<PAGE>
 
                     SECURITIES AND EXCHANGE COMMISSION       Conformed
                         Washington, D.C. 20549                    Copy

                                   FORM 10-Q

           (Mark One)
           [X]  QUARTERLY REPORT PURSUANT TO SECTION 13        
                OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 
                1934

           For the quarterly period ended September 30, 1996
                                          ------------------

                                      OR

           [ ]  TRANSITION REPORT PURSUANT TO SECTION 13      
                OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 
                1934

           For the transition period from         to        
                                          -------    ------
                        Commission file number  0-14879
                                               ---------

                              CYTOGEN Corporation
                        ------------------------------
            (Exact name of Registrant as specified in its charter)

           Delaware                            22-2322400
---------------------------------        ----------------------
(State or Other Jurisdiction  of            (I.R.S. Employer
Incorporation or Organization)           Identification Number)

            600 College Road East, CN 5308, Princeton, NJ 08540-5308
            --------------------------------------------------------
             (Address of Principal Executive Offices and Zip Code)

       Registrant's telephone number, including area code (609) 987-8200

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:  Yes X  No
                                              ---   ---.    

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

          Class                            Outstanding at October 22, 1996
------------------------                   -------------------------------
Common Stock, $.01 par value                          50,150,534


Warrants to Purchase One Share of Common Stock,        4,023,595
        $.01 par value
<PAGE>
 
                      CYTOGEN CORPORATION AND SUBSIDIARIES
                               September 30, 1996



PART I  -  FINANCIAL INFORMATION
------     ---------------------



Item 1  -  Consolidated Financial Statements



            INTRODUCTORY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            -------------------------------------------------------

      The accompanying consolidated financial statements have been prepared by
the Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note disclosure
normally included in annual consolidated financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to those rules and regulations.  It is suggested that these
condensed consolidated financial statements be read in conjunction with CYTOGEN
Corporation's (the "Company" or "CYTOGEN") audited consolidated financial
statements and notes thereto for the year ended December 31, 1995.  In the
opinion of the Registrant, these consolidated financial statements contain all
adjustments necessary to present fairly the financial position of CYTOGEN as of
September 30, 1996, the results of operations for the three and nine months
ended September 30, 1996 and 1995, and the cash flows for the nine months ended
September 30, 1996 and 1995.


      The results of operations for the periods ended September 30, 1996 are not
necessarily indicative of the operating results for the full year.

                                       2
<PAGE>



                      CYTOGEN CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                  (All amounts in thousands, except share data)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                
                                                                                    September 30,              December 31,
ASSETS                                                                                  1996                       1995
                                                                                --------------------       -------------------- 
<S>                                                                             <C>                        <C>    
Current Assets:                                                                                                                
      Cash and cash equivalents                                                 $             14,478       $             27,551    
      Short term investments                                                                   5,977                      1,201    
      Restricted cash                                                                          9,850                        383    
      Accounts receivable, net                                                                   527                        284    
      Inventories                                                                                270                        356    
      Other current assets                                                                       500                        360    
                                                                                --------------------       -------------------- 
                                                                                                                               
           Total current assets                                                               31,602                     30,135    
                                                                                --------------------       -------------------- 
                                                                                                                               
Property and Equipment:                                                                                                        
      Leasehold improvements                                                                   9,977                      9,850    
      Equipment and furniture                                                                  7,022                      6,535    
                                                                                --------------------       -------------------- 
                                                                                              16,999                     16,385    
                                                                                                                               
      Less- Accumulated depreciation and amortization                                        (12,058)                   (10,923)   
                                                                                --------------------       -------------------- 
                                                                                                                               
            Net property and equipment                                                         4,941                      5,462    
                                                                                --------------------       -------------------- 
                                                                                                                               
Other Assets                                                                                   1,501                      1,552    
                                                                                --------------------       -------------------- 
                                                                                                                               
                                                                                $             38,044       $             37,149    
                                                                                --------------------       -------------------- 
                                                                                                                               
                                                                                                                               
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                           
                                                                                                                               
Current Liabilities:                                                                                                           
      Accounts payable and accrued liabilities                                  $              3,534       $              6,385    
      Current portion of long term liabilities                                                 1,807                      2,213    
                                                                                --------------------       -------------------- 
                                                                                                                               
           Total current liabilities                                                           5,341                      8,598    
                                                                                --------------------       -------------------- 
                                                                                                                               
Long Term Liabilities                                                                          1,895                      3,275    
                                                                                --------------------       -------------------- 
                                                                                                                               
Stockholders' Equity:                                                                                                          
      Preferred stock, $.01 par value, 5,400,000 shares authorized - Series A                                                  
           Preferred Stock, $.01 par value,                                                                                    
           1,000 shares authorized and outstanding in 1996                                        --                         --
      Common stock, $.01 par value, 89,600,000 shares                                                                          
           authorized, 49,241,000 and 46,040,000 shares                                                                        
           issued and outstanding in 1996 and 1995, respectively                                 492                        460    
      Additional paid-in capital                                                             275,310                    253,122    
      Unrealized (loss) gains on short term investments                                           (3)                        34    
      Accumulated deficit                                                                   (244,991)                  (228,340)   
                                                                                --------------------       -------------------- 
                                                                                                                               
           Total stockholders' equity                                                         30,808                     25,276    
                                                                                --------------------       -------------------- 
                                                                                                                               
                                                                                $             38,044       $             37,149  
                                                                                ====================       ====================
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        3
<PAGE>



                      CYTOGEN CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (All amounts in thousands, except per share data)
                                   (Unaudited)
                                               
<TABLE>
<CAPTION>


                                                Three Months Ended Sept. 30,                    Nine Months Ended Sept. 30,
                                              ---------------------------------               -------------------------------
                                                   1996               1995                       1996                1995
                                               -----------        -------------               ------------       -----------  
<S>                                            <C>                <C>                         <C>                <C>   
REVENUES:                                                                                                                     
      Product related                          $      393        $         347                $      1,135       $     1,075  
      License and contract                            795                2,445                       2,804             3,237  
                                                ----------        -------------                ------------       ----------- 
                                                                                                                              
           Total Revenues                           1,188                2,792                       3,939             4,312  
                                                ----------        -------------                ------------       ----------- 
                                                                                                                              
                                                                                                                              
OPERATING EXPENSES:                                                                                                           
      Research and development                      4,825                4,526                      14,441            14,822  
      Selling and marketing                           874                  652                       2,573             2,371  
      Acquisition of technology rights                 -                     -                        -               19,663  
      General and administrative                    1,258                1,512                       4,313             4,702  
                                                ----------        -------------                ------------       ----------- 
                                                                                                                              
           Total Operating Expenses                 6,957                6,690                      21,327            41,558  
                                                ----------        -------------                ------------       ----------- 
                                                                                                                              
                                                                                                                              
LOSS FROM OPERATIONS                           $   (5,769)       $      (3,898)               $    (17,388)      $   (37,246) 
                                                ----------        -------------                ------------       ----------- 
                                                                                                                              
GAINS ON INVESTMENTS, net                             313                  142                       1,079               518  
INTEREST EXPENSE                                     (116)                (148)                       (342)             (444) 
                                                ----------        -------------                ------------       ----------- 
                                                                                                                              
NET LOSS                                       $   (5,572)       $      (3,904)               $    (16,651)      $   (37,172) 
                                                ==========        =============                ============       =========== 
                                                                                                                              
                                                                                                                              
NET LOSS PER COMMON SHARE                      $    (0.12)       $      (0.12)                $     (0.35)       $     (1.20)  
                                                ==========        =============                ============       =========== 
                                                                                                                              
                                                                                                                              
WEIGHTED AVERAGE COMMON                                                                                                       
   SHARES OUTSTANDING                              48,358               33,013                      47,703            30,998  
                                                ==========        =============                ============       =========== 
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       4
<PAGE>
 
                      CYTOGEN CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (All amounts in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                        
                                                                              Nine Months Ended September 30,     
                                                                        -------------------------------------------
                                                                                 1996                   1995
                                                                        -------------------------------------------
<S>                                                                     <C>                         <C>  
                                                                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                              
Net Loss                                                               $      (16,651)              $    (37,172)  
                                                                        --------------               ------------  
Adjustments to Reconcile Net Loss to Cash Used for                                                                 
     Operating Activities:                                                                                         
           Depreciation and Amortization                                        1,135                      1,101   
           Imputed Interest                                                       310                        444   
           Amortization of Deferred Charges                                       (17)                       (27)  
           Acquisition of Technology Rights                                        -                      19,663   
           Inventory Writedown                                                     -                       1,144   
           Stock Grants                                                            -                          43   
           Changes in Assets and Liabilities, Net of Effect                                                        
                from Acquisition:                                                                                  
                Accounts receivable, net                                         (243)                      (197)  
                Inventories                                                        86                       (106)  
                Other assets                                                      (89)                      (375)  
                Accounts payable and accrued liabilities                       (2,851)                    (2,870)  
                Other liabilities                                              (2,079)                    (2,103)  
                                                                        --------------               ------------  
                                                                                                                   
           Total adjustments                                                   (3,748)                    16,717   
                                                                        --------------               ------------  
                                                                                                                   
           Net cash used for operating activities                             (20,399)                   (20,455)  
                                                                        --------------               ------------  
                                                                                                                   
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                              
Purchases of  Short Term Investments                                           (4,813)                    (1,232)  
(Increase) in Restricted Cash                                                  (9,467)                         -
Purchases of Property and Equipment                                              (614)                      (475)  
Net Cash Acquired in CytoRad Acquisition (See Note 8)                              -                      10,514   
                                                                        --------------               ------------  
                                                                                                                   
           Net cash (used for) provided by investing activities               (14,894)                     8,807   
                                                                        --------------               ------------  
                                                                                                                   
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                              
Proceeds from Issuance of Common Stock                                         17,370                     14,309   
Proceeds from Issuance of Series A Preferred Stock                              4,850                         -    
Redemption of Common Stock                                                         -                        (332)  
                                                                        --------------               ------------  
                                                                                                                   
           Net cash provided by financing activities                           22,220                     13,977   
                                                                        --------------               ------------  
                                                                                                                   
Net (Decrease) Increase in Cash and Cash Equivalents                          (13,073)                     2,329   
                                                                                                                   
Cash and Cash Equivalents, Beginning of Period                                 27,551                      7,700   
                                                                        --------------               ------------  
                                                                                                                   
Cash and Cash Equivalents, End of Period                               $       14,478               $     10,029   
                                                                        ==============               ============  
                                                                                                    
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        5
<PAGE>
 
                      CYTOGEN CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


From time to time, the term "Company" as used herein, may include CYTOGEN and
its wholly-owned subsidiaries Cellcor, Inc. ("Cellcor") and Targon Corporation
("Targon") taken as a whole, where appropriate.

(Information as of September 30, 1996 and for the three and nine months ended
September 30, 1996 and  1995 is unaudited.)

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Consolidation

      The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries.  Intercompany balances and transactions have
been eliminated in consolidation.

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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

      Cash and cash equivalents include cash on hand, cash in banks and all
highly-liquid investments with a maturity of three months or less at the time of
purchase.

Short Term Investments

      Management determines the appropriate classification of debt and equity
securities at the time of purchase and re-evaluates such designation as of each
balance sheet date.  At September 30, 1996, the Company's short term investments
are classified as available for sale and are carried at fair value based on
quoted market prices.  Differences between an investment's amortized cost and
fair value are charged directly to stockholders' equity, net of income taxes.
Accordingly, a net unrealized loss of approximately $3,000 has been recorded as
a separate component of stockholders' equity at September 30, 1996.

Restricted Cash

      In September 1996, the Company and Elan Corporation, plc and affiliated
corporations (collectively, "Elan") created Targon, a new U.S.-based cancer
company (see Note 2).  Through this collaboration, the Company received net
proceeds of $9.9 million from Elan.  The uses of these funds are restricted to
Targon's operations.

                                       6
<PAGE>
 
Other Assets

      Other assets consist primarily of undeveloped real property with a net
book value of $1.3 million, which is valued at the lower of cost or market (see
Note 11).

Revenue Recognition

      Product related revenues include product sales by CYTOGEN to its customers
and in 1996, to its European distributor, CIS biointernational ("CISbio") (see
Note 4).  Product sales are recognized upon shipment of finished goods.
Beginning in October 1995, as a result of CYTOGEN's acquisition of Cellcor (see
Note 6), product related revenues also include the recovery of costs associated
with the treatment of patients who have received the autolymphocyte therapy
("ALT") for metastatic renal cell carcinoma ("mRCC") under a compassionate
protocol and in 1996, also include the cost recovery associated with the
Treatment IND program.

      License and contract revenues include milestone payments and fees under
collaborative agreements with third parties, the sale of research and
manufacturing services and materials, and revenues from other miscellaneous
sources.  Revenues from milestone payments are recognized when all parties
concur that the events stipulated in the agreement have been achieved.  Revenues
from cost-plus contracts are recognized when the costs are incurred.

Common Stock Outstanding

      As a result of the Cellcor merger, the issued and outstanding shares of
Cellcor common stock and preferred stock ("Cellcor Shares") were converted into
the right to receive shares of CYTOGEN common stock.  As of September 30, 1996,
certain holders of Cellcor Shares had not yet exchanged their Cellcor Shares for
shares of CYTOGEN common stock.  For accounting purposes, all Cellcor Shares
were deemed exchanged for issued and outstanding shares of CYTOGEN common stock
as of the date of the Cellcor merger.  See Note 6.

New Accounting Pronouncements

      The Company will be required to adopt the disclosure requirement of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," for the year ended December 31, 1996.  The adoption of this
pronouncement will have no impact on the Company's statement of operations.

Reclassifications

      Certain reclassifications have been reflected in the 1995 financial
statements to conform with the 1996 presentation.

2.    TARGON CORPORATION:

      Pursuant to agreements between the Company and Elan, Targon was
established in September 1996.  Targon will focus on the development,
registration, manufacturing and commercialization of differentiated oncology
products utilizing the competencies of the Company and Elan in drug development
and manufacturing.  Targon is, initially, a wholly-owned subsidiary of the
Company.  At the time of the establishment of Targon, Elan purchased 932,535
shares of

                                       7
<PAGE>
 
CYTOGEN's common stock for $5 million and 1,000 shares of CYTOGEN's newly
created Series A Preferred Stock for $15 million.  The Company used the proceeds
of these sales to capitalize Targon.  Targon used $10 million of these proceeds
to acquire certain technology from Advanced Therapeutics Systems Ltd., an
affiliate of Elan.  The Series A Preferred Stock has a liquidation value of $5
million.  Accordingly, for accounting purposes, the Company recorded the Series
A Preferred Stock investment as a net capital contribution of $5 million.  The
Series A Preferred Stock of CYTOGEN held by Elan may, at Elan's option, be
either  (i) exchanged for one-half of the Company's interest in Targon or (ii)
converted into shares of common stock of CYTOGEN.  If Elan elects to exchange
the Series A Preferred Stock for one-half of the Company's interest in Targon,
then Elan will be entitled through March 31, 2003 to exercise a warrant to
purchase up to 1 million shares of CYTOGEN's common stock, at an exercise price
per share which escalates from $8.40 to $14 over the life of the warrant.  If
Elan elects to convert the Series A Preferred Stock into CYTOGEN's common stock,
it will receive a number of shares which declines from 1,785,715 shares to
1,071,429 shares, depending on the time of conversion.  If Elan exercises its
conversion right, then the Company will retain full ownership of Targon.  Elan
must elect to exchange its Series A Preferred Stock no later than March 31,
2001. Any shares of Series A Preferred Stock not exchanged or converted by March
31, 2003 will be automatically converted into CYTOGEN's common stock on that
date.  The Series A Preferred Stock has no special dividend rights, however if
dividends are declared on CYTOGEN's common stock,  holders of Series A Preferred
Stock will be entitled to such dividends as they would have received had they
converted their shares of Series A Preferred Stock into common stock immediately
prior to the dividend.  Each share of Series A Preferred Stock carries a
liquidation value of $5,000 per share.  In connection with the formation of
Targon, the Company contributed certain technology to Targon.

3.    C.R. BARD, INC.:

      In August 1996, CYTOGEN entered into a co-promotion agreement (the "Co-
Promotion Agreement") with C.R. Bard, Inc. ("Bard") pursuant to which CYTOGEN
granted to Bard (i) the exclusive right to market and promote ProstaScint, an
FDA approved prostate cancer imaging product, to urologists in the U.S. and (ii)
the co-exclusive right with CYTOGEN to market and promote ProstaScint to managed
care organizations in the U.S.  The Co-Promotion Agreement provides that Bard
shall make payments upon the occurrence of certain milestones which include
expansion of co-promotion rights in selected countries outside the U.S.  During
the term of the Co-Promotion Agreement, Bard will receive performance-based
compensation for its services.  The initial term of the Co-Promotion Agreement
is ten (10) years from the date of the product launch of ProstaScint.

4.    CIS BIOINTERNATIONAL AND FAULDING:

      In January 1996, CYTOGEN entered into a distribution agreement (the
"CISbio Agreement") with CISbio, granting to CISbio the exclusive right to
distribute and sell OncoScint CR/OV in all the countries of the world, except
for the U.S. and Canada.  The CISbio Agreement provides for payments upon
execution of the agreement and upon achievement of a certain milestone, payments
for minimum annual purchases of the components of OncoScint CR/OV by CISbio, and
certain royalties based upon net sales, if any, of OncoScint CR/OV by CISbio.
For the nine months ended September 30, 1996, CYTOGEN  recorded $244,000 in
license and product related revenues from CISbio.

                                       8
<PAGE>
 
      In December 1995, CYTOGEN entered into a distribution agreement (the
"Faulding Agreement") with Faulding (Canada) Inc. ("Faulding") granting to
Faulding the exclusive right to distribute and sell OncoScint CR/OV in Canada.
Faulding is currently pursuing the necessary regulatory approvals to market the
product in Canada.  In addition to a one-time, up-front cash payment for
execution of the agreement, which amount was recognized by the Company in 1996,
Faulding will be required to make additional payments upon achievement of
certain milestones, payments for minimum annual purchases of OncoScint CR/OV by
Faulding, and certain royalties based upon net sales, if any, of OncoScint CR/OV
by Faulding.

5.    ELAN CORPORATION:

      In December 1995, CYTOGEN entered into a research and development and
option agreement (the "Elan Agreement") with Elan under which both parties will
implement a research program that combines CYTOGEN's Genetic Diversity Library
("GDL") technology with Elan's drug delivery system technology to
collaboratively develop orally administered products. Thereunder, Elan has been
granted an option for the exclusive worldwide licensing rights to any products
so developed and the Company will receive royalties based on sales, if any, of
such products.  Elan will provide the funding necessary for the Company to
fulfill its obligations under the research program with aggregate payments for
work performed by CYTOGEN not to exceed $1.5 million during the first sixteen
months of the research program.  For the three and nine months ended September
30, 1996, CYTOGEN recorded $344,000 and $988,000, respectively, in contract
revenues from Elan.

6.    CELLCOR, INC.:

      Pursuant to an Agreement and Plan of Merger dated June 15, 1995, as
amended, in October 1995, CYTOGEN completed its acquisition of Cellcor and the
related subscription offering (the "Subscription Offering").  As a result,
CYTOGEN issued (i) 4,713,564 shares of CYTOGEN common stock to acquire Cellcor
(see Note 1) and (ii) 5,144,388 shares of CYTOGEN common stock in connection
with the Subscription Offering raising a total of $20.0 million, and has
reserved for issuance up to 606,952 shares of CYTOGEN common stock issuable upon
the exercise of the options that were outstanding under the Cellcor employee
stock option plans at the time of merger. The transaction was accounted for by
using the purchase method of accounting, whereby the Company recorded a one-
time, non-cash charge of approximately $26.2 million for acquisition of
technology rights to its statement of operations during the three months ended
December 31, 1995, which charge represented the amount by which the purchase
price exceeded the fair value of net assets acquired from Cellcor.

7.    DUPONT MERCK:

      Pursuant to a license agreement dated as of December 20, 1994 and as
amended on March 29, 1996 (the "DP/Merck Agreement"), CYTOGEN has sub-licensed
to The DuPont Merck Pharmaceutical Company ("DuPont Merck") CYTOGEN's
manufacturing and marketing rights to Quadramet in the U.S., Canada and Latin
America (the "Territory Rights"), if and when approved for marketing in each
applicable country.  CYTOGEN has retained the right to co-promote the product to
nuclear medicine specialists.  Quadramet is a therapy agent for treatment of
severe pain associated with cancers that spread to the bone.  CYTOGEN acquired
the Territory Rights to Quadramet from The Dow Chemical Company ("Dow") pursuant
to a license agreement, under

                                       9
<PAGE>
 
which it assumed responsibility for the development and commercialization of the
product (see Note 9).  The New Drug Application ("NDA") for Quadramet was
officially filed by FDA in August 1995.

      Pursuant to the terms of the DP/Merck Agreement, in January 1995, CYTOGEN
received from DuPont Merck $4.0 million for the sale of 908,265 shares of
CYTOGEN common stock to DuPont Merck and $1.3 million to fund additional
clinical programs to expand the use and marketing of Quadramet, of which
$333,000 and $1.0 million were recognized as license and contract revenues
during the three and nine months ended September 30, 1995, respectively.  The
remaining $333,000 was classified as deferred revenues, and was recognized in
the fourth quarter of 1995 as services under the contract were performed.  For
the three and nine months ended September 30, 1996, CYTOGEN recorded $364,000
and $1.2 million, respectively, as license and contract revenues from DuPont
Merck.  The DP/Merck Agreement further provides for future payments of up to
$1.8 million toward additional clinical programs, a $2.0 million milestone
payment if and when Quadramet receives FDA approval, additional payments upon
achievement of certain other milestones and royalty payments based on sales,
including guaranteed minimum payments.

8.    CYTORAD INCORPORATED:

      In February 1995, CYTOGEN completed its acquisition of CytoRad
Incorporated ("CytoRad") pursuant to an Agreement and Plan of Merger dated
November 15, 1994, under which CYTOGEN exchanged for each outstanding CytoRad
unit (i) 1.5 shares of CYTOGEN common stock, (ii) a warrant to acquire one share
of CYTOGEN common stock for $8.00 that expires January 31, 1997 and (iii) a
contingent value right ("CVR") to receive, under certain circumstances and at no
additional cost, up to one-half share of CYTOGEN common stock.  On February 29,
1996, the Company announced that the CVRs had expired by their terms and were of
no further value. Accordingly, the Company no longer has an obligation to issue
shares of its common stock to holders of CVRs on January 31, 1997.

      As a result of the merger, the Company acquired $11.7 million of CytoRad's
cash and securities, before payment of certain transaction costs.  In addition,
CYTOGEN recorded approximately $19.7 million for acquisition of technology and
marketing rights as a charge to its statement of operations during the three
months ended March 31, 1995, which charge represented the amount by which the
purchase price exceeded the fair value of net assets acquired from CytoRad.

9.    THE DOW CHEMICAL COMPANY:

      In 1993, CYTOGEN acquired from Dow an exclusive license in the U.S. for
Quadramet. This license was amended in 1995 to expand the territory to include
Canada and Latin America, and in 1996 to expand the field to include all
osteoblastic diseases.  For the three months ended September 30, 1995, upon the
filing of the NDA for Quadramet with FDA, the Company recorded a one-time
licensing fee of $2.0 million from Dow for their use of Quadramet's NDA filing
package. At the same time, the Company was required to pay to Dow $1.0 million.
The Company will be required to pay to Dow $4.0 million if and when Quadramet
receives FDA approval.  The agreement provides for additional payments by the
Company upon achievement of certain milestones and royalties on net sales of the
product once commercialized, including guaranteed minimum payments.

                                       10
<PAGE>
 
10.   REVENUES FROM MAJOR CUSTOMERS:

      Customers who contributed 10% or more of the Company's total product
related, license and contract revenues were as follows:

<TABLE>
<CAPTION>
                                 3 Months Ended September 30,        9 Months Ended September 30,    
                                 ----------------------------        ----------------------------
                                    1996             1995               1996              1995
                                   ------           ------             ------            ------
<S>                                <C>              <C>                <C>                <C>
Customer
------------
DuPont Merck (See Note 7)            31%              12%                29%                23%
Medi-Physics                         11%               6%                11%                11%
Elan (See Note 5)                    29%               -                 25%                 -
Dow (See Note 9)                      -               70%                 -                 45%
</TABLE> 
 
Medi-Physics is a chain of radiopharmacies.
 
11.    LONG TERM LIABILITIES:

<TABLE> 
<CAPTION> 
                                              September 30,     December 31,
                                                 1996              1995
                                              -----------       -----------
           <S>                                <C>               <C> 
           Due to Knoll                       $ 2,904,000       $ 4,237,000
           Due to Chiron                          428,000           785,000
           Capital lease obligations              370,000           448,000
           Deferred charges                             -            18,000
                                              -----------       -----------
                                                3,702,000         5,488,000
                                                       
           Less:  Current portion              (1,807,000)       (2,213,000)
                                              -----------       -----------
                                              $ 1,895,000       $ 3,275,000
                                              ===========       ===========
</TABLE>

   In November 1994, CYTOGEN executed a termination agreement (the "Termination
Agreement") with Knoll Pharmaceutical Company ("Knoll").  Pursuant to the
Termination Agreement, the Company has reacquired from Knoll all U.S. marketing
rights to OncoScint CR/OV (the "U.S. Rights"), which were previously granted to
Knoll.  The resulting liability of CYTOGEN to Knoll will be paid over a four-
year period and without interest, as follows:  $3.1 million in 1995 (which
amount has been paid); $1.6 million in 1996 (which amount was paid in July
1996); $1.6 million in 1997; and $1.7 million in 1998.  Imputed interest of
$88,000 and $266,000 relating to the obligation, which was discounted based upon
a 10% interest rate, was recorded for the three and nine months ended September
30, 1996, respectively.  For the three and nine months ended September 30, 1995,
imputed interest was $130,000 and $390,000, respectively.

     In December 1994, the Company entered into a disengagement agreement (the
"Disengagement Agreement") with Chiron B.V., formerly EuroCetus B.V., successor
in interest to EuroCetus International, N.V. ("Chiron").  Under the
Disengagement Agreement, the Company reacquired the exclusive marketing and
distribution rights in Europe (the "European Rights"), which were previously
granted to Chiron, and purchased certain business assets relating to the
European Rights.  The resulting liability of CYTOGEN to Chiron will be paid over
three years and without interest, as follows:  $200,000 in 1995 (which amount
has been paid), $300,000 in 1996 (of which $200,000 has been paid) and $377,181
in 1997.  Payment is secured by a mortgage covering approximately 11 acres of
undeveloped real property owned by the Company in Ewing, New Jersey.

                                       11
<PAGE>
 
This obligation is non-recourse to the Company.  Imputed interest of $15,000 and
$44,000 relating to the obligation, which was discounted based upon a 10%
interest rate, was recorded for the three and nine months ended September 30,
1996, respectively.  For the three and nine months ended September 30, 1995,
imputed interest was $18,000 and $54,000, respectively.

12.  COMMON STOCK:

   Under an option agreement (the "Option") granted to Fletcher Capital Market,
Inc. ("Fletcher") in May 1994, as amended, Fletcher purchased (i) 1.8 million
shares of CYTOGEN common stock in August 1995, at an aggregate price of
approximately $7.3 million, or $4.058 per share, (ii) 500,000 shares of CYTOGEN
common stock in November 1995, at an aggregate price of $2.3 million, or $4.696
per share, and (iii) an aggregate of 1.0 million shares of CYTOGEN common stock
in January 1996, at an aggregate price of $4.7 million, or $4.70 per share.

   Pursuant to an Investment Agreement between the Company and Fletcher Fund,
L.P., a Delaware limited partnership ("Fletcher Fund"), dated as of September 8,
1995 (as amended, the "Investment Agreement"), the Company sold 665,352 shares
of CYTOGEN common stock,  for an aggregate purchase price of approximately $2.7
million.  Under the Investment Agreement, as amended by the First Amendment to
Investment Agreement dated April 26, 1996 (the "Amendment"), the Company was
also granted the right to issue and sell to Fletcher Fund, and Fletcher Fund
will be obligated to purchase, up to 675,000 shares of CYTOGEN common stock from
time to time (collectively, the "Put Rights") at a purchase price per share
equal to 101% of the average of the daily volume weighted average price of
CYTOGEN common stock on the Nasdaq National Market ("NASDAQ") during (a) a
designated twenty-one business day period or (b) the last three business days of
said designated twenty-one business day period, whichever is less.  The Put
Rights, which were originally scheduled to expire on March 29, 1996, were
extended until December 15, 1996 pursuant to the Amendment.  Under certain
circumstances, Fletcher Fund will have the right to decrease or increase the
number of shares of CYTOGEN Common Stock to be purchased in connection with the
exercise of a Put Right by the Company, but in no event shall the total number
of shares sold by the Company and purchased by Fletcher Fund pursuant to the
Investment Agreement exceed 4.9% of the total number of shares of CYTOGEN common
stock outstanding, after giving effect to the proposed sale and purchase of the
shares in question.  The shares to be issued and sold in this transaction were
registered pursuant to a registration statement on Form S-3 filed with the
Securities and Exchange Commission ("SEC") in April 1994.  In September 1996, in
connection with the exercise of a Put Right, the Company sold 225,000 shares of
CYTOGEN common stock to Fletcher Fund at an aggregate price of $1.5 million, or
$6.529 per share.

   In November 1995, the Company sold 1,256,565 shares of CYTOGEN common stock
to a European institutional investor ("the Investor") in a private placement
transaction pursuant to Regulation S of the Securities Act for an aggregate
price of $5.0 million.  The Company also sold to the Investor (i ) 729,394
shares of CYTOGEN common stock in April 1996 for an aggregate price of $5.0
million, (ii) 913,909 shares of CYTOGEN common stock in October 1996 for an
aggregate price of $5.0 million pursuant to a Stock Purchase Agreement between
CYTOGEN and the Investor, dated as of August 27, 1996, as amended (the "Purchase
Agreement"), and (iii) 776,791 shares of CYTOGEN common stock in November 1996
for an aggregate price of approximately $4.0  million under the Purchase
Agreement.

                                       12
<PAGE>
 
   CYTOGEN and Nomura Securities International, Inc. ("Nomura") executed an
agreement effective as of February 23, 1996 that terminated the Purchase
Agreement between CYTOGEN and Nomura dated March 28, 1995.  No sales of stock
occurred under the terms of the agreement.

   See Notes 2, 6, 7 and 8 for information related to the Company's issuance of
common stock in connection with Targon, the Cellcor merger, DP/Merck Agreement,
and CytoRad merger.

                                       13
<PAGE>
 
Item 2  -  Management's Discussion and Analysis of Financial Condition and
   Results of Operations

Background

   Historically, CYTOGEN's revenues have resulted primarily from (i) payments
received from the sale of research services pursuant to collaborative
agreements, (ii) fees generated from the licensing of its technology and
marketing rights to its products and (iii) product related revenues on sales of
its OncoScint products in the U.S. and Western Europe.

   In January 1995, CYTOGEN received from DuPont Merck $5.3 million pursuant to
the DP/Merck Agreement (see Note 7 to the Consolidated Financial Statements), of
which $1.3 million was to fund additional clinical programs to expand the use
and marketing of Quadramet and $4.0 million was to purchase 908,265 shares of
CYTOGEN common stock.  In addition, for the three and nine months ended
September 30, 1996, CYTOGEN recorded $364,000 and $1.2 million, respectively, in
license and contract revenues from DuPont Merck.  The NDA for Quadramet was
accepted for filing by FDA effective August 1995.  The timing and outcome of
FDA's decision regarding Quadramet cannot be predicted by the Company.

   In February 1995, CYTOGEN acquired CytoRad by merging CytoRad with and into a
wholly-owned subsidiary of CYTOGEN.  See Note 8 to the Consolidated Financial
Statements.  As a result of the merger, the Company acquired $11.7 million of
CytoRad's cash and securities, before payment of certain transaction costs.  In
addition, during the three months ended March 31, 1995, the Company recorded a
one-time non-cash charge to the statement of operations of $19.7 million for the
acquisition of technology rights pertaining to the merger.

   In December 1995, CYTOGEN entered into the Elan Agreement with Elan under
which Elan will provide the funding necessary for the Company to fulfill its
obligations under a research program with aggregate payments for work performed
by CYTOGEN not to exceed $1.5 million during the first sixteen months of that
research program.  See Note 5 to the Consolidated Financial Statements.  For the
three and nine months ended September 30, 1996, CYTOGEN recorded $344,000 and
$988,000, respectively, in contract revenues from Elan.

   In 1996, the Company has created certain strategic business units ("SBUs").
The Company believes that, if successful, such SBU's will enable the Company to
leverage existing assets and capabilities to attract new collaborations and
partnerships and increase revenues.  There can be no assurance as to the
strategy's success or that revenues will increase markedly.

   To date, sales of OncoScint CR/OV in both the U.S. and European markets have
been limited, in part, because OncoScint CR/OV is a "technique-dependent"
product that requires a high degree of proficiency in nuclear imaging, as well
as a thorough appreciation of the information the scan can provide.  In December
1995 and January 1996, CYTOGEN entered into agreements with Faulding and CISbio,
respectively, to market and distribute OncoScint CR/OV outside the U.S.
Faulding is currently pursuing the necessary regulatory approvals in Canada.
CISbio has advised the Company that, as of September 30, 1996, it had relaunched
OncoScint CR/OV in eight of the twelve European

                                       14
<PAGE>
 
countries where the product has been approved for marketing, and that it is in
the process of relaunching in the rest of the countries while initiating steps
to obtain regulatory approvals for additional markets in accordance with the
terms of the CISbio Agreement.  See Note 4 to the Consolidated Financial
Statements.

   In August 1996, CYTOGEN entered into the Co-Promotion Agreement with  Bard
pursuant to which CYTOGEN granted to Bard (i) the exclusive right to market and
promote ProstaScint to urologists in the U.S. and (ii) the co-exclusive right
with CYTOGEN to market and promote ProstaScint to managed care organizations in
the U.S.  See Note 3 to the Consolidated Financial Statements.  In October 1996,
ProstaScint received marketing approval from FDA.  In preparation for the launch
of ProstaScint in early 1997, CYTOGEN is  developing  its Partners in Excellence
or PIE/TM/ Program (the "PIE Program") by establishing a network of qualified
nuclear medicine sites and physicians.  Each site will be trained and certified
in acquiring, processing and interpreting antibody-derived images.  ProstaScint
can be directed to such qualified sites, thus providing  quality control and
support.

   In October 1995, CYTOGEN completed its acquisition of Cellcor by merging
Cellcor with and into a wholly-owned subsidiary of CYTOGEN.  See Note 6 to the
Consolidated Financial Statements.  In the fourth quarter of 1995, Cellcor
completed patient accrual for its Phase III pivotal clinical trial using ALT to
treat metastatic kidney cancer patients.  The study is expected to  conclude in
the fourth quarter of 1996.  If results from the trial are favorable and FDA
concurs, the Company and FDA will determine the timing and contents of the
formal application with FDA seeking marketing approval.  It is likely that ALT
would qualify for a new application called a Biologics License Application
("BLA").  The BLA is a result of FDA's initiative to accelerate review and
approval of cancer products specifically for autologous cell therapies (such as
Cellcor's ALT).  There can be no assurance regarding the results of the study or
the timing or outcome of FDA's review.

   Cellcor has received FDA approval to proceed with a Treatment IND that allows
ALT to be available as a treatment option for patients who have no satisfactory
alternative therapy to treat their metastatic kidney cancer.  The Treatment IND
also allows the Company to recover costs associated with the treatment.  ALT
will be available through the Treatment IND while the Company continues to
pursue FDA approval of ALT.  As a result of the Cellcor merger, beginning
October 1995, the Company's product related revenues included the cost recovery
related to the treatment of patients receiving ALT under a compassionate
protocol and in 1996, also included the cost recovery related to the Treatment
IND program.  In addition, during the three months ended December 31, 1995, the
Company recorded a one-time non-cash charge to the statement of operations of
approximately $26.2 million for acquisition of Cellcor technology rights.

   In September 1996, pursuant to agreements between the Company and Elan,
Targon was established.  Targon will focus on the development, registration,
manufacturing and commercialization of differentiated oncology products
utilizing the competencies of the Company and Elan in drug development and
manufacturing.  Targon is initially a wholly-owned subsidiary of the Company.
At the time of the establishment of Targon, Elan purchased 932,535 shares of
CYTOGEN's common stock for $5 million and 1,000 shares of CYTOGEN's newly
created Series A Preferred Stock for $15 million.  The Company used the proceeds
of these sales to capitalize Targon (see Note 2 to the Consolidated Financial
Statements).  In connection with the formation of

                                       15
<PAGE>
 
Targon, the Company contributed certain technology to Targon.  Targon used $10
million of the proceeds of the Company's investment in Targon to acquire certain
technology from Advanced Therapeutics Systems Ltd., an affiliate of Elan.  The
Series A Preferred Stock has a liquidation value of $5 million.  Accordingly,
for accounting purposes, the Company recorded the Series A Preferred Stock
investment as a net capital contribution of $5 million.

Results of Operations

   Revenues.  Total revenues for the three months ended September 30, 1996 were
$1.2  million compared to $2.8 million recorded in the same period of 1995.  The
decrease is primarily attributable to a $2.0 million one-time license fee from
Dow for their use of Quadramet's NDA filing package in 1995.  Year-to-date
revenues of $3.9 million were only slightly below the $4.3 million recorded in
the same period of 1995 and include additional license and contract revenues
realized in 1996 under agreements executed in the fourth quarter of 1995 and the
first quarter of 1996 with Elan and CISbio, respectively.

   For the three and nine months ended September 30, 1996, product related
revenues were $393,000 and $1.1 million, respectively, compared to $347,000 and
$1.1 million recorded for the same periods of 1995.  In addition to sales of
OncoScint CR/OV, the 1996 product related revenues included cost recovery
associated with the ALT Treatment, for which $66,000 and $111,000 were
recognized during the three and nine months ended September 30, 1996,
respectively.  The 1995 product related revenues were from the sales of
OncoScint CR/OV.

   License and contract revenues for three months ended September 30, 1996 were
$795,000 compared to $2.4 million recorded in the same period of 1995. The
decrease is primarily attributable to a one-time license fee from Dow recorded
in 1995. Year-to-date license and contract revenues of $2.8 million were only
slightly below the $3.2 million recorded in the same period of 1995 and include
revenues realized in 1996 from Elan and CISbio.

   Operating Expenses. Operating expenses for the three and nine months ended
September 30, 1996 were $7.0 million and $21.3 million, respectively, compared
to $6.7 million and $41.6 million recorded in the same periods of 1995. The 
year-to-date decrease from the prior year period is largely attributable to a 
one-time non-cash charge of $19.7 million recorded in the three months ended
March 31, 1995 for the acquisition of technology rights associated with the
CytoRad merger. After excluding this one-time charge, year-to-date 1996
operating expenses, which included $912,000 and $2.8 million of expenses for the
three and nine months ended September 30, 1996, respectively, from Cellcor
operations, were lower than those recorded in the comparable period of 1995. The
level of current year operating expenses reflects the Company's objective to
control spending and to focus its efforts on its highest priority products and
technology, which are (i) OncoScint CR/OV, (ii) Quadramet, (iii) ProstaScint,
(iv) the GDL technology and (v) ALT therapy for mRCC.

   Research and development expenses for the three and nine months ended
September 30, 1996 were $4.8 million and $14.4 million, respectively, compared
to $4.5 million and $14.8 million recorded in the same periods of 1995.  These
expenses principally reflect product development efforts and support for various
ongoing clinical trials.  The 1996 research and development expenses 

                                       16
<PAGE>
 
included $811,000 and $2.6 million of expenses for the three and nine months
ended September 30, 1996, respectively, from Cellcor operations. 1995 research
and development expenses for the three months ended September 30 included a $1.0
million milestone payment to Dow at the time of the NDA filing for Quadramet.
1995 year-to-date expenses also included a charge of $1.1 million for inventory
writedown of commercial inventory relating to OncoScint CR/OV.

   Selling and marketing expenses for the three and nine months ended September
30, 1996 were $874,000 and $2.6 million, respectively, compared to $652,000 and
$2.4 million recorded in the same periods of 1995.  The increase from the prior
year periods is primarily attributable to expenses associated with establishing
the PIE Program.

   The acquisition of technology rights expense of $19.7 million was a one-time
non-cash charge recorded during the three months ended March 31, 1995,
representing the amount by which the purchase price exceeded the fair value of
net assets acquired in connection with the CytoRad merger.

   General and administrative expenses for the three and nine months ended
September 30, 1996 were $1.3 million and $4.3 million, respectively, compared to
$1.5 million and $4.7 million recorded in the comparable periods of 1995.  The
decrease from the prior year periods is primarily attributable to decreased
spending for professional and consulting services.

   Other Income/Expense.  Net gains on investments for the three and nine months
ended September 30, 1996 were $313,000 and $1.1 million, respectively, compared
to $142,000 and $518,000 realized in the same periods of 1995.  The increase
from the prior year periods is due primarily to higher average cash and short
term investment balances for the periods.

   Interest expense for the three and nine months ended September 30, 1996 was
$116,000 and $342,000, respectively, compared to $148,000 and $444,000 recorded
in the same periods of 1995. Imputed interest on liabilities associated with
CYTOGEN's termination agreements with Knoll and Chiron were $103,000 and
$310,000 for the three and nine months ended September 30, 1996, respectively,
compared to $148,000 and $444,000 recorded for the comparable periods of 1995.

   Net Loss.  Net loss for the three months ended September 30, 1996 was $5.6
million compared to a net loss of $3.9 million incurred in the same period of
1995.  The loss per common share was $0.12 on 48.4 million average shares
outstanding compared to $0.12 on 33.0 million average shares outstanding for the
same period in 1995.  For the nine months ended September 30, 1996, the net loss
was $16.7 million compared to a $37.2 million loss recorded in the comparable
period of the prior year.  The loss per common share was $0.35 on 47.7 million
average shares outstanding compared to $1.20 on 31.0 million average shares
outstanding in 1995.  As discussed above, the decrease in the net loss and net
loss per common share for the nine months is primarily attributable to the
charge to the statement of operations for the acquisition of technology rights
in 1995.  At September 30, 1996, the Company had outstanding (i) options to
purchase up to 3.1 million shares of CYTOGEN common stock under its various
stock option plans with exercise prices ranging from $0.83 to $18.33 per share;
(ii) warrants to purchase 4.3 million shares of CYTOGEN common stock with
exercise prices ranging from $8.00 to $18.87 per share; and (iii) certain put
rights to issue and sell up to approximately 1.2 million shares of CYTOGEN
common stock, subject to adjustment. The loss per share calculation stated above
does not take into account the shares issuable in 

                                       17
<PAGE>
 
connection with such options, warrants and put rights as their effect is
antidilutive.

Liquidity and Capital Resources

   The Company's cash, restricted cash  and short term investments were $30.3
million as of September 30, 1996,  compared to $29.1 million as of December 31,
1995.  The cash used for operating activities and purchases of property and
equipment for the nine months ended September 30, 1996 were $20.4 million and
$614,000, respectively, compared to $20.5 million and $475,000 used in the same
period of 1995.

   Historically, the Company's primary sources of cash have been proceeds from
the issuance and sale of its stock through public offerings and private
placements, product related revenues, the sale of research services, fees paid
under its license agreements and interest earned on its cash and short term
investments.

   CYTOGEN Capital Stock.  In January 1996, Fletcher purchased an aggregate of
1.0 million shares of CYTOGEN common stock at an aggregate price of
approximately $4.7 million, or $4.70 per share, pursuant to the Option granted
to Fletcher in May 1994, as amended.  See Note 12 to the Consolidated Financial
Statements.

   Effective as of February 23, 1996, CYTOGEN and Nomura executed an agreement
that terminated the Purchase Agreement between CYTOGEN and Nomura dated March
28, 1995.  No sales of stock occurred under the terms of the agreement.

   During 1996, CYTOGEN sold to a European institutional investor (i) 729,394
shares of common stock in April for an aggregate purchase price of $5.0 million,
(ii) 913,909 shares of common stock in October for an aggregate purchase price
of $5.0 million, and (iii) 776,791 shares of common stock in November for an
aggregate purchase price of approximately $4.0 million.  See Note 12 to the
Consolidated Financial Statements.

   In September 1996, CYTOGEN sold 225,000 shares of common stock to Fletcher
Fund at an aggregate price of $1.5 million or $6.529 per share, upon the
exercise of a Put Right granted to CYTOGEN pursuant to the Investment Agreement,
as amended in April 1996, between CYTOGEN and Fletcher Fund.  Under the
Investment Agreement, CYTOGEN has the right until December 15, 1996 to issue and
sell to Fletcher Fund, and Fletcher Fund will be obligated to purchase, up to
450,000 additional shares of CYTOGEN common stock from time to time, subject to
adjustment.  See Note 12 to the Consolidated Financial Statements.

   In September 1996, at the time of the establishment of Targon (see Note 2 to
the Consolidated Financial Statements), Elan purchased 932,535 shares of CYTOGEN
common stock for $5 million and 1,000 shares of CYTOGEN's newly created Series A
Preferred Stock for $15 million.  The Company used the proceeds of these sales
to capitalize Targon.  Targon used $10 million of the proceeds of the Company's
investment in Targon to acquire certain technology from Advanced Therapeutics
Systems Ltd.

   Product Related Revenues.  OncoScint CR/OV.  To date, sales of OncoScint
CR/OV have not 

                                       18
<PAGE>
 
been significant and are not expected to become a significant source of cash
flow in 1996. In November 1994, the Company executed the Termination Agreement
with Knoll, pursuant to which the Company is required to pay to Knoll, over a
four-year period and without interest, $3.0 million to reacquire the U.S. Rights
and $5.0 million of liabilities previously incurred under the terms of a
license, supply and marketing agreement executed in December 1991. The payment
of these liabilities will be made as follows: $3.1 million in 1995 (which amount
has been paid); $1.6 million in 1996 (which amount has been paid); $1.6 million
in 1997; and $1.7 million in 1998.

   In December 1994, CYTOGEN entered into the Disengagement Agreement with
Chiron to reacquire the European Rights and purchase certain business assets
relating to the European Rights. The resulting liability of CYTOGEN to Chiron
will be paid over three years and without interest, as follows:  $200,000 in
1995 (which amount has been paid); $300,000 in 1996 (of which $200,000 has been
paid); and $377,000 in 1997.  Payment is secured by a mortgage covering
approximately 11 acres of undeveloped real property owned by the Company in
Ewing, New Jersey.  This obligation is non-recourse to the Company.

   In December 1995 and January 1996, CYTOGEN entered into agreements with
Faulding and CISbio, respectively, to market and distribute OncoScint CR/OV
outside the U.S.  Faulding is currently pursuing the necessary regulatory
approvals in Canada.  As described above, CISbio is actively marketing OncoScint
CR/OV in certain countries in Europe.  In addition to one-time, up-front cash
payments for execution of the agreements, which amounts were recognized by the
Company in 1996, each of Faulding and CISbio will be required to make payments
upon the achievement of certain milestones, payments for the purchase of
products and royalties on net sales, if any.  See Note 4 to the Consolidated
Financial Statements.

   ProstaScint.  In August 1996, CYTOGEN entered into the Co-Promotion Agreement
with Bard to market and promote ProstaScint, pursuant to which Bard shall make
payments upon the occurrence of certain milestones which include expansion of
co-marketing rights in selected countries outside the U.S.  During the term of
the Co-Promotion Agreement, Bard will receive performance-based compensation for
its service.  See Note 3 to the Consolidated Financial Statements.

   In October 1996, ProstaScint was approved for marketing by FDA.  CYTOGEN is
developing the PIE Program (as described above) in preparation for the
ProstaScint launch in early 1997 and significant resources might be required.

   ALT.  Beginning October 1995, as a result of the Cellcor merger, the
Company's product related revenues included the cost recovery related to the
treatment of patients receiving ALT under a compassionate protocol, and in 1996
also included the cost recovery associated with the Treatment IND program.

   Research Services and Licenses.  Pursuant to the terms of the DP/Merck
Agreement between CYTOGEN and DuPont Merck, CYTOGEN will receive from DuPont
Merck future payments of up to $1.8 million towards additional clinical
programs, a $2.0 million milestone payment if and when Quadramet receives FDA
approval and royalty payments based on sales, including guaranteed minimum
payments.  For the three and nine months ended September 30, 1996, CYTOGEN

                                       19
<PAGE>
 
recorded $364,000 and $1.2 million, respectively, in license and contract
revenues from DuPont Merck. See Note 7 to the Consolidated Financial Statements.

   CYTOGEN acquired an exclusive license in the U.S. from Dow for Quadramet in
1993.  This license was later amended in 1995 and 1996.  See Note 9 to the
Consolidated Financial Statements. The Company will be required to pay to Dow
$4.0 million if and when Quadramet receives FDA approval.  The agreement
provides for additional payments by the Company upon achievement of certain
milestones and royalties on net sales of the product once commercialized,
including guaranteed minimum payments.

   In December 1995, the Company and Elan entered into the Elan Agreement, under
which Elan will provide the funding necessary for the Company to fulfill its
obligations under the research program, with aggregate payments for work
performed by CYTOGEN not to exceed $1.5 million during the first sixteen months
of the research program.  For the three and nine months ended September 30,
1996, CYTOGEN recorded $344,000 and $988,000, respectively, in contract revenues
from Elan.  See Note 5 to the Consolidated Financial Statements.

   The Company's capital and operating requirements, as described above, may
further change depending upon several factors, including:  (i) the amount of
resources which the Company devotes to clinical evaluations and the
establishment of manufacturing, marketing and sales capabilities; (ii) results
of preclinical testing, clinical trials and research and development activities;
and (iii) competitive and technological developments.  The Company plans to
continue to control spending and expects that its cash position at September 30,
1996, together with the approximate $9.0 million received from the Investor for
sales of CYTOGEN common stock in October and November 1996, will be adequate to
support the Company's operations into 1997.

   The Company's financial strategy is to meet its capital and operating
requirements through revenues from existing products, the establishment of
strategic marketing alliances and research and development partnerships, the
acquisition, in-licensing and development of other technologies, products or
services, subcontract manufacturing revenues, license and contract revenues,
sale of equity securities as market conditions permit, interest income, and a
continued commitment to control spending.  Certain of these transactions may
require payments by the Company in either cash or stock in addition to the costs
associated with developing and marketing any product or technology and, if
successful, increase long term revenues.  There can be no assurance as to the
strategy's success or that any resulting funds will be sufficient to meet the
Company's cash requirements through the time that product related resources are
sufficient to cover the Company's operating expenses.

   The foregoing discussion contains historical information as well as forward
looking statements that involve a number of risks and uncertainties.  In
addition to the risks discussed above, among other factors that could cause
actual results to differ materially from expected results are the following:
(i) the timing and results of clinical studies; (ii) market acceptance of the
Company's products, including programs designed to facilitate use of the
products, such as the PIE Program and the use of teleradiology; (iii) the
profitability of its products; (iv) the ability to attract, and the ultimate
success of strategic partnering arrangements, collaborations, and acquisition
candidates; (v) the ability of the Company and its partners to identify new
products as a result of those 

                                       20
<PAGE>
 
collaborations that are capable of achieving FDA approval, that are cost-
effective alternatives to existing products and that are ultimately accepted by
the key users of the product; (vi) the success of the Company's distributors in
obtaining marketing approvals in Canada and in additional European countries, in
achieving milestones and achieving sales of products resulting in royalties; and
(vii) the Company's ability to access the capital markets in the future for
continued funding of existing projects and for the pursuit of new projects.




PART II   -    OTHER INFORMATION
-------        -----------------

Item 6  - Exhibits and Reports on Form 8-K
------                                    

          (a) Exhibits:

                   3.1-   Certificate of Designations, Powers, Preferences and
                          Rights of the Series A Convertible and Exchangeable
                          Preferred Stock of CYTOGEN Corporation.

                  10.1-   Securities Purchase Agreement between CYTOGEN
                          Corporation and Elan International Services, Ltd.,
                          dated as of September 26, 1996.

                  10.2-   Warrant to purchase CYTOGEN common stock, issued to
                          Elan International Services, Ltd., dated September 26,
                          1996.

                  10.3-   Joint Development and Operating Agreement among
                          CYTOGEN Corporation, Elan Corporation, plc. and Targon
                          Corporation dated September 26, 1996.*

                  10.4-   Marketing and Co-Promotion Agreement between CYTOGEN
                          Corporation and C.R. BARD, Inc. effective August 1,
                          1996.*

                  27-     Financial Data Schedule (Submitted to SEC only in
                          electronic format).
 
*     CYTOGEN Corporation has requested confidential treatment of certain
      provisions contained in this exhibit. The copy filed as an exhibit omits
      the information subject to the confidentiality request.
 
          (b) Reports on Form 8-K:
 
                  None

                                       21
<PAGE>
 
                                   SIGNATURES



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


                                          CYTOGEN CORPORATION



Date November 13, 1996                    By /s/ T. Jerome Madison
    ---------------------------             --------------------------------
                                            T. Jerome Madison
                                            Chief Financial Officer
                                            (Authorized Officer and Principal
                                             Financial Officer)

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