COULTER PHARMACEUTICALS INC, S-3, 1998-07-10

COULTER PHARMACEUTICALS INC
S-3, 1998-07-10
PHARMACEUTICAL PREPARATIONS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1998

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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>

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550 CALIFORNIA AVENUE, SUITE 200
PALO ALTO, CALIFORNIA 94306-1440
(650) 849-7500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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MICHAEL F. BIGHAM

PRESIDENT AND CHIEF EXECUTIVE OFFICER
COULTER PHARMACEUTICAL, INC.
550 CALIFORNIA AVENUE, SUITE 200
PALO ALTO, CALIFORNIA 94306-1440
(650) 849-7500
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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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>

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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]

If the 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. [ ]
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CALCULATION OF REGISTRATION FEE
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<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
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<S> <C> <C> <C> <C>
Common Stock,
$0.001 par value.... 2,300,000 $29.25 $67,275,000 $19,847
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</TABLE>

(1) Includes 300,000 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 $29.25 is an 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 July 8, 1998.
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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.

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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
JULY 10, 1998

2,000,000 Shares

CoultPharm.logo

Common Stock

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All of the 2,000,000 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 July 8, 1998, the last reported sale price of the Common Stock was
$29.8125 per share.

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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.

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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>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
<S> <C> <C> <C>
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Per Share.................................. $ $ $
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Total(2)................................... $ $ $
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</TABLE>

(1) Before deducting expenses of the offering estimated at $300,000, payable by
the Company.
(2) The Company has granted to the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock solely to cover
over-allotments, if any. To the extent the option is exercised, the
Underwriters will offer additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See
"Underwriting."

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The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of BT Alex. Brown Incorporated, Baltimore, Maryland, on or about
, 1998.

BT Alex. Brown

Hambrecht & Quist

Pacific Growth Equities, Inc.

Piper Jaffray Inc.

The date of this Prospectus is , 1998.
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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" or "Commission"). 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.

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

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents or portions of documents filed by the Company (File
No. 0-19311) with the SEC are incorporated herein by reference: (a) Annual
Report on Form 10-K for the fiscal year ended December 31, 1997; (b) Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998; (c) Proxy Statement
dated April 17, 1998; and (d) the description of the Company's Common Stock
which is contained in its Registration Statement on Form 8-A filed under the
Exchange Act on December 20, 1996, including any amendments or reports filed for
the purpose of updating any of such reports, statements or descriptions.

All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement contained in a document
incorporated by reference herein shall be deemed modified or superseded for
purposes of this Prospectus to the extent that a statement contained or
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person to whom this
Prospectus is delivered a copy of any or all of such documents which are
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates). Written or oral requests for copies should be
directed to Secretary, Coulter Pharmaceutical, Inc., at the Company's executive
offices located at 550 California Avenue, Suite 200, Palo Alto, CA 94306, (650)
849-7500.
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THE UNDERWRITERS AND CERTAIN OTHER PERSONS PARTICIPATING IN THIS OFFERING
MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE
PRICE OF THE COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE 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."

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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 is developing a
family of cancer therapeutics based upon two drug discovery programs:
therapeutic antibodies and targeted oncologics. Within these broad drug
discovery programs, the Company is currently concentrating on two distinct
platform technologies: therapeutic antibodies based on conjugated antibody
technology and targeted oncologics based on tumor activated peptide ("TAP")
pro-drug technology.

The Company's most advanced product candidate, Bexxar(TM)(iodine I 131
tositumomab), consists of a monoclonal antibody conjugated with a radioisotope.
The Company intends to file a Biologic License Application ("BLA") with the
United States Food and Drug Administration ("FDA") by the end of 1998 for the
use of Bexxar for the treatment of low-grade and transformed low-grade
non-Hodgkin's lymphoma ("NHL") in patients who have relapsed after or are
refractory to chemotherapy. The Company intends to seek expedited BLA review and
marketing approval for Bexxar, while simultaneously pursuing clinical trials to
expand its potential uses to other indications. The Company believes that
Bexxar, if successfully developed, would be the first radioimmunotherapy
approved in the United States for the treatment of people with cancer.

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 and a 48% complete response rate. Of those
patients who experienced a complete response, the average duration of response
was 20.2 months as of July 1997, the date of the final study report. In December
1997, the Company presented data on a multi-center, Phase II clinical trial in
heavily pre-treated, relapsed and refractory low-grade and transformed low-grade
NHL patients. The 45 evaluable patients in this trial achieved a 60% overall
response rate and a 31% complete response rate. As of December 1997, the longest
complete response was 20 months and the median duration of complete response had
not yet been reached.

Currently, the Company is gathering data from a fully enrolled 60-patient
Phase III multi-center investigational trial which included NHL patients
refractory to chemotherapy with few or no other treatment options. The objective
of this trial is to compare each patient's duration of response to treatment
with Bexxar with that patient's duration of response to his or her most recent
chemotherapy. For the primary endpoint of this trial to be achieved, the
duration of response to Bexxar must be at least one month longer than the
duration of response to prior chemotherapy in a majority of patients. In May
1998, the Company announced interim data from this trial. Of the 13 patients
with adequate follow up data and whose response durations to chemotherapy and
Bexxar were not equivalent, 77% experienced a longer duration of response to
Bexxar compared to 23% who experienced a longer duration of response to his or
her prior chemotherapy.

The Company also 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 up to 70 newly diagnosed low-grade
NHL patients. An interim analysis of data from the first 32 patients showed a
100% overall response rate. Of the 24 patients for whom adequate follow up data
was available, 71% achieved complete responses. Additionally, in nine of the
patients no evidence of NHL could be detected at molecular levels using
polymerase chain reaction ("PCR") analysis. As of April 1998, 24 patients were
in ongoing remission, with the longest duration being 18.5 months. 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.

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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 under applicable Nuclear
Regulatory Commission ("NRC") regulations.

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. In vitro studies of one
analog of Super-Leu-Dox have shown that the compound 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 is in the
process of selecting the lead development analog of Super-Leu-Dox to pursue in
clinical trials, which are expected to commence in 1999.

The Company intends to market and sell its products in North America
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) 849-7500.

4
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THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,000,000 shares
Common Stock to be outstanding after the
offering................................... 15,629,528 shares(1)
Use of proceeds.............................. For establishing sales and marketing
capabilities, building pre-launch inventory,
funding of clinical trials and manufacturing
scale-up; and for other research and
development, working capital and general
corporate purposes.
Nasdaq National Market symbol................ CLTR
</TABLE>

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

<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
INCEPTION DECEMBER 31, ENDED MARCH 31,
(FEB. 16, 1995 TO -------------------- -------------------
DEC. 31, 1995) 1996 1997 1997 1998
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<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Research and development
expenses..................... $ 2,539 $ 13,681 $ 21,045 $ 3,036 $ 9,017
Selling, general and
administrative expenses...... 581 2,409 7,610 1,208 2,160
Total operating expenses....... 3,120 16,090 28,655 4,244 11,177

Net loss....................... (2,993) (15,338) (26,328) (3,806) (10,265)
Basic and diluted net loss per
share........................ $(12,736.17) $(649.39) $ (2.58) $ (0.56) $ (0.77)
Shares used in computing basic
and diluted net loss per
share(2)..................... 0.235 24 10,197 6,792 13,377
Pro forma basic and diluted net
loss per share............... $(1.28) $(2.65)
Shares used in computing pro
forma basic and diluted net
loss per share(2)............ 2,342 5,793
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
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ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments....... $67,371 $123,417
Working capital......................................... 54,660 110,706
Total assets............................................ 71,105 127,151
Deficit accumulated during the development stage........ (54,924) (54,924)
Total stockholders' equity.............................. 55,797 111,843
</TABLE>

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(1) Based on the number of shares outstanding at March 31, 1998. Excludes
1,707,180 shares of Common Stock that were subject to outstanding options at
such date at a weighted average exercise price of $8.71 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."
(2) See Note 1 of Notes to March 31, 1998 and December 31, 1997 Consolidated
Financial Statements for an explanation of the determination of shares used
in computing basic and diluted net loss per share and pro forma basic and
diluted net loss per share.
(3) As adjusted to reflect the sale of 2,000,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $29.8125 per
share and the receipt of the estimated net 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."

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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 and in documents incorporated by reference into 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. Additional development and clinical testing will be required
prior to seeking any regulatory approval for commercialization of these
potential products. 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 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 one to two 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 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."

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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 ("FD&C
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 and indication, 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, including the Company's third party
manufacturers, also are required to comply with the applicable FDA current 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.
The Company relies upon MDS Nordion Inc. ("Nordion") for centralized
radiolabeling of the B-1 Antibody at Nordion's radiolabeling facility in Canada.
To the Company's knowledge, Nordion's facilities previously have not been
licensed by the FDA as suitable for commercial manufacturing of a drug or
biologic. There can be no assurance that the Company, Nordion or any of its
other 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 intends to seek expedited review of the Bexxar BLA under
provisions recently enacted in the FDA Modernization Act of 1997 ("FDAMA").
Under FDAMA's new fast track program, the sponsor of a new drug or biologic
intended for the treatment of a serious or life-threatening condition that
demonstrates the potential to address unmet medical needs for such a condition
may qualify for expedited review. Significant uncertainty exists as to the
extent to which FDAMA will result in expedited review and approval. Further,
although the FDA has been mandated to issue guidance on the policies and
procedures applicable to "fast track products" under FDAMA, such guidelines are
not yet available. Moreover, the FDA is not bound by discussions that an

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applicant may have had with FDA staff. Approval of a fast track product may be
subject to (i) post-approval studies to validate a surrogate endpoint or to
confirm the effect on a clinical endpoint and (ii) prior FDA review of all
promotional materials. A determination that Bexxar is not eligible for expedited
review or delays and additional expenses associated with generating a response
to any request for additional trials or for review of promotional materials
could have a material adverse effect on the Company's business, financial
condition and results of operations. Additionally, products approved under
expedited procedures are also subject to expedited withdrawal of approval
procedures. See "Business -- Government Regulation."

DEPENDENCE ON SUPPLIERS; MANUFACTURING AND SCALE-UP RISK

The Company has no internal capacity or experience with respect to
manufacturing products for large-scale clinical trials or commercial purposes.
The Company has entered into development contracts with two third-party
manufacturers, Lonza Biologics PLC ("Lonza") and Boehringer Ingleheim Pharma KG
("BI Pharma KG"), to produce the B-1 Antibody. The Company has entered into a
commercial supply agreement with Lonza and is negotiating a commercial supply
agreement with BI Pharma KG, although there can be no assurance that such
contract will be entered into in a timely manner, if at all. In addition, there
can be no assurance that any B-1 Antibody produced by BI Pharma KG will be
deemed by the FDA to be clinically equivalent to B-1 Antibody produced by Lonza,
which equivalence is a prerequisite to clinical or commercial use of any B-1
Antibody produced by BI Pharma KG. These manufacturers have limited experience
producing the B-1 Antibody, and there can be no assurance that they will be able
to produce the Company's requirements at commercially reasonable prices or with
acceptable quality.

The Company relies upon Nordion for centralized radiolabeling of the B-1
Antibody at Nordion's radiolabeling facility in Canada. 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. 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 producers of unlabeled antibody or its radiolabeler, or any
failure by its existing suppliers to meet the Company's requirements for any
reason, 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 the B-1 Antibody from an
inventory produced by Coulter Corporation, and radiolabeling was performed by
radiopharmacies at the individual clinical trial sites. In 1997, Beckman
Instruments, Inc. acquired Coulter Corporation, which is now known as Beckman
Coulter ("Beckman Coulter"). 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. A failure to establish clinical
comparability could lead to a requirement that the Company collect

8
<PAGE> 10

additional comparability data from clinical trials, which may delay the
completion of such trials, increase costs and potentially delay the Company's
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."

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 approved, Bexxar 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. 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, local
or individual hospital regulations. As with any new drug, physicians may be
inclined to continue to treat patients with conventional therapies, such as
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 North America
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. The Company is considering whether to
supplement its own efforts in North America with the sales and marketing
capabilities of a marketing partner and is currently in discussions with several
potential partners. Development of an effective sales and marketing capability,
either independently or with the help of a marketing partner, will require
significant financial resources and time. There can be no assurance that the
Company will be able to establish such a capability in a timely or cost
effective manner, if at all, or that it can successfully generate demand for
Bexxar or other product candidates.

HIGHLY COMPETITIVE INDUSTRY; RISK OF TECHNOLOGICAL OBSOLESCENCE

9
<PAGE> 11

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 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 from time to time receives correspondence offering the
opportunity to license the patents of third parties. In addition, 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 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.

10
<PAGE> 12

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.

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. Differences in what constitutes
patentable subject matter in various countries 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."

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 next several years. The development of the Company's
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 earned thereon, will be adequate to
satisfy the requirements of its current and planned operations into 2000.
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, the cost, timing and outcome of
regulatory approvals, the expenses of establishing a sales and marketing force,
continued progress of the Company's research and development of potential
products, the establishment of collaborations, the timing and cost of
establishment or procurement of requisite production, radiolabeling and other
manufacturing capacities, the adequacy of facilities, 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 may need to raise substantial additional capital to fund its
operations and may 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

11
<PAGE> 13

HISTORY OF OPERATING LOSSES; ANTICIPATED FUTURE LOSSES

The Company has a limited history of operations and has experienced
significant losses since inception. As of March 31, 1998, the Company's
accumulated deficit was approximately $54.9 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 one to two 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."

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.

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

12
<PAGE> 14

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 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

As of February 27, 1998, executive officers and principal stockholders of
the Company beneficially owned approximately 33.3% 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.

13
<PAGE> 15

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, including the Company, 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 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.

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.

14
<PAGE> 16

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby are estimated to be $56.0 million
($64.5 million if the Underwriters' over-allotment option is exercised in full).

The Company anticipates that approximately $45.0 million of the proceeds of
this offering will be used to support the potential commercialization of Bexxar,
including costs associated with establishing sales and marketing capabilities
and pre-launch inventory in anticipation of potential product launch, as well as
to support ongoing clinical and manufacturing development costs. 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; the cost, timing and outcome
of regulatory approvals; the expenses of establishing a sales and marketing
force; continued progress of the Company's research and development of potential
products; the establishment of collaborations; the timing and cost of
establishment or procurement of requisite production, radiolabeling and other
manufacturing capacities; the adequacy of facilities; 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 may 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 2000.

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the Nasdaq National Market under the symbol
"CLTR." The Company completed its initial public offering on January 28, 1997.
Prior to that date, no public market existed for the Common Stock. The following
table sets forth the high and low intra-day sales price for the Common Stock for
the periods indicated as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
YEAR ENDING DECEMBER 31, 1997
First Quarter (from January 28, 1997)..................... $13.25 $ 8.75
Second Quarter............................................ 12.63 6.50
Third Quarter............................................. 15.13 7.88
Fourth Quarter............................................ 23.50 13.00
YEAR ENDING DECEMBER 31, 1998
First Quarter............................................. 28.44 17.00
Second Quarter............................................ 35.13 21.63
Third Quarter (through July 8, 1998)...................... 32.13 27.50
</TABLE>

On July 8, 1998, the last reported sales price for the Common Stock on the
Nasdaq National Market was $29.8125 per share. As of June 30, 1998 there were
approximately 347 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 as of March 31, 1998: (i) the capitalization
of the Company and (ii) the capitalization of the Company on an as adjusted
basis to reflect the sale of the shares of Common Stock offered by the Company
hereby (based on an assumed offering price of $29.8125 per share) and the
application of the estimated net proceeds therefrom.

<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL(1) AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of equipment financing obligations and debt
facility.................................................. $ 765 $ 765
======== ========

Noncurrent portion of equipment financing obligations and
debt facility............................................. $ 2,106 $ 2,106
-------- --------

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; 13,629,528 shares issued and outstanding
actual; 15,629,528 shares issued and outstanding, as
adjusted............................................... 14 16
Additional paid-in capital................................ 111,746 167,790
Accumulated other comprehensive income.................... (35) (35)
Deferred compensation..................................... (1,004) (1,004)
Deficit accumulated during the development stage.......... (54,924) (54,924)
-------- --------
Total stockholders' equity............................. 55,797 111,843
-------- --------
Total capitalization.............................. $ 57,903 $113,949
======== ========
</TABLE>

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

(1) Excludes 1,707,180 shares of Common Stock reserved for issuance upon
exercise of stock options outstanding at March 31, 1998, at a weighted
average exercise price of $8.71 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.

16
<PAGE> 18

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data as of
December 31, 1996 and 1997 and for each of the two years in the period ended
December 31, 1997 and the period from inception (February 16, 1995) to December
31, 1995 which are derived from the Company's financial statements that have
been audited by Ernst & Young LLP, independent auditors, and which are included
herein. The selected consolidated financial data as of December 31, 1995 are
derived from the Company's financial statements that have been audited by Ernst
& Young LLP, and which are not included herein. The selected consolidated
financial data as of March 31, 1998 and for the three months ended March 31,
1997 and 1998 and the period from inception (February 16, 1995) to March 31,
1998 are derived from the Company's unaudited financial statements which are
included herein.

<TABLE>
<CAPTION>
INCEPTION THREE MONTHS ENDED INCEPTION
(FEB 16, 1995) YEAR ENDED YEAR ENDED --------------------- (FEB 16, 1995)
TO DEC 31 DEC 31, DEC 31, MARCH 31, MARCH 31, TO MARCH 31,
1995 1996 1997 1997 1998 1998
-------------- ---------- ---------- --------- --------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Operating expenses:
Research and development............. $ 2,539 $ 13,681 $ 21,045 $ 3,036 $ 9,017 $ 46,282
Selling, general and
administrative..................... 581 2,409 7,610 1,208 2,160 12,760
----------- -------- -------- -------- -------- --------
Total operating expenses....... 3,120 16,090 28,655 4,244 11,177 59,042
Interest income and other, net......... 127 752 2,327 438 912 4,118
----------- -------- -------- -------- -------- --------
Net loss............................... $ (2,993) $(15,338) $(26,328) $ (3,806) $(10,265) $(54,924)
=========== ======== ======== ======== ======== ========
Basic and diluted net loss per
share(1)............................. $(12,736.17) $(649.39) $ (2.58) $ (0.56) $ (0.77)
=========== ======== ======== ======== ========
Shares used in computing basic and
diluted net loss per share(1)(2)..... 0.235 24 10,197 6,792 13,377
=========== ======== ======== ======== ========
Pro forma basic and diluted net loss
per share............................ $ (1.28) $ (2.65)
=========== ========
Shares used in computing pro forma
basic and diluted net loss per
share(2)............................. 2,342 5,793
=========== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997 1998
------------ ------------ ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 3,438 $ 16,443 $ 75,445 $ 67,371
Working capital (deficit)................................... 2,878 10,737 65,202 54,660
Total assets................................................ 3,628 18,321 78,671 71,105
Noncurrent portion of equipment financing obligations and
debt facility............................................. -- 1,535 2,298 2,106
Deficit accumulated during the development stage............ (2,993) (18,331) (44,659) (54,924)
Total stockholders' equity.................................. 2,997 10,546 65,861 55,797
</TABLE>

- ---------------
(1) Data for the period from inception (February 16, 1995) to December 31, 1995
and the year ended December 31, 1996 has been retroactively restated to
comply with Staff Accounting Bulletin No. 98, which was issued by the staff
of the Securities and Exchange Commission in February 1998.

(2) See Note 1 of Notes to March 31, 1998 and December 31, 1997 consolidated
financial statements for an explanation of the determination of shares used
in computing basic and diluted net loss per share and pro forma basic and
diluted net loss per share.

17
<PAGE> 19

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 and in documents incorporated by
reference into this Prospectus.

OVERVIEW

Coulter Pharmaceutical is engaged in the development of novel drugs and
therapies for the treatment of people with cancer. The Company is developing a
family of cancer therapeutics based upon two drug discovery programs:
therapeutic antibodies and targeted oncologics. Within these broad discovery
programs, the Company is currently concentrating on two distinct platform
technologies: therapeutic antibodies based on conjugated antibody technology and
targeted oncologics based on TAP pro-drug technology.

The Company's most advanced product candidate, Bexxar, consists of a
monoclonal antibody conjugated with a radioisotope. The Company intends to file
a BLA with the FDA by the end of 1998 for the use of Bexxar for the treatment of
low-grade and transformed low-grade non-Hodgkin's lymphoma ("NHL") in patients
who have relapsed after or are refractory to chemotherapy. The Company intends
to seek expedited BLA review and marketing approval for Bexxar, while
simultaneously pursuing clinical trials to expand its potential uses to other
indications. Bexxar is based upon the antibody therapeutics program which
originated at Coulter Corporation. In 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
research and development programs, as well as selling, general and
administrative activities needed to support product development and potential
product sales. 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 one to two years.
The Company has a limited history of operations and has experienced significant
operating losses to date. 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 March 31, 1998, the Company's accumulated deficit was
approximately $54.9 million.

RESULTS OF OPERATIONS

Comparison of Quarters Ended March 31, 1998 and 1997

Operating Expenses. Research and development expenses were $9.0 million for
the quarter ended March 31, 1998, compared to $3.0 million for the same period
in 1997. This $6.0 million increase was due primarily to increases in staffing
and expenditures associated with the development of Bexxar, including costs of
clinical trials and manufacturing expenses. These manufacturing expenses
included 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 during
the remainder of 1998, reflecting anticipated increased costs related to
additions to staffing, preclinical studies, clinical trials and manufacturing.

18
<PAGE> 20

Selling, general and administrative expenses were $2.2 million for the
quarter ended March 31, 1998, compared to $1.2 million for the same period in
1997. This $1.0 million increase was incurred to support the Company's
facilities and staffing expansion, increased research and development efforts,
increased pre-commercialization activities, increased corporate development
activities and related legal and patent activities. The Company expects its
selling, general and administrative expenses to continue to increase during the
remainder of 1998, 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 and Other, Net. Interest income was $912,000 for the
quarter ended March 31, 1998, compared to $438,000 for the same period in 1997.
This increase was due to higher average cash, cash equivalents and short-term
investments balances as a result of the completion of the Company's follow-on
offering in October 1997.

Comparison of Years Ended December 31, 1997, December 31, 1996 and Period from
Inception (February 16, 1995) to December 31, 1995

Operating Expenses. Research and development expenses were $21.0 million
for the year ended December 31, 1997, compared to $13.7 million for the year
ended December 31, 1996 and $2.5 million for the period from inception (February
16, 1995) to December 31, 1995. The $7.3 million increase from the year ended
December 31, 1996 to the year ended December 31, 1997 was due primarily to
increases in staffing and expenditures associated with the development of
Bexxar, including costs of clinical trials and manufacturing expenses. These
manufacturing expenses included certain expenses associated with scaled-up
production of monoclonal antibodies and the establishment of a centralized
radiolabeling capability. The $11.2 million increase from the period from
inception (February 16, 1995) to December 31, 1995 to the year ended December
31, 1996 was due primarily to increases in staffing and in expenditures
associated with the development of Bexxar, including costs of clinical trials
and manufacturing expenses. The Company expects its research and development
expenses to grow in 1998, reflecting anticipated increased costs related to
additions to staffing, preclinical studies, clinical trials and manufacturing.

Selling, general and administrative expenses were $7.6 million for the year
ended December 31, 1997, compared to $2.4 million for the year ended December
31, 1996 and $0.6 million for the period from inception (February 16, 1995) to
December 31, 1995. The $5.2 million increase from the year ended December 31,
1996 to the year ended December 31, 1997 was incurred to support the Company's
increased pre-commercialization expenses, as well as facilities and staffing
expansion, increased corporate development activities and related legal and
patent activities. The $1.8 million increase in expenses from the period from
inception (February 16, 1995) to December 31, 1995 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
Company expects its selling, general and administrative expenses to continue to
increase in 1998, due to increasing commercialization efforts in anticipation of
potential product sales, as well as to support its increased research and
development, patent and corporate development activities and facilities
expansion.

Interest Income and Other, Net. Interest income was $2.3 million for the
year ended December 31, 1997, compared to $0.8 million for the year ended
December 31, 1996 and $0.1 million for the period from inception (February 16,
1995) to December 31, 1995. The Company first recorded interest income in the
period from inception (February 16, 1995) to December 31, 1995 which resulted
from investment of the net proceeds from the sale of the Company's preferred
stock in 1995. The $0.7 million increase from the period from inception
(February 16, 1995) to December 31, 1995 to the year ended December 31, 1996 was
due to higher average cash, cash equivalents and short-term investments balances
as a result of the Company's sale of preferred stock in August 1995 and April
1996. The $1.5 million increase from the year ended December 31, 1996 to the
year ended December 31, 1997 was due to higher average cash, cash equivalents
and short-term

19
<PAGE> 21

investments balances as a result of the Company's initial public offering in
January 1997 and a follow-on offering in October 1997.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception through March 31, 1998, the Company has financed its
operations primarily through private placements and public offerings of equity
securities totaling $109.3 million. In addition, the Company entered into a $3.8
million equipment lease financing and debt facility in December 1996, $0.3
million of which was available at March 31, 1998. Cash, cash equivalents and
short-term investments totaled $67.4 million at March 31, 1998.

The negative cash flow from operations results primarily from the Company's
net operating losses and is expected to continue and to accelerate in the next
several years. 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 may need to raise substantial additional capital to fund
its operations. The Company may seek such additional funding through public or
private equity or debt financings from time to time, as market conditions
permit, or through collaborative arrangements. 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.

Net cash used in operations was $7.6 million for the quarter ended March
31, 1998, compared to $6.4 million for the same period in 1997. This $1.2
million increase is primarily the result of the increased net loss for the
quarter ended March 31, 1998, partially offset by an increase in accrued
liabilities. Net cash used in investing activities decreased to $1.8 million for
the quarter ended March 31, 1998 from $14.3 million for the same period in 1997
primarily resulting from the purchase of $32.4 million short-term investments,
partially offset by an increase in maturities of short-term investments.

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 2000. The Company has
entered into a long-term lease obligation for office and laboratory space that
will require approximately $5.0 million in capital expenditures through the end
of 1998 which the Company may elect to offset by bank or other borrowings. The
Company's future capital requirements will depend on a number of factors,
including: the scope and results of preclinical studies and clinical trials; the
cost, timing and outcome of regulatory approvals; the expenses of establishing a
sales and marketing capability; continued progress of the Company's research and
development of potential products; the establishment of collaborations; the
timing and cost of establishment or procurement of requisite production,
radiolabeling and other manufacturing capacities; the adequacy of facilities;
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.

20
<PAGE> 22

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 drug discovery
programs: therapeutic antibodies and targeted oncologics. Within these broad
drug discovery programs, the Company is currently concentrating on two distinct
platform technologies: therapeutic antibodies based on conjugated antibody
technology and targeted oncologics based on TAP pro-drugs.

The Company's most advanced product candidate, Bexxar, consists of a
monoclonal antibody conjugated with a radioisotope. The Company intends to file
a BLA with the FDA by the end of 1998 for the use of Bexxar for the treatment of
low-grade and transformed low-grade non-Hodgkin's lymphoma in patients who have
relapsed after or are refractory to chemotherapy. The Company intends to seek
expedited BLA review and marketing approval for Bexxar, while simultaneously
pursuing clinical trials to expand its potential uses to other indications. 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.

Currently, the Company is gathering data from a fully enrolled 60-patient
Phase III multi-center investigational trial which included NHL patients
refractory to chemotherapy with few or no other treatment options. The objective
of this trial is to compare each patient's duration of response to treatment
with Bexxar with that patient's duration of response to his or her most recent
chemotherapy. For the primary endpoint to be achieved, the duration of response
to Bexxar must be at least one month longer than the duration of response to
prior chemotherapy in a majority of the patients. In May 1998, the Company
announced interim data from this trial. Of the 13 patients who had adequate
follow-up data and whose response durations to chemotherapy and Bexxar were not
equivalent, 77% experienced a longer duration of response to Bexxar compared to
23% who experienced a longer duration of response to his or her prior
chemotherapy.

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 up to 70 newly diagnosed low-grade NHL patients.
An interim analysis of data from the first 32 patients showed a 100% overall
response rate. Of the 24 patients for whom adequate follow-up data was
available, 71% achieved complete responses. Additionally, in nine of the
patients no evidence of NHL could be detected at molecular levels using PCR
analysis. As of April 1998, 24 patients were in ongoing remission, with the
longest duration being 18.5 months. 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.

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 1999.

21
<PAGE> 23

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 is estimated to have accounted
for more than 560,000 deaths in 1997 alone. Some 40% 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 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 chemother-

22
<PAGE> 24

apy. 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, nerve toxicity, and fatigue, as well as life-
threatening side effects such as immune system suppression and cardiac toxicity.
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.

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

23
<PAGE> 25

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 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.

24
<PAGE> 26

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 drug discovery
programs: therapeutic antibodies and targeted oncologics. Within these broad
drug discovery programs, the Company is currently concentrating on two distinct
platform technologies: therapeutic antibodies based on conjugated antibody
technology and targeted oncologics based on 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 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.

The Company intends to file a BLA with the FDA by the end of 1998 for the
use of Bexxar for the treatment of low-grade and transformed low-grade NHL in
patients who have relapsed after or are refractory to chemotherapy. The Company
intends to seek expedited BLA review and marketing approval for Bexxar, while
simultaneously pursuing clinical trials to expand its potential uses to other
indications. The Company believes that Bexxar, if successfully developed, would
be the first radioimmunotherapy approved in the United States for the treatment
of 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.

25
<PAGE> 27

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 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 Approval of Bexxar. The Company intends to seek expedited
FDA review for marketing approval for Bexxar for the treatment of low-grade and
transformed low-grade NHL in patients who have relapsed after or are refractory
to chemotherapy, while simultaneously pursuing clinical trials to expand the
potential use of Bexxar to other indications. The ongoing Phase III
investigational 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 includes 60
patients with NHL refractory to chemotherapy. The Company intends to file for
FDA marketing approval for this indication by the end 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 with newly diagnosed 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
1999. The Company also intends to apply its TAP pro-drug technology to other
classes of cytotoxic drugs 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 manufac-

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turing 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.

BEXXAR: RADIOIMMUNOTHERAPY FOR NON-HODGKIN'S LYMPHOMA

The Company plans to file a BLA with the FDA by the end of 1998 for its
first product candidate, Bexxar. 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 54,000 new cases are expected
to be diagnosed in 1998. 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 a dosimetric dose, three whole body gamma counts
and a therapeutic dose. The proprietary protocol is flexible: the timing of the
counts 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 dosimetric
dose consists of 35 mg of B-1 Antibody trace-labeled with 5 millicuries ("mCi")
of (131)I. Immediately after the dosimetric dose, the patient undergoes a whole
body gamma count. The patient returns for additional gamma counts on the third
and eighth days of the therapy to show how much of the radiolabeled antibody 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 dose ranges from approximately 50 to 200 mCi of (131)I due to wide
patient-to-patient variability in the rates at which the

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antibody is eliminated. Both the dosimetric dose and the therapeutic dose
immediately are preceded by a 450 mg 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.

[FLOW CHART]

Relying upon the dosimetric 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. Although the
Company believes that Bexxar can be administered primarily on an outpatient
basis under applicable NRC Regulations, 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."

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<PAGE> 30

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.

[B-Cell Life Cycle Diagram]

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 dosimetry 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 dosimetric and the
therapeutic dose provides assurance that the clearance rates observed in
dosimetry also will apply for the therapeutic dose. Having established the
patient's actual clearance rate, the clinician 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

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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 may 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.

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.

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 of 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 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 the yet to be 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, the date of the final study report. 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 37% partial response rate. Of
the 17 patients in this trial who had intermediate- or high-grade

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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.

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 stem cell rescue. Other side effects observed were mild and consisted
primarily of temporary flu-like symptoms.

As part of its Phase I/II dose escalation trial, 13 patients who had
responded to an initial treatment with Bexxar were retreated following relapse.
Data concerning these patients was presented at the American Society of Clinical
Oncology meeting in May 1998. Eight of the 13 responded to retreatment with four
of 13 patients experiencing a complete response. In patients who had achieved a
complete response after initial treatment with Bexxar, five of six experienced
an overall response and three of six achieved a second complete response.

Phase II Dosimetry Validation Clinical Trial. The Company completed a
multi-center 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 counts. Overall, 45 of the 47 enrolled patients were evaluable,
having received the protocol-specified therapy. The evaluable patients had
received on average, more than four prior therapies, 42% had bulky disease
(tumor burden of greater than 500 grams), and 53% had not responded to their
last chemotherapy. Of the evaluable patients, 31% (14 patients) achieved a
complete response. Ten of the 14 patients with a complete response had not
relapsed and the longest duration of response was 20 months as of December 1997.
As of that date, the median duration of complete response had not been reached.
None of the evaluable patients developed human anti-mouse antibodies. At least
one complete response was achieved at each clinical site involved in the trial.

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 and the Phase II dosimetry validation trials, which were conducted at
relatively few sites 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 and Phase II dosimetry
validation clinical trials, the Company will rely on three additional clinical
trials to support an application to the FDA for the initial marketing approval
of Bexxar expected to be filed by the end of 1998: (i) an ongoing Phase III
investigational trial for the treatment of patients refractory to chemotherapy;
(ii) interim data from 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;
and (iii) to expand the use of Bexxar to other indications and to support the
initial BLA, interim data from an ongoing 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.

Phase III Investigational Trial. The Company's Phase III investigational
trial, which commenced in December 1996, was designed to enroll a target of 60
evaluable patients who have low-grade and transformed low-grade NHL, are
refractory to chemotherapy, having either no response to prior chemotherapy or
having disease progression within six months of their last chemotherapy regimen,
and have not received prior bone marrow transplantation. The Company announced
in May

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1998 that the patient enrollment for this trial was closed. 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 duration of response
to Bexxar as assessed by a masked independent review panel of physicians will be
measured against his or her own duration of response to the previous regimen of
chemotherapy similarly assessed, rather than by comparison to patients in a
separate control arm. The duration of response on Bexxar must be at least one
month longer than the duration of response with the prior chemotherapy in a
majority of patients with nonequivalent duration of response. Based on this
primary endpoint, the Company designed this clinical trial with a relatively
short post-treatment follow-up period of approximately six months. In May 1998,
the Company announced interim data on 30 patients enrolled in this trial. Of the
30 patients, 22 had adequate follow-up data to contribute toward the primary
endpoint at the time of analysis. As assessed by the trial's clinical
investigators, ten of 13 (77%) of the non-equivalent cases experienced a longer
duration of response on Bexxar compared to three of 13 (23%) patients
experiencing a longer duration on the prior chemotherapy. Nine cases resulted in
an equivalent duration of response on Bexxar and prior chemotherapy. Adverse
events related to Bexxar, observed to date, include a decrease in blood counts
which are reversible and generally self-limiting. A minority of these heavily
pre-treated patients may require support by blood transfusion or growth factor.
A mild to moderate flu-like syndrome also has been observed.

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. This trial was the subject of an abstract presented at
the 1997 American Society of Therapeutic Radiation Oncology meeting in October
1997. 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 32 patients
was presented at the American Society of Clinical Oncology meeting in May 1998
showed a 100% overall response rate. Of the 24 patients for whom adequate follow
up data was available, 71% achieved a complete responses. Additionally, in nine
of the patients, no evidence of NHL could be detected at molecular levels using
PCR analysis. As of April 1998, 24 patients were in ongoing remission, with the
longest duration being 18.5 months. Side-effects were generally mild to moderate
and self-limited. 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. 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."

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Use of Bexxar For Bone-Marrow Transplantation. 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 997 cGy (over ten
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 high doses
of chemotherapy in preparation for autologous bone marrow transplant. This
clinical trial has enrolled 43 patients since its commencement in January 1995.
Data from this clinical trial was presented at the American Society of Clinical
Oncology meeting in May 1998. In this Phase I/II trial, 28 of 43 patients (65%)
had low grade and 15 of 43 patients (35%) had intermediate or high grade NHL. Of
the 42 evaluable patients, 31 of 42 patients (74%) are progression-free after a
median follow-up of 1.5 years. All patients experienced myelosuppression by
design with the high dose combination regimen of chemotherapy and Bexxar (at a
level approximately four to ten times the mean standard dose of Bexxar). Other
dose-limiting toxicities included pulmonary and gastrointestinal toxicities.

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.

Other Clinical Trials and Developments. The Company is also conducting a
Phase II multi-center investigational trial in patients previously treated with
Bexxar. This open label trial include low-, intermediate- and high-grade NHL
patients who have relapsed from their initial Bexxar treatment.

The Company has received initial approval from the FDA to commence an
expanded access program. Through this program, additional patients may be
treated with Bexxar during the period prior to FDA marketing approval.

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, prostate, ovarian and soft-tissue sarcoma cancers.

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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.

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 one analog 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
1999.

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.

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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 currently intend to relocate the research program. In 1997, the Company also
entered into a sponsored research agreement with Catholique Universite de
Louvain to conduct research in the area of TAP pro-drugs.

OTHER PRODUCT CANDIDATES

In 1997, the Company began a program which actively seeks to in-license
promising product development candidates in the area of cancer therapeutics with
the objective of expanding the Company's product pipeline.

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 $10.7 million, of which
approximately $6.1 million had been incurred and expensed through March 31,
1998. 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 has entered into a commercial supply agreement
with Lonza to purchase B-1 Antibody.

In addition, the Company has entered into a Development Agreement with BI
Pharma KG to manufacture and supply B-1 Antibody for use in ongoing clinical
trials and to meet commercial requirements. Aggregate commitments under this
contract are approximately $7.0 million, of which $6.8 million had been incurred
and expensed through March 31, 1998. The Company is currently negotiating a
commercial supply agreement that will, in addition to manufacturing, provide for
fill/finish and packaging services. There can be no assurance that such an
agreement will be entered into in a timely manner or that the material produced
by BI Pharma KG will be suitable for human use.

Radiolabeling currently is conducted at Nordion 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 $5.9 million to Nordion under this development contract through March
31, 1998. The Company and Nordion currently are negotiating an agreement for
supply of the
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<PAGE> 37

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.

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 and BI Pharma KG, (ii) filling and
labeling of individual product vials with B-1 Antibody by another third-party
supplier and/or BI Pharma KG, 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. There
can be no assurance that agreements will be entered into in a timely manner or
that the material produced under the agreements will be suitable for human use.

MARKETING AND SALES

The Company intends to market and sell its products in the North America
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 efforts 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 count 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 may supplement its own sales and marketing efforts
in North America through a co-promotion arrangement with an established
pharmaceutical company and is currently in discussions with several potential
partners. The Company intends to distribute its products internationally through
marketing partners. The Company has not yet 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
capability, and there is no assurance that it will be able to do so in a timely
or cost effective manner, whether by itself or in collaboration with a
co-promotion partner.

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. 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.
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<PAGE> 38

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

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 at 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
FDA under the FD&C 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 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 Investigational New Drug
application ("IND") for human clinical testing, which must become
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<PAGE> 39

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 BLA,
or in the case of a drug, a New Drug Application ("NDA"), (v) FDA review of the
BLA 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 expedited 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 expedited 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.

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 complies with GMP. The FDA may delay approval of a BLA or
NDA if

38
<PAGE> 40

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.

Food and Drug Administration Modernization Act of 1997

FDAMA was enacted, in part, to ensure the timely availability of safe and
effective drugs, biologics, and medical devices by expediting the FDA review
process for new products. FDAMA establishes a statutory program for the approval
of "fast track products," including biologics. The fast track provisions
essentially codifies FDA's Accelerated Approval regulations for drugs and
biologics. A "fast track product" is defined as a new drug or biologic intended
for the treatment of a serious or life-threatening condition that demonstrates
the potential to address unmet medical needs for such a condition. Under the new
fast track program, the sponsor of a new drug or biologic may request the FDA to
designate the drug or biologic as a "fast track product" at any time during the
clinical development of the product. FDAMA specifies that the FDA must determine
if the product qualifies for fast track designation within 60 days of receipt of
the sponsor's request. Approval of a license application for a fast track
product can be based on an effect on a clinical endpoint or on a surrogate
endpoint that is reasonably likely to predict clinical benefit. Approval of a
fast track product may be subject to (i) post-approval studies to validate the
surrogate endpoint or confirm the effect on the clinical endpoint, and (ii)
prior review of copies of all promotional materials. If a preliminary review of
the clinical data suggests efficacy, the FDA may initiate review of sections of
an application for a "fast track product" before the application is complete.
This "rolling review" is available if the applicant provides a schedule for
submission of remaining information and pays applicable user fees. However, the
Prescription Drug User Fees Act time period does not begin until the complete
application is submitted.

The Company intends to seek fast track designation to secure expedited
review of the BLA for Bexxar under FDAMA. It is uncertain if fast track
designation will be obtained. Further, although the FDA has been mandated to
issue guidance on the policies and procedures applicable to fast track products
no later than November 1998, such guidelines are not yet available. The Company
cannot predict the ultimate impact, if any, of the new fast track 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
39
<PAGE> 41

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
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. Regulations enacted in 1997 by the NRC 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, one
allowed United States patent application and several other pending 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 one allowed United States patent application and
several other pending 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.
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<PAGE> 42

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.

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 from time to time receives correspondence offering the
opportunity to license the patents of third parties. In addition, 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 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.

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
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<PAGE> 43

in the United States and not generally patentable outside of the United States.
Differences in what constitutes patentable subject matter in various countries
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
Beckman Coulter. The rights expire on October 31, 2002 or earlier depending upon
the occurrence of certain events.

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 developing therapies that could be used for treatment of the
same diseases targeted by the Company. In 1997, one competitor received FDA
approval for, and commenced marketing 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 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

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<PAGE> 44

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 June 30, 1998 the Company had 91 employees, 54 of whom were engaged
in research and development activities. Forty of such employees hold
post-graduate degrees, including five with medical degrees and 16 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.

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.

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.

Sandra J. Horning, M.D., is Associate Professor of Medicine in the Division
of Oncology and director of the Oncology Fellowship Training Program at Stanford
University School of Medicine. In her 18 years at Stanford University, Dr.
Horning has been involved in clinical trials of new biologics and drugs for
Hodgkin's disease and non-Hodgkin's lymphoma. Dr. Horning is chairman of the
Lymphoma Committee of the Eastern Cooperative Oncology Group and member of the
Publications Committee of the American Society of Clinical Oncology.

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.

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<PAGE> 45

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The executive officers, directors and key employees of the Company, and
their ages as of June 30, 1998, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael F. Bigham................... 41 President, Chief Executive Officer and
Director
Dwayne M. Elwood(1)................. 50 Vice President, Sales and Marketing
William G. Harris................... 40 Vice President, Finance and Chief Financial
Officer
Arlene M. Morris(1)................. 46 Vice President, Business Development
Dan Shochat, Ph.D. ................. 58 Vice President, Research and Development
Michael W. Spellman, Ph.D.(1)....... 45 Vice President, Preclinical Development
George F. Tidmarsh, M.D., 38 Vice President, Clinical Development
Ph.D.(1)..........................
James C. Kitch, J.D.(1)............. 51 Secretary
Arnold Oronsky, Ph.D.(2)............ 57 Chairman of the Board
Brian G. Atwood(3).................. 45 Director
Joseph R. Coulter, III.............. 38 Director
Donald L. Lucas(2)(3)............... 68 Director
Robert Momsen(2).................... 51 Director
George J. Sella, Jr................. 69 Director
Sue Van(2)(3)....................... 51 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, LJL BioSystems, Inc., a
publicly-held scientific instrumentation company, and two 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
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<PAGE> 46

was a Staff Accountant at Ernst & Young, LLP. Mr. Harris received a B.A. degree
in Economics from the 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.

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.

Michael W. Spellman, Ph.D. has served as Vice President, Preclinical
Development of the Company since March 1998. From August 1984 to March 1998, Dr.
Spellman held various positions with increasing responsibility at Genentech,
Inc., a biotechnology company, most recently as Director, Pharmacokinetics and
Metabolism. Dr. Spellman received a B.A. degree in Natural Science from
Assumption College and a Ph.D. degree in Biochemistry from Michigan State
University. He was a postdoctoral research associate in the Department of
Organic Chemistry at Stockholm University in Stockholm, Sweden. Dr. Spellman is
the author of 35 scientific papers on various topics in biotechnology.

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. From February 1997 to December 1997,
Dr. Oronsky has been President and Chief Executive Officer at Coulter Cellular
Therapies, a private biotechnology company, and is currently Chairman of the
Board. Since December 1996, Dr. Oronsky has been Chief Executive Officer at
Dynavax, a privately-held 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

45
<PAGE> 47

lecturer in the Department of Medicine at Johns Hopkins Medical School. Dr.
Oronsky is a member of the Board of Directors of Corixa Corp., a publicly-held
biotechnology company.

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 October 1997, Mr. Atwood has been a General Partner of
Brentwood Venture Capital, a private venture capital firm and since November
1995 he served as a Venture Partner at the firm. 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. Mr. Atwood currently serves as
chairman of one privately-held company.

Joseph R. Coulter, III has served as a director of the Company since
December 1996. Mr. Coulter had been employed by Coulter Corporation until
December 1997. Coulter Corporation was acquired by Beckman Instruments in
October 1997. During his 18 years at Coulter Corporation, Mr. Coulter served in
various capacities including director, Executive Vice President, Director of
Information Systems and Program Manager for Research and Development. Mr.
Coulter currently serves as an officer of one privately-held company.

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 Cadence
Design Systems, Inc., Macromedia, Inc., Oracle Corporation, 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, Inc. Mr.
Momsen also serves as a director of five private companies.

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 Companies, Inc. and two privately-held companies.

Sue Van has served as a director of the Company since its inception in
February 1995. Since December 1997, she has been Trustee of the Wallace H.
Coulter Trust. Ms. Van was employed by Coulter Corporation until December 1997.
During her 22 years at Coulter Corporation, she was most recently a director,
Executive Vice President, Chief Financial Officer and Treasurer. Coulter
Corporation was acquired by Beckman Instruments in October 1997. Ms. Van
currently serves as a director of one private company.

46
<PAGE> 48

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting
Agreement, the Underwriters named below (the "Underwriters") through their
Representatives, BT Alex. Brown Incorporated, Hambrecht & Quist LLC, Pacific
Growth Equities, Inc. and Piper Jaffray Inc. have severally agreed to purchase
from the Company the following respective numbers of shares of Common Stock at
the public offering price less the underwriting discounts and commissions set
forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
BT Alex. Brown Incorporated.................................
Hambrecht & Quist LLC.......................................
Pacific Growth Equities, Inc................................
Piper Jaffray Inc...........................................
---------
Total....................................................... 2,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of the Common Stock offered hereby if any
of such shares are purchased.

The Company has been advised by the Representatives of the Underwriters
that the Underwriters propose to offer the shares of Common Stock 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 offering, 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 not
later than 30 days after the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions 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 that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 2,000,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 2,000,000 shares are being offered.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.

Subject to certain exceptions, the Company has agreed not to issue, offer,
sell, sell short or otherwise dispose of any shares of Common Stock for a period
of 90 days from the date of this Prospectus without the prior written consent of
BT Alex. Brown Incorporated. In addition, all officers and directors and certain
stockholders of the Company have agreed not to offer or otherwise dispose of any
such Common Stock for a period of 90 days from the date of this Prospectus
without the prior written consent of BT Alex. Brown Incorporated.

The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Exchange Act of 1934, as amended, certain persons
participating in this Offering may engage in transactions, including stabilizing
bids, syndicate covering transactions or the imposition of penalty bids which
may have the effect of stabilizing, maintaining or otherwise affecting the
market price of the Common Stock at a level above that which might otherwise
prevail in the open market. A "stabilizing bid" is a bid for or the purchase of
Common Stock on behalf of the Underwriters for the purpose of fixing or
maintaining the price of the Common Stock. A "syndicate

47
<PAGE> 49

covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with the offering. A "penalty bid" is an arrangement
permitting the Representatives to reclaim the selling concession otherwise
accruing to an Underwriter or syndicate member in connection with the offering
if the Common Stock originally sold by such Underwriter or syndicate member is
purchased by the Underwriters in a syndicate covering transaction and has
therefore not been effectively placed by such Underwriter or syndicate member.
The Representatives have advised the Company that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

In connection with this offering, certain Underwriters may engage in
passive market making transactions in the Common Stock on the Nasdaq National
Market in accordance with Rule 103 of Regulation M. Passive market making
consists of displaying bids on the Nasdaq National Market limited by the bid
prices of independent market makers and making purchases limited by such prices
and effected in response to order flow. Net purchases by a passive market on
each day are limited to a specified percentage of the passive market maker's
average daily trading volume in the Common Stock during a specified period and
must be discontinued when such limit is reached.

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.
appearing in Coulter Pharmaceutical, Inc.'s Annual Report (Form 10-K) for the
year ended December 31, 1997 (also included herein), have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report thereon included
herein (also incorporated herein by reference). Such consolidated financial
statements are included (and incorporated herein by reference) in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.

48
<PAGE> 50

ADDITIONAL INFORMATION

A Registration Statement on Form S-3, 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.

49
<PAGE> 51

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COULTER PHARMACEUTICAL, INC. CONSOLIDATED FINANCIAL
STATEMENTS -- MARCH 31, 1998 (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, 1997
Report of Ernst & Young LLP, Independent Auditors........... F-7
Consolidated Balance Sheets................................. F-8
Consolidated Statements of Operations....................... F-9
Consolidated Statement of Stockholders' Equity.............. F-10
Consolidated Statements of Cash Flows....................... F-11
Notes to Consolidated Financial Statements.................. F-12
</TABLE>

F-1
<PAGE> 52

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

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

ASSETS

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED) (NOTE 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 11,031 $ 20,451
Short-term investments.................................... 56,340 54,994
Prepaid expenses and other current assets................. 491 269
-------- --------
Total current assets.............................. 67,862 75,714
Property and equipment, net................................. 2,573 2,263
Employee loans receivable................................... 299 323
Other assets................................................ 371 371
-------- --------
$ 71,105 $ 78,671
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,470 $ 1,838
Accrued liabilities....................................... 10,967 7,959
Current portion of equipment financing obligations and 765 715
debt facility..........................................
-------- --------
Total current liabilities......................... 13,202 10,512
Non current portion of equipment financing obligations and 2,106 2,298
debt facility.............................................
Commitments
Stockholders' equity:
Preferred stock, issuable in series, $.001 par value: -- --
3,000,000 shares authorized; no shares issued or
outstanding at March 31, 1998 or December 31, 1997.....
Common stock, $.001 par value: 30,000,000 shares 14 14
authorized; 13,629,528 shares and 13,570,224 shares
issued and outstanding at March 31, 1998 and December
31, l997, respectively.................................
Additional paid-in capital................................ 111,746 111,598
Accumulated other comprehensive income.................... (35) (7)
Deferred compensation..................................... (1,004) (1,085)
Deficit accumulated during the development stage.......... (54,924) (44,659)
-------- --------
Total stockholders' equity........................ 55,797 65,861
-------- --------
$ 71,105 $ 78,671
======== ========
</TABLE>

See accompanying notes.
F-2
<PAGE> 53

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

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

<TABLE>
<CAPTION>
THREE MONTHS ENDED FOR THE PERIOD
MARCH 31, FROM INCEPTION
------------------- (FEBRUARY 16, 1995)
1998 1997 TO MARCH 31, 1998
-------- ------- -------------------
<S> <C> <C> <C>
Operating expenses:
Research and development..................... $ 9,017 $ 3,036 $ 46,282
Selling, general and administrative.......... 2,160 1,208 12,760
-------- ------- --------
Total operating expenses.......................... 11,177 4,244 59,042
Interest income and other, net.................... 912 438 4,118
-------- ------- --------
Net loss.......................................... $(10,265) $(3,806) $(54,924)
======== ======= ========
Basic and diluted net loss per share.............. $ (0.77) $( 0.56)
-------- -------

Shares used in computing basic and diluted net
loss per share.................................. 13,377 6,792
======== =======
</TABLE>

See accompanying notes.
F-3
<PAGE> 54

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

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

<TABLE>
<CAPTION>
THREE MONTHS FOR THE PERIOD FROM
ENDED MARCH 31, INCEPTION
-------------------- (FEBRUARY 16, 1995)
1998 1997 TO MARCH 31, 1998
-------- -------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................... $(10,265) $ (3,806) $(54,924)
Adjustments to reconcile net loss to net cash
provided by
(used in) operating activities:
Depreciation and amortization.................. 98 22 409
Amortization of deferred compensation.......... 81 298 1,496
Changes in operating assets and liabilities:
Prepaid expenses and other current assets...... (222) (66) (491)
Employee loans receivable...................... 24 37 (299)
Other assets................................... -- 9 (371)
Accounts payable............................... (368) 285 1,470
Accrued liabilities............................ 3,008 (3,202) 10,967
-------- -------- --------
Net cash used in operating
activities....................................... (7,644) (6,423) (41,743)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments.............. (32,432) (21,781) (104,749)
Maturities of short-term investments............. 25,984 7,645 41,114
Sales of short-term investments.................. 5,074 -- 7,344
Purchases of property and equipment.............. (408) (185) (2,978)
-------- -------- --------
Net cash used in investing
activities........................... (1,782) (14,321) (59,269)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of equipment financing obligations and
debt facility.................................. (175) (86) (750)
Borrowings under equipment financing obligations
and debt facility.............................. 33 1,159 3,533
Proceeds from issuances of convertible preferred
stock, net..................................... -- -- 28,355
Proceeds from issuance of common stock, net...... 148 34,445 80,905
-------- -------- --------
Net cash provided by financing
activities........................... 6 35,518 112,043
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents.................................... (9,420) 14,774 11,031
Cash and cash equivalents at beginning of
period......................................... 20,451 8,826 --
-------- -------- --------
Cash and cash equivalents at end of period....... $ 11,031 $ 23,600 $ 11,031
======== ======== ========
</TABLE>

See accompanying notes
F-4
<PAGE> 55

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The information at March 31, 1998, for the three month periods ended March
31, 1998 and 1997 and for the period from inception (February 16, 1995) to March
31, 1998 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 March 31, 1998 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, 1997 included in the
Company's annual report on Form 10-K.

The consolidated balance sheet at December 31, 1997 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

Effective December 31, 1997 the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share", which modifies
the way in which earnings per share are calculated and disclosed.

"Basic" net loss per share (as defined by SFAS 128) is computed using the
weighted average number of common shares outstanding less those shares
outstanding subject to continued vesting. As the Company reported a loss for all
periods presented, there is no difference between basic and diluted net loss per
share amounts as prescribed by SFAS 128. Loss per share for the three months
ended March 31, 1997 has been restated to conform to the requirements of SFAS
128.

New Accounting Standard

As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income."
SFAS 130 establishes new rules for the reporting and display of comprehensive
income and its components; however, the adoption of this Statement had no impact
on the Company's net income or shareholders' equity. SFAS 130 requires
unrealized gains or losses on the Company's available-for-sale securities which,
prior to adoption, were reported separately in shareholders' equity to be
included in other comprehensive income. Prior year financial statements have
been reclassified to conform to the requirements of SFAS 130.

During the first quarter of 1998 and 1997, total comprehensive loss
amounted to $10.3 million and $3.9 million, respectively.

2. INVESTMENTS

Management determines the appropriate classification of debt securities at
the time of purchase and re-evaluates 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 accumulated other comprehensive
income in 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

F-5
<PAGE> 56
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
(UNAUDITED)

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
classified as available-for-sale are included in interest income. The Company's
cash equivalents and short-term investments as of March 31, 1998 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.................. $ 1,943 $ -- $ -- $ 1,943
Commercial paper.................... 20,571 -- (16) 20,555
Corporate bond...................... 24,117 -- (10) 24,107
Certificates of Deposit............. 20,636 -- (9) 20,627
-------- ---- ---- --------
Total..................... 67,267 -- (35) 67,232
Less amounts classified as cash
equivalents....................... (10,898) -- 6 (10,892)
-------- ---- ---- --------
Total short-term
investments............. $ 56,369 $ -- $(29) $ 56,340
======== ==== ==== ========
</TABLE>

Realized gain or losses of available-for-sale securities for the quarter
ended March 31, 1998 were not significant. There were no realized gains or
losses on the sale of available-for-sale securities for the quarter ended March
31, 1997.

At March 31, 1998 the contractual maturities of short term investments were
as follows (in thousands):

<TABLE>
<CAPTION>
ESTIMATED FAIR
AMORTIZED COST VALUE
-------------- --------------
<S> <C> <C>
Due in one year or less........................ $30,944 $30,925
Due after one year through two years........... 25,425 25,415
------- -------
$56,369 $56,340
======= =======
</TABLE>

F-6
<PAGE> 57

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, 1997 and 1996, and the related consolidated statements of
operations and cash flows for each of the two years in the period ended December
31, 1997 and for the periods from inception (February 16, 1995) to December 31,
1995 and 1997 and the related statement of stockholders' equity for the period
from inception (February 16, 1995) to December 31, 1997. 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, 1997 and 1996, and the consolidated results
of its operations and its cash flows for each of the two years in the period
ended December 31, 1997 and for the periods from inception (February 16, 1995)
to December 31, 1995 and 1997, in conformity with generally accepted accounting
principles.

/s/ ERNST & YOUNG LLP

Palo Alto, California
January 26, 1998

F-7
<PAGE> 58

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,
1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 20,451 $ 8,826
Short-term investments.................................... 54,994 7,617
Prepaid expenses and other current assets................. 269 499
Current portion of employee loans receivable.............. -- 35
-------- --------
Total current assets.............................. 75,714 16,977
Property and equipment, net................................. 2,263 924
Employee loans receivable................................... 323 271
Other assets................................................ 371 149
-------- --------
$ 78,671 $ 18,321
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,768 $ 1,490
Payable to Beckman Coulter................................ 70 111
Accrued liabilities....................................... 7,959 4,330
Current portion of equipment financing obligations and
debt facility.......................................... 715 309
-------- --------
Total current liabilities......................... 10,512 6,240
Non current portion of equipment financing obligations and
debt facility............................................. 2,298 1,535
Commitments
Stockholders' equity:
Preferred stock, issuable in series, $.001 par value:
3,000,000 and 20,000,000 shares authorized; none and
19,797,940 shares issued and outstanding at December
31, 1997 and 1996, respectively........................ -- 28,355
Common stock, $.001 par value: 30,000,000 shares
authorized; 13,570,224 and 437,612 shares issued and
outstanding at December 31, 1997 and 1996,
respectively........................................... 14 1
Additional paid-in capital.................................. 111,598 2,488
Net unrealized loss on securities available-for-sale........ (7) (3)
Deferred compensation....................................... (1,085) (1,964)
Deficit accumulated during the development stage............ (44,659) (18,331)
-------- --------
Total stockholders' equity........................ 65,861 10,546
-------- --------
$ 78,671 $ 18,321
======== ========
</TABLE>

See accompanying notes.
F-8
<PAGE> 59

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

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

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM FROM
INCEPTION INCEPTION
(FEBRUARY 16, (FEBRUARY 16,
1995) TO YEAR ENDED YEAR ENDED 1995) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1997
--------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Operating expenses:
Research and development............ $ 2,539 $ 13,681 $ 21,045 $ 37,265
Selling, general and
administrative................... 581 2,409 7,610 10,600
------------ -------- -------- --------
Total operating expenses.............. 3,120 16,090 28,655 47,865
Interest income and other, net........ 127 752 2,327 3,206
------------ -------- -------- --------
Net loss.............................. $ (2,993) $(15,338) $(26,328) $(44,659)
============ ======== ======== ========
Basic and diluted net loss per
share............................... $ (12,736.17) $(649.39) $ (2.58)
------------ -------- --------
Shares used in computing
basic and diluted net loss per
share............................... 0.235 24 10,197
============ ======== ========
Pro forma basic and diluted net loss
per share........................... $ (1.28) $ (2.65)
------------ --------
Shares used in computing pro forma
basic and diluted net loss per
share............................... 2,342 5,793
============ ========
</TABLE>

See accompanying notes.
F-9
<PAGE> 60

COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NET
UNREALIZED
CONVERTIBLE PREFERRED LOSS
STOCK COMMON STOCK ADDITIONAL ON SECURITIES
--------------------- ------------------- PAID-IN AVAILABLE-FOR- DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL SALE COMPENSATION
----------- ------- ---------- ------ ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A
convertible preferred stock
for cash ($1.00 per share)
and technology in February
1995........................ 7,500,000 $ 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 -- -- -- -- --
Exercise of common stock
options by a consultant at
$0.30 per share for cash in
November 1995................ -- -- 2,059 -- 1 -- --
Net loss...................... -- -- -- -- -- -- --
----------- ------- ---------- --- -------- --- -------
Balances at December 31,
1995......................... 9,833,333 5,989 2,059 -- 1 -- --
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 -- -- -- -- --
Issuance of common stock to a
prospective officer at $0.45
per share for cash in March
1996......................... -- -- 400,000 1 179 -- --
Issuance of common stock
pursuant to stock option
exercises.................... -- -- 35,553 -- 14 -- --
Unrealized loss on securities
available-for-sale, net...... -- -- -- -- -- (3) --
Deferred compensation related
to grants of certain stock
options...................... -- -- -- -- 2,294 -- (2,294)
Amortization of deferred
compensation................. -- -- -- -- -- -- 330
Net loss...................... -- -- -- -- -- -- --
----------- ------- ---------- --- -------- --- -------
Balances at December 31,
1996......................... 19,797,940 28,355 437,612 1 2,488 (3) (1,964)
Conversion of convertible
preferred stock into common
stock........................ (19,797,940) (28,355) 6,599,287 6 28,349 -- --
Issuance of 2,875,000 shares
of common stock at $12.00 per
share less issuance costs of
$3,226....................... -- -- 2,875,000 3 31,274 -- --
Issuance of common stock
pursuant to stock options
exercises.................... -- -- 77,358 -- 45 -- --
Issuance of common stock
pursuant to warrant
exercises.................... -- -- 385,315 1 3,127 -- --
Deferred compensation related
to grant of certain stock
options...................... -- -- -- -- 206 -- (206)
Amortization of deferred
compensation................. -- -- -- -- -- -- 1,085
Issuance of common stock
pursuant to the employee
stock purchase plan.......... -- -- 33,152 -- 280 -- --
Issuance of 3,162,500 shares
of common stock at $15.50 per
share less issuance costs of
$3,190....................... -- -- 3,162,500 3 45,829 -- --
Unrealized loss on securities
available-for-sale, net...... -- -- -- -- -- (4) --
Net loss...................... -- -- -- -- -- -- --
----------- ------- ---------- --- -------- --- -------
Balance at December 31,
1997......................... -- $ -- 13,570,224 $14 $111,598 $(7) $(1,085)
=========== ======= ========== === ======== === =======

DEFICIT
ACCUMULATED
DURING THE TOTAL
DEVELOPMENT STOCKHOLDERS'
STAGE EQUITY
------------ -------------
<S> <C> <C>
Issuance of Series A
convertible preferred stock
for cash ($1.00 per share)
and technology in February
1995........................ $ -- $ 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................. -- 3,489
Exercise of common stock
options by a consultant at
$0.30 per share for cash in
November 1995................ -- 1
Net loss...................... (2,993) (2,993)
-------- --------
Balances at December 31,
1995......................... (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........ -- 22,366
Issuance of common stock to a
prospective officer at $0.45
per share for cash in March
1996......................... -- 180
Issuance of common stock
pursuant to stock option
exercises.................... -- 14
Unrealized loss on securities
available-for-sale, net...... -- (3)
Deferred compensation related
to grants of certain stock
options...................... --
Amortization of deferred
compensation................. -- 330
Net loss...................... (15,338) (15,338)
-------- --------
Balances at December 31,
1996......................... (18,331) 10,546
Conversion of convertible
preferred stock into common
stock........................ -- --
Issuance of 2,875,000 shares
of common stock at $12.00 per
share less issuance costs of
$3,226....................... -- 31,277
Issuance of common stock
pursuant to stock options
exercises.................... -- 45
Issuance of common stock
pursuant to warrant
exercises.................... -- 3,128
Deferred compensation related
to grant of certain stock
options...................... --
Amortization of deferred
compensation................. -- 1,085
Issuance of common stock
pursuant to the employee
stock purchase plan.......... -- 280
Issuance of 3,162,500 shares
of common stock at $15.50 per
share less issuance costs of
$3,190....................... -- 45,832
Unrealized loss on securities
available-for-sale, net...... -- (4)
Net loss...................... (26,328) (26,328)
-------- --------
Balance at December 31,
1997......................... $(44,659) $ 65,861
======== ========
</TABLE>

See accompanying notes.
F-10
<PAGE> 61

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 FROM
INCEPTION INCEPTION
(FEBRUARY 16, YEAR ENDED (FEBRUARY 16,
1995) TO DECEMBER 31, 1995) TO
DECEMBER 31, ------------------- DECEMBER 31,
1995 1996 1997 1997
-------------- -------- -------- --------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $(2,993) $(15,338) $(26,328) $(44,659)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization.................... 12 49 250 311
Amortization of deferred compensation............ -- 330 1,085 1,415
Changes in operating assets and liabilities:
Prepaid expenses and other current assets........ (40) (459) 230 (269)
Employee loans receivable........................ (31) (275) (17) (323)
Other assets..................................... (26) (123) (222) (371)
Accounts payable................................. 341 1,149 278 1,768
Payable to Beckman Coulter....................... 25 86 (41) 70
Accrued liabilities.............................. 265 4,152 3,629 8,046
------- -------- -------- --------
Net cash used in operating activities.... (2,447) (10,429) (21,136) (34,012)
------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments................ -- (10,879) (61,525) (72,404)
Maturities of short-term investments............... -- 986 14,144 15,130
Sale of short-term investments..................... -- 2,270 -- 2,270
Purchases of property and equipment................ (105) (876) (1,589) (2,570)
------- -------- -------- --------
Net cash used in investing activities.... (105) (8,499) (48,970) (57,574)
------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of equipment financing obligations and
debt facility.................................... -- (44) (531) (575)
Borrowings under equipment financing obligations
and debt facility................................ -- 1,800 1,700 3,500
Proceeds from issuances of convertible preferred
stock, net....................................... 5,989 22,366 -- 28,355
Proceeds from issuance of common stock, net........ 1 194 80,562 80,757
------- -------- -------- --------
Net cash provided by financing
activities............................. 5,990 24,316 81,731 112,037
------- -------- -------- --------
Net increase in cash and cash equivalents.......... 3,438 5,388 11,625 20,451
Cash and cash equivalents at beginning of period... -- 3,438 8,826 --
------- -------- -------- --------
Cash and cash equivalents at end of period......... $ 3,438 $ 8,826 $ 20,451 $ 20,451
======= ======== ======== ========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Interest paid...................................... $ -- $ -- $ 283 $ 283
Schedule of non-cash investing and financing
activities:
Net exercises of warrants to purchase 37,785 shares
of common stock.................................. $ -- $ -- $ 453 $ 453
Acquisition of equipment pursuant to supplemental
lease obligation................................. $ -- $ 78 $ -- $ 78
Deferred compensation related to grant of certain
stock options.................................... $ -- $ 2,294 $ 206 $ 2,500
</TABLE>

See accompanying notes.
F-11
<PAGE> 62

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 its operations with a
combination of stock sales, collaborative agreements with corporate partners,
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 (since converted to 1,666,666 shares of common
stock) to Coulter Corporation in exchange for rights to certain intellectual
property, contractual rights and other assets pertaining to Bexxar(TM). In 1997
Beckman Instruments acquired Coulter Corporation (now known as "Beckman
Coulter"). Prior to the acquisition, all shares of the Company's stock were
distributed to the members of the Coulter family. Beckman Coulter retains the
rights to the assignment agreement and under the terms of this assignment
agreement, royalties are payable to Beckman Coulter upon commercial sale of
product, if any, derived from these licenses. Beckman Coulter also has the
right, in lieu of receiving cash, to purchase 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 Beckman Coulter 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.

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.

Net Loss Per Share

Effective December 31, 1997, the Company adopted Statement of Financial
Standards No. 128 "Earnings Per Share" ("SFAS 128"). The Statement requires the
presentation of basic earnings (loss) per share and diluted earnings (loss) per
share, if more dilutive, for all periods presented.

For all periods presented, both basic and diluted net loss per share are
computed based on weighted average number of common shares outstanding during
the period. Stock options and warrants to purchase common shares could
potentially dilute basic earnings per share in the future, but were excluded
from the computation of diluted net loss per share as their effect is
anti-dilutive for the periods presented.

F-12
<PAGE> 63
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pro forma basic net loss per share as presented in the Statements of
Operations has been computed as described above and also gives effect to the
conversion of the convertible preferred stock that automatically converted into
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.

A reconciliation of shares used in the calculation of basic and diluted and
pro forma basic and diluted net loss per share follows:

<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(FEBRUARY 16, 1995) YEAR ENDED DECEMBER 31
TO DECEMBER ---------------------------
1995 1996 1997
--------------------- ------------ ------------
<S> <C> <C> <C>
Net loss................... $(2,993,000) $(15,338,000) $(26,328,000)
=========== ============ ============
Basic and diluted:
Weighted-average shares of
common stock
outstanding.............. 235 23,619 10,197,225
----------- ------------ ------------
Shares used in computing
basic and diluted net
loss per share........... 235 23,619 10,197,225
=========== ============ ============
Basic and diluted net loss
per share................ $(12,736.17) $ (649.39) $ (2.58)
=========== ============ ============
Pro forma basic and
diluted:
Shares used in computing
basic and diluted net
loss per share........... 235 23,619
Adjusted to reflect the
effect of the assumed
conversion of preferred
stock.................... 2,341,665 5,768,911
----------- ------------
Shares used in computing
pro forma basic and
diluted net loss per
share.................... 2,341,900 5,792,530
=========== ============
Pro forma basic and diluted
net loss per share....... $ (1.28) $ (2.65)
=========== ============
</TABLE>

Current Vulnerability to Certain Concentrations

The Company has contracted with two third-party manufacturers, Boehringer
Ingleheim Pharma KG ("BI Pharma KG") and LONZA Biologics plc ("Lonza"), to
produce a monoclonal antibody (the "B-1 Antibody"). The Company has also
contracted with a third-party manufacturer, MDS Nordion, Inc. ("Nordion") for
the radiolabeling of the B-1 Antibody in a centralized facility. However, should
the Company not be able to obtain sufficient quantities of the B-1 Antibody from
BI Pharma KG or Lonza or radiolabeled B-1 Antibody from Nordion, 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 two years.

F-13
<PAGE> 64
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 115"). Under the
provisions of SFAS 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 selling, general and administrative 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.