  -------        -------
                                                 $ 20,115       $ 20,035
                                                  =======        =======
</TABLE>
                        See notes to financial statements.

<PAGE 4>
                                NEORX CORPORATION
                          (a development stage company)



STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)                                      
(unaudited)
<TABLE>
<CAPTION>
                                                                              February 13,
                                                                                 1984   
                                   Three months ended    Nine months ended  (inception) to 
                                      September 30,        September 30,     September 30,
                                   ------------------    -----------------  --------------  
                                    1995        1994      1995       1994        1995     
                                   ------      ------    ------     ------      ------
<S>                                <C>        <C>        <C>       <C>        <C>
REVENUES:

  Contract revenues and fees       $     -    $   112    $    57   $   203    $  37,390
                                    ------     ------     ------    ------     --------
OPERATING EXPENSES:

  Research and development           1,904      1,936      5,889     5,406       89,230

  General and administrative         1,142      1,179      3,455     4,094       53,453
                                    ------     ------     ------    ------     --------                    
    Total operating expenses         3,046      3,115      9,344     9,500      142,683
                                    ------     ------     ------    ------     --------
Loss from operations                (3,046)    (3,003)    (9,287)   (9,297)    (105,293)

Other income (expense):
  Investment and interest                            
    income, net                        286        241        746       701       10,600

  Interest expense                     (37)       (32)      (104)      (98)       5,459)

  Litigation expense, net                -          -          -         -         (888)

  Debt conversion expense                -          -          -         -       (1,228)
                                    ------     ------     ------    ------     --------  
Net loss                           $(2,797)   $(2,794)   $(8,645)  $(8,694)   $(102,268)
                                    ======     ======     ======    ======     ========
Preferred stock dividends             (133)      (182)      (477)     (545)      (5,783)
                                    ------     ------      ------   ------     --------
Net loss applicable to 
  common shares                    $(2,930)   $(2,976)   $(9,122)  $(9,239)   $(108,051)
                                    ======     ======     ======    ======     ========
Net loss per common share          $  (.22)   $  (.26)   $  (.71)  $  (.80)   $  (21.08)
                                    ======     ======     ======    ======     ======== 
Weighted average common shares
  outstanding                       13,578     11,547     12,824    11,546        5,126
                                    ======     ======     ======    ======     ========
</TABLE>



                        See notes to financial statements.
<PAGE 5>
                                NEORX CORPORATION
                          (a development stage company)
STATEMENTS OF CASH FLOWS
(in thousands)(unaudited)
<TABLE>
<CAPTION>
                                                                                February 13,
                                                                                    1984   
                                    Three months ended     Nine months ended   (inception) to
                                      September 30,          September 30,      September 30,
                                    ------------------     -----------------   --------------
                                     1995        1994       1995       1994        1995   
                                    ------      ------     ------     ------      ------ 
<S>                                 <C>        <C>        <C>        <C>        <C>
CASH FLOWS FROM OPERATING 
ACTIVITIES:
Net loss                            $(2,797)   $(2,794)   $(8,645)   $(8,694)   $(102,268)
                                     ------     ------     ------     ------     --------
Adjustments to reconcile net 
  loss to net cash provided by 
  (used in) operating activities:
  Depreciation and amortization          93         70        304        219        9,355
  (Increase) decrease in 
    inventories                        (159)         5       (157)        80         (550)
  Increase in prepaids
    and other assets                   (164)      (190)      (141)      (159)      (1,578)
  Increase (decrease)in  
    accounts payable and   
    accrued liabilities                 244         44         92       (199)       2,748
  Increase in deferred 
    revenue                               -        139          -         48          250
  Return of common stock for                                             
    license                               -          -          -          -       (3,850)
  Debt conversion expense                 -          -          -          -        1,228
  Compensation expense on       
    stock awards and options             24         24         70         70        1,010
  Common stock issued for services        -          -         80          9          383
                                     ------     ------     ------     ------     --------
       Total adjustments                 38         92        248         68        8,996
                                     ------     ------     ------     ------     --------
Net cash (used in) operating 
  activities                         (2,759)    (2,702)    (8,397)    (8,626)     (93,272)
                                     ------     ------     ------     ------     --------
CASH FLOWS FROM INVESTING 
ACTIVITIES:
Proceeds from (purchases of) 
  short-term investments                605          -       (677)    (1,863)     (15,400)
Facilities and equipment purchases      (52)       (32)      (122)      (213)      (8,913)
Other                                     -          -          -          -          (17)
                                     ------     ------     ------     ------     --------
Net cash provided by (used in)
  investing activities                  553        (32)      (799)    (2,076)     (24,330)
                                     ------     ------     ------     ------     --------
CASH FLOWS FROM FINANCING 
ACTIVITIES:
Proceeds from sale of common stock
  and warrants                        1,880          -      8,331          -       99,302
Proceeds from sale of convertible
  debentures                              -          -          -          -       26,606
Proceeds from capital lease 
  obligations                             -          -          -          -        2,322
Repayments of capital lease
  obligations                           (16)        (9)       (24)       (30)      (3,553)
Proceeds from stock options 
  exercised                             226          -        274          7        1,224
Preferred stock issuance costs            -          -          -          -         (792)
Preferred stock dividends                 -          -       (204)      (363)      (5,261)
Repurchase of preferred stock             -          -          -          -         (305)
Repurchase of common stock                -          -          -          -         (332)
                                     ------     ------     ------     ------     --------
Net cash provided by (used in)
  financing activities                2,090         (9)     8,377       (386)      119,211
                                     ------     ------     ------     ------     ---------
Net increase (decrease) in cash 
  and cash equivalents                 (116)    (2,743)      (819)   (11,088)        1,609
Cash and cash equivalents:
Beginning of period                   1,725      6,002      2,428     14,347             -
                                     ------     ------     ------     ------     ---------
End of period                       $ 1,609    $ 3,259    $ 1,609    $ 3,259     $   1,609
                                     ======     ======     ======     ======      ========
</TABLE>
                        See notes to financial statements.

<PAGE 6>
                                NEORX CORPORATION
                          (a development stage company)


NOTES TO FINANCIAL STATEMENTS 
            
1.  Basis of Presentation

The interim financial statements contained herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures normally included
in annual financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to those rules and regulations, although the Company believes that the
disclosures made are adequate to make the information presented not
misleading.  These financial statements should be read in conjunction
with the Company's Annual Report to Shareholders for the year ended
December  31, 1994.  
            
In the opinion of management, the interim financial statements reflect
all adjustments, consisting only of normal recurring accruals
necessary to present fairly the Company's financial position as of
September 30, 1995 and the results of operations and cash flows for
the three and nine month periods ended September 30, 1995 and 1994 and
for the period from inception to September 30, 1995.

The results of operations for the three and nine month periods ended
September 30, 1995 are not necessarily indicative of the expected
operating results for the full year.

2.  Shareholders' Equity

Changes in shareholders' equity from December 31, 1994 to September
30, 1995 were as follows:
<TABLE>
<CAPTION>
                <S>                                     <C>         
                Balance December 31, 1994               $15,841             
                Common stock issued                       8,845   
                Preferred stock dividends                  (477)
                Net loss                                 (8,645)  
                Amortization of deferred compensation        70
                                                         ------
                Balance September 30, 1995              $15,634
                                                         ======
</TABLE>

<PAGE 7>
                                NEORX CORPORATION
                          (a development stage company)


NOTES TO FINANCIAL STATEMENTS (continued)

3.  Non-Cash Operating, Investing and Financing Activities

Capital lease obligations incurred upon entering into leases for
new equipment were $1,344,000 since inception, of which $106,000 
occurred in the three and nine month periods ended September 30,
1995.
                                
<PAGE 8>
                                         
                                NEORX CORPORATION
                          (a development stage company)


Item 2.     Management's Discussion and Analysis of Results of
            Operations and Financial Condition, Capital Resources and
            Liquidity

QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO
QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1994

There were no contract revenues and fees earned in the quarter ended
September 30, 1995 and $112,000 earned in the comparable quarter in
1994. For the nine months ended September 30, 1995, contract revenues
and fees were $57,000 compared to $203,000 in last year's nine month
period. 

Total operating expenses for the quarter ended September 30, 1995
decreased 2% to $3,046,000 from $3,115,000 recorded in the quarter
ended September 30, 1994 and for the nine months ended September 30,
1995 amounted to $9,344,000, a decrease of 2% from $9,500,000 in the
comparable period in 1994.  Research and development expenses for the
quarter decreased 2% to $1,904,000 from $1,936,000 for the comparable
1994 quarter and increased 9% to $5,889,000 for the nine months ended
September 30, 1995 from $5,406,000 for the comparable 1994 period. 
General and administrative expenses for the third quarter of 1995
decreased 3% to $1,142,000 from $1,179,000 for the comparable 1994
quarter and decreased 16% to $3,455,000 for the nine months ended
September 30, 1995 from $4,094,000 for the comparable period in 1994. 
The decrease in general and administrative expenses was primarily due
to the settlement of litigation in 1994.

Interest income was $286,000 and $241,000 for the three months ended
September 30, 1995 and 1994, respectively, and $746,000 compared to
$701,000 in last years's comparable nine month period.  Interest
expense was $37,000 and $32,000 for each of the three month periods
ended September 30, 1995 and 1994, respectively, and $104,000 compared
to $98,000 in last year's comparable nine month period.

Net loss remained essentially unchanged for the periods.  Net loss for
the three and nine month periods ended September 30, 1995 and 1994
were $2,797,000 and $2,794,000, and $8,645,000 and $8,694,000,
respectively.
                                        
<PAGE 9>                                        
                                        
                                NEORX CORPORATION
                          (a development stage company)


CAPITAL RESOURCES AND LIQUIDITY

In September 1995, the Company received $2,000,000 from the sale to
an investor of 77,859 units consisting of three shares of common stock
and four 3-year warrants to purchase one-quarter share of common stock
at an exercise price of $5.31.

The Company expects that its capital resources and interest income
will be sufficient to finance its currently anticipated working
capital and capital requirements into 1997.  The Company's working
capital and capital requirements will depend upon numerous factors,
including results of research and development activities, clinical
trials and the levels of resources that the Company devotes to
establishing and expanding marketing and manufacturing capabilities,
competitive and technological developments and the timing and cost of
relationships with parties to collaborative agreements.  The Company
will need to raise substantial additional funds to conduct research
and development activities, preclinical studies and clinical trials
necessary to bring its products to market, and to establish marketing
and limited manufacturing capabilities.  The Company intends to seek
additional funding through public or private equity financings,
arrangements with corporate collaborators or other sources.  Adequate
funds may not be available when needed or on terms acceptable to the
Company.


<PAGE 10>
                                NEORX CORPORATION
                          (a development stage company)


                           PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

IN RE BLECH SECURITIES LITIGATION

The Company has been named as an additional codefendant in an amended
complaint filed in the United States District Court Southern District
of New York on March 27, 1995 in a pending purported class action suit
against David Blech, D. Blech & Co. and a number of other defendants,
including eleven publicly traded biotechnology companies.  The
complaint seeks damages for alleged unlawful manipulation of the stock
market prices of the named biotechnology companies.  The Company
believes that the claims against it have no factual or legal basis and
are without merit.  Although the complaint alleges that D. Blech & Co.
was the principal market maker for NeoRx Corporation stock, to the
Company's knowledge D. Blech & Co. was never a significant market
maker for the Company's stock.  The Company intends to defend this
suit vigorously.

MELD V. NEORX CORPORATION

In February 1995, the Company settled a lawsuit filed against it and
certain Directors and officers in May 1994 on behalf of a class of
purchasers of NeoRx common stock.  In October 1995, under the terms of
the settlement, NeoRx issued to the class 246,775 shares of NeoRx common
stock and collected insurance company proceeds of $925,000.  The Company
has agreed that if proceeds from the sale of the shares and the value of
any unsold shares on February 13, 1996 total less than $1,500,000, the
company will issue cash or additional shares to the class in an amount
equal to the shortfall.


<PAGE 11>

                                NEORX CORPORATION
                          (a development stage company)




                                    SIGNATURES


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

                                  NeoRx Corporation
                                  (Registrant)

<TABLE>
<S>                               <C>
Date: November 9, 1995           By: /s/ Robert M. Littauer    
                                      Robert M. Littauer
                                      Authorized Officer and 
                                      Senior Vice President,
                                      Chief Financial Officer and
                                      Treasurer
</TABLE>


<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS OF NEORX CORPORATION AS OF 9/30/95 AND 12/31/94, AND THE RELATED
STATEMENTS OF OPERATIONS FOR EACH OF THE 9 MONTHS ENDED 9/30/95 AND 9/30/94 AND
FOR THE PERIOD FROM 12/31/84 (INCEPTION) TO 9/30/95 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH 10-Q REPORT FOR THE PERIOD ENDED 9/30/95.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>                     
<PERIOD-TYPE>                   9-MOS                   
<FISCAL-YEAR-END>                          DEC-31-1995       
<PERIOD-END>                               SEP-30-1995          
<CASH>                                           1,609       
<SECURITIES>                                    15,400       
<RECEIVABLES>                                        0        
<ALLOWANCES>                                         0   
<INVENTORY>                                        550      
<CURRENT-ASSETS>                                19,131      
<PP&E>                                           6,687         
<DEPRECIATION>                                   5,816        
<TOTAL-ASSETS>                                  20,115         
<CURRENT-LIABILITIES>                            3,212       
<BONDS>                                          1,269           
<COMMON>                                           276           
                                0         
                                          4           
<OTHER-SE>                                      15,354            
<TOTAL-LIABILITY-AND-EQUITY>                    20,115          
<SALES>                                              0            
<TOTAL-REVENUES>                                     0             
<CGS>                                                0  
<TOTAL-COSTS>                                        0 
<OTHER-EXPENSES>                                     0 
<LOSS-PROVISION>                                     0     
<INTEREST-EXPENSE>                                 104     
<INCOME-PRETAX>                                (8,645)    
<INCOME-TAX>                                         0      
<INCOME-CONTINUING>                            (8,645)       
<DISCONTINUED>                                       0        
<EXTRAORDINARY>                                      0            
<CHANGES>                                            0             
<NET-INCOME>                                   (8,645)         
<EPS-PRIMARY>                                    (.71)           
<EPS-DILUTED>                                    (.71)         
        

</TABLE>


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