<PAGE>

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


                                    FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

FOR QUARTER ENDED JUNE 30, 2000
                                       OR

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

FOR THE TRANSITION PERIOD FROM __________TO__________


                         Commission file number 33-90516
                                                --------

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

             Delaware                                    51-0327886
     (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                 Identification Number)


                               100 Corporate North
                                    Suite 215
                           Bannockburn, Illinois 60015
               (Address of principal executive offices) (Zip Code)

                                 (847) 295-8678
              (Registrant's telephone number, including area code)

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report:


          Title of each class                      Number of shares outstanding
          -------------------                      ----------------------------
   Common Stock ($.0002145 par value)                      11,144,432


<PAGE>

                                 NEOPHARM, INC.
                            (A DELAWARE CORPORATION)

<TABLE>
<CAPTION>
                                                                     Page Number
                                                                     -----------

<S>                    <C>                                                  <C>
PART I.                Financial Information

          ITEM 1.      Financial Statements

                       Balance Sheets                                         3

                       Statement of Operations                                4

                       Statement of Cash Flows                                5

                       Notes to Financial Statements                          6


          ITEM 2.      Management's Discussion and Analysis of Financial
                       Condition and Results of Operations                    8

PART II.  Other Information                                                  14

SIGNATURE PAGE                                                               15

</TABLE>


                                       2
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS
NEOPHARM, INC.
(A DELAWARE CORPORATION)
BALANCE SHEET
(Unaudited)

<TABLE>
<CAPTION>
                                                                                              JUNE 30,       DECEMBER 31,
                                                                                               2000              1999
                                                                                           ------------      ------------
<S>                                                                                        <C>               <C>
ASSETS

Current assets:
  Cash and cash equivalents                                                                $ 25,296,283      $ 24,664,567
  Other receivables                                                                              49,079            76,007
  Tax refund receivable                                                                         126,000           126,000
  Prepaid expenses                                                                              357,059           118,800
                                                                                           ------------      ------------
         Total current assets                                                              $ 25,828,421      $ 24,985,374

Equipment and furniture
  Equipment                                                                                      87,004            85,447
  Furniture                                                                                      80,210            80,210
Less accumulated depreciation                                                                  (111,166)          (99,283)
                                                                                           ------------      ------------
         Total equipment and furniture, net                                                      56,048            66,374

         Total assets                                                                      $ 25,884,469      $ 25,051,748
                                                                                           ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Accounts payable and accrued liabilities:
    Obligations under research agreements                                                  $    148,333      $     68,333
    Accounts payable                                                                            176,569           567,357
    Accrued compensation                                                                        121,690           296,000
    Other accrued expenses                                                                       65,325           115,000
                                                                                           ------------      ------------
         Total current liabilities                                                              511,917      $  1,046,690
                                                                                           ------------      ------------



Stockholders' equity
  Common stock, $.0002145 par value;
    15,000,000 shares authorized:
    11,144,432 and 11,028,617 shares issued and
    outstanding, respectively                                                                     2,391             2,366
  Additional paid-in capital                                                                 26,119,645        25,709,261
  Accumulated deficit                                                                          (749,484)       (1,706,569)
                                                                                           ------------      ------------
         Total stockholders' equity                                                          25,372,552      $ 24,005,058
                                                                                           ------------      ------------
         Total liabilities and stockholders'
           equity                                                                          $ 25,884,469      $ 25,051,748
                                                                                           ============      ============
</TABLE>

      The accompanying notes are an integral part of these balance sheets.


                                       3
<PAGE>

NEOPHARM, INC.
(A DELAWARE CORPORATION)
STATEMENT OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)

<TABLE>
<CAPTION>

                                  THREE MONTHS                       SIX MONTHS
                                    JUNE 30,                           JUNE 30,
                             2000              1999              2000             1999
<S>                        <C>                <C>            <C>              <C>
Revenues:
  Licensing Revenues       $       --         $      --      $  3,000,000     $  9,000,000
Expenses:
  Research and
   development                818,304           430,221         1,337,385        1,037,220
  General and
   administrative             706,526           494,007         1,204,009        1,082,745
  Related party
  expenses (Note 3)           166,644            95,019           308,580          997,710
                         ------------      ------------      ------------     ------------
    Total Expenses          1,691,474         1,019,247         2,849,974        3,117,675

Income/(loss)
 from operations           (1,691,474)       (1,019,247)          150,026        5,882,325

Interest income               393,886            63,588           807,059           98,595
Interest expense                    -               266                 -            2,126
                         ------------      ------------      ------------     ------------
Interest income - net         393,886            63,322           807,059           96,469

Net income/(loss)
 before income taxes       (1,297,588)         (955,925)          957,085        5,978,794
                         ------------      ------------      ------------     ------------

Income taxes                        -          (382,000)                -        2,392,000
                         ------------      ------------      ------------     ------------

Net Income/(loss)        $ (1,297,588)     $   (573,925)     $    957,085     $  3,586,794
                         ============      ============      ============     ============

Net Income (loss) per
share:
         Basic           $       (.12)     $      (0.07)     $       0.09     $       0.43
                         ============      ============      ============     ============

         Diluted         $       (.12)     $      (0.07)     $       0.08     $       0.31
                         ============      ============      ============     ============

Weighted average
shares outstanding:
         Basic             11,141,305         8,459,288        11,092,602        8,438,570
                         ============      ============      ============     ============

         Diluted           11,845,771        11,620,726        11,902,365       11,552,102
                         ============      ============      ============     ============

</TABLE>

      The accompanying notes are an integral part of these financial statements.


                                       4
<PAGE>

NEOPHARM, INC.
(A DELAWARE CORPORATION)
STATEMENT OF CASH FLOWS
SIX  MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)

<TABLE>
<CAPTION>

                                                  JUNE 30,          JUNE 30,

                                                   2000               1999
                                                   ----               ----
<S>                                           <C>               <C>
Cash flows used in operating activities:
  Net income                                  $    957,085      $  3,586,794
  Adjustments to reconcile net income
    to net cash provided by operating
    activities:
  Depreciation and amortization                     11,883            18,000
  Deferred income taxes                                 --         2,317,000
  Compensation expense from non-employee
         stock options                             157,112                --
  Restricted stock grants in lieu of
         cash compensation                          49,610                --
  Increase in other assets                        (211,331)         (195,137)
  (Decrease)/Increase in accounts
    payable and accrued liabilities               (534,773)           99,391
                                              ------------      ------------

Net cash provided by
operating activities                               429,586         5,826,048
                                              ------------      ------------

Cash flows used in investing activities:
  Purchase of equipment and furniture               (1,557)           (2,757)
                                              ------------      ------------

Net cash used in investing activities               (1,557)           (2,757)
                                              ------------      ------------

Cash flows from financing activities:

  Proceeds from issuance of common stock           203,687           183,750
  Proceeds from exercise of warrants, net               --           171,790
  Cashless exercise of warrants, charge         (1,844,314)       (1,074,208)
  Cashless exercise of warrants, proceeds        1,844,314         1,074,208
                                              ------------      ------------

Net cash and cash equivalents
provided by financing activities                   203,687           355,540
                                              ------------      ------------

Net increase in cash                               631,716         6,178,831
Cash and cash equivalents, beginning
         of period                              24,664,567            40,681
                                              ------------      ------------
Cash and cash equivalents, end of period        25,296,283         6,219,512
                                              ============      ============
Supplemental disclosure of cash paid for:
  Interest                                   $          --      $      2,126
  Income taxes                                          --            75,000

</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       5
<PAGE>

                                 NEOPHARM, INC.
                            (A DELAWARE CORPORATION)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2000

NOTE 1   BASIS OF PRESENTATION

The financial information herein is unaudited, other than the Balance Sheet at
December 31, 1999, which is derived from the audited financial statements.

The accompanying unaudited statements of NeoPharm, Inc. (the "Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not contain all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company, the accompanying unaudited
interim financial statements contain all adjustments (consisting of normal
recurring adjustments) necessary to present fairly the Company's financial
position as of June 30, 2000, the results of operations for the three and six
months ended June 30, 2000 and 1999 and the changes in cash flows for the three
month and six month periods ended June 30, 2000 and 1999.

While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these financial statements
be read in conjunction with the financial statements and notes included in the
Company's 1999 Annual Report on Form 10-K filed with the Securities and Exchange
Commission.

NOTE 2  EARNINGS PER SHARE

The following table sets forth the computation of the basic and diluted earnings
per share from continuing operations:

<TABLE>
<CAPTION>
                                                                For the three months ended:         For the six months ended:
                                                                ---------------------------         -------------------------
                                                                 June 30,          June 30          June 30,         June 30
                                                                  2000              1999              2000             1999
<S>                                                          <C>               <C>               <C>              <C>
Numerator:
  Net income (loss) from continuing operations               $ (1,297,588)     $   (573,925)     $    957,085     $  3,586,794
                                                             ============      ============      ============     ============

Denominator:
  Denominator for basic income (loss) per share-weighted
  average shares                                               11,141,305         8,459,288        11,092,602        8,438,570

Effect of dilutive securities:
  Stock options                                                   704,466         1,783,888           786,293        1,777,595
  Warrant exercise                                                     --         1,377,550            23,470        1,335,937
                                                             ------------      ------------      ------------     ------------

Dilutive potential common shares                               11,845,771        11,620,726        11,902,365       11,552,102
                                                             ============      ============      ============     ============

Denominator for diluted income (loss) per share-weighted
  average shares and assumed conversions

Basic income (loss) per share                                $       (.12)     $       (.07)     $        .09     $        .43
                                                             ============      ============      ============     ============
Diluted income (loss) per share                              $       (.12)     $       (.07)     $        .08     $        .31
                                                             ============      ============      ============     ============

</TABLE>


                                       6
<PAGE>

NOTE 3   RELATED PARTY EXPENSES

         The following table provides further detail of the related party
expenses reflected in the statement of operations:

<TABLE>
<CAPTION>
                                                              Three Months              Six Months
                                                                June 30,                 June 30,

Related Party                          Expense Type         2000         1999         2000         1999
                                       ------------     --------     --------     --------     --------
<S>                                                      <C>           <C>        <C>          <C>
Unicorn Pharma Consulting, Inc.         Consulting         5,000       $    -     $  5,000     $      -
Georgetown University                Research & Fees     118,750       54,098      217,233      854,098
Gail Salzberg                           Consulting             -            -        2,323       60,705
E.J. Financial Enterprises              Consulting        31,250       31,250       62,500       62,500
E.J. Financial Enterprises           Direct Expenses       3,251        1,323        4,940        2,803
                                                        --------     --------     --------     --------
    Total research and development
      expenses                                           158,251       86,671      291,996      980,106

Option Care, Inc.                   Rent and Expenses      8,393        8,348       16,584       17,604
                                                        --------     --------     --------     --------

    Total general and
      administrative expenses                              8,393        8,348       16,584       17,604
                                                        --------     --------     --------     --------

  Total related party expenses                          $166,644     $ 95,019     $308,580     $997,710
                                                        ========     ========     ========     ========

</TABLE>

Management believes that the terms of the related party transactions listed
above were at fair market rates.


                                       7
<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Any statements made by NeoPharm Inc. ("we", "us", "our", or the
"Company") in this quarterly report that are forward looking are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The Company cautions readers that important factors may
affect the Company's actual results and could cause such results to differ
materially from forward-looking statements made by or on behalf of the
Company. Such factors include, but are not limited to, changing market
conditions, the impact of competitive products and pricing, the timely
development, approval by the Food and Drug Administration ("FDA") and foreign
health authorities, and market acceptance of the Company's products in
development, the Company's ability to further raise capital, the Company's
dependence on key personnel, and other factors referenced under "Risk
Factors" in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999.

OVERVIEW

         We are a biopharmaceutical company engaged in the research and
development and commercialization of drugs for the treatment of various
cancers. We currently have a portfolio of seven anti-cancer drugs, three of
which are in clinical trials. We have built our drug portfolio based on our
two novel proprietary technology platforms: a liposomal drug delivery
platform and a tumor-targeting platform. In February 1999, we entered into a
collaboration agreement with Pharmacia Corporation ("PNU"), to develop and
commercialize two of our products: liposomal encapsulated doxorubicin, or
LED, and liposomal encapsulated paclitaxel, or LEP. In conjunction with PNU
we have initiated multi-center Phase II/III clinical trials of LEP for the
treatment of a variety of cancers, including breast, ovarian and lung
cancers, and we are currently conducting multi-center Phase II/III clinical
trials for LED for the treatment of breast and prostate cancers.

         In addition to LEP and LED, we have five other products under
development. Under our liposomal platform, we filed an investigational new
drug application in July, 2000 for LE-AON, our liposomal encapsulated gene
inhibitor for radiation resistant tumors, and we have initiated preclinical
studies for liposomal encapsulated epirubicin, or LEE, and liposomal
encapsulated mitoxantrone, or LEM. Under our tumor-targeting platform, we are
currently in a Phase I/II clinical trial for IL13-PE38, a tumor-targeting
product for the treatment of kidney cancer. Additionally, we filed an
investigational new drug application for IL13-PE38 for the treatment of
glioblastoma and expect to commence Phase I/II clinical trials in the third
quarter of 2000. We filed an investigational new drug application for our
other tumor-targeting product, SS1 (ds Fv)-PE38, and we expect to commence
Phase I/II clinical trials for SS1 (ds Fv)-PE38 for the treatment of various
cancers in the third quarter of 2000.

OUR PRODUCTS

We have utilized both our liposomal platform and our tumor-targeting platform to
develop a group of novel anti-cancer products. Presently, we have three products
in clinical trials and four in preclinical trials.


                                       8
<PAGE>

LIPOSOMAL PLATFORM

LIPOSOMAL ENCAPSULATED PACLITAXEL

PRODUCT DESCRIPTION. LEP is a liposomal encapsulated formulation of the
widely-used cancer drug, paclitaxel. Paclitaxel is marketed by Bristol-Myers
Squibb Company under the trade name "Taxol-Registered Trademark-" and is used
in the treatment of a number of tumors, including breast and lung cancer.
Despite paclitaxel's wide use and its anti-tumor characteristics, its
effectiveness is limited by its side effects, which can include nausea,
vomiting, hair loss and nerve and muscle pain. The low solubility of
paclitaxel necessitates formulation in a toxic mixture of castor oil and
ethanol which requires premedication. In addition, paclitaxel must be infused
over a period of at least three hours.

         We believe we have overcome many of the current limitations of
paclitaxel by utilizing cardiolipin, a naturally occurring negatively charged
lipid found in cardiac tissue, to increase the solubility of paclitaxel, thus
eliminating the need for administration of castor oil and ethanol and the
accompanying premedication. Since paclitaxel has a positive charge and
cardiolipin has a negative charge, cardiolipin combines with the paclitaxel to
form a stable product that can be freeze dried and easily reconstituted. We have
been able to standardize the preparation of cardiolipin through the development
of a proprietary form of synthetic cardiolipin. Based on preclinical studies, we
believe another potential advantage of LEP is the ability of cardiolipin to
overcome the resistance to cancer drugs developed by cells which have been
exposed to several rounds of chemotherapy. As a result, the cytotoxicity of LEP
against tumors increases significantly, maximizing the killing of otherwise
resistant cells.

DEVELOPMENT STATUS. We believe LEP is the first, and only, liposomal form of
paclitaxel to enter clinical trials. We completed our Phase I clinical trials in
March 2000. These Phase I trials, which involved 29 advanced stage cancer
patients, confirmed that LEP could be administered at higher levels than
paclitaxel is currently administered, with fewer side effects. Six patients have
experienced tumor reductions greater than 35%. The tumors in eight other
patients did not increase in size after 12 weeks, and in four of these eight
patients, the tumors were still stable in size one year later. Some patients
received significantly more cycles of LEP than can be given with uncapsulated
paclitaxel, and no patients showed signs of the nerve and muscle pain commonly
associated with paclitaxel. Two patients have received greater than 20 cycles of
LEP. Most patients did not experience the hair loss or nausea often associated
with paclitaxel treatment.

         Currently, our collaboration partner, PNU, is initiating large scale
multi-center, multinational Phase II/III clinical trials. These Phase II/III
trials will test LEP as both a single and combination therapy for a variety of
solid tumors to determine its safety and efficacy.

LIPOSOMAL ENCAPSULATED DOXORUBICIN

PRODUCT DESCRIPTION. LED is a liposomal encapsulated formulation of the widely
used cancer drug, doxorubicin. Doxorubicin is used to treat a number of cancers
including solid tumors and leukemia, a form of blood cancer. Though effective in
treating these and other cancers, doxorubicin may produce irreversible heart
damage. The risk of heart failure increases with increasing total cumulative
doses of doxorubicin. Doxorubicin also causes suppression of white blood cell
production, which may be dose limiting, and produces side effects such as
nausea, vomiting and hair loss. As we have done with LEP, we have diminished
these side effects by encapsulating doxorubicin using synthetic cardiolipin.
Since doxorubicin has a positive charge


                                       9
<PAGE>

and cardiolipin has a negative charge, cardiolipin combines with the doxorubicin
to form a stable product that can be freeze dried and easily reconstituted. We
believe LED, unlike other liposomal doxorubicin products currently available,
will, because of its formulation with cardiolipin, overcome the resistance to
cancer drugs developed by cells which have been exposed to several rounds of
chemotherapy and will be easier to manufacture.

DEVELOPMENT STATUS. In June 1998, we started Phase II clinical trials for the
treatment of advanced prostate cancer in 10 patients. After four rounds of
treatment, the level of prostate specific antigen, an indicator of the extent of
disease progression, decreased by greater than 35% in two patients and
stabilized in two other patients. These four patients reported a significant
reduction in pain. Our collaborative partner, PNU, is currently conducting
multi-center Phase II/III clinical trials of LED.

         We completed a Phase I trial in May 1998, which confirmed that LED
demonstrated lower toxicity when compared to unencapsulated doxorubicin and
could be given at approximately double the current dose for doxorubicin.

LIPOSOMAL ENCAPSULATED ANTISENSE OLIGONUCLEOTIDES

PRODUCT DESCRIPTION. We have developed a liposomal encapsulated antisense cRaf
oligonucleotide, LE-AON, which we believe inhibits the expression of the cRaf
protein and thus may have potential to enhance the effectiveness of radiation in
the treatment of certain cancers. cRaf is a protein which is expressed at higher
levels in cancer cells which are resistant to radiation therapy than in healthy
cells. By inhibiting expression of this gene, the cell becomes more susceptible
to radiation therapy. Our liposomes provide a non-viral method of delivering the
gene inhibitor into the cell. An additional advantage of LE-AON is that it can
be administered intravenously and is relatively easy to manufacture.

DEVELOPMENT STATUS. We have completed preclinical studies of LE-AON which were
designed to enable us to undertake a Phase I clinical trial. In our preclinical
studies, intravenous administration of LE-AON inhibited cRaf gene expression in
tumor tissue. When LE-AON was given in combination with radiation treatment,
tumor regression for at least 27 days was observed. We filed an investigational
new drug application for LE-AON in July, 2000, and expect to commence Phase I/II
clinical trials for LE-AON late in the third quarter of 2000.

LIPOSOMAL ENCAPSULATED EPIRUBICIN

         Epirubicin is a drug that is widely used in Europe for the treatment of
breast cancer and was recently introduced in the U.S. market by our
collaborative partner, PNU. We have recently encapsulated epirubicin in our
liposomes and are continuing to evaluate its properties as a treatment for
breast cancer.

LIPOSOMAL ENCAPSULATED MITOXANTRONE

         We recently encapsulated mitoxantrone in our liposomes. Mitoxantrone is
used for the treatment of prostate cancer and multiple sclerosis. We believe LEM
will demonstrate a safety and efficacy advantage over unencapsulated
mitoxantrone. Currently we are continuing preclinical studies to evaluate the
profile of this drug.


                                      10
<PAGE>

TUMOR-TARGETING PLATFORM

IL13-PE38

PRODUCT DESCRIPTION. IL13-PE38 is a tumor-targeting agent we are developing for
the treatment of kidney and brain cancers. Research by scientists at the FDA and
the NIH has demonstrated that some solid tumors express high numbers of IL13
receptors on their cell surfaces. IL13-PE38 links the cytotoxin PE38 to the
tumor-targeting agent IL13. When administered, IL13-PE38 targets the IL13
receptors, which are present in greater numbers in cancer cells than healthy
cells, and delivers the PE38 toxin to these cancer cells without harming the
healthy cells.

         In October 1997, we entered into an exclusive worldwide licensing
agreement with the FDA and the NIH giving us rights to develop and commercialize
IL13-PE38. We also entered into a cooperative research and development agreement
with the FDA for the clinical and commercial development of IL13-PE38 as an
anti-cancer agent. We believe this is the first collaboration between the FDA
and a biopharmaceutical company.

DEVELOPMENT STATUS. In preclinical studies, IL13-PE38 has demonstrated tumor
regression in a number of cancers. We filed an investigational new drug
application for IL13-PE38 for the treatment of kidney cancer in June 1999 and
entered Phase I/II clinical trials in October 1999 for this indication. We filed
an investigational new drug application for brain cancer in March 2000 and
anticipate beginning Phase I/II clinical trials for brain cancer in the third
quarter of 2000.

SS1 (DS FV)-PE38

PRODUCT DESCRIPTION. SS1 (ds Fv)-PE38 links the cytotoxin PE38 to the antibody
SS1 (ds Fv). As is the case with IL13, SS1 (ds Fv) targets specific receptors on
cancer cells and delivers the cytotoxin directly to the cancer cells without
effecting healthy cells. In March 1999, we executed a worldwide exclusive
licensing agreement with the NIH giving us rights to develop and commercialize
SS1 (ds Fv)-PE38. We also entered into a cooperative research and development
agreement with the NIH for the clinical and commercial development of SS1 (ds
Fv)-PE38 as an anti-cancer agent.

DEVELOPMENT STATUS. In April 2000, we filed an investigational new drug
application for SS1 (ds Fv)-PE38 for the treatment of certain common cancers
and expect to commence Phase I/II clinical studies in ovarian cancer, lung
cancer, and head and neck cancers in the third quarter of 2000. In
preclinical studies, SS1 (ds Fv)-PE38 demonstrated very specific targeting to
receptors for ovarian, esophageal, cervical and head and neck cancers and
provided a high level of cytotoxicity in the cancer cells. Preclinical
studies have shown a complete response rate in ovarian tumors.

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2000 AND THREE MONTHS ENDED
JUNE 30, 1999.

The Company recorded no revenue for the three month periods ended June 30, 2000
and June 30, 1999.

Research and development expense for the three month period ended June 30,
2000 was $976,555 compared to $516,892 for the same period in 1999. The
overall increase in research and development costs was the result of
increased consulting expenses of approximately $93,000 and other research
expenses of approximately $367,000 related primarily to the pre-clinical
development of LE-AON, IL13-PE38 and SS1 (ds Fv) PE38.

                                      11
<PAGE>

General and administrative expenses for the three month period ended June 30
2000 were $714,919 compared to $502,355 for the same period in 1999. The overall
increase in general and administrative expenses was a result of increased
consulting and compensation expenses of approximately $83,000, increased
insurance costs of approximately $27,000 and increased professional fees and
other miscellaneous of expenses approximately $103,000.

We generated interest income on excess cash balances of $393,886 and $63,588 for
the three month periods ended June 30, 2000 and June 30, 1999 respectively.

We incurred no interest expense for the three month period ended June 30, 2000
and $266 for the three month period ended June 30, 1999.

We recorded no income tax expense or benefit for the current period ended June
30, 2000 and a tax benefit of $382,000 for the period ended June 30, 1999.

The net loss for the three months ended June 30, 2000 was $1,297,588 compared to
a net loss of $573,925 for the three month period ended June 30, 1999. Net loss
per share for the three month period ended June 30, 2000 was $0.12 basic and
diluted compared to a net loss per share of $0.07 basic and diluted for the
three months ended June 30, 1999.

RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2000 AND
SIX MONTHS ENDED JUNE 30, 1999.

For the six month period ended June 30, 2000, we recorded $3,000,000 in
milestones payments from PNU for completion of Phase I/ beginning of Phase II
clinical trials for LEP. We recorded a nonrefundable license fee of $9,000,000
for the same period in 1999 related to the licensing agreement with PNU for the
development and commercialization of LEP and LED.

Research and development expense for the six month period ended June 30, 2000
was $1,629,381 compared to $2,017,326 for the same period in 1999. The overall
reduction in research and development costs was the result of nonrecurring 1999
expenses associated with licensing of SS1 (ds Fv)-PE38 of approximately $256,000
and a sublicense fee paid to Georgetown of $800,000 coupled with increased
spending in 2000 of approximately $668,000 related primarily to the pre-clinical
development of LE-AON, IL13-PE38 and SS1 (ds Fv)-PE38.

General and administrative expenses for the six month period ended June 30, 2000
were $1,220,593 compared to $1,100,349 for the same period in 1999. The overall
increase in general and administrative expenses was the result of reduced
professional fees and various other general and administrative expenses of
$36,300 coupled with an increase in franchise taxes of approximately $47,000 an
increase in consulting and compensation expense of approximately $83,000 and an
increase in insurance costs of approximately $27,000. In the prior year period,
we incurred additional professional fees and administrative expenses in
completing our license agreement with PNU. The current year's increase in
franchise taxes resulted from the increase in our capitalization due to the sale
of shares to PNU and the conversion of our warrants into common stock following
the calling for redemption of our warrants.

We generated interest income on excess cash balances of $807,059 and $98,595 for
the six month periods ended June 30, 2000 and June 30, 1999.

We incurred interest expense of $0 and $2,126 for the six month periods ended
June 30, 2000 and June 30, 1999, respectively.

We recorded no income tax expense or benefit for the period ended June 30, 2000
composed to income tax expense of $2,392,000 for the period ended June 30, 1999.


                                      12
<PAGE>

The net income for the six month period ended June 30, 2000 was $957,085
compared to $3,586,794 for the six month period ended June 30, 1999. Net income
per share for the six month period ended June 30, 2000 was $0.09 basic and $0.08
diluted compared to net income per share of $0.43 basic and $0.31 dilated for
the six month period ended June 30, 1999.

LIQUIDITY AND CAPITAL RESOURCES

At June 2000, we had $25,296,283 in cash and cash equivalents and net working
capital of $25,316,504. We believe that our cash and cash equivalents should be
adequate to fund our immediate needs. However, we can offer no assurances that
additional funding will not be required in the foreseeable future. All excess
cash has been invested in short-term investments.

Our assets at June 2000, were $25,884,469 compared to $25,051,748 at December
31, 1999. This increase in assets was primarily due to an increase of cash and
cash equivalents of approximately $632,000 as a result of cash generated by
operating activities of approximately $430,000, cash provided by financing
activities of approximately $204,000 and cash used in investing activities of
approximately $2,000. The cash generated by operating activities was primarily
from the milestone payment received from PNU. The cash provided by financing
activities resulted primarily from the exercise of stock options that were held
by consultants to the Company.

Our liabilities at June 30, 2000 decreased to approximately $512,000 from
approximately $1,047,000 at December 31, 1999. This decrease was attributable to
a decrease in trade payables of approximately $391,000 a decrease in accrued
expenses of approximately $50,000 a decrease in accrued compensation of
approximately $174,000 and an increase in obligations under research agreements
of approximately $80,000.

We may seek to satisfy our future funding requirements through public or private
offerings of securities, with collaborative or other arrangements with corporate
partners or from other sources. Additional financing may not be available when
needed or on terms acceptable to us. If adequate financing is not available, we
may be required to delay, scale back or eliminate certain of our research and
development programs, relinquish rights to certain or our technologies, cancer
drugs or products, or license third parties to commercialize products or
technologies that we would otherwise seek to develop ourselves.


                                      13
<PAGE>

PART II - OTHER INFORMATION

         Item 1.        Legal Proceedings                                   None

         Item 2.        Changes in Securities                               None

         Item 3.        Defaults Upon Senior Securities                     None

         Item 4.        Submission of Matters to a Vote
                        of Security-Holders                                 None

On June 8, 2000, the Company held its annual meeting of Stockholders for the
purpose of electing 6 directors to serve until the 2001 Annual Meeting of
Stockholders.

         With respect to the election for directors, the votes were as follows:

<TABLE>
<CAPTION>

                             VOTES FOR                  VOTES AGAINST              VOTES WITHHELD
                             ---------                  -------------              --------------

<S>                            <C>                             <C>                      <C>
John N. Kapoor                 10,565,253                      0                        2,208
James M. Hussey                10,565,253                      0                        2,208
Matthew P. Rogan               10,565,103                      0                        2,358
Kaveh T. Safavi                10,565,103                      0                        2,358
Sander A. Flaum                10,565,253                      0                        2,208
Erick E. Hanson                10,565,253                      0                        2,208

</TABLE>

         Item 5.        Other Information                                   None

         Item 6.        Exhibits and Reports on Form 8-K

                        Exhibit 10.01  Consulting Agreement

                        Exhibit 27     Financial Data Schedule


                                      14
<PAGE>

                                 SIGNATURE PAGE

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                                          NEOPHARM, INC.

                                          By:      /s/  Kevin M. Harris
                                          ---------------------------------
                                                   Kevin M. Harris,
                                                   CHIEF FINANCIAL OFFICER
                                                   AND AUTHORIZED OFFICER

                                                   Date: August 11, 2000
                                                        ----------------