COULTER PHARMACEUTICALS INC, S-1/A, 1997-10-09

COULTER PHARMACEUTICALS INC
S-1/A, 1997-10-09
PHARMACEUTICAL PREPARATIONS

Previous: JTS CORP, SC 13D, 1997-10-09

Next: COULTER PHARMACEUTICALS INC, S-1MEF, 1997-10-09

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 1997

REGISTRATION NO. 333-36607
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COULTER PHARMACEUTICAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 2834 94-3219075
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

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

550 CALIFORNIA AVENUE, SUITE 200
PALO ALTO, CALIFORNIA 94306-1440
(650) 842-7300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

MICHAEL F. BIGHAM

PRESIDENT AND CHIEF EXECUTIVE OFFICER
COULTER PHARMACEUTICAL, INC.
550 CALIFORNIA AVENUE, SUITE 200
PALO ALTO, CALIFORNIA 94306-1440
(650) 842-7300
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
JAMES C. KITCH, ESQ. ALAN K. AUSTIN, ESQ.
JOHN A. DADO, ESQ. ELIZABETH R. FLINT, ESQ.
COOLEY GODWARD LLP WILSON SONSINI GOODRICH & ROSATI
FIVE PALO ALTO SQUARE PROFESSIONAL CORPORATION
3000 EL CAMINO REAL 650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94306 PALO ALTO, CALIFORNIA 94304
</TABLE>

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

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
------------------------
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

CALCULATION OF REGISTRATION FEE
================================================================================

<TABLE>
<CAPTION>
TITLE OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE(3)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$0.001 par value............ 2,760,000 $14.02 $38,704,400 $11,729
========================================================================================================================
</TABLE>

(1) Includes 360,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.

(2) Estimated in accordance with Rule 457(c) for the purpose of computing the
amount of the registration fee. The proposed maximum offering price per
share of $14.02 is a weighted average based on the average of the high and
low prices of the Company's Common Stock as reported on the Nasdaq National
Market on September 22, 1997 of $13.44 with respect to 2,300,000 shares and
the average of the high and low prices of the Company's Common Stock as
reported on the Nasdaq National Market on October 8, 1997 of $16.94 with
respect to 460,000 shares.

(3) Includes an additional registration fee of $2,361, with respect to the
increase in the size of the offering. A registration fee of $9,368 was
previously paid.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2

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

SUBJECT TO COMPLETION, DATED OCTOBER 9, 1997

PROSPECTUS
- ----------------

2,400,000 SHARES

COULTPHARM.LOGO

COMMON STOCK

All of the 2,400,000 shares of Common Stock offered hereby are being sold
by Coulter Pharmaceutical, Inc. ("Coulter Pharmaceutical" or the "Company"). The
Company's Common Stock is quoted on the Nasdaq National Market under the symbol
CLTR. On October 8, 1997, the last reported sale price of the Common Stock was
$16.38 per share. See "Price Range of Common Stock."

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

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

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

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

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

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

(2) Before deducting expenses payable by the Company estimated at $300,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 360,000 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."

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

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

HAMBRECHT & QUIST

BT ALEX. BROWN

PACIFIC GROWTH EQUITIES, INC.

, 1997
<PAGE> 3

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). Such reports, proxy statements
and other information can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's Regional Offices at
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material also can be obtained from the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at
prescribed rates. The SEC maintains a website that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. The address of the site is http://www.sec.gov.

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

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF
1934. SEE "UNDERWRITING."

Bexxar(TM) is a trademark of the Company. This Prospectus also may contain
trademarks of other companies.

2
<PAGE> 4

PROSPECTUS SUMMARY

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

THE COMPANY

Coulter Pharmaceutical is engaged in the development of novel drugs and
therapies for the treatment of people with cancer. The Company currently is
developing a family of cancer therapeutics based upon two platform technologies
(i.e., the technologies upon which it intends to base product development):
conjugated antibodies and tumor-activated peptide ("TAP") pro-drugs.

The Company's most advanced product candidate, Bexxar (formerly known as
the "B-1 Therapy"), consists of a monoclonal antibody conjugated with a
radioisotope. The Company intends to seek expedited initial approval of Bexxar
for the treatment of low-grade and transformed low-grade non-Hodgkin's lymphoma
("NHL") in patients refractory to chemotherapy, while simultaneously pursuing
clinical trials to expand the potential use of Bexxar to other indications. In a
Phase I/II clinical trial of Bexxar, 42 patients with low-grade or transformed
low-grade NHL who had relapsed from previous chemotherapy regimens achieved an
83% overall response rate, with a 48% complete response rate and a 35% partial
response rate. Of those patients who experienced a complete response, the
average duration of response was 20.2 months as of July 1997. Currently, the
Company is conducting a pivotal Phase II/III clinical trial for its initial
indication, low-grade and transformed low-grade NHL in patients refractory to
chemotherapy, which includes 60 patients and a post-treatment follow-up period
of approximately six months. The Company intends to file for U.S. Food and Drug
Administration ("FDA") marketing approval of Bexxar for this indication in the
second half of 1998. The Company believes that Bexxar, if successfully
developed, could become the first radioimmunotherapy approved in the United
States for the treatment of people with cancer.

The Company intends to pursue additional trials to expand the potential use
of Bexxar to other indications. The Company currently is conducting a
single-center Phase II trial in newly diagnosed low-grade NHL patients. An
interim analysis of data from the first 17 patients showed a 100% overall
response rate, with 41% (seven patients) having achieved complete responses and
59% (ten patients) having achieved partial responses. Of the ten partial
responses, three were awaiting confirming tests necessary for classification as
complete responses, six had ongoing tumor shrinkage and one had relapsed. The
Company believes that its Phase II trial of Bexxar for patients newly diagnosed
with NHL is the first clinical trial of a radioimmunotherapy as a stand-alone,
first-line treatment for people with cancer.

Cancer is a family of more than one hundred diseases that can be
categorized into two broad groups: hematologic ("blood-borne") malignancies and
solid tumor cancers. Bexxar addresses NHL, a blood-borne cancer of the immune
system affecting B-cells that is categorized as low-, intermediate- or
high-grade disease. In the United States, the Company estimates that
approximately 140,000 patients have low-grade or transformed low-grade NHL.
While patients with low-grade and transformed low-grade NHL often can achieve
one or more remissions with chemotherapy, eventually these patients relapse and
ultimately die from the disease or from complications of treatment.

Bexxar is designed to optimize therapeutic benefit for each patient without
the debilitating side effects typically associated with conventional cancer
treatments. Bexxar consists of a radioisotope, 131)Iodine ("(131)I"), combined
with a monoclonal antibody (the "B-1 Antibody") which recognizes and binds to
the CD20 antigen, an antigen commonly expressed on the surface of B-cells
primarily during that stage of their life cycle when NHL arises. Bexxar is
administered to patients pursuant to a proprietary therapeutic protocol
consisting of a single, two-dose regimen that the Company believes can be
administered primarily on an outpatient basis pursuant to Nuclear Regulatory
Commission ("NRC") regulations.

3
<PAGE> 5

The objective of the Company's second technology platform, the TAP pro-drug
program, is to broaden significantly the therapeutic windows of conventional
chemotherapies. The Company is developing TAP pro-drug versions of cytotoxic
drugs designed to be activated preferentially in the proximity of metastatic
cancer cells, yet stable in circulation and normal tissues. Accordingly,
relatively larger quantities of cytotoxic agents are expected to reach and enter
malignant cells as opposed to normal cells, which could permit a significant
increase in maximum tolerated dosages, potentially overcoming drug resistance in
cancer cells.

The Company currently is developing a pro-drug version of doxorubicin,
"Super-Leu-Dox," to treat certain solid tumor cancers and plans to commence
clinical trials during the first half of 1998. In vitro studies have shown that
Super-Leu-Dox is 40 times more likely to be absorbed and chemically activated by
tumor cells than by normal cells. An earlier leucine-doxorubicin conjugate was
tested as a stand-alone therapy for the treatment of solid tumors in two
separate dose escalation trials in Europe in a total of 59 patients. Patients in
these trials safely tolerated doses well in excess of those associated with
unmodified doxorubicin.

The Company intends to market and sell its products in the United States
through a direct sales force and, where appropriate, in collaboration with
marketing partners. The Company believes that an established sales and marketing
capability will enable it to compete effectively for opportunities to license or
distribute later-stage product candidates and approved products.
Internationally, the Company intends to distribute its products through
marketing partners.

The Company was incorporated under the laws of Delaware in February 1995.
The Company's executive offices are located at 550 California Avenue, Suite 200,
Palo Alto, California 94306, and its telephone number is (650) 842-7300.

4
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,400,000 shares
Common Stock to be outstanding after the
offering................................... 12,752,745 shares (1)
Use of proceeds.............................. For funding of manufacturing scale-up,
clinical trials and prelaunch marketing of
Bexxar; for facilities expansion; and for
other research and development, working
capital and general corporate purposes.
Nasdaq National Market symbol................ CLTR
</TABLE>

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

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------ -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Research and development
expenses................. $ 1,574 $ 1,838 $ 2,798 $ 2,739 $ 13,681 $ 4,940 $ 6,583
Net loss................... $(1,701) $(2,016) $(3,086) $(3,229) $(15,338) $(5,311) $(8,800)
Net loss per share......... $ (2.03) $ (0.69) $ (1.01)
Shares used in computing
net loss per share(2).... 7,557 7,736 8,725
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments............ $41,038 $ 77,698
Working capital.............................................. 37,199 73,859
Total assets................................................. 43,487 80,147
Deficit accumulated during the development stage............. (27,131) (27,131)
Total stockholders' equity................................... 36,883 73,543
</TABLE>

- ---------------
(1) Based on the number of shares outstanding at August 31, 1997. Excludes
1,539,337 shares of Common Stock which were subject to outstanding options
at such date at a weighted average exercise price of $5.78 per share and
24,666 shares of Common Stock issuable upon exercise of a warrant at an
exercise price of $9.75 per share. See "Capitalization" and
"Management -- Stock Option Plans."
(2) See Note 1 of Notes to December 31, 1996 and June 30, 1997 Consolidated
Financial Statements for an explanation of the determination of shares used
in computing net loss per share.

(3) As adjusted to reflect the sale of 2,400,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $16.38 per
share and the receipt of the estimated proceeds therefrom. See "Use of
Proceeds" and "Capitalization."

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

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

5
<PAGE> 7

RISK FACTORS

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

Uncertainties Related to Product Development. The Company's product
candidates are generally in early stages of development, with only one in
clinical trials. The development of safe and effective therapies for the
treatment of people with cancer is highly uncertain and subject to numerous
risks. Product candidates that may appear to be promising at early stages of
development may not reach the market for a number of reasons. Product candidates
may be found ineffective or cause harmful side effects during clinical trials,
may take longer to progress through clinical trials than had been anticipated,
may fail to receive necessary regulatory approvals, may prove impracticable to
manufacture in commercial quantities at reasonable cost and with acceptable
quality or may fail to achieve market acceptance.

The results of initial preclinical and clinical testing of the products
under development by the Company are not necessarily indicative of results that
will be obtained from subsequent or more extensive preclinical studies and
clinical testing. The Company's clinical data gathered to date with respect to
Bexxar are primarily from a Phase I/II dose escalation trial which was designed
to develop and refine the therapeutic protocol, to determine the maximum
tolerated dose of total body radiation and to assess the safety and efficacy
profile of treatment with a radiolabeled antibody. Further, the data from this
Phase I/II dose escalation trial were compiled from testing conducted at a
single site and with a relatively small number of patients per NHL histology and
disease stage. The Company has since completed a multi-center Phase II dosimetry
clinical trial and currently is conducting a multi-center pivotal Phase II/III
clinical trial. However, substantial additional development, clinical testing
and investment will be required prior to seeking any regulatory approval for
commercialization of this potential product. There can be no assurance that
clinical trials of Bexxar or other product candidates under development will
demonstrate the safety and efficacy of such products to the extent necessary to
obtain regulatory approvals for the indications being studied, or at all.
Companies in the pharmaceutical and biotechnology industries have suffered
significant setbacks in advanced clinical trials, even after obtaining promising
results in earlier trials. The failure to demonstrate adequately the safety and
efficacy of Bexxar or any other therapeutic product under development could
delay or prevent regulatory approval of the product and would have a material
adverse effect on the Company's business, financial condition and results of
operations.

Furthermore, the timing and completion of current and planned clinical
trials of Bexxar, as well as clinical trials of other products, are dependent
upon, among other factors, the rate at which patients are enrolled, which is a
function of many factors, including the size of the patient population, the
proximity of patients to the clinical sites, the number of clinical sites, the
eligibility criteria for the study and the existence of competing clinical
trials. There can be no assurance that delays in patient enrollment in clinical
trials will not occur, and any such delays may result in increased costs,
program delays or both, which could have a material adverse effect on the
Company's business, financial condition and results of operations.

Early Stage of Development. Since its inception in 1995, the Company has
been engaged in the development of drugs and related therapies for the treatment
of people with cancer. The Company's product candidates are generally in early
stages of development, with only one in clinical trials. No revenues have been
generated from product sales or product royalties; and products resulting from
the Company's research and development efforts, if any, are not expected to be
available commercially for at least the next few years. No assurance can be
given that the Company's product development efforts, including clinical trials,
will be successful, that required regulatory approvals for the indications being
studied can be obtained, that its products can be manufactured at acceptable
cost

6
<PAGE> 8

and with appropriate quality or that any approved products can be successfully
marketed. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Government Regulation; No Assurance of Regulatory Approvals. All new drugs
and biologics, including the Company's products under development, are subject
to extensive and rigorous regulation by the federal government, principally the
FDA under the Food, Drug and Cosmetic Act and other laws including, in the case
of biologics, the Public Health Services Act, and by state and local
governments. Such regulations govern, among other things, the development,
testing, manufacture, labeling, storage, premarket approval, advertising,
promotion, sale and distribution of such products. If drug products are marketed
abroad, they also are subject to extensive regulation by foreign governments.

The regulatory process, which includes preclinical studies and clinical
trials of each potential product, is lengthy, expensive and uncertain. Prior to
commercial sale in the United States, most new drugs and biologics, including
the Company's products under development, must be approved by the FDA. Securing
FDA marketing approvals often requires the submission of extensive preclinical
and clinical data and supporting information to the FDA. Product approvals, if
granted, can be withdrawn for failure to comply with regulatory requirements or
upon the occurrence of unforeseen problems following initial marketing.
Moreover, regulatory approvals for products such as new drugs and biologics,
even if granted, may include significant limitations on the uses for which such
products may be marketed.

There can be no assurance that the Company will be able to obtain necessary
regulatory approvals on a timely basis, if at all, for any of its product
candidates, and delays in receipt or failures to receive such approvals or
failures to comply with existing or future regulatory requirements could have a
material adverse effect on the Company's business, financial condition and
results of operations. Certain material manufacturing changes to new drugs and
biologics also are subject to FDA review and approval. There can be no assurance
that any approvals that are required, once obtained, will not be withdrawn or
that compliance with other regulatory requirements can be maintained. Further,
failure to comply with applicable FDA and other regulatory requirements can
result in sanctions being imposed on the Company or the manufacturers of its
products, including warning letters, fines, product recalls or seizures,
injunctions, refusals to permit products to be imported into or exported out of
the United States, refusals of the FDA to grant premarket approval of drugs and
biologics or to allow the Company to enter into government supply contracts,
withdrawals of previously approved marketing applications and criminal
prosecutions.

Manufacturers of drugs and biologics also are required to comply with the
applicable FDA good manufacturing practice ("GMP") regulations, which include
requirements relating to quality control and quality assurance as well as the
corresponding maintenance of records and documentation. Manufacturing facilities
are subject to inspection by the FDA, including unannounced inspection, and must
be licensed before they can be used in commercial manufacturing of the Company's
products. There can be no assurance that the Company or its suppliers will be
able to comply with the applicable GMP regulations and other FDA regulatory
requirements. Such failure could have a material adverse effect on the Company's
business, financial condition and results of operations.

The Company may elect to seek approval of Bexxar under the Clinton-Kessler
Cancer Initiative. Significant uncertainty exists as to the extent to which such
initiative will result in accelerated review and approval. Further, the FDA has
not made available comprehensive guidelines with respect to this initiative,
retains considerable discretion to determine eligibility for accelerated review
and approval and is not bound by discussions that an applicant may have had with
FDA staff. Accordingly, the FDA could employ such discretion to deny eligibility
of Bexxar as a candidate for accelerated review or to require additional
clinical trials or other information before approving Bexxar. A determination
that Bexxar is not eligible for accelerated review or delays and additional
expenses associated with generating a response to any such request for
additional trials could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Government Regulation."

7
<PAGE> 9

Dependence on Suppliers; Manufacturing and Scale-up Risk. The Company has
no existing capacity or experience with respect to manufacturing products for
large-scale clinical trials or commercial purposes. The Company has contracted
with a third-party manufacturer, LONZA Biologics plc ("Lonza"), to produce
unlabeled B-1 Antibody for use in clinical trials. The Company is negotiating a
commercial supply agreement, although there can be no assurance that such a
contract with Lonza will be entered into in a timely manner, if at all. Lonza
has limited experience producing the B-1 Antibody, and there can be no assurance
that Lonza will be able to produce the Company's requirements at commercially
reasonable prices or with acceptable quality.

The Company relies upon MDS Nordion Inc. ("Nordion") for radiolabeling of
the B-1 Antibody at Nordion's centralized radiolabeling facility. The Company
and Nordion are negotiating an agreement for supply of the radiolabeled B-1
Antibody for both clinical trials and commercial sale. If Bexxar is approved and
is successful in the market, Nordion's capacity to radiolabel antibodies may not
be sufficient to meet all of the Company's commercial requirements. There can be
no assurance that the contract with Nordion will be entered into in a timely
manner, if at all.

The Company is aware of only a limited number of manufacturers capable of
producing the B-1 Antibody in commercial quantities or radiolabeling the
antibody with (131)I on a commercial scale. Should the Company's existing or
planned contractual relationships for production or radiolabeling of the B-1
Antibody cease or be interrupted, or if its existing suppliers are unable to
meet the Company's requirements for any reason, there can be no assurance that
any additional or alternative third parties could be engaged to carry out said
production or radiolabeling on a timely basis or on commercially acceptable
terms, if at all. To establish and qualify a new facility to centrally
radiolabel antibodies could take as long as two years. Further, radiolabeled
antibody cannot be stockpiled against future shortages due to the eight-day
half-life of the (131)I radioisotope. Accordingly, any change in the Company's
existing contractual relationships with, or interruption in supply from, its
producer of unlabeled antibody or its radiolabeler could affect adversely the
Company's ability to complete its ongoing clinical trials and to market Bexxar,
if approved. Any such change or interruption would have a material adverse
effect on the Company's business, financial condition and results of operations.
Although the Company is evaluating additional sources of supply for production
and radiolabeling of the B-1 Antibody, no assurance can be given that such
sources will be secured on commercially reasonable terms, on a timely basis, or
at all.

Prior to August 1997, the Company obtained B-1 Antibody from an inventory
produced by Coulter Corporation, and radiolabeling was performed by
radiopharmacies at the individual clinical trial sites. In order to begin using
the centrally radiolabeled B-1 Antibody from Nordion, the Company filed and the
FDA cleared an Investigational New Drug application ("IND") amendment to
establish that the centrally radiolabeled material was biologically and
biochemically equivalent to the on-site radiolabeled B-1 Antibody. The Company
is collecting data from its ongoing clinical trials to be filed with the FDA to
establish clinical comparability between the centrally and on-site radiolabeled
B-1 Antibody, however, there can be no assurance that it will be able to
establish clinical comparability. A failure to establish clinical comparability
could lead to a requirement that the Company enlarge the size of its ongoing
Phase II/III pivotal clinical trial, which would delay the completion of such
trial, increase its cost and potentially delay the Company's initial pursuit of
regulatory approval for Bexxar.

Third-party manufacturers must comply with GMP regulations prescribed by
the FDA and other standards prescribed by various federal, state and local
regulatory agencies in the United States and any other relevant country. Failure
to comply with these regulations could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"-- Government Regulation; No Assurance of Regulatory Approvals" and
"Business -- Government Regulation."

Future Capital Needs; Uncertainty of Additional Funding. The Company's
operations to date have consumed substantial and increasing amounts of cash. The
negative cash flow from operations is expected to continue and to accelerate in
the foreseeable future. The development of the Company's

8
<PAGE> 10

technology and potential products will require a commitment of substantial
funds. The Company expects that its existing capital resources, including the
net proceeds of this offering and interest thereon, will be adequate to satisfy
the requirements of its current and planned operations into the second half of
1999. However, the rate at which the Company expends its resources is variable,
may be accelerated and will depend on many factors, including the scope and
results of preclinical studies and clinical trials, continued progress of the
Company's research and development of product candidates, the cost, timing and
outcome of regulatory approvals, the expenses of establishing a sales and
marketing force, the timing and cost of establishment or procurement of
requisite production, radiolabeling and other manufacturing capacities, the cost
involved in preparing, filing, prosecuting, maintaining, defending and enforcing
patent claims, the acquisition of technology licenses, the status of competitive
products and the availability of other financing.

The Company will need to raise substantial additional capital to fund its
operations and intends to seek such additional funding through public or private
equity or debt financings, as well as through collaborative arrangements. There
can be no assurance that such additional funding will be available on acceptable
terms, if at all. If additional funds are raised by issuing equity securities,
substantial dilution to stockholders may result. 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 or obtain funds
through arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies, product candidates
or products that the Company would otherwise seek to develop or commercialize.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Uncertainty of Market Acceptance of Bexxar. Even if the Company's product
candidates are approved for marketing by the FDA and other regulatory
authorities, there can be no assurance that the Company's products will be
commercially successful. If the Company's most advanced product candidate,
Bexxar, is approved, it would represent a significant departure from currently
approved methods of treatment for NHL and would require the handling of
radioactive materials. Accordingly, Bexxar may experience under-utilization by
oncologists and hematologists who are unfamiliar with the application of Bexxar
in the treatment of NHL. Further, oncologists and hematologists are not
typically licensed to administer radioimmunotherapies such as Bexxar and will
need to engage a nuclear medicine physician or receive specialty training to
administer Bexxar. Recently enacted NRC regulations permit Bexxar to be
administered on an outpatient basis in most cases as is currently contemplated
by the Company. However, market acceptance could be affected adversely because
some hospitals may be required to administer the therapeutic dose of Bexxar on
an inpatient basis under applicable state or local or individual hospital
regulations. As with any new drug, doctors may be inclined to continue to treat
patients with conventional therapies, in this case chemotherapy. Market
acceptance also could be affected by the availability of third-party
reimbursement. Failure of Bexxar to achieve significant market acceptance would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "-- Uncertainty Related to Health Care Reform and
Third-Party Reimbursement," "-- Hazardous and Radioactive Materials," and
"Business -- Radioactive and Other Hazardous Materials."

Absence of Commercialization Resources and Experience. The Company intends
to market and sell its products in the United States through a direct sales
force and, where appropriate, in collaboration with marketing partners, and
internationally through marketing partners. The Company currently does not
possess the resources and experience necessary to commercialize any of its
product candidates. The Company's ability to market Bexxar, if approved, will be
contingent upon recruitment, training and deployment of a sales and marketing
force. Development of an effective sales force will require significant
financial resources and time. There can be no assurance that the Company will be
able to establish such a sales force in a timely or cost effective manner, if at
all, or that such a sales force will be capable of generating demand for Bexxar
or other product candidates. The Company has no collaborative arrangements for
the distribution of Bexxar, and there can be no assurance that the Company will
be able to enter into any such arrangements in a timely manner or on
commercially favorable terms, or at all. Failure to enter into any such
collaborative arrangements could have a

9
<PAGE> 11

material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Marketing and Sales."

Dependence Upon Proprietary Technology; Uncertainty of Patents and
Proprietary Technology. The pharmaceutical and biotechnology fields are
characterized by a large number of patent filings. A substantial number of
patents have already been issued to other pharmaceutical and biotechnology
companies. Research has been conducted for many years in the monoclonal antibody
field by pharmaceutical and biotechnology companies and other organizations.
Competitors may have filed applications for or have been issued patents and may
obtain additional patents and proprietary rights related to products or
processes competitive with or similar to those of the Company. Patent
applications are maintained in secrecy for a period after filing. Publication of
discoveries in the scientific or patent literature tends to lag behind actual
discoveries and the filing of related patent applications. The Company may not
be aware of all of the patents potentially adverse to the Company's interests
that may have been issued to other companies, research or academic institutions,
or others. No assurance can be given that such patents do not exist, have not
been filed, or could not be filed or issued, which contain claims relating to
the Company's technology, products or processes.

To date, no consistent policy has emerged regarding the breadth of claims
allowed in pharmaceutical and biotechnology patents. If patents have been or are
issued to others containing preclusive or conflicting claims and such claims are
determined ultimately to be valid, the Company may be required to obtain
licenses to one or more of such patents or to develop or obtain alternative
technology. The Company is aware of various patents that have been issued to
others that pertain to a portion of the Company's prospective business; however,
the Company believes that it does not infringe any patents that ultimately would
be determined to be valid. There can be no assurance that patents do not exist
in the United States or in other foreign countries or that patents will not be
issued to third parties that contain preclusive or conflicting claims with
respect to Bexxar or any of the Company's other product candidates or programs.
Commercialization of monoclonal antibody-based products may require licensing
and/or cross-licensing of one or more patents with other organizations in the
field. There can be no assurance that the licenses that might be required for
the Company's processes or products would be available on commercially
acceptable terms, if at all.

The Company's breach of an existing license or failure to obtain a license
to technology required to commercialize its product candidates may have a
material adverse effect on the Company's business, financial condition and
results of operations. Litigation, which could result in substantial costs to
the Company, may also be necessary to enforce any patents issued to the Company
or to determine the scope and validity of third-party proprietary rights. If
competitors of the Company prepare and file patent applications in the United
States that claim technology also claimed by the Company, the Company may have
to participate in interference proceedings declared by the United States Patent
and Trademark Office to determine priority of invention, which could result in
substantial cost to the Company, even if the eventual outcome is favorable to
the Company. An adverse outcome could subject the Company to significant
liabilities to third parties and require the Company to license disputed rights
from third parties or to cease using such technology.

The Company also relies on trade secrets to protect its technology,
especially where patent protection is not believed to be appropriate or
obtainable. The Company protects its proprietary technology and processes, in
part, by confidentiality agreements with its employees, consultants, advisory
board members, collaborators and certain contractors. There can be no assurance
that these agreements will not be breached, that the Company would have adequate
remedies for any breach, or that the Company's trade secrets or those of its
collaborators or contractors will not otherwise become known or be discovered
independently by competitors.

10
<PAGE> 12

subject matter may limit the protection the Company can obtain on some of its
inventions outside of the United States. For example, methods of treating humans
are not patentable in many countries outside of the United States. These and/or
other issues may prevent the Company from obtaining patent protection outside of
the United States which would have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Patents and Other Intellectual Property."

History of Operating Losses; Anticipated Future Losses. The Company has a
limited history of operations and has experienced significant losses since
inception. As of June 30, 1997, the Company's accumulated deficit was
approximately $27.1 million. The Company expects to incur significant additional
operating losses over the next several years and expects cumulative losses to
increase substantially due to expanded research and development efforts,
preclinical studies and clinical trials and development of manufacturing,
marketing and sales capabilities. The Company expects that losses will fluctuate
from quarter to quarter and that such fluctuations may be substantial. All of
the Company's product candidates are in development in preclinical studies and
clinical trials, and no revenues have been generated from product sales. To
achieve and sustain profitable operations, the Company, alone or with others,
must develop successfully, obtain regulatory approval for, manufacture,
introduce, market and sell its products. The time frame necessary to achieve
market success is long and uncertain. The Company does not expect to generate
product revenues for at least the next few years. There can be no assurance that
the Company will ever generate sufficient product revenues to become profitable
or to sustain profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Highly Competitive Industry; Risk of Technological Obsolescence. The
pharmaceutical and biotechnology industries are intensely competitive. Any
product candidate developed by the Company would compete with existing drugs and
therapies. There are many pharmaceutical companies, biotechnology companies,
public and private universities and research organizations actively engaged in
research and development of products for the treatment of people with cancer.
Many of these organizations have financial, technical, manufacturing and
marketing resources greater than those of the Company. Several of them may have
developed or are developing therapies that could be used for treatment of the
same diseases targeted by the Company. One competitor known to the Company
recently received a recommendation for approval from an FDA Advisory Panel of
its non-radiolabeled chimeric antibody for the treatment of low-grade NHL. If a
competing company were to develop or acquire rights to a more efficacious or
safer cancer therapy for treatment of the same diseases targeted by the Company,
or one which offers significantly lower costs of treatment, the Company's
business, financial condition and results of operations could be materially
adversely affected. The Company believes that its product development programs
will be subject to significant competition from companies utilizing alternative
technologies as well as to increasing competition from companies that develop
and apply technologies similar to the Company's technologies. Other companies
may succeed in developing products earlier than the Company, obtaining approvals
for such products from the FDA more rapidly than the Company or developing
products that are safer and more effective than those under development or
proposed to be developed by the Company. There can be no assurance that research
and development by others will not render the Company's technology or product
candidates obsolete or non-competitive or result in treatments superior to any
therapy developed by the Company, or that any therapy developed by the Company
will be preferred to any existing or newly developed technologies. See
"Business -- Competition."

Dependence on Management and Other Key Personnel. The Company is dependent
upon a limited number of key management and technical personnel. The loss of the
services of one or more of such key employees could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the Company's success will be dependent upon its ability to attract
and retain additional highly qualified sales, management, manufacturing and
research and development personnel. The Company faces intense competition in its
recruiting activities, and there can be no assurance that the Company will be
able to attract and/or retain qualified personnel.

11
<PAGE> 13

Exposure to Product Liability. The manufacture and sale of human
therapeutic products involve an inherent risk of product liability claims and
associated adverse publicity. The Company has only limited product liability
insurance for clinical trials and no commercial product liability insurance.
There can be no assurance that the Company will be able to maintain existing
insurance or obtain additional product liability insurance on acceptable terms
or with adequate coverage against potential liabilities. Such insurance is
expensive, difficult to obtain and may not be available in the future on
acceptable terms, if at all. An inability to obtain sufficient insurance
coverage on reasonable terms or to otherwise protect against potential product
liability claims brought against the Company in excess of its insurance
coverage, if any, or a product recall could have a material adverse effect upon
the Company's business, financial condition and results of operations. See
"Business -- Product Liability and Insurance."

Uncertainty Related to Health Care Reform and Third-Party
Reimbursement. Political, economic and regulatory influences are subjecting the
health care industry in the United States to fundamental change. Initiatives to
reduce the federal deficit and to reform health care delivery are increasing
cost-containment efforts. The Company anticipates that Congress, state
legislatures and the private sector will continue to review and assess
alternative benefits, controls on health care spending through limitations on
the growth of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups, price controls on
pharmaceuticals and other fundamental changes to the health care delivery
system. Any such proposed or actual changes could cause the Company to limit or
eliminate spending on development projects and affect the Company's ultimate
profitability. Legislative debate is expected to continue in the future, and
market forces are expected to drive reductions of health care costs. The Company
cannot predict what impact the adoption of any federal or state health care
reform measures or future private sector reforms may have on its business.

In both domestic and foreign markets, sales of the Company's proposed
products will depend in part upon the availability of reimbursement from
third-party payors, such as government health administration authorities,
managed care providers, private health insurers and other organizations.
Third-party payors are increasingly challenging the price and cost effectiveness
of medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products. Bexxar, as
potentially the first radioimmunotherapy for cancer, faces particular
uncertainties due to the absence of a comparable, approved therapy to serve as a
model for pricing and reimbursement decisions. Further, if Bexxar is not
administered in most cases on an outpatient basis, as is contemplated currently
by the Company, the projected cost of the therapy will be higher than
anticipated. In addition, there can be no assurance that products can be
manufactured on a commercial scale for a cost that will enable the Company to
price its products within reimbursable rates. Consequently, there can be no
assurance that the Company's product candidates will be considered cost
effective or that adequate third-party reimbursement will be available to enable
the Company to maintain price levels sufficient to realize an appropriate return
on its investment in product development. If adequate coverage and reimbursement
rates are not provided by the government and third-party payors for the
Company's products, the market acceptance of these products could be adversely
affected, which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Pharmaceutical
Pricing and Reimbursement."

Hazardous and Radioactive Materials. The manufacturing and administration
of Bexxar requires the handling, use and disposal of (131)I, a radioactive
isotope of iodine. These activities must comply with various state and federal
regulations. Violations of these regulations could delay significantly
completion of clinical trials and commercialization of Bexxar. For its ongoing
clinical trials and for commercial-scale production, the Company relies on
Nordion to radiolabel the B-1 Antibody with (131)I at a single location in
Canada. Violations of safety regulations could occur with this manufacturer,
and, therefore, there is a risk of accidental contamination or injury. In the
event of any such noncompliance or accident, the supply of radiolabeled B-1
Antibody for use in clinical trials or commercially could be

12
<PAGE> 14

interrupted, which could have a material adverse effect on the Company's
business, financial condition and results of operations.

The Company also expects to use hazardous chemicals and radioactive
compounds in its ongoing research activities. The Company could be held liable
for any damages that result from such an accident, contamination or injury from
the handling and disposal of these materials, as well as for unexpected remedial
costs and penalties that may result from any violation of applicable
regulations, which could result in a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company may incur substantial costs to comply with environmental regulations.
See "Business -- Radioactive and Other Hazardous Materials."

Control By Officers, Directors and Principal Stockholders. Following
completion of this offering, directors, executive officers and principal
stockholders of the Company will beneficially own approximately 36.2% of the
outstanding shares of the Company's Common Stock. Accordingly, these
stockholders, individually and as a group, may be able to control the Company
and direct its affairs and business, including any determination with respect to
a change in control of the Company, future issuances of Common Stock or other
securities by the Company, declaration of dividends on the Common Stock and the
election of directors. See "Principal Stockholders."

Potential Volatility of Stock Price. The securities markets have from time
to time experienced significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. The market prices of the
common stock of many publicly held biotechnology and pharmaceutical companies
have in the past been, and can in the future be expected to be, especially
volatile. Announcements of technological innovations or new products by the
Company or its competitors, release of reports by securities analysts,
developments or disputes concerning patents or proprietary rights, regulatory
developments, changes in regulatory or medical reimbursement policies, economic
and other external factors, as well as period-to-period fluctuations in the
Company's financial results, may have a significant and adverse impact on the
market price of the Common Stock. See "Price Range of Common Stock."

Potential Adverse Impact of Shares Eligible for Future Sale. Sales of
shares of Common Stock (including shares issued upon the exercise of outstanding
options) in the public market after this offering could adversely affect the
market price of the Common Stock. Such sales also might make it more difficult
for the Company to sell equity securities or equity-related securities in the
future at a time and price that the Company deems appropriate. Upon completion
of this offering, the Company will have outstanding an aggregate of 12,752,745
shares of Common Stock, assuming no exercise of the Underwriters' over-allotment
option and no exercise of options outstanding as of August 31, 1997. Of these
shares, 5,275,000 shares of Common Stock, including the 2,400,000 shares sold in
this offering, will be freely tradable without restriction or further
registration under the Securities Act, unless held by affiliates of the Company
as that term is defined in Rule 144 under the Securities Act ("Affiliates"). The
remaining 7,477,745 shares of Common Stock held by existing stockholders are
restricted securities as that term is defined in Rule 144 under the Securities
Act (the "Restricted Shares"). Restricted Shares may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rules 144 or 701, promulgated under the Securities Act. As a result of
agreements not to sell such shares (the "Lock-up Agreements") and the provisions
of Rules 144 and 701, additional shares will be available in the public market
as follows: (i) 2,875,434 Restricted Shares will be eligible for immediate sale
on the effective date of this offering (in some cases subject to the volume
limitations under Rule 144); and (ii) 4,602,311 Restricted Shares will be
eligible for sale upon expiration of Lock-up Agreements 90 days after the
effective date of the registration statement relating to this offering (in some
cases subject to the volume limitations under Rule 144). Hambrecht & Quist LLC
may, in its sole discretion and at any time without notice, release all or any
portion of the shares subject to Lock-up Agreements. Upon completion of this
offering, the holders of 7,097,994 shares of Common Stock, or their transferees,
will be entitled to certain rights with respect to the registration of such
shares under the Securities Act. Registration of such shares under the
Securities Act would result in such shares

13
<PAGE> 15

becoming freely tradable without restriction under the Securities Act (except
for shares purchased by Affiliates) immediately upon the effectiveness of such
registration.

Dilution. Purchasers of the shares of Common Stock offered hereby will
experience immediate dilution of $10.61 in net tangible book value per share
after deducting the underwriting discounts and estimated offering expenses. Such
investors will experience additional dilution upon the exercise of outstanding
options. See "Dilution."

Adverse Impact of Possible Issuances of Preferred Stock; Anti-Takeover
Effect of Certain Charter and Bylaw Provisions. The Board of Directors has
authority to issue up to 3,000,000 shares of Preferred Stock and to fix the
price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock that may
be issued in the future. The issuance of Preferred Stock could affect adversely
the voting power of holders of Common Stock and the likelihood that such holders
will receive dividend payments and payments upon liquidation. Additionally, the
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company, may discourage bids for the
Common Stock at a premium over the market price of the Common Stock and may
affect adversely the market price of and the voting and other rights of the
holders of the Common Stock. In addition, the Company's Bylaws provide that
special meetings of stockholders may be called only by the Chairman of the Board
of Directors, the Chief Executive Officer or the Board of Directors pursuant to
a resolution approved by a majority of the Board of Directors. In July 1997, the
Company adopted a Share Purchase Rights Plan, commonly referred to as a "poison
pill." In addition, the Company is subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law, which prohibits the Company
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. These provisions, along with certain provisions of
California law that may be applicable to the Company, could have the effect of
discouraging certain attempts to acquire the Company which could deprive the
Company's stockholders of the opportunity to sell their shares of Common Stock
at prices higher than prevailing market prices. See "Description of Capital
Stock."

Forward-looking Statements. This prospectus contains forward-looking
statements, which may be deemed to include the Company's plans to continue
development of Bexxar, conduct clinical trials with respect to Bexxar and other
product candidates, seek regulatory approvals, engage third-party manufacturers
to supply its clinical trials and commercial requirements, establish a sales and
marketing capability, evaluate additional product candidates for subsequent
clinical and commercial development and expend the proceeds of this offering.
Actual results could differ materially from those projected in any
forward-looking statements for a variety of reasons, including those detailed in
the other sections of this "Risk Factors" portion of the Prospectus or elsewhere
in this Prospectus.

14
<PAGE> 16

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,400,000 shares of
Common Stock offered by the Company hereby are estimated to be $36,660,000
($42,204,000 if the Underwriters' over-allotment option is exercised in full).

The Company anticipates that approximately $15 million of the proceeds of
this offering will be used to support the development of Bexxar, including
manufacturing scale-up, clinical trial costs and prelaunch marketing. The
Company intends to use approximately $4 million of the proceeds of this offering
to expand its facilities and to purchase additional capital equipment. The
balance of the net proceeds of this offering, including interest earned thereon,
is expected to be used primarily in the Company's other research and development
programs such as its TAP pro-drug program and for working capital and other
general corporate purposes. The Company may also use a portion of the net
proceeds to acquire technologies or products complementary to its business,
although no material expenditures in connection with any such acquisitions
currently are anticipated. Pending application as described above, the Company
intends to invest the net proceeds of this offering in short-term,
investment-grade, interest-bearing securities.

The amounts and timing of the Company's actual expenditure for the purposes
described above will depend upon a number of factors, including: the scope and
results of preclinical studies and clinical trials; continued progress of the
Company's research and development of potential products; the cost, timing and
outcome of regulatory approvals; the adequacy of facilities; the expenses of
establishing a sales and marketing force; the timing and cost of establishment
or procurement of requisite production, radiolabeling and other manufacturing
capacities; the cost involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims; the acquisition of technology licenses;
the status of competitive products and the availability of other financing. The
Company will require substantial additional funds to conduct its operations in
the future, and there can be no assurance that such funding will be available on
acceptable terms, if at all. The Company expects that its existing capital
resources, including the net proceeds of this offering and interest thereon,
will be adequate to satisfy the requirements of its current and planned
operations into the second half of 1999.

PRICE RANGE OF COMMON STOCK

The Common Stock of the Company commenced trading publicly on the Nasdaq
National Market on January 28, 1997, and is traded under the symbol CLTR. The
following table sets forth for the periods indicated the high and low sales
prices for the Common Stock:

<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
1997
First Quarter (from January 28, 1997)....................... $13.25 $8.75
Second Quarter.............................................. 12.63 6.50
Third Quarter (through October 8, 1997)..................... 17.50 7.88
</TABLE>

On October 8, 1997, the last reported sale price for the Common Stock on
the Nasdaq National Market was $16.38 per share. As of August 31, 1997 there
were approximately 249 holders of record of the Common Stock.

DIVIDEND POLICY

The Company has never paid a cash dividend on its capital stock and does
not anticipate paying any cash dividends in the foreseeable future.

15
<PAGE> 17

CAPITALIZATION

The following table sets forth the actual capitalization of the Company as
of June 30, 1997 and as adjusted to give effect to the sale by the Company of
the 2,400,000 shares of Common Stock offered hereby at an assumed public
offering price of $16.38 per share and the application of the estimated net
proceeds therefrom. This table should be read in conjunction with the
Consolidated Financial Statements of the Company and the Notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------
ACTUAL(1) AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of equipment financing obligations and debt
facility............................................................ $ 576 $ 576
======== ========
Noncurrent portion of equipment financing obligations and debt
facility............................................................ $ 2,213 $ 2,213
-------- --------

Stockholders' equity:
Preferred Stock, $0.001 par value, 3,000,000 shares authorized; no
shares issued or outstanding..................................... -- --
Common Stock, $0.001 par value, 30,000,000 shares authorized;
10,335,484 shares issued and outstanding actual; 12,735,484
shares issued and outstanding as adjusted........................ 10 13
Additional paid-in capital.......................................... 65,354 102,011
Net unrealized gain on securities available-for-sale................ 20 20
Deferred compensation............................................... (1,370) (1,370)
Deficit accumulated during the development stage.................... (27,131) (27,131)
-------- --------
Total stockholders' equity....................................... 36,883 73,543
-------- --------
Total capitalization........................................ $ 39,096 $ 75,756
======== ========
</TABLE>

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

(1) Excludes 1,079,261 shares of Common Stock reserved for issuance upon
exercise of stock options outstanding at June 30, 1997, at a weighted
average exercise price of $3.97 per share and 24,666 shares of Common Stock
issuable upon the exercise of a warrant outstanding at the same date at an
exercise price of $9.75 per share. At June 30, 1997, options to purchase
123,389 shares of Common Stock and a warrant to purchase 24,666 shares of
Common Stock was immediately exercisable. As of August 31, 1997, options
were outstanding to purchase 1,539,337 shares of Common Stock at a weighted
average exercise price of $5.78 per share and a warrant was outstanding to
purchase 24,666 shares of Common Stock at an exercise price of $9.75 per
share. See "Management -- Equity Incentive Plans."

16
<PAGE> 18

DILUTION

As of June 30, 1997, the Company had a net tangible book value of
approximately $36,874,000 or $3.57 per share of Common Stock. Net tangible book
value represents the amount of total tangible assets less total liabilities
divided by the number of shares of Common Stock outstanding. Without taking into
account any other changes in the net tangible book value after June 30, 1997,
other than to give effect to the receipt by the Company of the net proceeds from
the sale of the 2,400,000 shares of Common Stock offered by the Company hereby
at an assumed public offering price of $16.38 per share, the pro forma net
tangible book value of the Company as of June 30, 1997 would have been
approximately $73,534,000 or $5.77 per share. This represents an immediate
increase in net tangible book value of $2.20 per share to existing stockholders
and an immediate dilution of $10.61 per share to new investors. The following
table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per share............................. $16.38
Net tangible book value before the offering....................... $3.57
Increase per share attributable to new investors.................. 2.20
-----
Pro forma net tangible book value per share after the offering...... 5.77
-----
Dilution per share to new investors................................. $10.61
=====
</TABLE>

The following table summarizes, on a pro forma basis as of June 30, 1997,
the difference between existing stockholders and the new investors with respect
to the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CASH CONSIDERATION
---------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 10,335,484 81.2% $ 66,359,178 62.8% $ 6.42
New investors........... 2,400,000 18.8 39,312,000 37.2 16.38
---------- ----- ---------- -----
Total......... 12,735,484 100.0% $105,671,178 100.0%
========== ===== ========== =====
</TABLE>

Other than as noted above, the foregoing computations assume the exercise
of no stock options or warrants after June 30, 1997. As of June 30, 1997 options
were outstanding to purchase 1,079,261 shares of Common Stock at a weighted
average exercise price of $3.97 per share and 24,666 shares of Common Stock
issuable upon the exercise of a warrant outstanding at the same date at an
exercise price of $9.75 per share. As of August 31, 1997, options were
outstanding to purchase 1,539,337 shares of Common Stock at a weighted average
exercise price of $5.78 per share and a warrant was outstanding to purchase
24,666 shares of Common Stock at an exercise price of $9.75 per share. See
"Management -- Equity Incentive Plans."

17
<PAGE> 19

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of December 31, 1993,
1994, 1995 and 1996 and for each of the two years in the period ended December
31, 1994, the periods from January 1, 1995 to February 15, 1995 and from
inception (February 16, 1995) to December 31, 1995, and for the year ended
December 31, 1996 are derived from the Consolidated Financial Statements of
Coulter Pharmaceutical, Inc. and the Financial Statements of the Antibody
Therapeutics Business Operations of Coulter Corporation that have been audited
by Ernst & Young LLP, independent auditors, which are included elsewhere in this
Prospectus. The statement of operations data for the six months ended June 30,
1996 and 1997 and for the period from inception (February 16, 1995) to June 30,
1997, and the balance sheet data as of June 30, 1997, are derived from unaudited
financial statements of the Company included elsewhere herein and the statement
of operations data for the year ended December 31, 1992 are derived from the
unaudited financial statements of the Antibody Therapeutics Business Operations
of Coulter Corporation not included herein which, in the opinion of management
of the Company and the management of Coulter Corporation, respectively, reflect
all adjustments, consisting only of normal recurring adjustments, that the
Company and Coulter Corporation consider necessary for a fair presentation of
the financial condition and results of operations for these periods. The
operating results for the six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the entire year.

<TABLE>
<CAPTION>
FULL YEAR 1995
---------------------------
ANTIBODY
THERAPEUTICS
BUSINESS
ANTIBODY THERAPEUTICS OPERATIONS
BUSINESS OPERATIONS OF COULTER COMPANY
OF COULTER CORPORATION CORPORATION --------------------------------------------------------------
--------------------------- ------------ INCEPTION INCEPTION
JANUARY 1, (FEBRUARY SIX MONTHS (FEBRUARY
YEAR ENDED DECEMBER 31, 1995 TO 16, 1995) TO YEAR ENDED ENDED JUNE 30, 16, 1995) TO
--------------------------- FEBRUARY 15, DECEMBER 31, DECEMBER 31, ----------------- JUNE 30,
1992 1993 1994 1995 1995 1996 1996 1997 1997
------- ------- ------- ------------ ------------ ------------ ------- ------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF
OPERATIONS DATA:
Operating
expenses:
Research and
development... $ 1,574 $ 1,838 $ 2,798 $ 200 $ 2,539 $ 13,681 $ 4,940 $ 6,583 $ 22,803
General and
administrative... 127 178 288 36 581 2,409 625 3,180 6,170
------- ------- ------- ----- ------ ------- ------- -------
Total
operating
expenses.. 1,701 2,016 3,086 236 3,120 16,090 5,565 9,763 28,973
Interest income,
net........... -- -- -- -- 127 752 254 963 1,842
------- ------- ------- ----- ------ ------- ------- -------
Net loss........ $(1,701) $(2,016) $(3,086) $ (236) $ (2,993) $(15,338) $(5,311) $(8,800) $(27,131)
======= ======= ======= ===== ====== ======= ======= =======
Pro forma net
loss per
share......... $ (0.44) $ (2.03) $ (0.69) $ (1.01)
====== ======= ======= =======
Shares used in
computing pro
forma net loss
per share(1).. 6,798 7,557 7,736 8,725
====== ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
ANTIBODY THERAPEUTICS
BUSINESS OPERATIONS OF
COULTER CORPORATION COMPANY
----------------------------- ----------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1993 1994 1995 1996 1997
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.............................. $ -- $ -- $ 3,438 $ 16,443 $ 41,038
Working capital (deficit).................. (124) (50) 2,878 10,737 37,199
Total assets............................... 109 135 3,628 18,321 43,487
Deficit accumulated during the development
stage.................................... -- -- (2,993) (18,331) (27,131)
Total stockholders' equity................. -- -- 2,997 10,546 36,883
Coulter Corporation's net investment....... (15) 85 -- -- --
</TABLE>

(1) See Note 1 of Notes to December 31, 1996 and June 30, 1997 Consolidated
Financial Statements for an explanation of the determination of shares used
in computing net loss per share.

18
<PAGE> 20

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

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

OVERVIEW

Coulter Pharmaceutical is engaged in the development of novel drugs and
therapies for the treatment of people with cancer. The Company's first product
candidate, Bexxar, is based upon the antibody therapeutics program which
originated in the late 1970s at Coulter Corporation. Coulter Corporation
conducted research and development on the potential therapeutic applications of
the B-1 Antibody as part of a broader antibody therapeutics program. To
accelerate the pace of development of Bexxar and to obtain external sources of
capital for the program, Coulter Corporation decided to create a separate
Company into which it placed its conjugated antibody therapeutics assets. Thus,
in February 1995, Coulter Pharmaceutical was incorporated and acquired worldwide
rights to Bexxar and related intellectual property, know-how and other assets
from Coulter Corporation.

To date, the Company has devoted substantially all of its resources to its
research and development programs. No revenues have been generated from product
sales, and products resulting from the Company's research and development
efforts, if any, are not expected to be available commercially for at least the
next few years. The Company has a limited history of operations and has
experienced significant operating losses to date. The Company expects to incur
significant additional operating losses over the next several years and expects
cumulative losses to increase substantially due to expanded research and
development efforts, preclinical studies and clinical trials and development of
manufacturing, marketing and sales capabilities. The Company expects that losses
will fluctuate from quarter to quarter and that such fluctuations may be
substantial. There can be no assurance that the Company will successfully
develop, manufacture and commercialize its products or ever achieve or sustain
product revenues or profitability. As of June 30, 1997, the Company's
accumulated deficit was approximately $27.1 million.

RESULTS OF OPERATIONS

Comparison of Six Months Ended June 30, 1997 and 1996

Operating Expenses. Research and development expenses increased $1.7
million to $6.6 million for the six-month period ended June 30, 1997 from $4.9
million for the same period in 1996. This increase was due primarily to
increases in staffing and expenditures associated with the development of
Bexxar, including costs of clinical trials and manufacturing expenses. Included
in manufacturing expenses are certain expenses associated with scaled-up
production of monoclonal antibodies and the establishment of a centralized
radiolabeling capability. The Company expects its research and development
expenses to continue to grow, reflecting anticipated increased costs related to
staffing, preclinical studies, clinical trials and manufacturing.

General and administrative expenses were $3.2 million and $0.6 million for
the six-month periods ended June 30, 1997 and 1996, respectively, representing
an increase of $2.6 million. This increase was incurred to support the Company's
facilities and staffing expansion, increased research and development efforts,
increased corporate development activities and related legal and patent
activities.

19
<PAGE> 21

The Company expects its general and administrative expenses to continue to grow
in support of its increased research and development, patent and corporate
development activities, as well as increasing commercialization efforts in
anticipation of potential product sales.

Interest Income, Net. Net interest income for the six-month periods ended
June 30, 1997 and 1996 was $963,000 and $254,000, respectively. This increase
was due to higher average cash, cash equivalents and short-term investment
balances as a result of the Company's sale of Preferred Stock in April 1996 and
the completion of the Company's initial public offering in January 1997.

Comparison of Year Ended December 31, 1996, the Combined Year Ended December 31,
1995 and the Antibody Therapeutics Business Operations of Coulter Corporation
for the Year Ended December 31, 1994

The following table consists of operating data for the year ended December
1994 for the Antibody Therapeutics Business Operations of Coulter Corporation
and for the year ended December 31, 1996 for the Company. For the year ended
December 31, 1995, the table combines data for the Antibody Therapeutics
Business Operations of Coulter Corporation (for the period from January 1, 1995
to February 15, 1995) and the Company (for the period from February 16, 1995 to
December 31, 1995) in order to facilitate management's discussion of financial
results. Certain costs and expenses presented in the statements of operations of
the Antibody Therapeutics Business Operations of Coulter Corporation represent
allocations and Coulter Corporation's management's estimates. As a result, the
statements of operations presented for periods prior to February 16, 1995 are
not strictly comparable to those of subsequent periods and may not be indicative
of the results of operations that would have been achieved had the Antibody
Therapeutics Business Operations of Coulter Corporation operated as a
non-affiliated entity during such periods.

<TABLE>
<CAPTION>
ANTIBODY
THERAPEUTICS
BUSINESS
OPERATIONS
OF COULTER
CORPORATION COMBINED COMPANY
------------ ------------ -----------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996
------------ ------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating expenses:
Research and development............................ $ 2,798 $ 2,739 $ 13,681
General and administrative.......................... 288 617 2,409
------- ------- --------
Total operating expenses.............................. 3,086 3,356 16,090
Interest income....................................... -- 127 752
------- ------- --------
Net loss.............................................. $ (3,086) $ (3,229) $ (15,338)
======= ======= ========
</TABLE>

Operating Expenses. Research and development expenses were $13.7 million
for the year ended December 31, 1996, compared to $2.7 million for the combined
year ended December 31, 1995 and $2.8 million for the year ended December 31,
1994. The $11.0 million increase from the combined year ended December 31, 1995
to the year ended December 31, 1996 was due primarily to increases in staffing
and expenditures associated with the development of Bexxar, including costs of
clinical trials and manufacturing expenses. The $0.1 million decrease in
expenses from the year ended December 31, 1994 to the combined year ended
December 31, 1995 was due primarily to the net effect of decreased expenses
resulting from the elimination of payments to the Dana-Farber Cancer Institute
for prepaid royalties and sponsored research, primarily offset by increases in
staffing and in expenditures associated with the development of Bexxar,
including costs of clinical trials and manufacturing expenses.

General and administrative expenses were $2.4 million for the year ended
December 31, 1996, compared to $0.6 million for the combined year ended December
31, 1995 and $0.3 million for the year ended December 31, 1994. The $1.8 million
increase from the combined year ended December 31, 1995

20
<PAGE> 22

to the year ended December 31, 1996 was incurred to support the Company's
facilities expansion, increased research and development efforts, and related
legal and patent activities. The $0.3 million increase from the year ended
December 31, 1994 to the combined year ended December 31, 1995 primarily
represents expenses associated with the formation of the Company and investment
in infrastructure.

Interest Income, Net. Net interest income was $752,000 for the year ended
December 31, 1996, compared to $127,000 for the combined year ended December 31,
1995 and none for the year ended December 31, 1994. The Company first recorded
interest income in the combined year ended December 31, 1995 which resulted from
investment of the net proceeds from the sale of the Company's Preferred Stock in
1995. The increase from the combined year ended December 31, 1995 to the year
ended December 31, 1996 was due to higher average cash, cash equivalents and
short-term investment balances as a result of the Company's sale of Preferred
Stock in August 1995 and April 1996.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception through June 30, 1997, the Company has financed its
operations primarily through private and public equity financings totaling $63.4
million. In December 1996, the Company entered into a $3.8 million equipment
financing agreement, $0.8 million of which was available at June 30, 1997.

Cash, cash equivalents and short-term investments totaled $41.0 million at
June 30, 1997. In January 1997, the Company completed its initial public
offering of 2,500,000 shares of Common Stock at a price to the public of $12.00
per share resulting in net proceeds to the Company of approximately $27.9
million. Also in January 1997, the Company received an additional $3.1 million
from the exercise of warrants to purchase 385,315 shares of Common Stock. In
February 1997, the Company received an additional $4.2 million from the sale of
375,000 shares of its Common Stock pursuant to the exercise of the Underwriters'
over-allotment option in connection with the Company's initial public offering.

The negative cash flows from operations result primarily from the Company's
net operating losses and are expected to continue and to accelerate in the
foreseeable future. The Company expects to incur substantial and increasing
research and development expenses, including expenses related to additions to
personnel, preclinical studies, clinical trials, manufacturing and
commercialization efforts. The Company will need to raise substantial additional
capital to fund its operations. The Company intends to seek such additional
funding through public or private equity or debt financings as well as through
collaborative arrangements. 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 or obtain funds
through arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies, product candidates
or products that the Company would otherwise seek to develop or commercialize.

Net cash used in operations was $10.2 million for the six-month period
ended June 30, 1997, compared to $3.2 million for the same period in 1996. This
$7.0 million increase is primarily the result of the increased net loss for the
six-month period ended June 30, 1997, as well as a $3.1 million decrease in
accrued liabilities resulting from payments primarily related to manufacturing
activities. Net cash used in investing activities increased to $22.7 million for
the six-month period ended June 30, 1997, from $534,000 for the same period in
1996, primarily resulting from the purchase of $31.0 million in short-term
investments using a portion of the proceeds of the Company's initial public
offering. Maturities of such investments were $9.0 million during the six-month
period ended June 30, 1997. Net cash provided by financing activities increased
to $35.5 million for the six-month period ended June 30, 1997 resulting
primarily from the completion of the Company's initial public offering.

Net cash used in operations was $10.4 million for the year ended December
31, 1996, compared to $2.6 million for the combined year ended December 31,
1995. This increase is primarily the result of the increased net loss for the
period ended December 31, 1996, partially offset by an increase in

21
<PAGE> 23

accrued liabilities. Net cash used in investing activities increased $8.4
million for the year ended December 31, 1996 from $0.1 million for the combined
year ended December 31, 1995 primarily resulting from the purchase of $8.6
million in short-term investments using a portion of the proceeds of the
Company's sale of Preferred Stock in April 1996. The Company's capital
expenditures increased to $0.9 million for the year ended December 31, 1996 from
$0.1 million for the combined year ended December 31, 1995, primarily
representing investment in equipment associated with the centralized
radiolabeling capability. Net cash provided by financing activities increased to
$24.3 million for the year ended December 31, 1996 from $6.2 million for the
combined year ended December 31, 1995, resulting primarily from the sale of the
Company's Preferred Stock in April 1996.

The Company expects that its existing capital resources, including the net
proceeds of this offering and interest thereon, will be adequate to satisfy the
requirements of its current and planned operations into the second half of 1999.
At June 30, 1997, the Company had no material commitments for capital
expenditures. The Company's future capital requirements will depend on a number
of factors, including: the scope and results of preclinical studies and clinical
trials; continued progress of the Company's research and development of
potential products; the cost, timing and outcome of regulatory approvals; the
adequacy of its facilities; the expenses of establishing a sales and marketing
force; the timing and cost of establishment or procurement of requisite
production, radiolabeling and other manufacturing capacities; the cost involved
in preparing, filing, prosecuting, maintaining, defending and enforcing patent
claims; the need to acquire licenses to new technology; the status of
competitive products; and the availability of other financing.

22
<PAGE> 24

BUSINESS

OVERVIEW

Coulter Pharmaceutical is engaged in the development of novel drugs and
therapies for the treatment of people with cancer. The Company currently is
developing a family of cancer therapeutics based upon two platform technologies:
conjugated antibodies and tumor-activated peptide pro-drugs.

The Company's most advanced product candidate, Bexxar, consists of a
monoclonal antibody conjugated with a radioisotope. The Company intends to seek
expedited initial approval of Bexxar for the treatment of low-grade and
transformed low-grade NHL in patients refractory to chemotherapy, while
simultaneously pursuing clinical trials to expand the potential use of Bexxar to
other indications. In a Phase I/II clinical trial of Bexxar, 42 patients with
low-grade or transformed low-grade NHL who had relapsed from previous
chemotherapy regimens achieved an 83% overall response rate, with a 48% complete
response rate and a 35% partial response rate. Of those patients who experienced
a complete response, the average duration of response was 20.2 months as of July
1997. Currently, the Company is conducting a pivotal Phase II/III clinical trial
for its initial indication, low-grade and transformed low-grade NHL in patients
refractory to chemotherapy, which includes 60 patients and a post-treatment
follow-up period of approximately six months. The Company intends to file for
FDA marketing approval of Bexxar for this indication in the second half of 1998.
The Company believes that Bexxar, if successfully developed, could become the
first radioimmunotherapy approved in the United States for the treatment of
people with cancer.

The objective of the Company's second technology platform, the TAP pro-drug
program, is to broaden significantly the therapeutic windows of conventional
chemotherapies. The Company currently is developing a pro-drug version of
doxorubicin to treat certain solid tumor cancers with the objective of
commencing clinical trials in the first half of 1998.

The Company was incorporated under the laws of Delaware in February 1995.
The Company's conjugated antibody program is based upon the antibody
therapeutics program which originated in the late 1970s at Coulter Corporation,
a recognized leader in the field of hematology. Upon its formation in February
1995, the Company acquired worldwide rights to Bexxar and related intellectual
property, know-how and other assets from Coulter Corporation.

BACKGROUND

Cancer: The Disease and Its Treatment

Cancer afflicts millions of people worldwide. It is currently the second
leading cause of death in the United States and are estimated to account for
more than 560,000 deaths in 1997 alone. Some forty percent of Americans are
expected to develop cancer and, despite noteworthy success in the treatment of
some cancers, about half of these cancer patients will die from the disease.

Cancer is a family of more than one hundred diseases that can be
categorized into two broad groups: (i) hematologic or blood-borne malignancies
(e.g., lymphomas and leukemias) and (ii) solid tumor cancers (e.g., lung,
prostate, breast and colon cancers). Both groups are generally characterized

23
<PAGE> 25

by a breakdown of the cellular mechanisms that regulate cell growth and cell
death ("apoptosis") in normal tissues.

Blood-borne cancers involve a disruption of the developmental processes of
blood cell formation, preventing these cells from functioning normally in the
blood and lymph systems. Death from blood-borne cancers ultimately is caused by
infection, organ failure or bleeding. While chemotherapy is the primary
treatment for blood-borne malignancies, many such malignancies are
radiosensitive and some localized lymphomas can be treated with radiation
therapy. Nonetheless, radiation therapy cannot be used in the treatment of most
blood-borne malignancies because the levels of radiation necessary to destroy
diseases that are widely disseminated within the body would result in severe
damage to the bone marrow of the patient, leading to life-threatening
suppression of the immune system, and other serious side effects.

In solid tumor cancers, malignant tumors invade and disrupt nearby tissues
and can also spread throughout the body or "metastasize." The impact of these
tumors on vital organs such as the lungs and the liver frequently leads to
death. Surgery is used to remove solid tumors that are accessible to the surgeon
and can be effective if the cancer has not metastasized. Radiation therapy also
can be employed to irradiate a solid tumor and surrounding tissues and is a
first-line therapy for inoperable tumors, but side effects are a limiting factor
in treatment. Radiation therapy is used frequently in conjunction with surgery
either to reduce the tumor mass prior to surgery or to destroy tumor cells that
may remain at the tumor site after surgery. However, radiation therapy cannot
assure that all tumor cells will be destroyed and has only limited utility for
treating widespread metastases. While surgery and radiation therapy are the
primary treatments for solid tumors, chemotherapy and hormonal treatments often
are used as adjunctive therapies and also are used as primary therapies for
inoperable or metastatic cancers.

Chemotherapy, which typically involves the intravenous administration of
drugs designed to destroy malignant cells, is used for the treatment of both
solid tumors and blood-borne malignancies. Chemotherapeutic drugs generally
interfere with cell division and are therefore more toxic to rapidly dividing
cancer cells. Since cancer cells can often survive the effect of a single drug,
several different drugs usually are given in a combination therapy designed to
target overlapping mechanisms of cellular metabolism to overwhelm the ability of
cancer cells to develop resistance to chemotherapy. Combination chemotherapy is
used widely as first-line therapy for leukemias and lymphomas and has had
considerable success in the treatment of some forms of these cancers.
Nevertheless, partial and even complete remissions obtained through chemotherapy
often are not durable, and the patient relapses when the cancer reappears and/or
resumes its progression within a few months or years of treatment. The relapsed
patient's response typically becomes shorter and shorter with each successive
treatment regimen as the cancer becomes resistant to the chemotherapy.
Eventually, patients may become "refractory" to chemotherapy, meaning that the
length of their response, if any, to treatment is so brief as to lead to the
conclusion that further chemotherapy regimens would be of little or no benefit.

Chemotherapeutic drugs are not sufficiently specific to cancer cells to
avoid affecting normal cells, especially those that are growing rapidly. As a
result, patients often experience debilitating side effects such as nausea,
vomiting, hair loss, anemia and fatigue, as well as life-threatening side
effects such as immune system suppression. Such side effects can limit the
effectiveness of therapy because the clinician must avoid exceeding the maximum
dose of drug that the patient can tolerate. Since dosages must be limited to
avoid unacceptable side effects, it may not be possible to administer
sufficiently high doses of chemotherapeutic drugs to overcome the natural
ability of cancer cells to become resistant. A number of chemotherapeutic agents
originally thought to have promise as cancer drugs have failed in the clinic
because the minimum effective dose exceeded the maximum tolerable dose. Ideally,
a chemotherapeutic agent would have a minimum effective dose well below the
maximum tolerable dose, thereby providing physicians with a wide "therapeutic
window" or a range of doses within which all patients could be treated
effectively.

24
<PAGE> 26

In cases of certain severe blood-borne malignancies and metastatic solid
tumor cancers, bone marrow transplants ("BMT") may be performed to treat
patients who typically have exhausted all other treatment options. Transplants
generally are performed in connection with regimens of aggressive chemotherapy
and/or radiation therapy. While techniques are improving, BMTs are associated
with significant mortality and high rates of morbidity and remain a very
expensive alternative.

Emerging Methods of Treatment

Scientific progress in the elucidation of the underlying molecular biology
of cancer in recent years has yielded a number of promising treatment
approaches. These approaches generally are designed to enhance the specificity
and potency of cancer therapeutics, to improve overall efficacy and to reduce
side effects. The Company believes that two of the most promising of these
approaches are (i) monoclonal antibodies that bind to targeted cells to
stimulate the body's immune system and/or to deliver cytotoxic agents to destroy
malignant cells and (ii) modifications of conventional chemotherapeutic drugs
and drug formulations to improve efficacy by expanding their therapeutic
windows.

Monoclonal Antibodies

The human immune system is composed of specialized cells, including B-cells
and T-cells, that function in the recognition, destruction and elimination of
disease-causing foreign substances and of virally infected or malignant cells.
Human antibodies, which are produced by the B-cells, play a vital role in the
proper functioning of the immune system. They have predetermined functions based
primarily upon their ability to recognize specific antigens, which are molecular
structures on the surface of disease-causing substances or diseased cells. Each
antigen serves as a binding site for the antibody specific to that antigen, and
each disease-causing substance or diseased cell can be identified by its
antigens.

The ability of specific antibodies to bind to specific antigens that are
expressed on the surface of targeted cells, and to trigger an immune system
attack on those cells, provides the theoretical basis for the development of
cancer immunotherapeutics. In the 1970s, researchers discovered techniques to
produce unlimited supplies of identical murine (mouse-derived) antibodies,
referred to as monoclonal antibodies, by cloning antibody producing cells that
were derived from hybridization of a single B-cell. These techniques provided
researchers with the tools to identify and study specific antigens and to
produce potential therapeutics. In principle, once an antigen expressed by
malignant cells has been identified, a monoclonal antibody specific to that
antigen can be created. If an antibody could be produced that binds to an
antigen expressed exclusively by human cancer cells, the antibody would be
specific to only those cells. As a result, the use of such a monoclonal antibody
as a therapeutic would have few, if any, side effects. However, the development
of such a therapy has proven to be more problematic than originally hoped.
Immunotherapies based solely upon monoclonal antibodies have had only limited
clinical effectiveness, particularly in solid tumors where the uneven supply of
blood throughout such tumors prevents adequate exposure of monoclonal antibodies
to malignant cells.

The effectiveness of a particular monoclonal antibody in the treatment of
cancer fundamentally is linked to the characteristics of the antigen to which it
binds. For example, while researchers have identified numerous antigens on
cancer cells that can be recognized by monoclonal antibodies, most of these
antigens are also expressed to some degree by other types of cells. An antibody
to such an antigen may not be sufficiently specific to the cancer cells to avoid
or minimize unintended side effects caused by damage to normal cells. Moreover,
the behavior of antigens following binding with an antibody is quite variable:
the bound antibody-antigen complex can remain on the cell surface, can be
internalized into the cell or can be released from the cell surface. Thus, the
identification of suitable antigens to serve as targets for therapeutic
monoclonal antibodies must account for these and other complexities.

Once a suitable antigen has been identified, researchers have found that
different antibodies binding to different sites on the antigen may not have the
same biological activity, introducing another

25
<PAGE> 27

element of variability. Antibodies also differ in the degree to which they
stimulate an immune system response and in the extent to which they have other
effects on the cell. Even the most effective antibodies have limited biological
activity. In addition, research conducted since the late 1970s has revealed the
importance of selecting the proper type of antibody for use in the intended
therapy. Murine antibodies are appropriate in treatments involving a single dose
or other short treatment regimen where it is beneficial that the antibodies,
together with any therapeutic conjugate, are metabolized and cleared from the
body fairly quickly. Chimerized or humanized antibodies are desirable for
multi-dose or chronic treatment regimens as they reduce the risk of a human
immune response to the antibodies themselves. While these manipulations of the
antibodies have permitted more extended therapeutic regimens in some
circumstances, they do not overcome the inherent limitations in the biological
activity of the underlying antibodies. Thus, despite early expectations, no
monoclonal antibody has yet been shown to be effective as a stand-alone,
first-line therapy in the treatment of cancer.

Researchers have attempted to increase the effectiveness of antibodies by
attaching radioisotopes or other cytotoxic agents for use in
"radioimmunotherapy" or "chemoimmunotherapy," respectively. By using an antibody
to deliver a radioisotope or other cytotoxic agent to the targeted cells, the
effect of the radiation or cytotoxic agent can be concentrated in the immediate
vicinity of malignant cells. Development of effective radioimmunotherapies,
however, presents an additional set of challenges, including the need to select
an appropriate radioisotope for the intended therapy, to develop a reliable
means of linking the radioisotope to the antibody and to devise a therapeutic
protocol that optimizes therapeutic effect while minimizing undesirable side
effects. The development of effective chemoimmunotherapies presents similar
challenges.

Enhancements of Conventional Chemotherapies

A number of organizations have explored methods of improving the delivery
of cytotoxic drugs to tumor cells, with the objective of expanding the
therapeutic window for these drugs in the treatment of cancer. Approaches that
have been commercialized include encapsulation of the drug in a liposome to
regulate the rate at which it is released and impregnation of an implantable
matrix with the drug to enable its delivery locally over time as the matrix
dissolves. Sustained release of cytotoxic drugs using liposomal formulations has
modestly enhanced the therapeutic window for these compounds, but instability of
the formulations and accumulations in the skin have produced undesirable side
effects. Surgical implantation of a matrix is limited inherently to the
treatment of localized tumor masses and is not applicable to blood-borne or
metastatic cancers.

Another approach, the development of pro-drugs, involves the chemical
modification of cytotoxic drugs to render them inactive until they are delivered
to, or into the proximity of, targeted cancer cells. The pro-drug is transformed
into its active form only in the presence of enzymes or other chemicals produced
by the tumor cells. The preferential activation of a pro-drug in the tumor
milieu increases its lethal effect on tumor cells while limiting side effects to
non-malignant tissues. Pro-drug versions of cytotoxic drugs offer the potential
to broaden significantly the therapeutic windows of such drugs beyond that which
can be achieved using existing approaches such as liposomal formulations.
Challenges that have constrained the development of effective pro-drugs to date
have included the inability to construct or identify suitable tumor-specific
activation mechanisms and difficulties in designing pro-drugs that will have
adequate stability in circulation.

COULTER PHARMACEUTICAL'S APPROACH

Coulter Pharmaceutical is developing a family of cancer therapeutics to
address the shortcomings of current therapies based upon two platform
technologies: (i) conjugated antibodies (primarily radioimmunotherapies) and
(ii) tumor-activated peptide pro-drugs.

The Company is developing conjugated antibody therapies to overcome the
inherent limitations of monoclonal antibodies when used as stand-alone
therapeutics and to provide advantages over

26
<PAGE> 28

current chemotherapy and radiation therapy treatments. The Company believes that
Bexxar, its first product candidate, incorporates each of the principal
attributes of an effective radioimmunotherapy for the treatment of NHL: (i) an
antigen specific to B-cells, (ii) a therapeutically active monoclonal antibody,
(iii) the radioisotope appropriate for the disease profile and (iv) an optimized
therapeutic protocol.

In a Phase I/II clinical trial of Bexxar conducted at the University of
Michigan Medical Center, 42 patients with low-grade and transformed low-grade
NHL, who on average had failed more than four prior treatment regimens with
chemotherapy, achieved an 83% overall response rate, with a 48% complete
response rate and a 35% partial response rate. Bexxar is currently the subject
of a pivotal Phase II/III trial for the treatment of low-grade and transformed
low-grade NHL patients refractory to chemotherapy as its initial indication. The
Company also intends to seek approval for other NHL indications based on
additional clinical trials, and has commenced a Phase II clinical trial of
Bexxar as a stand-alone, first-line treatment for patients newly diagnosed with
low-grade NHL. An interim analysis of data from the first 17 patients in this
trial showed a 100% overall response rate, with 41% (seven patients) having
achieved complete responses and 59% (ten patients) having achieved partial
responses. Of the ten partial responders, three were awaiting confirming tests
necessary for classification as complete responders, six had ongoing tumor
shrinkage and one had relapsed. The Company believes that this Phase II trial is
the first clinical trial of a radioimmunotherapy as a stand-alone, first-line
treatment for people with cancer. See "-- Clinical Results and Development
Plan."

The Company believes that radioimmunotherapies will emerge as important
treatments for blood-borne cancers due to the radiosensitivity of these
malignancies and the ready accessibility of the blood and lymph systems to
monoclonal antibodies. Radioimmunotherapy also may become an important
adjunctive therapy for the treatment of certain solid tumor cancers following
surgery, radiation therapy or chemotherapy, where it may be useful in
eliminating circulating and other undetected malignant cells missed by primary
therapies. In the future, the Company intends to use its expertise in conjugated
antibodies to expand beyond radioimmunotherapy to develop effective
chemoimmunotherapies for the treatment of certain cancers.

The Company's second technology platform, its TAP pro-drug technology, has
the potential to broaden significantly the therapeutic windows of conventional
chemotherapies based on the Company's understanding of biochemical mechanisms
involved in metastasis and the identification of a potential means for
exploiting these mechanisms. TAP pro-drug versions of existing cytotoxic drugs
are designed to be activated preferentially in the proximity of metastatic
cancer cells, yet stable in circulation and in normal tissues. Accordingly,
relatively larger quantities of cytotoxic agents are expected to reach and enter
malignant cells as opposed to normal cells, which could permit a significant
increase in maximum tolerated dosages, potentially overcoming drug resistance in
cancer cells. The Company also believes that cytotoxic agents currently
considered too toxic to be used in their unmodified forms may be suitable
candidates to become TAP pro-drugs.

COULTER PHARMACEUTICAL'S STRATEGY

The Company's goal is to develop and commercialize novel drugs and drug
therapies for the treatment of people with cancer based on selected insights
from the emerging understanding of the molecular biology of malignant cells. The
Company's conjugated antibody program is based upon the antibody therapeutics
program which originated in the late 1970s at Coulter Corporation, a recognized
leader in the field of hematology. Upon its formation, Coulter Pharmaceutical
obtained worldwide rights to Bexxar and related intellectual property, as well
as a significant body of expertise pertaining to the selection and development
of suitable antibodies and appropriate radioisotopes (and other cytotoxic
agents) and methods for devising optimized therapies. The Company's TAP pro-drug
program is based upon technology that has been under development at Catholique
Universite de

27
<PAGE> 29

Louvain, Belgium, since 1986 and which was exclusively licensed to the Company
in 1996. Based on this foundation, the Company has established a strategy
comprised of the following primary elements:

Pursue Expedited Initial Approval of Bexxar. The Company intends to seek
expedited FDA marketing approval for Bexxar for the treatment of low-grade and
transformed low-grade NHL in patients refractory to chemotherapy, while
simultaneously pursuing clinical trials to expand the potential use of Bexxar to
other indications. The ongoing pivotal Phase II/III clinical trial of Bexxar is
designed to take advantage of regulatory changes intended to accelerate the
testing, review and approval of therapies for patients who have limited
treatment options. This multi-center trial will include 60 patients and a
post-treatment follow-up period of approximately six months. The Company intends
to file for FDA marketing approval for this indication in the second half of
1998. The Company also intends to seek approval for other NHL indications based
on additional clinical trials, and has commenced a Phase II clinical trial of
Bexxar as a stand-alone, first-line treatment for patients newly diagnosed with
low-grade NHL.

Establish Sales and Marketing Capability. The Company intends to market
and sell its products in the United States through a direct sales force and,
where appropriate, in collaboration with marketing partners. This strategy is
intended to enable the Company to establish a commercial presence in the cancer
therapeutics market with Bexxar, if approved, and to create the capability to
sell other products that it may develop or in-license. The Company believes that
an established sales and marketing capability will enable it to compete
effectively for opportunities to license or distribute later-stage product
candidates and approved products. Internationally, the Company intends to
distribute its products through marketing partners.

Leverage Existing Technology Platforms. The Company intends to develop
additional products based on the lead compounds being generated in its TAP
pro-drug program and by leveraging its expertise in conjugated antibodies to
develop other immunotherapies. In its TAP pro-drug program, the Company
currently is engaged in preclinical development of Super-Leu-Dox, a pro-drug
version of doxorubicin, with the objective of commencing clinical trials in the
first half of 1998. The Company also intends to apply its TAP pro-drug
technology to other classes of cytotoxic drugs, including the vinca alkaloids,
to broaden significantly the therapeutic windows of such agents. The Company is
evaluating potential conjugated antibody therapies for the treatment of other
blood-borne malignancies and selected solid tumor cancers.

Leverage Development Expertise. The Company believes that it has built
substantial product development capabilities and expertise in the cancer field
due in part to the advanced stage of the Bexxar program at the time that it was
obtained from Coulter Corporation. The Company believes it can leverage this
development expertise to accelerate the development of other products in the
cancer therapeutics field. The Company intends to pursue other product
candidates derived from sponsored research or available for in-licensing in both
blood-borne malignancies and solid tumor cancers, particularly in areas that may
be complementary to its existing technology platforms.

Utilize Contract Manufacturers. The Company intends to manufacture its
commercial products through contract manufacturers. This strategy is expected to
(i) accelerate the scale-up of manufacturing processes to commercial scale, (ii)
reduce initial capital investment, (iii) result in competitive manufacturing
costs and (iv) provide access to a wide range of manufacturing technologies.

28
<PAGE> 30

BEXXAR: RADIOIMMUNOTHERAPY FOR NON-HODGKIN'S LYMPHOMA

The Company's first product candidate, Bexxar, is in clinical trials for
the treatment of NHL. The Company believes that Bexxar, if successfully
developed, could become the first radioimmunotherapy approved in the United
States for the treatment of people with cancer.

Non-Hodgkin's Lymphoma and Its Current Treatment

Non-Hodgkin's lymphomas are blood-borne cancers of the immune system, all
sharing the common feature of a proliferation of malignant B-cells. According to
statistics from the National Cancer Institute, approximately 270,000 people are
afflicted with NHL in the United States. More than 53,000 new cases are expected
to be diagnosed in 1997. NHL is currently the sixth leading cause of death among
cancers in the United States and has the second fastest growing mortality rate.

NHL is categorized by histology as either low-, intermediate- or high-grade
disease. These classifications differ significantly with respect to the speed of
disease progression, the pattern of response to and relapse after conventional
chemotherapy and the average life expectancy. In relapsed low-grade patients,
the disease can transform to an intermediate- or high-grade histology
("transformed low-grade NHL"). In the United States, the Company estimates that
approximately 140,000 patients have low-grade or transformed low-grade, 100,000
have intermediate-grade and 30,000 have high-grade NHL. Initially, the Company
is pursuing clinical development of Bexxar for the treatment of patients with
low-grade and transformed low-grade NHL. Patients with low-grade NHL have a
fairly long life expectancy from the time of diagnosis with a median survival of
more than six years. While patients with low-grade and transformed low-grade NHL
can often achieve one or more remissions with chemotherapy, these patients
eventually relapse. Relapsed patients are more difficult to treat as remissions
are harder to achieve and, if achieved, last for shorter periods of time as the
disease becomes more resistant to chemotherapy and/or transforms to an
intermediate- or high-grade histology. Patients ultimately die from the disease
or from complications of treatment. Intermediate-and high-grade NHL are more
rapidly growing forms of the disease. However, approximately one-half of all
intermediate- and high-grade cases can be treated effectively with conventional
chemotherapy.

Description of Bexxar

Bexxar consists of a radioisotope, (131)I, combined with a monoclonal
antibody that recognizes and binds to the CD20 antigen, an antigen commonly
expressed on the surface of B-cells primarily during that stage of their life
cycle when NHL arises. Bexxar is administered to patients in a proprietary
therapeutic protocol consisting of a single, two-dose regimen. The Company
believes that the potential benefits of Bexxar result from the following four
constituent elements:

Proprietary Protocol

Bexxar is administered intravenously in a single, two-dose regimen
consisting of an imaging dose, three gamma camera scans and a therapeutic dose.
The proprietary protocol is flexible: the timing of the gamma camera scans and
of the therapeutic dose can be adjusted to some extent to accommodate the
schedules of clinicians and patients. The chart below depicts an example of
Bexxar's protocol used in the Company's current clinical trials. The imaging
dose consists of 35 mg of B-1 Antibody trace-labeled with 5 millicuries ("mCi")
of (131)I. Immediately after the imaging dose, the patient is scanned with a
gamma camera to provide an image of the initial distribution of radiolabeled
antibody in the patient's body. The patient returns for additional gamma camera
scans on the third and eighth days of the therapy to show how much of the
radiolabeled antibody is bound to targeted cells and how much has been
eliminated from the body at each point in time. This information is used to
calculate the correct therapeutic dose to achieve a total body radiation of 75
centiGray ("cGy"). The amount of radiolabeled antibody needed to achieve this
optimal radiation level ranges from approximately 50 to 200 mCi of (131)I due
to wide patient-to-patient variability in the rates at which the antibody is
eliminated. Both the imaging dose and the therapeutic dose immediately are
preceded by a 450 mg

29
<PAGE> 31

dose of unlabeled B-1 Antibody to improve the targeting of malignant B-cells by
the radiolabeled B-1 Antibody. These pre-doses of unlabeled B-1 Antibody serve
to protect the spleen, liver and other vital organs from excessive radiation
exposure by binding to some of the CD20 antigens on circulating B-cells which
naturally accumulate in these organs. Additionally, the patient takes
non-radioactive iodine drops orally during the course of the therapy to prevent
uptake of (131)I into the thyroid gland.

LOGO

Relying upon the imaging properties of (131)I to account for critical
patient-to-patient variability in the rate at which the antibody is cleared
makes it possible to deliver predictably a total body radiation dose that has
been determined to maximize therapeutic benefit with manageable side effects and
without the need for bone marrow rescue. Because Bexxar is administered in a
single, two-dose regimen and is well tolerated, it is expected to require
relatively little patient follow-up and physician intervention. In contrast,
chemotherapy requires administration of several cytotoxic agents in repeated
cycles of therapy over a six- to eight-month period during which the patient
must be monitored carefully and/or treated for side effects. Until recently,
patients have been kept in the hospital to monitor radiation levels for up to
three days following the therapeutic dose. However, under recently enacted NRC
regulations, some patients have been treated with Bexxar on an outpatient basis.
Although the Company believes that Bexxar can be administered primarily on an
outpatient basis, some hospitals may be required to administer the therapeutic
dose on an inpatient basis under their own or under applicable state or local
regulations. See "-- Radioactive and Other Hazardous Materials."

30
<PAGE> 32

CD20 Antigen

The CD20 antigen is a highly selective cell surface marker found on
B-cells: expression of the CD20 antigen is limited to B-cells, is found on 95%
of such cells and occurs on B-cells primarily during that stage of their life
cycle when NHL arises. The CD20 antigen is not expressed by stem cells, B-cell
progenitor cells or plasma cells; thus, these cells are not targeted by Bexxar.
As a result, while Bexxar targets and destroys both normal and malignant
B-cells, unaffected plasma cells continue to function in the immune system and
B-cell populations can be regenerated after therapy by unaffected B-cell
progenitor cells.

LOGO

In addition, the CD20 antigen is neither internalized by the B-cell nor
released into circulation after it has been bound to the B-1 Antibody, ensuring
that the antibody-radioisotope conjugate will remain in place to destroy the
B-cell.

The B-1 Antibody

The B-1 Antibody exhibits very high specificity for the CD20 antigen and,
because it is a murine sub-class IgG(2a) antibody, is capable of recruiting an
immune response to those B-cells to which it binds. Further, the B-1 Antibody
directly affects cell function, triggering apoptosis in a portion of the B-cells
to which it binds. The use of a murine antibody promotes rapid clearance of
unbound radiolabeled antibody from circulation, which reduces radiotoxicity. Due
to the impaired state of the NHL patient's immune system and the short course of
therapy, the human immune response to the murine antibody has been minimal to
date and has not been a limiting factor in treatment under the protocol.

The B-1 Antibody used in Bexxar was generated in 1978 by the Dana-Farber
Cancer Institute in collaboration with Coulter Corporation. The B-1 Antibody has
been available commercially from Coulter Corporation as a diagnostic reagent
since 1982 and is generally accepted as the reference standard for the
identification of B-cells. Rights to the antibody for therapeutic applications
were transferred to Coulter Pharmaceutical from Coulter Corporation in February
1995.

(131)Iodine Radioisotope

The (131)I radioisotope used in Bexxar was selected over other
radioisotopes because it (i) produces both gamma emissions which permit imaging
for dose optimization and compact beta emissions for a concentrated therapeutic
effect, (ii) provides additional commercial and clinical benefits based on its
relatively long half-life, (iii) has characteristics which reduce the risk of
bone marrow damage without sacrificing efficacy and (iv) has long-established
medical uses in other cancer treatments.

Gamma emissions from (131)I permit dose optimization by enabling clinicians
to calculate the actual clearance rate of radiolabeled antibody for each
patient. Use of the same radioisotope for both the imaging and the therapeutic
dose provides assurance that the clearance rates observed in imaging also will
apply for the therapeutic dose. Having established the patient's actual
clearance rate, the clinician

31
<PAGE> 33

can determine reliably the therapeutic dose which will deliver the optimized
level of total body radiation.

The lower relative energy and short path length of the beta emission of
(131)I concentrate the destructive energy of the radioisotope on the B-cell to
which the antibody is bound and, in a so-called bystander effect, on adjacent
B-cells in the microscopic clusters of malignant cells which are common to NHL.
Moreover, (131)I causes minimal damage to nearby normal tissues in contrast to
other radioisotopes that have longer path length beta emissions which extend too
far beyond the targeted area.

The relatively long half-life of (131)I, approximately eight days, permits
radiolabeling at a centralized facility to ensure consistent quality, increase
the number of clinical sites capable of administering this radioimmunotherapy
and reduce overall manufacturing costs. The eight-day half-life also provides
the therapeutic advantage of exposing bound malignant cells to radiation over a
longer period of time.

When bound to a B-cell, (131)I's lower relative energy and short path
length, together with its relatively long half-life, minimize bone marrow damage
while optimizing the therapeutic effect of the radiation. Further, as the B-1
Antibody is metabolized, the released (131)I radioisotope is eliminated rapidly
and unlike other radioisotopes does not concentrate naturally in the bone
matrix.

(131)Iodine is an inexpensive radioisotope that has long-established
medical uses in other cancer treatments. Hence, medical facilities and
clinicians are accustomed to its handling, use and disposal and already have
developed the appropriate procedures and facilities for its safe therapeutic
application.

Clinical Results and Development Plan

Bexxar was developed initially in the course of an extended Phase I/II dose
escalation clinical trial at the University of Michigan Medical Center which
completed patient enrollment in early 1996. This trial was used to develop and
refine the proprietary therapeutic protocol, to determine the maximum tolerated
dose of total body radiation and to assess the safety and efficacy profile of
treatment with the radiolabeled B-1 Antibody in patients representing a full
range of NHL histologies. Based on the data generated in this clinical trial,
the Company is pursuing clinical development of Bexxar for the treatment of
low-grade and transformed low-grade NHL.

Phase I/II Trial Results

A total of 59 patients were enrolled in the Phase I/II dose escalation
clinical trial. Preliminary data from this clinical trial were first published
in August 1993 in the New England Journal of Medicine and updated, interim
clinical results were reported in July 1996 in the Journal of Clinical Oncology.
Of the 59 patients enrolled in this trial, 42 had low-grade or transformed
low-grade NHL, which are the histologies the Company is pursuing in its clinical
trials. These 42 patients, who had failed on average more than four prior
treatment regimens with chemotherapy, achieved an 83% overall response rate,
with a 48% complete response rate and a 35% partial response rate. This
42-patient cohort included eight patients who previously had received and failed
an autologous bone marrow transplant prior to participation in the clinical
trial. The 42 patients in this cohort received total body radiation doses of up
to 85 cGy in this dose escalation trial. Four out of the 42 patients did not
receive the therapeutic dose of radiolabeled antibody due to their rapidly
deteriorating medical condition or the presence of a human immune response to
the murine antibody, which arose prior to May 1993 in the early stages of the
Phase I/II dose escalation clinical trial under a non-optimized treatment
protocol. Of the 38 patients who received a therapeutic dose, 53% experienced a
complete response with an average duration of response of 20.2 months, with a
range of five to 46 months as of July 1997. As of such date, nine of these
patients were still in complete response.

On an intent-to-treat basis, which includes all enrolled patients whether
treated or not, the 59 enrolled patients achieved an overall response rate of
71%, with a complete response rate of 34% and a

32
<PAGE> 34

37% partial response rate. Of the 17 patients in this trial who had
intermediate- or high-grade NHL, the overall response rate was 41%, with no
complete responders. While this data is encouraging, the Company currently is
pursuing clinical development of Bexxar in low-grade and transformed low-grade
NHL patients.

The following definitions apply to all discussions of the results of the
Company's clinical trials: A "complete response" is defined as the disappearance
of all detectable disease and all signs and symptoms of the disease. A "partial
response" is defined as a greater than 50% reduction in tumor measurement. The
"overall response" rate combines complete response with partial response.
Complete and partial response classifications also require that there be no
progression at any disease site and no new sites of disease.

Bexxar was generally well tolerated by patients. Dose limiting side effects
were hematologic, consisting primarily of reversible declines in blood cell
counts. These toxicities were generally mild to moderate, with no patient
requiring a bone marrow transplant. Other side effects observed were mild and
consisted primarily of temporary flu-like symptoms.

Results presented are based upon interim data which have been submitted to
the FDA, certain portions of which have not yet been published in a peer
reviewed publication. No assurance can be given that the Company's future
clinical results will be consistent with the results of the Phase I/II dose
escalation trial, which was conducted at a single site with a relatively small
number of patients per NHL histology and disease stage and had different
clinical objectives than the Company's current or planned clinical trials. See
"Risk Factors -- Uncertainties Related to Product Development."

Clinical Development of Bexxar

Based on the foregoing results of the Phase I/II clinical trial, the
Company will rely on three additional clinical trials to support an application
to the FDA for the initial marketing approval of Bexxar: (i) an ongoing pivotal
Phase II/III clinical trial for the treatment of patients refractory to
chemotherapy, (ii) a recently completed Phase II dosimetry validation clinical
trial and (iii) an ongoing Phase II clinical trial to evaluate the extent to
which the therapeutic benefit of Bexxar is derived from the combination of the
B-1 Antibody and the radioisotope, in comparison to the B-1 Antibody alone. To
expand the use of Bexxar to other indications, the Company also is conducting a
Phase II clinical trial of Bexxar as a first-line treatment for patients with
low-grade NHL and intends to conduct additional clinical trials in the future.

Pivotal Phase II/III Clinical Trial. The Company's pivotal Phase II/III
clinical trial, which commenced in December 1996, is designed to enroll a total
of 60 patients who have low-grade and transformed low-grade NHL, who are
refractory to chemotherapy and who have not received prior bone marrow
transplants. This multi-center clinical trial is focused on the refractory
segment of this NHL population in an effort to qualify for expedited FDA
approval of Bexxar. Because of the limited treatment options for refractory
patients, each patient's response to Bexxar will be measured against his or her
own response to the previous regimen of chemotherapy, rather than by comparison
to patients in a separate control arm. Based on this primary endpoint, the
Company designed this clinical trial with a relatively short post-treatment
follow-up period of approximately six months. The Company's objective is to
complete enrollment of this trial as early as the end of 1997.

Phase II Dosimetry Validation Clinical Trial. The Company completed a
dosimetry validation clinical trial in a total of 47 patients with relapsed or
refractory low-grade and transformed low-grade NHL in order to demonstrate that
Bexxar's treatment protocol could be implemented consistently at multiple
clinical sites. During this trial, the Company refined its proprietary protocol
to streamline the therapeutic dose calculation, establishing that accurate
antibody elimination rates could be determined from three gamma camera scans.
Based upon interim data from this clinical trial showing consistent
implementation of the treatment protocol, the FDA agreed in September 1996 that
this clinical trial could be ended. The Company then was able to commence its
pivotal Phase II/III clinical trial in December 1996.

33
<PAGE> 35

Phase II Unlabeled Versus Labeled Antibody Clinical Trial. The Company is
conducting a multi-center Phase II clinical trial in 78 patients with relapsed,
low-grade and transformed low-grade NHL. Patients are randomized into two
groups: one group receives Bexxar pursuant to the proprietary protocol; the
other group receives two 485 mg doses of unlabeled B-1 Antibody eight days apart
in a treatment regimen that is parallel to Bexxar. The objective of this
clinical trial is to assess the incremental clinical activity from radiolabeling
the B-1 Antibody as compared to the clinical activity of the unlabeled B-1
Antibody alone. Administration of the unlabeled B-1 Antibody has not been
designed for use as a stand-alone therapy, nor has the treatment regimen been
optimized for such use. The Company's objective is to complete enrollment of
patients in this clinical trial in the second half of 1998.

Phase II First-Line, Stand-Alone Treatment Clinical Trial. The Company
currently is conducting a single-center Phase II trial in 60 newly diagnosed
low-grade NHL patients. An interim analysis of data from the first 17 patients
was presented at the American Society of Clinical Oncology meeting in May 1997.
All 17 patients (100%) had responded to Bexxar, with 41% (seven patients) having
achieved complete responses and 59% (ten patients) having achieved partial
responses. Of the ten partial responders, three were awaiting confirming tests
necessary for classification as complete responders, six had ongoing tumor
shrinkage and one had relapsed. All side-effects were mild to moderate and self-
limited. The Company's objective is to complete enrollment of patients in this
clinical trial in the second half of 1998.

The ability of the Company to conduct and complete its ongoing and planned
clinical trials in a timely manner is subject to a number of uncertainties and
risks, including the rate at which patients can be accrued in each clinical
trial, the Company's ability to obtain necessary regulatory approvals, the
capacity of the Company's contract manufacturers to supply unlabeled and
radiolabeled B-1 Antibody as needed for patient treatment and the occurrence of
unanticipated adverse events. Any suspension or delay of one or more of such
clinical trials could have a material adverse effect on the Company's business,
financial condition and results of operation. See "Risk Factors -- Uncertainties
Related to Product Development," "-- Government Regulation; No Assurance of
Regulatory Approvals," and "-- Dependence on Suppliers; Manufacturing and
Scale-up Risk."

Other Clinical Trials

The radiolabeled B-1 Antibody has been the subject of other clinical trials
to assess the efficacy of using the radiolabeled B-1 Antibody to deliver the
high levels of radiation necessary to prepare patients for autologous bone
marrow transplants. The conventional preparation for autologous bone marrow
transplants is chemotherapy and total body irradiation. These clinical trials
were designed to demonstrate improved tolerability, response rate and duration
of response.

The first of two clinical trials conducted at the University of Washington
Cancer Center and the Fred Hutchinson Cancer Research Center tested radiolabeled
B-1 Antibody as a single agent to prepare patients for an autologous bone marrow
transplant by achieving a total body radiation level of up to 570 cGy (over
seven times Bexxar's dose). As reported in The Lancet in August 1995, of the 21
patients receiving the full radiotherapeutic regimen, the overall response rate
was 86%, with a 76% complete response rate and a 10% partial response rate. High
incidences of radiotoxicity-related side effects were reported due to the
extreme dosages employed. Interim data from this clinical trial were published
in the New England Journal of Medicine in October 1993.

The second clinical trial, currently ongoing, is designed to test the
combination of similarly high doses of radiolabeled B-1 Antibody and standard
doses of chemotherapy in preparation for autologous bone marrow transplant. This
clinical trial has enrolled 36 patients since its commencement in January 1995.
Data from this clinical trial have not yet appeared in a peer reviewed
publication.

In addition, a Phase II dose escalation clinical trial has commenced at the
University of Nebraska for the combined use of radiolabeled B-1 Antibody and
standard chemotherapy as preparation for autologous bone marrow transplant.

34
<PAGE> 36

TAP PRO-DRUG PLATFORM

The Company's second technology platform, its tumor-activated peptide
pro-drug technology, has the potential to broaden significantly the therapeutic
window of cytotoxic agents. The TAP pro-drug technology is based upon an
understanding of the biochemical mechanisms utilized by cancer cells to
metastasize and the identification of a potential means for exploiting these
mechanisms and is being developed in collaboration with the Catholique
Universite de Louvain, Belgium. TAP pro-drugs are designed to be (i) activated
preferentially at the tumor site by enzymes secreted by the tumor, (ii) stable
in circulation and in normal tissues and (iii) unable to penetrate normal cells
or malignant cells until activated. As a result, relatively larger quantities of
cytotoxic agents are expected to reach and enter malignant cells as opposed to
normal cells, which could permit a significant increase in maximum tolerated
dosages, potentially overcoming drug resistance in cancer cells. The Company's
lead preclinical pro-drug candidate is a pro-drug version of doxorubicin known
as Super-Leu-Dox. Doxorubicin is an off-patent chemotherapeutic drug which
currently is used in the treatment of a number of solid tumor cancers, including
breast, prostrate, ovarian and soft-tissue sarcoma cancers.

SUPER LEU DOX

As depicted in the graphic above, Super-Leu-Dox is based on a proprietary
peptide of four amino acids (a "tetrapeptide") that can be linked to
doxorubicin's active site. In the two-step activation process, (1) the
extracellular tumor enzyme cleaves three amino acids from the tetrapeptide
leaving a leucine amino acid-doxorubicin conjugate that is able to penetrate
cells. (2) The resulting conjugate is then capable of entering cells. Since this
first activation step occurs in the immediate vicinity of tumor cells that are
secreting the enzyme, the probability that the cytotoxic drug will enter tumor
cells as opposed to normal cells is increased. Moreover, the conjugate remains
inactive inside the cells until (3) the remaining leucine is removed from
doxorubicin's active site by an intracellular enzyme. Although it is expressed
in both normal and tumor cells, this intracellular enzyme is present in tumor
cells in concentrations three to five times higher than in normal cells. As a
result, (4) the doxorubicin is activated to a greater extent in tumor cells
relative to normal cells.

35
<PAGE> 37

This two-step activation process is designed to produce a significantly
higher ratio of active to inactive doxorubicin in cancer cells relative to
normal cells. In in vitro studies of Super-Leu-Dox, researchers have found that
the concentration of activated to inactivated doxorubicin in tumor cells was 40
times higher than in normal cells. These results, if confirmed in clinical
trials, offer the potential to improve significantly the therapeutic window of
doxorubicin. The Company currently plans to complete preclinical development of
Super-Leu-Dox and to commence clinical trials during the first half of 1998.

Prior to the licensing of the TAP pro-drug technology by Coulter
Pharmaceutical, an earlier generation leucine-doxorubicin conjugate was tested
as a stand-alone therapy for the treatment of solid tumors in two separate dose
escalation clinical trials in Europe. A total of 59 patients were enrolled in
these clinical trials, and patients safely tolerated doses well in excess of
those associated with unmodified doxorubicin. Results from these clinical
trials, along with data from preclinical studies, will be used by the Company to
select the initial indication to pursue in clinical trials of Super-Leu-Dox.
Selection of the particular indication or indications to be evaluated in such
clinical trials has not been finalized.

While the Company will focus initially on previously approved
chemotherapeutic drugs, it also is evaluating TAP pro-drug versions of cytotoxic
agents currently considered too toxic to be used in their unmodified forms. The
Company believes that the TAP pro-drug technology potentially can be applied to
several classes of cytotoxic agents, including the vinca alkaloids, which are
used commonly to treat blood-borne malignancies and some solid tumors. The
Company also plans to develop and evaluate other peptide structures for possible
use in pro-drug versions of cytotoxic agents and other cancer therapeutics.

Under its agreement with Catholique Universite de Louvain, Belgium, the
Company has secured an exclusive license to the intellectual property underlying
the program and will pay royalties on sales of licensed products. The agreement
also provides for specified minimum payments, including one payment that will be
due if the Company should elect to relocate the program outside of Belgium. The
amounts of these payments are not material and, in any event, the Company does
not intend to relocate the research program.

MANUFACTURING

The Company intends to utilize contract manufacturers for most of the
preclinical and clinical requirements for its potential products and for all of
its commercial needs. This strategy is expected to (i) accelerate the scale-up
of manufacturing processes to commercial scale, (ii) reduce initial capital
investment, (iii) result in competitive manufacturing costs, and (iv) provide
access to a wide range of manufacturing technologies.

Pursuant to a development contract with the Company, Lonza now is supplying
the B-1 Antibody for use in ongoing clinical trials and to meet initial
commercial requirements. The Company's contract with Lonza is structured on a
staged basis, with specified payments due upon Lonza's satisfactory completion
of particular steps in the re-cloning and production scale-up process. Aggregate
commitments under this contract are approximately $9.0 million, of which
approximately $4.2 million had been incurred and expensed through September 26,
1997. The Company will make purchases of material from Lonza pursuant to
purchase orders to be issued from time to time based on the Company's needs. The
level of purchases that will be made from Lonza during the course of the program
is currently unknown. The Company is negotiating a commercial supply agreement
with Lonza, although no assurance can be given that the agreement will be
entered into in a timely manner, if at all, or that clinical trials or
commercial supply will not be delayed or disrupted as a result.

Radiolabeling currently is conducted at Nordion's centralized radiolabeling
facility. The Company has a development contract with Nordion that is structured
on a cost-plus-a-percentage-of-cost basis and provides a framework for the
negotiation of separate facilities and supply agreements. The Company paid a
total of $970,000 to Nordion under this development contract. The Company and

36
<PAGE> 38

Nordion currently are negotiating an agreement for supply of the radiolabeled
B-1 Antibody for both clinical trials and commercial sale. In the interim, the
Company is procuring radiolabeling services from Nordion on a purchase order
basis. There can be no assurance that the contract with Nordion will be entered
into in a timely manner, if at all, or that clinical trials or commercial supply
will not be delayed or disrupted as a result.

Prior to August 1997, the Company obtained B-1 Antibody from an inventory
produced by Coulter Corporation, and radiolabeling was performed by
radiopharmacies at the individual clinical trial sites. In order to begin using
the centrally radiolabeled B-1 Antibody from Nordion, the Company filed and the
FDA cleared an IND amendment to establish that the centrally radiolabeled
material was biologically and biochemically equivalent to the on-site
radiolabeled B-1 Antibody. The Company is collecting data from its ongoing
clinical trials to be filed with the FDA to establish clinical comparability
between the centrally and on-site radiolabeled B-1 Antibody, however, there can
be no assurance that it will be able to establish clinical comparability. See
"Risk Factors -- Dependence on Suppliers; Manufacturing and Scale-up Risk."

If Bexxar is successfully developed and is approved for marketing by the
FDA, the Company expects that production for commercialization will consist of
(i) production of bulk B-1 Antibody by Lonza, (ii) filling and labeling of
individual product vials with B-1 Antibody by another third-party supplier, and
(iii) radiolabeling of B-1 Antibody at Nordion. While the Company plans to
develop additional suppliers of these services, it expects to rely on its
current suppliers for all or a significant portion of its requirements for
Bexxar for the foreseeable future. Radiolabeled antibody cannot be stockpiled
against future shortages due to the eight-day half-life of the (131)I
radioisotope. Accordingly, any change in the Company's existing or planned
contractual relationships with, or interruption in supply from, its third-party
suppliers could adversely affect the Company's ability to complete its ongoing
clinical trials and to market Bexxar, if approved. Any such change or
interruption would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Risk Factors -- Dependence
on Suppliers; Manufacturing and Scale-up Risk."

The Company believes that the products it expects to develop in its TAP
pro-drug program can be produced with standard chemical synthesis processes and
expects to utilize third parties to meet clinical trial and any commercial
requirements for these products. The Company is in discussions with potential
manufacturers of Super-Leu-Dox, its initial pro-drug product candidate.

MARKETING AND SALES

The Company intends to market and sell its products in the United States
through a direct sales force and, where appropriate, in collaboration with
marketing partners. This strategy is intended to enable the Company to establish
a commercial presence in the cancer therapeutics market with Bexxar, if
approved, and to create the capability to sell other products that it may
develop or in-license. The sales force is expected to initially call upon
oncologists, hematologists and nuclear medicine physicians in connection with
the sale of Bexxar. The Company initially will focus its sales force on those
physicians who treat the largest volume of NHL patients. These physicians
generally are concentrated in large metropolitan areas. Because of the
characteristics of Bexxar, the target physician must have access to a facility
with radiopharmaceutical and gamma camera scan capabilities. The Company
believes such facilities generally are available in large metropolitan areas
such that a significant portion of physicians who treat NHL patients will be
able to prescribe Bexxar. The Company intends to distribute its products
internationally through marketing partners. The Company has not yet identified
or entered into any agreements with any such partners, and there is no assurance
that it will be able to do so in a timely manner, if at all. The Company has not
yet established a sales force in North America, and there is no assurance that
it will be able to do so in a timely or cost effective manner, if at all.

The current purchasers of cancer therapeutics are hospitals, clinics,
physicians, pharmacies, large HMOs and state and federal governments.
Historically, physicians made treatment decisions and prescribed therapeutics
which then were dispensed through the clinic, hospital or pharmacy.

37
<PAGE> 39

However, the United States health care system is undergoing significant changes
and the decision-making authority of the physician varies. These changes may
make it necessary for the Company to alter its strategy prior to launch of
Bexxar or even after launch and could affect adversely the ability of the
Company to generate revenues.

The Company's ability to market effectively may be affected adversely by a
number of factors including physicians' resistance to change from established
methods of treatment such as chemotherapy or radiation therapy and the special
handling and administration requirements of a radioimmunotherapy. Further, the
Company can provide no assurance as to whether Bexxar will be priced
competitively compared to existing methods of treatment such as chemotherapy and
radiation therapy. See "Risk Factors -- Uncertainty of Market Acceptance of
Bexxar."

PHARMACEUTICAL PRICING AND REIMBURSEMENT

Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. Initiatives to reduce
the federal deficit and to reform health care delivery are increasing
cost-containment efforts. The Company anticipates that Congress, state
legislatures and the private sector will continue to review and assess
alternative benefits, controls on health care spending through limitations on
the growth of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups, price controls on
pharmaceuticals and other fundamental changes to the health care delivery
system. Any such proposed or actual changes could cause the Company to limit or
eliminate spending on development projects and affect the Company's ultimate
profitability. Legislative debate is expected to continue in the future, and
market forces are expected to drive reductions of health care costs. The Company
cannot predict what impact that adoption of any federal or state health care
reform measures or future private sector reforms may have on its business.

In both domestic and foreign markets, sales of the Company's proposed
products will depend in part upon the availability of reimbursement from
third-party payors, such as government health administration authorities,
managed care providers, private health insurers and other organizations. In
addition, other third-party payors increasingly are challenging the price and
cost effectiveness of medical products and services. Significant uncertainty
exists as to the reimbursement status of newly approved health care products.
Bexxar, as potentially the first radioimmunotherapy for cancer, faces particular
uncertainties due to the absence of a comparable, approved therapy to serve as a
model for pricing and reimbursement decisions. There can be no assurance that
the Company's product candidates will be considered cost effective or that
adequate third-party reimbursement will be available to enable the Company to
maintain price levels sufficient to realize an appropriate return on its
investment in product development. Further, there can be no assurance that
products can be manufactured on a commercial scale, for a cost that will enable
the Company to price its products within reimbursable rates. Legislation and
regulations affecting the pricing of pharmaceuticals may change before the
Company's proposed products are approved for marketing. Adoption of such
legislation could further limit reimbursement for medical products. If adequate
coverage and reimbursement rates are not provided by the government and
third-party payors for the Company's products, the market acceptance of these
products would be adversely affected, which would have a material adverse effect
on the Company's business, financial condition and results of operations.

GOVERNMENT REGULATION

The testing, manufacturing, labeling, advertising, promotion, export and
marketing, among other things, of the Company's proposed products are subject to
extensive regulation by governmental authorities in the United States and other
countries. In the United States, pharmaceutical products are regulated by the
Food and Drug Administration under the Federal Food, Drug and Cosmetic Act and
other laws, including, in the case of biologics, the Public Health Service Act.
At the present time, the Company believes that Bexxar and other
immunotherapeutics that it may develop will be regulated by

38
<PAGE> 40

the FDA as biologics and that other products to be developed by the Company,
including Super-Leu-Dox and other TAP pro-drugs, are likely to be regulated as
drugs.

The steps required before a drug or biologic may be approved for marketing
in the United States generally include (i) preclinical laboratory tests and
animal tests, (ii) the submission to the FDA of an IND for human clinical
testing, which must become effective before human clinical trials may commence,
(iii) adequate and well-controlled human clinical trials to establish the safety
and efficacy of the product, (iv) in the case of a biologic, the submission to
the FDA of a Biologic License Application ("BLA"), or in the alternative a
Product License Application ("PLA") for the product and an Establishment License
Application ("ELA") for the facility at which the product is manufactured, or in
the case of a drug, a New Drug Application ("NDA"), (v) FDA review of the BLA
(or PLA/ELA) or NDA and (vi) satisfactory completion of an FDA inspection of the
manufacturing facilities at which the product is made to assess compliance with
GMP. The testing and approval process requires substantial time, effort and
financial resources, and there can be no assurance that any approval will be
granted on a timely basis, if at all.

Preclinical studies include laboratory evaluation of the product, as well
as animal studies to assess the potential safety and efficacy of the product.
The results of the preclinical studies, together with manufacturing information
and analytical data, are submitted to the FDA as part of the IND, which must
become effective before clinical trials may be commenced. The IND automatically
will become effective thirty days after receipt by the FDA, unless the FDA
before that time raises concerns or questions about the conduct of the trials as
outlined in the IND. In such case, the IND sponsor and the FDA must resolve any
outstanding concerns before clinical trials can proceed. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials.

Clinical trials involve the administration of the investigational products
to healthy volunteers or patients under the supervision of a qualified principal
investigator. Further, each clinical trial must be reviewed and approved by an
independent Institutional Review Board ("IRB") at each institution at which the
study will be conducted. The IRB will consider, among other things, ethical
factors, the safety of human subjects and the possible liability of the
institution.

Clinical trials typically are conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the drug into human
subjects, the drug is usually tested for safety (adverse effects), dosage
tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
Phase II clinical trials usually involve studies in a limited patient population
to (i) evaluate the efficacy of the drug for specific, targeted indications,
(ii) determine dosage tolerance and optimal dosage and (iii) identify possible
adverse effects and safety risks. Phase III clinical trials generally further
evaluate clinical efficacy and test further for safety within an expanded
patient population and at multiple clinical sites. Phase IV clinical trials are
conducted after approval to gain additional experience from the treatment of
patients in the intended therapeutic indication and to document a clinical
benefit in the case of drugs approved under accelerated approval regulations. If
the FDA approves a product while a company has ongoing clinical trials that were
not necessary for approval, a company may be able to use the data from these
clinical trials to meet all or part of any Phase IV clinical trial requirement.
These clinical trials are often referred to as "Phase III/IV post-approval
clinical trials." Failure to conduct promptly Phase IV clinical trials could
result in withdrawal of approval for products approved under accelerated
approval regulations.

In the case of products for severe or life-threatening diseases, the
initial clinical trials are sometimes done in patients rather than in healthy
volunteers. Since these patients are afflicted already with the target disease,
it is possible that such clinical trials may provide evidence of efficacy
traditionally obtained in Phase II clinical trials. These trials are referred to
frequently as Phase I/II trials. There can be no assurance that Phase I, Phase
II or Phase III testing will be completed successfully within any specific time
period, if at all, with respect to any of the Company's product candidates.
Furthermore, the FDA may suspend clinical trials at any time on various grounds,
including a finding that the subjects or patients are being exposed to an
unacceptable health risk.

39
<PAGE> 41

The results of the preclinical studies and clinical trials, together with
detailed information on the manufacture and composition of the product, are
submitted to the FDA in the form of a BLA requesting approval to market the
product. Before approving a BLA or NDA, the FDA will inspect the facilities at
which the product is manufactured and will not approve the product unless the
manufacturing facility is in GMP compliance. The FDA may delay approval of a BLA
or NDA if applicable regulatory criteria are not satisfied, require additional
testing or information, and/or require postmarketing testing and surveillance to
monitor safety or efficacy of a product. There can be no assurance that FDA
approval of any BLA or NDA submitted by the Company will be granted on a timely
basis, if at all. Also, if regulatory approval of a product is granted, such
approval may entail limitations on the indicated uses for which such product may
be marketed.

The Company also will be subject to a variety of foreign regulations
governing clinical trials and sales of its products. Whether or not FDA approval
has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must be obtained prior to the commencement of
marketing of the product in those countries. The approval process varies from
country to country and the time needed to secure approval may be longer or
shorter than that required for FDA approval.

Clinton-Kessler Cancer Initiative

In March 1996, the FDA announced a new policy intended to accelerate the
approval process for cancer therapies addressing disease conditions in which
patients have limited treatment options. The Company may elect to seek approval
of Bexxar under this accelerated approval process. Significant uncertainty
exists as to the extent to which such initiative will result in accelerated
review and approval. Further, the FDA has not made available comprehensive
guidelines with respect to this initiative, and it retains considerable
discretion in determining eligibility for accelerated review and approval and is
not bound by discussions that an applicant may have with FDA staff. Accordingly,
the FDA could employ such discretion to deny eligibility of Bexxar as a
candidate for accelerated review or require additional clinical trials or other
information before approving Bexxar. The Company cannot predict the ultimate
impact, if any, of the new approval process on the timing or likelihood of FDA
approval of Bexxar or any of its other potential products.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a "rare disease or condition," which is generally a
disease or condition that affects fewer than 200,000 individuals in the United
States. Orphan drug designation must be requested before submitting a BLA. After
the FDA grants orphan drug designation, the generic identity of the therapeutic
agent and its potential orphan use are disclosed publicly by the FDA. Orphan
drug designation does not convey any advantage in, or shorten the duration of,
the regulatory review and approval process. If a product that has orphan drug
designation subsequently receives FDA approval for the indication for which it
has such designation, the product is entitled to orphan exclusivity, i.e., the
FDA may not approve any other applications to market the same drug for the same
indication, except in very limited circumstances, for seven years. Bexxar has
received orphan drug designation from the FDA. Although the FDA recently decided
to remove NHL from the list of diseases for which orphan drug designation may be
obtained, the previous designation of Bexxar will not be affected. In any event,
there can be no assurance that competitors will not receive approval of other,
different drugs or biologics for low-grade NHL. Thus, although obtaining FDA
approval to market a product with orphan drug exclusivity can be advantageous,
there can be no assurance that it would provide the Company with a material
commercial benefit.

RADIOACTIVE AND OTHER HAZARDOUS MATERIALS

The manufacturing and administration of Bexxar requires the handling, use
and disposal of (131)I, a radioactive isotope of iodine. These activities must
comply with various state and federal regulations, regarding the handling and
use of radioactive materials. Violations of these regulations could

40
<PAGE> 42

significantly delay completion of clinical trials and commercialization of
Bexxar. For its ongoing clinical trials and for commercial-scale production, the
Company relies on Nordion to radiolabel the B-1 Antibody with (131)I at a single
location in Canada. Violations of safety regulations could occur and the risk of
accidental contamination or injury cannot be eliminated completely. In the event
of any such noncompliance or accident, the supply of radiolabeled B-1 Antibody
for use in clinical trials or commercially could be interrupted, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "-- Manufacturing."

The administration of Bexxar entails the introduction of radioactive
materials into patients. These patients emit radioactivity at levels that pose a
safety concern to others around them, especially healthcare workers for whom the
cumulative effect of repeated exposure to radioactivity is of particular
concern. These concerns are addressed in regulations promulgated by the NRC, as
well as by various state and local governments and individual hospitals.
Generally, patients who emit radioactivity above specified levels were required
to be admitted to the hospital, where they could be isolated from others until
radiation fell to acceptable levels. The NRC recently enacted regulations that
have made it easier for hospitals to treat patients with radioactive materials
on an outpatient basis. Under these regulations, Bexxar may be administered on
an outpatient basis in most cases. Although state and local governments often
follow the lead of the NRC, many currently do not, and there can be no assurance
that they will do so or that patients receiving Bexxar will not have to remain
in the hospital for one to three days following administration of the
therapeutic dose, adding to the overall cost of the therapy.

The Company also expects to use hazardous chemicals and radioactive
compounds in its ongoing research activities. Although the Company believes that
safety procedures for handling and disposing of such materials will comply with
the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. The Company could be held liable for any damages that result from
such an accident, as well as for unexpected remedial costs and penalties that
may result from any violation of applicable regulations, which could result in a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company may incur substantial costs to
comply with environmental regulations.

PATENTS AND OTHER INTELLECTUAL PROPERTY

The Company believes that patent and trade secret protection is important
to its business and that its future will depend in part on its ability to
maintain its technology licenses, protect its trade secrets, secure additional
patents and operate without infringing the proprietary rights of others. The
Company currently holds exclusive rights to one issued United States patent and
several patent applications that relate to the Bexxar therapeutic protocol. The
Company also holds exclusive rights to a United States patent application
relating to the manufacture of Bexxar and to several patent applications
relating to the dosimetry methods employed in the administration of Bexxar. The
Company also holds an exclusive license to patent applications filed in the
United States and Europe relating to its TAP pro-drug program.

The pharmaceutical and biotechnology fields are characterized by a large
number of patent filings. A substantial number of patents have already been
issued to other pharmaceutical and biotechnology companies. Research has been
conducted for many years in the monoclonal antibody field by pharmaceutical and
biotechnology companies and other organizations. Competitors may have filed
applications for or have been issued patents and may obtain additional patents
and proprietary rights related to products or processes competitive with or
similar to those of the Company. Patent applications are maintained in secrecy
for a period after filing. Publication of discoveries in the scientific or
patent literature tends to lag behind actual discoveries and the filing of
related patent applications. The Company may not be aware of all of the patents
potentially adverse to the Company's interest that may have been issued to other
companies, research or academic institutions, or others. No assurances can be
given that such patents do not exist, have not been filed, or could not be filed
or issued, which contain claims relating to the Company's technology, products
or processes.

41
<PAGE> 43

To date, no consistent policy has emerged regarding the breadth of claims
allowed in pharmaceutical and biotechnology patents. If patents have been or are
issued to others containing preclusive or conflicting claims and such claims are
ultimately determined to be valid, the Company may be required to obtain
licenses to one or more of such patents or to develop or obtain alternative
technology. The Company is aware of various patents that have been issued to
others that pertain to a portion of the Company's prospective business; however,
the Company believes that it does not infringe any patents that ultimately would
be determined to be valid. There can be no assurance that patents do not exist
in the United States or in other foreign countries or that patents will not be
issued to third parties that contain preclusive or conflicting claims with
respect to Bexxar or any of the Company's other product candidates or programs.
Commercialization of monoclonal antibody-based products may require licensing
and/or cross-licensing of one or more patents with other organizations in the
field. There can be no assurance that the licenses that might be required for
the Company's processes or products would be available on commercially
acceptable terms, if at all.

Patents issued and patent applications filed internationally relating to
biologics are numerous and there can be no assurance that current and potential
competitors and other third parties have not filed or in the future will not
file applications for, or have not received or in the future will not receive,
patents or obtain additional proprietary rights relating to products or
processes used or proposed to be used by the Company. Moreover, there is certain
subject matter which is patentable in the United States and not generally
patentable outside of the United States. Statutory differences in patentable
subject matter may limit the protection the Company can obtain on some of its
inventions outside of the United States. For example, methods of treating humans
are not patentable in many countries outside of the United States. These and/or
other issues may prevent the Company from obtaining patent protection outside of
the United States which would have a material adverse effect on the Company's
business, financial condition and results of operations.

Rights to use the name "Coulter Pharmaceutical, Inc." are licensed from
Coulter Corporation.

COMPETITION

The pharmaceutical and biotechnology industries are intensely competitive.
Any product candidate developed by the Company would compete with existing drugs
and therapies. There are many pharmaceutical companies, biotechnology companies,
public and private universities and research organizations actively engaged in
research and development of products for the treatment of people with cancer.
Many of these organizations have financial, technical, manufacturing and
marketing resources greater than those of the Company. Several of them have
developed or are

42
<PAGE> 44

developing therapies that could be used for treatment of the same diseases
targeted by the Company. One competitor known to the Company recently received a
recommendation for approval from an FDA Advisory Panel for a non-radiolabeled
chimeric antibody for the treatment of low-grade NHL. If a competing company
were to develop or acquire rights to a more efficient or safer cancer therapy
for treatment of the same diseases targeted by the Company, or one which offers
significantly lower costs of treatment, the Company's business, financial
condition and results of operations could be materially adversely affected.

The Company believes that competition in the development and marketing of
new cancer therapies will be based primarily on product efficacy and safety,
time to market and price. To the extent the Company's product programs are
successful, it also intends to rely to some degree on patents and other
intellectual property and orphan drug designations to protect its products from
competition.

The Company believes that its product development programs will be subject
to significant competition from companies utilizing alternative technologies as
well as to increasing competition from companies that develop and apply
technologies similar to the Company's technologies. Other companies may succeed
in developing products earlier than the Company, obtaining approvals for such
products from the FDA more rapidly than the Company or developing products that
are safer and more effective than those under development or proposed to be
developed by the Company. There can be no assurance that research and
development by others will not render the Company's technology or potential
products obsolete or non-competitive or result in treatments superior to any
therapy developed by the Company, or that any therapy developed by the Company
will be preferred to any existing or newly developed technologies.

PRODUCT LIABILITY AND INSURANCE

The manufacture and sale of human therapeutic products involve an inherent
risk of product liability claims and associated adverse publicity. The Company
has only limited product liability insurance for clinical trials and no
commercial product liability insurance. There can be no assurance that the
Company will be able to maintain existing insurance or obtain additional product
liability insurance on acceptable terms or with adequate coverage against
potential liabilities. Such insurance is expensive, difficult to obtain and may
not be available in the future on acceptable terms, if at all. An inability to
obtain sufficient insurance coverage on reasonable terms or to otherwise protect
against potential product liability claims brought against the Company in excess
of its insurance coverage, if any, or a product recall could have a material
adverse effect upon the Company's business, financial condition and results of
operations.

HUMAN RESOURCES

As of August 31, 1997 the Company had 56 employees, 31 of whom were engaged
in product development activities. Twenty-seven of such employees hold
post-graduate degrees, including four with medical degrees and ten with Ph.D.s.
The Company's employees are not represented by a collective bargaining
agreement. The Company believes its relations with its employees are good.

FACILITIES

The Company currently leases approximately 15,000 square feet of office
space located in Palo Alto, California, under a short-term lease agreement.
Management is looking currently for a larger facility and expects to relocate
during 1998.

SCIENTIFIC ADVISORY BOARD

James O. Armitage, M.D., is Chairman of the Department of Internal Medicine
at the University of Nebraska Medical Center. He previously directed the Bone
Marrow Transplant Program at the University of Iowa, where he was an Assistant
Professor of Medicine.

43
<PAGE> 45

Paul P. Carbone, M.D., MACP, D.Sc. (Hon.), is the Director of the
University of Wisconsin Comprehensive Cancer Center. He also is Professor
Emeritus of Medicine and Associate Dean for Program Development at the
University of Wisconsin Medical School. He previously served as a physician
scientist at the National Institutes of Health. His clinical research has
included the development of active combination chemotherapy for Hodgkin's
disease, non-Hodgkin's lymphoma and breast cancer.

Lawrence H. Einhorn, M.D., is Distinguished Professor of Medicine at
Indiana University Medical Center. His research of germ cell tumors focused upon
the discovery of treatments for testicular and ovarian cancer. Dr. Einhorn's
work has also been directed toward the optimization of combination chemotherapy
for these cancers.

Robert J. Mayer, M.D., is the President of the American Society of Clinical
Oncology, Chief of the Division of Clinical Oncology at the Dana-Farber Cancer
Institute and Professor of Medicine at Harvard Medical School. He also is an
attending physician at The Brigham and Women's Hospital, The Massachusetts
General Hospital and the Beth Israel/Deaconess Medical Center. Dr. Mayer is
known for his work in the treatment of leukemia and gastrointestinal cancers and
for developing programs to train cancer researchers and clinicians.

Saul Rosenberg, M.D., MACP, is Professor of Medicine and Radiology Emeritus
at Stanford University School of Medicine and is an oncologist known for his
contributions to advances in the treatment of Hodgkin's disease.

44
<PAGE> 46

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The executive officers, directors and key employees of the Company, and
their ages as of August 31, 1997, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -------------------------------------------
<S> <C> <C>
Michael F. Bigham................. 40 President, Chief Executive Officer and
Director
Dwayne M. Elwood(1)............... 49 Vice President, Sales and Marketing
William G. Harris................. 39 Vice President, Finance and Chief Financial
Officer
Arlene M. Morris(1)............... 44 Vice President, Business Development
Linda L. Nardone, Ph.D.(1)........ 51 Vice President, Regulatory Affairs
Dan Shochat, Ph.D. ............... 57 Vice President, Research and Development
George F. Tidmarsh, M.D.,
Ph.D.(1)........................ 37 Vice President, Clinical Development
James C. Kitch, J.D.(1)........... 50 Secretary
Arnold Oronsky, Ph.D.(2).......... 56 Chairman of the Board
Brian G. Atwood(3)................ 44 Director
Joseph R. Coulter, III............ 37 Director
Donald L. Lucas(2)(3)............. 67 Director
Robert Momsen(2).................. 50 Director
George J. Sella, Jr............... 69 Director
Sue Van(2)(3)..................... 50 Director
</TABLE>

- ------------------------------
(1) Non-executive officer or key employee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.

Michael F. Bigham has served as President, Chief Executive Officer and a
director of the Company since July 1996. During June 1996, Mr. Bigham provided
consulting services to the Company. Mr. Bigham served as Executive Vice
President of Operations from April 1994 to June 1996 and Chief Financial Officer
from April 1989 to June 1996 at Gilead Sciences, Inc., a biotechnology company.
While at Gilead, he also served as Vice President of Corporate Development from
July 1988 to March 1992. Mr. Bigham was Co-head of Healthcare Investment Banking
for Hambrecht & Quist LLC, an investment banking firm where he was employed from
1984 to 1988. Mr. Bigham is a member of the Board of Directors of Datron
Systems, Inc., a publicly-held electronics company, and three privately-held
companies. Mr. Bigham received a B.S. degree in Commerce with distinction from
the University of Virginia and an M.B.A. from the Stanford University Graduate
School of Business.

Dwayne M. Elwood has served as Vice President, Sales and Marketing of the
Company since July 1997. From May 1990 to July 1997, Mr. Elwood served as Vice
President of New Product Development and as a Management Board Member at
Ortho-McNeil Pharmaceutical, Inc., a division of Johnson & Johnson. His
responsibilities at Ortho-McNeil Pharmaceutical included the commercialization
and launch of several products in therapeutic areas, including biologicals, CNS
agents, metabolic diseases and anti-infectives. He recently managed the launch
of Ultram, a drug for chronic pain which is being marketed to various
specialists, including oncologists. From January 1972 to May 1990, Mr. Elwood
served in various sales and marketing management positions at Bristol-Myers
Squibb, a pharmaceutical company. Mr. Elwood received a B.S. degree in Business
Administration/Marketing from California State University, Chico.

William G. Harris has served as Vice President, Finance and Chief Financial
Officer of the Company since July 1996. From July 1992 to July 1996, Mr. Harris
served as Director of Finance at Gilead Sciences, Inc., a biotechnology company.
While at Gilead, Mr. Harris also served as Controller and Manager of
Administration from July 1991 to July 1992, and as Assistant Controller and
Manager of Administration from October 1990 to July 1992. From July 1988 to
October 1990, he was a Staff Accountant at Ernst & Young, LLP. Mr. Harris
received a B.A. degree in Economics from the

45
<PAGE> 47

University of California, San Diego, and an M.B.A. from the University of Santa
Clara Leavey School of Business and Administration.

Arlene M. Morris has served as Vice President, Business Development of the
Company since October 1996. From April 1993 to October 1996, Ms. Morris served
as Vice President, Business Development at Scios, Inc., a biotechnology company.
From November 1988 to April 1993, she served as Vice President, Business
Development at McNeil Pharmaceutical, a subsidiary of Johnson & Johnson, where
she was responsible for new product planning and business development. Ms.
Morris received a B.A. degree in Biology and Chemistry from Carlow College.

Linda L. Nardone, Ph.D. has served as Vice President, Regulatory Affairs of
the Company since August 1995. From September 1989 to July 1995, Dr. Nardone
served as Vice President of Drug Regulatory Affairs at Sterling
Winthrop/Nycomed, a pharmaceutical company, where she was responsible for
strategy, operations and FDA interactions for drugs in development and marketed
drugs, including three new drug applications and multiple supplemental
approvals. From 1986 to 1989, Dr. Nardone worked for Immunomedics, Inc., a
biotechnology company, where she had regulatory responsibility for three
monoclonal antibody-based diagnostic and therapeutic agents for cancer, and held
various positions, including Vice President, Regulatory Affairs. Dr. Nardone
received a B.S. degree from Fairleigh Dickinson University, M.S. and Ph.D.
degrees from Pennsylvania State University and held a post-doctoral fellowship
at Yale University School of Medicine.

Dan Shochat, Ph.D. has served as Vice President, Research and Development
of the Company since March 1995. From July 1988 to April 1995, Dr. Shochat
served as Director of Biotechnology Development at Lederle Laboratories, a
pharmaceutical division of American Cyanamid, Inc., where he was responsible for
the worldwide program in monoclonal antibodies for the treatment of cancer. He
received B.S. and M.S. degrees from Hebrew University in Israel and a Ph.D. in
Biochemistry from L.S.U. Medical School in New Orleans. Dr. Shochat is the
author of 25 scientific papers on tumor antigens and on antibodies for
diagnostic and therapeutic use in cancer.

George F. Tidmarsh, M.D., Ph.D. has served as Vice President, Clinical
Development of the Company since March 1997. From October 1996 to March 1997,
Dr. Tidmarsh served as Senior Director of Clinical Development of the Company.
He provided consulting services to the Company from September 1996 to October
1996. Dr. Tidmarsh has held an appointment as clinical faculty at Stanford
University since July 1995, where he attends in oncology. From June 1993 to June
1995, Dr. Tidmarsh was associate Medical Director, Oncology, at SEQUUS
Pharmaceuticals, Inc., where he oversaw clinical development of Doxil, an
oncology drug which received accelerated approval from the FDA in 1995. From
December 1991 to June 1993, Dr. Tidmarsh was a research scientist at Gilead
Sciences, Inc., a biotechnology company. He received a B.S. degree in
Microbiology and an M.D. and a Ph.D. in Cancer Biology from Stanford University.
Dr. Tidmarsh is the author of 12 scientific papers on monoclonal antibodies and
tumor biology.

James C. Kitch, J.D. has served as the Secretary of the Company since
December 1996. He has been a partner for more than ten years of Cooley Godward
LLP, a law firm which has provided legal services to the Company. Mr. Kitch is a
director of Lynx Therapeutics, Inc., a life sciences company.

Arnold Oronsky, Ph.D. has served as Chairman of the Board of Directors of
the Company since its inception in February 1995. From February 1995 to July
1996, Dr. Oronsky also served as President and Chief Executive Officer of the
Company. Since March 1994, Dr. Oronsky has been a general partner at InterWest
Partners, a private venture capital firm. Since February 1997, Dr. Oronsky has
been President and Chief Executive Officer at Coulter Cellular Therapies, a
biotechnology company. Since December 1996, Dr. Oronsky has been Chief Executive
Officer at Dynavax, a biotechnology company. From 1984 to 1994, Dr. Oronsky
served as Vice President for Discovery Research at Lederle Laboratories, a
pharmaceutical division of American Cyanamid, Inc., where he was responsible for
the research of new drugs. Dr. Oronsky has won numerous grants and awards and
has published over 125 scientific articles. Since 1988, Dr. Oronsky has served
as a senior lecturer in the Department of Medicine at Johns Hopkins Medical
School.

46
<PAGE> 48

Brian G. Atwood has served as a director of the Company since April 1996.
From March to December 1995, Mr. Atwood was a consultant on business development
to the Company. Since November 1995, Mr. Atwood has been a Venture Partner of
Brentwood Venture Capital, a private venture capital firm. Mr. Atwood served as
the acting President and Chief Executive Officer of gene/Networks, Inc., a
genomics company, from June 1995 to March 1997 and from June 1995 to September
1997, respectively. He was a founder and served as President and Chief Executive
Officer from December 1993 to May 1995 and Vice President, Operations from July
1988 to November 1993 of Glycomed Incorporated, a company dedicated to the
discovery and development of novel drugs based on complex carbohydrates. From
January 1986 to June 1987, Mr. Atwood was a Director at Perkin-Elmer/Cetus
Instrument Systems, a joint venture formed by Perkin-Elmer Corp. and Cetus
Corporation, where he oversaw the development and launch of three biotechnology
instrument research systems.

Joseph R. Coulter, III has served as a director of the Company since
December 1996. Mr. Coulter has been employed by Coulter Corporation, a research,
development and manufacturing company of precision medical devices, since 1979.
Since November 1996, he has been Executive Vice President and since February
1995, he has served as Director of Information Systems. From June 1992 to
January 1995, Mr. Coulter served as Director of Operations, and from January
1988 to June 1992, he served as Program Manager for Research and Development.
Mr. Coulter currently serves as a director of Coulter Corporation.

Donald L. Lucas has served as a director of the Company since April 1996.
Since 1967, Mr. Lucas has been actively engaged in venture capital activities as
a private individual. Mr. Lucas currently serves as a board member of Amati
Communications Corporation, Cadence Design Systems, Inc., Macromedia, Inc.,
Oracle Corporation, Racotek, Inc., Transcend Services, Inc. and Tricord Systems,
Inc.

Robert Momsen has served as a director of the Company since its inception
in February 1995. Since August 1982, Mr. Momsen has been a General Partner at
InterWest Partners, a private venture capital firm. From 1977 to 1981, Mr.
Momsen served as General Manager and Chief Financial Officer of Life Instruments
Corporation, a medical diagnostic imaging company that he co-founded. Mr. Momsen
currently serves as a director of ArthroCare Corp., COR Therapeutics, Inc.,
Innovasive Devices, Inc., Integ, Inc., Urologix, Inc. and ProGenitor.

George J. Sella, Jr. has served as a director of the Company since December
1996. From January 1983 to his retirement in April 1993, Mr. Sella served as
Chief Executive Officer of American Cyanamid Company, a chemical, agricultural
and medical products company. From September 1979 to January 1991, Mr. Sella
served as President of American Cyanamid. From May 1984 to April 1993, he served
as Chairman of the Board of Directors of American Cyanamid. Mr. Sella currently
serves as a director of Union Camp Corporation, Bush Boake Allen, Inc.,
Equitable Life Assurance Society of the United States and two private companies.

Sue Van has served as a director of the Company since its inception in
February 1995. Since November 1996, she has been Executive Vice President of
Coulter Corporation, a research, development and manufacturing company of
precision medical devices. Since May 1992, Ms. Van has served as the Chief
Financial Officer of Coulter Corporation and since January 1984, Ms. Van has
served as the Corporate Treasurer of Coulter Corporation.

BOARD COMMITTEES

The Audit Committee of the Board of Directors was formed in October 1996 to
review the internal accounting procedures of the Company and consult with and
review the services provided by the Company's independent auditors. The
Compensation Committee of the Board of Directors was formed in October 1996 to
establish salaries, incentives and other forms of compensation paid to officers
and employees of the Company. The Compensation Committee also administers the
issuance of stock options and other awards under the Company's stock plans.

47
<PAGE> 49

DIRECTOR COMPENSATION

Directors currently do not receive any cash compensation from the Company
for their services as members of the Board of Directors, although they are
reimbursed for certain expenses in connection with attendance at Board and
Committee meetings. In December 1996, Mr. Sella was granted options to purchase
20,000 shares of Common Stock. In July 1997, Messrs. Atwood and Lucas were each
granted an option to purchase 20,000 shares of Common Stock. Ms. Van and Mr.
Coulter, the representatives of Coulter Corporation, were each granted an option
to purchase 10,000 shares of Common Stock, for an aggregate of 20,000 shares.
Dr. Oronsky and Mr. Momsen, the representatives of the entities affiliated with
InterWest Partners, were each granted an option to purchase 10,000 shares of
Common Stock, for an aggregate of 20,000 shares. All such options have an
exercise price equal to the fair market value of Common Stock at the time of
grant and vest annually over four years. Directors are eligible to receive
future grants under the 1996 Plan. See "-- Equity Incentive Plans."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to the formation of the Compensation Committee in October 1996, the
Board of Directors made all determinations with respect to executive officer
compensation. Of the directors who participated in deliberations concerning
executive officer compensation, either prior to the formation of the
Compensation Committee or in their capacity as a member of the Compensation
Committee, Dr. Oronsky served as acting President and Chief Executive Officer of
the Company from February 1995 to June 1996, and Mr. Bigham has served as
President and Chief Executive Officer of the Company since July 1996. Each of
the Company's directors has purchased securities of the Company individually or
through an affiliated entity. See "Certain Transactions" and "Principal
Stockholders."

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth the
compensation earned by the Company's Chief Executive Officer, former Chief
Executive Officer and the other executive officer who earned in excess of
$100,000 during the fiscal year ended December 31, 1996 (collectively, the
"Named Executive Officers") and the compensation of the Named Executive Officers
during the period from inception (February 16, 1995) to December 31, 1995:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
SECURITIES
-------------------- OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)
- ----------------------------------------- --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Michael F. Bigham(1)..................... 1995 -- -- -- --
President and Chief Executive Officer 1996 150,000 50,000 57,000(1) 0
Arnold Oronsky, Ph.D.(2) ................ 1995 0 0 0 0
President and Chief Executive Officer 1996 0 0 0 0
Dan Shochat, Ph.D. ...................... 1995 138,721 26,250 13,332(3) 58,333
Vice President, Research and 1996 160,008 8,750 11,084(3) 41,666
Development
</TABLE>

- ---------------
(1) Mr. Bigham joined the Company as its President and Chief Executive Officer
in July 1996. During June 1996, Mr. Bigham provided consulting services to
the Company and received compensation for those services.

(2) Dr. Oronsky, Chairman of the Company's Board of Directors, served as acting
President and Chief Executive Officer from February 1995 to June 1996.

(3) Represents reimbursement for moving expenses.

48
<PAGE> 50

EQUITY INCENTIVE PLANS

Equity Incentive Plans. In March 1995, the Company adopted the 1995 Equity
Incentive Plan (the "1995 Plan") under which an aggregate of 866,666 shares of
Common Stock were reserved for issuance upon exercise of options granted to
employees, directors of and consultants to the Company. As of August 31, 1997,
options to purchase an aggregate of 708,637 shares of Common Stock were
outstanding under the 1995 Plan. The 1995 Plan was terminated in January 1997 by
the Board of Directors. No additional options will be granted under the 1995
Plan.

In December 1996, the Company adopted the 1996 Equity Incentive Plan (the
"1996 Plan" and, together with the 1995 Plan, the "Incentive Plans"). A total of
1,400,000 shares of Common Stock have been reserved under the 1996 Plan. As of
August 31, 1997, 834,700 options have been granted under the 1996 Plan. The 1996
Plan will terminate in December 2006, unless sooner terminated by the Board of
Directors.

The Incentive Plans provide for the granting to employees (including
officers and employee directors) of incentive stock options within the meaning
of Section 422 of the Internal Revenue Code, as amended (the "Code"), and for
the granting of nonstatutory stock options, restricted stock purchase awards,
and stock bonuses (collectively, "Stock Awards") to employees, directors of and
consultants to the Company. The Company's Board of Directors has delegated
administration of the Incentive Plans to the Compensation Committee (the
"Committee"). The Committee membership is intended to satisfy the provisions of
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended,
and Code section 162(m), in each case to the extent applicable. The Committee
has the authority, subject to the terms of the Incentive Plans, to determine the
recipients and types of awards to be granted, the terms of the awards granted,
including the exercise price, number of shares subject to the award the
exercisability thereof, and the form of consideration payable upon exercise.

The terms of stock options granted under the Incentive Plans generally may
not exceed 10 years. The exercise price of options granted under the Incentive
Plans is determined by the Board of Directors, provided that the exercise price
for an incentive stock option cannot be less than 100% of the fair market value
of the Common Stock on the date of the option grant and the exercise price for a
nonstatutory stock option cannot be less than 85% of the fair market value of
the Common Stock on the date of option grant. The exercise price of options
under the 1995 Plan or incentive stock options under the 1996 Plan granted to
any person who at the time of grant owns stock possessing more than 10% of the
total combined voting power of all classes of stock must be at least 110% of the
fair market value of such stock on the date of grant and the terms of these
options cannot exceed five years. The aggregate fair market value, determined at
the time of grant, of the shares of Common Stock with respect to which incentive
stock option are exercisable for the first time by an optionee during any
calendar year (under all such plans of the Company and its affiliates) may not
exceed $100,000. No optionee shall be eligible for option grants under the 1996
Plan covering more than 280,000 shares of Common Stock in any calendar year at
such time as Section 162(m) of the Code becomes applicable to the Plan.

Options granted under the Incentive Plans vest at the rate specified in the
option agreement; provided, however, that options granted under the 1995 must
vest at least 20% per year. No stock option granted under the Incentive Plans
may be transferred by the optionee other than by will or the laws of descent or
distribution or, for a nonstatutory option, pursuant to a domestic relations
order, provided that an optionee may designate a beneficiary who may exercise
the option following the optionee's death, and, provided further, that the
Compensation Committee may grant a nonstatutory stock option that is
transferable under the 1996 Plan.

An optionee under the 1995 Plan whose relationship with the Company or any
affiliate ceases for any reason (other than by death or disability) may exercise
options in the thirty-day period following such cessation (unless such options
terminate or expire sooner or later by their terms). An optionee under the 1996
Plan whose relationship with the Company or any affiliate ceases for any reason
(other than by death or disability) may exercise options in the three-month
period following such cessation

49
<PAGE> 51

(unless such options terminate or expire sooner or later by their terms).
Options granted under the Incentive Plans may be exercised for up to twelve
months after an Optionee's relationship with the Company and its affiliates
ceases due to disability and for up to eighteen months after an Optionee's
relationship with the Company and its affiliates ceases due to death (unless
such options expire sooner or later by their terms).

Shares subject to stock options under the 1996 Plan that have expired or
otherwise terminated without having been exercised in full become available for
the grant of options under the 1996 Plan. Furthermore, the Board of Directors
may offer to exchange new options for existing options under the 1996 Plan, with
the shares subject to the existing options again becoming available for grant
under the 1996 Plan. The Board of Directors has the authority to reprice
outstanding options and to offer optionees the opportunity to replace
outstanding options with new options for the same or a different number of
shares.

Restricted stock purchase awards granted under the 1996 Plan may be granted
pursuant to a repurchase option in favor of the Company in accordance with a
service vesting schedule determined by the Board. The purchase price of such
awards will be at least 85% of the fair market value of the Common Stock on the
date of grant. Stock bonuses may be awarded in consideration for past services
without a purchase payment.

Upon certain changes in control of the Company, all outstanding awards
under the Incentive Plans shall be continued, assumed or substituted by the
surviving entity. If the surviving entity determines not to continue, assume or
substitute such awards, then the vesting of such awards shall be accelerated and
shall be terminated if not exercised prior to such event. In the event of a
dissolution or liquidation of the Company, outstanding, unexercised awards shall
be terminated.

Employee Stock Purchase Plan. In December 1996, the Company's Board of
Directors adopted the Employee Stock Purchase Plan (the "Purchase Plan")
covering an aggregate of 350,000 shares of Common Stock. The Purchase Plan is
intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Code. Under the Purchase Plan, the Board of Directors may
authorize participation by eligible employees, including officers, in periodic
offerings following the adoption of the Purchase Plan. The offering period for
any offering will be no more than 27 months. The Board has currently authorized
an offering period that began with the effectiveness of the Company's initial
public offering on January 28, 1997 and will end December 31, 1998 and
additional 24-month offering periods begin each July 1 and January 1 thereafter.

Employees are eligible to participate if they are employed by the Company
or an affiliate of the Company designated by the Board of Directors, provided
that under the currently authorized offerings an employee's customary employment
must be for at least 20 hours per week and five months per calendar year.
Employees who participate in an offering can have up to 15% of their earnings
withheld pursuant to the Purchase Plan and applied, on specified dates
determined by the Board of Directors, to the purchase of shares of Common Stock.
Under the currently authorized offerings, the purchase dates are each June 30
and December 31. The price of Common Stock purchased under the Purchase Plan
will be equal to 85% of the lower of the fair market value of the Common Stock
on the commencement date of each offering or the relevant purchase date.
Employees may end their participation in an offering at any time during the
offering, and participation ends automatically on termination of employment with
the Company or, under the currently authorized offerings, when the employee
elects to enroll in another offering.

In the event of certain changes of control, the Board of Directors has
discretion to provide that each right to purchase Common Stock may be assumed or
an equivalent right substituted by the successor corporation, or the Board may
shorten the offering period and provide for all sums collected by payroll
deductions to be applied to purchase stock immediately prior to the change in
control. The Board has the authority to amend or terminate the Purchase Plan,
subject to the limitation that no such action may adversely affect any
outstanding rights to purchase Common Stock.

50
<PAGE> 52

401(k) Plan. As of October 31, 1996, the Company adopted a tax-qualified
employee savings and retirement plan (the "401(k) Plan") covering the Company's
employees. Pursuant to the 401(k) Plan, eligible employees may elect to reduce
their current compensation by up to the lesser of 20% of their annual
compensation or the statutorily prescribed annual limit ($9,500 in 1997) and
have the amount of such reduction contributed to the 401(k) Plan. Although the
Company does not currently match contributions by employees, the 401(k) Plan
allows for matching contributions to be made by the Company in an amount
determined by the Company. The trustees under the 401(k) Plan, at the direction
of each participant, invest the assets of the 401(k) Plan in designated
investment options. The 401(k) Plan is intended to qualify under Section 401 of
the Internal Revenue Code of 1986, as amended (the "Code"), so that
contributions to the 401(k) Plan, and income earned on the 401(k) Plan
contributions, are not taxable until withdrawn, and so that the contributions by
the Company will be deductible when made.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth for each of the Named Executive Officers
each grant of stock options granted during the fiscal year ended December 31,
1996:

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------
PERCENTAGE
OF TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS VALUE AT ASSUMED
SECURITIES GRANTED ANNUAL RATES OF STOCK
UNDERLYING IN FISCAL EXERCISE PRICE APPRECIATION
OPTIONS 1996 PRICE EXPIRATION FOR OPTION TERM(4)
NAME GRANTED(1) (%)(2) ($/SH)(3) DATE 5% $ 10% $
- ------------------------------------ ---------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael F. Bigham................... -- -- -- -- -- --
Arnold Oronsky, Ph.D. .............. -- -- -- -- -- --
Dan Shochat, Ph.D. ................. 25,000 3.7% $ .75 06/13/06 $11,792 $29,883
16,666(5) 2.5% $2.25 10/31/06 $23,585 $59,763
</TABLE>

- ---------------
(1) Options granted in 1996 generally vest over four years, with 25% of the
option shares becoming fully vested one year from the grant date and 1/48th
vesting in each successive month, with full vesting occurring on the fourth
anniversary date.

(2) Based on an aggregate of 678,492 options granted to employees and directors
of and consultants to the Company in 1996, including the Named Executive
Officers.

(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant, as determined by the Board
of Directors.

(4) The potential realizable value is calculated by assuming that the stock
price on the date of grant as determined by the Board of Directors
appreciates at the indicated annual rate compounded annually for the entire
term of the option (ten years) and the option is exercised and sold on the
last day of its term for the appreciated stock price. The 5% and 10% assumed
rates of appreciation are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of the future Common Stock price.

(5) Twenty-five percent of these option shares vest annually commencing October
31, 2000, with full vesting October 31, 2004.

51
<PAGE> 53

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on the exercise of stock options during
the fiscal year ended December 31, 1996 and the number and value of securities
underlying unexercised options held by the Named Executive Officers at December
31, 1996:

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 1996(#) DECEMBER 31, 1996($)(1)
ACQUIRED ON REALIZED -------------------------- --------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael F. Bigham................ -- -- -- -- -- --
Arnold Oronsky, Ph.D. ........... -- -- -- -- -- --
Dan Shochat, Ph.D. .............. 21,874 $157,493 2,431 75,694 $28,445 $ 841,872
</TABLE>

- ---------------
(1) Based on the fair market value of $12.00 per share on December 31, 1996, as
determined by the Company's Board of Directors minus the exercise price
multiplied by the number of shares underlying the option.

LIMITATION OF LIABILITY AND INDEMNIFICATION

As permitted by the Delaware General Corporation Law (the "Delaware Law"),
the Company's Certificate of Incorporation provides that no director of the
Company will be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except (i) for any
breach of the directors' duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or involving intentional misconduct
or a knowing violation of law, (iii) unlawful payments of dividends or unlawful
stock repurchases or redemptions, or (iv) for any transaction from which the
director derives any improper personal benefit. In addition, the Company's
Bylaws provide that the Company shall indemnify any director and may indemnify
any officer, to the fullest extent permitted by the Delaware Law, who was or is
a party or is threatened to be made a party to any action or proceeding by
reason of his or her services to the Company.

The Company has entered into indemnification agreements with each of its
directors and executive officers pursuant to which the Company has indemnified
each of them against expenses and losses incurred for claims brought against
them by reason of their being a director or executive officer of the Company. In
addition, the Company has purchased directors' and officers' liability
insurance.

There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or executive officer.

52
<PAGE> 54

CERTAIN TRANSACTIONS

The Company was incorporated in February 1995. In connection with its
formation, the Company issued 5,000,000 shares of its Series A Preferred Stock
(the "Series A Stock") to Coulter Corporation in exchange for rights to certain
intellectual property, know-how, contractual rights and other assets pertaining
to the Company's B-1 Therapy pursuant to an assignment agreement dated February
24, 1995, and issued 2,500,000 shares of Series A Stock to InterWest Partners V,
L.P. ("InterWest") and certain parties related thereto in exchange for
$2,500,000 in cash. In connection with such transaction, the Company assumed
certain obligations to pay minimum annual license fees and royalties due upon
sales of the B-1 Therapy.

Prior to August 1997, Coulter Corporation supplied B-1 Antibody and certain
services at its cost to support the Company's ongoing development of Bexxar. See
Note 8 of Notes to December 31, 1996 Financial Statements. In addition, the
Company has agreed to reimburse Coulter Corporation for royalties (payable upon
sales of Bexxar, if any) due to a third party for certain intellectual property
rights sublicensed to the Company. Coulter Corporation has the right to convert
the initial reimbursements of royalties, up to a maximum of $4,500,000, into
Common Stock of the Company at the fair market value thereof at the time such
reimbursements are due. Additionally, in April 1995, the Company reimbursed
Coulter Corporation $100,000 for a one-time license issue fee previously paid by
Coulter Corporation in connection with certain intellectual property rights
assigned to the Company. Joseph Coulter, III and Sue Van, directors of the
Company, are executive officers of Coulter Corporation and Mr. Coulter is a
director of and beneficial stockholder of Coulter Corporation.

In August and September 1995, the Company issued 2,333,333 shares of its
Series B Preferred Stock (the "Series B Stock") for aggregate consideration of
$3,500,000 in cash, including: (i) 2,266,667 shares of Series B Stock to
InterWest and certain parties related thereto, (ii) 16,667 shares of Series B
Stock to the Richard M. Lucas Foundation, of which Donald L. Lucas, a director
of the Company, is the Chairman of the Board and (iii) 16,666 shares of Series B
Stock to the Donald L. Lucas Profit Sharing Trust of which Mr. Lucas is the
successor trustee.

In April 1996, the Company issued 9,964,607 shares of its Series C
Preferred Stock (the "Series C Stock") and warrants to purchase 498,705 shares
of its Common Stock (after giving effect to a one-for-three reverse stock
split), at an exercise price of $9.00 per share (the "Warrants") for aggregate
consideration of $22,420,366 in cash, including: (i) 888,889 shares of Series C
Stock and Warrants to purchase 44,488 shares of Common Stock to InterWest and
certain parties related thereto, (ii) 1,122,222 shares of Series C Stock and
Warrants to purchase 56,167 shares of Common Stock to Brentwood Associates VII,
L.P. ("Brentwood") and certain parties related thereto, (iii) 948,884 shares of
Series C Stock and Warrants to purchase 47,490 shares of Common Stock to certain
entities affiliated with Donald L. Lucas, a director of the Company, (iv)
102,222 shares of Series C Stock and Warrants to purchase 5,116 shares of Common
Stock to a charitable trust formed by Michael F. Bigham, Chief Executive
Officer, President and a director of the Company, (v) 100,000 shares of Series C
Stock and Warrants to purchase 5,005 shares of Common Stock to Sue Van, a
director of the Company, (vi) 11,111 shares of Series C Stock and Warrants to
purchase 566 shares of Common Stock to Brian G. Atwood, a director of the
Company and (vii) 11,111 shares of Series C Stock and Warrants to purchase 1,668
shares of Common Stock to Joseph R. Coulter, III, a director of the Company.

Each share of Preferred Stock was converted into one-third of a share of
Common Stock upon completion of the Company's initial public offering in January
1997.

In August 1995 and February 1996, in connection with consulting services
provided to the Company, the Company granted Mr. Atwood, a director of the
Company, options to purchase 2,059 and 4,021 shares of Common Stock,
respectively, at an exercise price of $.30 per share. Such options were
immediately exercisable and fully vested. Mr. Atwood received compensation of
$94,863 for such consulting services.

53
<PAGE> 55

In March 1996, Michael F. Bigham, Chief Executive Officer and President of
the Company, purchased 400,000 shares of Common Stock at $0.45, the fair market
value of such shares, and purchased the shares by delivering a promissory note
in the amount of $180,000. The Company has a right to repurchase these shares in
the event Mr. Bigham's employment is terminated. Such repurchase right lapses
over a four year period which may be accelerated if Mr. Bigham's employment is
involuntarily terminated for a reason other than gross misconduct. If the
Company terminates Mr. Bigham's employment for any reason, other than gross
misconduct, the Company will continue to pay his salary and provide full
benefits for one year after such termination and the Company's stock repurchase
rights will continue to expire during such period. In the event of a change in
control of the Company, Mr. Bigham will receive severance equal to at least two
years salary plus a 30% bonus and full benefits for two years. In addition, all
repurchase right expirations will be accelerated in full. During June 1996, Mr.
Bigham provided consulting services to the Company for which he was paid
$57,000. In July 1996, the Company entered into an agreement with Mr. Bigham
pursuant to which he repaid an outstanding loan to the Company in the amount of
$180,000 and obtained from the Company a home loan in the amount of $280,000,
which new loan is secured by a second deed of trust on his principal residence.
This loan will be forgiven semiannually at the rate of 12.5% per semiannual
period so long as Mr. Bigham remains employed by the Company. If Mr. Bigham's
employment is terminated, interest shall commence and begin to accrue at the
prime rate plus two percentage points and will become due and payable within 60
days of his termination. If Mr. Bigham's employment is terminated for other than
gross misconduct or death, the principal of such loan shall become due upon the
earlier of Mr. Bigham securing other employment or the date 60 days from the
date of his termination. In the event of a change in control of the Company, the
remaining balance on the home loan will be forgiven.

In July 1996 and October 1996, the Company granted Mr. Harris, Vice
President, Finance and Chief Financial Officer of the Company, options to
purchase 58,333 shares of Common Stock at $0.75 per share and 8,333 shares of
Common Stock at $2.25 per share, respectively. Such options vest over a
four-year period. In October 1996, the Company also granted Mr. Harris an option
to purchase 16,666 shares of Common Stock at $2.25 per share which will begin
vesting in October 2000.

In July 1997, the Company granted Mr. Bigham, Mr. Harris and Dr. Shochat,
officers of the Company, options to purchase 75,000, 27,500 and 30,000 shares of
Common Stock, respectively. Such options have an exercise price of $8.625 per
share and vest over a four year period.

54
<PAGE> 56

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of August 31, 1997 for (i) each
stockholder who is known by the Company to own beneficially more than five
percent of the Company's Common Stock; (ii) each Named Executive Officer; (iii)
each director of the Company and (iv) all executive officers and directors of
the Company as a group. Except as otherwise provided below, the address of each
person listed is c/o the Company, 550 California Avenue, Suite 200, Palo Alto,
California 94306.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED(1)
SHARES -----------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- -------------------------------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Entities Affiliated with InterWest Partners(2)...................... 1,896,340 18.3% 14.9%
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, CA 94025
Robert Momsen(2).................................................... 1,896,340 18.3 14.9
Arnold Oronsky(2)................................................... 1,885,021 18.2 14.8
Joseph R. Coulter, III(3)........................................... 1,674,350 16.2 13.1
Coulter Corporation................................................. 1,666,666 16.1 13.1
Coulter Technology Center
11800 SW 147th Avenue
Miami, FL 33196
Michael F. Bigham(4)................................................ 439,642 4.2 3.4
Brian G. Atwood(5).................................................. 436,320 4.2 3.4
Donald L. Lucas(6).................................................. 102,194 * *
Sue Van(7).......................................................... 34,584 * *
Dan Shochat, Ph.D (8)............................................... 46,453 * *
George J. Sella, Jr. ............................................... 0 * *
All executive officers and directors as a
group (9 persons)(9).............................................. 4,629,883 44.7 36.2
</TABLE>

- ---------------
* Represents beneficial ownership of less than 1% of the outstanding shares
of the Company's Common Stock.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
Company believes, based on information furnished by such persons, that the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 10,352,745 shares of Common
Stock outstanding as of August 31, 1997, and 12,752,745 shares of Common
Stock outstanding after completion of this offering.

(2) Consists of 1,799,825 shares held by InterWest Partners V, L.P., 11,319
shares held by InterWest Investors V, and 85,196 shares held by MedVenture
Associates II; provided that shares attributable to Dr. Oronsky do not
include any shares owned by InterWest Investors V. Mr. Momsen and Dr.
Oronsky, directors of the Company, are general partners of InterWest
Management Partners V, L.P. which is the general partner of InterWest
Partners V, L.P. InterWest Partners V, L.P. is a limited partner of
MedVenture Associates II. Mr. Momsen is a general partner of InterWest
Investors V. Mr. Momsen and Dr. Oronsky disclaim beneficial ownership of the
shares held by InterWest Partners V, L.P. and InterWest Investors V, except
to the extent of their respective pecuniary interest therein.

(3) Includes 1,666,666 shares held by Coulter Corporation. Mr. Coulter is a
director, officer and beneficial stockholder of Coulter Corporation. Also
includes 3,842 shares held by Mr. Coulter's wife, Susan Sekman Coulter. Mr.
Coulter disclaims beneficial ownership of the shares held by Coulter
Corporation, except to the extent of his pecuniary interest therein.

(4) Includes 375,000 shares that were issued pursuant to a restricted stock
purchase agreement 258,333 of which will be subject to repurchase by the
Company as of August 31, 1997. Also includes 39,190 shares held by a

55
<PAGE> 57

charitable trust formed by Michael F. Bigham and 25,000 shares held by an
irrevocable trust formed for members of Mr. Bigham's family. Mr. Bigham
disclaims beneficial ownership of the shares held in each such trust except
to the extent of his pecuniary interest therein.

(5) Includes 425,981 shares held by Brentwood Associates VII, L.P. Mr. Atwood,
a director of the Company, is a venture partner of Brentwood VII Ventures,
L.P., which is the general partner of Brentwood Associates VII, L.P. Mr.
Atwood disclaims beneficial ownership of the shares held by Brentwood
Associates VII, L.P., except to the extent of his pecuniary interest
therein.

(6) Consists of 51,486 shares held by the Donald L. Lucas & Lygia S. Lucas
Trust and 50,708 shares held by the Richard M. Lucas Foundation. Donald L.
Lucas, a director of the Company, is trustee of the Donald L. Lucas & Lygia
S. Lucas Trust and Chairman of the Board of the Richard M. Lucas
Foundation. Mr. Lucas disclaims beneficial ownership of the shares held by
the Richard M. Lucas Foundation.

(7) Includes 14,871 shares held by the Sue Van Revocable Trust.

(8) Includes 24,131 shares of Common Stock subject to options exercisable
within 60 days of August 31, 1997.

(9) Includes 4,174,083 shares held by entities and persons affiliated with
certain directors and executive officers as described above, and 24,131
shares of Common Stock subject to options exercisable within 60 days of
August 31, 1997.

56
<PAGE> 58

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock, $.001 par value, and 3,000,000 shares of Preferred Stock, $.001
par value.

COMMON STOCK

As of August 31, 1997, there were 10,352,745 shares of Common Stock
outstanding held of record by 249 stockholders. The holders of Common Stock are
entitled to one vote per share on all matters to be voted on by the
stockholders. Subject to preferences that may be applicable to outstanding
shares of Preferred Stock, if any, the holders of Common Stock are entitled to
receive ratably such dividends as may be declared from time to time by the Board
of Directors out of funds legally available therefor. See "Dividend Policy." In
the event of the liquidation, dissolution of winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities, subject to prior liquidation rights of Preferred
Stock, if any, then outstanding. The Common Stock has no preemptive conversion
rights or other subscription rights. There are no redemption or sinking funds
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and non-assessable, and the shares of Common Stock to be
outstanding upon completion of this offering will be fully paid and
non-assessable.

PREFERRED STOCK

No shares of Preferred Stock are outstanding. The Board of Directors has
the authority to issue up to 3,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions granted
to or imposed upon such Preferred Stock, including dividend rights, conversion
rights, terms of redemption, liquidation preference sinking fund terms and the
number of shares constituting any series or the designation of such series,
without any further vote or action by the stockholders. The Board of Directors,
without stockholder approval, can issue Preferred Stock with voting and
conversion rights which could adversely affect the voting power of the holders
of Common Stock. In July 1997, the Board of Directors designated a series of
200,000 shares of Preferred Stock designated Series A Junior Participating
Preferred Stock in connection with the adoption of a Share Rights Purchase Plan.
The issuance of Preferred Stock could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plan
to issue any shares of Preferred Stock.

WARRANTS

The Company has a warrant outstanding to purchase 24,666 shares of the
Company's Common Stock at a purchase price of $9.75 per share, subject to
adjustment in certain circumstances. This warrant expires in December 2002.

REGISTRATION RIGHTS

The holders (or their permitted transferees) of approximately 7,097,994
shares of Common Stock ("Holders") are entitled to certain rights with respect
to the registration of such shares under the Securities Act of 1933, as amended
(the "Securities Act"). Under the terms of an agreement between the Company and
such holders, if the Company proposes to register any of its Common Stock,
subject to certain exceptions, under the Securities Act, the Holders are
entitled to notice of the registration and are entitled to include, at the
Company's expense, shares of such Common Stock therein. The Holders have waived
their registration right with respect to this offering. In addition, the Holders
of sufficient shares with registration rights may require the Company at its
expense on no more than two occasions to file a registration statement under the
Securities Act with respect to their shares of Common Stock. Further, Holders of
sufficient shares with registration rights may require the Company to register
their shares on Form S-3 when such form becomes available to the Company,
subject to certain conditions and limitations. Such registration rights expire
in January 2004.

57
<PAGE> 59

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

The Company is subject to the provisions of Section 203 of the Delaware
Law. In general, Section 203 prohibits a public Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. Generally, a "business combination" includes mergers, asset
sales and other transactions resulting in a financial benefit to the
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
a corporation's voting stock. The statute could have the effect of delaying,
deferring or preventing a change in control of the Company.

The Company's Certificate of Incorporation and Bylaws also require that any
action required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of the stockholders and may
not be effected by a consent in writing. In addition, special meetings of the
stockholders of the Company may be called only by the Board of Directors, the
Chairman of the Board or the Chief Executive Officer of the Company. The
Company's Certificate of Incorporation also specifies that the authorized number
of directors may be changed only by resolution of the Board of Directors. In
July 1997, the Company's Board of Directors adopted a Share Purchase Rights
Plan, commonly known as a "poison pill." The Share Purchase Rights Plan provides
for the distribution of certain rights to acquire shares of the Company's Series
A Junior Participating Preferred Stock (the "Rights") as a dividend for each
share of Common Stock held of record as of August 20, 1997. The Rights are
triggered and become potentially exercisable upon the occurrence of either the
(i) acquisition of 20% or greater beneficial ownership of the Company's Common
Stock by a person or group, or (ii) a public announcement of a tender or
exchange offer for 20% or greater beneficial ownership of the Company's Common
Stock by a person or group. If triggered and certain other conditions are met,
each Right effectively provides its holder, other than holders who are
"Acquiring Persons," the right to purchase shares of Common Stock at a 50%
discount from the market price at that time, upon payment of an exercise price
of $80 per Right. In addition, in the event of certain business combinations,
the Rights permit the purchase of shares of common stock of an acquirer at a 50%
discount from the market price at that time. In general, an Acquiring Person is
a person, the affiliates or associates of such person, or a group, which has
acquired beneficial ownership of 20% or more of the Company's outstanding Common
Stock. The Board of Directors has the right to redeem the Rights at a price of
$0.001 per Right at any time prior to the close of business on the day of the
first public announcement that a person has become an "Acquiring Person." If the
Rights are triggered the Board of Directors may elect to exchange each Right
(other than Rights held by Acquiring Persons) for one share of Common Stock. The
Rights have no voting privileges and are attached to and automatically traded
with the Company's Common Stock. The Board of Directors also generally may amend
the terms of the Rights without the consent of the holders of the Rights. The
Rights expire on July 30, 2007. These provisions may have the effect of
deterring hostile takeovers or delaying changes in control or management of the
Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is
ChaseMellon Shareholder Services.

58
<PAGE> 60

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of Common Stock in the public market
could adversely affect the market price of the Common Stock prevailing from time
to time.

Upon completion of this offering, the Company will have outstanding an
aggregate of 12,752,745 shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of options outstanding as of
August 31, 1997. Of these shares, the 5,275,000 shares of Common Stock,
including the 2,400,000 shares sold in this offering, will be freely tradable
without restriction or further registration under the Securities Act, unless
held by Affiliates of the Company. The remaining 7,477,745 shares of Common
Stock held by existing stockholders are Restricted Shares. Restricted Shares may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144 or 701 promulgated under the
Securities Act, which rules are summarized below. As a result of Lock-up
Agreements and the provisions of Rules 144 and 701, additional shares will be
available for sale in the public market as follows: (i) 2,875,434 Restricted
Shares will be eligible for immediate sale on the effective date of this
offering (in some cases subject to the volume limitations under Rule 144); and
(ii) 4,602,311 Restricted Shares will be eligible for sale upon expiration of
the Lock-up Agreements 90 days after the effective date of the registration
statement relating to this offering (in some cases subject to the volume
limitations under Rule 144).

Upon completion of this offering, the holders of 7,097,994 shares of Common
Stock, or their transferees, will be entitled to certain rights with respect to
the registration of such shares under the Securities Act. Registration of such
shares under the Securities Act would result in such shares becoming freely
tradeable without restriction under the Securities Act (except for shares
purchased by Affiliates, if any) immediately upon the effectiveness of such
registration. See "Description of Capital Stock -- Registration Rights."

The Company's officers, directors and certain stockholders, who in the
aggregate own 4,602,311 shares of the Company's Common Stock have agreed that
they will not, without the prior written consent of Hambrecht & Quist LLC,
offer, sell, or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into Shares of Common Stock owned by them during the 90-day period
following the effective date of the registration statement relating to this
offering. The Company has agreed that it will not, without the prior written
consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares
of Common Stock, options or warrants to acquire shares of Common Stock or
securities exchangeable for or convertible into shares of Common Stock during
the 90-day period following the effective date of the registration statement
relating to this offering, except that the Company may issue shares upon the
exercise of options granted and warrants outstanding prior to the date hereof,
and may grant additional options under its stock option plans, provided that,
without the prior written consent of Hambrecht & Quist LLC, such additional
options shall not be exercisable during such period. However, Hambrecht & Quist
LLC may, in its sole discretion and at any time without notice, release all or
any portion of the shares subject to Lock-up Agreements.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an Affiliate of the Company, or person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least one year will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of (i) one percent of the then
outstanding shares of the Company's Common Stock (approximately 127,527 shares
immediately after the offering) or (ii) the average weekly trading volume of the
Company's Common Stock in the Nasdaq National Market during the four calendar
weeks immediately preceding the date on which notice of the sale is filed with
the SEC. Sales pursuant to Rule 144 are subject to certain requirements relating
to manner of sale, notice and availability of current public information about
the Company. A person (or persons whose shares are aggregated) who is not deemed
to have been an Affiliate of the Company at any time during the 90 days
immediately preceding the sale and who has beneficially owned the shares

59
<PAGE> 61

proposed to be sold for at least two years is entitled to sell such shares under
Rule 144(k) without regard to the limitations described above.

The Company has filed a registration statement under the Securities Act
covering shares of Common Stock reserved for issuance under the Company's 1995
Plan, 1996 Plan and Purchase Plan. Such registration statement covers 2,571,471
shares. Shares registered under such registration statement will, subject to
Rule 144 volume limitations applicable to Affiliates, be available for sale in
the open market upon expiration of the Lock-up Agreements or contractual
restrictions and any vesting restrictions. See "Management -- Equity Incentive
Plans."

60
<PAGE> 62

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC,
BT Alex. Brown Incorporated and Pacific Growth Equities, Inc., have severally
agreed to purchase from the Company the following respective number of shares of
Common Stock:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---------------------------------------------------------------- ---------
<S> <C>
Hambrecht & Quist LLC...........................................
BT Alex. Brown Incorporated.....................................
Pacific Growth Equities, Inc....................................

---------
Total................................................. 2,400,000
==========
</TABLE>

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

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

The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 360,000
additional shares of Common Stock at the public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
above table bears to the total number of shares of Common Stock offered hereby.
The Company will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of Common Stock offered hereby.

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

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

The Company's officers, directors and certain stockholders have agreed that
they will not, without the prior written consent of Hambrecht & Quist LLC,
offer, sell or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into Shares of Common Stock owned by them during the 90-day period
following the effective date of the registration statement relating to this
offering. The Company has agreed that it

61
<PAGE> 63

will not, without the prior written consent of Hambrecht & Quist LLC, offer,
sell or otherwise dispose of any shares of Common Stock, options or warrants to
acquire shares of Common Stock or securities exchangeable for or convertible
into shares of Common Stock during the 90-day period following the effective
date of the registration statement relating to this offering, except that the
Company may issue shares upon the exercise of options granted and warrants
outstanding prior to the date hereof, and may grant additional options under its
stock option plans, provided that, without the prior written consent of
Hambrecht & Quist LLC, such additional options shall not be exercisable during
such period. However, Hambrecht & Quist LLC may, in its sole discretion and at
any time without notice, release all or any portion of the shares subject to
Lock-up Agreements.

The Underwriters have advised the Company that the Underwriters and dealers
may engage in passive market making transactions in the Common Stock in
accordance with rules promulgated by the SEC. In general, a passive market maker
may not bid for or purchase the Common Stock at a price that exceeds the highest
independent bid. In addition, the net daily purchases made by any passive market
maker generally may not exceed 30% of its average daily trading volume in the
Common Stock during a specified two-month prior period or 200 shares, whichever
is greater. A passive market maker must identify passive market making bids as
such on the Nasdaq electronic inter-dealer reporting system. Passive market
making may have the effect of stabilizing or maintaining the market price of the
Common Stock at a level above that which might otherwise prevail in the open
market. Underwriters and dealers are not required to engage in passive market
making and may discontinue such activities at any time.

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

LEGAL MATTERS

The legality of the Common Stock offered hereby will be passed upon for the
Company by Cooley Godward LLP, Palo Alto, California ("Cooley Godward"). Certain
legal matters will be passed upon for the Underwriters by Wilson Sonsini
Goodrich & Rosati, Palo Alto, California. As of the date of this Prospectus,
Cooley Godward and certain members of Cooley Godward beneficially owned an
aggregate of approximately 11,000 shares of the Company's Common Stock.

EXPERTS

The Consolidated Financial Statements of Coulter Pharmaceutical, Inc. at
December 31, 1995 and 1996 and for the year ended December 31, 1996, and for the
periods from inception (February 16, 1995) to December 31, 1995 and 1996,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

The Financial Statements of the Antibody Therapeutics Business Operations
of Coulter Corporation at December 31, 1993 and 1994, and for each of the two
years in the period ended December 31, 1994 and for the period from January 1,
1995 to February 15, 1995, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

62
<PAGE> 64

ADDITIONAL INFORMATION

A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered by the Company has been filed with the SEC,
Washington, D.C. 20549. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules thereto. A copy of the
Registration Statement may be inspected by anyone without charge at the public
reference facilities maintained by the SEC in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048, and copies of all or any part thereof may be obtained from such offices,
upon payment of certain fees prescribed by the SEC. The SEC maintains a website
that contains reports, proxy and information statements and other information
filed electronically with the SEC. The address of the site is
http://www.sec.gov.

63
<PAGE> 65

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COULTER PHARMACEUTICAL, INC. CONSOLIDATED FINANCIAL STATEMENTS -- JUNE 30, 1997
(UNAUDITED)
Consolidated Balance Sheets........................................................... F-2
Consolidated Statements of Operations................................................. F-3
Consolidated Statements of Cash Flows................................................. F-4
Notes to Consolidated Financial Statements............................................ F-5

COULTER PHARMACEUTICAL, INC. CONSOLIDATED FINANCIAL STATEMENTS -- DECEMBER 31, 1996
Report of Ernst & Young LLP, Independent Auditors..................................... F-8
Consolidated Balance Sheets........................................................... F-9
Consolidated Statements of Operations................................................. F-10
Consolidated Statement of Stockholders' Equity........................................ F-11
Consolidated Statements of Cash Flows................................................. F-12
Notes to Consolidated Financial Statements............................................ F-13

ANTIBODY THERAPEUTICS BUSINESS OPERATIONS OF COULTER CORPORATION
Report of Ernst & Young LLP, Independent Auditors..................................... F-22
Balance Sheets........................................................................ F-23
Statements of Operations.............................................................. F-24
Statements of Cash Flows.............................................................. F-25
Notes to Financial Statements......................................................... F-26
</TABLE>

F-1
<PAGE> 66

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
-----------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................ $ 11,368 $ 8,826
Short-term investments........................................... 29,670 7,617
Prepaid expenses and other current assets........................ 518 499
Current portion of employee loans receivable..................... 34 35
------- -------
Total current assets.......................................... 41,590 16,977
Property and equipment, net........................................ 1,515 924
Employee loans receivable.......................................... 148 271
Other assets....................................................... 234 149
------- -------
$ 43,487 $ 18,321
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 2,528 $ 1,490
Payable to Coulter Corporation................................... 85 111
Accrued liabilities.............................................. 1,202 4,330
Current portion of equipment financing obligations and debt
facility...................................................... 576 309
------- -------
Total current liabilities..................................... 4,391 6,240
Noncurrent portion of equipment financing obligations and debt
facility...................................................... 2,213 1,535
Commitments
Stockholders' equity:
Preferred stock, issuable in series, $.001 par value:
3,000,000 and 20,000,000 shares authorized at June 30, 1997
and December 31, 1996, respectively; none and 19,797,940
shares issued and outstanding at June 30, 1997 and December
31, 1996, respectively........................................ -- 28,355
Common stock, $.001 par value: 30,000,000 shares authorized;
10,335,484 shares and 437,612 shares issued and outstanding at
June 30, 1997 and December 31, 1996, respectively............. 10 1
Additional paid-in capital....................................... 65,354 2,488
Net unrealized gain (loss) on securities available-for-sale...... 20 (3)
Deferred compensation............................................ (1,370) (1,964)
Deficit accumulated during the development stage................. (27,131) (18,331)
------- -------
Total stockholders' equity.................................... 36,883 10,546
------- -------
$ 43,487 $ 18,321
======= =======
</TABLE>

See accompanying notes.

F-2
<PAGE> 67

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED FOR THE PERIOD
JUNE 30, FROM INCEPTION
------------------ (FEBRUARY 16, 1995)
1996 1997 TO JUNE 30, 1997
------- ------- -------------------
<S> <C> <C> <C>
Operating costs and expenses:
Research and development............................. $ 4,940 $ 6,583 $ 22,803
General and administrative........................... 625 3,180 6,170
------- ------- -------
Total operating costs and expenses..................... 5,565 9,763 28,973
Interest income, net................................... 254 963 1,842
------- ------- -------
Net loss............................................... $(5,311) $(8,800) $ (27,131)
======= ======= =======
Net loss per share..................................... $ (0.69) $ (1.01)
======= =======
Shares used in computing net loss per share............ 7,736 8,725
======= =======
</TABLE>

See accompanying notes.

F-3
<PAGE> 68

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED JUNE 30, FROM INCEPTION
-------------------- (FEBRUARY 16, 1995)
1996 1997 TO JUNE 30, 1997
-------- ------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................ $ (5,311) $(8,800) $ (27,131)
Adjustments used to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization..................... 19 58 122
Amortization of deferred compensation............. -- 594 924
Changes in operating assets and liabilities:
Prepaid expenses and other current assets......... (163) (18) (517)
Employee loans receivable......................... (321) 37 (269)
Other assets...................................... 2 1 (151)
Accounts payable.................................. 819 1,037 2,527
Payable to Coulter Corporation.................... 32 (26) 85
Accrued liabilities............................... 1,711 (3,128) 1,289
-------- ------- -------------------
Net cash used in operating activities..... (3,212) (10,245) (23,121)
-------- ------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments................. -- (31,035) (39,644)
Maturities of short-term investments................ -- 9,006 9,992
Purchases of property and equipment................. (534) (649) (1,630)
-------- ------- -------------------
Net cash used in investing activities..... (534) (22,678) (31,282)
-------- ------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of equipment financing obligations and debt
facility.......................................... -- (214) (258)
Borrowings under equipment lease financing and debt
facility.......................................... -- 1,159 2,959
Proceeds from issuances of convertible preferred
stock, net........................................ 22,366 -- 28,355
Proceeds from issuance of common stock.............. 182 34,520 34,715
-------- ------- -------------------
Net cash provided by financing
activities.............................. 22,548 35,465 65,771
-------- ------- -------------------
Net increase in cash and cash equivalents........... 18,802 2,542 11,368
Cash and cash equivalents at beginning of period.... 3,438 8,826 --
-------- ------- -------------------
Cash and cash equivalents at end of period.......... $ 22,240 $11,368 $ 11,368
======== ======= ==================
</TABLE>

See accompanying notes.

F-4
<PAGE> 69

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The information at June 30, 1997, for the six-month periods ended June 30,
1996 and 1997 and for the period from inception (February 16, 1995) to June 30,
1997 is unaudited but includes all adjustments (consisting only of normal
recurring adjustments) which, in the opinion of management, are necessary to
state fairly the financial information set forth therein in accordance with
generally accepted accounting principles. The interim results are not
necessarily indicative of results to be expected for the full fiscal year. These
financial statements should be read in conjunction with the audited financial
statements for the fiscal year ended December 31, 1996 included in this
Prospectus.

The consolidated balance sheet at December 31, 1996 has been derived from
audited consolidated financial statements at that date but does not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements.

Net Loss Per Share

Net loss per share is computed using the weighted average number of common
shares outstanding during the period. Common stock equivalents relating to stock
options are excluded from the computation as their effect is antidilutive. For
the period prior to the Company's initial public offering, the calculation
includes those shares required by the Securities and Exchange Commission's staff
accounting bulletins and guidelines.

In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings Per Share" ("Statement 128"). The statement is
effective for both interim and annual financial statements for periods ending
after December 15, 1997. Under Statement 128, primary EPS computed in accordance
with Accounting Principle Board Opinion No. 25 will be replaced with a new
simpler calculation called "basic EPS" and the Company will be required to
restate comparative EPS amounts for all prior periods. Under the new
requirements, basic EPS for the six-month periods ended June 30, 1997 and 1996
will be unchanged from primary EPS as currently disclosed. Fully diluted EPS
will not change significantly but has been named "diluted EPS." The Company will
implement the Statement in the fourth quarter of 1997.

In June 1997, the FASB issued Statement No. 130 "Reporting Comprehensive
Income." Although the Company has only recently commenced evaluation of this new
pronouncement, its impact is not expected to be significant. The Company will be
required to comply with the provisions of the Statement in fiscal 1998.

2. INVESTMENTS

Management determines the appropriate classfication of debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. The Company's debt securities are classified as available-for-sale and are
carried at estimated fair value in cash equivalents and short-term investments.
Unrealized gains and losses are reported as a separate component of
stockholders' equity. The amortized cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in interest income. Realized gains and losses on
available-for-sale securities are included in interest income and expense. The
cost of securities sold is based on the specific identification method. Interest
and dividends on securities

F-5
<PAGE> 70

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)

classified as available-for-sale are included in interest income. The Company's
cash equivalents and short-term investments as of June 30, 1997 are as follows
(in thousands):

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Money market funds............................. $ 1,715 $ -- $ -- $ 1,715
Commercial paper............................... 7,414 -- (4) 7,410
Corporate bond................................. 15,431 -- (6) 15,425
U.S. Government backed securities.............. 11,268 30 -- 11,298
CDs............................................ 5,108 -- -- 5,108
--------- ---------- ---------- ----------
Total................................ 40,936 30 (10) 40,956
Less amounts classified as cash equivalents.... (11,286) -- -- (11,286)
--------- ---------- ---------- ----------
Total short-term investments................... $ 29,650 $ 30 $ (10) $ 29,670
======== ======== ======== ========
</TABLE>

At June 30, 1997, the contractual maturities of short-term investments were
as follows (in thousands):

<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED COST FAIR VALUE
-------------- ----------
<S> <C> <C>
Due in one year or less............................................ $ 19,859 $ 19,881
Due after one year through two years............................... 9,791 9,789
-------------- ----------
$ 29,650 $ 29,670
============ ========
</TABLE>

3. STOCKHOLDERS' EQUITY

On January 28, 1997, the Company completed its initial public offering of
2,500,000 shares of its common stock at a price to the public of $12.00 per
share, resulting in net proceeds to the Company of approximately $27.9 million.
A one-for-three reverse common stock split became effective prior to the
commencement of the offering. All common share and per share amounts have been
retroactively restated to reflect the reverse stock split.

Also in January 1997, the Company received approximately $3.1 million from
the cash exercise of warrants to purchase 347,530 shares of its common stock and
issued an additional 37,785 shares of its common stock upon the net exercise of
warrants to purchase 151,175 shares of its common stock. In February 1997, the
Company received approximately $4.2 million from the sale of 375,000 shares of
its common stock pursuant to the exercise of the underwriters' over-allotment
option in connection with the initial public offering.

Upon completion of the initial public offering all of the 19,797,940 shares
of Series A, B and C preferred stock outstanding converted to shares of common
stock on a three-for-one basis. Also upon the completion of the offering, the
Company filed and Amended and Restated Certificate of Incorporation authorizing
the Company to issue 33,000,000 shares, 30,000,000 of which is designated Common
Stock and 3,000,000 of which is designated Preferred Stock.

F-6
<PAGE> 71

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)

4. SUBSEQUENT EVENT

In July 1997, the Company's Board of Directors adopted a Share Purchase
Rights Plan (the "Rights Plan"). The Rights Plan provides for the distribution
of a preferred stock purchase right (a "Right") as a dividend for each share of
Company common stock held of record as of August 20, 1997. The Rights are not
currently exercisable. Under certain conditions involving an acquisition or
proposed acquisition by any person or group of 20% or more of the common stock,
the Rights permit the holders (other than the 20% holder) to purchase Company
common stock at a 50% discount from the market price at that time, upon payment
of an exercise price of $80 per Right. In addition, in the event of certain
business combinations, the Rights permit the purchase of shares of common stock
of an acquiror at a 50% discount from the market price at that time. Under
certain conditions, the Rights may be redeemed by the Company's Board of
Directors in whole, but not in part, at a price of $0.001 per Right. The Rights
have no voting privileges and are attached to and automatically trade with the
Company's common stock. The Rights expire on July 30, 2007.

F-7
<PAGE> 72

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Coulter Pharmaceutical, Inc.

We have audited the accompanying consolidated balance sheets of Coulter
Pharmaceutical, Inc. (a development stage company) (the "Company") as of
December 31, 1995 and 1996, and the related consolidated statements of
operations and cash flows for the periods from inception (February 16, 1995) to
December 31, 1995 and 1996 and for the year ended December 31, 1996 and the
related consolidated statement of stockholders' equity for the period from
inception (February 16, 1995) to December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Coulter
Pharmaceutical, Inc. at December 31, 1995 and 1996, and the consolidated results
of its operations and its cash flows for the periods from inception (February
16, 1995) to December 31, 1995 and 1996 and for the year ended December 31,
1996, in conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Palo Alto, California
February 2, 1997

F-8
<PAGE> 73

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 3,438 $ 8,826
Short-term investments.......................................... -- 7,617
Prepaid expenses and other current assets....................... 40 499
Current portion of employee loans receivable.................... 31 35
------- ---------
Total current assets......................................... 3,509 16,977
Property and equipment, net....................................... 93 924
Other assets...................................................... 26 149
Employee loans receivable......................................... -- 271
------- ---------
$ 3,628 $ 18,321
======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................ $ 341 $ 1,490
Payable to Coulter Corporation.................................. 25 111
Accrued liabilities............................................. 265 4,330
Current portion of equipment financing obligations and debt
facility..................................................... -- 309
------- ---------
Total current liabilities.................................... 631 6,240
Non current portion of equipment financing obligations and debt
facility..................................................... -- 1,535
Commitments
Stockholders' equity:
Preferred stock, issuable in series, $.001 par value:
20,000,000 shares authorized; 9,833,333 and 19,797,940 shares
issued and outstanding at December 31, 1995 and 1996,
respectively; at amounts paid in; aggregate liquidation
preference of $33,420 at December 31, 1996................... 5,989 28,355
Common stock, $.001 par value: 25,000,000 shares authorized;
2,059 and 437,612 shares issued and outstanding at December
31, 1995 and 1996, respectively.............................. -- 1
Additional paid-in capital...................................... 1 2,488
Net unrealized loss on securities available-for-sale............ -- (3)
Deferred compensation........................................... -- (1,964)
Deficit accumulated during the development stage................ (2,993) (18,331)
------- ---------
Total stockholders' equity................................... 2,997 10,546
------- ---------
$ 3,628 $ 18,321
======= =========
</TABLE>

See accompanying notes.

F-9
<PAGE> 74

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See accompanying notes.

F-10
<PAGE> 75

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NET DEFICIT
CONVERTIBLE UNREALIZED LOSS ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL ON SECURITIES DURING THE TOTAL
-------------------- ---------------- PAID-IN AVAILABLE-FOR- DEFERRED DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL SALE COMPENSATION STAGE EQUITY
---------- ------- ------- ------ ---------- --------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
Series A
convertible
preferred
stock to
founders
at $1.00
per share
for cash
and
technology
in
February
1995...... 7,500,000 $ 2,500 -- $ -- $ -- $-- $ -- $ -- $ 2,500
Issuance of
Series B
convertible
preferred
stock to a
founder at
$1.50 per
share for
cash in
August and
October
1995, less
issuance
costs of
$11....... 2,333,333 3,489 -- -- -- -- -- -- 3,489
Exercise of
common
stock
options by
a
consultant
at $0.30
per share
for cash
in
November
1995...... -- -- 2,059 -- 1 -- -- -- 1
Net loss.... -- -- -- -- -- -- -- (2,993) (2,993)
---------- ------- ------- ------ ------ --- ------- ------- -------
Balances at
December
31, 1995.. 9,833,333 5,989 2,059 -- 1 -- -- (2,993) 2,997
Issuance of
Series C
convertible
preferred
stock and
warrants
for
498,705
shares of
common
stock to
investors
at $2.25
per share
for cash
in April
1996, less
issuance
costs of
$55....... 9,964,607 22,366 -- -- -- -- -- -- 22,366
Issuance of
common
stock to a
prospective
officer at
$0.45 per
share for
cash in
March
1996...... -- -- 400,000 1 179 -- -- -- 180
Issuance of
common
stock
pursuant
to stock
option
exercises... -- -- 35,553 -- 14 -- -- -- 14
Unrealized
loss on
securities
available-for-sale,
net....... -- -- -- -- -- (3) -- -- (3)
Deferred
compensation
related to
grants of
certain
stock
options... -- -- -- -- 2,294 -- (2,294) -- --
Amortization
of
deferred
compensation... -- -- -- -- -- -- 330 -- 330
Net loss.... -- -- -- -- -- -- -- (15,338) 15,338
---------- ------- ------- ------ ------ --- ------- ------- -------
Balances at
December
31, 1996.. 19,797,940 $28,355 437,612 $ 1 $2,488 $(3) $ (1,964) $ (18,331) $10,546
========== ======= ======= ====== ====== === ======= ======= =======
</TABLE>

See accompanying notes.

F-11
<PAGE> 76

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM INCEPTION YEAR ENDED FROM INCEPTION
(FEBRUARY 16, 1995) DECEMBER 31, (FEBRUARY 16, 1995)
TO DECEMBER 31, 1995 1996 TO DECEMBER 31, 1996
-------------------- ------------ --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $ (2,993) $(15,338) $(18,331)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 15 49 64
Amortization of deferred compensation................... -- 330 330
Changes in operating assets and liabilities:
Prepaid expenses and other current assets............... (40) (459) (499)
Employee loans receivable............................... (31) (275) (306)
Other assets............................................ (29) (123) (152)
Accounts payable........................................ 341 1,149 1,490
Payable to Coulter Corporation.......................... 25 86 111
Accrued liabilities..................................... 265 4,152 4,417
-------- -------- --------
Net cash used in operating activities........... (2,447) (10,429) (12,876)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments....................... -- (8,609) (8,609)
Maturities of short-term investments...................... -- 986 986
Purchases of property and equipment....................... (105) (876) (981)
-------- -------- --------
Net cash used in investing activities........... (105) (8,499) (8,604)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of equipment financings obligations.............. -- (44) (44)
Borrowings under equipment lease financing and debt
facility................................................ -- 1,800 1,800
Proceeds from issuances of convertible preferred stock,
net..................................................... 5,989 22,366 28,355
Proceeds from issuance of common stock.................... 1 194 195
-------- -------- --------
Net cash provided by financing activities....... 5,990 24,316 30,306
-------- -------- --------
Net increase in cash and cash equivalents................. 3,438 5,388 8,826
Cash and cash equivalents at beginning of period.......... -- 3,438 --
-------- -------- --------
Cash and cash equivalents at end of period................ $ 3,438 $ 8,826 $ 8,826
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING
ACTIVITIES:
Acquisition of equipment pursuant to equipment lease
obligations............................................. $ -- $ 78 $ 78
======== ======== ========
Deferred compensation related to grant of certain stock
options................................................. $ -- $ 2,294 $ 2,294
======== ======== ========
</TABLE>

See accompanying notes.

F-12
<PAGE> 77

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Principles of Consolidation

Coulter Pharmaceutical, Inc. (the "Company" or "Coulter") was incorporated
in the State of Delaware on February 16, 1995 to engage in the research and
development of products for the treatment of cancer. The Company's principal
activities to date have involved conducting research and development, recruiting
management and technical personnel, obtaining financing and securing operating
facilities. Therefore, the Company is classified as a development stage company.

In the course of its development activities, the Company has sustained
continuing operating losses and expects such losses to continue over the next
several years. The Company plans to continue to finance the Company with a
combination of stock sales, revenues from product sales and technology licenses.
The Company's ability to continue as a going concern is dependent upon
successful execution of financings and, ultimately, upon achieving profitable
operations.

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Coulter Pharma Belgium, SA which was formed
under the laws of Belgium in June 1996. Intercompany balances and transactions
have been eliminated.

In connection with its formation, the Company issued 5,000,000 shares of
its Series A preferred stock to Coulter Corporation in exchange for rights to
certain intellectual property, contractual rights and other assets pertaining to
the Company's B-1 Therapy (convertible into 1,666,666 shares of common stock).
Under the terms of this assignment agreement, royalties are payable to Coulter
Corporation upon commercial sale of product, if any, derived from these
licenses. Coulter Corporation also has the right, in lieu of receiving cash, to
purchase additional shares of the Company's equity securities at the then
current fair market value of such securities with respect to the first $4.5
million payable to Coulter Corporation under this assignment agreement. This
transaction was accounted for as an acquisition of assets from an affiliate with
the amounts brought over at their historical basis of $0.

Net Loss Per Share

Except as noted below, historical net loss per share is computed using the
weighted average number of common shares outstanding. Common equivalent shares
from outstanding stock options, convertible preferred stock and warrants are
excluded from the computation as their effect is antidilutive, except that,
pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common and common equivalent shares issued during the period beginning 12 months
prior to September 30, 1996 (the period reported in the initial public offering
Registration Statement on Form S-1) at prices below the initial public offering
price have been included in the calculation as if they were outstanding for all
periods presented (using the treasury stock method and the initial public
offering price for stock options and warrants and the if-converted method for
convertible preferred stock).

Historical net loss per share information is as follows:

<TABLE>
<CAPTION>
PERIOD FROM INCEPTION YEAR ENDED
(FEBRUARY 16, 1995) DECEMBER 31,
TO DECEMBER 31, 1995 1996
--------------------- ----------------
<S> <C> <C>
Net loss per share...................... $ (0.67) $(4.45)
Share used in computing historical net
loss per share (in thousands)......... 4,456 3,450
</TABLE>

Pro forma net loss per share has been computed as described above and also
gives effect to the conversion of convertible preferred shares not included
above that automatically converted into

F-13
<PAGE> 78

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

common stock upon completion of the Company's initial public offering in January
1997 (using the if-converted method). Such shares are included from their
original date of issuance.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Current Vulnerability to Certain Concentrations

The Company is supplying the B-1 Antibody to clinical trial sites from an
existing, finite inventory produced by Coulter Corporation, a related party. To
achieve the levels of production necessary to support on-going clinical trials
of its B-1 Therapy, the Company has contracted with a third-party manufacturer,
LONZA Biologics plc ("Lonza"), to produce the B-1 Antibody. In January 1997, the
Company received FDA clearance to use Lonza-produced material. However, should
the Company not be able to obtain sufficient quantities of the B-1 Antibody from
Lonza or additional suppliers, certain research and development activities may
be delayed.

Cash, Cash Equivalents and Short-Term Investments

The Company considers all highly liquid investments with maturities of
three months or less from the date of purchase to be cash equivalents.
Short-term investments consist of investments with original maturities greater
than three months, but less than one year.

The Company accounts for its cash equivalents and short-term investments
under Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). Under the
provisions of SFAS No. 115, the Company has classified its cash equivalents and
short-term investments as "available-for-sale." Such investments are recorded at
fair value and unrealized gains and losses, which are considered to be
temporary, are recorded as a separate component of Stockholders' equity until
realized. The Company classifies all investments in its available-for-sale
portfolio as current assets.

Foreign Currency Translation

The functional currency of Coulter Pharma Belgium, SA is the U.S. Dollar.
Assets and liabilities of Coulter Pharma Belgium, SA are translated at current
exchange rates, and the related revenues and expenses are translated at average
exchange rates in effect during the period. The resulting translation adjustment
is recorded in other (income) expense in the accompanying consolidated
statements of operations and has been immaterial since the formation of the
subsidiary in June 1996.

Property and Equipment

Purchased property and equipment are stated at cost less accumulated
depreciation which is calculated using the straight-line method over the
estimated useful lives of the respective assets of three to five years.