<PAGE>   1
 
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                       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, 1996
 
[ ]   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 SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                           <C>
                   DELAWARE                                     94-32190758
       (STATE OR OTHER JURISDICTION OF                       (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)
            550 CALIFORNIA AVENUE                                  94306
            PALO ALTO, CALIFORNIA                               (ZIP CODE)
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
 
       Registrant's telephone number, including area code: (415) 842-7300
                            ------------------------
 
        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.  [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 on the Nasdaq
Stock Market on February 28, 1997 was $61,002,911.*
 
     The number of shares outstanding of the Registrant's Common Stock was
10,304,434 as of February 28, 1997.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of Registrant's Definitive Proxy Statement filed with the
Commission pursuant to Regulation 14A in connection with the 1997 Annual Meeting
are incorporated herein by reference into Part III of this Report.
 
     Certain Exhibits filed with the Registrant's Registration Statement on Form
S-1 (Registration Nos. 333-17661, are incorporated herein by reference into Part
IV of this Report.
------------------------
 
* Based on a closing price of $11.25 per share. Excludes 4,881,953 shares of the
  Registrant's Common Stock held by executive officers, directors and
  stockholders whose ownership exceeds 5% of the Common Stock outstanding at
  February 28, 1997. 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.
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                                     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"
below.
 
ITEM 1. BUSINESS
 
     Coulter Pharmaceutical is engaged in the development of novel drugs and
therapies for the treatment of people with cancer. The Company currently is
developing a family of cancer therapeutics based upon two platform technologies:
conjugated antibodies and tumor-activated peptide pro-drugs. The Company's most
advanced product candidate, the "B-1 Therapy," consists of a monoclonal antibody
conjugated with a radioisotope. In a Phase I/II clinical trial of the B-1
Therapy, 40 patients with low-grade or transformed low-grade non-Hodgkin's
lymphoma who had relapsed from previous chemotherapy regimens achieved an 82%
overall response rate and a 45% complete response rate. The Company has
commenced a pivotal Phase II/III clinical trial for the treatment of NHL in
low-grade and transformed low-grade patients refractory to chemotherapy. The
Company intends to file for U.S. Food and Drug Administration marketing approval
of its B-1 Therapy for this indication in the second half of 1998. The Company
believes that the B-1 Therapy, if successfully developed, could become the first
radioimmunotherapy approved in the United States for the treatment of people
with cancer. The Company has commenced and plans additional clinical trials to
broaden the label indication of the B-1 Therapy. The Company's TAP pro-drug
program is designed to broaden significantly the therapeutic windows of
conventional chemotherapies. The Company currently is developing a pro-drug
version of doxorubicin to treat certain solid tumor cancers with the objective
of commencing clinical trials in early 1998.
 
     The Company was incorporated under the laws of Delaware in February 1995.
The Company's conjugated antibody program is based upon the antibody
therapeutics program which originated in the late 1970s at Coulter Corporation,
a recognized leader in the field of hematology. Upon its formation in February
1995, the Company acquired worldwide rights to the B-1 Therapy and related
intellectual property, know-how and other assets from Coulter Corporation.
 
BACKGROUND
 
  Cancer: The Disease and Its Treatment
 
     Cancer afflicts millions of people worldwide. It is currently the second
leading cause of death in the United States and was projected to account for
more than 550,000 deaths in 1996 alone. Some forty percent of Americans are
expected to develop cancer and, despite noteworthy success in the treatment of
some cancers, 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.
 
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     In solid tumor cancers, malignant tumors invade and disrupt nearby tissues
and can also spread throughout the body or "metastasize." The impact of these
tumors on vital organs such as the lungs and the liver frequently leads to
death. Surgery is used to remove solid tumors that are accessible to the surgeon
and can be effective if the cancer has not metastasized. Radiation therapy also
can be employed to irradiate a solid tumor and surrounding tissues and is a
first-line therapy for inoperable tumors, but side effects are a limiting factor
in treatment. Radiation therapy is used frequently in conjunction with surgery
either to reduce the tumor mass prior to surgery or to destroy tumor cells that
may remain at the tumor site after surgery. However, radiation therapy cannot
assure that all tumor cells will be destroyed and has only limited utility for
treating widespread metastases. While surgery and radiation therapy are the
primary treatments for solid tumors, chemotherapy and hormonal treatments often
are used as adjunctive therapies and also are used as primary therapies for
inoperable or metastatic cancers.
 
     Chemotherapy, which typically involves the intravenous administration of
drugs designed to destroy malignant cells, is used for the treatment of both
solid tumors and blood-borne malignancies. Chemotherapeutic drugs generally
interfere with cell division and are therefore more toxic to rapidly dividing
cancer cells. Since cancer cells can often survive the effect of a single drug,
several different drugs usually are given in a combination therapy designed to
target overlapping mechanisms of cellular metabolism to overwhelm the ability of
cancer cells to develop resistance to chemotherapy. Combination chemotherapy is
used widely as first-line therapy for leukemias and lymphomas and has had
considerable success in the treatment of some forms of these cancers.
Nevertheless, partial and even complete remissions obtained through chemotherapy
often are not durable, and the cancer may reappear and/or resume its progression
within a few months or years of treatment. The relapsed patient's response
typically becomes shorter and shorter with each successive treatment regimen as
the cancer becomes resistant to the chemotherapy. Eventually, patients may
become "refractory" to chemotherapy, meaning that the length of their response,
if any, to treatment is so brief as to lead to the conclusion that further
chemotherapy regimens would be of little or no benefit.
 
     Chemotherapeutic drugs are not sufficiently specific to cancer cells to
avoid affecting normal cells, especially those that are growing rapidly. As a
result, patients often experience debilitating side effects such as nausea,
vomiting, hair loss, anemia and fatigue, as well as life-threatening side
effects such as immune system suppression. Such side effects can limit the
effectiveness of therapy because the clinician must avoid exceeding the maximum
dose of drug that the patient can tolerate. Since dosages must be limited to
avoid unacceptable side effects, it may not be possible to administer
sufficiently high doses of chemotherapeutic drugs to overcome the natural
ability of cancer cells to become resistant. A number of chemotherapeutic agents
originally thought to have promise as cancer drugs have failed in the clinic
because the minimum effective dose exceeded the maximum tolerable dose. Ideally,
a chemotherapeutic agent would have a minimum effective dose well below the
maximum tolerable dose, thereby providing physicians with a wide "therapeutic
window" or a range of doses within which all patients could be treated
effectively.
 
     In cases of certain severe blood-borne malignancies and metastatic solid
tumor cancers, bone marrow transplants ("BMT") may be performed to treat
patients who typically have exhausted all other treatment options. Transplants
generally are performed in connection with regimens of aggressive chemotherapy
and/or radiation therapy. While techniques are improving, BMTs are associated
with significant mortality and high rates of morbidity and remain a very
expensive alternative.
 
  Emerging Methods of Treatment
 
     Scientific progress in the elucidation of the underlying molecular biology
of cancer in recent years has yielded a number of promising treatment
approaches. These approaches generally are designed to enhance the specificity
and potency of cancer therapeutics, to improve overall efficacy and to reduce
side effects. The Company believes that two of the most promising of these
approaches are (i) monoclonal antibodies that bind to targeted cells to
stimulate the body's immune system and/or to deliver cytotoxic agents to destroy
malignant cells and (ii) modifications of conventional chemotherapeutic drugs
and drug formulations to improve efficacy by expanding their therapeutic
windows.
 
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  Monoclonal Antibodies
 
     The human immune system is composed of specialized cells, including B-cells
and T-cells, that function in the recognition, destruction and elimination of
disease-causing foreign substances and of virally infected or malignant cells.
Human antibodies, which are produced by the B-cells, play a vital role in the
proper functioning of the immune system. They have predetermined functions based
primarily upon their ability to recognize specific antigens, which are molecular
structures on the surface of disease-causing substances or diseased cells. Each
antigen serves as a binding site for the antibody specific to that antigen, and
each disease-causing substance or diseased cell can be identified by its
antigens.
 
     The ability of specific antibodies to bind to specific antigens that are
expressed on the surface of targeted cells, and to trigger an immune system
attack on those cells, provides the theoretical basis for the development of
cancer immunotherapeutics. In the 1970s, researchers discovered techniques to
produce unlimited supplies of identical murine (mouse-derived) antibodies,
referred to as monoclonal antibodies, by cloning antibody producing cells that
were derived from hybridization of a single B-cell. These techniques provided
researchers with the tools to identify and study specific antigens and to
produce potential therapeutics. In principle, once an antigen expressed by
malignant cells has been identified, a monoclonal antibody specific to that
antigen can be created. If an antibody could be produced that binds to an
antigen expressed exclusively by human cancer cells, the antibody would be
specific to only those cells. As a result, the use of such a monoclonal antibody
as a therapeutic would have few, if any, side effects. However, the development
of such a therapy has proven to be more problematic than originally hoped.
Immunotherapies based solely upon monoclonal antibodies have had only limited
clinical effectiveness, particularly in solid tumors where the uneven supply of
blood throughout such tumors prevents adequate exposure of monoclonal antibodies
to malignant cells.
 
     The effectiveness of a particular monoclonal antibody in the treatment of
cancer fundamentally is linked to the characteristics of the antigen to which it
binds. For example, while researchers have identified numerous antigens on
cancer cells that can be recognized by monoclonal antibodies, most of these
antigens are also expressed to some degree by other types of cells. An antibody
to such an antigen may not be sufficiently specific to the cancer cells to avoid
or minimize unintended side effects caused by damage to normal cells. Moreover,
the behavior of antigens following binding with an antibody is quite variable:
the bound antibody-antigen complex can remain on the cell surface, can be
internalized into the cell or can be released from the cell surface. Thus, the
identification of suitable antigens to serve as targets for therapeutic
monoclonal antibodies must account for these and other complexities.
 
     Once a suitable antigen has been identified, researchers have found that
different antibodies binding to different sites on the antigen may not have the
same biological activity, introducing another 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 "chemoimmuno therapy," 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
 
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antibody and to devise a therapeutic protocol that optimizes therapeutic effect
while minimizing undesirable side effects. The development of effective
chemoimmunotherapies presents similar challenges.
 
  Enhancements of Conventional Chemotherapies
 
     A number of organizations have explored methods of improving the delivery
of cytotoxic drugs to tumor cells, with the objective of expanding the
therapeutic window for these drugs in the treatment of cancer. Approaches that
have been commercialized include encapsulation of the drug in a liposome to
regulate the rate at which it is released and impregnation of an implantable
matrix with the drug to enable its delivery locally over time as the matrix
dissolves. Sustained release of cytotoxic drugs using liposomal formulations has
modestly enhanced the therapeutic window for these compounds, but instability of
the formulations and accumulations in the skin have produced undesirable side
effects. Surgical implantation of a matrix is limited inherently to the
treatment of localized tumor masses and is not applicable to blood-borne or
metastatic cancers.
 
     Another approach, the development of pro-drugs, involves the chemical
modification of cytotoxic drugs to render them inactive until they are delivered
to, or into the proximity of, targeted cancer cells. The pro-drug is transformed
into its active form only in the presence of enzymes or other chemicals produced
by the tumor cells. The preferential activation of a pro-drug in the tumor
milieu increases its lethal effect on tumor cells while limiting side effects to
non-malignant tissues. Pro-drug versions of cytotoxic drugs offer the potential
to broaden significantly the therapeutic windows of such drugs beyond that which
can be achieved using existing approaches such as liposomal formulations.
Challenges that have constrained the development of effective pro-drugs to date
have included the inability to construct or identify suitable tumor-specific
activation mechanisms and difficulties in designing pro-drugs that will have
adequate stability in circulation.
 
COULTER PHARMACEUTICAL'S APPROACH
 
     Coulter Pharmaceutical is developing a family of cancer therapeutics to
address the shortcomings of current therapies based upon two platform
technologies: (i) conjugated antibodies (primarily radioimmunotherapies) and
(ii) tumor-activated peptide pro-drugs.
 
     The Company is developing conjugated antibody therapies to overcome the
inherent limitations of monoclonal antibodies when used as stand-alone
therapeutics and to provide advantages over current chemotherapy and radiation
therapy treatments. The Company believes that the B-1 Therapy, its first product
candidate, incorporates each of the principle attributes of an effective
radioimmunotherapy for the treatment of NHL: (i) an antigen specific to B-cells,
(ii) a therapeutically active monoclonal antibody, (iii) the radioisotope
appropriate for the disease profile and (iv) an optimized therapeutic protocol.
In a Phase I/II clinical trial conducted at the University of Michigan Medical
Center, 40 patients with low-grade and transformed low-grade NHL, who on average
had failed more than three prior treatment regimens with chemotherapy, achieved
an 82% overall response rate and a 45% complete response rate. The B-1 Therapy
is currently the subject of a pivotal Phase II/III trial for the treatment of
low-grade and transformed low-grade NHL patients refractory to chemotherapy as
its initial indication. To broaden this initial label indication, the Company
currently is planning to commence a Phase III/IV "post-approval" clinical trial
in patients in first or second relapse and also has commenced a Phase II
clinical trial of its B-1 Therapy in patients newly diagnosed with low-grade
NHL. The Company believes that this Phase II trial is the first clinical trial
of a radioimmunotherapy as a stand-alone, first-line treatment for people with
cancer. See " -- Clinical Results and Development Plan."
 
     The Company believes that radioimmunotherapies will emerge as important
treatments for blood-borne cancers due to the radiosensitivity of these
malignancies and the ready accessibility of the blood and lymph systems to
monoclonal antibodies. Radioimmunotherapy also may become an important
adjunctive therapy for the treatment of certain solid tumor cancers following
surgery, radiation therapy or chemotherapy, where it may be useful in
eliminating circulating and other undetected malignant cells missed by primary
therapies. In the future, the Company intends to use its expertise in conjugated
antibodies to expand beyond radioimmunotherapy to develop effective
chemoimmunotherapies for the treatment of certain cancers.
 
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     The Company's second technology platform, its TAP pro-drug technology, has
the potential to broaden significantly the therapeutic windows of conventional
chemotherapies based on the Company's understanding of biochemical mechanisms
involved in metastasis and the identification of a potential means for
exploiting these mechanisms. TAP prodrug versions of existing cytotoxic drugs
are designed to be activated preferentially in the proximity of metastatic
cancer cells, yet stable in circulation and in normal tissues. Accordingly,
relatively larger quantities of cytotoxic agents are expected to reach and enter
malignant cells as opposed to normal cells, which could permit a significant
increase in maximum tolerated dosages, potentially overcoming drug resistance in
cancer cells. The Company also believes that cytotoxic agents currently
considered too toxic to be used in their unmodified forms may be suitable
candidates to become TAP pro-drugs.
 
COULTER PHARMACEUTICAL'S STRATEGY
 
     The Company's goal is to develop and commercialize novel drugs and drug
therapies for the treatment of people with cancer based on selected insights
from the emerging understanding of the molecular biology of malignant cells. The
Company's conjugated antibody program is based upon the antibody therapeutics
program which originated in the late 1970s at Coulter Corporation, a recognized
leader in the field of hematology. Upon its formation, Coulter Pharmaceutical
obtained worldwide rights to the B-1 Therapy and related intellectual property,
as well as a significant body of expertise pertaining to the selection and
development of suitable antibodies and appropriate radioisotopes (and other
cytotoxic agents) and methods for devising optimized therapies. The Company's
TAP pro-drug program is based upon technology that has been under development at
Catholique Universite de Louvain, Belgium, since 1986 and which was exclusively
licensed to the Company in 1996. Based on this foundation, the Company has
established a strategy comprised of the following primary elements:
 
     Pursue Expedited Initial Approval of the B-1 Therapy. The Company intends
to seek expedited FDA marketing approval for its B-1 Therapy for the treatment
of low-grade and transformed low-grade NHL in patients who are refractory to
chemotherapy, while simultaneously pursuing studies to broaden the initial label
indication. The recently commenced pivotal Phase II/III clinical trial of the
B-1 Therapy has been designed to comply with the guidelines of the
ClintonKessler Cancer Initiative, which is intended to accelerate the testing,
review and approval of therapies for patients suffering from life-threatening or
disabling cancers who have limited treatment options. Based on this initiative
and on guidance from FDA staff, the Company is focusing on chemotherapy
refractory patients in this pivotal Phase II/III clinical trial. The trial will
include 60 patients and a post-treatment follow-up period of six months. The
Company intends to file for FDA marketing approval for this indication in the
second half of 1998. The Company also intends to seek approval for other NHL
indications and, accordingly, is currently planning to commence a Phase III/IV
"postapproval" clinical trial during the second half of 1997 in patients with
low-grade or transformed low-grade NHL in first or second relapse. The Company
also has commenced a Phase II clinical trial of the B-1 Therapy as a stand-
alone, firstline treatment for patients newly diagnosed with low-grade NHL.
 
     Establish Sales and Marketing Capability. The Company intends to market and
sell its products in the United States through a direct sales force and, where
appropriate, in collaboration with marketing partners. This strategy is intended
to enable the Company to establish a commercial presence in the cancer
therapeutics market with its B-1 Therapy, 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 even approved products. Internationally, the Company
intends to distribute its products through marketing partners.
 
     Leverage Existing Technology Platforms. The Company intends to develop
additional products based on the lead compounds being generated in its TAP
pro-drug program and by leveraging its expertise in conjugated antibodies to
develop other immunotherapies. In its TAP pro-drug program, the Company
currently is engaged in preclinical development of SuperLeu-Dox, a pro-drug
version of doxorubicin, with the objective of commencing clinical trials in
early 1998. The Company also intends to apply its TAP pro-drug technology to
other classes of cytotoxic drugs, including the vinca alkaloids, to broaden
significantly the therapeutic windows of such agents. The Company is evaluating
potential conjugated antibody therapies for the treatment of other blood-borne
malignancies and selected solid tumor cancers.
 
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     Leverage Development Expertise. The Company believes that it has built
substantial product development capabilities and expertise in the cancer field
due in part to the advanced stage of the B-1 Therapy program at the time that it
was obtained from Coulter Corporation. The Company believes it can leverage this
development expertise to accelerate the development of other products in the
cancer therapeutics field. The Company intends to pursue other product
candidates derived from sponsored research or available for in-licensing in both
blood-borne malignancies and solid tumor cancers, particularly in areas that may
be complementary to its existing technology platforms.
 
     Utilize Contract Manufacturers. The Company intends to manufacture its
commercial products through contract manufacturers. This strategy is expected to
(i) accelerate the scale-up of manufacturing processes to commercial scale, (ii)
reduce initial capital investment, (iii) result in competitive manufacturing
costs and (iv) provide access to a wide range of manufacturing technologies.
 
B-1 RADIOIMMUNOTHERAPY FOR NON-HODGKIN'S LYMPHOMA
 
     The Company's first product candidate, the B-1 Therapy, is in clinical
trials for the treatment of NHL. The Company believes that the B-1 Therapy, if
successfully developed, could become the first radioimmunotherapy approved in
the United States for the treatment of people with cancer.
 
  Non-Hodgkin's Lymphoma and Its Current Treatment
 
     Non-Hodgkin's lymphomas are blood-borne cancers of the immune system, all
sharing the common feature of a proliferation of malignant B-cells. According to
statistics from the National Cancer Institute, approximately 270,000 people are
afflicted with NHL in the United States. More than 52,000 new cases were
expected to be diagnosed in 1996. 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 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 its B-1 Therapy 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, eventually these patients relapse. Relapsed patients are more
difficult to treat as remissions are harder to achieve and, if achieved, last
for shorter periods of time as the disease becomes more resistant to
chemotherapy and/or transforms to an intermediate- or high-grade histology.
Patients ultimately die from the disease or from complications of treatment.
Intermediate- and high-grade NHL are more rapidly growing forms of the disease.
However, approximately one-half of all intermediate- and high-grade cases can be
treated effectively with conventional chemotherapy.
 
  Description of the B-1 Therapy
 
     The Company's B-1 Therapy 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. The B-1 Therapy is
administered to patients in a proprietary therapeutic protocol consisting of a
single, two-dose regimen. The Company believes that the potential benefits of
its B-1 Therapy result from the following four constituent elements:
 
  Proprietary Protocol
 
     The B-1 Therapy is administered intravenously in a single, two-dose regimen
consisting of an imaging dose, three gamma camera scans and a therapeutic dose.
The proprietary protocol is flexible: the timing of the gamma camera scans and
of the therapeutic dose can be adjusted to some extent to accommodate the
schedules of clinicians and patients. The chart below depicts an example of the
B-1 Therapy protocol as
 
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proposed for use in the Company's current Phase II/III pivotal trial. The
imaging dose consists of 50 mg of B-1 Antibody trace-labeled with 5 millicuries
("mCi") of (131)I. Immediately after the imaging dose, the patient is scanned
with a gamma camera to provide an image of the initial distribution of
radiolabeled antibody in the patient's body. The patient returns for additional
gamma camera scans on the third and eighth days of the therapy to show how much
of the radiolabeled antibody is bound to targeted cells and how much has been
eliminated from the body at each point in time. This information is used to
calculate the correct therapeutic dose to achieve a total body radiation of 75
centigray ("cGy"). The amount of radiolabeled antibody needed to achieve this
optimal radiation level ranges from approximately 50 to 180 mCi of (131)I due to
wide patient-to-patient variability in the rates at which the antibody is
eliminated. Both the imaging dose and the therapeutic dose immediately are
preceded by a 450 mg dose of unlabeled B-1 Antibody to improve the targeting of
malignant B-cells by the radiolabeled B-1 Antibody. These pre-doses of unlabeled
B-1 Antibody serve to protect the spleen, liver and other vital organs from
excessive radiation exposure by binding to some of the CD20 antigens on
circulating B-cells which naturally accumulate in these organs. Additionally,
the patient takes non-radioactive iodine drops orally during the course of the
therapy to prevent uptake of (131)I into the thyroid gland.
 
                   [DIAGRAM OF STEPS OF PROPRIETARY PROTOCOL]
 
     Relying upon the imaging properties of (131)I to account for critical
patient-to-patient variability in the rate at which the antibody is cleared
makes it possible to deliver predictably a total body radiation dose that has
been determined to maximize therapeutic benefit with manageable side effects and
without the need for bone marrow rescue. Because the B-1 Therapy is administered
in a single, two-dose regimen and is well tolerated, it is expected to require
relatively little patient follow-up and physician intervention. In contrast,
chemotherapy requires administration of several cytotoxic agents in repeated
cycles of therapy over a six- to eight-month period during which the patient
must be monitored carefully and/or treated for side effects. Although patients
to date have been kept in the hospital to monitor radiation levels for up to
three days following the therapeutic dose, under recently enacted regulations of
the Nuclear Regulatory Commission, the Company believes that the B-1 Therapy can
be administered primarily on an outpatient basis. However, 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 the B-1
Therapy. As a result, while the B-1 Therapy 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.
 
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                      [DIAGRAM OF LIFE-CYCLE OF A B-CELL]
 
     In addition, the CD20 antigen is neither internalized by the B-cell nor
released into circulation after it has been bound to the B-1 Antibody, ensuring
that the antibody-radioisotope conjugate will remain in place to destroy the
Bcell.
 
  The B-1 Antibody
 
     The B-1 Antibody exhibits very high specificity for the CD20 antigen and,
because it is a murine sub-class IgG(2)a antibody, is capable of recruiting an
immune response to those B-cells to which it binds. Further, the B-1 Antibody
directly affects cell function, triggering apoptosis in a portion of the B-cells
to which it binds. The use of a murine antibody promotes rapid clearance of
unbound radiolabeled antibody from circulation, which reduces radiotoxicity. Due
to the impaired state of the NHL patient's immune system and the short course of
therapy, the human immune response to the murine antibody ( the "HAMA response")
has been minimal to date and has not been a limiting factor in treatment under
the protocol.
 
     The B-1 Antibody used in the Company's B-1 Therapy was generated in 1978 by
the Dana-Farber Cancer Institute in collaboration with Coulter Corporation. The
B-1 Antibody has been available commercially from Coulter Corporation as a
diagnostic reagent since 1982 and is generally accepted as the reference
standard for the identification of B-cells. Rights to the antibody for
therapeutic applications were transferred to Coulter Pharmaceutical from Coulter
Corporation in February 1995.
 
  (131)Iodine Radioisotope
 
     The (131)I radioisotope was selected over other radioisotopes for use in
the B-1 Therapy because it (i) produces both gamma emissions which permit
imaging for dose optimization and compact beta emissions for a concentrated
therapeutic effect, (ii) provides additional commercial and clinical benefits
based on its relatively long half-life, (iii) has characteristics which reduce
the risk of bone marrow damage without sacrificing efficacy and (iv) has
long-established medical uses in other cancer treatments.
 
     Gamma emissions from (131)I permit dose optimization by enabling clinicians
to calculate the actual clearance rate of radiolabeled antibody for each
patient. Use of the same radioisotope for both the imaging and the therapeutic
dose provides assurance that the clearance rates observed in imaging also will
apply for the therapeutic dose. Having established the patient's actual
clearance rate, the clinician can determine reliably the therapeutic dose which
will deliver the optimized level of total body radiation.
 
     The lower relative energy and short path length of the beta emission of
(131)I concentrate the destructive energy of the radioisotope on the B-cell to
which the antibody is bound and, in a so-called bystander effect, on adjacent
Bcells in the microscopic clusters of malignant cells which are common to NHL.
Moreover, (131)I causes minimal damage to nearby normal tissues in contrast to
other radioisotopes that have longer path length beta emissions which extend too
far beyond the targeted area.
 
     The relatively long half-life of (131)I, approximately eight days, permits
radiolabeling at a centralized facility to ensure consistent quality, increase
the number of clinical sites capable of administering this radioimmunotherapy
and reduce overall manufacturing costs. The eight-day half-life also provides
the therapeutic advantage of exposing bound malignant cells to radiation over a
longer period of time.
 
                                        9
<PAGE>   10
 
     When bound to a B-cell, (131)I's lower relative energy and short path
length, together with its relatively long half-life, minimize bone marrow damage
while optimizing the therapeutic effect of the radiation. Further, as the B-1
Antibody is metabolized, the released (131)I radioisotope is eliminated rapidly
and unlike other radioisotopes does not concentrate naturally in the bone
matrix.
 
     (131)Iodine is an inexpensive radioisotope that has long-established
medical uses in other cancer treatments. Hence, medical facilities and
clinicians are accustomed to its handling, use and disposal and already have
developed the appropriate procedures and facilities for its safe therapeutic
application.
 
  Clinical Results and Development Plan
 
     The B-1 Therapy was developed in the course of an extended Phase I/II dose
escalation clinical trial at the University of Michigan Medical Center which
completed patient enrollment in early 1996. This trial was used to develop and
refine the proprietary therapeutic protocol, to determine the maximum tolerated
dose of total body radiation and to assess the safety and efficacy profile of
treatment with the radiolabeled B-1 Antibody in patients representing a full
range of NHL histologies. Based on the data generated in this clinical trial,
the Company has decided to pursue clinical development of the B-1 Therapy for
the treatment of low-grade and transformed low-grade NHL.
 
  Phase I/II Trial Results
 
     A total of 59 patients were enrolled in the Phase I/II dose escalation
clinical trial. Preliminary data from this clinical trial were first published
in August 1993 in the New England Journal of Medicine and updated, interim
clinical results were reported in July 1996 in the Journal of Clinical Oncology
 
<TABLE>
<CAPTION>
                                RELAPSED AND REFRACTORY
                                        PATIENTS                    RELAPSED PATIENTS ONLY            REFRACTORY PATIENTS ONLY
                             ------------------------------     ------------------------------     ------------------------------
 LOW-GRADE AND TRANSFORMED    NO. OF    OVERALL    COMPLETE      NO. OF    OVERALL    COMPLETE      NO. OF    OVERALL    COMPLETE
  LOW-GRADE NHL PATIENTS     PATIENTS   RESPONSE   RESPONSE     PATIENTS   RESPONSE   RESPONSE     PATIENTS   RESPONSE   RESPONSE
---------------------------  --------   --------   --------     --------   --------   --------     --------   --------   --------
<S>                          <C>        <C>        <C>          <C>        <C>        <C>          <C>        <C>        <C>
- All Patients.............     40        82%        45%           17         94%       64%           23        73%        30%
- Treated Patients Only....     36        86%        50%           14        100%       78%           22        77%        31%
- Treated Patients.........     28        92%        46%            9        100%       66%           19        89%        36%
Excluding Prior BMT
  Recipients
</TABLE>
 
---------------
 
"Overall response" is the sum of complete and partial responses.
 
"Complete response" is defined as the disappearance of all detectable disease
and all signs and symptoms of the disease. A complete response must be verified
by two measurements no less than four weeks apart and by a bone marrow biopsy. A
complete response classification also requires that the measurements detect no
progression at any disease site and no new sites of disease.
 
"Partial response" is defined as a 50% or greater reduction in detectable
disease, as verified by two measurements no less than four weeks apart. A
partial response classification also requires that the measurements detect no
progression at any disease site and no new sites of disease.
 
"Relapsed patients" are patients who have failed previous regimens of
chemotherapy but who experienced a response duration that lasted six months or
longer after their last treatment regimen.
 
"Refractory patients" are patients who received two or more previous regimens of
chemotherapy and who experienced no response or a response duration that lasted
less than six months after their last treatment regimen.
 
     Of the 59 patients enrolled in this trial, 40 had low-grade or transformed
low-grade NHL, which are the histologies the Company is pursuing in its clinical
trials. These 40 patients had failed on average more than three prior treatment
regimens with chemotherapy. These patients exhibited an 82% overall response
rate and a 45% complete response rate. This 40-patient cohort included eight
patients who previously had received and failed an autologous bone marrow
transplant prior to participation in the clinical trial. The 40 patients in this
cohort received total body radiation doses of up to 85 cGy in this dose
escalation trial. Of these patients, 17 have been classified as relapsed and 23
as refractory to chemotherapy. The overall response rate in relapsed
 
                                       10
<PAGE>   11
 
patients was 94% and the complete response rate was 64%. The overall response
rate in refractory patients was 73% and the complete response rate was 30%. Four
out of the 40 patients did not receive the therapeutic dose of radiolabeled
antibody due to their rapidly deteriorating medical condition or the presence of
a HAMA response, which arose prior to May 1993 in the early stages of the Phase
I/II dose escalation clinical trial under a non-optimized treatment protocol. Of
the 36 patients who received a therapeutic dose, 50% experienced a complete
response with an average duration of response of 18.1 months, with a range of
two to 44 months as of October 1996. 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% and a complete response rate of 32%. Of the 19 patients who had
intermediate- or high-grade NHL, the overall response rate was 47% and the
complete response rate was 5%. While response rates in these histologies were
encouraging, the Company currently is pursuing clinical development of the B-1
Therapy in low-grade and transformed low-grade NHL patients.
 
     The B-1 Therapy was generally well tolerated by patients. Dose limiting
side effects were hematologic, consisting primarily of reversible declines in
blood cell counts. These toxicities were generally mild to moderate, with no
patient requiring a bone marrow transplant. Other side effects observed were
mild and consisted primarily of temporary flu-like symptoms.
 
     Results presented are based upon interim data which have been submitted to
the FDA, certain portions of which have not yet been published in a peer
reviewed publication. No assurance can be given that the Company's future
clinical results will be consistent with the results of the Phase I/II dose
escalation trial, which was conducted at a single site with a relatively small
number of patients per NHL histology and disease stage and had different
clinical objectives than the Company's current or planned clinical trials. See
"Risk Factors -- Uncertainties Related to Product Development."
 
  Clinical Development of the B-1 Therapy
 
     Based on the foregoing results of the Phase I/II clinical trial, the
Company is conducting three additional clinical trials to support an application
to the FDA for the initial marketing approval of the B-1 Therapy: (i) a pivotal
Phase II/III clinical trial for the treatment of patients refractory to
chemotherapy, (ii) a Phase II dosimetry validation clinical trial and (iii) a
Phase II clinical trial to evaluate the extent to which the therapeutic benefit
of the B-1 Therapy is derived from the combination of the B-1 Antibody and the
radioisotope, in comparison to the B-1 Antibody alone. To broaden the initial
label indication, the Company also has commenced a Phase II clinical trial of
its B-1 Therapy in patients newly diagnosed with low-grade NHL and plans to
commence a Phase III/IV "post-approval" clinical trial in patients with
low-grade or transformed low-grade NHL in first or second relapse.
 
     Pivotal Phase II/III Clinical Trial. The Company's pivotal Phase II/III
clinical trial, which commenced in December 1996, is designed to enroll a total
of 60 patients who have low-grade and transformed low-grade NHL, who have proven
refractory to chemotherapy and who have not received prior bone marrow
transplants. This clinical trial, to be conducted at six to eight clinical
sites, is focused on the refractory segment of this NHL population in an effort
to qualify for expedited FDA approval of the B-1 Therapy under the
Clinton-Kessler Cancer Initiative. Based on this initiative and on guidance from
FDA staff, the Company designed this clinical trial with a relatively short
posttreatment follow-up period of six months. Because of the limited alternative
treatment options for refractory patients, each patient's response to the B-1
Therapy will be measured against his or her own response to the previous regimen
of chemotherapy, rather than by comparison to patients in a separate control
arm.
 
     Phase II Dosimetry Validation Clinical Trial. Prior to commencing the
pivotal Phase II/III clinical trial, the Company conducted a dosimetry
validation clinical trial in a total of 47 patients, designed to demonstrate
that the B-1 Therapy's treatment protocol could be implemented consistently at
multiple clinical sites. In connection with this clinical trial, the Company
also was able to refine its proprietary protocol to streamline the therapeutic
dose calculation, establishing that accurate antibody elimination rates could be
determined from three gamma camera scans. Based upon interim data from this
clinical trial showing consistent implementation of the treatment protocol, the
FDA agreed in September 1996 that this clinical trial
 
                                       11
<PAGE>   12
 
could be ended. The Company then was able to commence its pivotal Phase II/III
clinical trial in December 1996.
 
     Phase II Unlabeled Versus Labeled Antibody Clinical Trial. In August 1996,
the Company commenced a Phase II clinical trial at a single site in 28 patients
with relapsed, low-grade NHL. One- half of the patients will receive two 500 mg
doses of unlabeled B-1 Antibody eight days apart in a treatment regimen that is
parallel to the B-1 Therapy; the other half will receive the B-1 Therapy in a
treatment protocol equivalent to that used in the pivotal Phase II/III clinical
trial. The objective of this clinical trial is to assess the incremental
clinical activity from radiolabeling the B-1 Antibody as compared to the
clinical activity of the unlabeled B-1 Antibody alone. Administration of the
unlabeled B-1 Antibody has not been designed for use as a stand-alone therapy,
nor has the treatment regimen been optimized for such use. The Company is
evaluating the possibility of expanding this study to other sites. The Company's
objective is to complete enrollment of patients in this clinical trial in the
second half of 1997.
 
     Phase III/IV "Post-Approval" Clinical Trial. To comply with the
Clinton-Kessler Cancer Initiative and to broaden the label indication, the
Company plans to carry out a randomized, controlled Phase III/IV "post-approval"
clinical trial in patients with low-grade or transformed low-grade NHL in first
or second relapse. To evaluate the efficacy and safety of the B-1 Therapy versus
conventional chemotherapy, the Phase III/IV clinical trial will be conducted
with a control arm in which a portion of the patients in the trial will be
treated with a further regimen of conventional chemotherapy. The Company
currently expects to commence this clinical trial during the second half of
1997.
 
     Phase II First-Line, Stand-Alone Treatment Clinical Trial. In June 1996,
the Company has also commenced a 60-patient Phase II clinical trial at a single
site to evaluate the safety and efficacy of the B-1 Therapy as a first-line,
stand-alone treatment of patients with newly diagnosed low-grade NHL. This
single-arm clinical trial includes a planned interim analysis after 14 patients
have been treated. The Company's objective is to complete patient enrollment for
this clinical trial by early 1998.
 
     The ability of the Company to conduct and complete its ongoing and planned
clinical trials in a timely manner is subject to a number of uncertainties and
risks, including the rate at which patients can be accrued in each clinical
trial, the Company's ability to obtain necessary regulatory approvals, the
capacity of the Company's contract manufacturers to supply unlabeled and
radiolabeled B-1 Antibody as needed for patient treatment and the occurrence of
unanticipated adverse events. Any suspension or delay of one or more of such
clinical trials could have a material adverse effect on the Company's business,
financial condition and results of operation. See "Risk Factors -- Uncertainties
Related to Product Development," "-- Government Regulation; No Assurance of
Regulatory Approvals," and " -- Dependence on Suppliers; Manufacturing and
Scale-up Risk."
 
  Other Clinical Trials
 
     The radiolabeled B-1 Antibody has been the subject of other clinical trials
to assess the efficacy of using the radiolabeled B-1 Antibody to deliver the
high levels of radiation necessary to prepare patients for autologous bone
marrow transplants. The conventional preparation for autologous bone marrow
transplants is chemotherapy and total body irradiation. These clinical trials
were designed to demonstrate improved tolerability, response rate and duration
of response.
 
     The first of two clinical trials conducted at the University of Washington
Cancer Center and the Fred Hutchinson Cancer Research Center tested radiolabeled
B-1 Antibody as a single agent to prepare patients for an autologous bone marrow
transplant by achieving a total body radiation level of up to 570 cGy (over
seven times the B-1 Therapy's dose). As reported in The Lancet in August 1995,
of the 21 patients receiving the full radiotherapeutic regimen, the overall
response rate was 86% and the complete response rate was 73%. High incidences of
radiotoxicity-related side effects were reported due to the extreme dosages
employed. Interim data from this clinical trial were published in the New
England Journal of Medicine in October 1993.
 
     The second clinical trial, currently ongoing, is designed to test the
combination of similarly high doses of radiolabeled B-1 Antibody and standard
doses of chemotherapy in preparation for autologous bone marrow
 
                                       12
<PAGE>   13
 
transplant. This clinical trial has enrolled 23 patients since its commencement
in January 1995. Data from this clinical trial have not yet appeared in a peer
reviewed publication.
 
     The Company intends to commence a dose refinement clinical trial in the
second half of 1997 for the combined use of lower doses of radiolabeled B-1
Antibody and standard chemotherapy as preparation for autologous bone marrow
transplant.
 
TAP PRO-DRUG PLATFORM
 
     The Company's second technology platform, its tumor-activated peptide
pro-drug technology, has the potential to broaden significantly the therapeutic
window of cytotoxic agents. The TAP pro-drug technology is based upon an
understanding of the biochemical mechanisms utilized by cancer cells to
metastasize and the identification of a potential means for exploiting these
mechanisms and is being developed in collaboration with the Catholique
Universite de Louvain, Belgium. TAP pro-drugs are designed to be (i) activated
preferentially at the tumor site by enzymes secreted by the tumor, (ii) stable
in circulation and in normal tissues and (iii) unable to penetrate normal cells
or malignant cells until activated. As a result, relatively larger quantities of
cytotoxic agents are expected to reach and enter malignant cells as opposed to
normal cells, which could permit a significant increase in maximum tolerated
dosages, potentially overcoming drug resistance in cancer cells.
 
     The Company's lead preclinical pro-drug candidate is a pro-drug version of
doxorubicin known as Super-Leu-Dox. Doxorubicin is an off-patent
chemotherapeutic drug which currently is used in the treatment of a number of
solid tumor cancers, including breast, prostrate, ovarian and soft-tissue
sarcoma cancers. Super-Leu-Dox is based on a proprietary peptide of four amino
acids (a "tetrapeptide") that can be linked to doxorubicin's active site. In the
first step of a two-step activation process, the extracellular tumor enzyme
cleaves three amino acids from the tetrapeptide leaving a leucine amino
acid-doxorubicin conjugate that is able to penetrate cells. Since this first
activation step occurs in the immediate vicinity of tumor cells that are
secreting the enzyme, the probability that the cytotoxic drug will enter tumor
cells as opposed to normal cells is increased. Moreover, the conjugate remains
inactive inside the cell until the remaining leucine is removed from
doxorubicin's active site by an intracellular enzyme. Although it is expressed
in both normal and tumor cells, this intracellular enzyme is present in tumor
cells in concentrations three to five times higher than in normal cells. As a
result, the doxorubicin is activated to a greater extent in tumor cells relative
to normal cells.
 
     This two-step activation process is designed to produce a significantly
higher ratio of active to inactive doxorubicin in cancer cells relative to
normal cells. In in vitro studies of Super-Leu-Dox, researchers have found that
the concentration of activated to inactivated doxorubicin in tumor cells was 40
times higher than in normal cells. These results, if confirmed in clinical
trials, offer the potential to improve significantly the therapeutic window of
doxorubicin. The Company currently plans to complete preclinical development of
Super-Leu-Dox during 1997 and to commence clinical trials during early 1998.
 
     Prior to the licensing of the TAP pro-drug technology by Coulter
Pharmaceutical, an earlier generation leucinedoxorubicin conjugate was tested as
a stand-alone therapy for the treatment of solid tumors in two separate dose
escalation clinical trials in Europe. A total of 59 patients were enrolled in
these clinical trials, and patients safely tolerated doses well in excess of
those associated with unmodified doxorubicin. Results from these clinical
trials, along with data from preclinical studies, will be used by the Company to
select the initial indication to pursue in clinical trials of Super-Leu-Dox.
Selection of the particular indication or indications to be evaluated in such
clinical trials has not been finalized.
 
     While the Company will focus initially on previously approved
chemotherapeutic drugs, it also plans to evaluate TAP pro-drug versions of
cytotoxic agents currently considered too toxic to be used in their unmodified
forms. The Company believes that the TAP pro-drug technology potentially can be
applied to several classes of cytotoxic agents, including the vinca alkaloids,
which are used commonly to treat blood-borne malignancies and some solid tumors.
The Company also plans to develop and evaluate other peptide structures for
possible use in pro-drug versions of cytotoxic agents and other cancer
therapeutics.
 
                                       13
<PAGE>   14
 
     Under its agreement with Catholique Universite de Louvain, Belgium, the
Company has secured an exclusive license to the intellectual property underlying
the program and will pay royalties on sales of licensed products. The agreement
also provides for specified minimum payments, including one payment that will be
due if the Company should elect to relocate the program outside of Belgium. The
amounts of these payments are not material and, in any event, the Company does
not intend to relocate the research program.
 
MANUFACTURING
 
     The Company intends to utilize contract manufacturers for most of the
preclinical and clinical requirements for its potential products and for all of
its commercial needs. This strategy is expected to (i) accelerate the scale-up
of manufacturing processes to commercial scale, (ii) reduce initial capital
investment, (iii) result in competitive manufacturing costs, and (iv) provide
access to a wide range of manufacturing technologies. For its clinical trials of
the B-1 Therapy, the Company currently is supplying B-1 Antibody to clinical
trial sites from an existing, finite inventory of the antibody produced by
Coulter Corporation from the B-1 Antibody cell line originally developed by the
Dana-Farber Cancer Institute in 1978. Labeling with (131)I currently is
performed by radiopharmacies at the individual clinical trial sites.
 
     Pursuant to a development contract with the Company, a third-party
manufacturer, Lonza Biologics plc ("Lonza"), has re-cloned the B-1 Antibody cell
line to improve the productivity of the cell line in intermediate-scale
production and currently is preparing to supply the B-1 Antibody to meet initial
commercial requirements. The Company's contract with Lonza is structured on a
staged basis, with specified payments due upon Lonza's satisfactory completion
of particular steps in the re-cloning and production scale-up process. Aggregate
commitments under this contract are approximately $3.7 million, of which
approximately $3.6 million had been incurred and expensed through December 31,
1996. The Company will make purchases of material from Lonza pursuant to
purchase orders to be issued from time to time based on the Company's needs. The
level of purchases that will be made from Lonza during the course of the program
is currently unknown. The Company also anticipates that Lonza may be engaged to
conduct some additional development work in support of regulatory filings, the
cost of which is currently unknown. To date, Lonza has produced three batches of
the B-1 Antibody under GMP conditions. Lonza-produced B-1 Antibody has been
tested to confirm biological equivalency to the existing inventory of B-1
Antibody, and in January 1997 the Company received clearance by the FDA to start
using Lonza-produced antibody in its clinical trials of the B-1 Therapy.
 
     While radiolabeling of the B-1 Antibody at the individual trial sites has
been sufficient to date to support clinical trials, the Company believes that
radiolabeling should be performed at a central site to supply clinics that do
not have requisite radiolabeling capability, to ensure consistency and to reduce
cost. To this end, the Company has contracted with MDS Nordion International
("Nordion") to develop a process for radiolabeling the B-1 Antibody centrally.
This development contract is structured on a cost-plus-a-percentage-of-cost
basis and provides a framework for the negotiation of separate facilities and
supply agreements. Under this development contract, approximately $700,000 was
incurred and expensed through December 31, 1996. This development work is near
completion, and the parties are currently negotiating the terms of agreements
pursuant to which Nordion will supply radiolabeled B-1 Antibody from the
facility being constructed at Nordion. The Company anticipates that
radiolabeling services will be procured from Nordion from time to time on a
purchase order basis. Levels of purchases that will be made from Nordion during
the course of the program are currently unknown. The Company plans to switch to
centrally radiolabeled antibody from Nordion in mid-1997, for both completion of
clinical trials and commercial supplies. However, before using Nordion-labeled
material, an IND supplement must be cleared by the FDA. There can be no
assurance that contracts with Nordion will be entered into in a timely manner,
if at all, or that the FDA will provide such clearance in a timely manner, if at
all, and that clinical trials will not be delayed or disrupted as a result.
 
     Thus, if the B-1 Therapy is developed successfully and is approved for
marketing by the FDA, the Company expects that production for commercialization
will consist of (i) production of bulk B-1 Antibody by Lonza, (ii) the filling
and labeling of individual product vials with B-1 Antibody by another
third-party supplier, and (iii) radiolabeling of B-1 Antibody at Nordion. While
the Company plans to develop additional suppliers of these services, it expects
to rely on its current suppliers for all or a significant portion of its
 
                                       14
<PAGE>   15
 
requirements for the B-1 Therapy 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 the B-1 Therapy, if approved.
Any such change or interruption would have a material adverse effect on the
Company's business, financial condition and results of operators. 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 currently intends to produce these
products in Belgium in order to take advantage of local government research
grants that have been applied for to support the TAP pro-drug program. The
Company is in early discussions with potential manufacturers of Super-Leu-Dox,
its initial pro-drug product candidate.
 
MARKETING AND SALES
 
     The Company intends to market its products in the United States through its
own 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 its B-1 Therapy, if
approved, and to create the capability to sell other products that it may
develop or in-license. The sales force is expected to initially call upon
oncologists, hematologists and nuclear medicine physicians in connection with
the sale of the Company's B-1 Therapy. The Company initially will focus its
sales force on those physicians who treat the largest volume of NHL patients.
These physicians generally are concentrated in large metropolitan areas. Because
of the characteristics of the B-1 Therapy, the target physician must have access
to a facility with radiopharmaceutical and gamma camera scan capabilities. The
Company believes such facilities generally are available in large metropolitan
areas such that a significant portion of physicians who treat NHL patients will
be able to prescribe the B-1 Therapy. The Company intends to distribute its
products internationally through marketing partners. The Company has not yet
identified or entered into any agreements with any such partners, and there is
no assurance that it will be able to do so in a timely manner, if at all. The
Company has not yet established a sales and marketing capability in North
America, and there is no assurance that it will be able to do so in a timely or
cost effective manner, if at all.
 
     The current purchasers of cancer therapeutics are hospitals, clinics,
physicians, pharmacies, large HMOs and state and federal governments.
Historically, physicians made treatment decisions and prescribed therapeutics
which then were dispensed through the clinic, hospital or pharmacy. However, the
United States health care system is undergoing significant changes and the
decision-making authority of the physician varies. These changes may make it
necessary for the Company to alter its strategy prior to launch of the B-1
Therapy or even after launch and could affect adversely the ability of the
Company to generate revenues.
 
     The Company's ability to market effectively the B-1 Therapy 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 its B-1 Therapy will
be priced competitively compared to existing methods of treatment such as
chemotherapy and radiation therapy. See "Risk Factors -- Uncertainty of Market
Acceptance of the B-1 Therapy."
 
PHARMACEUTICAL PRICING AND REIMBURSEMENT
 
     Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. Recent 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
 
                                       15
<PAGE>   16
 
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.
The Company's B-1 Therapy, as potentially the first radioimmunotherapy for
cancer, faces particular uncertainties due to the absence of a comparable,
approved therapy to serve as a model for pricing and reimbursement decisions.
There can be no assurance that the Company's product candidates will be
considered cost effective or that adequate third-party reimbursement will be
available to enable the Company to maintain price levels sufficient to realize
an appropriate return on its investment in product development. Further, there
can be no assurance that products can be manufactured on a commercial scale, for
a cost that will enable the Company to price its products within reimbursable
rates. Legislation and regulations affecting the pricing of pharmaceuticals may
change before the Company's proposed products are approved for marketing.
Adoption of such legislation could further limit reimbursement for medical
products. If adequate coverage and reimbursement rates are not provided by the
government and third-party payors for the Company's products, the market
acceptance of these products would be adversely affected, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
GOVERNMENT REGULATION
 
     The testing, manufacturing, labeling, advertising, promotion, export and
marketing, among other things, of the Company's proposed products are subject to
extensive regulation by governmental authorities in the United States and other
countries. In the United States, pharmaceutical products are regulated by the
Food and Drug Administration under the Federal Food, Drug and Cosmetic Act and
other laws, including, in the case of biologics, the Public Health Service Act.
At the present time, the Company believes that its B-1 Therapy and other
immunotherapeutics that it may develop will be regulated by the FDA as biologics
and that other products to be developed by the Company, including Super-Leu-Dox
and other TAP pro-drugs, are likely to be regulated as drugs.
 
     The steps required before a drug or biologic may be approved for marketing
in the United States generally include (i) preclinical laboratory tests and
animal tests, (ii) the submission to the FDA of an IND for human clinical
testing, which must become effective before human clinical trials may commence,
(iii) adequate and well-controlled human clinical trials to establish the safety
and efficacy of the product, (iv) in the case of a biologic, the submission to
the FDA of a biologic license application ("BLA"), or in the alternative a
Product License Application ("PLA") for the product and an Establishment License
Application ("ELA") for the facility at which the product is manufactured, or in
the case of a drug, a New Drug Application ("NDA"), (v) FDA review of the BLA
(or PLA/ELA) or NDA and (vi) satisfactory completion of an FDA inspection of the
manufacturing facilities at which the product is made to assess compliance with
GMP. The testing and approval process requires substantial time, effort and
financial resources, and there can be no assurance that any approval will be
granted on a timely basis, if at all.
 
     Preclinical studies include laboratory evaluation of the product, as well
as animal studies to assess the potential safety and efficacy of the product.
The results of the preclinical studies, together with manufacturing information
and analytical data, are submitted to the FDA as part of the IND, which must
become effective before clinical trials may be commenced. The IND automatically
will become effective thirty days after receipt by the FDA, unless the FDA
before that time raises concerns or questions about the conduct of the trials as
outlined in the IND. In such case, the IND sponsor and the FDA must resolve any
outstanding concerns before clinical trials can proceed. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials.
 
                                       16
<PAGE>   17
 
     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. 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 requesting approval to market the
product. Before approving a BLA or NDA, the FDA will inspect the facilities at
which the product is manufactured and will not approve the product unless the
manufacturing facility is in GMP compliance. The FDA may delay a BLA or NDA if
applicable regulatory criteria are not satisfied, require additional testing or
information, and/or require postmarketing testing and surveillance to monitor
safety or efficacy of a product. There can be no assurance that FDA approval of
any BLA or NDA submitted by the Company will be granted on a timely basis, if at
all. Also, if regulatory approval of a product is granted, such approval may
entail limitations on the indicated uses for which such product may be marketed.
 
     The Company also will be subject to a variety of foreign regulations
governing clinical trials and sales of its products. Whether or not FDA approval
has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must be obtained prior to the commencement of
marketing of the product in those countries. The approval process varies from
country to country and the time needed to secure approval may be longer or
shorter than that required for FDA approval.
 
  Clinton-Kessler Cancer Initiative
 
     In March 1996, the FDA announced a new policy intended to accelerate the
approval process for cancer therapies addressing disease conditions in which
patients have limited treatment options. The Company believes that the B-1
Therapy may qualify for this accelerated approval process and designed its Phase
II/III clinical trial of the B-1 Therapy with the objective of securing
accelerated approval. Significant uncertainty exists as to the extent to which
such initiative will result in accelerated review and approval. Further, the FDA
has not made available comprehensive guidelines with respect to this initiative,
and it retains considerable discretion in determining eligibility for
accelerated review and approval and is not bound by discussions that an
 
                                       17
<PAGE>   18
 
applicant may have with FDA staff. Accordingly, the FDA could employ such
discretion to deny eligibility of the B-1 Therapy as a candidate for accelerated
review or require additional clinical trials or other information before
approving the B-1 Therapy. The Company cannot predict the ultimate impact, if
any, of the new approval process on the timing or likelihood of FDA approval of
its B-1 Therapy or any of its other potential products.
 
  Orphan Drug Designation
 
     Under the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a "rare disease or condition," which is generally a
disease or condition that affects fewer than 200,000 individuals in the United
States. Orphan drug designation must be requested before submitting a BLA. After
the FDA grants orphan drug designation, the generic identity of the therapeutic
agent and its potential orphan use are disclosed publicly by the FDA. Orphan
drug designation does not convey any advantage in, or shorten the duration of,
the regulatory review and approval process. If a product that has orphan drug
designation subsequently receives FDA approval for the indication for which it
has such designation, the product is entitled to orphan exclusivity, i.e., the
FDA may not approve any other applications to market the same drug for the same
indication, except in very limited circumstances, for seven years. The Company's
B-1 Therapy has received orphan drug designation from the FDA. Although the FDA
recently decided to remove NHL from the list of diseases for which orphan drug
designation may be obtained, the previous designation of the Company's B-1
Therapy 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 use of the Company's B-1 Therapy requires the
handling and disposal of (131)I, a radioactive isotope of iodine. The
radiolabeling of the B-1 Antibody currently is performed by radiopharmacies at
the individual clinical trial sites. These sites must comply with various state
and federal regulations regarding the handling and use of radioactive materials.
Violation of these state and federal regulations by a clinical trial site could
significantly delay completion of such trials. For the continuation of its
ongoing clinical trials and for commercial-scale production, the Company plans
to rely on a contract manufacturer, Nordion, to radiolabel the B-1 Antibody with
(131)I, initially at a single location in Canada. Although this vendor is
experienced in the handling and use of radioactive materials, violation of
safety regulations could occur and the risk of accidental contamination or
injury cannot be eliminated completely. In the event of any such noncompliance
or accident, the supply of radiolabeled B-1 Antibody for use in clinical trials
or commercially could be interrupted, which could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"-- Manufacturing."
 
     The administration of the B-1 Therapy entails the introduction of
radioactive materials into patients. These patients emit radioactivity at levels
that pose a safety concern to others around them, especially healthcare workers
for whom the cumulative effect of repeated exposure to radioactivity is of
particular concern. These concerns are addressed in regulations promulgated by
the Nuclear Regulatory Commission, as well as by various state and local
governments and individual hospitals. Generally, patients who emit radioactivity
above specified levels must be admitted to the hospital, where they can be
isolated from others, until radiation falls to acceptable levels. The NRC
recently enacted revised regulations that are likely to make it easier for
hospitals to treat patients with radioactive materials on an outpatient basis.
Under these regulations, the Company believes that its B-1 Therapy could be
administered on an outpatient basis in most cases. Although state and local
governments often follow the lead of the NRC, there can be no assurance that
they will do so or that patients receiving the B-1 Therapy will not have to
remain in the hospital for one to three days following administration of the
therapeutic dose, adding to the overall cost of the therapy.
 
     The Company also expects to use hazardous chemicals and radioactive
compounds in its ongoing research activities. Although the Company believes that
safety procedures for handling and disposing of such materials will comply with
the standards prescribed by state and federal regulations, the risk of
accidental
 
                                       18
<PAGE>   19
 
contamination or injury from these materials cannot be completely eliminated.
The Company could be held liable for any damages that result from such an
accident, as well as for unexpected remedial costs and penalties that may result
from any violation of applicable regulations, which could result in a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the Company may incur substantial costs to comply with
environmental regulations.
 
PATENTS AND OTHER INTELLECTUAL PROPERTY
 
     The Company believes that patent and trade secret protection is important
to its business and that its future will depend in part on its ability to
maintain its technology licenses, protect its trade secrets, secure additional
patents and operate without infringing the proprietary rights of others. The
Company currently holds exclusive rights to an issued United States patent and
several United States patent applications that relate to therapeutic protocols
used in the B-1 Therapy. The Company also holds an exclusive license to patent
applications filed worldwide, including the United States, relating to its TAP
pro-drug program.
 
     The pharmaceutical and biotechnology fields are characterized by a large
number of patent filings. A substantial number of patents have already been
issued to other pharmaceutical and biotechnology companies. Research has been
conducted for many years in the monoclonal antibody field by pharmaceutical and
biotechnology companies and other organizations. Competitors may have filed
applications for or have been issued patents and may obtain additional patents
and proprietary rights related to products or processes competitive with or
similar to those of the Company. Patent applications are maintained in secrecy
for a period after filing. Publication of discoveries in the scientific or
patent literature tends to lag behind actual discoveries and the filing of
related patent applications. The Company may not be aware of all of the patents
potentially adverse to the Company's interest that may have been issued to other
companies, research or academic institutions, or others. No assurances can be
given that such patents do not exist, have not been filed, or could not be filed
or issued, which contain claims relating to the Company's technology, products
or processes.
 
     To date, no consistent policy has emerged regarding the breadth of claims
allowed in pharmaceutical and biotechnology patents. If patents have been or are
issued to others containing preclusive or conflicting claims and such claims are
ultimately determined to be valid, the Company may be required to obtain
licenses to one or more patents or to develop or obtain alternative technology.
The Company is aware of various patents that have been issued to others that
pertain to a portion of the Company's prospective business; however, the Company
believes that it does not infringe any patents that ultimately would be
determined to be valid. There can be no assurance that patents do not exist in
the United States or in other foreign countries or that patents will not be
issued to third parties that contain preclusive or conflicting claims with
respect to the B-1 Therapy or any of the Company's other product candidates or
programs. Commercialization of monoclonal antibody-based products may require
licensing and/or cross-licensing of one or more patents with other organizations
in the field. There can be no assurance that the licenses that might be required
for the Company's processes or products would be available on commercially
acceptable terms, if at all.
 
     The Company's breach of an existing license or failure to obtain a license
to technology required to commercialize its product candidates may have a
material adverse effect on the Company's business, financial condition and
results of operations. Litigation, which could result in substantial costs to
the Company, may also be necessary to enforce any patents issued to the Company
or to determine the scope and validity of third-party proprietary rights. If
competitors of the Company prepare and file patent applications in the United
States that claim technology also claimed by the Company, the Company may have
to participate in interference proceedings declared by the United States Patent
and Trademark Office to determine priority of invention, which could result in
substantial cost to the Company, even if the eventual outcome is favorable to
the Company. An adverse outcome could subject the Company to significant
liabilities to third parties and require the Company to license disputed rights
from third parties or to cease using such technology.
 
     The Company also relies on trade secrets to protect its technology,
especially where patent protection is not believed to be appropriate or
obtainable. The Company protects its proprietary technology and processes, in
part, by confidentiality agreements with its employees, consultants,
collaborators and certain contractors.
 
                                       19
<PAGE>   20
 
There can be no assurance that these agreements will not be breached, that the
Company would have adequate remedies for any breach, or that the Company's trade
secrets or those of its collaborators or contractors will not otherwise become
known or be discovered independently by competitors.
 
     Patents issued and patent applications filed internationally relating to
biologics are numerous and there can be no assurance that current and potential
competitors and other third parties have not filed or in the future will not
file applications for, or have not received or in the future will not receive,
patents or obtain additional proprietary rights relating to products or
processes used or proposed to be used by the Company. Moreover, there is certain
subject matter which is patentable in the United States and not generally
patentable outside of the United States. Statutory differences in patentable
subject matter may limit the protection the Company can obtain on some of its
inventions outside of the United States. For example, methods of treating humans
are not patentable in many countries outside of the United States. These and/or
other issues may prevent the Company from obtaining patent protection outside of
the United States which would have a material adverse effect on the Company's
business, financial condition and results of operations.
 
     Rights to use the name "Coulter Pharmaceutical, Inc." are licensed from
Coulter Corporation.
 
COMPETITION
 
     The pharmaceutical and biotechnology industries are intensely competitive.
Any product candidate developed by the Company would compete with existing drugs
and therapies. There are many pharmaceutical companies, biotechnology companies,
public and private universities and research organizations actively engaged in
research and development of products for the treatment of people with cancer.
Many of these organizations have financial, technical, manufacturing and
marketing resources greater than those of the Company. Several of them have
developed or are developing therapies that could be used for treatment of the
same diseases targeted by the Company. In March 1997, one competitor known to
the Company submitted applications in the U.S. and Europe for approval of a
chimeric antibody treatment for NHL. If a competing company were to develop or
acquire rights to a more efficient or safer cancer therapy for treatment of the
same diseases targeted by the Company, or one which offers significantly lower
costs of treatment, the Company's business, financial condition and results of
operations could be materially adversely affected.
 
     The Company believes that competition in the development and marketing of
new cancer therapies will be based primarily on product efficacy and safety,
time to market and price. To the extent the Company's product programs are
successful, it also intends to rely to some degree on patents and other
intellectual property and orphan drug designations to protect its products from
competition.
 
     The Company believes that its product development programs will be subject
to significant competition from companies utilizing alternative technologies as
well as to increasing competition from companies that develop and apply
technologies similar to the Company's technologies. Other companies may succeed
in developing products earlier than the Company, obtaining approvals for such
products from the FDA more rapidly than the Company or developing products that
are safer and more effective than those under development or proposed to be
developed by the Company. There can be no assurance that research and
development by others will not render the Company's technology or potential
products obsolete or non-competitive or result in treatments superior to any
therapy developed by the Company, or that any therapy developed by the Company
will be preferred to any existing or newly developed technologies.
 
PRODUCT LIABILITY AND INSURANCE
 
     The manufacture and sale of human therapeutic products involve an inherent
risk of product liability claims and associated adverse publicity. The Company
has only limited product liability insurance for clinical trials and no
commercial product liability insurance. There can be no assurance that the
Company will be able to maintain existing insurance or obtain additional product
liability insurance on acceptable terms or with adequate coverage against
potential liabilities. Such insurance is expensive, difficult to obtain and may
not be available in the future on acceptable terms, if at all. An inability to
obtain sufficient insurance coverage on reasonable terms or to otherwise protect
against potential product liability claims brought against the
 
                                       20
<PAGE>   21
 
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 January 21, 1997, the Company had 31 employees, 17 of whom were
engaged in product development activities. Fourteen of such employees hold
post-graduate degrees, including four with medical degrees and eight 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.
 
                                  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 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
its B-1 Therapy are primarily from a Phase I/II dose escalation trial which was
designed to develop and refine the therapeutic protocol, to determine the
maximum tolerated dose of total body radiation and to assess the safety and
efficacy profile of treatment with a radiolabeled antibody. Further, the data
from this Phase I/II dose escalation trial were compiled from testing conducted
at a single site and with a relatively small number of patients per NHL
histology and disease stage. Substantial additional development and clinical
testing and investment will be required prior to seeking any regulatory approval
for commercialization of this potential product. There can be no assurance that
clinical trials of the B-1 Therapy 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 the B-1 Therapy 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 the B-1 Therapy, 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 eligibility
criteria for the study and the existence of competing clinical trials. There can
be no assurance that delays in patient enrollment in clinical trials will not
occur, and any such delays may result in increased costs, program delays or
both, which could have a material adverse effect on the Company's business,
financial condition and results of operations.
 
     Early Stage of Development. Since its inception in 1995, the Company has
been engaged in the development of drugs and related therapies for the treatment
of people with cancer. The Company's product candidates are generally in early
stages of development, with only one in clinical trials. No revenues have been
generated from product sales or product royalties; and products resulting from
the Company's research and development efforts, if any, are not expected to be
available commercially for at least the next few years. No
 
                                       21
<PAGE>   22
 
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, and by state and local
governments. Such regulations govern, among other things, the development,
testing, manufacture, labeling, storage, premarket clearance or approval,
advertising, promotion, sale and distribution of such products. If drug products
are marketed abroad, they also are subject to extensive regulation by foreign
governments.
 
     The regulatory process, which includes preclinical studies and clinical
trials of each potential product, is lengthy, expensive and uncertain. Prior to
commercial sale in the United States, most new drugs and biologics, including
the Company's products under development, must be cleared or approved by the
FDA. Securing FDA marketing clearances and approvals often requires the
submission of extensive preclinical and clinical data and supporting information
to the FDA. Product clearances and 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 clearances
or 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 clearances or approvals on a timely basis, if at all, for any of its
product candidates, and delays in receipt or failures to receive such clearances
or 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 clearance
or approval. There can be no assurance that any clearances or 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 clearance or premarket approval of drugs and
biologics or to allow the Company to enter into government supply contracts,
withdrawals of previously approved marketing applications and criminal
prosecutions.
 
     Manufacturers of drugs and biologics also are required to comply with the
applicable FDA good manufacturing practice ("GMP") regulations, which include
requirements relating to quality control and quality assurance as well as the
corresponding maintenance of records and documentation. Manufacturing facilities
are subject to inspection by the FDA, including unannounced inspection, and must
be licensed before they can be used in commercial manufacturing of the Company's
products. There can be no assurance that the Company or its suppliers will be
able to comply with the applicable GMP regulations and other FDA regulatory
requirements. Such failure could have a material adverse effect on the Company's
business, financial condition and results of operations.
 
     An important part of the Company's strategy is to obtain expedited
marketing approval for its B-1 Therapy based upon policy changes in the
regulatory environment broadly referred to as the Clinton-Kessler Cancer
Initiative, announced in March 1996. Significant uncertainty exists as to the
extent to which such initiative will result in accelerated review and approval.
Further, the FDA has not made available comprehensive guidelines with respect to
this initiative, retains considerable discretion to determine eligibility for
accelerated review and approval and is not bound by discussions that an
applicant may have had with FDA staff. Accordingly, the FDA could employ such
discretion to deny eligibility of the B-1 Therapy as a candidate for accelerated
review or to require additional clinical trials or other information before
approving the B-1 Therapy. A determination that the B-1 Therapy is not eligible
for accelerated review or delays and
 
                                       22
<PAGE>   23
 
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 capacity or experience with respect to manufacturing products for
large-scale clinical trials or commercial purposes. The Company is supplying the
B-1 Antibody to clinical trial sites from an existing, finite inventory produced
by Coulter Corporation. To achieve the levels of production necessary to support
ongoing clinical trials and for early commercialization of its B-1 Therapy, the
Company has contracted with Lonza to produce unlabeled B-1 Antibody for use in
clinical trials and intends to enter into a commercial supply agreement. Lonza
has limited experience producing the B-1 Antibody on a commercial scale, and
there can be no assurance that Lonza will be able to produce the Company's
requirements on a timely basis, at commercially reasonable prices or with
acceptable quality.
 
     The Company also has contracted with Nordion to develop a process for
radiolabeling the B-1 Antibody with (131)I at a centralized site. Further, the
Company is in negotiations with Nordion to establish a centralized radiolabeling
facility and to supply radiolabeled B-1 Antibody. Radiolabeling of the B-1
Antibody currently is conducted at individual clinical trial sites, but the
Company plans to switch to centrally radiolabeled antibody from Nordion in
mid-1997, for both completion of clinical trials and commercial supplies.
However, before using Nordion-labeled material, an IND supplement must be
cleared by the FDA. There can be no assurance that the FDA will provide such
clearance in a timely manner, if at all, and that clinical trials will not be
delayed or disrupted as a result. Furthermore, if the B-1 Therapy is approved
and is successful in the market, Nordion's initial capacity to radiolabel
antibodies would not be sufficient to meet all of the Company's commercial
requirements, and additional capacity would have to be developed. There can be
no assurance that Nordion would be able to complete any such expansion scale-up
in a timely or cost effective manner, if at all, or that the Company could
obtain such capacity from others.
 
     The Company is aware of only a limited number of manufacturers capable of
producing the B-1 Antibody in commercial quantities or radiolabeling the
antibody with (131)I on a commercial scale. Should either of the Company's
existing or planned contractual relationships for production or radiolabeling of
the B-1 Antibody cease or be interrupted, or if its existing suppliers are
unable to meet the Company's requirements for any reason, there can be no
assurance that any additional or alternative third parties could be engaged to
carry out said production or radiolabeling on a timely basis or on commercially
acceptable terms, if at all. To establish and qualify a new facility to
centrally radiolabel antibodies could take as long as two years. Further,
radiolabeled antibody cannot be stockpiled against future shortages due to the
eight-day half-life of the (131)I radioisotope. Accordingly, any change in the
Company's existing contractual relationships with, or interruption in supply
from, its producer of unlabeled antibody or its radiolabeler could affect
adversely the Company's ability to complete its ongoing clinical trials and to
market the B-1 Therapy, if approved. Any such change or interruption would have
a material adverse effect on the Company's business, financial condition and
results of operations.
 
     Third-party manufacturers must comply with GMP regulations prescribed by
the FDA and other standards prescribed by various federal, state and local
regulatory agencies in the United States and any other relevant country. Failure
to comply with these regulations could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"-- Government Regulation; No Assurance of Regulatory Approvals" and
"Business -- Government Regulation."
 
     Future Capital Needs; Uncertainty of Additional Funding. The Company's
operations to date have consumed substantial and increasing amounts of cash. The
negative cash flow from operations is expected to continue and to accelerate in
the foreseeable future. The development of the Company's technology and
potential products will require a commitment of substantial funds. The Company
expects that its existing capital resources, including the net proceeds of its
initial public offering completed in January 1997 and interest thereon, will be
adequate to satisfy the requirements of its current and planned operations
through 1998. However, the rate at which the Company expends its resources is
variable, may be accelerated and will depend on many factors, including the
scope and results of preclinical studies and clinical trials, continued
 
                                       23
<PAGE>   24
 
progress of the Company's research and development of product candidates, the
cost, timing and outcome of regulatory approvals, the expenses of establishing a
sales and marketing force, the timing and cost of establishment or procurement
of requisite production, radiolabeling and other manufacturing capacities, the
cost involved in preparing, filing, prosecuting, maintaining, defending and
enforcing patent claims, the acquisition of technology licenses, the status of
competitive products and the availability of other financing.
 
     The Company will need to raise substantial additional capital to fund its
operations. The Company intends to 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 additional funds are raised by issuing equity
securities, substantial dilution to stockholders may result. If adequate funds
are not available, the Company may be required to delay, reduce the scope of, or
eliminate one or more of its research and development programs or obtain funds
through arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies, product candidates
or products that the Company would otherwise seek to develop or commercialize.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
     Uncertainty of Market Acceptance of the B-1 Therapy. 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, the
B-1 Therapy, 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, the B-1 Therapy may experience
under-utilization by oncologists and hematologists who are unfamiliar with the
application of the B-1 Therapy in the treatment of NHL. Further, oncologists and
hematologists are not typically licensed to administer radioimmunotherapies such
as the Company's B-1 Therapy and will need to engage a nuclear medicine
physician or receive specialty training to administer the B-1 Therapy. Market
acceptance of the B-1 Therapy also could be affected adversely if recently
enacted regulations of the Nuclear Regulatory Commission are not interpreted in
a manner to permit the B-1 Therapy to be administered on an outpatient basis in
most cases as is currently contemplated by the Company. Furthermore, market
acceptance could be affected adversely because some hospitals may be required to
administer the therapeutic dose of the B-1 Therapy on an inpatient basis under
applicable state or local or individual hospital regulations. As with any new
drug, doctors may be inclined to continue to treat patients with conventional
therapies, in this case chemotherapy. Market acceptance also could be affected
by the availability of thirdparty reimbursement. Failure of the B-1 Therapy to
achieve significant market acceptance would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"-- Uncertainty Related to Health Care Reform and Third-Party Reimbursement,"
"-- Hazardous and Radioactive Materials," and "Business -- Radioactive and Other
Hazardous Materials."
 
     Absence of Commercialization Resources and Experience. The Company intends
to sell its products in the United States through a direct sales force and,
where appropriate, in collaboration with marketing partners, and internationally
through marketing partners. The Company currently does not possess the resources
and experience necessary to commercialize any of its product candidates. If and
when the FDA approves the Company's B-1 Therapy, the Company's ability to market
the product will be contingent upon recruitment, training and deployment of a
sales and marketing force. Development of an effective sales force will require
significant financial resources and time. There can be no assurance that the
Company will be able to establish such a sales force in a timely or cost
effective manner, if at all, or that such a sales force will be capable of
generating demand for the Company's B-1 Therapy or other product candidates. The
Company has no arrangements for the international distribution of its B-1
Therapy, and there can be no assurance that the Company will be able to enter
into any such arrangements in a timely manner or on commercially favorable
terms, if at all. See "Business -- Marketing and Sales."
 
     Dependence Upon Proprietary Technology; Uncertainty of Patents and
Proprietary Technology. The pharmaceutical and biotechnology fields are
characterized by a large number of patent filings. A substantial number of
patents have already been issued to other pharmaceutical and biotechnology
companies. Research
 
                                       24
<PAGE>   25
 
has been conducted for many years in the monoclonal antibody field by
pharmaceutical and biotechnology companies and other organizations. Competitors
may have filed applications for or have been issued patents and may obtain
additional patents and proprietary rights related to products or processes
competitive with or similar to those of the Company. Patent applications are
maintained in secrecy for a period after filing. Publication of discoveries in
the scientific or patent literature tends to lag behind actual discoveries and
the filing of related patent applications. The Company may not be aware of all
of the patents potentially adverse to the Company's interests that may have been
issued to other companies, research or academic institutions, or others. No
assurance can be given that such patents do not exist, have not been filed, or
could not be filed or issued, which contain claims relating to the Company's
technology, products or processes.
 
     To date, no consistent policy has emerged regarding the breadth of claims
allowed in pharmaceutical and biotechnology patents. If patents have been or are
issued to others containing preclusive or conflicting claims and such claims are
determined ultimately to be valid, the Company may be required to obtain
licenses to one or more of such patents or to develop or obtain alternative
technology. The Company is aware of various patents that have been issued to
others that pertain to a portion of the Company's prospective business; however,
the Company believes that it does not infringe any patents that ultimately would
be determined to be valid. There can be no assurance that patents do not exist
in the United States or in other foreign countries or that patents will not be
issued to third parties that contain preclusive or conflicting claims with
respect to the B-1 Therapy or any of the Company's other product candidates or
programs. Commercialization of monoclonal antibody-based products may require
licensing and/or cross-licensing of one or more patents with other organizations
in the field. There can be no assurance that the licenses that might be required
for the Company's processes or products would be available on commercially
acceptable terms, if at all.
 
     The Company's breach of an existing license or failure to obtain a license
to technology required to commercialize its product candidates may have a
material adverse effect on the Company's business, financial condition and
results of operations. Litigation, which could result in substantial costs to
the Company, may also be necessary to enforce any patents issued to the Company
or to determine the scope and validity of third-party proprietary rights. If
competitors of the Company prepare and file patent applications in the United
States that claim technology also claimed by the Company, the Company may have
to participate in interference proceedings declared by the United States Patent
and Trademark Office to determine priority of invention, which could result in
substantial cost to the Company, even if the eventual outcome is favorable to
the Company. An adverse outcome could subject the Company to significant
liabilities to third parties and require the Company to license disputed rights
from third parties or to cease using such technology.
 
     The Company also relies on trade secrets to protect its technology,
especially where patent protection is not believed to be appropriate or
obtainable. The Company protects its proprietary technology and processes, in
part, by confidentiality agreements with its employees, consultants,
collaborators and certain contractors. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets or those of its
collaborators or contractors will not otherwise become known or be discovered
independently by competitors.
 
     Patents issued and patent applications filed internationally relating to
biologics are numerous and there can be no assurance that current and potential
competitors and other third parties have not filed or in the future will not
file applications for, or have not received or in the future will not receive,
patents or obtain additional proprietary rights relating to products or
processes used or proposed to be used by the Company. Moreover, there is certain
subject matter which is patentable in the United States and not generally
patentable outside of the United States. Statutory differences in patentable
subject matter may limit the protection the Company can obtain on some of its
inventions outside of the United States. For example, methods of treating humans
are not patentable in many countries outside of the United States. These and/or
other issues may prevent the Company from obtaining patent protection outside of
the United States which would have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Patents and Other Intellectual Property."
 
     History of Operating Losses; Anticipated Future Losses. The Company has a
limited history of operations and has experienced significant losses since
inception. As of December 31, 1996, the Company's
 
                                       25
<PAGE>   26
 
accumulated deficit was approximately $18.3 million. The Company expects to
incur significant additional operating losses over the next several years and
expects cumulative losses to increase substantially due to expanded research and
development efforts, preclinical studies and clinical trials and development of
manufacturing, marketing and sales capabilities. The Company expects that losses
will fluctuate from quarter to quarter and that such fluctuations may be
substantial. All of the Company's product candidates are in development in
preclinical studies and clinical trials, and no revenues have been generated
from product sales. To achieve and sustain profitable operations, the Company,
alone or with others, must develop successfully, obtain regulatory approval for,
manufacture, introduce, market and sell its products. The time frame necessary
to achieve market success is long and uncertain. The Company does not expect to
generate product revenues for at least the next few years. There can be no
assurance that the Company will ever generate sufficient product revenues to
become profitable or to sustain profitability. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
 
     Highly Competitive Industry; Risk of Technological Obsolescence. The
pharmaceutical and biotechnology industries are intensely competitive. Any
product candidate developed by the Company would compete with existing drugs and
therapies. There are many pharmaceutical companies, biotechnology companies,
public and private universities and research organizations actively engaged in
research and development of products for the treatment of people with cancer.
Many of these organizations have financial, technical, manufacturing and
marketing resources greater than those of the Company. Several of them may have
developed or are developing therapies that could be used for treatment of the
same diseases targeted by the Company. In March 1997, one competitor known to
the Company submitted applications for U.S. and European marketing approval of a
chimeric antibody treatment for NHL. If a competing company were to develop or
acquire rights to a more efficacious or safer cancer therapy for treatment of
the same diseases targeted by the Company, or one which offers significantly
lower costs of treatment, the Company's business, financial condition and
results of operations could be materially adversely affected. The Company
believes that its product development programs will be subject to significant
competition from companies utilizing alternative technologies as well as to
increasing competition from companies that develop and apply technologies
similar to the Company's technologies. Other companies may succeed in developing
products earlier than the Company, obtaining approvals for such products from
the FDA more rapidly than the Company or developing products that are safer and
more effective than those under development or proposed to be developed by the
Company. There can be no assurance that research and development by others will
not render the Company's technology or product candidates obsolete or
non-competitive or result in treatments superior to any therapy developed by the
Company, or that any therapy developed by the Company will be preferred to any
existing or newly developed technologies. See "Business -- Competition."
 
     Dependence on Management and Other Key Personnel. The Company is dependent
upon a limited number of key management and technical personnel. The loss of the
services of one or more of such key employees could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the Company's success will be dependent upon its ability to attract
and retain additional highly qualified sales, management, manufacturing and
research and development personnel. The Company faces intense competition in its
recruiting activities, and there can be no assurance that the Company will be
able to attract and/or retain qualified personnel.
 
     Exposure to Product Liability. The manufacture and sale of human
therapeutic products involve an inherent risk of product liability claims and
associated adverse publicity. The Company has only limited product liability
insurance for clinical trials and no commercial product liability insurance.
There can be no assurance that the Company will be able to maintain existing
insurance or obtain additional product liability insurance on acceptable terms
or with adequate coverage against potential liabilities. Such insurance is
expensive, difficult to obtain and may not be available in the future on
acceptable terms, if at all. An inability to obtain sufficient insurance
coverage on reasonable terms or to otherwise protect against potential product
liability claims brought against the Company in excess of its insurance
coverage, if any, or a product recall could have a material adverse effect upon
the Company's business, financial condition and results of operations. See
"Business -- Product Liability and Insurance."
 
                                       26
<PAGE>   27
 
     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. Recent
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. The Company's B-1
Therapy, 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 the B-1
Therapy is not administered in most cases on an outpatient basis, as is
contemplated currently by the Company, the projected cost of the therapy will be
higher than anticipated. In addition, there can be no assurance that products
can be manufactured on a commercial scale for a cost that will enable the
Company to price its products within reimbursable rates. Consequently, there can
be no assurance that the Company's product candidates will be considered cost
effective or that adequate third-party reimbursement will be available to enable
the Company to maintain price levels sufficient to realize an appropriate return
on its investment in product development. If adequate coverage and reimbursement
rates are not provided by the government and third-party payors for the
Company's products, the market acceptance of these products could be adversely
affected, which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Pharmaceutical
Pricing and Reimbursement."
 
     Hazardous and Radioactive Materials. The manufacturing and use of the
Company's B-1 Therapy requires the handling and disposal of (131)I, a
radioactive isotope of iodine. The radiolabeling of the B-1 Antibody currently
is performed by radiopharmacies at the individual clinical trial sites. These
sites must comply with various state and federal regulations regarding the
handling and use of radioactive materials. Violation of these state and federal
regulations by a clinical trial site could delay significantly completion of
such trials. For the continuation of its ongoing clinical trials and for
commercial-scale production, the Company plans to rely on a contract
manufacturer, Nordion, to radiolabel the B-1 Antibody with (131)I, initially at
a single location in Canada. Violations of safety regulations could occur with
this manufacturer, and, therefore, there is a risk of accidental contamination
or injury. In the event of any such noncompliance or accident, the supply of
radiolabeled B-1 Antibody for use in clinical trials or commercially could be
interrupted, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
 
     The Company also expects to use hazardous chemicals and radioactive
compounds in its ongoing research activities. The Company could be held liable
for any damages that result from such an accident, contamination or injury from
the handling and disposal of these materials, as well as for unexpected remedial
costs and penalties that may result from any violation of applicable
regulations, which could result in a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company may incur substantial costs to comply with environmental regulations.
See "Business -- Radioactive and Other Hazardous Materials."
 
     Adverse Impact of Possible Issuances of Preferred Stock; Anti-Takeover
Effect of Certain Charter and Bylaw Provisions. As of the completion of the
Company's initial public offering in January 1997, the Board of Directors has
the authority to issue up to 3,000,000 shares of Preferred Stock and to fix the
price, rights,
 
                                       27
<PAGE>   28
 
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 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 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 9,000 square feet of office
space located in Palo Alto, California, under a short-term lease agreement.
Management is looking currently for a larger facility and expects to relocate
during 1998.
 
ITEM 3. LEGAL PROCEEDINGS
 
     Not Applicable
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
 
     Not Applicable
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS MATTERS
 
     The Company's Common Stock is traded on The Nasdaq National Market under
the symbol "CLTR." Trading of the Company's Common Stock commenced on January
28, 1997, following effectiveness of its initial public offering. The Company's
Common Stock was not publicly traded during 1995 or 1996, hence data with
respect to high and low sales prices is not available. As of January 31, 1997,
the Company had approximately 143 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.
 
                                       28
<PAGE>   29
 
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
 
     The following selected consolidated financial data as of December 31, 1993,
1994, 1995 and 1996 and for each of the two years in the period ended December
31, 1994, the periods from January 1, 1995 to February 15, 1995 and from
inception (February 16, 1995) to December 31, 1995, for the year ended December
31, 1996, and for the period from inception (February 16, 1995) to December 31,
1996 are derived from the Consolidated Financial Statements of Coulter
Pharmaceutical, Inc. and the Financial Statements of the Antibody Therapeutics
Business Operations of Coulter Corporation that have been audited by Ernst &
Young LLP, independent auditors, and which are included elsewhere in this
Report. The statement of operations data for the year ended December 31, 1992
are derived from unaudited financial statements of the Antibody Therapeutics
Business Operations of Coulter Corporation not included herein which, in the
opinion of management of Coulter Corporation, reflect all adjustments,
consisting only of normal recurring adjustments, that Coulter Corporation
considers necessary for a fair presentation of the results of operations for
that period.
 
<TABLE>
<CAPTION>
                                                                  FULL YEAR 1995
                                                                -------------------
                                          ANTIBODY THERAPEUTICS
                                           BUSINESS OPERATIONS                        COMPANY
                                         OF COULTER CORPORATION           --------------------------------
                                  -------------------------------------   INCEPTION              INCEPTION
                                                                JAN 1,    (FEB 16,      YEAR     (FEB 16,
                                    YEAR ENDED DECEMBER 31,     1995 TO   1995) TO     ENDED     1995) TO
                                  ---------------------------   FEB 15,    DEC 31,    DEC 31,     DEC 31,
                                   1992      1993      1994      1995       1995        1996       1996
                                  -------   -------   -------   -------   ---------   --------   ---------
                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                               <C>       <C>       <C>       <C>       <C>         <C>        <C>
STATEMENT OF OPERATIONS DATA:
  Operating expenses:
  Research and development....... $ 1,574   $ 1,838   $ 2,798    $ 200     $  2,539   $ 13,681   $  16,220
  General and administrative.....     127       178       288       36          581      2,409       2,990
                                  -------   -------   -------    -----      -------   --------    --------
     Total operating expenses....   1,701     2,016     3,086      236        3,120     16,090      19,210
  Interest income................      --        --        --       --          127        752         879
                                  -------   -------   -------    -----      -------   --------    --------
  Net loss....................... $(1,701)  $(2,016)  $(3,086)   $(236)    $ (2,993)  $(15,338)  $ (18,331)
                                  =======   =======   =======    =====      =======   ========    ========
  Pro forma net loss per share...                                          $  (0.44)  $  (2.03)
                                                                            =======   ========
  Shares used in computing pro
     forma net loss per share....                                             6,798      7,557
                                                                            =======   ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                 ANTIBODY THERAPEUTICS
                                                 BUSINESS OPERATIONS OF
                                                  COULTER CORPORATION                COMPANY
                                                 ----------------------       ----------------------
                                                 DEC 31,       DEC 31,        DEC 31,       DEC 31,
                                                  1993           1994          1995           1996
                                                 -------       --------       -------       --------
                                                                   (IN THOUSANDS)
<S>                                              <C>           <C>            <C>           <C>
BALANCE SHEET DATA:
  Cash, cash equivalents and short-term
     investments................................  $  --         $   --        $ 3,438       $ 16,443
  Working capital (deficit).....................   (124)           (50)         2,878         10,737
  Total assets..................................    109            135          3,628         18,321
  Deficit accumulated during the development
     stage......................................     --             --         (2,993)       (18,331)
  Total stockholders' equity....................     --             --          2,997         10,546
  Coulter Corporation's net investment..........    (15)            85             --             --
</TABLE>
 
                                       29
<PAGE>   30
 
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. The Company's first product
candidate, the B-1 Therapy, is based upon the antibody therapeutics program
which originated in the late 1970s at Coulter Corporation. Coulter Corporation
conducted research and development on the potential therapeutic applications of
the B-1 Antibody as part of a broader antibody therapeutics program. To
accelerate the pace of development of the B-1 Therapy and to obtain external
sources of capital for the program, Coulter Corporation decided to create a
separate Company into which it placed its conjugated antibody therapeutics
assets. Thus, in February 1995, Coulter Pharmaceutical was incorporated and
acquired worldwide rights to the B-1 Therapy and related intellectual property,
know-how and other assets from Coulter Corporation.
 
     To date, the Company has devoted substantially all of its resources to its
research and development programs. No revenues have been generated from product
sales, and products resulting from the Company's research and development
efforts, if any, are not expected to be available commercially for at least the
next few years. The Company has a limited history of operations and has
experienced significant operating losses to date. The Company expects to incur
significant additional operating losses over the next several years and expects
cumulative losses to increase substantially due to expanded research and
development efforts, preclinical studies and clinical trials and development of
manufacturing, marketing and sales capabilities. The Company expects that losses
will fluctuate from quarter to quarter and that such fluctuations may be
substantial. There can be no assurance that the Company will successfully
develop, manufacture and commercialize its products or ever achieve or sustain
product revenues or profitability. As of December 31, 1996, the Company's
accumulated deficit during the development stage was approximately $18.3
million.
 
RESULTS OF OPERATIONS
 
     The following table consists of operating data for the year ended December
1994 for the Antibody Therapeutics Business Operations of Coulter Corporation
and for the year ended December 31, 1996 for the Company. For the fiscal year
December 31, 1995, the table combines data for the Antibody Therapeutics
Business Operations of Coulter Corporation (for the period January 1, 1995 to
February 15, 1995) and the Company (for the period from February 16, 1995 to
December 31, 1995) in order to facilitate management's discussion of financial
results. Certain costs and expenses presented in the statements of operations of
the Antibody Therapeutics Business Operations of Coulter Corporation represent
allocations and Coulter Corporation's management's estimates. As a result, the
statements of operations presented for periods prior to February 16, 1995 are
not strictly comparable to those of subsequent periods and may not be indicative
of the results of operations that would have been achieved had the Antibody
Therapeutics Business Operations of Coulter Corporation operated as a
non-affiliated entity during such period.
 
<TABLE>
<CAPTION>
                                          ANTIBODY THERAPEUTICS
                                          BUSINESS OPERATIONS OF
                                           COULTER CORPORATION           COMBINED               COMPANY
                                          ----------------------     -----------------     -----------------
                                                YEAR ENDED              YEAR ENDED            YEAR ENDED
                                            DECEMBER 31, 1994        DECEMBER 31, 1995     DECEMBER 31, 1996
                                          ----------------------     -----------------     -----------------
<S>                                       <C>                        <C>                   <C>
Operating expenses:
  Research and development..............         $  2,798                 $ 2,739              $  13,681
  General and administrative............              288                     617                  2,409
                                                 --------                --------              ---------
Total operating expenses................            3,086                   3,356                 16,090
Interest income.........................               --                     127                    752
                                                 --------                --------              ---------
Net loss................................         $ (3,086)                $(3,229)             $ (15,338)
                                                 ========                ========              =========
</TABLE>
 
                                       30
<PAGE>   31
 
COMPARISON OF YEAR ENDED DECEMBER 31, 1996, THE COMBINED YEAR ENDED DECEMBER 31,
1995 AND THE ANTIBODY THERAPEUTICS BUSINESS OPERATIONS OF COULTER CORPORATION
FOR THE YEAR ENDED DECEMBER 31, 1994.
 
     Operating Expenses. Research and development expenses were $13.7 million
for the year ended December 31, 1996, compared to $2.7 million for the combined
year ended December 31, 1995 and $2.8 million for the year ended December 31,
1994. The $11.0 million increase from the combined year ended December 31, 1995
to the year ended December 31, 1996 was due primarily to increases in staffing
and expenditures associated with the development of the B-1 Therapy, including
costs of clinical trials and manufacturing expenses. These manufacturing
expenses included certain expenses associated with scaled-up production of
monoclonal antibodies and the establishment of a centralized radiolabeling
capability. The $0.1 million decrease in expenses from the year ended December
31, 1994 to the combined year ended December 31, 1995 was due primarily to the
net effect of decreased expenses resulting from the elimination of payments to
the Dana-Farber Cancer Institute for prepaid royalties and sponsored research,
primarily offset by increases in staffing and in expenditures associated with
the development of the B-1 Therapy, including costs of clinical trials and
manufacturing expenses. The Company expects its research and development
expenses to grow in 1997, reflecting anticipated increased costs related to
additions to staffing, preclinical studies, clinical trials and manufacturing.
 
     General and administrative expenses were $2.4 million for the year ended
December 31, 1996, compared to $0.6 million for the combined year ended December
31, 1995 and $0.3 million for the year ended December 31, 1994. The $1.8 million
increase from the combined year ended December 31, 1995 to the year ended
December 31, 1996 was incurred to support the Company's facilities expansion,
increased research and development efforts, and related legal and patent
activities. The $0.3 million increase in expenses from the year ended December
31, 1994 to the combined year ended December 31, 1995 primarily represents
expenses associated with the formation of the Company and investment in
infrastructure. The Company expects its general and administrative expenses to
continue to increase in 1997, in support of its increased research and
development, patent and corporate development activities, as well as increasing
commercialization efforts in anticipation of potential product sales.
 
     Interest Income. Interest income was $0.8 million for the year ended
December 31, 1996, compared to $0.1 million for the combined year ended December
31, 1995 and none for the year ended December 31, 1994. The Company first
recorded interest income in the combined year ended December 31, 1995 which
resulted from investment of the net proceeds from the sale of the Company's
Preferred Stock in 1995. The $0.7 million increase from the combined year ended
December 31, 1995 to the year ended December 31, 1996 was due to higher average
cash, cash equivalent and short-term investment balances as a result of
Company's sale of Preferred Stock in August 1995 and April 1996.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Since its inception through December 31, 1996, the Company has financed its
operations primarily through private placements of equity securities totaling
$28.4 million. In December 1996, the Company entered into a $3.8 million
equipment financing agreement, $2.0 million of which is available at December
31, 1996.
 
     Cash, cash equivalents and short-term investments totaled $16.4 million at
December 31, 1996. In January 1997, the Company completed its initial public
offering of 2,500,000 shares of common stock at a price to the public of $12.00
per share, resulting in net proceeds to the Company of approximately $27.9
million. Also in January 1997, the Company received an additional $3.1 million
from the exercise of warrants to purchase 385,315 shares of its common stock. In
February 1997, the Company received an additional $4.2 million from the sale of
375,000 shares of its common stock pursuant to the exercise of the underwriters'
over-allotment option in connection with its initial public offering.
 
     The negative cash flow from operations results primarily from the Companies
net operating losses and is expected to continue and to accelerate in the
foreseeable future. The Company expects to incur substantial and increasing
research and development expenses, including expenses related to additions to
personnel, preclinical studies, clinical trials, manufacturing and
commercialization efforts. The Company will need to
 
                                       31
<PAGE>   32
 
raise substantial additional capital to fund its operations. The Company intends
to 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.
 
     Net cash used in operations was $10.4 million for the year ended December
31, 1996, compared to $2.6 million for the combined year ended December 31,
1995. This increase is primarily the result of the increased net loss for the
period ended December 31, 1996, partially offset by an increase in accrued
liabilities. Net cash used in investing activities increased to $8.4 million for
the year ended December 31, 1996 from $0.1 million for the combined year ended
December 31, 1995 primarily resulting from the purchase of $8.6 million in
short-term investments using a portion of the proceeds of the Company's sale of
Preferred Stock in April 1996. The Company's capital expenditures increased to
$0.9 million for the year ended December 31, 1996 from $0.1 million for the
combined year ended December 31, 1995, primarily representing investment in
equipment associated with the centralized radiolabeling capability. Net cash
provided by financing activities increased to $24.3 million for the year ended
December 31, 1996 from $6.2 million for the combined year ended December 31,
1995, resulting primarily from the sale of the Company's Preferred Stock in
April 1996.
 
     The Company expects that its existing capital resources, including the net
proceeds of its initial public offering and interest thereon, will be adequate
to satisfy the requirements of its current and planned operations through 1998.
At December 31, 1996, the Company had no material commitments for capital
expenditures. Moreover, the Company is not at present considering making any
such commitments. 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; and the availability of other
financing.
 
                                       32
<PAGE>   33
 
               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
The Board of Directors and Stockholders
Coulter Pharmaceutical, Inc.
 
     We have audited the accompanying consolidated balance sheets of Coulter
Pharmaceutical, Inc. (a development stage company) (the "Company") as of
December 31, 1995 and 1996, and the related consolidated statements of
operations and cash flows for the periods from inception (February 16, 1995) to
December 31, 1995 and 1996 and for the year ended December 31, 1996 and the
related consolidated statement of stockholders' equity for the period from
inception (February 16, 1995) to December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Coulter
Pharmaceutical, Inc. at December 31, 1995 and 1996, and the consolidated results
of its operations and its cash flows for the periods from inception (February
16, 1995) to December 31, 1995 and 1996 and for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
 
                                          /s/ Ernst & Young LLP
 
Palo Alto, California
February 2, 1997
 
                                       33
<PAGE>   34
 
ITEM 8.
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                          CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                     DECEMBER 31,     DECEMBER 31,
                                                                         1995             1996
                                                                     ------------     ------------
<S>                                                                  <C>              <C>
Current assets:
  Cash and cash equivalents........................................    $  3,438         $  8,826
  Short-term investments...........................................          --            7,617
  Prepaid expenses and other current assets........................          40              499
  Current portion of employee loans receivable.....................          31               35
                                                                        -------        ---------
     Total current assets..........................................       3,509           16,977
Property and equipment, net........................................          93              924
Other assets.......................................................          26              149
Employee loans receivable..........................................          --              271
                                                                        -------        ---------
                                                                       $  3,628         $ 18,321
                                                                        =======        =========
                               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable.................................................    $    341         $  1,490
  Payable to Coulter Corporation...................................          25              111
  Accrued liabilities..............................................         265            4,330
  Current portion of equipment financing obligations...............          --              309
                                                                        -------        ---------
     Total current liabilities.....................................         631            6,240
  Non current portion of equipment financing obligations and
     debt..........................................................          --            1,535
Commitments
Stockholders' equity:
  Preferred stock, issuable in series, $.001 par value:
     20,000,000 shares authorized; 9,833,333 and 19,797,940 shares
     issued and outstanding at December 31, 1995 and 1996,
     respectively; at amounts paid in; aggregate liquidation
     preference of $33,420 at December 31, 1996....................       5,989           28,355
  Common stock, $.001 par value: 25,000,000 shares authorized;
     2,059 and 437,612 shares issued and outstanding at December
     31, 1995 and 1996, respectively...............................          --                1
  Additional paid-in capital.......................................           1            2,488
  Net unrealized loss on securities available-for-sale.............          --               (3)
  Deferred compensation............................................          --           (1,964)
  Deficit accumulated during the development stage.................      (2,993)         (18,331)
                                                                        -------        ---------
     Total stockholders' equity....................................       2,997           10,546
                                                                        -------        ---------
                                                                       $  3,628         $ 18,321
                                                                        =======        =========
</TABLE>
 
                            See accompanying notes.
 
                                       34
<PAGE>   35
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                      FOR THE PERIOD                      FOR THE PERIOD
                                                      FROM INCEPTION                      FROM INCEPTION
                                                      (FEBRUARY 16,                       (FEBRUARY 16,
                                                         1995) TO         YEAR ENDED         1995) TO
                                                       DECEMBER 31,      DECEMBER 31,      DECEMBER 31,
                                                           1995              1996              1996
                                                      --------------     ------------     --------------
<S>                                                   <C>                <C>              <C>
Operating expenses:
  Research and development..........................     $  2,539          $ 13,681          $ 16,220
  General and administrative........................          581             2,409             2,990
                                                          -------          --------          --------
     Total operating expenses.......................        3,120            16,090            19,210
Interest income.....................................          127               752               879
                                                          -------          --------          --------
Net loss............................................     $ (2,993)         $(15,338)         $(18,331)
                                                          =======          ========          ========
Pro forma net loss per share........................     $  (0.44)         $  (2.03)
                                                          -------          --------
Shares used in computing pro forma net loss per
  share.............................................        6,798             7,557
                                                          =======          ========
</TABLE>
 
                            See accompanying notes.
 
                                       35
<PAGE>   36
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                           NET                          DEFICIT
                  CONVERTIBLE                                        UNREALIZED LOSS                  ACCUMULATED
                PREFERRED STOCK        COMMON STOCK     ADDITIONAL    ON SECURITIES                   DURING THE        TOTAL
              --------------------   ----------------    PAID-IN     AVAILABLE-FOR-      DEFERRED     DEVELOPMENT   STOCKHOLDERS'
                SHARES     AMOUNT    SHARES    AMOUNT    CAPITAL          SALE         COMPENSATION      STAGE         EQUITY
              ----------   -------   -------   ------   ----------   ---------------   ------------   -----------   -------------
<S>           <C>          <C>       <C>       <C>      <C>          <C>               <C>            <C>           <C>
Issuance of
  Series A
 convertible
  preferred
  stock to
  founders
  at $1.00
  per share
  for cash
  and
  technology
  in
  February
  1995......   7,500,000   $ 2,500        --    $ --      $   --           $--           $     --      $      --       $ 2,500
Issuance of
  Series B
 convertible
  preferred
  stock to a
  founder at
  $1.50 per
  share for
  cash in
  August and
  October
  1995, less
  issuance
  costs of
  $11.......   2,333,333     3,489        --      --          --            --                 --             --         3,489
Exercise of
  common
  stock
  options by
  a
  consultant
  at $0.30
  per share
  for cash
  in
  November
  1995......          --        --     2,059      --           1            --                 --             --             1
Net loss....          --        --        --      --          --            --                 --         (2,993)       (2,993)
              ----------   -------   -------   ------     ------           ---            -------        -------       -------
Balances at
  December
  31,
  1995......   9,833,333     5,989     2,059      --           1            --                 --         (2,993)        2,997
Issuance of
  Series C
 convertible
  preferred
  stock and
  warrants
  for
  498,705
  shares of
  common
  stock to
  investors
  at $2.25
  per share
  for cash
  in April
  1996, less
  issuance
  costs of
  $55.......   9,964,607    22,366        --      --          --            --                 --             --        22,366
Issuance of
  common
  stock to a
 prospective
  officer at
  $0.45 per
  share for
  cash in
  March
  1996......          --        --   400,000       1         179            --                 --             --           180
Issuance of
  common
  stock
  pursuant
  to stock
  option
exercises...          --        --    35,553      --          14            --                 --             --            14
Unrealized
  loss on
  securities
  available-
  for-sale,
  net.......          --        --        --      --          --            (3)                --             --            (3)
Deferred
compensation
  related to
  grants of
  certain
  stock
  options...          --        --        --      --       2,294            --             (2,294)            --            --
Amortization
  of
  deferred
  compensation..         --      --       --      --          --            --                330             --           330
Net loss....          --        --        --      --          --            --                 --        (15,338)       15,338
              ----------   -------   -------   ------     ------           ---            -------        -------       -------
Balances at
  December
  31,
  1996......  19,797,940   $28,355   437,612    $  1      $2,488           $(3)          $ (1,964)     $ (18,331)      $10,546
              ==========   =======   =======   ======     ======           ===            =======        =======       =======
</TABLE>
 
                            See accompanying notes.
 
                                       36
<PAGE>   37
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                               FOR THE PERIOD FROM                       FOR THE PERIOD FROM
                                                    INCEPTION                                 INCEPTION
                                               (FEBRUARY 16, 1995)      YEAR ENDED       (FEBRUARY 16, 1995)
                                                 TO DECEMBER 31,       DECEMBER 31,        TO DECEMBER 31,
                                                      1995                 1996                 1996
                                               -------------------   -----------------   -------------------
<S>                                            <C>                   <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.....................................        $(2,993)             $(15,338)            $(18,331)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
  Depreciation and amortization..............             15                   49                   64
  Amortization of deferred compensation......             --                  330                  330
Changes in operating assets and liabilities:
  Prepaid expenses and other current
     assets..................................            (40)                (459)                (499)
  Employee loans receivable..................            (31)                (275)                (306)
  Other assets...............................            (29)                (123)                (152)
  Accounts payable...........................            341                1,149                1,490
  Payable to Coulter Corporation.............             25                   86                  111
  Accrued liabilities........................            265                4,152                4,417
                                                    --------             --------             --------
Net cash used in operating activities........         (2,447)             (10,429)             (12,876)
                                                    --------             --------             --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments..........             --               (8,609)              (8,609)
Maturities of short-term investments.........             --                  986                  986
Purchases of property and equipment..........           (105)                (876)                (981)
                                                    --------             --------             --------
Net cash used in investing activities........           (105)              (8,499)              (8,604)
                                                    --------             --------             --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of equipment financings
  obligations................................                                 (44)                 (44)
Borrowings under equipment lease financing
  and debt facility..........................             --                1,800                1,800
Proceeds from issuances of convertible
  preferred stock, net.......................          5,989               22,366               28,355
Proceeds from issuance of common stock.......              1                  194                  195
                                                    --------             --------             --------
Net cash provided by financing activities....          5,990               24,316               30,306
                                                    --------             --------             --------
Net increase in cash and cash equivalents....          3,438                5,388                8,826
Cash and cash equivalents at beginning of
  period.....................................             --                3,438                   --
                                                    --------             --------             --------
Cash and cash equivalents at end of period...        $ 3,438              $ 8,826              $ 8,826
                                                    ========             ========             ========
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING
  AND FINANCING ACTIVITIES:
Acquisition of equipment pursuant to
  equipment lease obligations................        $    --              $    78              $    78
                                                    ========             ========             ========
Deferred compensation related to grant of
  certain stock options......................        $    --              $ 2,294              $ 2,294
                                                    ========             ========             ========
</TABLE>
 
                            See accompanying notes.
 
                                       37
<PAGE>   38
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Organization and Principles of Consolidation
 
     Coulter Pharmaceutical, Inc. (the "Company" or "Coulter") was incorporated
in the State of Delaware on February 16, 1995 to engage in the research and
development of products for the treatment of cancer. The Company's principal
activities to date have involved conducting research and development, recruiting
management and technical personnel, obtaining financing and securing operating
facilities. Therefore, the Company is classified as a development stage company.
 
     In the course of its development activities, the Company has sustained
continuing operating losses and expects such losses to continue over the next
several years. The Company plans to continue to finance the Company with a
combination of stock sales, revenues from product sales and technology licenses.
The Company's ability to continue as a going concern is dependent upon
successful execution of financings and, ultimately, upon achieving profitable
operations.
 
     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Coulter Pharma Belgium, SA which was formed
under the laws of Belgium in June 1996. Intercompany balances and transactions
have been eliminated.
 
     In connection with its formation, the Company issued 5,000,000 shares of
its Series A preferred stock to Coulter Corporation in exchange for rights to
certain intellectual property, contractual rights and other assets pertaining to
the Company's B-1 Therapy (convertible into 1,666,666 shares of common stock).
Under the terms of this assignment agreement, royalties are payable to Coulter
Corporation upon commercial sale of product, if any, derived from these
licenses. Coulter Corporation also has the right, in lieu of receiving cash, to
purchase additional shares of the Company's equity securities at the then
current fair market value of such securities with respect to the first $4.5
million payable to Coulter Corporation under this assignment agreement. This
transaction was accounted for as an acquisition of assets from an affiliate with
the amounts brought over at their historical basis of $0.
 
  Net Loss Per Share
 
     Except as noted below, historical net loss per share is computed using the
weighted average number of common shares outstanding. Common equivalent shares
from outstanding stock options, convertible preferred stock and warrants are
excluded from the computation as their effect is antidilutive, except that,
pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common and common equivalent shares issued during the period beginning 12 months
prior to September 30, 1996 (the period reported in the initial public offering
Registration Statement on Form S-1) at prices below the initial public offering
price have been included in the calculation as if they were outstanding for all
periods presented (using the treasury stock method and the initial public
offering price for stock options and warrants and the if-converted method for
convertible preferred stock).
 
     Historical net loss per share information is as follows:
 
<TABLE>
<CAPTION>
                                                    PERIOD FROM INCEPTION        YEAR ENDED
                                                     (FEBRUARY 16, 1995)        DECEMBER 31,
                                                    TO DECEMBER 31, 1995            1996
                                                    ---------------------     ----------------
        <S>                                         <C>                       <C>
        Net loss per share........................         $ (0.67)                $(4.45)
        Share used in computing historical net
          loss per share (in thousands)...........           4,456                  3,450
</TABLE>
 
                                       38
<PAGE>   39
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     Pro forma net loss per share has been computed as described above and also
gives effect to the conversion of convertible preferred shares not included
above that automatically converted into common stock upon completion of the
Company's initial public offering in January 1997 (using the if-converted
method). Such shares are included from their original date of issuance.
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
 
  Current Vulnerability to Certain Concentrations
 
     The Company is supplying the B-1 Antibody to clinical trial sites from an
existing, finite inventory produced by Coulter Corporation, a related party. To
achieve the levels of production necessary to support on-going clinical trials
of its B-1 Therapy, the Company has contracted with a third-party manufacturer,
LONZA Biologics plc ("Lonza"), to produce the B-1 Antibody. In January 1997, the
Company received FDA clearance to use Lonza-produced material. However, should
the Company not be able to obtain sufficient quantities of the B-1 Antibody from
Lonza or additional suppliers, certain research and development activities may
be delayed.
 
  Cash, Cash Equivalents and Short-Term Investments
 
     The Company considers all highly liquid investments with maturities of
three months or less from the date of purchase to be cash equivalents.
Short-term investments consist of investments with original maturities greater
than three months, but less than one year.
 
     The Company accounts for its cash equivalents and short-term investments
under Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). Under the
provisions of SFAS No. 115, the Company has classified its cash equivalents and
short-term investments as "available-for-sale." Such investments are recorded at
fair value and unrealized gains and losses, which are considered to be
temporary, are recorded as a separate component of Stockholders' equity until
realized. The Company classifies all investments in its available-for-sale
portfolio as current assets.
 
  Foreign Currency Translation
 
     The functional currency of Coulter Pharma Belgium, SA is the U.S. Dollar.
Assets and liabilities of Coulter Pharma Belgium, SA are translated at current
exchange rates, and the related revenues and expenses are translated at average
exchange rates in effect during the period. The resulting translation adjustment
is recorded in other (income) expense in the accompanying consolidated
statements of operations and has been immaterial since the formation of the
subsidiary in June 1996.
 
  Property and Equipment
 
     Purchased property and equipment are stated at cost less accumulated
depreciation which is calculated using the straight-line method over the
estimated useful lives of the respective assets of three to five years.
 
  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.
 
                                       39
<PAGE>   40
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
  Stock-Based Compensation
 
     In accordance with the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for StockBased 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 for its employee stock option plans. Under APB 25,
if the exercise price of the Company's employee stock options equals or exceeds
the fair value of the underlying stock on the date of grant as determined by the
Company's Board of Directors, no compensation expense is recognized.
 
2. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
 
     As of December 31, 1995, the Company had no short-term investments and all
cash equivalents were invested in a money market mutual fund with a single
institution. The difference between cost and fair value was immaterial at
December 31, 1995. The Company's cash equivalents and short-term investments as
of December 31, 1996 are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                               GROSS        GROSS      ESTIMATED
                                                 AMORTIZED   UNREALIZED   UNREALIZED     FAIR
                                                   COST        GAINS        LOSSES       VALUE
                                                 ---------   ----------   ----------   ---------
        <S>                                      <C>         <C>          <C>          <C>
        Money market funds.....................   $ 1,874     $     --     $     --     $ 1,874
        Commercial paper.......................    14,481           --           (3)     14,478
                                                 --------          ---        -----    --------
                  Total........................    16,355           --           (3)     16,352
        Less amounts classified as cash
          equivalents..........................    (8,735)          --           --      (8,735)
                                                 --------          ---        -----    --------
        Total short-term investments...........   $ 7,620     $     --     $     (3)    $ 7,617
                                                 ========          ===        =====    ========
</TABLE>
 
     Realized gains or losses on sales of available-for-sale securities in the
year ended December 31, 1996 were not significant. There were no realized gains
or losses in the period from inception (February 16, 1995) to December 31, 1995.
 
3. PROPERTY AND EQUIPMENT
 
     Property and equipment consists of the following at December 31 (in
thousands):
 
<TABLE>
<CAPTION>
                                                                        1995     1996
                                                                        ----     ----
        <S>                                                             <C>      <C>
        Machinery and equipment.......................................  $ 66     $143
        Furniture and fixtures........................................    39       95
        Construction in process.......................................    --      743
                                                                        ----     ----
                                                                         105      981
        Less accumulated depreciation.................................   (12)     (57)
                                                                        ----     ----
        Property and equipment, net...................................  $ 93     $924
                                                                        ====     ====
</TABLE>
 
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. As of December 31, 1996, noncancelable commitments under these
arrangements were not material. 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.
 
                                       40
<PAGE>   41
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
5. ACCRUED LIABILITIES
 
     Accrued liabilities consists of the following at December 31 (in
thousands):
 
<TABLE>
<CAPTION>
                                                                      1995      1996
                                                                      ----     ------
        <S>                                                           <C>      <C>
        Accrued research and development expenses...................  $ 83     $3,505
        Accrued clinical trial costs................................    21        342
        Other.......................................................   161        483
                                                                      ----     ------
        Total.......................................................  $265     $4,330
                                                                      ====     ======
</TABLE>
 
6. EQUIPMENT FINANCING OBLIGATIONS AND LONG TERM DEBT
 
     In December 1996, the Company entered into a $3,827,000 equipment lease
financing and debt facility with a financing company of which $2,027,000 remains
available at December 31, 1996. The Company will make monthly payments plus
interest on amounts borrowed over a 48-month term. Included in property and
equipment at December 31, 1996 are assets with a cost of $78,000 (none at
December 31, 1995) acquired pursuant to a fixed interest rate equipment loan.
Accumulated amortization of assets acquired pursuant to these obligations was
immaterial at December 31, 1996. Assets acquired under this arrangement secure
the related obligations.
 
     In December 1996, the Company borrowed $1,722,000 under the unsecured debt
provision of the facility. The Company will make 48 monthly payments of
approximately $42,000 followed by a final payment of approximately $172,000 all
of which include interest at a fixed rate of 11.75%
 
     At December 31, 1996, the Company's aggregate commitment under such
arrangement, together with the net present value of the obligations, is as
follows (in thousands):
 
<TABLE>
<CAPTION>
                             YEARS ENDING DECEMBER 31:
                    --------------------------------------------
                    <S>                                           <C>
                      1997......................................  $  484
                      1998......................................     526
                      1999......................................     525
                      2000......................................     702
                      2001......................................      87
                                                                   2,324
                    Less amounts representing interest..........    (480)
                    Less current portion........................    (309)
                                                                  $1,535
</TABLE>
 
7. COMMITMENTS
 
     The Company leases its offices under operating leases which expire on
December 31, 2000. Future minimum lease payments under all noncancelable leases
are as follows: (in thousands)
 
<TABLE>
<CAPTION>
                          YEARS ENDING DECEMBER 31:         OPERATING LEASES
                    --------------------------------------  ----------------
                    <S>                                     <C>
                    1997..................................          285
                    1998..................................          285
                    1999..................................          158
                    2000..................................           68
                    Total.................................       $  796
</TABLE>
 
                                       41
<PAGE>   42
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     Rent expense for the period from inception (February 16, 1995) to December
31, 1995 and for the year ended December 31, 1996 was $71,000 and $186,000,
respectively.
 
8. RELATED PARTY TRANSACTIONS
 
     During the period from inception (February 16, 1995) to December 31, 1995
and the year ended December 31, 1996, the Company issued loans to employees
totaling $30,000 and $455,000, respectively. Interest rates on these loans range
from 6.0% to prime plus 2.0% (10.25% at December 31, 1996). The total loan
amounts issued during 1996 include imputed interest of $106,000. At December 31,
1995 and 1996, the receivable due from employee loans outstanding was $31,000
and $306,000, respectively. These loans plus accrued interest are to be repaid
(less any amounts forgiven) at the end of their respective terms. The loans
mature at dates ranging from December 1997 to December 2000.
 
     The Company has a continuing relationship with Coulter Corporation, an
affiliate. Coulter Corporation has supplied the B-1 Antibody and certain other
services at its cost in support of the Company's ongoing development of the B-1
Therapy. In addition, pursuant to a sublicense assignment agreement, the Company
has agreed to reimburse Coulter Corporation for royalties due to third parties
with respect to certain intellectual property rights sublicensed to the Company.
Coulter Corporation also has the right, in lieu of receiving cash, to purchase
additional shares of the Company's equity securities at the then current market
value of such securities with respect to the first $4.5 million payable under
the assignment agreement for royalties due upon commercial sale of product, if
any, derived from these licenses. Further, Coulter Corporation has nominated and
elected two of the Company's Board of Directors members in accordance with a
voting rights agreement which terminated upon closing of the Company's Series C
preferred stock offering. Included in research and development expense is
$291,000 and $254,000 for the period from inception (February 16, 1995) to
December 31, 1995 and for the year ended December 31, 1996, respectively,
related to services provided by Coulter Corporation and reimbursements to
Coulter Corporation for license fees and supplies.
 
9. STOCKHOLDERS' EQUITY
 
  Preferred Stock
 
     Preferred stock authorized and outstanding at December 31, 1996 is as
follows:
 
<TABLE>
<CAPTION>
                                    NUMBER OF SHARES         SHARES OF
                                ------------------------   COMMON STOCK               AGGREGATE
                                             ISSUED AND    ISSUABLE UPON             LIQUIDATION
                                AUTHORIZED   OUTSTANDING    CONVERSION     AMOUNT    PREFERENCE
                                ----------   -----------   -------------   -------   -----------
                                                 (DOLLAR AMOUNTS IN THOUSANDS)
        <S>                     <C>          <C>           <C>             <C>       <C>
        Designated:
        Series A..............   7,500,000     7,500,000     2,499,999     $ 2,500     $ 7,500
        Series B..............   2,500,000     2,333,333       777,776       3,489       3,500
        Series C..............  10,000,000     9,964,607     3,321,514      22,366      22,420
                                ----------    ----------     ---------     -------     -------
                                20,000,000    19,797,940     6,599,289     $28,355     $33,420
                                ==========    ==========     =========     =======     =======
</TABLE>
 
     All currently designated series of preferred stock are convertible at the
stockholders' option at any time into common stock on a three-for-one (preferred
shares-for-common shares) basis, subject to adjustment for antidilution.
Conversion is automatic immediately upon the closing of a firm commitment
underwritten public offering with gross proceeds of at least $5,000,000 and an
offering price of at least $9.00 per share (appropriately adjusted for any stock
splits, stock dividends, recapitalization or similar events) or upon the written
election of more than three-fifths of the holders of outstanding shares of the
Series A, B and C
 
                                       42
<PAGE>   43
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
preferred stock. Each outstanding share of preferred stock has voting rights
equal to the voting rights of the common stock obtainable upon conversion.
 
     Holders of Series A, B and C preferred stock are entitled to noncumulative
cash dividends at the rate of 8% of the "Original Purchase Price" per annum on
each outstanding share, as adjusted, if and when declared by the Board of
Directors. The Original Issue Price of the Series A preferred stock is $1.00 and
the Series B preferred stock is $1.50 and the Series C preferred stock is $2.25.
These dividends are to be paid in advance of any distributions to common
stockholders. No dividends have been declared through December 31, 1996.
 
     In the event of a liquidation or winding up of the Company, holders of
Series A, B and C preferred stock shall have a liquidation preference of $1.00
and $1.50 and $2.25 per share respectively, together with any declared but
unpaid dividends, over holders of common shares.
 
     All outstanding preferred stock at December 31, 1996 converted into common
stock as described above upon the completion of the Company's initial public
offering completed in January 1997 (see Note 11).
 
  1995 Equity Incentive Plan
 
     The 1995 Equity Incentive Plan (the "Plan") was adopted in 1995 by the
Board of Directors and allows for the granting of options for up to 733,333
shares of common stock to employees, consultants and directors. On October 31,
1996, the Board of Directors approved an increase of 133,333 shares of common
stock available for grant under the Plan.
 
     Stock options granted under the Plan may be either incentive stock options
or nonqualified 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,
as determined by the Board of Directors. All options are to have a term not
greater than 10 years from the date of grant. Options vest as determined by the
Board of Directors, generally at the rate of 25% at the end of the first year
with the remaining balance vesting ratably over the next three years (but not
less than 20% of the total number of shares granted per year).
 
     Activity under the Plan was as follows:
 
<TABLE>
<CAPTION>
                                                      OPTIONS OUTSTANDING
                                          OPTIONS    ----------------------
                                          AVAILABLE  NUMBER      EXERCISE       WEIGHTED-
                                            FOR        OF         PRICE          AVERAGE
                                           GRANT     SHARES     PER SHARE     EXERCISE PRICE
                                          --------   -------   ------------   --------------
        <S>                               <C>        <C>       <C>            <C>
        Shares authorized...............   333,333        --   $         --       $   --
        Options granted.................  (220,756)  220,756   $       0.30       $ 0.30
        Options exercised...............        --    (2,059)  $       0.30       $ 0.30
                                          --------   -------   ------------        -----
        Balance at December 31, 1995....   112,577   218,697   $       0.30       $ 0.30
        Additional shares authorized....   533,333        --   $         --           --
        Options granted.................  (658,492)  658,492   $0.30-$12.00       $ 1.99
        Options exercised...............        --   (35,551)  $ 0.30-$2.25       $ 0.41
        Options canceled................    19,333   (19,333)  $  0.30-0.75       $ 0.73
                                          --------   -------   ------------        -----
        Balance at December 31, 1996....     6,751   822,305   $0.30-$12.00       $ 1.64
                                          ========   =======   ============        =====
</TABLE>
 
     At December 31, 1995 options were exercisable to purchase 11,104 shares at
a weighted-average exercise price of $0.30 per share. At December 31, 1996
options were exercisable to purchase 65,440 shares at a weighted-average
exercise price of $0.43 per share.
 
                                       43
<PAGE>   44
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     Exercise prices for options outstanding as of December 31, 1996 ranged from
$0.30 to $12.00 per share. The weighted-average remaining contractual life of
those options is 9.4 years.
 
<TABLE>
<CAPTION>
                                                                WEIGHTED-
                                      OPTIONS OUTSTANDING        AVERAGE       EXERCISABLE OPTIONS
                                    ------------------------    REMAINING    -----------------------
                                                WEIGHTED-      CONTRACTUAL              WEIGHTED-
              EXERCISE PRICE                     AVERAGE          LIFE                   AVERAGE
                  RANGE             NUMBER    EXERCISE PRICE   (IN YEARS)    NUMBER   EXERCISE PRICE
        --------------------------  -------   --------------   -----------   ------   --------------
        <S>                         <C>       <C>              <C>           <C>      <C>
        $0.30-$0.45...............  218,203       $ 0.30            8.7      57,336       $ 0.30
        $0.75-$1.00...............  212,331         0.75            9.5      3,500          0.75
        $1.01-$1.20...............   74,666         1.20            9.7      2,999          1.20
        $2.25-$3.00...............  242,107         2.25            9.8      1,216          2.25
        $3.01-$4.50...............   54,998         4.50            9.9        389          4.50
        $12.00-$12.00.............   20,000        12.00           10.0         --         12.00
                                    -------        -----           ----      ------       ------
                                    822,305       $ 1.64            9.4      65,440       $ 0.43
</TABLE>
 
     The Company has reserved sufficient shares of its common stock for issuance
upon conversion of the Series A, B and C preferred stock and options to purchase
common shares which may be issued under the Plan.
 
     The Company recorded deferred compensation expense 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 common stock options granted in 1996.
Such amount totals approximately $2,294,000 and is being amortized over the
corresponding vesting period of each respective share purchase or option,
generally four years.
 
     Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of that Statement.
The fair value of these options was estimated at the date of grant using the
minimum value method with weighted-average risk-free assumptions for 1995 and
1996 of 5.94% and 6.06%, respectively. The weighted-average expected life of the
options was approximately 4.9 years and 5.1 years for 1995 and 1996,
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>
                                                            PERIOD FROM
                                                             INCEPTION              YEAR
                                                        (FEBRUARY 16, 1995)        ENDED
                                                          TO DECEMBER 31,       DECEMBER 31,
                                                               1995                 1996
                                                        -------------------     ------------
        <S>                                             <C>                     <C>
        Pro forma (as adjusted) net loss..............        $(2,994)            $(15,378)
        Pro forma (as adjusted) net loss per share....        $ (0.44)            $  (2.04)
</TABLE>
 
     The weighted-average fair value per share of options granted in the period
from inception (February 16, 1995) to December 31, 1995 and the year ended
December 31, 1996 was $0.08 and $1.46, respectively. The pro forma effect of
SFAS 123 will not be fully reflected until approximately 1998.
 
                                       44
<PAGE>   45
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
  1996 Equity Incentive Plan
 
     In December 1996, the Board of Directors adopted the 1996 Equity Incentive
Plan under which a total of 1,400,000 share of the Company's authorized but
unissued common stock has been reserved for issuance thereunder.
 
     Stock options granted under the Plan may be either incentive stock options
or nonqualified 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,
as determined by the Board of Directors. All options are to have a term not
greater than 10 years from the date of grant. Options vest as determined by the
Board of Directors, generally at the rate of 25% at the end of the first year
with the remaining balance vesting ratably over the next three years (but not
less than 20% of the total number of shares granted per year). At December 31,
1996, no options have been granted under the plan.
 
  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 the
Company's authorized but unissued common stock has been reserved for issuance
thereunder. At December 31, 1996, the Board of Directors has not authorized an
offering under the Purchase Plan.
 
  Warrants
 
     As of December 31, 1996, warrants to purchase 498,705 shares of common
stock were outstanding at an exercise price of $9.00 per share and a warrant to
purchase 24,666 shares of common stock at an exercise price of the lower of
$9.75 per share or the per share price of the Company's next round of equity
financing were outstanding. At December 31, 1996, the Company has reserved
523,371 shares of authorized common stock pursuant to these warrants. Warrants
to purchase 498,705 shares of common stock are exercisable at the option of the
holders on or before dates ranging from April 19, 1996 through April 30, 2001,
or earlier upon effectiveness of an initial public offering. The warrant to
purchase 24,666 shares of common stock is exercisable on or before dates ranging
from December 6, 1996 through December 6, 2002.
 
10. INCOME TAXES
 
     As of December 31, 1996, the Company had a federal net operating loss
carryforward of approximately $17,700,000. The federal net operating loss
carryforward will expire at various dates beginning in 2010 through 2011, if not
utilized.
 
     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
 
     Significant components of the Company's deferred tax assets are as follows
at December 31 (in thousands):
 
                                       45
<PAGE>   46
 
                          COULTER PHARMACEUTICAL, INC.
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                    1995        1996
                                                                   -------     -------
        <S>                                                        <C>         <C>
        Net operating loss carryforward..........................  $ 1,000     $ 6,200
        Capitalized research and development.....................      100         900
        Research credit carryforwards (expiring 2010-2011).......       --         100
        Other - net..............................................       --         100
                                                                   -------     -------
        Total deferred tax assets................................    1,100       7,300
        Valuation allowance......................................   (1,100)     (7,300)
                                                                   -------     -------
        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 net valuation allowance
increased by $1,100,000 during the period from inception (February 16, 1995) to
December 31, 1995.
 
     Utilization of the net operating loss and credits may be subject to a
substantial annual limitation due to the ownership change provisions of the
Internal Revenue Code of 1986. The annual limitation may result in the
expiration of net operating losses and credits before utilization.
 
11. SUBSEQUENT EVENTS
 
     On January 28, 1997, the Company completed an initial public offering of
2,500,000 shares of its common stock at a price to the public of $12.00 per
share, resulting in net proceeds to the Company of approximately $27.9 million.
A one-for-three reverse common stock split became effective prior to the
commencement of the offering. All common share and per share amounts have been
retroactively restated to reflect the reverse stock split.
 
     Also in January 1997, the Company received approximately $3.1 million from
the cash exercise of warrants to purchase 385,315 shares of its common stock and
issued an additional 37,785 shares of its common stock upon the net exercise of
warrants to purchase 113,390 shares of its common stock. In February 1997, the
Company received approximately $4.2 million (unaudited) from the sale of 375,000
shares (unaudited) of its common stock pursuant to the exercise of the
underwriters' over-allotment option in connection with the initial public
offering.
 
     Upon completion of the initial public offering all of the 19,797,940 shares
of Series A, B and C preferred stock outstanding converted to shares of common
stock on a three-for-one basis.
 
                                       46
<PAGE>   47
 
               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
The Board of Directors
Coulter Pharmaceutical, Inc.
 
     We have audited the accompanying balance sheets of the Antibody
Therapeutics Business Operations of Coulter Corporation (the "Business") as of
December 31, 1993 and 1994, and the related consolidated statements of
operations and cash flows for the years ended December 31, 1993 and 1994 and for
the period from January 1, 1995 to February 15, 1995. These financial statements
are the responsibility of the management of the Business. Our responsibility is
to express an opinion on these financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     Certain costs and expenses presented in the accompanying financial
statements represent allocations of the estimated cost of services provided to
the Antibody Therapeutics Business by Coulter Corporation. As a result, the
financial statements presented may not be indicative of the financial position
or results of operations that would have been reported had the Antibody
Therapeutics Business Operations of Coulter Corporation operated as an
independent entity.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Antibody Therapeutics
Business Operations of Coulter Corporation at December 31, 1993 and 1994, and
the results of its operations and its cash flows for the years ended December
31, 1993 and 1994 and for the period from January 1, 1995 to February 15, 1995,
in conformity with generally accepted accounting principles.
 
                                          /s/ Ernst & Young LLP
 
Palo Alto, California
November 27, 1996
 
                                       47
<PAGE>   48
 
                  ANTIBODY THERAPEUTICS BUSINESS OPERATIONS OF
                              COULTER CORPORATION
 
                                 BALANCE SHEETS
                                 (IN THOUSANDS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                                -------------
                                                                                1993     1994
                                                                                ----     ----
<S>                                                                             <C>      <C>
Property and equipment, net...................................................  $109     $135
                                                                                ====     ====
                                                                                $109     $135
                                                                                ====     ====
                               LIABILITIES AND NET INVESTMENT
Current liabilities -- Accounts payable.......................................  $124     $ 50
Commitments...................................................................
Coulter Corporation's net investment in the Antibody Therapeutics Business
  Operations..................................................................   (15)      85
                                                                                ----     ----
                                                                                $109     $135
                                                                                ====     ====
</TABLE>
 
                            See accompanying notes.
 
                                       48
<PAGE>   49
 
                  ANTIBODY THERAPEUTICS BUSINESS OPERATIONS OF
                              COULTER CORPORATION
 
                            STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                    FOR THE PERIOD
                                                                YEARS ENDED         FROM JANUARY 1,
                                                               DECEMBER 31,             1995 TO
                                                            -------------------      FEBRUARY 15,
                                                             1993        1994            1995
                                                            -------     -------     ---------------
<S>                                                         <C>         <C>         <C>
Operating expenses:
  Research and development................................  $ 1,838     $ 2,798          $ 200
  General and administrative..............................      178         288             36
                                                            -------     -------          -----
Total operating expenses..................................    2,016       3,086            236
                                                            -------     -------          -----
Net loss..................................................  $(2,016)    $(3,086)         $(236)
                                                            =======     =======          =====
</TABLE>
 
                            See accompanying notes.
 
                                       49
<PAGE>   50
 
                  ANTIBODY THERAPEUTICS BUSINESS OPERATIONS OF
                              COULTER CORPORATION
 
                            STATEMENT OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                     FOR THE PERIOD
                                                                                          FROM
                                                                 YEARS ENDED           JANUARY 1,
                                                                DECEMBER 31,            1995 TO
                                                             -------------------      FEBRUARY 15,
                                                              1993        1994            1995
                                                             -------     -------     --------------
<S>                                                          <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss...................................................  $(2,016)    $(3,086)        $ (236)
Adjustments to reconcile net loss to net cash provided by
  (used in) operating activities:
  Depreciation and amortization............................       11          27              5
  Changes in operating assets and liabilities:
     Accounts payable......................................       98         (74)            62
                                                             -------     -------         ------
Net cash used in operating activities......................   (1,907)     (3,153)          (169)
                                                             -------     -------         ------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment........................      (96)        (66)            --
Net cash used in investing activities......................      (96)        (66)            --
                                                             -------     -------         ------
CASH FLOWS FROM FINANCING ACTIVITIES
Coulter Corporation's investment in the Antibody
  Therapeutics Business....................................    2,003       3,199            169
                                                             -------     -------         ------
Net cash provided by financing activities..................    2,003       3,199            169
                                                             -------     -------         ------
Net increase in cash and cash equivalents..................       --          --             --
Cash and cash equivalents at beginning of period...........       --          --             --
                                                             -------     -------         ------
Cash and cash equivalents at end of period.................  $    --     $    --         $   --
                                                             =======     =======         ======
</TABLE>
 
                            See accompanying notes.
 
                                       50
<PAGE>   51
 
                   ANTIBODY THERAPEUTICS BUSINESS OPERATIONS
                             OF COULTER CORPORATION
 
                         NOTES TO FINANCIAL STATEMENTS
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Organization and Basis of Presentation
 
     Coulter Corporation (the "Corporation" or "Coulter") is incorporated in the
State of Delaware and is engaged in the business of manufacturing, distributing,
financing, and servicing certain medical equipment (predominantly hematology
instruments) and related consumable products used in the health care industry,
research centers and universities. The Company's principal markets are North
America, Europe and the Far East. The Corporation has also conducted extensive
research and development programs in the area of human therapeutics. The
antibody therapeutics research and development activities, including various
license agreements, were acquired by Coulter Pharmaceutical, Inc. in exchange
for preferred stock on February 24, 1995, pursuant to an assignment agreement
between the two parties.
 
     The financial statements of the Antibody Therapeutics Business Operations
of Coulter Corporation (the "Business") include all direct materials and
personnel costs in addition to pro rata allocations of overhead costs from
Coulter to the Business. Such overhead costs are represented based on
management's estimate of the level of overhead required to support the Business
relative to the overhead cost requirements for the Corporation. Management
believes such estimates represent a reasonable allocation of such costs. These
charges comprise Coulter's net investment in the Business. Coulter has been
performing research and development activities under its antibody therapeutics
programs for several years.
 
  Property and Equipment
 
     Purchased property and equipment are stated at cost less accumulated
depreciation and amortization which is calculated using the straight-line method
over the estimated useful lives of the respective assets of three to eight
years.
 
  Income Taxes
 
     The Business operations have historically been included in the consolidated
income tax returns filed by Coulter. Income taxes in the accompanying financial
statements have been computed based on the stand-alone operations of the
Business as if such operations had filed separate income tax returns. Any net
operating loss carryforwards from the Business would not be available for use by
the Business for federal or state income tax purposes.
 
2. PROPERTY AND EQUIPMENT
 
     Property and equipment consists of the following at December 31 (in
thousands):
 
<TABLE>
<CAPTION>
                                                                      1993      1994
                                                                      -----     -----
        <S>                                                           <C>       <C>
        Equipment...................................................  $ 511     $ 561
        Leasehold improvements......................................    379       289
                                                                      -----     -----
                                                                        890       850
        Less accumulated depreciation and amortization..............   (781)     (715)
                                                                      -----     -----
        Property and equipment, net.................................  $ 109     $ 135
                                                                      =====     =====
</TABLE>
 
3. SUBSEQUENT EVENT
 
     On February 24, 1995, Coulter and Coulter Pharmaceutical, Inc. entered into
an assignment agreement. Pursuant to this agreement, Coulter received 5,000,000
shares of Series A preferred stock from Coulter Pharmaceutical, Inc.
(convertible into 1,666,666 shares of common stock) in exchange for sublicensed
rights to various license agreements and patents and confidential information
relating to the Business.
 
                                       51
<PAGE>   52
 
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 to the Registrant's
Definitive Proxy Statement filed with the Commission pursuant to Regulation 14A
in connection with the 1997 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 to 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 to 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 to the
Proxy Statement under the heading "Security Ownership of Certain Beneficial
Owners and Management."
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The information required by this Item is incorporated by reference to the
Proxy Statement under the headings "Certain Transactions" and "Executive
Compensation."
 
                                       52
<PAGE>   53
 
                                    PART IV
 
ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
(a) The following documents are filed as part of this Form 10-K:
 
     (1) Index to Consolidated Financial Statements. The following Consolidated
         Financial Statements of Coulter Pharmaceutical, Inc. and the Financial
         Statements of the Antibody Therapeutics Business Operations of Coulter
         Corporation are filed as part of the Form 10-K.
 
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
<S>                                                                                     <C>
COULTER PHARMACEUTICAL, INC. CONSOLIDATED FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors.....................................   33
Consolidated Balance Sheets at December 31, 1995 and 1996.............................   34
Consolidated Statements of Operations for the periods from inception (February 16,       35
  1995) to December 31, 1995 and 1996 and the year ended December 31, 1996............
Consolidated Statement of Stockholders' Equity for the period from inception (February   36
  16, 1995) to December 31, 1995 and the year ended December 31, 1996.................
Consolidated Statements of Cash Flows for the periods from inception (February 16,       37
  1995) to December 31, 1995 and 1996 and the year ended December 31, 1996............
Notes to Consolidated Financial Statements............................................   38
ANTIBODY THERAPEUTICS BUSINESS OPERATIONS OF COULTER CORPORATION
Report of Ernst & Young LLP, Independent Auditors.....................................   47
Balance Sheets at December 31, 1993 and 1994..........................................   48
Statements of Operations for the years ended December 31, 1993 and 1994 and the period   49
  from January 1, 1995 through February 15, 1995......................................
Statement of Cash Flows for the years ended December 31, 1993 and 1994 and the period    50
  from January 1, 1995 through February 15, 1995......................................
Notes to Financial Statements.........................................................   51
</TABLE>
 
     (2)FINANCIAL SCHEDULES
        All other schedules are omitted because they are not required, they are
        not applicable or the information is already included in the financial
        statement or notes thereto.
 
<TABLE>
<CAPTION>
 EXHIBIT   EXHIBIT
FOOTNOTE   NUMBER                              DESCRIPTION OF DOCUMENT
---------  ------     -------------------------------------------------------------------------
<C>        <C>        <S>
    *        3.1      Amended and Restated Certificate of Incorporation of the Registrant.
    *        3.2      Bylaws of the Registrant.
    *        4.1      Reference is made to Exhibits 3.1 through 3.5.
    *        4.2      Specimen stock certificate
    *        4.3      Amended and Restated Investors' Rights Agreement, dated April 18, 1996,
                      between the Registrant and certain investors.
    *        4.4      Warrant Agreement to purchase Common Stock, dated December 6, 1996,
                      between the Registrant and Lease Management Services, Inc.
    *        5.1      Opinion of Cooley Godward LLP.
    *       10.1      Form of Indemnity Agreement to be entered into between the Registrant and
                      its officers and directors.
    *       10.2      1996 Equity Incentive Plan.
    *       10.3      Form of Equity Incentive Stock Option.
            10.4      Form of Nonstatutory Stock Option.
</TABLE>
 
                                       53
<PAGE>   54
 
<TABLE>
<CAPTION>
 EXHIBIT   EXHIBIT
FOOTNOTE   NUMBER                              DESCRIPTION OF DOCUMENT
---------  ------     -------------------------------------------------------------------------
<C>        <C>        <S>
    *       10.5      1996 Employee Stock Purchase Plan.
    *       10.6      Assignment Agreement, dated February 24, 1995, between the Registrant,
                      Coulter Corporation and certain investors.
    *       10.7      Manufacturing Agreement, dated August 20, 1996, between Lonza Biologics
                      PLC and the Registrant.
    *       10.8      Equipment Lease Financing Agreement, dated December 6, 1996, between the
                      Registrant and Lease Management Services, Inc.
    *       10.9      First Amendment to Manufacturing Agreement, dated November 21, 1996, by
                      and between Lonza Biologics PLC and the Registrant.
    *      10.10 +    Development Agreement, dated November 15, 1995, by and between Nordion
                      International, Inc. and the Registrant.
    *      10.11 +    Patent License Agreement, dated March 15, 1996, by and between the Region
                      Wallone, the Universite Cathololique de Louvain and Coulter Pharma
                      Belgium, SA.
            11.1      Statement regarding computation of net loss per share.
    *       21.1      Subsidiaries of the Registrant.
            23.1      Consent of Ernst & Young LLP, Independent Auditors.
            27.1      Financial Data Schedule.
</TABLE>
 
---------------
 
* Incorporated by reference to the indicated exhibit in the Company's
  Registration Statement on Form S-1 (File No. 333-17661), as amended.
 
+ 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.
 
                                       54
<PAGE>   55
 
                                   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
                                            President and CEO
 
                                          Date: March 28, 1997
 
                               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 28,1997
-----------------------------------------------  Officer and Director
(Michael F. Bigham)                              (Principal Executive Officer)
 
/s/ WILLIAM G. HARRIS                            Vice President and Chief         March 28,1997
-----------------------------------------------  Financial Officer (Principal
(William G. Harris)                              Financial and Accounting
                                                 Officer)
/s/ BRIAN ATWOOD                                 Director                        March 28, 1997
-----------------------------------------------
(Brian Atwood)
 
/s/ DONALD L. LUCAS                              Director                        March 28, 1997
-----------------------------------------------
(Donald L. Lucas)
 
/s/ ROBERT MOMSEN                                Director                        March 28, 1997
-----------------------------------------------
(Robert Momsen)
</TABLE>
 
                                       55
<PAGE>   56
 
<TABLE>
<CAPTION>
                   SIGNATURE                                 TITLE                   DATE
-----------------------------------------------  -----------------------------  ---------------
 
<S>                                              <C>                            <C>
 
/s/ ARNOLD ORONSKY                               Director                        March 28, 1997
-----------------------------------------------
(Arnold Oronsky)
 
/s/ SUE VAN                                      Director                        March 28, 1997
-----------------------------------------------
(Sue Van)
 
/s/ GEORGE J. SELLA, JR.                         Director                        March 28, 1997
-----------------------------------------------
(George J. Sella, Jr.)
 
/s/ JOSEPH R. COULTER, III                       Director                        March 28, 1997
-----------------------------------------------
(Joseph R. Coulter, III)
</TABLE>
 
                                       56
<PAGE>   57
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT         EXHIBIT
FOOTNOTE        NUMBER           DESCRIPTION OF DOCUMENT
---------       -------          -----------------------
    <S>         <C>              <C>
    *           3.1              Amended and Restated Certificate of Incorporation of the Registrant.

    *           3.2              Bylaws of the Registrant.

    *           4.1              Reference is made to Exhibits 3.1 through 3.5.

    *           4.2              Specimen stock certificate

    *           4.3              Amended and Restated Investors' Rights Agreement, dated April 18,
                                 1996, between the Registrant and certain investors.

    *           4.4              Warrant Agreement to purchase Common Stock, dated December 6, 1996,
                                 between the Registrant and Lease Management Services, Inc.

    *           5.1              Opinion of Cooley Godward LLP.

    *           10.1             Form of Indemnity Agreement to be entered into between the Registrant
                                 and its officers and directors.

    *           10.2             1996 Equity Incentive Plan.

    *           10.3             Form of Equity Incentive Stock Option.

                10.4.            Form of Nonstatutory Stock Option.

    *           10.5             1996 Employee Stock Purchase Plan.

    *           10.6             Assignment Agreement, dated February 24, 1995, between the Registrant,
                                 Coulter Corporation and certain investors.

    *           10.7             Manufacturing Agreement, dated August 20, 1996, between Lonza
                                 Biologics PLC and the Registrant.

    *           10.8             Equipment Lease Financing Agreement, dated December 6, 1996, between
                                 the Registrant  and Lease Management Services, Inc.
</TABLE>



                                      57
<PAGE>   58
<TABLE>
    <S>         <C>              <C>
    *           10.9             First Amendment to Manufacturing Agreement, dated November 21, 1996,
                                 by and between Lonza Biologics PLC and the Registrant.

    *           10.10+           Development Agreement, dated November 15, 1995, by and between Nordion
                                 International, Inc. and the Registrant.

    *           10.11+           Patent License Agreement, dated March 15, 1996, by and between the
                                 Region Wallone, the Universite Cathololique de Louvain and Coulter
                                 Pharma Belgium, SA.

                11.1             Statement regarding computation of net loss per share.

    *           21.1             Subsidiaries of the Registrant.

                23.1             Consent of Ernst & Young LLP, Independent Auditors
  
                27.1             Financial Data Schedule
</TABLE>

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

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



                                      58