<PAGE>   1

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

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

                                   FORM 10-K
                            ------------------------

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

                      FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

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

             FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .

                              COMMISSION FILE NO. 0-21905

                              COULTER PHARMACEUTICAL, INC.
                 (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                  DELAWARE                                      94-3219075
       (STATE OR OTHER JURISDICTION OF               (IRS EMPLOYER IDENTIFICATION NO.)
       INCORPORATION OR ORGANIZATION)
           600 GATEWAY BOULEVARD,                                  94080
       SOUTH SAN FRANCISCO, CALIFORNIA                          (ZIP CODE)
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>

        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 650-553-2000

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                          COMMON STOCK $.001 PAR VALUE
                                (TITLE OF CLASS)

     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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.  Yes [X]

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant based upon the closing price of the Common Stock listed on the
Nasdaq Stock Market(R) on March 10, 2000 was $587,450,434*.

     The total number of shares outstanding of the Registrant's Common Stock was
17,052,597 as of March 10, 2000.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of Registrant's Definitive Proxy Statement filed with the
Commission pursuant to Regulation 14A in connection with the 2000 Annual Meeting
are incorporated herein by reference into Part III of this Report.

     Certain Exhibits filed with the Registrant's Registration Statements on
Form S-1 (Registration Nos. 333-17661 and 333-36607), are incorporated herein by
reference into Part IV of this Report.
---------------
* Based on a closing price of $43.00 per share. Excludes 3,390,959 shares of the
  Registrant's Common Stock held by executive officers, directors and
  stockholders whose ownership exceeds 5% of the Common Stock outstanding at
  March 10, 2000. Exclusion of such shares should not be construed to indicate
  that any such person possesses the power, direct or indirect, to direct or
  cause the direction of the management or policies of the Registrant or that
  such person is controlled by or under common control with the Registrant.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

                                     PART I

     Except for historical information contained herein, this Annual Report on
Form 10-K contains forward-looking statements which involve risks and
uncertainties. All forward-looking statements included in this document are
based upon information available to the Company as of the date hereof, and the
Company assumes no obligation to update any such forward-looking statements. It
is important to note that the Company's actual results could differ materially
from those in such forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in "Risk Factors" at
the end of Item 1 Business.

ITEM 1. BUSINESS

     Coulter Pharmaceutical is engaged in the development of novel drugs and
therapies for the treatment of people with cancer and autoimmune diseases. The
Company currently is developing a family of potential therapeutics based upon
two drug discovery programs: therapeutic antibodies and targeted oncologics.
Within these broad drug discovery programs, the Company is currently
concentrating on several distinct platform technologies: therapeutic antibodies
consisting of both conjugated and unconjugated antibody technology, and targeted
oncologics based on tumor activated pro-drug ("TAP") technology and tumor
specific targeting ("TST") technology. The Company also is developing a
portfolio of proprietary ultra potent compounds which it believes will be
suitable payloads for both its TAP and TST platforms. Ultra potent compounds
generally are at least 1,000 times more potent than standard chemotherapeutic
agents and are active against resistant tumor cells.

     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 seek a priority review for the initial approval 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,
while simultaneously pursuing clinical trials to expand the potential use of
Bexxar to other indications. In a Phase I/II clinical trial of Bexxar, 42
patients with low-grade or transformed low-grade NHL who had relapsed from
previous chemotherapy regimens achieved an 83% overall response rate 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 low-grade and
transformed low-grade NHL patients. Of the 45 evaluable patients, 31% achieved a
complete response with the median duration of complete response not yet reached
(longest complete response of greater than 20 months). In December 1998, the
Company presented data from its pivotal Phase III clinical trial on 60 NHL
patients who were refractory to chemotherapy. The results showed, with
statistical significance, that more patients experienced remission with a single
therapeutic dose of Bexxar compared to their last chemotherapy regimen and that
these remissions were of longer duration. The investigator assessed overall
response rate was 65% with a median duration of response of 6.5 months. The
Company also announced in December 1998, that the United States Food and Drug
Administration ("FDA") had designated Bexxar as a Fast Track Product for which
the agency will take appropriate actions to expedite development and review. The
designation was awarded because one of the targeted indications for the therapy
is transformed, low-grade NHL, a life-threatening disease, representing an unmet
medical need. The Company believes that Bexxar, if approved, would become the
first radioimmunotherapy approved in the United States for the treatment of
people with cancer. Significant uncertainty exists as to the extent to which the
Fast Track designation will result in a priority review and approval, and this
designation does not ensure product approval. The FDA could require additional
clinical trials or other information before approving Bexxar. The Company cannot
predict the ultimate impact, if any, of the Fast Track designation on the timing
or likelihood of FDA approval of Bexxar.

     The Company intends to pursue additional trials to expand the potential use
of Bexxar to other indications, both as a single agent and in combination with
chemotherapy. The Company has completed enrollment of a single-center Phase II
trial in newly diagnosed low-grade NHL patients. An interim analysis of data
from the first 52 patients showed a 96% overall response rate. Of the 52
patients for whom adequate data was available, 63% achieved complete responses.
Additionally, in 17 of the patients, no evidence of NHL
                                        2
<PAGE>   3

could be detected at molecular levels using polymerase chain reaction ("PCR")
analysis. As of December 1999, 23 patients were in on-going remission. The
Company also has completed enrollment of a single-center Phase II trial in newly
diagnosed low-grade NHL patients evaluating a sequential combination regimen of
the chemotherapeutic agent fludarabine followed by Bexxar. In December 1999, the
Company presented an interim analysis of fourteen patients for whom adequate
data was available. Overall response rate following the fludarabine portion of
the regimen was 93%, of which 14% achieved a complete response. The combined
overall response rate and complete response rate of these patients after
receiving both fludarabine and Bexxar increased to 100%, and 71%, respectively.

     The objective of the Company's TAP 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 filing an Investigational New Drug ("IND")
application and commencing clinical trials in 2001. The objective of the
Company's TST program is to selectively target ultra potent compounds to tumor
cells with the goal of developing better tolerated and more efficacious
anti-tumor therapeutics. Ultra potent compounds generally are at least 1,000
times more potent than standard chemotherapeutic agents and are active against
resistant tumor cells.

     The objective of the Company's Type I interferon research and development
program is to develop monoclonal antibodies specific for the Type I interferon
receptor as potential therapeutics for the treatment of autoimmune diseases. The
Company has developed human versions of its lead monoclonal, 64G12, and expects
to select its lead candidate in 2000.

     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. In October 1997,
Coulter Corporation was acquired by Beckman Instruments, Inc., and is now known
as Beckman Coulter, Inc. ("Beckman Coulter"). In December 1998, the Company
announced a joint collaboration agreement with SmithKline Beecham Corporation
("SB") granting them joint marketing rights in the United States and exclusive
commercial rights internationally, except Japan, for Bexxar.

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 account for more
than 560,000 deaths annually. 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

                                        3
<PAGE>   4

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

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

     Chemotherapeutic drugs are not sufficiently specific to cancer cells to
avoid affecting normal cells, especially those that are growing rapidly. As a
result, patients often experience debilitating side effects such as nausea,
vomiting, hair loss, anemia, 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 side effects and high rates of mortality and 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.

                                        4
<PAGE>   5

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

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

     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
                                        5
<PAGE>   6

antibody and to devise a therapeutic protocol that optimizes therapeutic effect
while minimizing undesirable side effects. The development of effective
chemoimmunotherapies presents similar challenges.

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

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

COULTER PHARMACEUTICAL'S APPROACH

     Coulter Pharmaceutical is developing a family of cancer therapeutics to
address the shortcomings of current therapies based upon two drug discovery
programs: therapeutic antibodies and targeted oncologics. Within these broad
drug discovery programs, the Company is currently concentrating on several
distinct platform technologies: therapeutic antibodies consisting of conjugated
and unconjugated antibody technology and targeted oncologics based on both TAP
and TST technologies.

     The Company is developing conjugated and unconjugated monoclonal
antibodies. Bexxar, its most advanced product candidate, is an antibody
conjugated to a radioisotope. The Company believes that Bexxar 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 seek priority review and marketing approval for
Bexxar, while simultaneously pursuing clinical trials to expand its potential
uses to other indications. In December 1998, the Company announced that the FDA
had designated Bexxar a Fast Track Product for which the agency will take
appropriate actions to expedite development and review. The Company filed a
Biologics License Application ("BLA") with the FDA in June 1999. The Company
announced that the BLA received priority review status in July 1999. In August
1999, the Company announced that FDA had requested modifications to the BLA. The
Company has been working with the FDA to modify its BLA and expects to re-submit
the application in 2000.

     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.

     Within its targeted oncologics program, the Company is developing drug
candidates based on two principal technology platforms, TAP and TST. The
Company's TAP technology has the potential to broaden

                                        6
<PAGE>   7

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
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.

     In addition to the tumor activated pro-drugs, the Company has begun the
design and synthesis of cell targeted ultra potent TST drug candidates. The
ultra potent compounds generally are at least 1,000 times more potent than
standard chemotherapeutic drugs and are active against both drug resistant and
drug sensitive cell lines. Although these compounds are too potent to be used in
their unmodified forms, the Company believes that they may be suitable for use
as targeted therapies and is working on a number of targeting technologies,
including: peptides, non-peptides, and internalizing monoclonal antibodies.
These targeting approaches are designed to bind the TST selectively to tumor
target cells. Upon binding, the TST compound is internalized into the cell and
the ultra potent payload is released from the targeting entity. Once released,
the ultra potent drug acts on its intracellular target and kills the tumor cell.
The Company believes that the TST platform represents an exciting approach to
the generation of potentially better tolerated and more efficacious anti-tumor
therapeutics.

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 and autoimmune diseases based
on selected insights from the emerging understanding of the underlying
immunology of these diseases. The Company's conjugated antibody program is based
upon the antibody therapeutics program which originated in the late 1970s at
Beckman Coulter, 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 program is based upon technology that has
been under development at Universite Catholique de Louvain, Belgium, since 1986
and which was exclusively licensed to the Company in 1996. In June 1999, the
Company expanded the scope of its antibody therapeutics program to include
unconjugated monoclonal antibodies specific for the Type I interferon receptor.
This program is based upon technology developed at Pharma Pacific Pty. Ltd.,
("Pharma Pacific") of Australia, which was exclusively licensed to the Company
in June 1999. Based on this foundation, the Company has established a strategy
comprised of the following primary elements:

     Pursue Priority Review of Bexxar. The Company intends to seek priority
review and 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 Company intends to re-submit
an application for FDA marketing approval for this indication in 2000. In
December 1998, the Company announced that the FDA had designated Bexxar as a
Fast Track Product for which the agency will take appropriate actions to
expedite development and review. The Company also intends to seek approval for
other NHL indications based on additional clinical trials, and to date, has
completed enrollment of two Phase II clinical trials of Bexxar as a first-line
treatment for patients with newly diagnosed low-grade NHL, as well as a Phase II
clinical trial of Bexxar for patients who have failed treatment with Rituximab.

     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.
                                        7
<PAGE>   8

Internationally, the Company intends to distribute its products through
marketing partners. In December 1998, the Company entered into an agreement with
SB to jointly commercialize Bexxar. The two companies will co-promote Bexxar in
the United States following regulatory approval with each company fielding its
own sales force and both companies sharing profits equally. Outside the Unites
States, excluding Japan, the Company has granted SB exclusive marketing and
distribution rights for Bexxar in return for product royalties and milestone
payments.

     Leverage Existing Technology Platforms. The Company intends to develop
additional products by leveraging its expertise in conjugated and unconjugated
antibodies to develop other immunotherapies and by leveraging its proprietary
portfolio of ultra potent compounds as potential payloads for its TAP and TST
programs. In its TAP program, the Company currently is engaged in preclinical
development of CPI-004, a pro-drug version of doxorubicin formerly known as
Super-Leu-Dox, with the objective of filing an IND and commencing clinical
trials in 2001. The Company also intends to apply its TAP 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, and is developing an unconjugated antibody, 64G12, for the potential
treatment of autoimmune diseases.

     Leverage Development Expertise. The Company believes that it has built
substantial product development capabilities and expertise in the immunology
field due in part to the advanced stage of the Bexxar program since 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 for the treatment of cancer and autoimmune diseases. The Company
intends to pursue other product candidates derived from sponsored research or
available for in-licensing for blood-borne malignancies, solid tumor cancers and
autoimmune diseases, particularly in areas that may be complementary to its
existing technology platforms.

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

BEXXAR: RADIOIMMUNOTHERAPY FOR NON-HODGKIN'S LYMPHOMA

     The Company plans to re-submit a BLA to the FDA in 2000 to seek marketing
approval for its first product candidate, Bexxar. The Company believes that
Bexxar, if successfully developed, would 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 56,000 new cases are
estimated to have been diagnosed in 1999. 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
                                        8
<PAGE>   9

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)Iodine ("(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 the protocol
being used in the Company's current clinical trials. The dosimetric dose
consists of 35 mg of Anti-B1 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 two additional counts on the second,
third or fourth and the seventh or eighth days of the therapy to measure 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 individualized
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 40 to 200 mCi of (131)I due to wide patient-to-patient variability
in the rates at which the antibody is eliminated. The therapeutic dose is
administered once from seven to fourteen days after the dosimetric dose. Both
the dosimetric dose and the therapeutic dose are preceded by a 450 mg dose of
unlabeled Anti-B1 Antibody to improve the targeting of malignant B-cells by the
radiolabeled Anti-B1 Antibody. These pre-doses of unlabeled Anti-B1 Antibody
optimize the distribution of radiolabeled antibody in patients with bulky
disease or large spleens, minimize the required dose by slowing its elimination
from the body and may also contribute to the overall efficacy of the product.
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. Until recently,
patients have been kept in the hospital to monitor radiation levels for up to
four days following the therapeutic dose. However, under Nuclear Regulatory
Commission ("NRC") regulations adopted in 1997, patients are increasingly being
treated with Bexxar on an outpatient basis. Although the Company believes that
Bexxar can
                                        9
<PAGE>   10

be administered primarily on an outpatient basis, some hospitals may be required
to administer the therapeutic dose on an inpatient basis under their own or
under applicable state or local regulations. See "-- Radioactive and Other
Hazardous Materials."

     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 Anti-B1 Antibody,
ensuring that the antibody-radioisotope conjugate will remain in place to
destroy the B-cell.

     The Anti-B1 Antibody. The Anti-B1 Antibody exhibits very high specificity
for the CD20 antigen and, because it is a sub-class IgG(2a) antibody, is capable
of recruiting an immune response to those B-cells to which it binds. Further,
the Anti-B1 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 development of antibodies to the murine
antibody has been minimal to date and has not been a limiting factor in
treatment under the protocol.

     The Anti-B1 Antibody used in Bexxar was generated in 1978 by the
Dana-Farber Cancer Institute in collaboration with Coulter Corporation. The
Anti-B1 Antibody has been available commercially from Coulter Corporation (now
Beckman Coulter) 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 comparatively lower energy and shorter 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 to adjacent

                                       10
<PAGE>   11

microscopic clusters of malignant cells which are common to NHL. Moreover,
(131)I causes minimal damage to nearby normal tissues in contrast to other
radioisotopes that have longer path length beta emissions which 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 than other radioisotopes with shorter half-lives.

     When bound to a B-cell, (131)I's 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 Anti-B1 Antibody is
metabolized, the released (131)I radioisotope is eliminated rapidly and unlike
some other radioisotopes does not concentrate naturally in the bone matrix.

     (131)Iodine is currently 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

     The initial study of Bexxar was a 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 Anti-B1 Antibody in patients representing a full range of NHL
histologies. Based on the data generated in this clinical trial, the Company has
pursued 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 has pursued
in its clinical trials. These 42 patients, who had failed on average more than
four prior treatment regimens with chemotherapy, achieved an 83% overall
response rate, with a 48% complete response rate and a 35% partial response
rate. This 42-patient cohort included eight patients who previously had received
and failed an autologous bone marrow transplant prior to participation in the
clinical trial. The 42 patients in this cohort received total body radiation
doses of up to 85 cGy in this dose escalation trial. Four of the 42 patients did
not receive the therapeutic dose of radiolabeled antibody due to their rapidly
deteriorating medical condition or the presence of an antibody 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. 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 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.

                                       11
<PAGE>   12

     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 study, 13 patients who had
responded to an initial treatment with Bexxar were retreated following relapse.
Data concerning there patients was presented at the American Society of Clinical
Oncology meeting in May 1998. Eight of the 13 patients responded to treatment
with four of the 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 camera scans. Overall, 45 of the 47 enrolled patients were
evaluable, having received the protocol-specified therapy. The evaluable
patients had received on average, over 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 with the longest duration of response exceeding 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. A complete response was achieved at each clinical site involved in
the trial.

     Phase III Pivotal Trial. In December 1998, the Company presented results
from its pivotal Phase III trial of 60 NHL patients refractory to chemotherapy.
The patients represented a difficult-to-treat group, having either no response
to prior chemotherapy, or disease progression within six months of their last
chemotherapy regimen. The primary clinical endpoint was the comparison between
the patient's duration of remission on Bexxar and the duration of remission on
the patient's last chemotherapy, as assessed by a masked, randomized review of
efficacy data by an independent panel of physicians. Of the 41 cases where
response durations to chemotherapy and Bexxar were not equivalent, 32 patients
(78 percent) experienced a longer duration of response to Bexxar compared to
only nine patients (22 percent) who experienced a longer duration of response to
prior chemotherapy. The investigator assessed median duration of remission on
Bexxar was 6.5 months, approximately doubling the 3.4-month median duration of
remission experienced on their last chemotherapy. At December 1998, the longest
investigator assessed duration of remission in this trial with Bexxar was
ongoing at 17.3 months. The investigator assessed overall response rate, a
secondary clinical endpoint, also was significantly greater on Bexxar with 39 of
60 patients (65 percent) responding to Bexxar compared to only 17 of 60 patients
(28 percent) responding to prior chemotherapy. In addition, ten of 60
Bexxar-treated patients (17 percent) experienced a complete remission (or
complete elimination of signs and symptoms of the disease) compared to only two
of 60 patients (3 percent) who experienced a complete remission on prior
chemotherapy, all as assessed by the investigator. Bexxar was well tolerated
with mild to moderate non-hematologic toxicity and acceptable hematologic
toxicity.

     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, the Phase II dosimetry validation and the Phase III pivotal clinical
trials, which were conducted at relatively few sites with a relatively small
number of patients per NHL histology and disease stage and some of which had
different clinical objectives than the Company's current or planned clinical
trials. See "Risk Factors -- Uncertainties Related to Product Development."

                                       12
<PAGE>   13

  Clinical Development of Bexxar

     Based on the foregoing results of the Phase I/II, Phase II dosimetry
validation and Phase III pivotal 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 re-submitted in 2000; (i) interim
data from an ongoing expanded access clinical trial, (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 Anti-B1 Antibody and
the radioisotope, in comparison to the Anti-B1 Antibody alone; and (iii) interim
data from an ongoing Phase II clinical trial of Bexxar as a first-line treatment
for patients with low-grade NHL. Data from these trials, as well as additional
clinical trials being conducted by the Company, will be used to support future
expanded use of Bexxar in other indications. The Company's collaboration
agreement with SB provides for SB to participate in the administration,
management and funding of certain current and future clinical trials.

     Expanded Access Clinical Trial. The Company currently is conducting a
multi-center expanded access trial for patients with NHL who have failed prior
chemotherapy. The program was established by the Company in response to requests
from physicians and patients for continued access to Bexxar during the period
prior to potential FDA marketing approval. The trial is expected to include
approximately 100 community and academic oncology centers across the United
States.

     Phase II Unlabeled Versus Labeled Antibody Clinical Trial. The Company has
completed enrollment of a multi-center Phase II clinical trial in 78 patients
with relapsed, low-grade and transformed low-grade NHL. Patients were randomized
into two groups: one group receives Bexxar pursuant to the proprietary protocol;
the other group receives two 485 mg doses of unlabeled Anti-B1 Antibody seven
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 Anti-B1 Antibody as compared to the clinical activity of the
unlabeled Anti-B1 Antibody alone. Administration of the unlabeled Anti-B1
Antibody has not been designed for use as a stand-alone therapy, nor has the
treatment regimen been optimized for such use. Interim data from this trial were
the subject of an abstract presented at the 1997 American Society of Therapeutic
Radiation Oncology meeting in October 1997.

     Phase II First-Line, Stand-Alone Treatment Clinical Trial. The Company has
completed enrollment of a single-center Phase II trial in 76 newly diagnosed
low-grade NHL patients. An interim analysis of data from the first 54 patients
showed a 96% response rate with 63% achieving a complete response. Additionally,
in 17 of the patients, no evidence of NHL could be detected at molecular levels
using PCR analysis. As of December 1999, 23 patients were in ongoing remission.
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 trial of radioimmunotherapy as a stand alone, first-line treatment
for people with cancer.

     Other Clinical Trials. The Company intends to pursue additional trials to
expand the potential uses of Bexxar to other indications, both as a single agent
and in combination with chemotherapy.

     The Company has completed enrollment of a single-center Phase II trial in
newly diagnosed low-grade NHL patients evaluating a sequential combination
regimen of the chemotherapeutic agent fludarabine followed by Bexxar. In
December 1999, the Company presented an interim analysis of fourteen patients
for whom adequate data was available. Overall response rate following the
fludarabine portion of the regimen was 93%, of which 14% achieved a complete
response. The combined overall response rate of these patients after receiving
both the fludarabine and Bexxar was 100%, of which 71% achieved a complete
response. Bexxar was well tolerated with mild to moderate non-hemotological
toxicity and acceptable hemotological toxicity.

     The Company also has completed enrollment of a multi-center, Phase II
clinical trial in low-grade NHL patients who have failed treatment with
Rituximab. The Company currently is collecting data for analysis.

  The Company is also conducting the following clinical trials:

     - multi-center Phase I dose escalation trial in previously treated,
       low-grade NHL patients with more than 25% bone marrow involvement.

                                       13
<PAGE>   14

     - single-center Phase I dose escalation trial in patients with intermediate
       or high risk B-cell chronic lymphocytic leukemia.

     - multi-center Phase II clinical trial in 1st or 2nd relapse, low-grade and
       transformed low-grade patients.

     - multi-center Phase II clinical trial in low-, intermediate-, and
       high-grade NHL patients who have relapsed after previous treatment with
       Bexxar.

     - multi-center Phase II clinical trial sponsored by the Southwest Oncology
       Group evaluating the sequential combination of the chemotherpy regimen
       CHOP (cyclophosphamide, doxorubicin, vincristine and prednisone) followed
       by Bexxar in previously untreated patients with low-grade NHL.

     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 Anti-B1 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."

     Use of Bexxar for Bone Marrow Transplantation. The radiolabeled Anti-B1
Antibody has been the subject of other clinical trials to assess the efficacy of
using the radiolabeled Anti-B1 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 determine the
maximum tolerated dose, response duration and rates of response,
progression-free survival and overall survival.

     The first of two clinical trials conducted at the University of Washington
Medical Center and the Fred Hutchinson Cancer Research Center tested
(131)I-labeled Anti-B1 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 at the American
Society of Hemotology meeting in December 1999, of the 29 evaluable patients
receiving the full radiotherapeutic regimen, the overall response rate was 86%,
with a 79% complete response rate and a 7% partial response rate. Interim data
from this clinical trial were published in the New England Journal of Medicine
in October 1993. The second clinical trial was designed to test the combination
of similarly high doses of radiolabeled Anti-B1 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. Interim
data from this clinical trial were presented at the American Society of Clinical
Oncology meeting in May 1998. In this Phase I/II trial, 28 of 43 patients (65%)
had indolent NHL and 15 of 43 patients (35%) had aggressive 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.

     Two clinical trials are currently ongoing at the University of Washington
to further evaluate the use of Bexxar in the transplant setting. The first trial
is a Phase II study using high-dose Bexxar with autologous transplantation in
patients over 60 years of age and the second trial is a Phase II study
evaluating the efficacy of high-dose Bexxar in combination with cyclophosphamide
and etoposide as a conditioning regimen for autologous transplantation.

     In addition, a Phase I dose escalation clinical trial is ongoing at the
University of Nebraska for the combined use of standard dose radiolabeled
Anti-B1 Antibody and high dose chemotherapy as preparation for autologous bone
marrow transplant.

                                       14
<PAGE>   15

TARGETED ONCOLOGIC'S PROGRAM

     The objective of the Company's targeted oncologics program is to develop
better tolerated and more efficacious therapeutics by concentrating a greater
percentage of their cytotoxic effects to tumor cells versus normal cells. The
Company is developing drug candidates based on two principal technology
platforms; tumor activated pro-drugs, compounds designed to be activated by
tumor associated enzymes and tumor specific targeting therapeutics, compounds
designed to deliver their payloads directly to the tumor cells.

  TAP Platform

     The Company's tumor activated pro-drug technology has the potential to
broaden significantly the therapeutic window of cytotoxic agents. The TAP
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
Universite Catholique de Louvain, Belgium. Tumor activated 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 candidate is a
pro-drug version of doxorubicin known as CPI-0004. 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.

                                 SUPER LEU DOX

     As depicted in the graphic above, CPI-0004 is based on a proprietary
peptide of four amino acids (a "tetrapeptide") that can be linked to
doxorubicin. In a two-step activation process, (1) extracellular tumor enzymes
cleave three amino acids from the tetrapeptide leaving a leucine
amino-acid-doxorubicin conjugate. The higher levels of "activating enzymes' in
tumor tissue relative to normal tissues, ensures that higher concentrations of
cytotoxic drug are generated at the tumor site. Leucine-doxorubicin enters tumor
cells and local normal cells (2) and the final amino-acid is removed by an
intracellular enzyme. (3) The levels of this
                                       15
<PAGE>   16

enzyme are three to fivefold higher in tumor cells compared to normal cells.
This again favors greater activation of the cytotoxic compound in tumor cells,
(4) since leucine-doxorubicin is inactive unless the leucine amino-acid is
removed.

     This activation process is designed to deliver significantly higher levels
of chemotherapeutic drugs to a tumor site relative to normal tissues. The
pro-drug approach is also designed to achieve a higher dose of active drug to
the tumor site than can be achieved using unconjugated drug. Recent studies in
disease models have demonstrated that an eight-tenfold increase in drug dose to
the tumor can be achieved. Moreover, this increase translates into increase
anti-tumor efficacy. CPI-0004 demonstrates significantly better anti-tumor
efficacy than doxorubicin in both drug sensitive and insensitive human tumor
xenografts. These results, if confirmed in clinical trials, offer the potential
to significantly increase the therapeutic window and the efficacy of
doxorubicin. The Company currently plans to complete preclinical development of
CPI-0004 and to commence Phase I clinical trials in 2001.

     Prior to the licensing of the TAP technology by the Company, an earlier
generation molecule, leucine-doxorubicin 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 tolerated doses well in excess of those acceptable for unmodified
doxorubicin. The results from these clinical trials, along with data from our
preclinical studies, will be used by the Company to select the initial
indications and doses to pursue in the clinical trials of CPI-0004.

     Tumor activated pro-drugs represent a platform technology which may have a
broad applicability. Recently, the Company has established a medicinal chemistry
program aimed at synthesizing and conjugating ultra potent compounds which
generally are at least 1,000 times more potent than standard chemotherapeutic
drugs and have shown activity on drug resistant cells. Tumor activated pro-drugs
of these compounds have been synthesized and initial in vivo studies have
demonstrated that the pro-drugs are significantly better tolerated than the
unconjugated drugs. These results are consistent with the broad potential
applicability of the TAP technology and represent an exciting new development.
Studies are now being initiated to evaluate the in vivo efficacy of these
pro-drugs in tumor models.

     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 the TAP program.

  TST Platform

     In addition to the tumor activated pro-drugs, the Company has begun the
design and synthesis of cell targeted ultra potent TST drug candidates. The
ultra potent compounds generally are at least 1,000 times more potent than
standard chemotherapeutic drugs and are equally potent on drug resistant and
drug sensitive cell lines. Although these compounds are too potent to be used in
their unmodified forms, the Company believes that they may be suitable for use
as targeted therapies and is working on a number of targeting technologies,
including peptides, non-peptides, and internalizing monoclonal antibodies. These
targeting approaches are designed to bind the TST selectively to tumor target
cells. Upon binding, the TST compound is internalized into the cell and the
ultra potent payload is released from the targeting entity. Once released, the
ultra potent drug acts on its intracellular target and kills the tumor cell. The
Company believes that the TST platform represents an exciting approach to the
generation of potentially better tolerated and more efficacious anti-tumor
therapeutics.

                                       16
<PAGE>   17

AUTOIMMUNE DISEASES AND INFLAMMATION

     Discoveries in immunology are continuing to unravel the mechanisms
underlying tissue destruction and inflammation associated with many autoimmune
diseases. The Company is developing new therapeutic approaches based on these
mechanisms primarily through its therapeutic antibody programs.

     Based on these mechanisms, new therapeutic approaches can be devised and
readily tested using monoclonal antibody technology. The Type I interferons
((LOGO), (LOGO) and (LOGO)) are a family of secreted immunomodulatory proteins
which form part of the protective innate immune response, but may also be
involved in the initiation and maintenance of disease activity in patients with
autoimmune diseases. Some patients treated with Type I interferons develop
autoimmune disease symptoms which are reversed when treatment is stopped. In
other diseases there is a good correlation between the disease activity and
circulating plasma interferon levels. The Company is developing a monoclonal
antibody, 64G12, which binds to sub-unit one of the Type I interferon receptor
and neutralizes the activity of all Type I interferons. This antibody may
provide therapeutic benefit in a number of diseases including: rheumatoid
arthritis, Crohn's disease, systemic lupus erythematosus, psoriasis, bone marrow
transplantation and solid organ transplantation.

     Rheumatoid arthritis is a chronic disease which is characterized by joint
inflammation, pain, bone and cartilage deterioration. The disease affects over 2
million people in the United States. Symptoms of arthritis can be induced in
some patients treated with alpha interferon. Disease models also support the
hypothesis that Type I interferons play a causative role in collagen-induced
arthritis.

     Systemic lupus erythematosus is a life-threatening auto-antibody mediated
disease in which disease causing antibodies damage various tissues. Recent
statistics compiled by the Lupus Foundation of America, epidemological studies
and other sources estimate the number of lupus patients in the United States is
between 250,000 -- 1,000,000 with 16,000 new cases diagnosed each year.
Approximately ninety percent of cases are young women of child bearing age.
Lupus is characterized by a number of symptoms, including chronic kidney
inflammation leading to kidney failure, fatigue and arthritis. A number of
studies have shown that disease severity is correlated with plasma levels of
alpha interferon.

     Psoriasis is a chronic disease that results in skin thickening and scaling
accompanied by inflammation. The disease affects approximately four to five
million patients in the Unites States. About 500,000 patients suffer severe
enough symptoms to require systemic therapy with immunosuppressives and
ultraviolet radiation therapy. Some patients treated with Type I interferons
develop psoriasis symptoms.

  Type I Interferons

     The underlying mechanisms of many autoimmune diseases may be similar and
the Type I interferons appear to play an important role in the initiation and
prolongation of disease episodes. In June 1999, the Company entered into an
agreement with Pharma Pacific granting the Company worldwide rights to Pharma
Pacific's 64G12, a therapeutic monoclonal antibody specific for the Type I
interferon receptor. Preclinical in vivo data suggests that the 64G12 antibody
provides selective and prolonged neutralization of Type I interferons which may
represent a new approach to the treatment of autoimmune diseases and transplant
rejection.

     Under the terms of the agreement, the Company received exclusive worldwide
rights for all human therapeutic and prophylactic uses for 64G12 and related
intellectual property, as well as other antibodies recognizing the Type I
interferon receptor. The Company will be responsible for worldwide clinical
development, manufacturing and commercialization. In return for the worldwide
rights, the Company paid Pharma Pacific an upfront payment of $1.5 million and
will pay potential license fees and milestone payments of up to $10.25 million
based on achieving certain regulatory milestones. In addition, Pharma Pacific
also will receive royalties on potential future product sales.

                                       17
<PAGE>   18

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 and
autoimmune diseases with the objective of expanding the Company's product
pipeline.

RESEARCH AND DEVELOPMENT

     The Company incurred research and development expenses of $21.0 million,
$30.8 million, $44.8 million and $112.9 million for the years ended December 31,
1997, 1998, and 1999, and for the period from inception (February 16, 1995) to
December 31, 1999, respectively.

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. The Company's
collaboration agreement with SB provides for SB to participate in the planning,
management and funding of manufacturing development.

     Pursuant to several contracts with the Company, Lonza Biologics PLC
("Lonza") supplied the Anti-B1 Antibody for use in clinical trials. The Company
has entered into agreements with Boehringer Ingelheim Pharma KG ("BI Pharma KG")
to manufacture and supply Anti-B1 Antibody for use in ongoing clinical trials
and to meet commercial requirements as well as provide for fill/finish and
packaging services. The Company has committed to minimum order quantities of the
Anti-B1 antibody from BI Pharma KG. The maximum amount of the penalty which
would be payable if the Company did not place orders to purchase any antibody is
approximately $5.4 million. There can be no assurance that the material produced
by Lonza and BI Pharma KG will be suitable for human use and that clinical
trials or commercial supply will not be delayed or disrupted if BI Pharma KG is
unable to meet the Company's demand for product.

     Radiolabeling currently is conducted at MDS Nordion Inc.'s ("Nordion")
centralized radiolabeling facility. The Company has several contracts with
Nordion that provide for radiolabeling services for clinical and commercial
product. There can be no assurance that material produced by Nordion will be
suitable for human use and clinical trials or commercial supply will not be
delayed or disrupted if Nordion is unable to meet the Company's demand for
product.

     The Company currently obtains the (131)I radioisotope from Nordion under
purchase orders placed from time to time. Nordion intends to change its source
of (131)I from tellurium-derived (131)I to fission-derived (131)I. The Company
will need to obtain FDA approval of the fission-derived (131)I prior to its use
in clinical trials or commercial supply. While fission-derived (131)I has been
approved for human use in other applications, there can be no assurance that the
fission-derived (131)I labeled Anti-B1 Antibody will be suitable for human use,
and that clinical trials or commercial supply will not be delayed or disrupted
if the Company is unable to obtain such FDA approval.

     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 Anti-B1 Antibody and filling of individual product vials
with Anti-B1 Antibody by BI Pharma KG, (ii) labeling and packaging of individual
product vials by another third-party supplier and/or BI Pharma KG, and (iii)
radiolabeling of Anti-B1 Antibody at Nordion. While the Company may 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

                                       18
<PAGE>   19

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 has entered into an agreement with
a potential manufacturer of CPI-0004, its initial TAP pro-drug product
candidate, for use in clinical trials. There can be no assurance that the
material produced under the agreement will be suitable for human use.

DISTRIBUTION

     The unique properties of the Bexxar therapy require the distribution of the
product to be tightly controlled. Due to its radioactive component, the product
is shipped in a shielded container and must arrive at its destination within
24 - 48 hours of production. The product must also be under controlled
temperature during shipment. The company will rely on many third parties to
process orders and to package, store and ship the product. The Company is
working with these suppliers to establish a commercial scale system for the
product which will minimize risk and loss of inventory and provide efficient
service to customers. There can, however, be no assurance that these third
parties will handle the product in a manner that will minimize loss and damage
of inventory. The Company is in the process of negotiating several contracts for
the handling of the product before it is delivered to the customer. There can be
no assurance that the Company will be able to enter into such agreements on
commercially reasonable terms, on a timely basis or at all.

MARKETING AND SALES

     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. 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 on
hospital-based 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 are available in most metropolitan areas such that a
significant portion of physicians who treat NHL patients will be able to
prescribe Bexxar. The Company intends to distribute its products internationally
through marketing partners.

     In December 1998, the Company entered into an agreement with SB to jointly
commercialize Bexxar. The two companies will co-promote Bexxar in the United
States following regulatory approval, with each company fielding its own sales
force and both companies sharing profits equally. Outside the United States,
excluding Japan, the Company has granted SB exclusive marketing and distribution
rights in return for milestone payments and product royalties.

     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 marketing strategy prior to the launch of
Bexxar or even after launch and could affect adversely the ability of the
Company to generate revenues.

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

                                       19
<PAGE>   20

PHARMACEUTICAL PRICING AND REIMBURSEMENT

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

     In both domestic and foreign markets, sales of the Company's proposed
products will depend in part upon the availability of reimbursement from
third-party payors, such as government health administration authorities,
managed care providers, private health insurers and other organizations. In
addition, other third-party payors increasingly are challenging the price and
cost effectiveness of medical products and services. Significant uncertainty
exists as to the reimbursement status of newly approved health care products.
Bexxar, as potentially the first radioimmunotherapy for cancer, faces particular
uncertainties due to the absence of a comparable, approved therapy to serve as a
model for pricing and reimbursement decisions. There can be no assurance that
the Company's product candidates will be considered cost effective or that
adequate third-party reimbursement will be available to enable the Company to
maintain price levels sufficient to realize an appropriate return on its
investment in product development. Further, there can be no assurance that
products can be manufactured on a commercial scale 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 Federal Food, Drug and Cosmetic Act and other laws, including, in
the case of biologics, the Public Health Service Act. At the present time, the
Company believes that Bexxar and other immunotherapeutics that it may develop
will be regulated by the FDA as biologics and that other products to be
developed by the Company, including CPI-0004 and other TAP pro-drugs, are likely
to be regulated as drugs.

     The steps required before a drug or biologic may be approved for marketing
in the United States generally include (i) preclinical laboratory tests and
animal tests, (ii) the submission to the FDA of an IND for human clinical
testing, which must become effective before human clinical trials may commence,
(iii) adequate and well-controlled human clinical trials to establish the safety
and efficacy of the product, (iv) in the case of a biologic, the submission to
the FDA of a BLA, or in the case of a drug, a New Drug Application ("NDA"), (v)
FDA review of the BLA (or PLA/ELA) or NDA and (vi) satisfactory completion of an
FDA inspection of the manufacturing facilities at which the product is made to
assess compliance with Good Manufacturing Practices ("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

                                       20
<PAGE>   21

information and analytical data, are submitted to the FDA as part of the IND,
which must become effective before clinical trials may be commenced. The IND
automatically will become effective thirty days after receipt by the FDA, unless
the FDA before that time raises concerns or questions about the conduct of the
trials as outlined in the IND. In such case, the IND sponsor and the FDA must
resolve any outstanding concerns before clinical trials can proceed. There can
be no assurance that submission of an IND will result in FDA authorization to
commence clinical trials.

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

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

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

     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 or NDA 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 applicable regulatory criteria are not satisfied, require additional
testing or information, and/or require post-marketing 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.

                                       21
<PAGE>   22

FOOD AND DRUG ADMINISTRATION MODERNIZATION ACT OF 1997

     In September 1998, the Company submitted a request to the FDA for the
designation of Bexxar (for the treatment of patients with relapsed or refractory
low-grade NHL) as a Fast Track product. The Fast Track designation means that
the FDA will take such actions as are appropriate to expedite the development
and review of the license for approval. In December 1998, the Company announced
that it was notified by the FDA that Bexxar met the criteria for Fast Track
designation. The designation was awarded because one of the targeted indications
for the therapy is transformed, low-grade NHL, a life-threatening disease,
representing an unmet medical need.

ORPHAN DRUG DESIGNATION

     Under the Orphan Drug Act and the Orphan Drug Amendments of 1998, 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 received orphan drug designation
from the FDA in May 1994. Although the FDA recently decided to remove NHL from
the list of diseases for which orphan drug designation may be obtained, the
previous designation of Bexxar will not be affected. In any event, there can be
no assurance that competitors will not receive approval of other, different
drugs or biologics for low-grade NHL. Thus, although obtaining FDA approval to
market a product with orphan drug exclusivity can be advantageous, there can be
no assurance that it would provide the Company with a material commercial
benefit.

RADIOACTIVE AND OTHER HAZARDOUS MATERIALS

     The manufacturing and administration of Bexxar requires the handling, use
and disposal of (131)I, a radioactive isotope of iodine. These activities must
comply with various state and federal regulations, regarding the handling, use
and disposal 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 Anti-B1 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
Anti-B1 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 may
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 are
required to be admitted to the hospital, where they can be isolated from others
until radiation falls to approved levels. The NRC modified its regulations in
1997 to make it easier for hospitals to treat patients with radioactive
materials on an outpatient basis. Under these modified 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 four days following administration
of the therapeutic dose, adding to the overall cost of the therapy.

                                       22
<PAGE>   23

     The Company also to uses hazardous chemicals and radioactive compounds in
its ongoing research activities. Although the Company believes that safety
procedures for handling and disposing of such materials 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 are 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 rights to several issued United States patents that
relate to the Bexxar therapeutic protocol, composition, formulation and
dosimetry methods. The Company also holds rights to one United States and two
Belgium patents relating to its TAP program, and to several United States
patents and one European patent relating to its interferon alpha program.
Furthermore, the Company is actively pursuing additional patent applications in
the United States and foreign countries relating to its various technology
platforms.

     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. In some jurisdictions, including the United
States, 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.

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

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

                                       23
<PAGE>   24

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, statutory
differences in patentable subject matter may limit the protection the Company
can obtain on some of its inventions in certain jurisdictions. 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 in certain markets 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 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 and
autoimmune disease. 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. If a competing company
were to develop or acquire rights to a more efficient or safer 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 and autoimmune disease 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, more effective and/or more cost effective than those under
development or proposed to be developed by the Company. There can be no
assurance that research and development by others will not render the Company's
technology or potential products obsolete or non-competitive or result in
treatments superior to any therapy developed by the Company, or that any therapy
developed by the Company will be preferred to any existing or newly developed
technologies.

PRODUCT LIABILITY AND INSURANCE

     The manufacture and sale of human therapeutic products involve an inherent
risk of product liability claims and associated adverse publicity. The Company
has only limited product liability insurance for clinical trials and no
commercial product liability insurance. There can be no assurance that the
Company will be able

                                       24
<PAGE>   25

to maintain existing insurance or obtain additional product liability insurance
on acceptable terms or with adequate coverage against potential liabilities.
Such insurance may be expensive, difficult to obtain and may not be available in
the future on acceptable terms, if at all. An inability to obtain sufficient
insurance coverage on reasonable terms or to otherwise protect against potential
product liability claims brought against the Company in excess of its insurance
coverage, if any, or a product recall could have a material adverse effect upon
the Company's business, financial condition and results of operations.

HUMAN RESOURCES

     As of December 31, 1999 the Company had 209 employees, 146 of whom were
engaged in product development activities. Seventy-five employees hold
post-graduate degrees, including four with medical degrees and thirty-seven 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, NHL 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 Professor of Medicine (Oncology and Bone Marrow
Transplantation) at Stanford University School of Medicine. She has been an
active member of the American Society of Clinical Oncology since 1983. Dr.
Horning's research has focused in the areas of Hodgkin's disease and lymphomas.

     T. Andrew Lister, is Professor of Medical Oncology at St. Bartholomew's
Hospital in London, England where he is also director of the medical oncology
unit. Professor Lister is also Honorary Consultant Physician at Broomfield
Hospital in Chelmsford, England. He is author of numerous scientific articles on
lymphomas and its clinical treatment.

     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.

                                       25
<PAGE>   26

                                  RISK FACTORS

     In this Section, the Company summarizes certain risks that should be
considered by stockholders and prospective investors in the Company. These risks
are discussed in greater detail below, and are discussed in context in other
Sections of this Report.

     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 or autoimmune diseases is highly uncertain and
subject to numerous risks. Product candidates that may appear to be promising at
early stages of development may not reach the market for a number of reasons.
Product candidates may be found ineffective or cause harmful side effects during
clinical trials, may take longer to progress through clinical trials than had
been anticipated, may fail to receive necessary regulatory approvals, may prove
impracticable to manufacture in commercial quantities at reasonable cost and
with acceptable quality or may fail to achieve market acceptance.

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

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

     Uncertainty of Market Acceptance of Bexxar. Even if the Company's product
candidates are approved for marketing by the FDA and other regulatory
authorities, there can be no assurance that the Company's products will be
commercially successful. If the Company's most advanced product candidate,
Bexxar, is approved, it would represent a significant departure from currently
approved methods of treatment for NHL and would require the handling of
radioactive materials. Accordingly, Bexxar may experience under-utilization by
oncologists and hematologists who are unfamiliar with the application of Bexxar
in the treatment of NHL. Further, oncologists and hematologists are not
typically licensed to administer radioimmunotherapies such as Bexxar and will
need to engage a nuclear medicine physician or receive specialty training to
administer Bexxar. Nuclear Regulatory Commission regulations permit Bexxar to be
administered on an outpatient basis in most cases as is currently contemplated
by the Company. However, market acceptance could be affected adversely because
some hospitals may be required to administer the therapeutic dose of Bexxar on
an inpatient basis under applicable state or local or individual hospital
regulations. As with any new drug, doctors may be inclined to continue to treat
patients with conventional therapies, in this case chemotherapy. Market

                                       26
<PAGE>   27

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."

     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 and autoimmune diseases. 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
there can be no assurance that products resulting from the Company's research
and development efforts will be available within a specific timeframe. 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."

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

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

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

     Manufacturers of drugs and biologics also are required to comply with the
applicable FDA 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 on Nordion for centralized radiolabeling of the Anti-B1 Antibody at
Nordion's radiolabeling facility in Canada. To the Company's knowledge,
Nordion's radiolabeling facilities previously have not been licensed by the FDA
as suitable for commercial manufactur-

                                       27
<PAGE>   28

ing of a drug or biologic. There can be no assurance that the Company or its
suppliers will be able to comply with the applicable GMP regulations and other
FDA regulatory requirements. Such failure could have a material adverse effect
on the Company's business, financial condition and results of operations.

     In December 1998, the Company announced that it had been notified by the
FDA that Bexxar met the criteria for Fast Track designation because one of the
targeted indications is transformed low-grade NHL, a life-threatening disease,
representing unmet medical need. However, significant uncertainty exists as to
the extent to which Bexxar's Fast Track designation will result in priority
review and approval. Further, the FDA retains considerable discretion to
determine eligibility for a priority review and approval and is not bound by
discussions that an applicant may have had with FDA staff. Accordingly, the FDA
could employ such discretion to deny eligibility of Bexxar as a candidate for a
priority review or to require additional clinical trials or other information
before approving Bexxar. A determination that Bexxar is not eligible for a
priority review or delays and additional expenses associated with generating a
response to any such request for additional trials could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Government Regulation."

     Dependence on Suppliers; Manufacturing and Scale-up Risk. The Company has
no existing internal capacity or experience with respect to manufacturing
products for large-scale clinical trials or commercial purposes. The Company
relies upon BI Pharma KG for the production of Anti-B1 Antibody. The Company and
BI Pharma KG have entered into an agreement for the production of bulk Anti-B1
Antibody and the filling of the individual product vials with Anti-B1 Antibody.
The Company has contracted with BI Pharma KG and a third-party supplier for
labeling and packaging services. These manufacturers have limited experience
producing, labeling and packaging the Anti-B1 Antibody, and there can be no
assurance that they will be able to produce the Company's requirements in
commercial quantities or with acceptable quality.

     The Company relies upon Nordion for radiolabeling of the Anti-B1 Antibody
at Nordion's centralized radiolabeling facility. The Company and Nordion have
entered into an agreement for supply of the radiolabeled Anti-B1 Antibody for
both clinical trials and commercial sale. Given the eight-day half-life of the
(131)I radioisotope, Nordion currently is producing radiolabeled Anti-B1
Antibody in a clinical scale facility sufficient to support on-going clinical
trials. Nordion will transition the production of radiolabeled Anti-B1 Antibody
to a commercial scale facility prior to anticipated FDA approval in support of
potential product launch. However, there can be no assurance that Nordion will
be able to successfully transition to the commercial scale facility and, if
Bexxar is approved and is successful in the market, there can be no assurance
that Nordion's capacity to radiolabel antibodies will be sufficient to meet all
of the Company's commercial requirements.

     The Company is aware of only a limited number of manufacturers capable of
producing the Anti-B1 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 three years or longer.
Further, radiolabeled antibody cannot be stockpiled against future shortages due
to the eight-day half-life of the (131)I radioisotope. Accordingly, any change
in the Company's existing contractual relationships with, or interruption in
supply from, its producer of unlabeled antibody or its radiolabeler could affect
adversely the Company's ability to complete its ongoing clinical trials and to
market Bexxar, if approved. Any such change or interruption would have a
material adverse effect on the Company's business, financial condition and
results of operations. Although the Company is evaluating additional sources of
supply for production and radiolabeling of the Anti-B1 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 Anti-B1 Antibody from an
inventory produced by Beckman Coulter, and radiolabeling was performed by
radiopharmacies at the individual clinical trial sites. In order to begin using
Lonza Anti-B1 Antibody, BI Pharma KG Anti-B1 Antibody, and the centrally
radiolabeled Anti-B1 Antibody from Nordion, the Company filed and the FDA
cleared IND amendments to allow the use of these materials in clinical trials.
The Company is collecting data from its clinical trials to be filed with the FDA
to establish that Anti-B1 Antibody from these different sources and that Nordion
radiolabeled and on-site radiolabeled Anti-B1 antibody are clinically
comparable. 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

                                       28
<PAGE>   29

requirement that the Company conduct additional clinical trials, which would
increase costs and potentially delay regulatory approval for Bexxar.

     The Company currently obtains the (131)I radioisotope from Nordion under
purchase orders placed from time to time. Nordion intends to change its source
of (131)I from tellurium-derived (131)I to fission-derived (131)I. The Company
will need to obtain FDA approval of the fission-derived (131)I prior to its use
in clinical trials or commercial supply. While fission-derived (131)I has been
approved for human use in other applications, there can be no assurance that the
fission-derived (131)I labeled Anti-B1 Antibody will be suitable for human use,
and that clinical trials or commercial supply will not be delayed or disrupted
if the Company is unable to obtain such FDA approval.

     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.

     Absence of Commercialization Resources and Experience; Reliance on
Marketing Partner. The Company intends to market and sell Bexxar in the United
States through a direct sales force and in collaboration with SB, and
internationally (except Japan) through SB. The Company currently does not
possess the resources and experience necessary to commercialize any of its
product candidates. The Company has hired approximately one-half of the direct
sales force and marketing personnel necessary to launch Bexxar, however, the
Company's ability to market Bexxar, if approved, will be contingent upon
recruitment, training and deployment of the remainder of its sales and marketing
force as well as the performance of SB under the collaboration agreement.
Development of an effective sales force will require significant financial
resources and time. There can be no assurance that the Company will be able to
establish such a sales force in a timely or cost effective manner, if at all, or
that such a sales force will be capable of generating demand for Bexxar or other
product candidates. Failure to establish such a sales force and marketing
capability could have a material adverse effect on the Company's business,
financial condition and results of operations.

     Highly Competitive Industry; Risk of Technological Obsolescence. The
pharmaceutical and biotechnology industries are intensely competitive. Any
product candidate developed by the Company would compete with existing drugs and
therapies. There are many pharmaceutical companies, biotechnology companies,
public and private universities and research organizations actively engaged in
research and development of products for the treatment of people with cancer and
autoimmune disease. Many of these organizations have financial, technical,
manufacturing and marketing resources greater than those of the Company. Several
of them may have developed or are developing therapies that could be used for
treatment of the same diseases targeted by the Company. If a competing company
were to develop or acquire rights to a more efficacious or safer 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.

     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

                                       29
<PAGE>   30

similar to those of the Company. In some jurisdictions, including the United
States, 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.

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

     The Company's breach of an existing license or failure to obtain a license
to technology required to commercialize its product candidates may have a
material adverse effect on the Company's business, financial condition and
results of operations. Litigation, which could result in substantial costs to
the Company, may also be necessary to enforce any patents issued to the Company
or to determine the scope and validity of third-party proprietary rights. If
competitors of the Company prepare and file patent applications in the United
States that claim technology also claimed by the Company, the Company may have
to participate in interference proceedings declared by the United States Patent
and Trademark Office to determine priority of invention, which could result in
substantial cost to the Company, even if the eventual outcome is favorable to
the Company. An adverse outcome in court or administrative agency proceedings
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, statutory
differences in patentable subject matter may limit the protection the Company
can obtain on some of its inventions in certain jurisdictions. 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 in certain markets 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
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 will be adequate to satisfy the requirements
of its current and planned operations through the second

                                       30
<PAGE>   31

quarter of 2001. 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, continued progress of the Company's
research and development of product candidates, the timing and cost of
establishment or procurement of requisite production radiolabeling and other
manufacturing capacities, the cost involved in preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims, the expenses of establishing
a sales and marketing force, 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, if needed, intends to seek such additional funding through
public or private equity or debt financings, as well as through collaborative
arrangements. There can be no assurance that such additional funding will be
available on acceptable terms, if at all. If additional funds are raised by
issuing equity securities, substantial dilution to stockholders may result. If
adequate funds are not available, the Company may be required to delay, reduce
the scope of, or eliminate one or more of its research and development programs
or obtain funds through arrangements with collaborative partners or others that
may require the Company to relinquish rights to certain of its technologies,
product candidates or products that the Company would otherwise seek to develop
or commercialize. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

     History of Operating Losses; Anticipated Future Losses. The Company has a
limited history of operations and has experienced significant losses since
inception. As of December 31, 1999, the Company's accumulated deficit was
approximately $97.2 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. Product revenues resulting from the
Company's research and development efforts will not occur until commercial
availability of such product. 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, may be 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.

                                       31
<PAGE>   32

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

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

     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 Anti-B1 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 Anti-B1
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 uses 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.

     Potential Volatility of Stock Price. The securities markets have from time
to time experienced significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. The market prices of the
common stock of many publicly held biotechnology and pharmaceutical companies
have in the past been, and can in the future be expected to be, especially
volatile. Announcements of technological innovations or new products by the
Company or its competitors, release of reports by securities analysts, sales of
stock by large holders, developments or disputes concerning patents or
proprietary rights, regulatory developments, changes in regulatory or medical
reimbursement policies, economic and other
                                       32
<PAGE>   33

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.

ITEM 2. PROPERTIES

     The Company currently leases approximately 115,000 square feet of office
and laboratory space in South San Francisco, California, under several lease
agreements. In November 1997, the Company entered into an agreement to build and
lease new facilities in South San Francisco, California. The first two buildings
are each approximately 50,000 square feet of mixed office and laboratory space,
which were occupied in April 1999 and October 1999. The lease includes an option
to occupy a third building. In connection with its lease agreement, the Company
obtained a letter of credit agreement from a bank which secures the aggregate
future payments under the lease.

ITEM 3. LEGAL PROCEEDINGS

     Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

     Not Applicable.

                                       33
<PAGE>   34

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS MATTERS

     The Company's Common Stock is traded on The Nasdaq Stock Market(R) under
the symbol "CLTR." Trading of the Company's Common Stock commenced on January
28, 1997, following effectiveness of its initial public offering. The following
table presents quarterly information on the price range of the Company's Common
Stock, indicating the high and low sales prices reported by the Nasdaq Stock
Market(R). These prices do not include retail markups, markdowns or commissions.

<TABLE>
<CAPTION>
            1999                                                   LOW      HIGH
            ----                                                   ---      ----
            <S>                                                   <C>      <C>
            First Quarter.......................................  19.250   31.000
            Second Quarter......................................  17.813   26.375
            Third Quarter.......................................  11.625   34.625
            Fourth Quarter......................................  12.500   24.750
</TABLE>

<TABLE>
<CAPTION>
            1998                                                   LOW      HIGH
            ----                                                   ---      ----
            <S>                                                   <C>      <C>
            First Quarter.......................................  17.000   28.438
            Second Quarter......................................  21.625   35.125
            Third Quarter.......................................  13.250   32.125
            Fourth Quarter......................................  18.375   34.125
</TABLE>

     As of March 10, 2000, the Company had approximately 346 holders of record
of its Common Stock.

     The Company has never paid any cash dividends on its capital stock and does
not expect to pay any such dividends in the foreseeable future.

     In December 1998, the Company issued to SmithKline Beecham Corporation
("SB") 239,607 shares of its Common Stock for a purchase price of $7.25 million
in connection with the collaboration agreement with SB. The above-listed
securities were issued in reliance on an exemption to the registration
requirements of the Securities Exchange Act of 1933.

                                       34
<PAGE>   35

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

     The following selected consolidated financial data as of December 31, 1998
and 1999 and for each of the three years in the period ended December 31, 1999
and the period from inception (February 16, 1995) to December 31, 1999 are
derived from the consolidated financial statements of Coulter Pharmaceutical,
Inc. 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, 1996 and 1997 and for the period from inception (February 16,
1995) to December 31, 1995 and for the year ended December 31, 1996 are derived
from the consolidated financial statements of Coulter Pharmaceutical, Inc. that
have been audited by Ernst & Young LLP, and which are not included herein.

<TABLE>
<CAPTION>
                                     INCEPTION                                                        INCEPTION
                                (FEBRUARY 16, 1995)             YEAR ENDED DEC. 31,              (FEBRUARY 16, 1995)
                                  TO DECEMBER 31,     ----------------------------------------     TO DECEMBER 31,
                                       1995             1996       1997      1998       1999            1999
                                -------------------   --------   --------   -------   --------   -------------------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                             <C>                   <C>        <C>        <C>       <C>        <C>
Statements of Operations Data:
Corporate partner revenues....      $        --       $     --   $     --   $34,250   $     --        $ 34,250
Revenues from unconsolidated
  joint business..............               --             --         --     1,750      5,449           7,199
                                    -----------       --------   --------   -------   --------        --------
         Total revenues.......               --             --         --    36,000      5,449          41,449
Operating expenses:
  Research and development....            2,539         13,681     21,045    30,848     44,804         112,917
  Selling, general and
    administrative............              581          2,409      7,610    11,358     15,947          37,905
                                    -----------       --------   --------   -------   --------        --------
         Total operating
           expenses...........            3,120         16,090     28,655    42,206     60,751         150,822
Interest income and other,
  net.........................              127            752      2,327     4,248      4,696          12,150
                                    -----------       --------   --------   -------   --------        --------
Net loss......................      $    (2,993)      $(15,338)  $(26,328)  $(1,958)  $(50,606)       $(97,223)
                                    ===========       ========   ========   =======   ========        ========
Basic and diluted net loss per
  share(1)....................      $(12,736.17)      $(649.39)  $  (2.58)  $ (0.13)  $  (3.03)
                                    -----------       --------   --------   -------   --------
Shares used in computing basic
  and diluted net loss per
  share(1)....................            0.235             24     10,197    14,562     16,695
                                    -----------       --------   --------   -------   --------
</TABLE>

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                 -------------------------------------------------------
                                                  1995        1996        1997        1998        1999
                                                 -------    --------    --------    --------    --------
<S>                                              <C>        <C>         <C>         <C>         <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
  investments..................................  $ 3,438    $ 16,443    $ 75,445    $139,778    $ 82,425
Working capital................................    2,878      10,737      65,202     131,263      73,734
         Total assets..........................    3,628      18,321      78,671     153,430     110,205
Non-current portion of equipment financing
  obligations and debt facility................       --       1,535       2,298       6,659       9,428
Deficit accumulated during the development
  stage........................................   (2,993)    (18,331)    (44,659)    (46,617)    (97,223)
         Total stockholders' equity............    2,997      10,546      65,861     135,193      86,807
</TABLE>

---------------
(1) See Note 1 to the December 31, 1999 financial statements for information
    regarding the calculation of net loss per share amounts.

                                       35
<PAGE>   36

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

     Coulter Pharmaceutical is engaged in the development of novel drugs and
therapies for the treatment of people with cancer and autoimmune diseases. The
Company currently is developing a family of potential therapeutics based upon
two drug discovery programs: therapeutic antibodies and targeted oncologics.
Within these broad drug discovery programs, the Company is currently
concentrating on several distinct platform technologies: therapeutic antibodies
consisting of both conjugated and unconjugated antibody technology, and targeted
oncologics based on tumor activated pro-drug ("TAP") technology and tumor
specific targeting ("TST") technology. The Company also is developing a
portfolio of proprietary ultra potent compounds which it believes will be
suitable payloads for both its TAP and TST platforms. Ultra potent compounds
generally are at least 1,000 times more potent than standard chemotherapeutic
agents and are active against resistant tumor cells.

     The Company's most advanced product candidate, Bexxar, consists of a
monoclonal antibody conjugated with a radioisotope. The Company intends to seek
initial approval 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 priority Biologics
License Application ("BLA") review and marketing approval for Bexxar, while
simultaneously pursuing clinical trials to expand the potential use of Bexxar 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. In 1997, Beckman
Instruments, Inc. acquired Coulter Corporation, and is now known as Beckman
Coulter. In December 1998, the Company announced a joint collaboration agreement
with SmithKline Beecham Corporation ("SB") granting SB joint marketing rights in
the United States and exclusive commercial rights internationally, except Japan.

     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 product
revenues resulting from the Company's research and development efforts will not
occur until commercial availability of such product. The Company has a limited
history of operations and has experienced significant operating losses to date.
The Company may continue 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 if product sales revenues do not offset these costs. 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 December 31, 1999, the
Company's accumulated deficit was approximately $97.2 million.

RESULTS OF OPERATIONS

     COMPARISON OF YEARS ENDED DECEMBER 31, 1999, DECEMBER 31, 1998 AND DECEMBER
31, 1997

     Revenues. Corporate Partner revenues for the year ended December 31, 1998
of $34.3 million was attributable to the license fee payment received from SB
under the joint development and commercialization agreement for Bexxar. This was
a one time, non-refundable license fee. Revenues from unconsolidated joint
business was $5.4 million for the year ended December 31, 1999 compared to $1.8
million for the year ended December 31, 1998 and none for the year ended
December 31, 1997. Revenues from unconsolidated joint business represents
reimbursement from SB of their share of the Company's Bexxar-related
manufacturing development expenses. In 1999, such revenues were partially offset
by the Company's share of the pre-tax Bexxar operating losses generated from its
joint business arrangement with SB to co-promote Bexxar. Revenue in future
periods will depend on the achievement of contract milestones, the timing and
scope of reimbursable development activities and commercial sales of Bexxar.

                                       36
<PAGE>   37

     Operating Expenses. Research and development expenses were $44.8 million
for the year ended December 31, 1999, compared to $30.8 million for the year
ended December 31, 1998 and $21.0 million for the year ended December 31, 1997.
The $14.0 million increase from 1998 to 1999 was due to increases in staffing
and expenditures associated with the development of Bexxar, including costs of
clinical trials and manufacturing expenses, as well as increases in staffing and
expenditures associated with the Company's research programs. The manufacturing
expenses included certain expenses associated with scaled-up production of
monoclonal antibodies and the establishment of a commercial scale centralized
radiolabeling capability. The $9.8 million increase from 1997 to 1998 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 continue
to increase in 2000, reflecting anticipated increased costs related to additions
to staffing, preclinical studies, clinical trials and manufacturing.

     Selling, general and administrative expenses were $15.9 million for the
year ended December 31, 1999, compared to $11.4 million for the year ended
December 31, 1998 and $7.6 million for the year ended December 31, 1997. The
$4.5 million increase from 1998 to 1999 was incurred to support the Company's
facilities and staffing expansion as well as increased Bexxar
pre-commercialization activities, including the recruitment of a direct sales
force, increased corporate development activities and related legal and patent
activities. The $3.8 million increase from 1997 to 1998 was incurred to support
increased Bexxar pre-commercialization activities, as well as 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 2000 to support its
increasing commercialization efforts in anticipation of potential product sales,
as well as to support its increased research and development, patent and
corporate development activities.

     Interest Income and other, net. Net interest income was $4.7 million for
the year ended December 31, 1999, compared to $4.2 million for the year ended
December 31, 1998 and $2.3 million for year ended December 31, 1997. The $0.5
million increase from 1998 to 1999 was due to the effect of higher average cash,
cash equivalent and short-term investment balances partially offset by increased
interest expense related to borrowings under a $10.0 million credit line. The
$1.9 million increase from 1997 to 1998 was due to the effect of higher average
cash, cash equivalent and short-term investment balances as a result of the
Company's follow-on offering of common stock in July 1998 and the proceeds from
SB related to the joint development and commercialization agreement for Bexxar.

LIQUIDITY AND CAPITAL RESOURCES

     Since its inception through December 31, 1999, the Company has financed its
operations primarily through private placements and public offerings of equity
securities totaling $179.8 million. In October 1998, the Company entered into a
$10.0 million revolving credit line agreement with a bank, none of which was
available at December 31, 1999. In addition, the SB agreement also provides for
a $15.0 million credit line, all of which was available at December 31, 1999.
Cash, cash equivalents and short-term investments totaled $82.4 million at
December 31, 1999.

     The negative cash flow from operations in the years ended December 31,
1997, 1998 and 1999 resulted 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 and manufacturing, as well as increasing expenses
associated with 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. There can be no assurance that additional
financing will be available on acceptable terms, if at all. If adequate funds
are not available, the Company may be required to delay, reduce the scope of, or
eliminate one or more of its research and development programs or obtain funds
through arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies, product candidates
or products that the Company would otherwise seek to develop or commercialize.
                                       37
<PAGE>   38

     Net cash used in operations was $48.9 million for the year ended December
31, 1999, compared to $3.2 million used in the year ended December 31, 1998.
This increase is primarily the result of the increased net loss for the year
ended December 31, 1999. In the year ended December 31, 1998, the Company
recorded total revenues under the SB collaboration of $36.0 million compared to
$5.4 million recognized in the year ended December 31, 1999. This reduction in
revenues combined with approximately $18.6 million of increased operating
expenses, resulted in the increased net loss in 1999. Net cash used in investing
activities increased to $24.6 million for the year ended December 31, 1999 from
$2.9 million used in the year ended December 31, 1998, primarily resulting from
higher purchases of short-term investments. The Company's capital expenditures
increased to $14.1 million for the year ended December 31, 1999 from $7.9
million for the year ended December 31, 1998, primarily representing investment
in the Company's new corporate facilities and related purchase of equipment and
furniture. Net cash provided by financing activities decreased to $5.9 million
for the year ended December 31, 1999 from $75.4 million for the year ended
December 31, 1998, resulting primarily from lower proceeds from issuance of the
Company's common stock. The 1998 period included a public offering of the
Company's common stock which raised approximately $62.1 million.

     Net cash used in operations was $3.2 million for the year ended December
31, 1998, compared to $21.1 million for the year ended December 31, 1997. This
decrease is primarily the result of the decreased net loss for the period ended
December 31, 1998, principally due to the $36.0 million in revenues earned under
the SB collaboration. Net cash used in investing activities decreased to $2.9
million for the year ended December 31, 1998 from $49.0 million for the year
ended December 31, 1997, primarily resulting from maturities and sales of
short-term investments. The Company's capital expenditures increased to $7.9
million for the year ended December 31, 1998 from $1.6 million for the year
ended December 31, 1997, primarily representing investment in the Company's new
corporate facilities, equipment for the central radiolabeling facility and
equipment and furniture related to increased staffing. Net cash provided by
financing activities decreased to $75.4 million for the year ended December 31,
1998 from $81.7 million for the year ended December 31, 1997, resulting
primarily from lower proceeds from public offerings of the Company's common
stock (approximately $62.1 million and $77.1 million raised in 1998 and 1997,
respectively), partially offset by proceeds from the sale of $7.5 million of
common stock to SB in conjunction with the Bexxar joint development and
commercialization agreement.

     The Company expects that its existing capital resources, including the net
proceeds of its public offerings and interest thereon, will be adequate to
satisfy the requirements of its current and planned operations through the
second quarter of 2001. At December 31, 1999, the Company had entered into
manufacturing supply agreements that require material commitments for clinical
and commercial supply. The Company's future capital requirements will depend on
a number of factors, including: the scope and results of preclinical studies and
clinical trials; continued progress of the Company's research and development of
potential products; the cost, timing and outcome of regulatory approvals; the
expenses of establishing a sales and marketing force; the timing and cost of
establishment or procurement of requisite production, radiolabeling and other
capacities; the cost involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims; the need to acquire licenses to new
technology; the status of competitive products; the availability of other
financing and the ability to achieve profitability.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments,
including forward foreign exchange contracts, and hedging activities. In June
1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and
Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133.
SFAS No. 133 is now effective for fiscal years beginning after June 15, 2000
and, therefore, the Company will adopt this accounting standard effective
January 1, 2001. Management has not yet determined the impact of SFAS No. 133 on
its financial position or results of operations.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." Among other things, SAB No. 101 requires that
                                       38
<PAGE>   39

license and other upfront fees from research collaborators be recognized over
the term of the agreement unless the fee is in exchange for products delivered
or services performed that represent the culmination of a separate earnings
process. The Company is currently reviewing the impact of SAB No. 101 on its
previously reported results of operations.

IMPACT OF YEAR 2000

     In prior years, the Company implemented a Year 2000 project to address the
issue of computer software and hardware correctly processing dates through and
beyond Year 2000. The goal of this project was to ensure that all computer
software and hardware that the Company uses or relies upon is retired, replaced
or made Year 2000 compliant before December 31, 1999. To date, the Company, has
not experienced any Year 2000-related operational issues and is not aware of any
material potential problems that may arise as a result of Year 2000 issues
either from its own internal systems or from the products and services of third
parties upon which it relies.

     The total cost of the Company's Year 2000 compliance efforts was not
material to its financial condition or results of operations. External costs of
such compliance efforts were approximately $200,000, all of which was expensed.
Any remaining expenses relating to remediation efforts will be charged to
expense as incurred. The Company will continue to monitor its business-critical
computer applications and those of its suppliers and vendors throughout the Year
2000 to ensure that any latent Year 2000 problems that may arise are promptly
addressed.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     In the normal course of business, the financial position of the Company is
routinely subjected to a variety of risks, including market risk associated with
interest rate movements and currency rate movements on non-United States dollar
denominated assets and liabilities. The Company regularly assesses these risks
and has established policies and business practices to protect against the
adverse effects of these and other potential exposures. As a result, the Company
does not anticipate material losses in these areas.

     Interest Rates -- The Company's interest income is sensitive to changes in
the general level of interest rates, primarily United States interest rates. In
this regard, changes in United States interest rates affect the interest earned
on the Company's cash equivalents and short-term investments. Based on the
Company's overall interest rate exposure at December 31, 1999, a near-term
change in interest rates, based on historical currency rate movements, would not
materially affect the fair value of interest rate sensitive instruments.

     Foreign Currency Exchange Rates -- The Company has certain liabilities
which are denominated in several European currencies. As a result, the Company's
financial results could be significantly affected by factors such as changes in
foreign currency exchange rates or economic conditions in the foreign markets in
which the Company's suppliers are located. To mitigate this risk, the Company
may enter into foreign currency forward contracts as is deemed necessary by
management. Based on the Company's overall currency rate exposure at December
31, 1999, a near-term change in currency rates, based on historical currency
rate movements, would not materially affect the fair value of foreign currency
sensitive liabilities.

                                       39
<PAGE>   40

     The Company invests cash which is not currently being used for operational
purposes in accordance with its investment policy. This policy allows for the
purchase of low risk securities issued by the government agencies and very
highly rated banks and corporations subject to certain concentration limits. The
maturities of these securities are maintained at less than two years. The
following table presents the amounts and related weighted average interest rates
by year of maturity for the Company's investment portfolio and long term debt
obligations at December 31, 1999:

<TABLE>
<CAPTION>
                                               1999      2000     2001    2002    2003    THEREAFTER    TOTAL     1998
                                              -------   ------   ------   -----   -----   ----------   -------   -------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                           <C>       <C>      <C>      <C>     <C>     <C>          <C>       <C>
Cash Equivalent Investments:
  Fixed Rate................................  $22,135       --       --      --      --      --        $22,135   $84,162
  Weighted Average Interest Rate............      5.8%      --       --      --      --      --             --        --
Short Term Investments:
  Fixed Rate................................       --   43,575   16,682      --      --      --         60,257    49,970
  Weighted Average Interest Rate............       --      5.2%     5.8%     --      --      --             --        --
Long-term debt, including current portion:
  Fixed Rate................................       --    2,258    1,767   1,380   6,281      --         11,686     5,000
  Weighted Average Interest Rate............       --     10.6%    10.3%    9.5%    9.4%     --             --        --
</TABLE>

                                       40
<PAGE>   41

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

               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, 1999 and 1998, and the related consolidated statements of
operations and cash flows for each of the three years in the period ended
December 31, 1999 and for the period from inception (February 16, 1995) to
December 31, 1999 and the related statement of stockholders' equity for the
period from inception (February 16, 1995) to December 31, 1999. 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 auditing standards generally
accepted in the United States. 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, 1999 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999 and for the period from inception (February 16, 1995) to
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.

                                          /s/ ERNST & YOUNG LLP

Palo Alto, California
January 27, 2000

                                       41
<PAGE>   42

                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

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

                                     ASSETS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1999        1998
                                                              --------    --------
<S>                                                           <C>         <C>
Current assets:
  Cash and cash equivalents.................................  $ 22,168    $ 89,808
  Short-term investments....................................    60,257      49,970
  Prepaid expenses and other current assets.................     5,279       3,063
                                                              --------    --------
          Total current assets..............................    87,704     142,841
Property and equipment, net.................................    21,029       9,449
Employee loans receivable...................................     1,274         907
Other assets................................................       198         233
                                                              --------    --------
                                                              $110,205    $153,430
                                                              ========    ========

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  6,504    $  4,068
  Accrued liabilities.......................................     5,208       6,353
  Current portion of equipment financing obligations and
     debt facility..........................................     2,258       1,157
                                                              --------    --------
          Total current liabilities.........................    13,970      11,578
Non current portion of equipment financing obligations and
  debt facility.............................................     9,428       6,659
Commitments Stockholders' equity:
  Preferred stock, issuable in series, $.001 par value:
     3,000,000 shares authorized; none outstanding at
      December 31, 1999 and 1998............................        --          --
  Common stock, $.001 par value:
     30,000,000 shares authorized; 16,896,438 and 16,704,103
      shares issued and outstanding at December 31, 1999 and
      1998, respectively....................................        17          17
Additional paid-in capital..................................   184,524     182,390
Accumulated other comprehensive loss........................      (215)        (32)
Deferred compensation.......................................      (296)       (565)
Deficit accumulated during the development stage............   (97,223)    (46,617)
                                                              --------    --------
          Total stockholders' equity........................    86,807     135,193
                                                              --------    --------
                                                              $110,205    $153,430
                                                              ========    ========
</TABLE>

                            See accompanying notes.
                                       42
<PAGE>   43

                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

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

<TABLE>
<CAPTION>
                                                                              FOR THE PERIOD FROM
                                               YEAR ENDED DECEMBER 31,             INCEPTION
                                           -------------------------------    (FEBRUARY 16, 1995)
                                             1997       1998        1999      TO DECEMBER 31, 1999
                                           --------    -------    --------    --------------------
<S>                                        <C>         <C>        <C>         <C>
Corporate partner revenues...............  $     --    $34,250    $     --          $ 34,250
Revenues from unconsolidated joint
  business...............................        --      1,750       5,449             7,199
                                           --------    -------    --------          --------
          Total revenues                   $     --    $36,000    $  5,449          $ 41,449
Operating expenses:
  Research and development...............  $ 21,045    $30,848    $ 44,804           112,917
  Selling, general and administrative....     7,610     11,358      15,947            37,905
                                           --------    -------    --------          --------
Total operating expenses.................    28,655     42,206      60,751           150,822
Interest income and other, net...........     2,327      4,248       4,696            12,150
                                           --------    -------    --------          --------
Net loss.................................  $(26,328)   $(1,958)   $(50,606)         $(97,223)
                                           ========    =======    ========          ========
Basic and diluted net loss per share.....  $  (2.58)   $ (0.13)   $  (3.03)
                                           ========    =======    ========
Shares used in computing basic and
  diluted net loss per share.............    10,197     14,562      16,695
                                           ========    =======    ========
</TABLE>

                            See accompanying notes.
                                       43
<PAGE>   44

                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

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

                                   CONVERTIBLE                                             ACCUMULATED
                                 PREFERRED STOCK          COMMON STOCK       ADDITIONAL       OTHER
                              ----------------------   -------------------    PAID-IN     COMPREHENSIVE     DEFERRED
                                SHARES       AMOUNT      SHARES     AMOUNT    CAPITAL         LOSS        COMPENSATION
                              -----------   --------   ----------   ------   ----------   -------------   ------------
<S>                           <C>           <C>        <C>          <C>      <C>          <C>             <C>
Issuance of Series A
 convertible preferred stock
 to founders at $1.00 per
 share for cash and
 technology in February
 1995.......................    7,500,000   $  2,500           --    $--      $     --        $  --         $    --
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....................           --         --           --     --            --           --              --
                              -----------   --------   ----------    ---      --------        -----         -------
Balance 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           --              --
Deferred compensation
 related to grants of
 certain stock options......           --         --           --     --         2,294           --          (2,294)
Amortization of deferred
 compensation...............           --         --           --     --            --           --             330
Net loss....................           --         --           --     --            --           --              --
Unrealized loss on
 securities
 available-for-sale, net....           --         --           --     --            --           (3)             --
 Comprehensive loss.........           --         --           --     --            --           --              --
                              -----------   --------   ----------    ---      --------        -----         -------
Balance 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           --              --

<CAPTION>
                                DEFICIT
                              ACCUMULATED
                              DURING THE        TOTAL
                              DEVELOPMENT   STOCKHOLDERS'
                                 STAGE         EQUITY
                              -----------   -------------
<S>                           <C>           <C>
Issuance of Series A
 convertible preferred stock
 to founders at $1.00 per
 share for cash 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)
                               --------       --------
Balance 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
Deferred compensation
 related to grants of
 certain stock options......         --             --
Amortization of deferred
 compensation...............         --            330
Net loss....................    (15,338)       (15,338)
Unrealized loss on
 securities
 available-for-sale, net....         --             (3)
                                              --------
 Comprehensive loss.........         --        (15,341)
                               --------       --------
Balance 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
</TABLE>

                                       44
<PAGE>   45
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

                                   CONVERTIBLE                                             ACCUMULATED
                                 PREFERRED STOCK          COMMON STOCK       ADDITIONAL       OTHER
                              ----------------------   -------------------    PAID-IN     COMPREHENSIVE     DEFERRED
                                SHARES       AMOUNT      SHARES     AMOUNT    CAPITAL         LOSS        COMPENSATION
                              -----------   --------   ----------   ------   ----------   -------------   ------------
<S>                           <C>           <C>        <C>          <C>      <C>          <C>             <C>
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        $  --         $    --
Net loss....................           --         --           --     --            --           --              --
Unrealized loss on
 securities
 available-for-sale, net....           --         --           --     --            --           (4)             --
 Comprehensive loss.........           --         --           --     --            --           --              --
                              -----------   --------   ----------    ---      --------        -----         -------
Balance at December 31,
 1997.......................           --   $     --   13,570,224    $14      $111,598        $  (7)        $(1,085)
Issuance of 239,607 shares
 of common stock pursuant to
 contract with corporate
 partner....................           --         --      239,607     --         7,250           --              --
Issuance of common stock
 pursuant to stock options
 exercises..................           --         --      164,785     --           538           --              --
Issuance of common stock
 pursuant to warrant
 exercise...................           --         --       16,787     --            --           --              --
Deferred compensation
 related to grant of certain
 stock options..............           --         --           --     --           156           --            (156)
Amortization of deferred
 compensation...............           --         --           --     --            --           --             676
Issuance of common stock
 pursuant to the employee
 stock purchase plan........           --         --       67,700     --           712           --              --
Issuance of 2,645,000 shares
 of common stock at $25.00
 per share less issuance
 costs of $3,986............           --         --    2,645,000      3        62,136           --              --
Net loss....................           --         --           --     --            --           --              --
Unrealized loss on
 securities
 available-for-sale, net....           --         --           --     --            --          (25)             --
 Comprehensive loss.........           --         --           --     --            --           --              --
                              -----------   --------   ----------    ---      --------        -----         -------
Balance at December 31,
 1998.......................           --   $     --   16,704,103    $17      $182,390        $ (32)        $  (565)
Issuance of common stock
 pursuant stock option
 exercises..................           --         --      124,561     --         1,103           --              --
Deferred compensation
 related to grants to
 certain stock options......           --         --           --     --           107           --            (107)
Amortization of deferred
 compensation...............           --         --           --     --            --           --             376
Issuance of common stock
 pursuant to stock purchase
 plan.......................           --         --       67,774     --           924           --              --
Net loss....................           --         --           --     --            --           --              --
Unrealized loss on
 securities
 available-for-sale, net....           --         --           --     --            --         (183)             --
 Comprehensive loss.........           --         --           --     --            --           --              --
Balance at December 31,
 1999.......................           --   $     --   16,896,438    $17      $184,524        $(215)        $  (296)
                              ===========   ========   ==========    ===      ========        =====         =======

<CAPTION>
                                DEFICIT
                              ACCUMULATED
                              DURING THE        TOTAL
                              DEVELOPMENT   STOCKHOLDERS'
                                 STAGE         EQUITY
                              -----------   -------------
<S>                           <C>           <C>
Issuance of 3,162,500 shares
 of common stock at $15.50
 per share less issuance
 costs of $3,190............   $     --       $ 45,832
Net loss....................    (26,328)       (26,328)
Unrealized loss on
 securities
 available-for-sale, net....         --             (4)
                                              --------
 Comprehensive loss.........         --        (26,332)
                               --------       --------
Balance at December 31,
 1997.......................   $(44,659)      $ 65,861
Issuance of 239,607 shares
 of common stock pursuant to
 contract with corporate
 partner....................         --          7,250
Issuance of common stock
 pursuant to stock options
 exercises..................         --            538
Issuance of common stock
 pursuant to warrant
 exercise...................         --             --
Deferred compensation
 related to grant of certain
 stock options..............         --             --
Amortization of deferred
 compensation...............         --            676
Issuance of common stock
 pursuant to the employee
 stock purchase plan........         --            712
Issuance of 2,645,000 shares
 of common stock at $25.00
 per share less issuance
 costs of $3,986............         --         62,139
Net loss....................     (1,958)        (1,958)
Unrealized loss on
 securities
 available-for-sale, net....         --            (25)
                                              --------
 Comprehensive loss.........         --         (1,983)
                               --------       --------
Balance at December 31,
 1998.......................   $(46,617)      $135,193
Issuance of common stock
 pursuant stock option
 exercises..................         --          1,103
Deferred compensation
 related to grants to
 certain stock options......         --             --
Amortization of deferred
 compensation...............         --            376
Issuance of common stock
 pursuant to stock purchase
 plan.......................         --            924
Net loss....................    (50,606)       (50,606)
Unrealized loss on
 securities
 available-for-sale, net....         --           (183)
                                              --------
 Comprehensive loss.........         --        (50,789)
                                              --------
Balance at December 31,
 1999.......................   $(97,223)      $ 86,807
                               ========       ========
</TABLE>

                            See accompanying notes.
                                       45
<PAGE>   46

                          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
                                                                                        FROM
                                                                                     INCEPTION
                                                                                   (FEBRUARY 16,
                                                   YEAR ENDED DECEMBER 31,            1995) TO
                                              ---------------------------------     DECEMBER 31,
                                                1997        1998        1999            1999
                                              --------    --------    ---------    --------------
<S>                                           <C>         <C>         <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................  $(26,328)   $ (1,958)   $ (50,606)     $ (97,223)
Adjustments to reconcile net loss to net
  cash used in operating activities:
  Depreciation and amortization.............       250         712        2,500          3,523
  Amortization of deferred compensation.....     1,085         676          376          2,467
  Loss on sale of equipment.................        --          --           40             40
Changes in operating assets and liabilities:
  Prepaid expenses and other current
     assets.................................       230      (2,794)      (2,216)        (5,279)
  Employee loans receivable.................       (17)       (171)        (367)        (1,274)
  Other assets..............................      (222)       (275)          35           (198)
  Accounts payable..........................       237       2,230        2,436          6,504
  Accrued liabilities.......................     3,629      (1,604)      (1,145)         5,208
                                              --------    --------    ---------      ---------
          Net cash used in operating
            activities......................   (21,136)     (3,184)     (48,947)       (86,232)
                                              --------    --------    ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments.........   (61,525)    (82,336)    (116,619)      (271,359)
Maturities of short-term investments........    14,144      82,261       96,775        194,166
Sale of short-term investments..............        --       5,073        9,374         16,717
Purchases of property and equipment.........    (1,589)     (7,899)     (14,125)       (24,594)
Proceeds from sale of equipment.............        --          --            5              5
                                              --------    --------    ---------      ---------
          Net cash used in investing
            activities......................   (48,970)     (2,901)     (24,590)       (85,065)
                                              --------    --------    ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of equipment financing obligations
  and debt facility.........................      (531)       (817)      (1,130)        (2,433)
Borrowings under equipment financing
  obligations and debt facility.............     1,700       5,620        5,000         14,120
Proceeds from issuances of convertible
  preferred stock, net......................        --          --           --         28,355
Proceeds from issuance of common stock,
  net.......................................    80,562      70,639        2,027        153,423
                                              --------    --------    ---------      ---------
          Net cash provided by financing
            activities......................    81,731      75,442        5,897        193,465
                                              --------    --------    ---------      ---------
          Net increase (decrease) in cash
            and cash equivalents............    11,625      69,357      (67,640)        22,168
Cash and cash equivalents at beginning of
  period....................................     8,826      20,451       89,808             --
                                              --------    --------    ---------      ---------
Cash and cash equivalents at end of
  period....................................  $ 20,451    $ 89,808    $  22,168      $  22,168
                                              ========    ========    =========      =========
SUPPLEMENTAL SCHEDULE OF CASH FLOW
  INFORMATION:
Interest paid...............................  $    283    $    385    $     821      $   1,489
SCHEDULE OF NON-CASH INVESTING AND FINANCING
  ACTIVITIES:
Net exercises of warrant to purchase common
  stock.....................................  $    453    $    512    $      --      $     965
Acquisition of equipment pursuant to
  supplemental lease obligation.............  $     --    $     --    $      --      $      78
Deferred compensation related to grant of
  certain stock options.....................  $    206    $    156    $     107      $   2,762
</TABLE>

                            See accompanying notes.
                                       46
<PAGE>   47

                          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 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 the 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

     Basic and diluted net loss per common shares are presented in conformity
with Statement of Financial Accounting Standard No. 128, "Earnings Per Share,"
("SFAS 128"). SFAS 128 requires the presentation of basic earnings (loss) per
share and diluted earnings (loss) per share, if dilutive, for all periods
presented. Basic earnings per share is computed by dividing income or loss
applicable to common stockholders by the weighted-average number of common
shares outstanding for the period net of certain common shares outstanding which
are subject to continued vesting and the Company's right to repurchase. Basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted net loss per share has not been presented
separately as, given the Company's net loss position, the result would be
antidilutive.

     The following have been excluded from the calculation of loss per share
because the effect of inclusion would be antidilutive: approximately 58,300
common shares which are outstanding but are subject to the Company's right of
repurchase which expires July 1, 2000 and options to purchase approximately
3,608,700 shares of common stock at a weighted average price of $17.87 per
share. The repurchasable shares and options

                                       47
<PAGE>   48
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

will be included in the calculation at such time as the effect is no longer
antidilutive, as calculated using the treasury stock method.

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

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                    -------------------------------------------
                                                        1997           1998            1999
                                                    ------------    -----------    ------------
<S>                                                 <C>             <C>            <C>
Net loss..........................................  $(26,328,000)   $(1,958,000)   $(50,606,000)
                                                    ============    ===========    ============
Basic and diluted weighted-average shares of
  common stock outstanding used in computing basic
  and diluted net loss per share..................    10,197,225     14,561,950      16,694,699
                                                    ============    ===========    ============
Basic and diluted net loss per share..............  $      (2.58)   $     (0.13)   $      (3.03)
                                                    ============    ===========    ============
</TABLE>

  Current Vulnerability to Certain Concentrations

     The Company has contracted with two third-party manufacturers, Boehringer
Ingelheim Pharma KG ("BI Pharma KG") and LONZA Biologics plc ("Lonza"), to
produce a monoclonal antibody (the "Anti-B1 Antibody"). The Company has also
contracted with a third-party manufacturer, MDS Nordion, Inc. ("Nordion") for
the radiolabeling of the Anti-B1 Antibody in a centralized facility. However,
should the Company not be able to obtain sufficient quantities of the Anti-B1
Antibody from BI Pharma KG or Lonza or radiolabeled Anti-B1 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.

     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. Realized gains and losses and declines in value judged to be other
than temporary on available-for-sale securities are included in interest income.
The cost of securities sold is based on the specific identification method. The
Company classifies all investments in its available-for-sale portfolio as
current assets.

  Revenues

     Corporate partner revenues for which no further performance obligations
exist are recognized when the payments are received or when collection is
assured. All corporate partner revenues to date have been earned under the
Company's collaboration agreement with SmithKline Beecham Corporation ("SB")
(see Note 5).

     Revenues from unconsolidated joint business consists of the Company's share
of the pretax operating results generated from its joint business arrangement
with SB and reimbursement from SB of their share of the Company's Bexxar-related
manufacturing development expenses. Under the joint business arrangement, all
sales of Bexxar and associated expenses will be recorded in the books and
accounts of SB with the Company recording its share of the pretax operating
results on a quarterly basis, as defined in the Company's collaborative
agreement with SB (see Note 5).

                                       48
<PAGE>   49
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

  Foreign Currency Translation

     The functional currency of Coulter Pharma Belgium, SA is the United States
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.

  Sponsored Research and License Fees

     Research and development expenses paid to third parties under sponsored
research arrangements are recognized as the related services are performed,
generally ratably over the period of service. License fees are expensed when the
related obligation is incurred.

  Stock-Based Compensation

     The Company generally grants stock options to employees for a fixed number
of shares with an exercise price equal to the fair value at the date of grant.
In accordance with the provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has
elected to follow Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"), and related interpretations in accounting
to employees under its stock option plans and to adopt the pro forma disclosure
alternative as described in SFAS 123 (see Note 10). Options granted to all
others are accounted for using the fair value method prescribed by SFAS 123.

  New Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments,
including forward foreign exchange contracts, and hedging activities. In June
1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and
Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133.
SFAS No. 133 is now effective for fiscal years beginning after June 15, 2000
and, therefore, the Company will adopt this accounting standard effective
January 1, 2001. Management has not yet determined the impact of SFAS No. 133 on
its financial position or results of operations.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." Among other things, SAB No. 101 requires that license and other
upfront fees from research collaborators be recognized over the term of the
agreement unless the fee is in exchange for products delivered or services
performed that represent the culmination of a separate earnings process. The
Company is currently reviewing the impact of SAB No. 101 on its previously
reported results of operations.

  Reclassifications

     Certain reclassifications have been made to prior year data to conform with
the current year presentation.

                                       49
<PAGE>   50
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 2. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

     The following is a summary of available-for-sale securities (in thousands):

<TABLE>
<CAPTION>
                                                                 GROSS         GROSS
                                                  AMORTIZED    UNREALIZED    UNREALIZED    ESTIMATED
                                                    COST         GAINS         LOSSES      FAIR VALUE
                                                  ---------    ----------    ----------    ----------
<S>                                               <C>          <C>           <C>           <C>
DECEMBER 31, 1999
Money market funds..............................  $  4,205        $ --         $  --        $  4,205
Commercial paper................................    22,910          --            (4)         22,906
Government bonds................................    25,904          --          (203)         25,701
Corporate bonds.................................     9,767          --            (8)          9,759
Certificates of deposits........................    19,821          --            --          19,821
                                                  --------        ----         -----        --------
          Total.................................    82,607          --          (215)         82,392
Less amounts classified as cash equivalents.....   (22,135)         --            --         (22,135)
                                                  --------        ----         -----        --------
          Total short-term investments..........  $ 60,472        $ --         $(215)       $ 60,257
                                                  ========        ====         =====        ========
DECEMBER 31, 1998
Money market funds..............................  $  1,719        $ --         $  --        $  1,719
Commercial paper................................   100,897          --            (8)        100,889
Corporate bonds.................................    17,624           4           (29)         17,599
Certificates of deposits........................    13,924           1            --          13,925
                                                  --------        ----         -----        --------
          Total.................................   134,164           5           (37)        134,132
Less amounts classified as cash equivalents.....   (84,170)         --             8         (84,162)
                                                  --------        ----         -----        --------
          Total short-term investments..........  $ 49,994        $  5         $ (29)       $ 49,970
                                                  ========        ====         =====        ========
</TABLE>

Realized gain or losses on available-for-sale securities for the years ended
December 31, 1999, 1998 and 1997 were not significant.

     At December 31, 1999, the contractual maturities of short-term investments
were as follows (in thousands):

<TABLE>
<CAPTION>
                                                              AMORTIZED    ESTIMATED
                                                                COST       FAIR VALUE
                                                              ---------    ----------
<S>                                                           <C>          <C>
Due in one year or less.....................................   $32,821      $32,782
Due after one year through two years........................    27,651       27,475
                                                               -------      -------
                                                               $60,472      $60,257
                                                               =======      =======
</TABLE>

 3. PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at December 31 (in
thousands):

<TABLE>
<CAPTION>
                                                               1998       1999
                                                              -------    -------
<S>                                                           <C>        <C>
Machinery and equipment.....................................  $ 4,737    $19,687
Furniture and fixtures......................................      480      3,033
Construction in process.....................................    5,252      1,777
                                                              -------    -------
                                                               10,469     24,497
Less accumulated depreciation and amortization..............   (1,020)    (3,468)
                                                              -------    -------
Property and equipment, net.................................  $ 9,449    $21,029
                                                              =======    =======
</TABLE>

                                       50
<PAGE>   51
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 4. SPONSORED RESEARCH AND LICENSE AGREEMENTS

     The Company has entered into numerous agreements with research
institutions, universities, and other entities for the performance of research
and development activities and for the acquisition of licenses related to those
activities. Included in research and development expenses for the years ended
December 31, 1999, 1998 and 1997 and for the period from inception (February 16,
1995) to December 31, 1999 is $1.3 million, $0.8 million, $0.8 million and $2.9
million, respectively, to fund activities under these agreements. As of December
31, 1999, noncancelable commitments under these arrangements were approximately
$0.7 million. In order to maintain certain of these licenses, the Company must
pay specified annual license fees. Certain of the licenses provide for the
payment of royalties by the Company on future product sales, if any.

 5. COLLABORATIVE DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

     In December 1998, the Company and SB entered into a collaborative agreement
for the development and commercialization of Bexxar, which is in late-stage
development for the treatment of non-Hodgkin's lymphoma ("NHL"). Under the terms
of the agreement, the Company and SB will jointly market and sell Bexxar in the
United States following regulatory approval and the two companies will share
profits and losses equally. Outside the United States, excluding Japan, the
Company has granted SB exclusive marketing and distributing rights in return for
milestone payments and product royalties. The agreement also provides for the
sharing of certain costs related to clinical and manufacturing development
activities as well as a $15.0 million credit line, all of which is available at
December 31, 1999.

     Upon signing of the agreement, the Company received a $34.25 million,
non-refundable license fee, all of which was recognized as corporate partner
revenues in fiscal 1998, as well as $7.25 million from the sale of the Company's
common stock. The Company may receive additional payments upon the achievement
of certain clinical development and regulatory milestones. As of December 31,
1999, no milestone payments have been earned or received. Commencing with the
year ended December 31, 1999, the Company and SB prepared a joint profit and
loss statement to account for the sharing of sales, costs of goods sold and
costs relating to selling, marketing, distribution and certain other Bexxar
related activities. The Company's share of the pretax operating results is
included as a component of revenues from unconsolidated joint business.
Development expenses for Bexxar will generally be shared by both companies, with
the Company retaining responsibility for funding certain predetermined
development costs. All such development expenses and the reimbursement is
included as a component of revenues from unconsolidated joint business.

     The following is a summary of revenues from unconsolidated joint business
(in thousands):

<TABLE>
<CAPTION>
                                                                              FOR THE PERIOD FROM
                                                 YEAR ENDED DECEMBER 31,           INCEPTION
                                               ---------------------------    (FEBRUARY 16, 1995)
                                                1997      1998      1999      TO DECEMBER 31, 1999
                                               ------    ------    -------    --------------------
<S>                                            <C>       <C>       <C>        <C>
Co-promotion operating loss..................  $   --    $   --    $(2,944)         $(2,944)
Reimbursement of development expenses........      --     1,750      8,393           10,143
                                               ------    ------    -------          -------
Revenues from unconsolidated joint
  business...................................  $   --    $1,750    $ 5,449          $ 7,199
                                               ======    ======    =======          =======
</TABLE>

     Revenue from unconsolidated joint business earned in excess of payments
received are classified as other current assets. Reimbursements owed to SB are
classified as accounts payable. Amounts receivable from SB were approximately
$2.6 million and $4.5 million at December 31, 1998 and 1999, respectively.
Amounts payable to SB were $0 and approximately $1.5 million at December 31,
1998 and 1999, respectively.

                                       51
<PAGE>   52
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 6. ACCRUED LIABILITIES

     Accrued liabilities consists of the following at December 31 (in
thousands):

<TABLE>
<CAPTION>
                                                               1998      1999
                                                              ------    ------
<S>                                                           <C>       <C>
Accrued research and development expenses...................  $4,028    $1,375
Accrued clinical trial costs................................     543     1,759
Accrued employee compensation & benefits....................   1,296     1,357
Other.......................................................     486       717
                                                              ------    ------
          Total.............................................  $6,353    $5,208
                                                              ======    ======
</TABLE>

 7. LONG TERM DEBT

  Equipment Financing

     In December 1996, the Company entered into a $3,827,000 equipment lease
financing and debt facility with a financing company, none of which remain
available at December 31, 1999. The Company makes monthly payments plus interest
on amounts borrowed over the 48-month term of the facility followed by a balloon
payment. Interest rates under the facility range from 11.75% to 11.93%. Amounts
outstanding under the equipment facility are secured by the underlying assets.
Included in property and equipment at December 31, 1999 and 1998 are assets with
a cost of $1,486,000 acquired pursuant to a fixed interest rate equipment loan.
Accumulated amortization of assets acquired pursuant to these obligations was
approximately $752,950 and $456,000 at December 31, 1999 and 1998, respectively.

  Operating Lines of Credit

     In November 1998, the Company entered into a $10.0 million revolving loan
facility with a commercial bank, none of which remain available at December 31,
1999. The loan is secured by the assets of the Company. Interest is paid each
month on the outstanding balance at prime rate plus 0.5% (8.75% at December 31,
1998). In accordance with the agreement, principal payments are due in 48
monthly installments beginning November 1999, followed by a balloon payment of
approximately $2.1 million due in November 2003. The agreement also requires the
maintenance of a $5 million compensating balance with the bank until the entire
amount of the facility has been drawn down. In September 1999, the Company
borrowed the remaining $5 million and converted the entire $10 million facility
from variable interest rate to fixed interest rate of 9.36% over the 48-month
term, followed by a balloon payment of $5.3 million due in October 2003.

     At December 31, 1999, the Company's aggregate commitment under its
long-term debt agreements are as follows (in thousands):

<TABLE>
<CAPTION>
             YEARS ENDING DECEMBER 31:
             -------------------------
<S>                                                  <C>
2000...............................................  $ 2,258
2001...............................................    1,767
2002...............................................    1,380
2003...............................................    6,281
                                                     -------
                                                     $11,686
                                                     =======
</TABLE>

 8. COMMITMENTS

     The Company leases its facilities under operating leases which expire at
various dates beginning in 2001 through 2010. Rent expense under these leases
totaled approximately $2,468,000, $1,051,000, $451,000 and

                                       52
<PAGE>   53
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$4,224,000 for the years ended December 31, 1999, 1998 and 1997, and for the
period from inception (February 16, 1995) to December 31, 1999, respectively.

     At December 31, 1999, the aggregate noncancelable future minimum payments
under the operating leases are as follows (in thousands):

<TABLE>
<CAPTION>
                                                     OPERATING
             YEARS ENDING DECEMBER 31:                LEASES
             -------------------------               ---------
<S>                                                  <C>
2000...............................................   $ 2,609
2001...............................................     2,359
2002...............................................     2,127
2003...............................................     2,212
2004...............................................     2,301
Thereafter.........................................    15,228
                                                      -------
          Total....................................   $26,836
                                                      =======
</TABLE>

     On November 7, 1997, the Company entered into an agreement to build and
lease new facilities. The lease was amended on November 10, 1998 to include a
second building. The monthly rent payments range from $78,000 to $241,000
throughout the term of the lease. In connection with this lease agreement, the
Company obtained a $2 million letter of credit agreement from a bank which
secures the aggregate future payments under the lease.

     At December 31, 1999, the Company had approximately $15.6 million in
noncancelable purchase commitments with BI Pharma KG, its third party
manufacturer. In the event of cancellation by Coulter prior to fulfillment of
its obligation, the agreements contain certain economic penalty provisions which
would be applied and determined at the point in time when cancellation occurs.

 9. RELATED PARTY TRANSACTIONS

     The Company issued loans to employees totaling $485,000 prior to December
31, 1996. These loans were either repaid in full or converted to new loan
agreements in 1997. The Company entered into loan agreements with certain key
employees, totaling $438,000 for the period ended December 31, 1998 and $490,000
for the period ended December 31, 1999. The loans are non-interest bearing with
various terms ranging from four to ten years. The forgiven amount and the repaid
amount is calculated on a pro-rata basis over years one through ten of continued
employment. In the event an employee ceases to be employed by the Company, the
loan becomes interest-bearing and due within a reasonable period not to exceed
three months. Each loan is secured by a Second Deed of Trust on employee's
residence.

10. STOCKHOLDERS' EQUITY

  Preferred Stock

     Upon the completion of the Company's initial public offering of common
stock in January 1997, all of the Series A, B and C preferred stock outstanding
converted into 6,599,287 shares of common stock. Also upon the completion of the
initial public offering, the Company's Certificate of Incorporation was amended
to authorize 3,000,000 shares of preferred stock, none of which are issued or
outstanding. The Company's board of directors is authorized to determine the
designation, powers, preferences and rights of any such series. The Company has
reserved 200,000 shares of preferred stock for potential issuance under the
Share Purchase Rights Plan.

                                       53
<PAGE>   54
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

  Common Stock

     In July 1998, the Company completed a follow-on public offering of
2,400,000 shares of common stock at a price to the public of $25.00 per share,
resulting in net proceeds to the Company of approximately $56.3 million. Also,
in August 1998, the underwriters of that offering purchased 245,000 additional
shares of common stock upon a partial exercise of their over-allotment option,
raising additional net proceeds of $5.8 million. The total net proceeds from
this offering were $62.1 million.

  Equity Incentive Plans

     The 1995 Equity Incentive Plan (the "1995 Plan") was adopted in 1995 by the
Board of Directors and allowed for the granting of options for up to 866,666
shares of common stock to employees, consultants and directors.

     In December 1996, the Board of Directors adopted the 1996 Equity Incentive
Plan (the "1996 Plan") under which a total of 1,400,000 shares of the Company's
authorized but unissued common stock has been reserved for issuance thereunder.
In February 1998, the Board of Directors approved an amendment to increase the
number of shares of common stock authorized from 1,400,000 to 2,800,000 shares.
The amendment was approved by the Company's stockholders in May 1998. In
February 1999, the Board of Directors authorized an additional 2,000,000 shares
of common stock as available for grant of future option. This amendment was
approved by the Company's stockholders in May 1999.

     Stock options granted under the 1995 and 1996 Plans (collectively, the
"Plans") may be either incentive stock options or non-qualified stock options.
Incentive stock options may be granted to employees with exercise prices not
less than the fair market value at the date of grant and nonqualified stock
options may be granted at exercise prices of no less than 85% of the fair market
value of the common stock on the date of grant. The options vest over four years
pursuant to a formula determined by the Company's Board of Directors and expire
after ten years. The 1995 Plan terminated upon the closing of the Company's
initial public offering in January 1997.

                                       54
<PAGE>   55
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Activity under the Plans was as follows:

<TABLE>
<CAPTION>
                                                          OPTIONS OUTSTANDING
                                                      ----------------------------
                                         OPTIONS       NUMBER         EXERCISE          WEIGHTED-
                                        AVAILABLE        OF             PRICE            AVERAGE
                                        FOR GRANT      SHARES         PER SHARE       EXERCISE PRICE
                                        ----------    ---------    ---------------    --------------
<S>                                     <C>           <C>          <C>                <C>
Balance at December 31, 1996..........       6,751      822,305    $ 0.30 - $12.00        $ 1.64
Shares authorized.....................   1,400,000           --    $            --        $   --
Options granted.......................  (1,010,100)   1,010,100    $ 8.50 - $19.13        $10.83
Options exercised.....................          --      (77,358)   $ 0.30 - $ 2.25        $ 0.59
Options canceled......................     106,063     (106,063)   $ 0.30 - $10.75        $ 2.04
Options terminated....................    (100,314)          --    $            --        $   --
                                        ----------    ---------    ---------------        ------
Balance at December 31, 1997..........     402,400    1,648,984    $ 0.30 - $19.13        $ 7.29
Shares authorized.....................   1,400,000           --    $            --        $   --
Options granted.......................  (1,117,800)   1,117,800    $19.38 - $32.38        $24.77
Options exercised.....................          --     (164,785)   $ 0.30 - $24.13        $ 3.26
Options canceled......................      95,505      (95,505)   $ 0.30 - $24.50        $ 4.34
Options terminated....................     (63,042)          --    $            --        $   --
                                        ----------    ---------    ---------------        ------
Balance at December 31, 1998..........     717,063    2,506,494    $ 0.30 - $32.38        $15.46
                                        ----------    ---------    ---------------        ------
Shares authorized.....................   2,000,000           --    $            --        $   --
Options granted.......................  (1,454,600)   1,454,600    $14.50 - $31.00        $22.08
Options exercised.....................          --     (124,561)   $16.88 - $34.00        $23.57
Options canceled......................     227,893     (227,893)   $ 0.30 - $29.19        $23.18
Options terminated....................      (3,412)          --    $            --        $   --
                                        ----------    ---------    ---------------        ------
Balance at December 31, 1999..........   1,486,944    3,608,640    $ 0.30 - $32.38        $17.87
                                        ==========    =========    ===============        ======
</TABLE>

     Options were exercisable to purchase 222,201 shares (at a weighted-average
exercise price of $6.52 per share), 557,676 shares (at a weighted-average
exercise price of $13.30 per share) and 1,071,482 shares (at a weighted-average
exercise price of $16.16 per share) for the years ended at December 31, 1997,
1998 and 1999, respectively.

     Exercise prices for options outstanding under the Plans as of December 31,
1999 ranged from $0.30 to $32.38 per share. The weighted-average remaining
contractual life of those options is 8.5 years.

<TABLE>
<CAPTION>
                     OPTIONS OUTSTANDING          WEIGHTED-         EXERCISABLE OPTIONS
                  --------------------------       AVERAGE       --------------------------
                                WEIGHTED-         REMAINING                    WEIGHTED-
 EXERCISE PRICE                  AVERAGE         CONTRACTUAL                    AVERAGE
     RANGE         NUMBER     EXERCISE PRICE   LIFE (IN YEARS)    NUMBER     EXERCISE PRICE
----------------  ---------   --------------   ---------------   ---------   --------------
<S>               <C>         <C>              <C>               <C>         <C>
$  0.30 - $ 8.625   980,163      $ 5.8478            7.2           604,724      $ 5.4589
$ 8.875 - $21.063   601,719      $16.4770            8.8           144,194      $15.4871
$21.375 - $22.625   675,215      $22.5215            9.4            49,592      $22.5887
$22.750 - $24.125   710,060      $23.7998            8.7           163,057      $23.8092
$24.375 - $29.875   615,983      $25.8594            9.1           106,759      $26.5647
$31.000 - $32.375    25,500      $31.3652            9.3             3,156      $31.9542
                  ---------      --------            ---         ---------      --------
                  3,608,640      $17.8686            8.5         1,071,482      $12.5747
</TABLE>

     The Company has reserved 5,095,584 shares of its common stock for options
to purchase common shares which may be issued under the Plans.

                                       55
<PAGE>   56
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     In March 1996, 400,000 shares of common stock were purchased at $0.45 per
share by an officer of the Company. The Company has the right to repurchase
these shares under certain conditions. At December 31, 1999, 58,000 common
shares were available for repurchase.

     The Company recorded deferred compensation expense of $2.3 million for the
difference between the exercise price and the deemed fair value for financial
statement presentation purposes of the Company's common stock, as determined by
the board of directors, for common stock issued and stock options granted prior
to the Company's initial public offering in January 1997. Additionally, deferred
compensation of approximately $468,000 was recorded based on the deemed fair
values of common stock options granted subsequent to the Company's initial
public offering. The deferred compensation is being amortized over the
corresponding vesting period of each respective share purchase or option,
generally four years. Amortization of approximately $1.1 million, $676,000,
$376,000, and $2.5 million was recorded in fiscal years 1997, 1998, and 1999,
and for the period from inception (February 16, 1995) to December 31, 1999,
respectively.

     In calculating pro forma compensation, the fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing model.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, the Black-Scholes model requires the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock-based awards to employees have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of its stock-based awards to its employees. The fair value of each
option grant is estimated assuming no expected dividends and the following
weighted-average assumptions:

<TABLE>
<CAPTION>
                                                              1997    1998    1999
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
Risk-free interest rate -- options..........................  5.81%   5.32%   5.60%
Risk-free interest rate -- ESPP.............................  5.69%   5.50%   5.48%
Volatility..................................................    68%     68%     68%
Expected life in years (from granting date) -- options......   4.1     4.0     4.0
Expected life in years -- ESPP..............................   1.2     1.2     1.4
Dividend yield..............................................     0%      0%      0%
</TABLE>

     The pro forma information required by SFAS 123 includes compensation
expenses related to the Company's employee stock purchase plan and has also been
calculated based on the fair value method using a Black-Scholes option pricing
model using the weighted-average assumptions discussed above.

     The weighted average fair market value of options granted for the years
ended December 31, 1997, 1998 and 1999 was $10.83, $24.77 and $22.08,
respectively.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options. The
Company's pro forma information follows (in thousands, except for earnings per
share information):

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                                      -------------------------------
                                                        1997       1998        1999
                                                      --------    -------    --------
<S>                                                   <C>         <C>        <C>
Net loss as reported................................  $(26,328)   $(1,958)   $(50,606)
Basic and diluted net loss per share as reported....  $  (2.58)   $ (0.13)   $  (3.03)
Pro forma net loss..................................  $(27,296)   $(5,482)   $(57,544)
Pro forma basic and diluted net loss per share......  $  (2.68)   $ (0.38)   $  (3.45)
</TABLE>

                                       56
<PAGE>   57
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

  1996 Employee Stock Purchase Plan

     In December 1996, the Board of Directors adopted the 1996 Employee Stock
Purchase Plan (the "Purchase Plan") under which employees can purchase shares of
the Company's common stock based on a percentage of their compensation. The
purchase price per share must be equal to at least 85% of the market value on
the date offered or the date purchased. A total of 350,000 shares of common
stock are reserved for issuance thereunder. As of December 31, 1999, 168,626
shares had been issued under the Purchase Plan (100,852 shares as of December,
1998).

     The Company has reserved sufficient shares of its common stock, which may
be issued under the Purchase Plan.

  Share Purchase Rights Plan

     In July 1997, the Company adopted a Share Purchase Rights Plan (the "Rights
Plan"), commonly known as a "poison pill." The Rights Plan provides for the
distribution of certain rights to acquire shares of the Company's Series A
Junior Participating Preferred Stock (the "Rights") as a dividend for each share
of common stock held of record as of August 20, 1997. Under certain conditions
involving an acquisition or proposed acquisition by any person or group holding
20% or more of the common stock, the Rights permit the holders (other than the
20% holder) to purchase the Company's common stock at a 50% discount from the
market price at that time, upon payment of an exercise price of $70 per Right.
In addition, in the event of certain business combinations, the Rights permit
the purchase of shares of common stock of an acquirer at a 50% discount from the
market price at that time. The Rights have no voting privileges and are attached
to and automatically trade with the Company's common stock. The Rights expire on
July 30, 2007.

  Warrants

     In January 1997, the Company received approximately $3.1 million from the
cash exercise of warrants to purchase 347,530 shares of its common stock and
issued an additional 37,785 shares of its common stock upon the net exercise of
warrants to purchase 151,173 shares of its common stock.

     In May 1998, the Company issued 16,787 shares of its common stock upon the
net exercise of a warrant to purchase 24,666 shares of its common stock. As of
December 31, 1999, no warrants were outstanding.

11. INCOME TAXES

     As of December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $92.7 million and $25.3 million,
respectively. The Company also had federal and California research and
development tax credit carryforwards of approximately $1.9 million and $1.1
million. The federal and California net operating loss and credit carryforwards
will expire at various dates beginning in the year 2003 through 2019, if not
utilized.

     Utilization of the federal and state net operating loss and credit
carryforwards may be subject to a substantial annual limitation due to the
"change in ownership" provisions of the Internal Revenue Code of 1986. The
annual limitation may result in the expiration of net operating losses and
credits before utilization.

                                       57
<PAGE>   58
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Significant components of the Company's deferred tax assets are as follows
at December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                1998        1999
                                                              --------    --------
<S>                                                           <C>         <C>
Deferred Tax Assets:
  Net operating loss carryforwards..........................  $ 14,700    $ 33,000
  Capitalized research and development......................     2,200       4,000
  Research credit carryforwards.............................     1,500       3,000
     Other -- net...........................................       200         300
                                                              --------    --------
          Total deferred tax assets.........................    18,600      40,300
Valuation allowance.........................................   (18,600)    (40,300)
                                                              --------    --------
Net deferred tax assets.....................................  $     --    $     --
                                                              ========    ========
</TABLE>

     Because of the Company's lack of earnings history, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $21,700,000 during the year ended December 31, 1999.

                                       58
<PAGE>   59

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE

     Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  Identification of Directors and Executive Officers

     The information required by this Item concerning the Company's directors
and executive officers is incorporated by reference from the Registrant's
Definitive Proxy Statement filed with the Commission pursuant to Regulation 14A
in connection with the 2000 Annual Meeting (the "Proxy Statement") under the
headings "Nominees" and "Executive Officers."

  Compliance with Section 16(a) of the Exchange Act

     The information required by this Item is incorporated by reference from the
Proxy Statement under the heading "Security Ownership of Certain Beneficial
Owners and Management."

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by reference from the
Proxy Statement under the heading "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is incorporated by reference from the
Proxy Statement under the "Certain Transactions."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by reference from the
Proxy Statement under the heading "Certain Transactions" and "Executive
Compensation."

                                       59
<PAGE>   60

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) LISTING OF EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NUMBER
 AND FOOTNOTE                      DESCRIPTION OF DOCUMENT
--------------                     -----------------------
<S>              <C>
 3.1(1)          Amended and Restated Certificate of Incorporation of the
                 Registrant.
 3.2(1)          Bylaws of the Registrant.
 4.1(1)          Reference is made to Exhibits 3.1 and 3.2.
 4.2(1)          Specimen stock certificate.
 4.3(1)          Amended and Restated Investors' Rights Agreement, dated
                 April 18, 1996, between the Registrant and certain
                 investors.
 4.4(1)          Warrant Agreement to purchase Common Stock, dated December
                 6, 1996, between the Registrant and Lease Management
                 Services, Inc.
10.1(1)          Form of Indemnity Agreement to be entered into between the
                 Registrant and its officers and directors.
10.2(2)          1996 Equity Incentive Plan.
10.3(2)          Form of Equity Incentive Stock Option.
10.4(2)          Form of Nonstatutory Stock Option.
10.5(2)          1996 Employee Stock Purchase Plan.
10.6(1)          Assignment Agreement, dated February 24, 1995, between the
                 Registrant, Beckman Coulter and certain investors.
10.7(1)          Manufacturing Agreement, dated August 20, 1996, between
                 Lonza Biologics PLC and the Registrant.
10.8(1)          Equipment Lease Financing Agreement, dated December 6, 1996,
                 between the Registrant and Lease Management Services, Inc.
10.9+(1)         First Amendment to Manufacturing Agreement, dated November
                 21, 1996, by and between Lonza Biologics PLC and the
                 Registrant.
10.10+(1)        Development Agreement, dated November 15, 1995, by and
                 between MDS Nordion Inc. and the Registrant.
10.11+(1)        Patent License Agreement, dated March 15, 1996, by and
                 between the Region Wallone, the Universite Catholique de
                 Louvain and Coulter Pharma Belgium, SA.
10.12+(3)        Second Amendment to Manufacturing Agreement, dated June 30,
                 1997, by and between Lonza Biologics PLC and the Registrant.
10.13+(4)        Third Amendment to Manufacturing Agreement, date September
                 26, 1997, by and between Lonza Biologics PLC and the
                 Registrant.
10.14+(4)        Fourth Amendment to Manufacturing Agreement, dated September
                 17, 1997, by and between Lonza Biologics PLC and the
                 Registrant.
10.15+(5)        Contract Research and Development Agreement, dated October
                 22, 1997, by and between Dr. Karl Thomae GmbH and the
                 Registrant.
10.16+(5)        Fifth Amendment to Manufacturing Agreement, dated October
                 27, 1997, by and between Lonza Biologics PLC and the
                 Registrant.
10.17+(5)        Lease Agreement, dated November 7, 1997, by and between HMS
                 Gateway Office L.P. and the Registrant.
10.18+(6)        Commercial Supply Agreement, dated May 28, 1998, by and
                 between Lonza Biologics PLC and the Registrant.
10.19+(7)        Supply agreement, dated August 31, 1998, by and between MDS
                 Nordion, Inc. and the Registrant.
</TABLE>

                                       60
<PAGE>   61

<TABLE>
<CAPTION>
EXHIBIT NUMBER
 AND FOOTNOTE                      DESCRIPTION OF DOCUMENT
--------------                     -----------------------
<S>              <C>
10.20+(7)        Facilities agreement, dated August 31, 1998, by and between
                 MDS Nordion, Inc. and the Registrant.
10.21+(8)        Stock Purchase Agreement, dated October 23, 1998, by and
                 between SmithKline Beecham Corporation and the Registrant.
10.22+(8)        Security Agreement, dated October 23, 1998, by and between
                 SmithKline Beecham Corporation and the Registrant.
10.23+(8)        Grant of Security Interest, dated October 23, 1998, by and
                 between SmithKline Beecham Corporation and the Registrant.
10.24+(8)        Loan Agreement, dated October 23, 1998, by and between
                 SmithKline Beecham Corporation and the Registrant.
10.25+(8)        Collaboration Agreement, dated October 23, 1998, by and
                 between SmithKline Beecham Corporation and the Registrant.
10.26+(8)        Supply Agreement, dated November 3, 1998, by and between
                 Boehringer Ingelheim Pharma KG and the Registrant.
10.27+(8)        First Amendment to Lease Agreement, dated November 10, 1998,
                 by and between HMS Gateway Office L.P. and the Registrant.
10.28+(8)        Amendment #1 to the Collaboration Agreement, dated November
                 30, 1998 by and between SmithKline Beecham Corporation and
                 the Registrant.
10.29+(8)        Loan and Security Agreement, dated October 29, 1998, by and
                 between Silicon Valley bank and the Registrant.
21.1(1)          Subsidiaries of the Registrant.
23.1             Consent of Ernst & Young LLP, Independent Auditors.
27.1             Financial Data Schedule.
</TABLE>

---------------
(1) Incorporated by reference to the indicated exhibit in the Company's
    Registration Statement on Form S-1 (File No. 333-17661), as amended.

(2) Filed as an exhibit to the Registrant's Registration Statement on Form S-8
    (No. 333-23265) and incorporated herein by reference.

(3) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
    the quarter ended June 30, 1997 and incorporated herein by reference.

(4) Filed as an exhibit to the Registrant's Special Report on Form 8-K filed
    September 29, 1997 and incorporated herein by reference.

(5) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
    year ended December 31, 1997 and incorporated herein by reference.

(6) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
    the quarter ended June 30, 1998 and incorporated herein by reference.

(7) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
    the quarter ended September 30, 1998 and incorporated herein by reference.

(8) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
    year ended December 31, 1998.

 +  Portions omitted pursuant to a request of confidentiality filed separately
    with the Commission.

(b) REPORTS ON FORM 8-K

     There were no reports on Form 8-K filed by the Registrant during the last
quarter covered by this Report.

                                       61
<PAGE>   62

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                                          COULTER PHARMACEUTICAL, INC.

                                          BY:     /s/ MICHAEL F. BIGHAM
                                            ------------------------------------
                                                     Michael F. Bigham
Date: March 27, 2000                                 President and CEO

                               POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael F. Bigham and William G. Harris
and each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments to this Report,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that all said
attorneys-in-fact and agents, or any of them or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                       SIGNATURE                                      TITLE                   DATE
                       ---------                                      -----                   ----
<S>                                                       <C>                            <C>

                 /s/ MICHAEL F. BIGHAM                     President, Chief Executive    March 27, 2000
--------------------------------------------------------      Officer and Director
                  (Michael F. Bigham)                     (Principal Executive Officer)

                 /s/ WILLIAM G. HARRIS                     Sr. Vice President & Chief    March 27, 2000
--------------------------------------------------------        Financial Officer
                  (William G. Harris)                       (Principal Financial and
                                                               Accounting Officer)

                    /s/ BRIAN ATWOOD                                Director             March 27, 2000
--------------------------------------------------------
                     (Brian Atwood)

               /s/ JOSEPH R. COULTER, III                           Director             March 27, 2000
--------------------------------------------------------
                (Joseph R. Coulter, III)

                  /s/ DONALD L. LUCAS                               Director             March 27, 2000
--------------------------------------------------------
                   (Donald L. Lucas)

                   /s/ ROBERT MOMSEN                                Director             March 27, 2000
--------------------------------------------------------
                    (Robert Momsen)

                   /s/ ARNOLD ORONSKY                               Director             March 27, 2000
--------------------------------------------------------
                    (Arnold Oronsky)

                /s/ GEORGE J. SELLA, JR.                            Director             March 27, 2000
--------------------------------------------------------
                 (George J. Sella, Jr.)

                      /s/ SUE VAN                                   Director             March 27, 2000
--------------------------------------------------------
                       (Sue Van)
</TABLE>

                                       62
<PAGE>   63

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER
 AND FOOTNOTE                       DESCRIPTION OF DOCUMENT
--------------                      -----------------------
<S>               <C>
 3.1(1)           Amended and Restated Certificate of Incorporation of the
                  Registrant.
 3.2(1)           Bylaws of the Registrant.
 4.1(1)           Reference is made to Exhibits 3.1 and 3.2.
 4.2(1)           Specimen stock certificate.
 4.3(1)           Amended and Restated Investors' Rights Agreement, dated
                  April 18, 1996, between the Registrant and certain
                  investors.
 4.4(1)           Warrant Agreement to purchase Common Stock, dated December
                  6, 1996, between the Registrant and Lease Management
                  Services, Inc.
10.1(1)           Form of Indemnity Agreement to be entered into between the
                  Registrant and its officers and directors.
10.2(2)           1996 Equity Incentive Plan.
10.3(2)           Form of Equity Incentive Stock Option.
10.4(2)           Form of Nonstatutory Stock Option.
10.5(2)           1996 Employee Stock Purchase Plan.
10.6(1)           Assignment Agreement, dated February 24, 1995, between the
                  Registrant, Beckman Coulter and certain investors.
10.7(1)           Manufacturing Agreement, dated August 20, 1996, between
                  Lonza Biologics PLC and the Registrant.
10.8(1)           Equipment Lease Financing Agreement, dated December 6, 1996,
                  between the Registrant and Lease Management Services, Inc.
10.9+(1)          First Amendment to Manufacturing Agreement, dated November
                  21, 1996, by and between Lonza Biologics PLC and the
                  Registrant.
10.10+(1)         Development Agreement, dated November 15, 1995, by and
                  between MDS Nordion Inc. and the Registrant.
10.11+(1)         Patent License Agreement, dated March 15, 1996, by and
                  between the Region Wallone, the Universite Catholique de
                  Louvain and Coulter Pharma Belgium, SA.
10.12+(3)         Second Amendment to Manufacturing Agreement, dated June 30,
                  1997, by and between Lonza Biologics PLC and the Registrant.
10.13+(4)         Third Amendment to Manufacturing Agreement, date September
                  26, 1997, by and between Lonza Biologics PLC and the
                  Registrant.
10.14+(4)         Fourth Amendment to Manufacturing Agreement, dated September
                  17, 1997, by and between Lonza Biologics PLC and the
                  Registrant.
10.15+(5)         Contract Research and Development Agreement, dated October
                  22, 1997, by and between Dr. Karl Thomae GmbH and the
                  Registrant.
10.16+(5)         Fifth Amendment to Manufacturing Agreement, dated October
                  27, 1997, by and between Lonza Biologics PLC and the
                  Registrant.
10.17+(5)         Lease Agreement, dated November 7, 1997, by and between HMS
                  Gateway Office L.P. and the Registrant.
10.18+(6)         Commercial Supply Agreement, dated May 28, 1998, by and
                  between Lonza Biologics PLC and the Registrant.
10.19+(7)         Supply agreement, dated August 31, 1998, by and between MDS
                  Nordion, Inc. and the Registrant.
</TABLE>

                                       63
<PAGE>   64

<TABLE>
<CAPTION>
EXHIBIT NUMBER
 AND FOOTNOTE                       DESCRIPTION OF DOCUMENT
--------------                      -----------------------
<S>               <C>
10.20+(7)         Facilities agreement, dated August 31, 1998, by and between
                  MDS Nordion, Inc. and the Registrant.
10.21+(8)         Stock Purchase Agreement, dated October 23, 1998, by and
                  between SmithKline Beecham Corporation and the Registrant.
10.22+(8)         Security Agreement, dated October 23, 1998, by and between
                  SmithKline Beecham Corporation and the Registrant.
10.23+(8)         Grant of Security Interest, dated October 23, 1998, by and
                  between SmithKline Beecham Corporation and the Registrant.
10.24+(8)         Loan Agreement, dated October 23, 1998, by and between
                  SmithKline Beecham Corporation and the Registrant.
10.25+(8)         Collaboration Agreement, dated October 23, 1998, by and
                  between SmithKline Beecham Corporation and the Registrant.
10.26+(8)         Supply Agreement, dated November 3, 1998, by and between
                  Boehringer Ingelheim Pharma KG and the Registrant.
10.27+(8)         First Amendment to Lease Agreement, dated November 10, 1998,
                  by and between HMS Gateway Office L.P. and the Registrant.
10.28+(8)         Amendment #1 to the Collaboration Agreement, dated November
                  30, 1998 by and between SmithKline Beecham Corporation and
                  the Registrant.
10.29+(8)         Loan and Security Agreement, dated October 29, 1998, by and
                  between Silicon Valley bank and the Registrant.
21.1(1)           Subsidiaries of the Registrant.
23.1              Consent of Ernst & Young LLP, Independent Auditors.
27.1              Financial Data Schedule.
</TABLE>

---------------
(1) Incorporated by reference to the indicated exhibit in the Company's
    Registration Statement on Form S-1 (File No. 333-17661), as amended.

(2) Filed as an exhibit to the Registrant's Registration Statement on Form S-8
    (No. 333-23265) and incorporated herein by reference.

(3) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
    the quarter ended June 30, 1997 and incorporated herein by reference.

(4) Filed as an exhibit to the Registrant's Special Report on Form 8-K filed
    September 29, 1997 and incorporated herein by reference.

(5) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
    year ended December 31, 1997 and incorporated herein by reference.

(6) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
    the quarter ended June 30, 1998 and incorporated herein by reference.

(7) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
    the quarter ended September 30, 1998 and incorporated herein by reference.

(8) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
    year ended December 31, 1998.

 +  Portions omitted pursuant to a request of confidentiality filed separately
    with the Commission.

                                       64