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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended
September 30, 2010

LOGO

Commission file numbers: 333-144492 and 0-26190

US Oncology Holdings, Inc.

US Oncology, Inc.

(Exact name of registrants as specified in their
charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 90-0222104                          
|                                                               | 
|Delaware                                                       |  | 84-1213501                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|10101 Woodloch Forest, The Woodlands, Texas                    |  | 77380                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code: (281) 863-1000

Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90
days.  Yes   No ü

Indicate by check mark whether the registrants have submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers,
or smaller reporting companies. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|Non-accelerated filer   |  | x  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrants are shell companies (as defined in rule 12b-2 of the Exchange Act). Yes
  No ü

As of
November 4, 2010, 424,069,205 and 100 shares of US Oncology Holdings, Inc. and US Oncology, Inc. common stock were outstanding, respectively.

This Form 10-Q is a combined quarterly report being filed separately by two registrants: US Oncology Holdings, Inc. and US Oncology, Inc. Unless the context indicates otherwise, any reference in this
report to Holdings refers to US Oncology Holdings, Inc. and any reference to US Oncology refers to US Oncology, Inc., the wholly-owned operating subsidiary of Holdings. References to the Company, we,
us, and our refer collectively to US Oncology Holdings, Inc. and US Oncology, Inc.



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##### Table of Contents



US
ONCOLOGY HOLDINGS, INC.

US ONCOLOGY, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010



|                              |  |                                                                                       |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | --
|TABLE OF CONTENTS             |  | PAGE NO.                                                                             
|                              | 
|PART I. FINANCIAL INFORMATION |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Condensed Consolidated Financial Statements (unaudited):                              |  |   
|                              |  | Condensed Consolidated Balance Sheets                                                 |  | 3 
|                              |  | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)       |  | 4 
|                              |  | Condensed Consolidated Statements of Equity (Deficit)                                 |  | 6 
|                              |  | Condensed Consolidated Statements of Cash Flows                                       |  | 7 
|                              |  | Notes to Condensed Consolidated Financial Statements                                  |  | 9 
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 38
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |  | 68
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 69
|                              |  |                                                                                      
|Item 1A.                      |  | Risk Factors                                                                          |  | 69
|                              |  |                                                                                      
|Item 4.                       |  | Reserved                                                                              |  | 70
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits                                                                              |  | 70
|                              | 
|SIGNATURES                    |  | 72                                                                                   

This Form 10-Q is being
filed by each of the registrants, US Oncology Holdings, Inc. and US Oncology, Inc. Each Registrant hereto is filing on its own behalf the information as required by Form 10-Q which is contained in this quarterly report.



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PART I.  FINANCIAL
INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share information)



|                                                                                                                                                        |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | -------------------------- | --------- | -------------------- | ----------------- | - | --------------------- |  |  | -------------------- | --------- |  |  | - | --------- | 
|                                                                                                                                                        |                       | US Oncology Holdings, Inc. |           |                      | US Oncology, Inc. |  
|                                                                                                                                                        | September 30,    2010 |                            |           | December 31,    2009 |                   |   | September 30,    2010 |  |  | December 31,    2009 |          
|ASSETS                                                                                                                                                  |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Current assets:                                                                                                                                         |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Cash and equivalents                                                                                                                                    |                       | $                          | 159,469   |                      |                   | $ | 161,811               |  |  | $                    | 158,919   |  |  | $ | 161,589   | 
|Accounts receivable                                                                                                                                     |                       |                            | 360,462   |                      |                   |   | 349,659               |  |  |                      | 360,462   |  |  |   | 349,659   | 
|Other receivables                                                                                                                                       |                       |                            | 28,891    |                      |                   |   | 30,928                |  |  |                      | 28,891    |  |  |   | 30,928    | 
|Prepaid expenses and other current assets                                                                                                               |                       |                            | 21,746    |                      |                   |   | 20,818                |  |  |                      | 21,724    |  |  |   | 20,818    | 
|Inventories                                                                                                                                             |                       |                            | 102,114   |                      |                   |   | 152,642               |  |  |                      | 102,114   |  |  |   | 152,642   | 
|Deferred income taxes                                                                                                                                   |                       |                            | 11,571    |                      |                   |   | 12,136                |  |  |                      | 5,437     |  |  |   | 6,002     | 
|Due from affiliates                                                                                                                                     |                       |                            | 66,419    |                      |                   |   | 48,052                |  |  |                      | 49,314    |  |  |   | 30,699    | 
|                                                                                                                                                        |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Total current assets                                                                                                                                    |                       |                            | 750,672   |                      |                   |   | 776,046               |  |  |                      | 726,861   |  |  |   | 752,337   | 
|Property and equipment, net                                                                                                                             |                       |                            | 389,192   |                      |                   |   | 404,928               |  |  |                      | 389,192   |  |  |   | 404,928   | 
|Service agreements, net                                                                                                                                 |                       |                            | 233,149   |                      |                   |   | 251,397               |  |  |                      | 233,149   |  |  |   | 251,397   | 
|Goodwill                                                                                                                                                |                       |                            | 378,917   |                      |                   |   | 377,270               |  |  |                      | 378,917   |  |  |   | 377,270   | 
|Other assets                                                                                                                                            |                       |                            | 75,010    |                      |                   |   | 78,586                |  |  |                      | 71,491    |  |  |   | 73,259    | 
|                                                                                                                                                        |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Total assets                                                                                                                                            |                       | $                          | 1,826,940 |                      |                   | $ | 1,888,227             |  |  | $                    | 1,799,610 |  |  | $ | 1,859,191 | 
|                                                                                                                                                        |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|                                                                                                                                                        |                       |                            |           |                     
|LIABILITIES AND EQUITY (DEFICIT)                                                                                                                        |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Current liabilities:                                                                                                                                    |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Current maturities of long-term indebtedness                                                                                                            |                       | $                          | 11,342    |                      |                   | $ | 10,579                |  |  | $                    | 11,342    |  |  | $ | 10,579    | 
|Accounts payable                                                                                                                                        |                       |                            | 285,824   |                      |                   |   | 279,948               |  |  |                      | 285,642   |  |  |   | 279,788   | 
|Due to affiliates                                                                                                                                       |                       |                            | 96,697    |                      |                   |   | 110,888               |  |  |                      | 96,697    |  |  |   | 110,888   | 
|Accrued compensation cost                                                                                                                               |                       |                            | 51,829    |                      |                   |   | 50,775                |  |  |                      | 51,829    |  |  |   | 50,775    | 
|Accrued interest payable                                                                                                                                |                       |                            | 15,463    |                      |                   |   | 40,373                |  |  |                      | 15,463    |  |  |   | 40,373    | 
|Income taxes payable                                                                                                                                    |                       |                            | 3,059     |                      |                   |   | 4,702                 |  |  |                      | 2,349     |  |  |   | 3,114     | 
|Other accrued liabilities                                                                                                                               |                       |                            | 47,735    |                      |                   |   | 51,450                |  |  |                      | 30,029    |  |  |   | 33,691    | 
|                                                                                                                                                        |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Total current liabilities                                                                                                                               |                       |                            | 511,949   |                      |                   |   | 548,715               |  |  |                      | 493,351   |  |  |   | 529,208   | 
|                                                                                                                                                        |                       |                            |           |                     
|Deferred revenue                                                                                                                                        |                       |                            | 3,849     |                      |                   |   | 4,636                 |  |  |                      | 3,849     |  |  |   | 4,636     | 
|Deferred income taxes                                                                                                                                   |                       |                            | 12,256    |                      |                   |   | 12,711                |  |  |                      | 34,630    |  |  |   | 36,658    | 
|Long-term indebtedness                                                                                                                                  |                       |                            | 1,594,223 |                      |                   |   | 1,568,242             |  |  |                      | 1,067,479 |  |  |   | 1,074,288 | 
|Other long-term liabilities                                                                                                                             |                       |                            | 37,995    |                      |                   |   | 44,796                |  |  |                      | 25,481    |  |  |   | 15,739    | 
|                                                                                                                                                        |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Total liabilities                                                                                                                                       |                       |                            | 2,160,272 |                      |                   |   | 2,179,100             |  |  |                      | 1,624,790 |  |  |   | 1,660,529 | 
|                                                                                                                                                        |                       |                            |           |                     
|Commitments and contingencies (Note 10)                                                                                                                 |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|                                                                                                                                                        |                       |                            |           |                     
|Equity (deficit):                                                                                                                                       |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Common stock, $0.001 par value, 500,000,000 shares authorized, 424,069,205 and 422,951,505 shares issued and outstanding in 2010
and 2009, respectively |                       |                            | 424       |                      |                   |   | 423                   |  |  |                      | -         |  |  |   | -         | 
|Common stock, $0.01 par value, 100 shares authorized, issued and outstanding                                                                            |                       |                            | -         |                      |                   |   | -                     |  |  |                      | 1         |  |  |   | 1         | 
|Additional paid-in capital                                                                                                                              |                       |                            | 110,546   |                      |                   |   | 108,723               |  |  |                      | 534,103   |  |  |   | 551,986   | 
|Accumulated deficit                                                                                                                                     |                       |                            | (459,205) |                      |                   |   | (415,624)             |  |  |                      | (374,187) |  |  |   | (368,930) | 
|                                                                                                                                                        |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Total Company stockholders (deficit) equity                                                                                                            |                       |                            | (348,235) |                      |                   |   | (306,478)             |  |  |                      | 159,917   |  |  |   | 183,057   | 
|Noncontrolling interests                                                                                                                                |                       |                            | 14,903    |                      |                   |   | 15,605                |  |  |                      | 14,903    |  |  |   | 15,605    | 
|                                                                                                                                                        |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Total equity (deficit)                                                                                                                                  |                       |                            | (333,332) |                      |                   |   | (290,873)             |  |  |                      | 174,820   |  |  |   | 198,662   | 
|                                                                                                                                                        |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 
|Total liabilities and equity (deficit)                                                                                                                  |                       | $                          | 1,826,940 |                      |                   | $ | 1,888,227             |  |  | $                    | 1,799,610 |  |  | $ | 1,859,191 | 
|                                                                                                                                                        |                       |                            |           |                      |                   |   |                       |  |  |                      |           |  |  |   |           | 

The accompanying notes are an integral part of these statements.



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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)



|                                                          |  |                                  |          |  |                                  |   |          |      |  |   |          |  |  |   |          | 
|--------------------------------------------------------- |  | -------------------------------- | -------- |  | -------------------------------- | - | -------- | ---- |  | - | -------- |  |  | - | -------- | 
|                                                          |  | US Oncology Holdings, Inc.       |          |  | US Oncology, Inc.                |  
|                                                          |  | Three Months Ended September 30, |          |  | Three Months Ended September 30, |  
|                                                          |  | 2010                             |          |  | 2009                             |   |          | 2010 |  |   | 2009     | 
|                                                          |  |                                  |          | 
|Product revenue                                           |  | $                                | 647,509  |  |                                  | $ | 608,035  |      |  | $ | 647,509  |  |  | $ | 608,035  | 
|Service revenue                                           |  |                                  | 293,179  |  |                                  |   | 293,419  |      |  |   | 293,179  |  |  |   | 293,419  | 
|                                                          |  |                                  |          |  |                                  |   |          |      |  |   |          |  |  |   |          | 
|Total revenue                                             |  |                                  | 940,688  |  |                                  |   | 901,454  |      |  |   | 940,688  |  |  |   | 901,454  | 
|                                                          |  |                                  |          | 
|Cost of products                                          |  |                                  | 642,966  |  |                                  |   | 596,208  |      |  |   | 642,966  |  |  |   | 596,208  | 
|                                                          |  |                                  |          | 
|Cost of services:                                         |  |                                  |          |  |                                  |   |          |      |  |   |          |  |  |   |          | 
|Operating compensation and benefits                       |  |                                  | 140,561  |  |                                  |   | 140,321  |      |  |   | 140,561  |  |  |   | 140,321  | 
|Other operating costs                                     |  |                                  | 83,130   |  |                                  |   | 84,824   |      |  |   | 83,130   |  |  |   | 84,824   | 
|Depreciation and amortization                             |  |                                  | 17,408   |  |                                  |   | 19,090   |      |  |   | 17,408   |  |  |   | 19,090   | 
|                                                          |  |                                  |          |  |                                  |   |          |      |  |   |          |  |  |   |          | 
|Total cost of services                                    |  |                                  | 241,099  |  |                                  |   | 244,235  |      |  |   | 241,099  |  |  |   | 244,235  | 
|                                                          |  |                                  |          | 
|Total cost of products and services                       |  |                                  | 884,065  |  |                                  |   | 840,443  |      |  |   | 884,065  |  |  |   | 840,443  | 
|General and administrative expense                        |  |                                  | 19,033   |  |                                  |   | 18,913   |      |  |   | 18,992   |  |  |   | 18,792   | 
|Impairment and restructuring charges                      |  |                                  | 3,252    |  |                                  |   | 4,117    |      |  |   | 3,252    |  |  |   | 4,117    | 
|Depreciation and amortization                             |  |                                  | 8,025    |  |                                  |   | 7,700    |      |  |   | 8,025    |  |  |   | 7,700    | 
|                                                          |  |                                  |          |  |                                  |   |          |      |  |   |          |  |  |   |          | 
|                                                          |  |                                  | 914,375  |  |                                  |   | 871,173  |      |  |   | 914,334  |  |  |   | 871,052  | 
|                                                          |  |                                  |          | 
|Income from operations                                    |  |                                  | 26,313   |  |                                  |   | 30,281   |      |  |   | 26,354   |  |  |   | 30,402   | 
|                                                          |  |                                  |          | 
|Other income (expense):                                   |  |                                  |          |  |                                  |   |          |      |  |   |          |  |  |   |          | 
|Interest expense, net                                     |  |                                  | (36,730) |  |                                  |   | (37,627) |      |  |   | (28,109) |  |  |   | (28,016) | 
|Loss on early extinguishment of debt                      |  |                                  | -        |  |                                  |   | (3,672)  |      |  |   | -        |  |  |   | (3,672)  | 
|Loss on interest rate swap                                |  |                                  | (3,605)  |  |                                  |   | (7,596)  |      |  |   | -        |  |  |   | -        | 
|Other income (expense), net                               |  |                                  | (1,215)  |  |                                  |   | -        |      |  |   | (1,215)  |  |  |   | -        | 
|                                                          |  |                                  |          |  |                                  |   |          |      |  |   |          |  |  |   |          | 
|Loss before income taxes                                  |  |                                  | (15,237) |  |                                  |   | (18,614) |      |  |   | (2,970)  |  |  |   | (1,286)  | 
|Income tax benefit (provision)                            |  |                                  | (12)     |  |                                  |   | (764)    |      |  |   | 595      |  |  |   | 1,332    | 
|                                                          |  |                                  |          |  |                                  |   |          |      |  |   |          |  |  |   |          | 
|Net income (loss)                                         |  |                                  | (15,249) |  |                                  |   | (19,378) |      |  |   | (2,375)  |  |  |   | 46       | 
|Less: Net income attributable to noncontrolling interests |  |                                  | (848)    |  |                                  |   | (912)    |      |  |   | (848)    |  |  |   | (912)    | 
|                                                          |  |                                  |          |  |                                  |   |          |      |  |   |          |  |  |   |          | 
|Net loss attributable to the Company                      |  | $                                | (16,097) |  |                                  | $ | (20,290) |      |  | $ | (3,223)  |  |  | $ | (866)    | 
|                                                          |  |                                  |          |  |                                  |   |          |      |  |   |          |  |  |   |          | 

The accompanying notes are an integral part of these statements.



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##### Table of Contents



CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)



|                                                          |  |                                 |           |  |                                 |   |           |      |  |   |           |  |  |   |           | 
|--------------------------------------------------------- |  | ------------------------------- | --------- |  | ------------------------------- | - | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|                                                          |  | US Oncology Holdings, Inc.      |           |  | US Oncology, Inc.               |  
|                                                          |  | Nine Months Ended September 30, |           |  | Nine Months Ended September 30, |  
|                                                          |  | 2010                            |           |  | 2009                            |   |           | 2010 |  |   | 2009      | 
|                                                          |  |                                 |           | 
|Product revenue                                           |  | $                               | 1,857,286 |  |                                 | $ | 1,765,687 |      |  | $ | 1,857,286 |  |  | $ | 1,765,687 | 
|Service revenue                                           |  |                                 | 882,223   |  |                                 |   | 859,975   |      |  |   | 882,223   |  |  |   | 859,975   | 
|                                                          |  |                                 |           |  |                                 |   |           |      |  |   |           |  |  |   |           | 
|Total revenue                                             |  |                                 | 2,739,509 |  |                                 |   | 2,625,662 |      |  |   | 2,739,509 |  |  |   | 2,625,662 | 
|                                                          |  |                                 |           | 
|Cost of products                                          |  |                                 | 1,839,400 |  |                                 |   | 1,730,012 |      |  |   | 1,839,400 |  |  |   | 1,730,012 | 
|                                                          |  |                                 |           | 
|Cost of services:                                         |  |                                 |           |  |                                 |   |           |      |  |   |           |  |  |   |           | 
|Operating compensation and benefits                       |  |                                 | 423,400   |  |                                 |   | 416,107   |      |  |   | 423,400   |  |  |   | 416,107   | 
|Other operating costs                                     |  |                                 | 252,473   |  |                                 |   | 248,168   |      |  |   | 252,473   |  |  |   | 248,168   | 
|Depreciation and amortization                             |  |                                 | 52,336    |  |                                 |   | 54,590    |      |  |   | 52,336    |  |  |   | 54,590    | 
|                                                          |  |                                 |           |  |                                 |   |           |      |  |   |           |  |  |   |           | 
|Total cost of services                                    |  |                                 | 728,209   |  |                                 |   | 718,865   |      |  |   | 728,209   |  |  |   | 718,865   | 
|                                                          |  |                                 |           | 
|Total cost of products and services                       |  |                                 | 2,567,609 |  |                                 |   | 2,448,877 |      |  |   | 2,567,609 |  |  |   | 2,448,877 | 
|General and administrative expense                        |  |                                 | 59,056    |  |                                 |   | 53,374    |      |  |   | 58,863    |  |  |   | 53,179    | 
|Impairment and restructuring charges                      |  |                                 | 7,333     |  |                                 |   | 5,907     |      |  |   | 7,333     |  |  |   | 5,907     | 
|Depreciation and amortization                             |  |                                 | 23,250    |  |                                 |   | 22,470    |      |  |   | 23,250    |  |  |   | 22,470    | 
|                                                          |  |                                 |           |  |                                 |   |           |      |  |   |           |  |  |   |           | 
|                                                          |  |                                 | 2,657,248 |  |                                 |   | 2,530,628 |      |  |   | 2,657,055 |  |  |   | 2,530,433 | 
|                                                          |  |                                 |           | 
|Income from operations                                    |  |                                 | 82,261    |  |                                 |   | 95,034    |      |  |   | 82,454    |  |  |   | 95,229    | 
|                                                          |  |                                 |           | 
|Other income (expense):                                   |  |                                 |           |  |                                 |   |           |      |  |   |           |  |  |   |           | 
|Interest expense, net                                     |  |                                 | (108,776) |  |                                 |   | (102,820) |      |  |   | (83,226)  |  |  |   | (73,122)  | 
|Loss on early extinguishment of debt                      |  |                                 | -         |  |                                 |   | (26,025)  |      |  |   | -         |  |  |   | (26,025)  | 
|Loss on interest rate swap                                |  |                                 | (11,591)  |  |                                 |   | (10,012)  |      |  |   | -         |  |  |   | -         | 
|Other income (expense), net                               |  |                                 | (1,372)   |  |                                 |   | 37        |      |  |   | (1,372)   |  |  |   | 37        | 
|                                                          |  |                                 |           |  |                                 |   |           |      |  |   |           |  |  |   |           | 
|Loss before income taxes                                  |  |                                 | (39,478)  |  |                                 |   | (43,786)  |      |  |   | (2,144)   |  |  |   | (3,881)   | 
|Income tax benefit (provision)                            |  |                                 | (1,309)   |  |                                 |   | 3,260     |      |  |   | (319)     |  |  |   | (948)     | 
|                                                          |  |                                 |           |  |                                 |   |           |      |  |   |           |  |  |   |           | 
|Net loss                                                  |  |                                 | (40,787)  |  |                                 |   | (40,526)  |      |  |   | (2,463)   |  |  |   | (4,829)   | 
|Less: Net income attributable to noncontrolling interests |  |                                 | (2,794)   |  |                                 |   | (2,615)   |      |  |   | (2,794)   |  |  |   | (2,615)   | 
|                                                          |  |                                 |           |  |                                 |   |           |      |  |   |           |  |  |   |           | 
|Net loss attributable to the Company                      |  | $                               | (43,581)  |  |                                 | $ | (43,141)  |      |  | $ | (5,257)   |  |  | $ | (7,444)   | 
|                                                          |  |                                 |           |  |                                 |   |           |      |  |   |           |  |  |   |           | 

The accompanying notes are an integral part of these statements.



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US ONCOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY (DEFICIT)

(unaudited, in
thousands)



|                                                                                                                 |  |                                         |         |  |          |   |     |                            |  |   |                    |  |  |                         |           |  |       |   |         |  |  |   |           | 
|---------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ------- |  | -------- | - | --- | -------------------------- |  | - | ------------------ |  |  | ----------------------- | --------- |  | ----- | - | ------- |  |  | - | --------- | 
|                                                                                                                 |  | US Oncology Holdings, Inc. Shareholders |         |  |          |  
|                                                                                                                 |  | SharesIssued                            |         |  | ParValue |   |     | Additional  Paid-InCapital |  |   | AccumulatedDeficit |  |  | NoncontrollingInterests |           |  | Total |  
|Balance at December 31, 2009                                                                                     |  |                                         | 422,951 |  |          | $ | 423 |                            |  | $ | 108,723            |  |  | $                       | (415,624) |  |       | $ | 15,605  |  |  | $ | (290,873) | 
|                                                                                                                 |  |                                         |         |  |          |  
|Share-based compensation                                                                                         |  |                                         | -       |  |          |   | -   |                            |  |   | 1,789              |  |  |                         | -         |  |       |   | -       |  |  |   | 1,789     | 
|Exercise of options to purchase common stock                                                                     |  |                                         | 26      |  |          |   | -   |                            |  |   | 34                 |  |  |                         | -         |  |       |   | -       |  |  |   | 34        | 
|Restricted stock award issuances                                                                                 |  |                                         | 1,470   |  |          |   | 1   |                            |  |   | -                  |  |  |                         | -         |  |       |   | -       |  |  |   | 1         | 
|Forfeiture of restricted stock awards                                                                            |  |                                         | (378)   |  |          |   | -   |                            |  |   | -                  |  |  |                         | -         |  |       |   | -       |  |  |   | -         | 
|Distributions to noncontrolling interests                                                                        |  |                                         | -       |  |          |   | -   |                            |  |   | -                  |  |  |                         | -         |  |       |   | (3,496) |  |  |   | (3,496)   | 
|Net income (loss)                                                                                                |  |                                         | -       |  |          |   | -   |                            |  |   | -                  |  |  |                         | (43,581)  |  |       |   | 2,794   |  |  |   | (40,787)  | 
|                                                                                                                 |  |                                         |         |  |          |   |     |                            |  |   |                    |  |  |                         |           |  |       |   |         |  |  |   |           | 
|Balance at September 30, 2010                                                                                    |  |                                         | 424,069 |  |          | $ | 424 |                            |  | $ | 110,546            |  |  | $                       | (459,205) |  |       | $ | 14,903  |  |  | $ | (333,332) | 
|                                                                                                                 |  |                                         |         |  |          |   |     |                            |  |   |                    |  |  |                         |           |  |       |   |         |  |  |   |           | 
|US ONCOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (unaudited, in thousands, except share information) | 
|                                                                                                                 |  | US Oncology, Inc. Shareholder           |         |  |          |  
|                                                                                                                 |  | SharesIssued                            |         |  | ParValue |   |     | Additional  Paid-InCapital |  |   | AccumulatedDeficit |  |  | NoncontrollingInterests |           |  | Total |  
|Balance at December 31, 2009                                                                                     |  |                                         | 100     |  |          | $ | 1   |                            |  | $ | 551,986            |  |  | $                       | (368,930) |  |       | $ | 15,605  |  |  | $ | 198,662   | 
|                                                                                                                 |  |                                         |         |  |          |  
|Share-based compensation                                                                                         |  |                                         | -       |  |          |   | -   |                            |  |   | 1,789              |  |  |                         | -         |  |       |   | -       |  |  |   | 1,789     | 
|Dividend paid                                                                                                    |  |                                         | -       |  |          |   | -   |                            |  |   | (19,672)           |  |  |                         | -         |  |       |   | -       |  |  |   | (19,672)  | 
|Distributions to noncontrolling interests                                                                        |  |                                         | -       |  |          |   | -   |                            |  |   | -                  |  |  |                         | -         |  |       |   | (3,496) |  |  |   | (3,496)   | 
|Net income (loss)                                                                                                |  |                                         | -       |  |          |   | -   |                            |  |   | -                  |  |  |                         | (5,257)   |  |       |   | 2,794   |  |  |   | (2,463)   | 
|                                                                                                                 |  |                                         |         |  |          |   |     |                            |  |   |                    |  |  |                         |           |  |       |   |         |  |  |   |           | 
|                                                                                                                 |  |                                         |         |  |          |  
|Balance at September 30, 2010                                                                                    |  |                                         | 100     |  |          | $ | 1   |                            |  | $ | 534,103            |  |  | $                       | (374,187) |  |       | $ | 14,903  |  |  | $ | 174,820   | 
|                                                                                                                 |  |                                         |         |  |          |   |     |                            |  |   |                    |  |  |                         |           |  |       |   |         |  |  |   |           | 

The accompanying notes are an integral part of these statements.



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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



|                                                                                  |  |                                 |          |  |                                 |   |          |      |  |   |          |  |  |   |          | 
|--------------------------------------------------------------------------------- |  | ------------------------------- | -------- |  | ------------------------------- | - | -------- | ---- |  | - | -------- |  |  | - | -------- | 
|                                                                                  |  | US Oncology Holdings, Inc.      |          |  | US Oncology, Inc.               |  
|                                                                                  |  | Nine Months Ended September 30, |          |  | Nine Months Ended September 30, |  
|                                                                                  |  | 2010                            |          |  | 2009                            |   |          | 2010 |  |   | 2009     | 
|Cash flows from operating activities:                                             |  |                                 |          |  |                                 |   |          |      |  |   |          |  |  |   |          | 
|Net loss                                                                          |  | $                               | (40,787) |  |                                 | $ | (40,526) |      |  | $ | (2,463)  |  |  | $ | (4,829)  | 
|Adjustments to reconcile net loss to net cash provided by operating activities:   |  |                                 |          |  |                                 |   |          |      |  |   |          |  |  |   |          | 
|Depreciation and amortization, including amortization of deferred financing costs |  |                                 | 82,119   |  |                                 |   | 83,891   |      |  |   | 80,323   |  |  |   | 82,101   | 
|Impairment and restructuring charges                                              |  |                                 | 7,333    |  |                                 |   | 5,907    |      |  |   | 7,333    |  |  |   | 5,907    | 
|Deferred income taxes                                                             |  |                                 | 110      |  |                                 |   | (6,034)  |      |  |   | (1,463)  |  |  |   | 339      | 
|Non-cash compensation expense                                                     |  |                                 | 1,789    |  |                                 |   | 1,571    |      |  |   | 1,789    |  |  |   | 1,571    | 
|Gain on sale of assets                                                            |  |                                 | (1,021)  |  |                                 |   | -        |      |  |   | (1,021)  |  |  |   | -        | 
|Equity losses (earnings) of joint ventures                                        |  |                                 | 591      |  |                                 |   | (2,429)  |      |  |   | 591      |  |  |   | (2,429)  | 
|Loss on interest rate swap                                                        |  |                                 | 11,591   |  |                                 |   | 10,012   |      |  |   | -        |  |  |   | -        | 
|Non-cash interest under PIK election                                              |  |                                 | 24,938   |  |                                 |   | 27,373   |      |  |   | -        |  |  |   | -        | 
|Loss on early extinguishment of debt                                              |  |                                 | -        |  |                                 |   | 26,025   |      |  |   | -        |  |  |   | 26,025   | 
|(Increase) Decrease in:                                                           |  |                                 |          |  |                                 |   |          |      |  |   |          |  |  |   |          | 
|Accounts and other receivables                                                    |  |                                 | (11,971) |  |                                 |   | (8,528)  |      |  |   | (11,971) |  |  |   | (8,528)  | 
|Prepaid expenses and other current assets                                         |  |                                 | 3,623    |  |                                 |   | (3,703)  |      |  |   | 3,630    |  |  |   | (3,703)  | 
|Inventories                                                                       |  |                                 | 48,120   |  |                                 |   | 10,391   |      |  |   | 48,120   |  |  |   | 10,391   | 
|Other assets                                                                      |  |                                 | -        |  |                                 |   | 26       |      |  |   | -        |  |  |   | 26       | 
|Increase (Decrease) in:                                                           |  |                                 |          |  |                                 |   |          |      |  |   |          |  |  |   |          | 
|Accounts payable                                                                  |  |                                 | 5,146    |  |                                 |   | 29,816   |      |  |   | 5,152    |  |  |   | 29,830   | 
|Due from/to affiliates                                                            |  |                                 | (32,173) |  |                                 |   | 5,338    |      |  |   | (32,421) |  |  |   | 13,330   | 
|Income taxes receivable/payable                                                   |  |                                 | (1,618)  |  |                                 |   | 9,549    |      |  |   | (765)    |  |  |   | (826)    | 
|Other accrued liabilities                                                         |  |                                 | (43,838) |  |                                 |   | (23,338) |      |  |   | (23,504) |  |  |   | (13,174) | 
|                                                                                  |  |                                 |          |  |                                 |   |          |      |  |   |          |  |  |   |          | 
|Net cash provided by operating activities                                         |  |                                 | 53,952   |  |                                 |   | 125,341  |      |  |   | 73,330   |  |  |   | 136,031  | 
|                                                                                  |  |                                 |          |  |                                 |   |          |      |  |   |          |  |  |   |          | 

Continued on following page

The accompanying notes are an integral part of these statements.



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CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(unaudited, in thousands)



|                                                  |  |                                 |          |  |                                 |   |           |      |  |   |          |  |  |   |           | 
|------------------------------------------------- |  | ------------------------------- | -------- |  | ------------------------------- | - | --------- | ---- |  | - | -------- |  |  | - | --------- | 
|                                                  |  | US Oncology Holdings, Inc.      |          |  | US Oncology, Inc.               |  
|                                                  |  | Nine Months Ended September 30, |          |  | Nine Months Ended September 30, |  
|                                                  |  | 2010                            |          |  | 2009                            |   |           | 2010 |  |   | 2009     | 
|Cash flows from investing activities:             |  |                                 |          |  |                                 |   |           |      |  |   |          |  |  |   |           | 
|Acquisition of property and equipment             |  |                                 | (45,887) |  |                                 |   | (66,696)  |      |  |   | (45,887) |  |  |   | (66,696)  | 
|Proceeds from contract separations                |  |                                 | 5,208    |  |                                 |   | 132       |      |  |   | 5,208    |  |  |   | 132       | 
|Payments in affiliation transactions              |  |                                 | (2,214)  |  |                                 |   | (4,525)   |      |  |   | (2,214)  |  |  |   | (4,525)   | 
|Payments for acquisition of business              |  |                                 | (4,367)  |  |                                 |   | -         |      |  |   | (4,367)  |  |  |   | -         | 
|Distributions from unconsolidated subsidiaries    |  |                                 | 3,017    |  |                                 |   | 3,509     |      |  |   | 3,017    |  |  |   | 3,509     | 
|Investments in unconsolidated subsidiaries        |  |                                 | (1,288)  |  |                                 |   | (7,790)   |      |  |   | (1,288)  |  |  |   | (7,790)   | 
|                                                  |  |                                 |          |  |                                 |   |           |      |  |   |          |  |  |   |           | 
|                                                  |  |                                 |          | 
|Net cash used in investing activities             |  |                                 | (45,531) |  |                                 |   | (75,370)  |      |  |   | (45,531) |  |  |   | (75,370)  | 
|                                                  |  |                                 |          |  |                                 |   |           |      |  |   |          |  |  |   |           | 
|Cash flows from financing activities:             |  |                                 |          |  |                                 |   |           |      |  |   |          |  |  |   |           | 
|Proceeds from Senior Secured Notes                |  |                                 | -        |  |                                 |   | 758,926   |      |  |   | -        |  |  |   | 758,926   | 
|Repayment of term loan                            |  |                                 | -        |  |                                 |   | (436,666) |      |  |   | -        |  |  |   | (436,666) | 
|Repayment of Senior Notes                         |  |                                 | -        |  |                                 |   | (311,578) |      |  |   | -        |  |  |   | (311,578) | 
|Repayment of other indebtedness                   |  |                                 | (7,156)  |  |                                 |   | (9,405)   |      |  |   | (7,156)  |  |  |   | (9,405)   | 
|Debt financing costs                              |  |                                 | (145)    |  |                                 |   | (21,188)  |      |  |   | (145)    |  |  |   | (21,188)  | 
|Net distributions to parent                       |  |                                 | -        |  |                                 |   | -         |      |  |   | (19,672) |  |  |   | (11,064)  | 
|Distributions to noncontrolling interests         |  |                                 | (3,496)  |  |                                 |   | (1,627)   |      |  |   | (3,496)  |  |  |   | (1,627)   | 
|Proceeds from exercise of stock options           |  |                                 | 34       |  |                                 |   | -         |      |  |   | -        |  |  |   | -         | 
|                                                  |  |                                 |          |  |                                 |   |           |      |  |   |          |  |  |   |           | 
|                                                  |  |                                 |          | 
|Net cash used in financing activities             |  |                                 | (10,763) |  |                                 |   | (21,538)  |      |  |   | (30,469) |  |  |   | (32,602)  | 
|                                                  |  |                                 |          |  |                                 |   |           |      |  |   |          |  |  |   |           | 
|Increase (decrease) in cash and cash equivalents  |  |                                 | (2,342)  |  |                                 |   | 28,433    |      |  |   | (2,670)  |  |  |   | 28,059    | 
|Cash and cash equivalents:                        |  |                                 |          |  |                                 |   |           |      |  |   |          |  |  |   |           | 
|Beginning of period                               |  |                                 | 161,811  |  |                                 |   | 104,477   |      |  |   | 161,589  |  |  |   | 104,476   | 
|                                                  |  |                                 |          |  |                                 |   |           |      |  |   |          |  |  |   |           | 
|                                                  |  |                                 |          | 
|End of period                                     |  | $                               | 159,469  |  |                                 | $ | 132,910   |      |  | $ | 158,919  |  |  | $ | 132,535   | 
|                                                  |  |                                 |          |  |                                 |   |           |      |  |   |          |  |  |   |           | 
|                                                  |  |                                 |          | 
|Interest paid                                     |  | $                               | 102,985  |  |                                 | $ | 79,792    |      |  | $ | 102,962  |  |  | $ | 79,767    | 
|Income taxes and related interest paid (refunded) |  |                                 | 1,694    |  |                                 |   | (6,739)   |      |  |   | 1,694    |  |  |   | 1,476     | 
|Non-cash investing and financing transactions:    |  |                                 |          |  |                                 |   |           |      |  |   |          |  |  |   |           | 
|Notes issued for interest paid-in-kind            |  |                                 | 32,790   |  |                                 |   | 37,203    |      |  |   | -        |  |  |   | -         | 
|Accretion of dividends on preferred stock         |  |                                 | -        |  |                                 |   | 19,339    |      |  |   | -        |  |  |   | -         | 

The accompanying notes
are an integral part of these statements.



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1  Basis of Presentation

US Oncology Holdings, Inc. (Holdings) was formed in March, 2004 when a wholly owned subsidiary of Holdings agreed to merge
with and into US Oncology, Inc. (US Oncology), with US Oncology continuing as the surviving corporation (the Merger). The Merger was consummated on August 20, 2004. Currently, Holdings principal asset is 100% of
the shares of common stock of US Oncology. Holdings and US Oncology and their subsidiaries are collectively referred to as the Company.

The consolidated financial statements of Holdings include the accounts of its wholly-owned subsidiary, US Oncology. Holdings conducts substantially all of its business through US Oncology and its
subsidiaries which provide extensive services and support to its affiliated cancer care sites nationwide to help them expand their offering of the most advanced cancer care treatments, build integrated community-based cancer care centers, improve
their therapeutic drug management programs, and participate in cancer-related clinical research studies. US Oncology is affiliated with 1,392 physicians operating in 517 locations, including 99 radiation oncology facilities in 39 states. US Oncology
also provides a broad range of services to pharmaceutical manufacturers, including product distribution and informational services such as data reporting and analysis.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim
financial reporting and in accordance with instructions for Form 10-Q and Rule 10.01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of
management, the unaudited condensed consolidated financial statements contained in this report reflect all adjustments that are normal and recurring in nature and considered necessary to be a fair statement of the financial position and the results
of operations for the interim periods presented. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for the interim period are not
necessarily indicative of the results expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses, as well as disclosures of contingent assets and liabilities. Because of inherent uncertainties in this process, actual future results could differ from those expected at the reporting date. These unaudited, condensed consolidated
financial statements, footnote disclosures and other information should be read in conjunction with the financial statements and the notes thereto included in the Companys Annual Report on Form 10-K, filed with the Securities and Exchange
Commission (SEC) on March 4, 2010.

NOTE 2  Revenues

The Company derives revenues primarily from (i) comprehensive management fees earned under our comprehensive strategic alliances
model where we act as exclusive manager and administrator of affiliated practices; (ii) targeted physician services fees earned for specific practice management services performed; (iii) fees paid by pharmaceutical companies for services
as a group purchasing organization, informational data services and other manufacturer services and (iv) clinical research services performed under agreements with pharmaceutical manufacturers and other trial sponsors.

Governmental programs, such as Medicare and Medicaid, are collectively the affiliated practices largest payers. For the three
months ended September 30, 2010 and 2009, the affiliated practices under comprehensive service agreements derived 41.2% and 39.6%, respectively, of their net patient revenue from services provided under the Medicare program (of which 7.6% and
7.2%, respectively, relate to Medicare managed care) and 4.2% and 3.8%, respectively, from services provided under state Medicaid programs. For the nine months ended September 30, 2010 and 2009, the affiliated practices under comprehensive
service agreements derived 40.7% and 39.6%, respectively, of their net patient revenue from services provided under the Medicare program (of which 7.3% and 6.8%, respectively, relate to Medicare managed care) and 4.1% and 3.7%, respectively, from
services provided under state Medicaid programs. Capitation revenues were less than 1% of total net patient revenue in all periods. Additional payers, depending on the quarter, may individually represent more or less than 10% of the aggregate net
revenues of affiliated practices under comprehensive service agreements. During the three months and nine months ended September 30, 2010 and 2009, there were no payers representing 10% or more of such affiliated practices aggregate net
revenues. Changes in the payer reimbursement rates, or in an affiliated practices payer mix could materially and adversely affect the Companys revenues.

Erythropoiesis-stimulating agents (ESAs) are drugs used for the treatment of anemia, a condition that occurs when the level of healthy red blood cells in the body becomes too low, thus
inhibiting the bloods ability to carry oxygen. Many cancer patients suffer from anemia either as a result of their disease or as a result of the treatments they receive for their cancer. ESAs have historically been used by oncologists to treat
anemia. ESAs are administered to increase levels of healthy red blood cells as an alternative to blood transfusions.



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





On July 30,
2007, the Centers for Medicare and Medicaid Services (CMS) issued a National Coverage Determination (NCD) establishing criteria for reimbursement by Medicare for ESA usage which led to a significant decline in utilization of
these drugs by oncologists, including those affiliated with the Company. In addition, the Oncologic Drugs Advisory Committee (ODAC) met on March 13, 2008, to further consider the use of ESAs in oncology. Based upon the ODAC
findings, on July 30, 2008, the U.S. Food and Drug Administration (FDA) published a final new label for the ESA drugs Aranesp and Procrit. Unlike the NCD from CMS, which governs reimbursement (rather than prescribing) for Medicare
beneficiaries only, the label indication directs appropriate physician prescribing and applies to all patients and payers.

The FDA also mandated implementation of a Risk Evaluation and Mitigation Strategy (REMS) for ESAs. A proposed REMS for ESAs
was filed by ESA manufacturers with the FDA in August, 2008 and became effective on March 24, 2010. The REMS is focused on ESA prescribing guidelines and includes additional patient consent/education requirements, medical guides and physician
registration requirements. The REMS also outlines additional procedural steps that will be necessary for qualified physicians to order and prescribe ESAs for their patients.

The decline in ESA usage has had a significant adverse affect on the Companys results of operations, particularly on its medical oncology services and pharmaceutical services segments. Prescribing
patterns may continue to change now that the REMS has been in effect for several months, a possible impact of which could be further significant reductions in ESA utilization. During the current periods, however, operating income attributable to
ESAs administered by our network of affiliated physicians remained relatively stable at $5.3 million and $5.6 million during the three months ended September 30, 2010 and 2009, respectively, and $14.6 million and $16.3 million during the nine
months ended September 30, 2010 and 2009, respectively. The operating income reflects results from the medical oncology services segment which relate primarily to the administration of ESAs by practices receiving comprehensive management
services and from the pharmaceutical services segment which includes purchases by physicians affiliated under the targeted physician services model, as well as distribution and group purchasing fees received from manufacturers for pharmaceuticals
purchased by physicians affiliated under both of these arrangements.

Decreasing financial performance of affiliated practices
as a result of further declining ESA usage, if any, also affects their relationship with the Company and, in some instances, has led to increased pressure to amend the terms of their management services agreements. In addition, reduced utilization
of ESAs may adversely impact the Companys ability to continue to receive favorable pricing from ESA manufacturers. Decreased financial performance may also adversely impact the Companys ability to obtain acceptable credit terms from
pharmaceutical manufacturers, including pharmaceutical manufacturers of products other than ESAs.

The Company expects
continued payer scrutiny of the side effects of supportive care products and other drugs that represent significant costs to payers. Such scrutiny by payers or additional scientific data could lead to future restrictions on usage or reimbursement
for other pharmaceuticals as a result of payer or FDA action or reductions in usage as a result of the independent determination of oncologists practicing in the network. Any such reduction could have an adverse effect on the business. In the
Companys evidence-based medicine initiative, affiliated physicians continually review emerging scientific information to develop clinical pathways for use in oncology and remain engaged with payers in determining optimal usage for all
pharmaceuticals.

Medicare reimbursement for physician services is based on a fee schedule, which establishes payment for
a given service, in relation to actual resources used in providing the service, through the application of relative value units (RVUs). The resources used are converted into a dollar amount of reimbursement through a conversion
factor, which is updated annually by CMS, based on a formula.

In late 2009, CMS announced payment rates for services to be
furnished under the 2010 physician fee schedule. Under the provisions, the current Sustainable Growth Rate (SGR) formula for setting aggregate Physician Fee Schedule spending would reduce payment for physician services by 21.3%.
Historically, Congress has intervened and through the budgetary process provided funding to prevent significant reductions in reimbursement rates. Most recently, The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of
2010 (H.R. 3962), which was signed into law on June 25, 2010, delays the payment reduction until November 30, 2010 and includes a 2.2% increase in the conversion factor for services provided from June 1, 2010 through November 30,
2010. H.R. 3962 also included rate change adjustments related to the Geographic Practice Cost Index retroactive to services provided beginning January 1, 2010.



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





The Companys
most significant, and only service agreement to provide more than 10% of total revenues, is with Texas Oncology, P.A. which accounted for approximately 25% of revenue for the nine month periods ended September 30, 2010, and 2009. Set forth
below is selected, unaudited financial information for Texas Oncology (in thousands):



|                                     |  |                                  |         |  |                                 |   |         |      |  |   |         |  |  |   |         | 
|------------------------------------ |  | -------------------------------- | ------- |  | ------------------------------- | - | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                                     |  | Three Months Ended September 30, |         |  | Nine Months Ended September 30, |  
|                                     |  | 2010                             |         |  | 2009                            |   |         | 2010 |  |   | 2009    | 
|                                     |  |                                  |         | 
|Revenue of Texas Oncology, P.A.      |  | $                                | 233,542 |  |                                 | $ | 223,876 |      |  | $ | 681,194 |  |  | $ | 655,792 | 
|Less: Reimbursement of expenses      |  |                                  | 221,484 |  |                                 |   | 210,436 |      |  |   | 643,123 |  |  |   | 618,564 | 
|                                     |  |                                  |         |  |                                 |   |         |      |  |   |         |  |  |   |         | 
|Earnings component of management fee |  | $                                | 12,058  |  |                                 | $ | 13,440  |      |  | $ | 38,071  |  |  | $ | 37,228  | 
|                                     |  |                                  |         |  |                                 |   |         |      |  |   |         |  |  |   |         | 

NOTE 3  Fair Value Measurements

Under the provisions of ASC820 Fair Value Measurements and Disclosures (Fair Value Measurements and Disclosure Topics), assets and liabilities measured at fair value are to be categorized into
one of three different levels depending on the observability of the inputs employed in the measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted
prices included within Level 1 for the asset or liability, either directly or indirectly through market-corroborated inputs. Level 3 inputs are unobservable inputs for the asset or liability reflecting our assumptions about pricing by market
participants. The Company classifies assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. The Companys methodology for categorizing assets and liabilities that are
measured at fair value pursuant to this hierarchy gives the highest priority to unadjusted quoted prices in active markets and the lowest level to unobservable inputs.

Liabilities consist of the Companys interest rate swap only, which is valued using models based on readily observable market parameters for all substantial terms of the derivative contract and,
therefore, are classified as Level 2. Under the interest rate swap, the Company pays a fixed rate of 4.97% and receives a floating rate based on the six-month LIBOR on a notional amount of $425.0 million. The floating rate is set at the start of
each semi-annual interest period with the final interest settlement date on March 15, 2012. The fair value of the interest rate swap is estimated based upon the expected future cash settlements, as reported by the counterparty, using observable
market information. The most significant factors in estimating the value of the interest rate swap is the assumption made regarding the future interest rates that will be used to establish the variable rate payments to be received by the Company and
the discount rate used to determine the present value of those estimated future payments. The Company considers both counterparty credit risk and its own credit risk when estimating the fair market value of the interest rate swap. Because of
negative differential between the current (and projected) LIBOR rate and the fixed interest rate paid by the Company, which results in a net liability position, as well as the counterpartys credit rating, counterparty credit risk is assessed
to be minimal and did not impact the fair value of the interest rate swap. The Company also assesses its own credit risk in the valuation of its obligation under the interest rate swap using Company-specific market information. The most significant
market information considered was the credit spread between the Holdings Notes (exchange notes registered with the SEC in 2007), an instrument with a similar credit profile and term as the interest rate swap, and the like term treasury
spread (as an estimate of a risk free rate). An increase in future LIBOR rates of 1.00 percent would increase (in the Companys favor) the fair value of the interest rate swap by $3.7 million and a decrease in future interest rates of 1.00
percent would negatively impact its fair value by $2.6 million. As of September 30, 2010, $101.7 million of the Companys indebtedness remains exposed to changes in variable interest rates. As such, movements that favorably impact the fair
market value of the interest rate swap will increase the interest expense associated with our indebtedness that remains subject to variable interest rate risk.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





The following
table summarizes the assets and liabilities measured at fair value on a recurring basis as of September 30, 2010 (in thousands):



|                            |  |                    |        |  |                    |   |   |                   |  |   |                     |  |  |   |   | 
|--------------------------- |  | ------------------ | ------ |  | ------------------ | - | - | ----------------- |  | - | ------------------- |  |  | - | - | 
|                            |  |                    |        |  | Quoted Prices in   |   |   |                   |  |   |                     | 
|                            |  |                    |        |  | Active Markets for |   |   | Significant Other |  |   | Significant         | 
|                            |  | Fair Value as of   |        |  | Identical Assets   |   |   | Observable Inputs |  |   | Unobservable Inputs | 
|                            |  | September 30, 2010 |        |  | (Level 1)          |   |   | (Level 2)         |  |   | (Level 3)           | 
|                            |  |                    |        | 
|Assets                      |  | $                  | -      |  |                    | $ | - |                   |  | $ | -                   |  |  | $ | - | 
|                            |  |                    |        | 
|Liabilities                 |  |                    |        |  |                    |   |   |                   |  |   |                     |  |  |   |   | 
|Other accrued liabilities   |  |                    | 17,703 |  |                    |   | - |                   |  |   | 17,703              |  |  |   | - | 
|Other long-term liabilities |  |                    | 7,720  |  |                    |   | - |                   |  |   | 7,720               |  |  |   | - | 
|                            |  |                    |        |  |                    |   |   |                   |  |   |                     |  |  |   |   | 
|Total                       |  | $                  | 25,423 |  |                    | $ | - |                   |  | $ | 25,423              |  |  | $ | - | 
|                            |  |                    |        |  |                    |   |   |                   |  |   |                     |  |  |   |   | 

Non-designated Derivative Instrument

The Companys interest rate swap agreement described above was initially designated as a cash flow hedge against the variability of cash future interest payments on the Holdings Notes (see Note 6
 Indebtedness). The Company no longer believes that payment of cash interest on the entire principal of the outstanding Holdings Notes remains probable and has discontinued cash flow hedge accounting for the interest rate swap. Subsequent to
discontinuation of hedge accounting, the Company has recognized all unrealized losses in earnings, rather than deferring such amounts in accumulated other comprehensive income. Holdings recognized unrealized losses during the three and nine months
ended September 30, 2010 and 2009 as follows (in thousands):



|                           |  |                                  |         |  |                                 |   |         |      |  |   |          |  |  |   |          | 
|-------------------------- |  | -------------------------------- | ------- |  | ------------------------------- | - | ------- | ---- |  | - | -------- |  |  | - | -------- | 
|                           |  | Three Months Ended September 30, |         |  | Nine Months Ended September 30, |  
|                           |  | 2010                             |         |  | 2009                            |   |         | 2010 |  |   | 2009     | 
|                           |  |                                  |         | 
|Loss on interest rate swap |  | $                                | (3,605) |  |                                 | $ | (7,596) |      |  | $ | (11,591) |  |  | $ | (10,012) | 

Although cash flow
hedge accounting is no longer applied to the interest rate swap, the Company believes the swap, economically, remains a hedge against the variability in a portion of interest accruing on the Holdings Notes.

NOTE 4  Intangible Assets and Goodwill

Changes in intangible assets relating to service agreements, customer relationships, trademarks and goodwill during the nine months ended September 30, 2010 consisted of the following (in thousands):



|                                                                                               |  |             |          |  |                |   |       |            |  |   |          |  |  |             |         |  |               |   |           |  |  |   |         | 
|---------------------------------------------------------------------------------------------- |  | ----------- | -------- |  | -------------- | - | ----- | ---------- |  | - | -------- |  |  | ----------- | ------- |  | ------------- | - | --------- |  |  | - | ------- | 
|                                                                                               |  | Service     |          |  | Customer       |   |       |            |  |   |          |  |  | Accumulated |         |  |               |  
|                                                                                               |  | Agreements, |          |  | Relationships, |   |       | Patents &  |  |   |          |  |  | Impairment  |         |  |               |  
|                                                                                               |  | net         |          |  | net            |   |       | Trademarks |  |   | Goodwill |  |  | Loss        |         |  | Goodwill, net |  
|                                                                                               |  |             |          |  |                |  
|Balance at December 31, 2009                                                                   |  | $           | 251,397  |  |                | $ | 3,244 |            |  | $ | -        |  |  | $           | 757,270 |  |               | $ | (380,000) |  |  | $ | 377,270 | 
|Additions                                                                                      |  |             | 2,214    |  |                |   | 2,180 |            |  |   | 925      |  |  |             | 1,647   |  |               |   | -         |  |  |   | 1,647   | 
|Impairment charges                                                                             |  |             | (2,523)  |  |                |   | -     |            |  |   | -        |  |  |             | -       |  |               |   | -         |  |  |   | -       | 
|Amortization expense and other                                                                 |  |             | (17,939) |  |                |   | (506) |            |  |   | (77)     |  |  |             | -       |  |               |   | -         |  |  |   | -       | 
|                                                                                               |  |             |          |  |                |   |       |            |  |   |          |  |  |             |         |  |               |   |           |  |  |   |         | 
|Balance at September 30, 2010                                                                  |  | $           | 233,149  |  |                | $ | 4,918 |            |  | $ | 848      |  |  | $           | 758,917 |  |               | $ | (380,000) |  |  | $ | 378,917 | 
|                                                                                               |  |             |          |  |                |   |       |            |  |   |          |  |  |             |         |  |               |   |           |  |  |   |         | 
|                                                                                               |  |             |          |  |                |  
|Average of straight-line based amortization period remaining in years as of September 30, 2010 |  |             | 12       |  |                |   | 7     |            |  |   | 4        |  |  |             | N/A     |  |               |   |           |  |  |   |         | 

Customer relationships, net, are classified as Other Assets in the accompanying Condensed
Consolidated Balance Sheets. Accumulated amortization relating to service agreements was $80.1 million and $73.4 million at September 30, 2010 and December 31, 2009, respectively. The amortization expense of amortizable intangible
assets for the nine months ended September 30, 2010 was $15.8 million, and the estimated annual amortization expense for the five succeeding years is approximately $20 million per year.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





During the nine
months ended September 30, 2010, the Company recorded additions to certain intangible assets related to the acquisition of CURE Media Group for cash consideration of $4.4 million. Additions to customer relationships of $2.2 million, trademarks
of $0.5 million and goodwill of $1.6 million, as noted in the table above, all relate to this acquisition. Goodwill related to our acquisition of the CURE Media Group is included in the pharmaceutical services segment. In addition, the Company
recorded additions to patents and trademarks related to the acquisition of NexCura of $0.5 million. As determinations and appraisals of the fair value of assets acquired and liabilities assumed in the acquisitions are finalized, values may be
adjusted if they vary from our original estimates. During the nine months ended September 30, 2010, the Company impaired service agreement intangible assets with a carrying value of $2.5 million (see Note 5  Impairment and
Restructuring Charges).

The carrying value of goodwill and the carrying value of service agreements are subject to
impairment tests under generally accepted accounting principles. There were no impairments of goodwill identified during the nine months ended September 30, 2010. However, future adverse changes in actual or anticipated operating results, as
well as unfavorable changes in economic factors and market multiples used to estimate the fair value of the Company, could result in future non-cash impairment charges.

NOTE 5  Impairment and Restructuring Charges

Impairment and
restructuring charges recognized during the three months and nine months ended September 30, 2010 and 2009 consisted of the following (in thousands):



|                        |  |                                  |  |   |       |                                 |  |  |  |      |  |  |  |      |       |  |  |  |  |  |  |  |  |   |       |  |  |  |  |  |  |  |  |   |       |  |  | 
|----------------------- |  | -------------------------------- |  | - | ----- | ------------------------------- |  |  |  | ---- |  |  |  | ---- | ----- |  |  |  |  |  |  |  |  | - | ----- |  |  |  |  |  |  |  |  | - | ----- |  |  | 
|                        |  | Three Months Ended September 30, |  |   |       | Nine Months Ended September 30,
|                        |  | 2010                             |  |   |       | 2009                            |  |  |  | 2010 |  |  |  | 2009
|Severance costs         |  |                                  |  | $ | 3,059 |                                 |  |  |  |      |  |  |  | $    | 4,117 |  |  |  |  |  |  |  |  | $ | 4,524 |  |  |  |  |  |  |  |  | $ | 5,731 |  |  | 
|Service agreements, net |  |                                  |  |   | -     |                                 |  |  |  |      |  |  |  |      | -     |  |  |  |  |  |  |  |  |   | 2,523 |  |  |  |  |  |  |  |  |   | 150   |  |  | 
|Other, net              |  |                                  |  |   | 193   |                                 |  |  |  |      |  |  |  |      | -     |  |  |  |  |  |  |  |  |   | 286   |  |  |  |  |  |  |  |  |   | 26    |  |  | 
|                        |  |                                  |  |   |       |                                 |  |  |  |      |  |  |  |      |       |  |  |  |  |  |  |  |  |   |       |  |  |  |  |  |  |  |  |   |       |  |  | 
|Total                   |  |                                  |  | $ | 3,252 |                                 |  |  |  |      |  |  |  | $    | 4,117 |  |  |  |  |  |  |  |  | $ | 7,333 |  |  |  |  |  |  |  |  | $ | 5,907 |  |  | 
|                        |  |                                  |  |   |       |                                 |  |  |  |      |  |  |  |      |       |  |  |  |  |  |  |  |  |   |       |  |  |  |  |  |  |  |  |   |       |  |  | 

The Company recorded severance charges related to employee separations of corporate personnel of
$3.1 million and $4.1 million during the three months ended September 30, 2010 and 2009, respectively, and $4.5 million and $5.7 million during the nine months ended September 30, 2010 and 2009, respectively. The Companys
severance-related liabilities of $5.4 million as of September 30, 2010, will be paid through the fourth quarter of 2011.

In addition, the nine months ended September 30, 2010 and 2009 include impairment charges related to service agreement intangibles
of $2.5 million and $0.2 million, respectively, related to practices which either converted from a comprehensive strategic alliance model to a targeted physician services relationship or separated from the network.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





NOTE 6  Indebtedness

As of September 30, 2010 and December 31, 2009, long-term indebtedness consisted of the following (in
thousands):



|                                                                        |  |               |           |  |              |   |           | 
|----------------------------------------------------------------------- |  | ------------- | --------- |  | ------------ | - | --------- | 
|                                                                        |  | September 30, |           |  | December 31, |  
|                                                                        |  | 2010          |           |  | 2009         |  
|                                                                        |  |              
|US Oncology, Inc.                                                       |  |               |           |  |              |   |           | 
|9.125% Senior Secured Notes, due 2017(a)                                |  |               | 760,790   |  |              |   | 759,680   | 
|10.75% Senior Subordinated Notes, due 2014                              |  |               | 275,000   |  |              |   | 275,000   | 
|9.625% Senior Subordinated Notes, due 2012                              |  |               | 3,000     |  |              |   | 3,000     | 
|Subordinated notes                                                      |  |               | 20,189    |  |              |   | 25,945    | 
|Mortgage, capital lease obligations and other                           |  |               | 19,842    |  |              |   | 21,242    | 
|                                                                        |  |               |           |  |              |   |           | 
|                                                                        |  |               | 1,078,821 |  |              |   | 1,084,867 | 
|Less current maturities                                                 |  |               | (11,342)  |  |              |   | (10,579)  | 
|                                                                        |  |               |           |  |              |   |           | 
|                                                                        |  |               | 1,067,479 |  |              |   | 1,074,288 | 
|                                                                        |  |               |           |  |              |   |           | 
|                                                                        |  |              
|US Oncology Holdings, Inc.                                              |  |               |           |  |              |   |           | 
|Senior Floating Rate PIK Toggle Notes, due 2012                         |  |               | 526,744   |  |              |   | 493,954   | 
|                                                                        |  |               |           |  |              |   |           | 
|                                                                        |  | $             | 1,594,223 |  |              | $ | 1,568,242 | 
|                                                                        |  |               |           |  |              |   |           | 
|                                                                       
|(a) Includes $14.2 million unamortized original issue discount balance. | 

Future principal obligations
under US Oncologys and Holdings long-term indebtedness as of September 30, 2010, are as follows (in thousands):



|                         |  |                                    |  |   |        |      |  |  |  |      |  |  |  |      |         |  |  |      |  |  |  |            |  |   |       |  |  |  |  |  |  |  |  |   |         |  |  |  |  |  |  |  |  |   |       |  |  |  |  |  |  |  |  |   |         |  |  | 
|------------------------ |  | ---------------------------------- |  | - | ------ | ---- |  |  |  | ---- |  |  |  | ---- | ------- |  |  | ---- |  |  |  | ---------- |  | - | ----- |  |  |  |  |  |  |  |  | - | ------- |  |  |  |  |  |  |  |  | - | ----- |  |  |  |  |  |  |  |  | - | ------- |  |  | 
|                         |  | Twelve months ending September 30,
|                         |  | 2011                               |  |   |        | 2012 |  |  |  | 2013 |  |  |  | 2014 |         |  |  | 2015 |  |  |  | Thereafter
|US Oncology payments due |  |                                    |  | $ | 11,342 |      |  |  |  |      |  |  |  | $    | 8,301   |  |  |      |  |  |  |            |  | $ | 8,333 |  |  |  |  |  |  |  |  | $ | 277,049 |  |  |  |  |  |  |  |  | $ | 5,826 |  |  |  |  |  |  |  |  | $ | 782,180 |  |  | 
|Holdings payments due    |  |                                    |  |   | -      |      |  |  |  |      |  |  |  |      | 526,744 |  |  |      |  |  |  |            |  |   | -     |  |  |  |  |  |  |  |  |   | -       |  |  |  |  |  |  |  |  |   | -     |  |  |  |  |  |  |  |  |   | -       |  |  | 
|                         |  |                                    |  |   |        |      |  |  |  |      |  |  |  |      |         |  |  |      |  |  |  |            |  |   |       |  |  |  |  |  |  |  |  |   |         |  |  |  |  |  |  |  |  |   |       |  |  |  |  |  |  |  |  |   |         |  |  | 
|                         |  |                                    |  | $ | 11,342 |      |  |  |  |      |  |  |  | $    | 535,045 |  |  |      |  |  |  |            |  | $ | 8,333 |  |  |  |  |  |  |  |  | $ | 277,049 |  |  |  |  |  |  |  |  | $ | 5,826 |  |  |  |  |  |  |  |  | $ | 782,180 |  |  | 
|                         |  |                                    |  |   |        |      |  |  |  |      |  |  |  |      |         |  |  |      |  |  |  |            |  |   |       |  |  |  |  |  |  |  |  |   |         |  |  |  |  |  |  |  |  |   |       |  |  |  |  |  |  |  |  |   |         |  |  | 

Financial Covenants

The Senior Secured Revolving Credit Facility, the Senior Secured Notes due 2017 and the Senior Subordinated Notes due 2014 contain affirmative and negative covenants including the maintenance of certain
financial ratios, restrictions on sales, leases or other dispositions of property, restrictions on other indebtedness, prohibitions on the payment of dividends and other customary restrictions. Events of default under the Senior Secured Notes and
the unsecured notes include cross-defaults to all material indebtedness, including each of those financings as well as hedging obligations under the interest rate swap. Substantially all of our assets, including certain real property, are pledged as
security on a second lien basis under the Senior Secured Notes.

At September 30, 2010, we were in compliance with the
financial covenants of our indebtedness. The senior secured revolving credit facility contains the most restrictive financial maintenance covenants related to our indebtedness and requires US Oncology to comply, on a quarterly basis, with certain
financial covenants, including a maximum leverage ratio test, which becomes more restrictive over time. At September 30, 2010, the terms of the senior secured revolving credit facility required that we maintain a maximum leverage ratio of
7.00:1. As of September 30, 2010, the maximum leverage ratio, as calculated under the terms of the senior secured revolving credit facility, was 4.92:1. The ratio becomes more restrictive (generally semiannually beginning in 2011) and, at
maturity in 2012, the maximum leverage ratio may not be more than 6.00:1. Our ability to access the senior secured revolving credit facility may be limited if we are not able to maintain compliance with these covenants through the facilitys
maturity in August 2012.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





Senior Secured Revolving Credit
Facility

On August 26, 2009, the Company entered into a $120.0 million Senior Secured Revolving Credit Facility,
including a letter of credit sub-facility and a swingline loan sub-facility, which matures on August 31, 2012. The Senior Secured Revolving Credit Facility is guaranteed on a senior secured basis by the wholly-owned domestic subsidiaries and is
secured on a first lien priority basis (subject to certain exceptions and permitted liens) by substantially all the tangible and intangible assets and properties of the Company and such guarantors. At September 30, 2010, availability had been
reduced by outstanding letters of credit amounting to $30.4 million and $89.6 million was available for borrowing. At September 30, 2010, no amounts had been borrowed under the Senior Secured Revolving Credit Facility.

Senior Floating Rate PIK Toggle Notes

On March 15, 2007, Holdings, whose principal asset is its investment in US Oncology, issued $425.0 million of senior floating rate PIK toggle notes, due March 15, 2012 (the Holdings
Notes). These notes are senior unsecured obligations of Holdings. Holdings may elect to pay interest on the Holdings Notes entirely in cash, by increasing the principal amount of the Holdings Notes (PIK interest), or by paying 50%
in cash and 50% by increasing the principal amount of the Holdings Notes. Cash interest accrues on the Holdings Notes at a rate per annum equal to 6-month LIBOR plus the applicable spread. PIK interest accrues on the Holdings Notes at a rate per
annum equal to the cash interest rate plus 0.75%. The Company must make an election regarding whether interest will be paid in cash or in kind prior to the start of the applicable interest period. The applicable spread is 5.50% and reflects the
final scheduled spread increase of 0.50% which was effective on March 15, 2010. The impact of scheduled spread increases is recognized as interest expense on a straight line basis to reflect a constant spread over the term of the Holdings
Notes. During the nine months ended September 30, 2010 and 2009, the Company elected to PIK interest on the Holdings Notes and total interest expense was $25.6 million and $29.7 million, respectively, which includes cash or PIK interest, as
well as interest related to spread increases and the amortization of debt issuance costs.

Holdings may redeem all or any of
the Holdings Notes at a price of 100% of the principal amount if redeemed on or after September 15, 2010 through final maturity on March 15, 2012.

Because Holdings principal asset is its investment in US Oncology, US Oncology provides funds to service Holdings indebtedness through payment of dividends to Holdings. US Oncologys
senior notes and senior subordinated notes limit its ability to make restricted payments from US Oncology, including dividends paid by US Oncology to Holdings. As of September 30, 2010, US Oncology has the ability to make approximately $6.3
million in restricted payments, which amount increases based on capital contributions to US Oncology, Inc. and by 50% of US Oncologys net income and is reduced by i) the amount of any restricted payments made and ii) net losses of US Oncology,
excluding certain non-cash charges such as the $26.0 million loss on early extinguishment of debt in 2009. Delaware law also requires that US Oncology be solvent both at the time, and immediately following, a dividend payment to Holdings. Because
Holdings relies on dividends from US Oncology to fund cash interest payments on the Holdings Notes, in the event that such restrictions prevent US Oncology from paying such a dividend, Holdings would be unable to pay interest on the notes in cash
and would instead be required to pay PIK interest.

In connection with issuing the Holdings Notes, Holdings entered into an
interest rate swap agreement, with a notional amount of $425.0 million, fixing the LIBOR base rate at 4.97% through maturity in 2012 (see Note 3). Unlike interest on the Holdings Notes, which may be settled in cash or through the issuance of
additional notes, payments due to the swap counterparty must be made in cash. As a result of the current and projected low interest rate environment, and the related expectation that Holdings will continue to be net payer on the interest rate swap,
the Company believes that cash payments for the interest rate swap obligations will reduce the availability under the restricted payments provisions in US Oncologys indebtedness to a level that additional payments for cash interest for the
Holdings Notes may not be prudent and therefore, no longer remain probable. The Companys semiannual payment obligations on the interest rate swap increase by $2.1 million for each 1.00% that the fixed interest rate of 4.97% paid to the
counterparty exceeds the variable interest rate received from the counterparty. Similarly, the Companys semiannual payment obligations on the interest rate swap decrease by $2.1 million when the difference between the fixed interest rate paid
to the counterparty and the variable interest rate received from the counterparty reduces by 1.00%. In the event amounts available under the restricted payments provision are insufficient for the Company to service interest on the Holdings Notes,
including any obligation related to the interest rate swap, the Company may be required to arrange additional financing or a capital infusion and use such proceeds to satisfy these obligations. There can be no assurance that additional financing or
a capital infusion, if available, will be made on terms that are acceptable to the Company. The Company issued $17.1 million in notes to settle the interest due in September 2010. In addition, the Company



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)



was required to pay $9.9 million to settle the obligation under its interest rate swap agreement for the interest period ending September 15, 2010. During the nine months ended
September 30, 2010, US Oncology paid dividends in the amount of $19.7 million to Holdings to finance obligations related to the Holdings Notes and interest rate swap. For the interest period due in March 2011, the Company expects to issue $17.6
million in notes to settle the interest and to pay $9.6 million to settle the swap obligation.

The Companys swap
obligation due March 15, 2011 of $9.6 million is greater than the restricted payment availability of $6.3 million at September 30, 2010. The amount available for the restricted payment on March 15, 2011 will be based on financial
results through December 31, 2010 and, if earnings through that date do not increase availability to a sufficient amount, US Oncology will be required to obtain a capital contribution to fund its obligation related to the swap.

Holdings issued the Holdings Notes pursuant to an Indenture dated March 13, 2007 between Holdings and a Trustee. Among other
provisions, the Indenture contains certain covenants that limit the ability of Holdings and certain restricted subsidiaries, including US Oncology, to incur additional debt, pay dividends on, redeem or repurchase capital stock, issue capital stock
of restricted subsidiaries, make certain investments, enter into certain types of transactions with affiliates, engage in unrelated businesses, create liens securing the debt of Holdings and sell certain assets or merge with or into other companies.

The fair value of the Companys long term indebtedness is estimated based on quoted market prices or prices quoted from
third party financial institutions. The carrying amount and fair value of the indebtedness, including the current portion, are as follows (in thousands):



|                                                                                |  |                          |         |  |                         |   |         |                  |  |   |            |  |  |   |         | 
|------------------------------------------------------------------------------- |  | ------------------------ | ------- |  | ----------------------- | - | ------- | ---------------- |  | - | ---------- |  |  | - | ------- | 
|                                                                                |  | As of September 30, 2010 |         |  | As of December 31, 2009 |  
|                                                                                |  | Carrying  Amount         |         |  | Fair Value              |   |         | Carrying  Amount |  |   | Fair Value | 
|9.125% Senior Secured Notes, due 2017(a)                                        |  | $                        | 775,000 |  |                         | $ | 815,688 |                  |  | $ | 775,000    |  |  | $ | 804,063 | 
|10.75% Senior Subordinated Notes, due 2014                                      |  |                          | 275,000 |  |                         |   | 283,250 |                  |  |   | 275,000    |  |  |   | 287,375 | 
|Holdings Senior Floating Rate PIK Toggle Notes, due 2012                        |  |                          | 526,744 |  |                         | $ | 495,139 |                  |  |   | 493,954    |  |  |   | 456,907 | 
|                                                                               
|(a) Does not include $14.2 million unamortized original issue discount balance. | 

On November 1, 2010, the
Company entered into an Agreement and Plan of Merger with McKesson Corporation pursuant to which substantially all of the Companys indebtedness would be retired. See Note 13  Subsequent Event.

NOTE 7  Stock-Based Compensation

The Company has two stock-based compensation plans as well as a long-term cash incentive plan. The following disclosures relate to stock incentive plans involving shares of or options to purchase Holdings
common stock. Activity related to Holdings stock-based compensation is also included in the financial statements of US Oncology, as the participants in such plans are employees of US Oncology.

Compensation expense is recognized in the Companys financial statements over the requisite service period, net of estimated
forfeitures, and based on the fair value as of the grant date.

US Oncology Holdings, Inc. Amended and Restated 2004 Equity Incentive Plan

The Holdings Board of Directors adopted the US Oncology Holdings, Inc. 2004 Equity Incentive Plan (the
Equity Incentive Plan) effective in August, 2004 and twice amended the plan effective January 1, 2008 and October 1, 2009. The purpose of the plan is to attract and retain the best available personnel and to provide additional
incentives to employees and consultants to promote the success of the business. Based on the individual vesting criteria for each award, the Company recorded compensation expense of $0.5 million and $1.8 million during the three and nine months
ended September 30, 2010, respectively, and $0.7 million and $1.6 million during the three and nine months ended September 30, 2009, respectively, related to restricted stock and stock option awards made under the Equity Incentive Plan. At
September 30, 2010, 485,020 shares of either restricted stock or stock options and 12,401,181 shares of stock options were available for future awards.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





The Company
granted awards of 1,245,000 and 1,370,000 restricted shares with an aggregate fair value at the time of grant of approximately $0.6 million during both the three and nine month periods ended September 30, 2010, and 500,000 and 750,000
restricted shares with an aggregate fair value at the time of grant of approximately $0.2 million and $0.3 million during the three and nine months ended September 30, 2009. Restricted shares vest over a three to five year period from the date
of grant. During the three and nine months ended September 30, 2010 there were 257,801 and 377,801 restricted shares forfeited by holders, respectively, and during the nine months ended September 30, 2009, 597,600 restricted shares were
forfeited by holders. No restricted shares were forfeited by holders during the three months ended September 30, 2009.

The following summarizes activity for restricted shares awarded under the Equity Incentive Plan for the nine months ended
September 30, 2010:



|                                                  |  |                           |             | 
|------------------------------------------------- |  | ------------------------- | ----------- | 
|                                                  |  | UnvestedRestricted Shares |            
|                                                  | 
|Restricted shares outstanding, December 31, 2009  |  |                           | 10,869,851  | 
|Granted                                           |  |                           | 1,370,000   | 
|Forfeited                                         |  |                           | (377,801)   | 
|Vested                                            |  |                           | (2,569,697) | 
|                                                  |  |                           |             | 
|Restricted shares outstanding, September 30, 2010 |  |                           | 9,292,353   | 
|                                                  |  |                           |             | 

The following summarizes activity for options awarded under the Equity Incentive Plan for the nine months
ended September 30, 2010:



|                                        |  |                                 |            |  |                                   |  |       |                                               |  |  |     | 
|--------------------------------------- |  | ------------------------------- | ---------- |  | --------------------------------- |  | ----- | --------------------------------------------- |  |  | --- | 
|                                        |  | Stock Options                   |           
|                                        |  | Shares 
Represented by
 Options |            |  | Weighted 
Average Exercise 
Price |  |       | Weighted Average 
Remaining 
Contractual Term | 
|                                        |  |                                 |           
|Balance, December 31, 2009              |  |                                 | 13,319,050 |  |                                   |  | $1.50 |                                               |  |  |     | 
|Granted                                 |  |                                 | 650,000    |  |                                   |  | 1.50  |                                               |  |  |     | 
|Exercised                               |  |                                 | (25,500)   |  |                                   |  | 1.33  |                                               |  |  |     | 
|Forfeited                               |  |                                 | (665,500)  |  |                                   |  | 1.46  |                                               |  |  |     | 
|                                        |  |                                 |            |  |                                   |  |       |                                               |  |  |     | 
|Balance, September 30, 2010             |  |                                 | 13,278,050 |  |                                   |  | 1.50  |                                               |  |  | 8.9 | 
|                                        |  |                                 |            |  |                                   |  |       |                                               |  |  |     | 
|                                        |  |                                 |           
|Options exercisable, September 30, 2010 |  |                                 | 334,650    |  |                                   |  | 1.46  |                                               |  |  | 5.1 | 

At September 30,
2010, 13,278,050 options to purchase Holdings common stock were outstanding. During the nine months ended September 30, 2010, there were 650,000 options granted to purchase common shares. No options were granted during the nine months ended
September 30, 2009. Compensation expense related to options granted has been recorded based on the fair value as of the grant date and vesting provisions.

Holdings Amended and Restated Director Stock Option and Restricted Stock Award Plan

The Holdings Board of Directors adopted the US Oncology Holdings 2004 Director Stock Option Plan (the Director Stock Option Plan), which became effective in October 2004 upon
stockholder approval. Effective October 1, 2009, Holdings amended and restated its Director Stock Option Plan in order to: (a) allow directors to be granted shares of restricted stock; (b) provide grants to directors; and
(c) increase the number of shares of common stock of Holdings available for awards under the plan from 500,000 to 1,000,000; in each case, as more fully set forth in the Amended and Restated Director Stock Option and Restricted Stock Award Plan
(the Amended Director Plan).



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





Under the Amended
Director Plan, each eligible director at the effective date of the Amended Director Plan is granted 15,000 shares of restricted common stock unless such director was first elected to the Board during or after 2009, in which case such director is
granted 25,000 shares of restricted common stock at the later of the effective date of the Amended Director Plan or the date of his or her election to the Board. In addition, each such director is granted 1,000 shares of restricted common stock for
each board committee on which such director served. On the date of the 2010 annual meeting of stockholders and for each annual meeting of stockholders thereafter, each eligible director will be granted 10,000 shares of restricted common stock. At
the first board meeting following the 2010 annual meeting of stockholders and each annual meeting of stockholders thereafter, each eligible director will be granted 1,000 shares of restricted common stock for each board committee such director
served. All grants of restricted common stock are contingent upon execution of a restricted stock agreement.

Through
September 30, 2010, options to purchase 191,000 shares of common stock, net of forfeitures, have been granted to directors under the Director Stock Option Plan as amended, with exercise prices ranging from $0.23 to $2.72. At September 30,
2010, 108,000 options to purchase Holdings common stock were outstanding. The options vest six months after the date of grant. During the nine months ended September 30, 2010, there were no exercises of options issued under the Amended Director
Plan. The Company granted 100,000 shares of restricted common stock during nine months ended September 30, 2010. Through September 30, 2010, 236,000 shares of restricted common stock have been granted to directors under the Amended
Director Plan. At September 30, 2010, 236,000 shares of restricted common stock were outstanding. At September 30, 2010, 573,000 shares were available for future awards under the Amended Director Plan.

On November 1, 2010, the Company entered into an Agreement and Plan of Merger with McKesson Corporation to purchase all of the
outstanding common shares of US Oncology Holdings, Inc. See Note 13  Subsequent Event.

NOTE 8  Income Taxes

The effective tax rate for the three months and nine months ended September 30, 2010 and 2009 was as follows (dollars in thousands):



|                                                                          |  |                                  |          |  |                                  |   |          |      |  |   |         |  |  |   |         | 
|------------------------------------------------------------------------- |  | -------------------------------- | -------- |  | -------------------------------- | - | -------- | ---- |  | - | ------- |  |  | - | ------- | 
|                                                                          |  | US Oncology Holdings, Inc.       |          |  | US Oncology, Inc.                |  
|                                                                          |  | Three Months Ended September 30, |          |  | Three Months Ended September 30, |  
|                                                                          |  | 2010                             |          |  | 2009                             |   |          | 2010 |  |   | 2009    | 
|                                                                          |  |                                  |          | 
|Loss before income taxes                                                  |  | $                                | (15,237) |  |                                  | $ | (18,614) |      |  | $ | (2,970) |  |  | $ | (1,286) | 
|Less: Income before income taxes attributable to noncontrolling interests |  |                                  | (848)    |  |                                  |   | (912)    |      |  |   | (848)   |  |  |   | (912)   | 
|                                                                          |  |                                  |          |  |                                  |   |          |      |  |   |         |  |  |   |         | 
|Loss before income taxes attributable to the Company                      |  | $                                | (16,085) |  |                                  | $ | (19,526) |      |  | $ | (3,818) |  |  | $ | (2,198) | 
|                                                                          |  |                                  |          |  |                                  |   |          |      |  |   |         |  |  |   |         | 
|Income tax benefit (provision) attributable to the Company                |  | $                                | (12)     |  |                                  | $ | (764)    |      |  | $ | 595     |  |  | $ | 1,332   | 
|                                                                          |  |                                  |          |  |                                  |   |          |      |  |   |         |  |  |   |         | 
|                                                                          |  |                                  |          | 
|Effective tax rate attributable to the Company                            |  |                                  | (0.1)%   |  |                                  |   | (3.9)%   |      |  |   | 15.6%   |  |  |   | 60.6%   | 
|                                                                          |  |                                  |          |  |                                  |   |          |      |  |   |         |  |  |   |         | 
|                                                                          |  |                                 
|                                                                          |  | US Oncology Holdings, Inc.       |          |  | US Oncology, Inc.                |  
|                                                                          |  | Nine Months Ended September 30,  |          |  | Nine Months Ended September 30,  |  
|                                                                          |  | 2010                             |          |  | 2009                             |   |          | 2010 |  |   | 2009    | 
|                                                                          |  |                                  |          | 
|Loss before income taxes                                                  |  | $                                | (39,478) |  |                                  | $ | (43,786) |      |  | $ | (2,144) |  |  | $ | (3,881) | 
|Less: Income before income taxes attributable to noncontrolling interests |  |                                  | (2,794)  |  |                                  |   | (2,615)  |      |  |   | (2,794) |  |  |   | (2,615) | 
|                                                                          |  |                                  |          |  |                                  |   |          |      |  |   |         |  |  |   |         | 
|Loss before income taxes attributable to the Company                      |  | $                                | (42,272) |  |                                  | $ | (46,401) |      |  | $ | (4,938) |  |  | $ | (6,496) | 
|                                                                          |  |                                  |          |  |                                  |   |          |      |  |   |         |  |  |   |         | 
|Income tax benefit (provision) attributable to the Company                |  | $                                | (1,309)  |  |                                  | $ | 3,260    |      |  | $ | (319)   |  |  | $ | (948)   | 
|                                                                          |  |                                  |          |  |                                  |   |          |      |  |   |         |  |  |   |         | 
|                                                                          |  |                                  |          | 
|Effective tax rate attributable to the Company                            |  |                                  | (3.1)%   |  |                                  |   | 7.0%     |      |  |   | (6.5)%  |  |  |   | (14.6)% | 
|                                                                          |  |                                  |          |  |                                  |   |          |      |  |   |         |  |  |   |         | 



-18-



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





The difference
between the effective tax rate for Holdings and US Oncology relates to the incremental expenses associated with Holdings separate capitalization and general and administrative expenses incurred by Holdings. These differences increase
Holdings taxable loss and, consequently, alter the impact of non-deductible costs and certain state income taxes assessed on a different basis than federal income taxes on its effective tax rate. Additionally, Holdings has recorded a valuation
allowance to reduce its deferred tax assets to their estimated realizable value.

The difference between our effective income
tax rate and the amount that would be determined by applying the statutory U.S. income tax rate before income taxes is as follows (dollars in thousands):



US Oncology Holdings, Inc.


US Oncology, Inc.Three Months Ended September 30,


Three Months Ended September 30,2010


2009


2010


2009U.S. statutory income tax rate

$
5,630



35.0%


$
6,834



35.0%


$
1,336



35.0%


$
768



35.0%Non-deductible expenses


(292)



(1.8)



346



1.8



(292)



(7.6)



112



5.1State income taxes, net of federal benefit(1)


60



0.4



98



0.5



(350)



(9.2)



902



41.0Reserve for uncertain tax positions


45



0.3



(57)



(0.3)



-



-



(57)



(2.6)Valuation allowance


(5,917)



(36.8)



(7,320)



(37.5)



-



-



-Other


462



2.8



(665)



(3.4)



(99)



(2.6)



(393)



(17.9)Effective tax benefit (provision)(2)

$
(12)



(0.1)%


$
(764)



(3.9)%


$
595



15.6%


$
1,332



60.6%US Oncology Holdings, Inc.


US Oncology, Inc.Nine Months Ended September 30,


Nine Months Ended September 30,2010


2009


2010


2009U.S. statutory income tax rate

$
14,795



35.0%


$
16,240



35.0%


$
1,728



35.0%


$
2,273



35.0%Non-deductible expenses


(766)



(1.8)



(837)



(1.8)



(766)



(15.5)



(837)



(12.9)State income taxes, net offederal benefit(1)


129



0.3



(626)



(1.3)



(1,048)



(21.2)



(1,372)



(21.1)Reserve for uncertain tax positions


595



1.4



(619)



(1.3)



(170)



(3.4)



(619)



(9.5)Valuation allowance


(15,366)



(36.4)



(9,834)



(21.2)



-



-



-



-Other


(696)



(1.6)



(1,064)



(2.4)



(63)



(1.4)



(393)



(6.1)Effective tax benefit (provision)(2)

$
(1,309)



(3.1)%


$
3,260



7.0%


$
(319)



(6.5)%


$
(948)



(14.6)%




| | (1) | The Texas state margin tax became effective January 1, 2007. Under the Texas margin tax, a Companys tax obligation is computed based on its
receipts less, in the case of the Company, the cost of pharmaceuticals. As such, significant costs incurred that would be deducted to compute federal income tax of an entity may not be considered in assessing an obligation for margin tax.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | For the nine months ended September 30, 2010, the annual effective tax rate for US Oncology, Inc. for the year ended December 31, 2010 could
not be reasonably estimated because the Company expects its pretax income for the year to be near breakeven.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At September 30, 2010, the Company had a gross federal net operating loss carryforward benefit of approximately $162.0 million that
will begin to expire in 2027. In assessing the realizability of deferred tax assets, management evaluates a variety of factors in considering whether it is more likely than not that some portion or all of the deferred tax assets will ultimately be
realized. Management considers earnings expectations, the existence of taxable temporary differences, tax planning strategies, and the periods in which estimated losses can be utilized. Based upon this analysis, management has concluded that it is
not more likely than not that Holdings will realize all of the benefits of its deferred tax assets and accordingly has recorded a valuation allowance of $31.8 million against its deferred tax assets as of September 30, 2010.

As of September 30, 2010, the Company had an accrual of $1.4 million for uncertain tax positions which are generally expected to
settle within the next twelve months. During the nine months ended September 30, 2010, the Company reduced its federal uncertain tax position by $1.5 million as a result of a settlement with the Internal Revenue Service. Of this amount,



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)



$0.7 million is reflected as an income tax benefit in the condensed consolidated statements of operations and comprehensive income (loss), $0.5 million as a reduction in Holdings net
operating loss carryforward in the condensed consolidated balance sheets, and $0.3 million was paid for excise taxes in August 2010.

On November 1, 2010, the Company entered into an Agreement and Plan of Merger with McKesson Corporation to purchase all of the outstanding common shares of US Oncology Holdings, Inc. which, if
consummated, would represent a change of control which may subject the future utilization of the Companys net operating loss carryforwards to an annual limitation pursuant to Internal Revenue Code Section 382. See Note 13 
Subsequent Event.

NOTE 9  Segment Financial Information

The Companys reportable segments are based on internal management reporting that disaggregates the business by service line. The Companys reportable segments are medical oncology services,
cancer center services, pharmaceutical services, and research/other services (primarily consisting of cancer research services). The Company provides comprehensive practice management services for the non-clinical aspects of practice management to
affiliated practices in its medical oncology and cancer center services segments. In addition to managing their non-clinical operations, the medical oncology segment provides oncology pharmaceutical services to practices affiliated through
comprehensive strategic alliances. The cancer center services segment develops and manages comprehensive, community-based cancer centers, which integrate various aspects of outpatient cancer care, from laboratory and radiology diagnostic
capabilities to radiation therapy for practices affiliated by comprehensive strategic alliance. The pharmaceutical services segment distributes oncology pharmaceuticals to affiliated practices, including practices affiliated under the targeted
physician services model, and provides informational and other services to pharmaceutical manufacturers. The research/other services segment contracts with pharmaceutical and biotechnology firms to provide a comprehensive range of services relating
to clinical trials.

Balance sheet information by reportable segment is not reported, since the Company does not prepare such
information internally.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





The tables below
present segment results for the three months and nine months ended September 30, 2010 and 2009 (in thousands). Income (loss) from operations of Holdings is identical to those of US Oncology with the exception of nominal administrative expenses:



|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|------------------------------------ |  | ------------------------------------- | --------- |  | -------------------- | - | -------- | ---------------------- |  | - | -------------- |  |  | -------------- | -------- |  | --------------- | - | -------- | ----- |  | - | --------- |  |  | - | --------- | 
|                                     |  |                                       |           | 
|                                     |  | Three Months Ended September 30, 2010 |          
|                                     |  |                                       |           | 
|                                     |  | MedicalOncologyServices               |           |  | CancerCenterServices |   |          | PharmaceuticalServices |  |   | Research/Other |  |  | CorporateCosts |          |  | Eliminations(1) |   |          | Total | 
|                                     |  |                                       |           | 
|US Oncology, Inc.                    |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Product revenue                      |  | $                                     | 453,472   |  |                      | $ | -        |                        |  | $ | 688,786        |  |  | $              | -        |  |                 | $ | -        |       |  | $ | (494,749) |  |  | $ | 647,509   | 
|Service revenue                      |  |                                       | 162,176   |  |                      |   | 95,038   |                        |  |   | 16,055         |  |  |                | 19,910   |  |                 |   | -        |       |  |   | -         |  |  |   | 293,179   | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Total revenue                        |  |                                       | 615,648   |  |                      |   | 95,038   |                        |  |   | 704,841        |  |  |                | 19,910   |  |                 |   | -        |       |  |   | (494,749) |  |  |   | 940,688   | 
|Operating expenses                   |  |                                       | (597,642) |  |                      |   | (63,102) |                        |  |   | (682,475)      |  |  |                | (18,187) |  |                 |   | (18,992) |       |  |   | 494,749   |  |  |   | (885,649) | 
|Impairment and restructuring charges |  |                                       | (4)       |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | (3,248)  |       |  |   | -         |  |  |   | (3,252)   | 
|Depreciation and amortization        |  |                                       | -         |  |                      |   | (8,527)  |                        |  |   | (788)          |  |  |                | (53)     |  |                 |   | (16,065) |       |  |   | -         |  |  |   | (25,433)  | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Income (loss) from operations        |  | $                                     | 18,002    |  |                      | $ | 23,409   |                        |  | $ | 21,578         |  |  | $              | 1,670    |  |                 | $ | (38,305) |       |  | $ | -         |  |  | $ | 26,354    | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|                                     |  |                                       |           |  |                      |   |         
|US Oncology Holdings, Inc.           |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Operating expenses                   |  | $                                     | -         |  |                      | $ | -        |                        |  | $ | -              |  |  | $              | -        |  |                 | $ | (41)     |       |  | $ | -         |  |  | $ | (41)      | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Income (loss) from operations        |  | $                                     | 18,002    |  |                      | $ | 23,409   |                        |  | $ | 21,578         |  |  | $              | 1,670    |  |                 | $ | (38,346) |       |  | $ | -         |  |  | $ | 26,313    | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Goodwill                             |  | $                                     | 28,913    |  |                      | $ | 191,424  |                        |  | $ | 158,580        |  |  | $              | -        |  |                 | $ | -        |       |  | $ | -         |  |  | $ | 378,917   | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|                                     | 
|                                     |  |                                       |          
|                                     |  |                                       |           | 
|                                     |  | Three Months Ended September 30, 2009 |          
|                                     |  |                                       |           | 
|                                     |  | MedicalOncologyServices               |           |  | CancerCenterServices |   |          | PharmaceuticalServices |  |   | Research/Other |  |  | CorporateCosts |          |  | Eliminations(1) |   |          | Total | 
|                                     |  |                                       |           | 
|US Oncology, Inc.                    |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Product revenue                      |  | $                                     | 450,202   |  |                      | $ | -        |                        |  | $ | 628,737        |  |  | $              | -        |  |                 | $ | -        |       |  | $ | (470,904) |  |  | $ | 608,035   | 
|Service revenue                      |  |                                       | 160,147   |  |                      |   | 99,457   |                        |  |   | 16,728         |  |  |                | 17,087   |  |                 |   | -        |       |  |   | -         |  |  |   | 293,419   | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Total revenue                        |  |                                       | 610,349   |  |                      |   | 99,457   |                        |  |   | 645,465        |  |  |                | 17,087   |  |                 |   | -        |       |  |   | (470,904) |  |  |   | 901,454   | 
|Operating expenses                   |  |                                       | (591,204) |  |                      |   | (64,044) |                        |  |   | (620,111)      |  |  |                | (16,996) |  |                 |   | (18,694) |       |  |   | 470,904   |  |  |   | (840,145) | 
|Impairment and restructuring charges |  |                                       | 1         |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | (4,118)  |       |  |   | -         |  |  |   | (4,117)   | 
|Depreciation and amortization        |  |                                       | -         |  |                      |   | (10,695) |                        |  |   | (392)          |  |  |                | (64)     |  |                 |   | (15,639) |       |  |   | -         |  |  |   | (26,790)  | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Income (loss) from operations        |  | $                                     | 19,146    |  |                      | $ | 24,718   |                        |  | $ | 24,962         |  |  | $              | 27       |  |                 | $ | (38,451) |       |  | $ | -         |  |  | $ | 30,402    | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|                                     |  |                                       |           |  |                      |   |         
|US Oncology Holdings, Inc.           |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Operating expenses                   |  | $                                     | -         |  |                      | $ | -        |                        |  | $ | -              |  |  | $              | -        |  |                 | $ | (121)    |       |  | $ | -         |  |  | $ | (121)     | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Income (loss) from operations        |  | $                                     | 19,146    |  |                      | $ | 24,718   |                        |  | $ | 24,962         |  |  | $              | 27       |  |                 | $ | (38,572) |       |  | $ | -         |  |  | $ | 30,281    | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Goodwill                             |  | $                                     | 28,913    |  |                      | $ | 191,424  |                        |  | $ | 156,933        |  |  | $              | -        |  |                 | $ | -        |       |  | $ | -         |  |  | $ | 377,270   | 
|                                     |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 



|(1) | Eliminations represent the sale of pharmaceuticals from the distribution center (pharmaceutical services segment) to the practices affiliated under
comprehensive service agreements (medical oncology segment).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|------------------------------------ |  | ------------------------------------ | ----------- |  | -------------------- | - | --------- | ---------------------- |  | - | -------------- |  |  | -------------- | -------- |  | --------------- | - | --------- | ----- |  | - | ----------- |  |  | - | ----------- | 
|                                     |  |                                      |             | 
|                                     |  | Nine Months Ended September 30, 2009 |            
|                                     |  |                                      |             | 
|                                     |  | MedicalOncologyServices              |             |  | CancerCenterServices |   |           | PharmaceuticalServices |  |   | Research/Other |  |  | CorporateCosts |          |  | Eliminations(1) |   |           | Total | 
|                                     |  |                                      |             | 
|US Oncology, Inc.                    |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Product revenue                      |  | $                                    | 1,340,137   |  |                      | $ | -         |                        |  | $ | 1,931,492      |  |  | $              | -        |  |                 | $ | -         |       |  | $ | (1,414,343) |  |  | $ | 1,857,286   | 
|Service revenue                      |  |                                      | 484,389     |  |                      |   | 292,788   |                        |  |   | 46,953         |  |  |                | 58,093   |  |                 |   | -         |       |  |   | -           |  |  |   | 882,223     | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Total revenue                        |  |                                      | 1,824,526   |  |                      |   | 292,788   |                        |  |   | 1,978,445      |  |  |                | 58,093   |  |                 |   | -         |       |  |   | (1,414,343) |  |  |   | 2,739,509   | 
|Operating expenses                   |  |                                      | (1,769,125) |  |                      |   | (193,319) |                        |  |   | (1,911,734)    |  |  |                | (55,438) |  |                 |   | (58,863)  |       |  |   | 1,414,343   |  |  |   | (2,574,136) | 
|Impairment and restructuring charges |  |                                      | (2,619)     |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | (4,714)   |       |  |   | -           |  |  |   | (7,333)     | 
|Depreciation and amortization        |  |                                      | -           |  |                      |   | (27,487)  |                        |  |   | (2,062)        |  |  |                | (173)    |  |                 |   | (45,864)  |       |  |   | -           |  |  |   | (75,586)    | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Income (loss) from operations        |  | $                                    | 52,782      |  |                      | $ | 71,982    |                        |  | $ | 64,649         |  |  | $              | 2,482    |  |                 | $ | (109,441) |       |  | $ | -           |  |  | $ | 82,454      | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|                                     |  |                                      |             |  |                      |   |          
|US Oncology Holdings, Inc.           |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Operating expenses                   |  | $                                    | -           |  |                      | $ | -         |                        |  | $ | -              |  |  | $              | -        |  |                 | $ | (193)     |       |  | $ | -           |  |  | $ | (193)       | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Income (loss) from operations        |  | $                                    | 52,782      |  |                      | $ | 71,982    |                        |  | $ | 64,649         |  |  | $              | 2,482    |  |                 | $ | (109,634) |       |  | $ | -           |  |  | $ | 82,261      | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Goodwill                             |  | $                                    | 28,913      |  |                      | $ | 191,424   |                        |  | $ | 158,580        |  |  | $              | -        |  |                 | $ | -         |       |  | $ | -           |  |  | $ | 378,917     | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|                                     | 
|                                     |  |                                      |            
|                                     |  |                                      |             | 
|                                     |  | Nine Months Ended September 30, 2009 |            
|                                     |  |                                      |             | 
|                                     |  | MedicalOncologyServices              |             |  | CancerCenterServices |   |           | PharmaceuticalServices |  |   | Research/Other |  |  | CorporateCosts |          |  | Eliminations(1) |   |           | Total | 
|                                     |  |                                      |             | 
|US Oncology, Inc.                    |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Product revenue                      |  | $                                    | 1,329,256   |  |                      | $ | -         |                        |  | $ | 1,799,532      |  |  | $              | -        |  |                 | $ | -         |       |  | $ | (1,363,101) |  |  | $ | 1,765,687   | 
|Service revenue                      |  |                                      | 468,581     |  |                      |   | 288,917   |                        |  |   | 47,697         |  |  |                | 54,780   |  |                 |   | -         |       |  |   | -           |  |  |   | 859,975     | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Total revenue                        |  |                                      | 1,797,837   |  |                      |   | 288,917   |                        |  |   | 1,847,229      |  |  |                | 54,780   |  |                 |   | -         |       |  |   | (1,363,101) |  |  |   | 2,625,662   | 
|Operating expenses                   |  |                                      | (1,744,915) |  |                      |   | (187,648) |                        |  |   | (1,774,123)    |  |  |                | (50,865) |  |                 |   | (53,016)  |       |  |   | 1,363,101   |  |  |   | (2,447,466) | 
|Impairment and restructuring charges |  |                                      | (176)       |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | (5,731)   |       |  |   | -           |  |  |   | (5,907)     | 
|Depreciation and amortization        |  |                                      | -           |  |                      |   | (29,711)  |                        |  |   | (1,566)        |  |  |                | (210)    |  |                 |   | (45,573)  |       |  |   | -           |  |  |   | (77,060)    | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Income (loss) from operations        |  | $                                    | 52,746      |  |                      | $ | 71,558    |                        |  | $ | 71,540         |  |  | $              | 3,705    |  |                 | $ | (104,320) |       |  | $ | -           |  |  | $ | 95,229      | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|                                     |  |                                      |             |  |                      |   |          
|US Oncology Holdings, Inc.           |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Operating expenses                   |  | $                                    | -           |  |                      | $ | -         |                        |  | $ | -              |  |  | $              | -        |  |                 | $ | (195)     |       |  | $ | -           |  |  | $ | (195)       | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Income (loss) from operations        |  | $                                    | 52,746      |  |                      | $ | 71,558    |                        |  | $ | 71,540         |  |  | $              | 3,705    |  |                 | $ | (104,515) |       |  | $ | -           |  |  | $ | 95,034      | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Goodwill                             |  | $                                    | 28,913      |  |                      | $ | 191,424   |                        |  | $ | 156,933        |  |  | $              | -        |  |                 | $ | -         |       |  | $ | -           |  |  | $ | 377,270     | 
|                                     |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 



| | (1) | Eliminations represent the sale of pharmaceuticals from the distribution center (pharmaceutical services segment) to the practices affiliated under
comprehensive service agreements (medical oncology segment).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Revenue related to the Research/Other segment
for the nine months ended September 30, 2010 includes an out of period adjustment to correct accounting errors of approximately $1.0 million related to services rendered during the year ended December 31, 2009, which were billed to
sponsors during the three months ended June 30, 2010 for currently ongoing trials. As a result, the Company increased revenue recognized by $1.0 million in its Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)
through September 30, 2010.

Also, during the three months ended June 30, 2010, the Company recorded an adjustment
to certain leasehold improvements that had been incorrectly depreciated beyond their historical cost as a result of receiving a partial cost reimbursement related to these assets from the affiliated practice conducting operations in the leased
location. To correct this error in accounting, the Company reduced depreciation expense under corporate costs by $1.1 million in its Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) which was offset by an increase in
property and equipment, net, in its Condensed Consolidated Balance Sheet as of September 30, 2010.



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





Collectively,
these items increased income from operations by approximately $2.1 million in the nine month period ended September 30, 2010. These corrections were recorded in the current nine months ended September 30, 2010 rather than restating
previously issued financial statements as management concluded that their impact on prior periods and the estimated results for the year ending December 31, 2010 was not material. Also, these adjustments had no material impact on the
Consolidated Statement of Cash Flows for any current or prior periods.

NOTE 10  Commitments and Contingencies

Leases

The Company
leases office space, along with certain comprehensive cancer centers and equipment under noncancelable operating lease agreements. As of September 30, 2010, total future minimum lease payments, including escalation provisions and leases with
entities affiliated with practices, are as follows (in thousands):



|             |  |                                    |        |  |      |   |        |      |  |   |        |  |  |      |        |  |            |   |        |  |  |   |         | 
|------------ |  | ---------------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  | ---------- | - | ------ |  |  | - | ------- | 
|             |  | Twelve months ending September 30, |       
|             |  | 2011                               |        |  | 2012 |   |        | 2013 |  |   | 2014   |  |  | 2015 |        |  | Thereafter |  
|Payments due |  | $                                  | 88,507 |  |      | $ | 82,647 |      |  | $ | 73,960 |  |  | $    | 64,696 |  |            | $ | 54,310 |  |  | $ | 261,973 | 

Summary

The Company believes the allegations in suits against it are customary for the size and scope of the Companys operations. However,
adverse judgments, individually or in the aggregate, could have a material adverse effect on the Company.

Assessing the
Companys financial and operational exposure on litigation matters requires the application of substantial subjective judgments and estimates based upon facts and circumstances, resulting in estimates that could change as more information
becomes available. Following is a summary of litigation matters of which the Company is aware.

U.S. Attorney Subpoena

On July 29, 2009 the Company received a subpoena from the United States Attorneys Office, Eastern District of New York, seeking
documents relating to its contracts and relationships with a pharmaceutical manufacturer and its business and activities relating to that manufacturers products. The Company believes that the subpoena related to an ongoing investigation being
conducted by that office regarding the manufacturers sales and marketing practices. The U.S. Attorney did not make any allegation of wrongdoing on the part of the Company. The Company fully cooperated with the request and in October 2010, was
notified that the Companys obligations under the subpoena have been satisfied, and the matter is considered closed at this time. The Company cannot provide assurance that the US Attorneys Office would not reopen the matter at a
future date.

U.S. Department of Justice Subpoena

During the fourth quarter of 2005, the Company received a subpoena from the United States Department of Justices Civil Litigation Division (DOJ) requesting a broad range of information
about the Company and its business, generally in relation to its contracts and relationships with pharmaceutical manufacturers. The Company has cooperated fully with the DOJ in responding to the subpoena. All outstanding document requests from the
DOJ were addressed in early 2008, and the Company awaits further direction and feedback from the DOJ. At the present time, the DOJ has not made any allegation of wrongdoing on the part of the Company. However, the Company cannot provide assurance
that such an allegation or litigation will not result from this investigation. While the Company believes that it is operating and has operated its business in compliance with the law, including with respect to the matters covered by the subpoena,
the Company cannot provide assurance that the DOJ will not make a determination that wrongdoing has occurred. In addition, the Company has devoted significant resources to responding to the DOJ subpoena.



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





Qui Tam Lawsuits

From time to time, the Company has become aware that the Company and certain of its subsidiaries and affiliated practices
have been the subjects of qui tam lawsuits (commonly referred to as whistle-blower suits). Because qui tam actions are filed under seal, it is possible that the Company is the subject of other qui tam actions of which it is unaware.

In previous qui tam suits which the Company has been made aware of, the DOJ has declined to intervene in such suits and the
suits have been dismissed. Qui tam suits are brought by private individuals, and there is no minimum evidentiary or legal threshold for bringing such a suit. The DOJ is legally required to investigate the allegations in these suits. The subject
matter of many such claims may relate both to alleged actions of the Company and alleged actions of an affiliated practice. Because the affiliated practices are separate legal entities not controlled by the Company, such claims necessarily involve a
more complicated, higher cost defense, and may adversely impact the relationship between the Company and the practices. If the individuals who file complaints and/or the United States were to prevail in these claims against the Company, and the
magnitude of the alleged wrongdoing were determined to be significant, the resulting judgment could have a material adverse financial and operational effect on the Company, including potential limitations in future participation in governmental
reimbursement programs. In addition, addressing complaints and government investigations requires the Company to devote significant financial and other resources to the process, regardless of the ultimate outcome of the claims.

Other Litigation

The
provision of medical services by the Companys affiliated practices entails an inherent risk of professional liability claims. The Company does not control the practice of medicine by the clinical staff or their compliance with regulatory and
other requirements directly applicable to practices. In addition, because the practices purchase and prescribe pharmaceutical products, they face the risk of product liability claims. In addition, because of licensing requirements and affiliated
practices participation in governmental healthcare programs, the Company and affiliated practices are, from time to time, subject to governmental audits and investigations, as well as internally initiated audits, some of which may result in
refunds to governmental programs. Although the Company and its affiliated practices maintain insurance coverage, successful malpractice, regulatory or product liability claims asserted against the Company or one of its affiliated practices, in
excess of insurance coverage, could have a material adverse effect on the Company.

The Company and its network physicians are
defendants in a number of lawsuits involving employment and other disputes and breach of contract claims. In addition, the Company is involved from time to time in disputes with, and claims by, its affiliated practices against the Company.

The Company is also involved in litigation with a practice in Oklahoma that was affiliated with the Company under the net
revenue model until April 2006. While the Company was still affiliated with the practice, the Company initiated arbitration proceedings pursuant to a provision in the service agreement providing for contract reformation in certain events. The
practice countered with a lawsuit that alleges, among other things, that the Company has breached the service agreement and that the service agreement is unenforceable as a matter of public policy due to alleged violations of healthcare laws. The
practice sought unspecified damages and a termination of the contract. The Company believes that its service agreement is lawful and enforceable and that it is operating in accordance with applicable law. As a result of alleged breaches of the
service agreement by the practice, the Company terminated the service agreement in April 2006. In March 2007, the Oklahoma Supreme Court overturned a lower courts ruling that would have compelled arbitration in this matter and remanded the
case back to the lower court to hold hearings to determine whether and to what extent the arbitration provisions of the service agreement will be applicable to the dispute. The Company expects those hearings to occur in early 2011. Because of the
need for further proceedings, the Company believes that the Oklahoma Supreme Court ruling will extend the amount of time it will take to resolve this dispute and increase the risk of the litigation to the Company. In any event, as with any complex
litigation, the Company anticipates that this dispute may take several years to resolve.

As a result of the ongoing
litigation, the Company has been unable to collect on a timely basis a receivable owed to the Company relating to accounts receivable purchased by the Company under the service agreement and amounts for reimbursement of expenses paid by the Company
on the practices behalf. At September 30, 2010, the total receivable owed to the Company of $22.4 million is reflected on its balance sheet as other assets. Currently, a deposit of approximately $14.9 million is held in an escrowed bank
account into which the practice had been making monthly deposits as required. In late 2009, the practice filed a motion to discontinue the monthly deposits and until a ruling is made the requirement has been suspended. These amounts will be released
upon resolution of the litigation. In addition, approximately $7.6 million is being



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)



held in a bank account that has been frozen pending the outcome of related litigation regarding that account. In addition, the Company has filed a security lien on the receivables of the
practice. The Companys management believes that the amounts held in the bank accounts combined with the receivables of the practice in which the Company has filed a security lien represent adequate collateral to recover the $22.4 million
receivable recorded as other noncurrent assets at September 30, 2010. Accordingly, the Company expects to realize the amount that is recorded on its balance sheet as owed by the practice. However, realization is subject to a successful
conclusion to the litigation with the practice.

The Company intends to vigorously pursue its claims, including claims for any
costs and expenses that it incurs as a result of the termination of the service agreement and to defend against the practices allegations that it breached the agreement and that the agreement is unenforceable. However, the Company cannot
provide assurance as to what the outcome of the litigation will be, or, even if it prevails in the litigation, whether it will be successful in recovering the full amount, or any, of its costs associated with the litigation and termination of the
service agreement. The Company expects to continue to incur expenses in connection with its litigation with the practice.

Certificate of
Need Regulatory Action

During the third quarter of 2006, one of the Companys affiliated practices in North Carolina
lost (through state regulatory action) the ability to provide radiation services at its cancer center in Asheville. The practice continued to provide medical oncology services, but was not permitted to use the radiation services area of the center
(approximately 18% of the square footage of the cancer center). The practice appealed the regulatory action and the North Carolina Court of Appeals ruled in favor of the practice on procedural grounds and ordered the state agency to hold a new
hearing on its regulatory action. In 2008, the practice received a ruling in its appeal, which mandated a rehearing by the state agency. The state agency conducted a rehearing and issued a new ruling upholding the practices right to provide
radiation services. That decision was appealed, and the appellants also sought a stay of the states decision. The request for a stay was denied in July 2008 while the appeal was pending and as a result, the practice resumed diagnostic services
in September, 2008 and radiation services in February, 2009. In June 2010, the North Carolina Court of Appeals ruled unanimously in favor of the practice which allows the practice to continue providing diagnostic scans and radiation therapy for
patients.

Antitrust Inquiry

The United States Federal Trade Commission (FTC) and a state Attorney General have informed one of the Companys affiliated physician practices that they have opened an investigation to
determine whether a recent transaction in which another group of physicians became employees of that affiliated group violated relevant state or federal antitrust laws. In addition, the FTC has requested information from the Company regarding its
role in that transaction. The Company is in the process of responding to a request for information on this matter. At present, the Company believes that the scope of the investigation is limited to a single transaction, but the Company cannot
provide assurance that the scope will remain limited. The Company believes that it and its affiliated physician practices comply with relevant antitrust laws. However, if this investigation were to result in a claim against the Company or its
affiliated physician practice in which the FTC or Attorney General prevails, the resulting judgment could have a material adverse financial and operational effect on the Company or that practice, including the possibility of monetary damages or
fines, a requirement that it unwind the transaction at issue or the imposition of restrictions on future operations and development. In addition, addressing government investigations requires the Company to devote significant financial and other
resources to the process, regardless of the ultimate outcome of the claims. Furthermore, because of the size and scope of the Companys network, there is a risk that it could be subjected to greater scrutiny by government regulators with regard
to antitrust issues.

Potential Pharmaceutical Label Change

In July, 2010, the ODAC of the FDA voted to recommend removal of certain indications for use in treating breast cancer
from the Avastin® (bevacizumab) label. The FDA has extended its review period of the ODAC recommendation and is
expected to make a decision in December, 2010. While the FDA often follows the recommendations of its advisory committees, it is not required to do so. Factors that could significantly affect the financial impact on the Company include future
actions of the FDA and, if applicable, ongoing clinical interpretations of the revised label. We are currently evaluating the impact on future earnings if this recommendation is adopted. However, our evaluation remains ongoing and we are unable to
estimate the financial impact at this time.



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





Insurance

The Company and its affiliated practices maintain insurance with respect to medical malpractice and associated vicarious liability risks
on a claims-made basis, in amounts believed to be customary and adequate. The Company is not aware of any outstanding claims or unasserted claims that are likely to be asserted against the Company or its affiliated practices, which would have a
material impact on its financial position or results of operations.

The Company maintains all other traditional insurance
coverages on either a fully insured or high-deductible basis, using loss funds for any estimated losses within the retained deductibles.

Guarantees

Beginning
January 1, 1997, the Company guaranteed that amounts retained by the Companys affiliated practice in Minnesota will amount to a minimum of $5.2 million annually under the terms of the related service agreement, provided that certain
targets are met. The Company has not been required to make any payments associated with this guarantee.

From time to time,
the Company may agree to provide financial support to affiliated practices encountering adverse conditions by temporarily guaranteeing a minimum level of earnings to be retained by such practices. This support is intended to allow a practice to
manage through those challenges, improve financial performance and establish a base for future growth. Typically such arrangements are structured as loans to be repaid by the practice at some future date however, there can be no assurance that all
amounts under such arrangements will be repaid. Amounts paid under such arrangements have not been material to the Companys financial position for the periods presented herein.

Holdings Long-Term Cash Incentive Plan

In addition to stock-based
incentive plans, Holdings has adopted the US Oncology Holdings, Inc. 2004 Long-Term Cash Incentive Plan (the Cash Incentive Plan). Effective January 1, 2008, the 2004 Cash Incentive Plan was cancelled and the 2008 Long-Term
Cash Incentive Plan (2008 Cash Incentive Plan) was adopted. Under the 2008 Cash Incentive Plan, which is administered by the Compensation Committee of the Board of Directors of Holdings, certain members of management will receive a
portion of the enterprise value created as determined by the plan provided that the maximum value that can be paid to management under the plan is limited to $100 million. The value of the awards under the 2008 Cash Incentive Plan is based upon
financial performance of the Company for the period beginning January 1, 2008 and ending on the earlier of the occurrence of a payment event or December 31, 2012, and will only be paid in the event of an initial public offering or a change
of control, provided that all shares of preferred stock, together with accrued dividends, have been redeemed or exchanged for common stock. No events occurred during the nine months ended September 30, 2010 that would require a payment under
the 2008 Cash Incentive Plan.

If any of the payment events described above occur, the Company may incur an additional
obligation and compensation expense as a result of such an event. As of September 30, 2010, $12.3 million was available for payment under the 2008 Cash Incentive Plan. Because payments of awards under the Plan are based upon occurrence of a
specific event, obligations arising under the 2008 Cash Incentive Plan will be recognized in the period when a payment event, as discussed above, occurs.

On November 1, 2010, the Company entered into an Agreement and Plan of Merger with McKesson Corporation which, if consummated, would represent a payment event under the 2008 Cash Incentive Plan. See
Note 13  Subsequent Event.

NOTE 11  Recent Accounting Pronouncements

From time to time, the Financial Accounting Standards Board (FASB), the SEC and other regulatory bodies seek to change
accounting rules, including rules applicable to the Companys business and financial statements. The Company cannot assure that future changes in accounting rules would not require it to make retrospective application to its financial
statements.

In October, 2009, the FASB issued Accounting Standard Update No. 2009-13 to Revenue Recognition (ASC Topic
605) Multiple-Deliverable Revenue Arrangements. This update provides amendments to the criteria in Subtopic 605-25 for separating consideration in multiple-deliverable arrangements. As a result of those amendments, multiple-deliverable arrangements
will be separated in more circumstances than under existing U.S. GAAP. The update also addresses how to measure and allocate arrangement consideration to one or more units of accounting. The amendments in this update will be effective for the
Company prospectively for revenue arrangements entered into or materially modified on or after January 1, 2011. Early adoption is permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





In June 2009, the
FASB issued consolidation guidance for variable interest entities (VIE) which was subsequently codified under Accounting Standards Update No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities. The new consolidation model is a more qualitative assessment of power and economics that considers which entity has the power to direct the activities that most significantly impact the VIEs economic performance
and has the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. The Companys adoption of this guidance effective January 1, 2010 did not change its conclusions with regard to
variable interest entities and was adopted without material impact on its consolidated financial statements.

In April 2010,
the FASB issued Accounting Standard Update No. 2010-17 to Revenue RecognitionMilestone Method (ASC Topic 605): Milestone Method of Revenue Recognition (ASU No. 2010-17). This ASU codifies the consensus reached in EITF Issue
No. 08-9, Milestone Method of Revenue Recognition. The amendments to the Codification provide guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for
research or development transactions. The amendments in this update will be effective for the Company prospectively for milestones achieved on or after January 1, 2011. Early adoption is permitted, however, if the Company elects early adoption
and the period of adoption is not the beginning of the fiscal year, ASU 2010-17 is to be applied retrospectively from the beginning of the year of adoption. Companies are also permitted to elect to adopt the amendments in this ASU retrospectively
for all prior periods. The Company is currently evaluating the impact of this update on its consolidated financial statements.

In July, 2010, the FASB issued Accounting Standard Update No. 2010-20 to Receivables (ASC Topic 310): Disclosures about the Credit
Quality of Financing Receivables and the Allowance for Credit Losses. This update enhances disclosures about the credit quality of financing receivables by requiring a greater level of disaggregated information about the credit quality of a
Companys financing receivables as well as expanded disclosures of credit quality indicators, past due information and modifications of its financing receivables. The amendments in this update will be effective for the Company prospectively for
the annual reporting period ended December 31, 2011. Companies are encouraged, but not required, to provide comparative disclosures for earlier reporting periods. The Company is currently evaluating the impact of this update on its consolidated
financial statements.

In August 2010, the FASB issued Accounting Standard Update No. 2010-23 to Health Care Entities
(Topic 954): Measuring Charity Care for Disclosure (a consensus of the FASB Emerging Issues Task Force) (ASU No. 2010-23). The purpose of the update is to remove inconsistencies related to values assigned to charity care for disclosure
purposes. The guidance requires that the measurement of charity care for disclosure purposes be based on the direct and indirect costs of providing the charity care. The amendments in this update are effective for disclosures provided on or after
January 1, 2011. Early adoption is permitted and companies are also permitted to elect to adopt the amendments in this ASU retrospectively for all prior periods. Although the Company partners with physician practices, the Company does not
engage in the practice of medicine. As such, the provisions of the update are not applicable to the Company and will not have an impact on its consolidated financial statements.

In August 2010, the FASB issued Accounting Standard Update No. 2010-24 to Health Care Entities (Topic 954): Presentation of
Insurance Claims and Related Insurance Recoveries (a consensus of the FASB Emerging Issues Task Force) (ASU No. 2010-24). This update clarifies that a health care entity should not net insurance recoveries against a related claim liability and
that the amount of the claim liability should be determined without consideration of insurance recoveries. The amendments in this update are effective prospectively for presentation of insurance claims and recoveries on or after January 1,
2011. Early adoption is permitted and companies are also permitted to elect to adopt the amendments in this ASU retrospectively for all prior periods. The Company does purchase insurance coverage for vicarious medical malpractice in the event that
the Company is named as a defendant in claims against affiliated practices. However, since the Company does not engage in the practice of medicine, legal costs incurred in such matters are related to the process of removing the Company from those
claims. The provisions of the update are not applicable to the Company and will not have an impact on its consolidated financial statements.



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





NOTE 12  Financial
Information for Subsidiary Guarantors and Non-Subsidiary Guarantors

The 9.125% Senior Secured Notes (the Senior
Secured Notes), the 9% Senior Secured Notes (the Senior Notes) which were redeemed with proceeds from the Senior Secured Notes and the 10.75% Senior Subordinated Notes (the Senior Subordinated Notes) issued by US
Oncology, Inc. are guaranteed fully and unconditionally, and on a joint and several basis, by all of US Oncologys wholly-owned subsidiaries. Certain of US Oncologys subsidiaries, primarily joint ventures, do not guarantee the Senior
Secured Notes, the Senior Notes and the Senior Subordinated Notes.

Presented on the following pages are condensed
consolidating financial statements for US Oncology, Inc. (the issuer of the Senior Secured Notes, the Senior Notes and the Senior Subordinated Notes), the subsidiary guarantors and the non-guarantor subsidiaries as of September 30, 2010 and
December 31, 2009 and for the three and nine months ended September 30, 2010 and 2009. The equity method has been used with respect to US Oncologys investments in its subsidiaries.

As of September 30, 2010, the non-guarantor subsidiaries include Cancer Treatment Associates of Northeast Missouri, Ltd., Colorado
Cancer Centers, L.L.C., Southeast Texas Cancer Centers, L.P., East Indy CC, L.L.C., KCCC JV, L.L.C., AOR Real Estate of Greenville, L.P., The Carroll County Cancer Center, Ltd, CCCN NW Building JV, L.L.C., Oregon Cancer Center, Ltd., and WFCC
Radiation Management Co., L.L.C.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





US Oncology,
Inc.

Condensed Consolidating Balance Sheet

As of September 30, 2010

(unaudited, in thousands, except share
information)



|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|---------------------------------------------------------------------------- |  | -------------------------------------- | --------- |  | -------------------- | - | --------- | ------------------------- |  | - | ------------ |  |  | ------------ | --------- | --- |  | - | --------- | 
|                                                                             |  | US Oncology, 
Inc.(ParentCompany Only) |           |  | SubsidiaryGuarantors |   |           | Non-guarantorSubsidiaries |  |   | Eliminations |  |  | Consolidated |          
|ASSETS                                                                       |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Current assets:                                                              |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Cash and equivalents                                                         |  | $                                      | -         |  |                      | $ | 158,628   |                           |  | $ | 291          |  |  | $            | -         |     |  | $ | 158,919   | 
|Accounts receivable                                                          |  |                                        | -         |  |                      |   | 353,612   |                           |  |   | 6,850        |  |  |              | -         |     |  |   | 360,462   | 
|Other receivables                                                            |  |                                        | -         |  |                      |   | 28,891    |                           |  |   | -            |  |  |              | -         |     |  |   | 28,891    | 
|Prepaid expenses and other current assets                                    |  |                                        | 371       |  |                      |   | 20,451    |                           |  |   | 902          |  |  |              | -         |     |  |   | 21,724    | 
|Inventories                                                                  |  |                                        | -         |  |                      |   | 102,114   |                           |  |   | -            |  |  |              | -         |     |  |   | 102,114   | 
|Deferred income taxes                                                        |  |                                        | 5,437     |  |                      |   | -         |                           |  |   | -            |  |  |              | -         |     |  |   | 5,437     | 
|Due from affiliates                                                          |  |                                        | 411,912   |  |                      |   | -         |                           |  |   | -            |  |  |              | (362,598) | (a) |  |   | 49,314    | 
|Investment in subsidiaries                                                   |  |                                        | 583,945   |  |                      |   | -         |                           |  |   | -            |  |  |              | (583,945) | (b) |  |   | -         | 
|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Total current assets                                                         |  |                                        | 1,001,665 |  |                      |   | 663,696   |                           |  |   | 8,043        |  |  |              | (946,543) |     |  |   | 726,861   | 
|Property and equipment, net                                                  |  |                                        | -         |  |                      |   | 345,488   |                           |  |   | 43,704       |  |  |              | -         |     |  |   | 389,192   | 
|Service agreements, net                                                      |  |                                        | -         |  |                      |   | 230,700   |                           |  |   | 2,449        |  |  |              | -         |     |  |   | 233,149   | 
|Goodwill                                                                     |  |                                        | -         |  |                      |   | 373,324   |                           |  |   | 5,593        |  |  |              | -         |     |  |   | 378,917   | 
|Other assets                                                                 |  |                                        | 22,344    |  |                      |   | 47,515    |                           |  |   | 1,632        |  |  |              | -         |     |  |   | 71,491    | 
|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|                                                                             |  | $                                      | 1,024,009 |  |                      | $ | 1,660,723 |                           |  | $ | 61,421       |  |  | $            | (946,543) |     |  | $ | 1,799,610 | 
|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|LIABILITIES AND EQUITY                                                       |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Current liabilities:                                                         |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Current maturities of long-term indebtedness                                 |  | $                                      | 9,503     |  |                      | $ | 351       |                           |  | $ | 1,488        |  |  | $            | -         |     |  | $ | 11,342    | 
|Accounts payable                                                             |  |                                        | -         |  |                      |   | 285,095   |                           |  |   | 547          |  |  |              | -         |     |  |   | 285,642   | 
|Intercompany accounts                                                        |  |                                        | (247,467) |  |                      |   | 256,421   |                           |  |   | (8,954)      |  |  |              | -         |     |  |   | -         | 
|Due to affiliates                                                            |  |                                        | -         |  |                      |   | 449,584   |                           |  |   | 9,711        |  |  |              | (362,598) | (a) |  |   | 96,697    | 
|Accrued compensation cost                                                    |  |                                        | -         |  |                      |   | 51,394    |                           |  |   | 435          |  |  |              | -         |     |  |   | 51,829    | 
|Accrued interest payable                                                     |  |                                        | 15,463    |  |                      |   | -         |                           |  |   | -            |  |  |              | -         |     |  |   | 15,463    | 
|Income taxes payable                                                         |  |                                        | 2,349     |  |                      |   | -         |                           |  |   | -            |  |  |              | -         |     |  |   | 2,349     | 
|Other accrued liabilities                                                    |  |                                        | 138       |  |                      |   | 29,623    |                           |  |   | 268          |  |  |              | -         |     |  |   | 30,029    | 
|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Total current liabilities                                                    |  |                                        | (220,014) |  |                      |   | 1,072,468 |                           |  |   | 3,495        |  |  |              | (362,598) |     |  |   | 493,351   | 
|Deferred revenue                                                             |  |                                        | -         |  |                      |   | 3,849     |                           |  |   | -            |  |  |              | -         |     |  |   | 3,849     | 
|Deferred income taxes                                                        |  |                                        | 34,630    |  |                      |   | -         |                           |  |   | -            |  |  |              | -         |     |  |   | 34,630    | 
|Long-term indebtedness                                                       |  |                                        | 1,049,476 |  |                      |   | 2,028     |                           |  |   | 15,975       |  |  |              | -         |     |  |   | 1,067,479 | 
|Other long-term liabilities                                                  |  |                                        | -         |  |                      |   | 20,969    |                           |  |   | 4,512        |  |  |              | -         |     |  |   | 25,481    | 
|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Total liabilities                                                            |  |                                        | 864,092   |  |                      |   | 1,099,314 |                           |  |   | 23,982       |  |  |              | (362,598) |     |  |   | 1,624,790 | 
|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Commitments and contingencies Equity                                         |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Common stock, $0.01 par value, 100 shares authorized, issued and outstanding |  |                                        | 1         |  |                      |   | -         |                           |  |   | -            |  |  |              | -         |     |  |   | 1         | 
|Additional paid-in capital                                                   |  |                                        | 534,103   |  |                      |   | -         |                           |  |   | -            |  |  |              | -         |     |  |   | 534,103   | 
|Accumulated deficit                                                          |  |                                        | (374,187) |  |                      |   | -         |                           |  |   | -            |  |  |              | -         |     |  |   | (374,187) | 
|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Total Company stockholders equity                                           |  |                                        | 159,917   |  |                      |   | -         |                           |  |   | -            |  |  |              | -         |     |  |   | 159,917   | 
|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Noncontrolling interests                                                     |  |                                        | -         |  |                      |   | -         |                           |  |   | 14,903       |  |  |              |           |     |  |   | 14,903    | 
|Subsidiary equity                                                            |  |                                        | -         |  |                      |   | 561,409   |                           |  |   | 22,536       |  |  |              | (583,945) | (b) |  |   | -         | 
|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|Total equity                                                                 |  |                                        | 159,917   |  |                      |   | 561,409   |                           |  |   | 37,439       |  |  |              | (583,945) |     |  |   | 174,820   | 
|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 
|                                                                             |  | $                                      | 1,024,009 |  |                      | $ | 1,660,723 |                           |  | $ | 61,421       |  |  | $            | (946,543) |     |  | $ | 1,799,610 | 
|                                                                             |  |                                        |           |  |                      |   |           |                           |  |   |              |  |  |              |           |     |  |   |           | 

(a) Elimination of intercompany balances

(b) Elimination of investment in subsidiaries



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





US Oncology,
Inc.

Condensed Consolidating Balance Sheet

As of December 31, 2009

(in thousands, except share information)



|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|--------------------------------------------------------------------------- |  | ------------------------------------- | --------- |  | -------------------- | - | --------- | -------------------------- |  | - | ------------ |  |  | ------------ | ----------- | --- |  | - | --------- | 
|                                                                            |  | US Oncology, Inc.(ParentCompany Only) |           |  | SubsidiaryGuarantors |   |           | Non-guarantor Subsidiaries |  |   | Eliminations |  |  | Consolidated |            
|ASSETS                                                                      |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Current assets:                                                             |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Cash and equivalents                                                        |  | $                                     | -         |  |                      | $ | 160,487   |                            |  | $ | 1,102        |  |  | $            | -           |     |  | $ | 161,589   | 
|Accounts receivable                                                         |  |                                       | -         |  |                      |   | 342,633   |                            |  |   | 7,026        |  |  |              | -           |     |  |   | 349,659   | 
|Other receivables                                                           |  |                                       | -         |  |                      |   | 30,928    |                            |  |   | -            |  |  |              | -           |     |  |   | 30,928    | 
|Prepaid expenses and other current assets                                   |  |                                       | 720       |  |                      |   | 19,106    |                            |  |   | 992          |  |  |              | -           |     |  |   | 20,818    | 
|Inventories                                                                 |  |                                       | -         |  |                      |   | 152,642   |                            |  |   | -            |  |  |              | -           |     |  |   | 152,642   | 
|Deferred income taxes                                                       |  |                                       | 6,002     |  |                      |   | -         |                            |  |   | -            |  |  |              | -           |     |  |   | 6,002     | 
|Due from affiliates                                                         |  |                                       | 539,531   |  |                      |   | -         |                            |  |   | -            |  |  |              | (508,832)   | (a) |  |   | 30,699    | 
|Investment in subsidiaries                                                  |  |                                       | 505,850   |  |                      |   | -         |                            |  |   | -            |  |  |              | (505,850)   | (b) |  |   | -         | 
|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Total current assets                                                        |  |                                       | 1,052,103 |  |                      |   | 705,796   |                            |  |   | 9,120        |  |  |              | (1,014,682) |     |  |   | 752,337   | 
|Property and equipment, net                                                 |  |                                       | -         |  |                      |   | 360,521   |                            |  |   | 44,407       |  |  |              | -           |     |  |   | 404,928   | 
|Service agreements, net                                                     |  |                                       | -         |  |                      |   | 248,577   |                            |  |   | 2,820        |  |  |              | -           |     |  |   | 251,397   | 
|Goodwill                                                                    |  |                                       | -         |  |                      |   | 371,677   |                            |  |   | 5,593        |  |  |              | -           |     |  |   | 377,270   | 
|Other assets                                                                |  |                                       | 25,986    |  |                      |   | 45,631    |                            |  |   | 1,642        |  |  |              | -           |     |  |   | 73,259    | 
|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|                                                                            |  | $                                     | 1,078,089 |  |                      | $ | 1,732,202 |                            |  | $ | 63,582       |  |  | $            | (1,014,682) |     |  | $ | 1,859,191 | 
|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|LIABILITIES AND EQUITY                                                      |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Current liabilities:                                                        |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Current maturities of long-term indebtedness                                |  | $                                     | 8,757     |  |                      | $ | 516       |                            |  | $ | 1,306        |  |  | $            | -           |     |  | $ | 10,579    | 
|Accounts payable                                                            |  |                                       | -         |  |                      |   | 278,658   |                            |  |   | 1,130        |  |  |              | -           |     |  |   | 279,788   | 
|Intercompany accounts                                                       |  |                                       | (248,738) |  |                      |   | 258,199   |                            |  |   | (9,461)      |  |  |              | -           |     |  |   | -         | 
|Due to affiliates                                                           |  |                                       | -         |  |                      |   | 605,098   |                            |  |   | 14,622       |  |  |              | (508,832)   | (a) |  |   | 110,888   | 
|Accrued compensation cost                                                   |  |                                       | -         |  |                      |   | 50,322    |                            |  |   | 453          |  |  |              | -           |     |  |   | 50,775    | 
|Accrued interest payable                                                    |  |                                       | 40,373    |  |                      |   | -         |                            |  |   | -            |  |  |              | -           |     |  |   | 40,373    | 
|Income taxes payable                                                        |  |                                       | 3,114     |  |                      |   | -         |                            |  |   | -            |  |  |              | -           |     |  |   | 3,114     | 
|Other accrued liabilities                                                   |  |                                       | -         |  |                      |   | 33,437    |                            |  |   | 254          |  |  |              | -           |     |  |   | 33,691    | 
|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Total current liabilities                                                   |  |                                       | (196,494) |  |                      |   | 1,226,230 |                            |  |   | 8,304        |  |  |              | (508,832)   |     |  |   | 529,208   | 
|Deferred revenue                                                            |  |                                       | -         |  |                      |   | 4,636     |                            |  |   | -            |  |  |              | -           |     |  |   | 4,636     | 
|Deferred income taxes                                                       |  |                                       | 36,658    |  |                      |   | -         |                            |  |   | -            |  |  |              | -           |     |  |   | 36,658    | 
|Long-term indebtedness                                                      |  |                                       | 1,054,868 |  |                      |   | 2,092     |                            |  |   | 17,328       |  |  |              | -           |     |  |   | 1,074,288 | 
|Other long-term liabilities                                                 |  |                                       | -         |  |                      |   | 12,369    |                            |  |   | 3,370        |  |  |              | -           |     |  |   | 15,739    | 
|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Total liabilities                                                           |  |                                       | 895,032   |  |                      |   | 1,245,327 |                            |  |   | 29,002       |  |  |              | (508,832)   |     |  |   | 1,660,529 | 
|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Commitments and contingencies Equity:                                       |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Common stock, $0.01 par value, 100 shares authorized issued and outstanding |  |                                       | 1         |  |                      |   | -         |                            |  |   | -            |  |  |              | -           |     |  |   | 1         | 
|Additional paid-in capital                                                  |  |                                       | 551,986   |  |                      |   | -         |                            |  |   | -            |  |  |              | -           |     |  |   | 551,986   | 
|Accumulated deficit                                                         |  |                                       | (368,930) |  |                      |   | -         |                            |  |   | -            |  |  |              | -           |     |  |   | (368,930) | 
|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Total Company stockholders equity                                          |  |                                       | 183,057   |  |                      |   | -         |                            |  |   | -            |  |  |              | -           |     |  |   | 183,057   | 
|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Noncontrolling interests                                                    |  |                                       | -         |  |                      |   | -         |                            |  |   | 15,605       |  |  |              | -           |     |  |   | 15,605    | 
|Subsidiary equity                                                           |  |                                       | -         |  |                      |   | 486,875   |                            |  |   | 18,975       |  |  |              | (505,850)   | (b) |  |   | -         | 
|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|Total equity                                                                |  |                                       | 183,057   |  |                      |   | 486,875   |                            |  |   | 34,580       |  |  |              | (505,850)   |     |  |   | 198,662   | 
|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 
|                                                                            |  | $                                     | 1,078,089 |  |                      | $ | 1,732,202 |                            |  | $ | 63,582       |  |  | $            | (1,014,682) |     |  | $ | 1,859,191 | 
|                                                                            |  |                                       |           |  |                      |   |           |                            |  |   |              |  |  |              |             |     |  |   |           | 

|                                              |  |  |  |  |  |  |  |  |  | 
|--------------------------------------------- |  |  |  |  |  |  |  |  |  | 
|                                             
|(a) Elimination of intercompany balances     
|                                             
|(b) Elimination of investment in subsidiaries



-30-



---

##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





US Oncology,
Inc.

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2010

(unaudited, in thousands)



|                                                          |  |                                        |          |  |                         |   |         |                            |  |   |              |  |  |              |          |     |  |   |          | 
|--------------------------------------------------------- |  | -------------------------------------- | -------- |  | ----------------------- | - | ------- | -------------------------- |  | - | ------------ |  |  | ------------ | -------- | --- |  | - | -------- | 
|                                                          |  | US Oncology, 
Inc.(ParentCompany Only) |          |  | Subsidiary   Guarantors |   |         | Non-guarantor Subsidiaries |  |   | Eliminations |  |  | Consolidated |         
|Product revenue                                           |  | $                                      | -        |  |                         | $ | 639,075 |                            |  | $ | 8,434        |  |  | $            | -        |     |  | $ | 647,509  | 
|Service revenue                                           |  |                                        | -        |  |                         |   | 287,231 |                            |  |   | 5,948        |  |  |              | -        |     |  |   | 293,179  | 
|                                                          |  |                                        |          |  |                         |   |         |                            |  |   |              |  |  |              |          |     |  |   |          | 
|Total revenue                                             |  |                                        | -        |  |                         |   | 926,306 |                            |  |   | 14,382       |  |  |              | -        |     |  |   | 940,688  | 
|Cost of products                                          |  |                                        | -        |  |                         |   | 634,591 |                            |  |   | 8,375        |  |  |              | -        |     |  |   | 642,966  | 
|Cost of services:                                         |  |                                        |          |  |                         |   |         |                            |  |   |              |  |  |              |          |     |  |   |          | 
|Operating compensation and benefits                       |  |                                        | -        |  |                         |   | 137,801 |                            |  |   | 2,760        |  |  |              | -        |     |  |   | 140,561  | 
|Other operating costs                                     |  |                                        | -        |  |                         |   | 83,006  |                            |  |   | 124          |  |  |              | -        |     |  |   | 83,130   | 
|Depreciation and amortization                             |  |                                        | -        |  |                         |   | 15,845  |                            |  |   | 1,563        |  |  |              | -        |     |  |   | 17,408   | 
|                                                          |  |                                        |          |  |                         |   |         |                            |  |   |              |  |  |              |          |     |  |   |          | 
|Total cost of services                                    |  |                                        | -        |  |                         |   | 236,652 |                            |  |   | 4,447        |  |  |              | -        |     |  |   | 241,099  | 
|Total cost of products and services                       |  |                                        | -        |  |                         |   | 871,243 |                            |  |   | 12,822       |  |  |              | -        |     |  |   | 884,065  | 
|General and administrative expense                        |  |                                        | 90       |  |                         |   | 18,902  |                            |  |   | -            |  |  |              | -        |     |  |   | 18,992   | 
|Impairment and restructuring charges                      |  |                                        | -        |  |                         |   | 3,252   |                            |  |   | -            |  |  |              | -        |     |  |   | 3,252    | 
|Depreciation and amortization                             |  |                                        | -        |  |                         |   | 8,025   |                            |  |   | -            |  |  |              | -        |     |  |   | 8,025    | 
|                                                          |  |                                        |          |  |                         |   |         |                            |  |   |              |  |  |              |          |     |  |   |          | 
|                                                          |  |                                        | 90       |  |                         |   | 901,422 |                            |  |   | 12,822       |  |  |              | -        |     |  |   | 914,334  | 
|                                                          |  |                                        |          |  |                         |   |         |                            |  |   |              |  |  |              |          |     |  |   |          | 
|Income (loss) from operations                             |  |                                        | (90)     |  |                         |   | 24,884  |                            |  |   | 1,560        |  |  |              | -        |     |  |   | 26,354   | 
|Other income (expense)                                    |  |                                        |          |  |                         |   |         |                            |  |   |              |  |  |              |          |     |  |   |          | 
|Interest expense, net                                     |  |                                        | (27,869) |  |                         |   | 126     |                            |  |   | (366)        |  |  |              | -        |     |  |   | (28,109) | 
|Other income (expense), net                               |  |                                        | -        |  |                         |   | (1,215) |                            |  |   | -            |  |  |              | -        |     |  |   | (1,215)  | 
|                                                          |  |                                        |          |  |                         |   |         |                            |  |   |              |  |  |              |          |     |  |   |          | 
|Income (loss) before income taxes                         |  |                                        | (27,959) |  |                         |   | 23,795  |                            |  |   | 1,194        |  |  |              | -        |     |  |   | (2,970)  | 
|Income tax benefit                                        |  |                                        | 595      |  |                         |   | -       |                            |  |   | -            |  |  |              | -        |     |  |   | 595      | 
|Equity in subsidiaries                                    |  |                                        | 24,989   |  |                         |   | -       |                            |  |   | -            |  |  |              | (24,989) | (a) |  |   | -        | 
|                                                          |  |                                        |          |  |                         |   |         |                            |  |   |              |  |  |              |          |     |  |   |          | 
|Net income (loss)                                         |  |                                        | (2,375)  |  |                         |   | 23,795  |                            |  |   | 1,194        |  |  |              | (24,989) |     |  |   | (2,375)  | 
|Less: Net income attributable to noncontrolling interests |  |                                        | (848)    |  |                         |   | (712)   |                            |  |   | (136)        |  |  |              | 848      | (a) |  |   | (848)    | 
|                                                          |  |                                        |          |  |                         |   |         |                            |  |   |              |  |  |              |          |     |  |   |          | 
|Net income (loss) attributable to the Company             |  | $                                      | (3,223)  |  |                         | $ | 23,083  |                            |  | $ | 1,058        |  |  | $            | (24,141) |     |  | $ | (3,223)  | 
|                                                          |  |                                        |          |  |                         |   |         |                            |  |   |              |  |  |              |          |     |  |   |          | 

(a) Elimination of investment in subsidiaries



-31-



---

##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





US Oncology, Inc.

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2009

(unaudited, in thousands)



|                                                          |  |                                        |          |  |                         |   |         |                             |  |   |              |  |  |              |          |     |  |   |          | 
|--------------------------------------------------------- |  | -------------------------------------- | -------- |  | ----------------------- | - | ------- | --------------------------- |  | - | ------------ |  |  | ------------ | -------- | --- |  | - | -------- | 
|                                                          |  | US Oncology, 
Inc.(ParentCompany Only) |          |  | Subsidiary   Guarantors |   |         | Non-guarantor  Subsidiaries |  |   | Eliminations |  |  | Consolidated |         
|Product revenue                                           |  | $                                      | -        |  |                         | $ | 599,055 |                             |  | $ | 8,980        |  |  | $            | -        |     |  | $ | 608,035  | 
|Service revenue                                           |  |                                        | -        |  |                         |   | 287,658 |                             |  |   | 5,761        |  |  |              | -        |     |  |   | 293,419  | 
|                                                          |  |                                        |          |  |                         |   |         |                             |  |   |              |  |  |              |          |     |  |   |          | 
|Total revenue                                             |  |                                        | -        |  |                         |   | 886,713 |                             |  |   | 14,741       |  |  |              | -        |     |  |   | 901,454  | 
|Cost of products                                          |  |                                        | -        |  |                         |   | 587,402 |                             |  |   | 8,806        |  |  |              | -        |     |  |   | 596,208  | 
|Cost of services:                                         |  |                                        |          |  |                         |   |         |                             |  |   |              |  |  |              |          |     |  |   |          | 
|Operating compensation and benefits                       |  |                                        | -        |  |                         |   | 137,876 |                             |  |   | 2,445        |  |  |              | -        |     |  |   | 140,321  | 
|Other operating costs                                     |  |                                        | -        |  |                         |   | 84,543  |                             |  |   | 281          |  |  |              | -        |     |  |   | 84,824   | 
|Depreciation and amortization                             |  |                                        | -        |  |                         |   | 17,916  |                             |  |   | 1,174        |  |  |              | -        |     |  |   | 19,090   | 
|                                                          |  |                                        |          |  |                         |   |         |                             |  |   |              |  |  |              |          |     |  |   |          | 
|Total cost of services                                    |  |                                        | -        |  |                         |   | 240,335 |                             |  |   | 3,900        |  |  |              | -        |     |  |   | 244,235  | 
|Total cost of products and services                       |  |                                        | -        |  |                         |   | 827,737 |                             |  |   | 12,706       |  |  |              | -        |     |  |   | 840,443  | 
|General and administrative expense                        |  |                                        | 76       |  |                         |   | 18,716  |                             |  |   | -            |  |  |              | -        |     |  |   | 18,792   | 
|Impairment and restructuring charges                      |  |                                        | -        |  |                         |   | 4,117   |                             |  |   | -            |  |  |              | -        |     |  |   | 4,117    | 
|Depreciation and amortization                             |  |                                        | -        |  |                         |   | 7,700   |                             |  |   | -            |  |  |              | -        |     |  |   | 7,700    | 
|                                                          |  |                                        |          |  |                         |   |         |                             |  |   |              |  |  |              |          |     |  |   |          | 
|                                                          |  |                                        | 76       |  |                         |   | 858,270 |                             |  |   | 12,706       |  |  |              | -        |     |  |   | 871,052  | 
|                                                          |  |                                        |          |  |                         |   |         |                             |  |   |              |  |  |              |          |     |  |   |          | 
|Income (loss) from operations                             |  |                                        | (76)     |  |                         |   | 28,443  |                             |  |   | 2,035        |  |  |              | -        |     |  |   | 30,402   | 
|Other income (expense)                                    |  |                                        |          |  |                         |   |         |                             |  |   |              |  |  |              |          |     |  |   |          | 
|Interest expense, net                                     |  |                                        | (27,876) |  |                         |   | 293     |                             |  |   | (433)        |  |  |              | -        |     |  |   | (28,016) | 
|Loss on early extinguishment of debt                      |  |                                        | (3,672)  |  |                         |   | -       |                             |  |   | -            |  |  |              | -        |     |  |   | (3,672)  | 
|Other income (expense), net                               |  |                                        | -        |  |                         |   | -       |                             |  |   | -            |  |  |              | -        |     |  |   | -        | 
|                                                          |  |                                        |          |  |                         |   |         |                             |  |   |              |  |  |              |          |     |  |   |          | 
|Income (loss) before income taxes                         |  |                                        | (31,624) |  |                         |   | 28,736  |                             |  |   | 1,602        |  |  |              | -        |     |  |   | (1,286)  | 
|Income tax benefit                                        |  |                                        | 1,332    |  |                         |   | -       |                             |  |   | -            |  |  |              | -        |     |  |   | 1,332    | 
|Equity in subsidiaries                                    |  |                                        | 30,338   |  |                         |   | -       |                             |  |   | -            |  |  |              | (30,338) | (a) |  |   | -        | 
|                                                          |  |                                        |          |  |                         |   |         |                             |  |   |              |  |  |              |          |     |  |   |          | 
|Net income (loss)                                         |  |                                        | 46       |  |                         |   | 28,736  |                             |  |   | 1,602        |  |  |              | (30,338) |     |  |   | 46       | 
|Less: Net income attributable to noncontrolling interests |  |                                        | (912)    |  |                         |   | (609)   |                             |  |   | (303)        |  |  |              | 912      | (a) |  |   | (912)    | 
|                                                          |  |                                        |          |  |                         |   |         |                             |  |   |              |  |  |              |          |     |  |   |          | 
|Net income (loss) attributable to the Company             |  | $                                      | (866)    |  |                         | $ | 28,127  |                             |  | $ | 1,299        |  |  | $            | (29,426) |     |  | $ | (866)    | 
|                                                          |  |                                        |          |  |                         |   |         |                             |  |   |              |  |  |              |          |     |  |   |          | 

(a) Elimination of investment in subsidiaries



-32-



---

##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





US Oncology,
Inc.

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2010

(unaudited, in thousands)



|                                                          |  |                                        |          |  |                        |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|--------------------------------------------------------- |  | -------------------------------------- | -------- |  | ---------------------- | - | --------- | --------------------------- |  | - | ------------ |  |  | ------------ | -------- | --- |  | - | --------- | 
|                                                          |  | US Oncology, 
Inc.(ParentCompany Only) |          |  | Subsidiary  Guarantors |   |           | Non-guarantor  Subsidiaries |  |   | Eliminations |  |  | Consolidated |         
|Product revenue                                           |  | $                                      | -        |  |                        | $ | 1,832,385 |                             |  | $ | 24,901       |  |  | $            | -        |     |  | $ | 1,857,286 | 
|Service revenue                                           |  |                                        | -        |  |                        |   | 863,817   |                             |  |   | 18,406       |  |  |              | -        |     |  |   | 882,223   | 
|                                                          |  |                                        |          |  |                        |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Total revenue                                             |  |                                        | -        |  |                        |   | 2,696,202 |                             |  |   | 43,307       |  |  |              | -        |     |  |   | 2,739,509 | 
|Cost of products                                          |  |                                        | -        |  |                        |   | 1,814,739 |                             |  |   | 24,661       |  |  |              | -        |     |  |   | 1,839,400 | 
|Cost of services:                                         |  |                                        |          |  |                        |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Operating compensation and benefits                       |  |                                        | -        |  |                        |   | 415,216   |                             |  |   | 8,184        |  |  |              | -        |     |  |   | 423,400   | 
|Other operating costs                                     |  |                                        | -        |  |                        |   | 251,339   |                             |  |   | 1,134        |  |  |              | -        |     |  |   | 252,473   | 
|Depreciation and amortization                             |  |                                        | -        |  |                        |   | 48,415    |                             |  |   | 3,921        |  |  |              | -        |     |  |   | 52,336    | 
|                                                          |  |                                        |          |  |                        |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Total cost of services                                    |  |                                        | -        |  |                        |   | 714,970   |                             |  |   | 13,239       |  |  |              | -        |     |  |   | 728,209   | 
|Total cost of products and services                       |  |                                        | -        |  |                        |   | 2,529,709 |                             |  |   | 37,900       |  |  |              | -        |     |  |   | 2,567,609 | 
|General and administrative expense                        |  |                                        | 410      |  |                        |   | 58,453    |                             |  |   | -            |  |  |              | -        |     |  |   | 58,863    | 
|Impairment and restructuring charges                      |  |                                        | -        |  |                        |   | 7,333     |                             |  |   | -            |  |  |              | -        |     |  |   | 7,333     | 
|Depreciation and amortization                             |  |                                        | -        |  |                        |   | 23,250    |                             |  |   | -            |  |  |              | -        |     |  |   | 23,250    | 
|                                                          |  |                                        |          |  |                        |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|                                                          |  |                                        | 410      |  |                        |   | 2,618,745 |                             |  |   | 37,900       |  |  |              | -        |     |  |   | 2,657,055 | 
|                                                          |  |                                        |          |  |                        |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Income (loss) from operations                             |  |                                        | (410)    |  |                        |   | 77,457    |                             |  |   | 5,407        |  |  |              | -        |     |  |   | 82,454    | 
|Other income (expense)                                    |  |                                        |          |  |                        |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Interest expense, net                                     |  |                                        | (82,623) |  |                        |   | 549       |                             |  |   | (1,152)      |  |  |              | -        |     |  |   | (83,226)  | 
|Other expense                                             |  |                                        | -        |  |                        |   | (1,372)   |                             |  |   | -            |  |  |              | -        |     |  |   | (1,372)   | 
|                                                          |  |                                        |          |  |                        |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Income (loss) before income taxes                         |  |                                        | (83,033) |  |                        |   | 76,634    |                             |  |   | 4,255        |  |  |              | -        |     |  |   | (2,144)   | 
|Income tax provision                                      |  |                                        | (319)    |  |                        |   | -         |                             |  |   | -            |  |  |              | -        |     |  |   | (319)     | 
|Equity in subsidiaries                                    |  |                                        | 80,889   |  |                        |   | -         |                             |  |   | -            |  |  |              | (80,889) | (a) |  |   | -         | 
|                                                          |  |                                        |          |  |                        |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Net income (loss)                                         |  |                                        | (2,463)  |  |                        |   | 76,634    |                             |  |   | 4,255        |  |  |              | (80,889) |     |  |   | (2,463)   | 
|Less: Net income attributable to noncontrolling interests |  |                                        | (2,794)  |  |                        |   | (2,089)   |                             |  |   | (705)        |  |  |              | 2,794    | (a) |  |   | (2,794)   | 
|                                                          |  |                                        |          |  |                        |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Net income (loss) attributable to the Company             |  | $                                      | (5,257)  |  |                        | $ | 74,545    |                             |  | $ | 3,550        |  |  | $            | (78,095) |     |  | $ | (5,257)   | 
|                                                          |  |                                        |          |  |                        |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 

(a) Elimination of investment in subsidiaries



-33-



---

##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





US Oncology, Inc.

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2009

(unaudited, in thousands)



|                                                          |  |                                        |          |  |                         |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|--------------------------------------------------------- |  | -------------------------------------- | -------- |  | ----------------------- | - | --------- | --------------------------- |  | - | ------------ |  |  | ------------ | -------- | --- |  | - | --------- | 
|                                                          |  | US Oncology, 
Inc.(ParentCompany Only) |          |  | Subsidiary   Guarantors |   |           | Non-guarantor  Subsidiaries |  |   | Eliminations |  |  | Consolidated |         
|Product revenue                                           |  | $                                      | -        |  |                         | $ | 1,740,064 |                             |  | $ | 25,623       |  |  | $            | -        |     |  | $ | 1,765,687 | 
|Service revenue                                           |  |                                        | -        |  |                         |   | 843,191   |                             |  |   | 16,784       |  |  |              | -        |     |  |   | 859,975   | 
|                                                          |  |                                        |          |  |                         |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Total revenue                                             |  |                                        | -        |  |                         |   | 2,583,255 |                             |  |   | 42,407       |  |  |              | -        |     |  |   | 2,625,662 | 
|Cost of products                                          |  |                                        | -        |  |                         |   | 1,704,906 |                             |  |   | 25,106       |  |  |              | -        |     |  |   | 1,730,012 | 
|Cost of services:                                         |  |                                        |          |  |                         |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Operating compensation and benefits                       |  |                                        | -        |  |                         |   | 408,745   |                             |  |   | 7,362        |  |  |              | -        |     |  |   | 416,107   | 
|Other operating costs                                     |  |                                        | -        |  |                         |   | 247,122   |                             |  |   | 1,046        |  |  |              | -        |     |  |   | 248,168   | 
|Depreciation and amortization                             |  |                                        | -        |  |                         |   | 51,281    |                             |  |   | 3,309        |  |  |              | -        |     |  |   | 54,590    | 
|                                                          |  |                                        |          |  |                         |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Total cost of services                                    |  |                                        | -        |  |                         |   | 707,148   |                             |  |   | 11,717       |  |  |              | -        |     |  |   | 718,865   | 
|Total cost of products and services                       |  |                                        | -        |  |                         |   | 2,412,054 |                             |  |   | 36,823       |  |  |              | -        |     |  |   | 2,448,877 | 
|General and administrative expense                        |  |                                        | 328      |  |                         |   | 52,851    |                             |  |   | -            |  |  |              | -        |     |  |   | 53,179    | 
|Impairment and restructuring charges                      |  |                                        | -        |  |                         |   | 5,907     |                             |  |   | -            |  |  |              | -        |     |  |   | 5,907     | 
|Depreciation and amortization                             |  |                                        | -        |  |                         |   | 22,470    |                             |  |   | -            |  |  |              | -        |     |  |   | 22,470    | 
|                                                          |  |                                        |          |  |                         |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|                                                          |  |                                        | 328      |  |                         |   | 2,493,282 |                             |  |   | 36,823       |  |  |              | -        |     |  |   | 2,530,433 | 
|                                                          |  |                                        |          |  |                         |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Income (loss) from operations                             |  |                                        | (328)    |  |                         |   | 89,973    |                             |  |   | 5,584        |  |  |              | -        |     |  |   | 95,229    | 
|Other income (expense)                                    |  |                                        |          |  |                         |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Interest expense, net                                     |  |                                        | (72,831) |  |                         |   | 982       |                             |  |   | (1,273)      |  |  |              | -        |     |  |   | (73,122)  | 
|Loss on early extinguishment of debt                      |  |                                        | (26,025) |  |                         |   | -         |                             |  |   | -            |  |  |              | -        |     |  |   | (26,025)  | 
|Other income (expense), net                               |  |                                        | -        |  |                         |   | 37        |                             |  |   | -            |  |  |              | -        |     |  |   | 37        | 
|                                                          |  |                                        |          |  |                         |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Income (loss) before income taxes                         |  |                                        | (99,184) |  |                         |   | 90,992    |                             |  |   | 4,311        |  |  |              | -        |     |  |   | (3,881)   | 
|Income tax provision                                      |  |                                        | (948)    |  |                         |   | -         |                             |  |   | -            |  |  |              | -        |     |  |   | (948)     | 
|Equity in subsidiaries                                    |  |                                        | 95,303   |  |                         |   | -         |                             |  |   | -            |  |  |              | (95,303) | (a) |  |   | -         | 
|                                                          |  |                                        |          |  |                         |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Net income (loss)                                         |  |                                        | (4,829)  |  |                         |   | 90,992    |                             |  |   | 4,311        |  |  |              | (95,303) |     |  |   | (4,829)   | 
|Less: Net income attributable to noncontrolling interests |  |                                        | (2,615)  |  |                         |   | (1,883)   |                             |  |   | (732)        |  |  |              | 2,615    | (a) |  |   | (2,615)   | 
|                                                          |  |                                        |          |  |                         |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 
|Net income (loss) attributable to the Company             |  | $                                      | (7,444)  |  |                         | $ | 89,109    |                             |  | $ | 3,579        |  |  | $            | (92,688) |     |  | $ | (7,444)   | 
|                                                          |  |                                        |          |  |                         |   |           |                             |  |   |              |  |  |              |          |     |  |   |           | 

(a) Elimination of investment in subsidiaries



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





US Oncology, Inc.

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2010

(unaudited, in thousands)



|                                               |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 
|---------------------------------------------- |  | -------------------------------------- | -------- |  | ------------------------ | - | -------- | --------------------------- |  | - | ------------ |  |  | - | -------- | 
|                                               |  | US Oncology, 
Inc.(ParentCompany Only) |          |  | Subsidiary    Guarantors |   |          | Non-guarantor  Subsidiaries |  |   | Consolidated | 
|Cash flows from operating activities:          |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 
|Net cash provided by operating activities      |  | $                                      | 25,573   |  |                          | $ | 41,016   |                             |  | $ | 6,741        |  |  | $ | 73,330   | 
|                                               |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 
|                                               |  |                                        |          | 
|Cash flows from investing activities:          |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 
|Acquisition of property and equipment          |  |                                        | -        |  |                          |   | (43,000) |                             |  |   | (2,887)      |  |  |   | (45,887) | 
|Proceeds from contract separations             |  |                                        |          |  |                          |   | 5,208    |                             |  |   |              |  |  |   | 5,208    | 
|Payments in affiliation transactions           |  |                                        | -        |  |                          |   | (2,214)  |                             |  |   | -            |  |  |   | (2,214)  | 
|Payments for acquisition of business           |  |                                        | -        |  |                          |   | (4,367)  |                             |  |   | -            |  |  |   | (4,367)  | 
|Distributions from unconsolidated subsidiaries |  |                                        | -        |  |                          |   | 3,017    |                             |  |   | -            |  |  |   | 3,017    | 
|Investments in unconsolidated subsidiaries     |  |                                        | -        |  |                          |   | (1,288)  |                             |  |   | -            |  |  |   | (1,288)  | 
|                                               |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 
|Net cash used in investing activities          |  |                                        | -        |  |                          |   | (42,644) |                             |  |   | (2,887)      |  |  |   | (45,531) | 
|                                               |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 
|                                               |  |                                        |          | 
|Cash flows from financing activities:          |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 
|Repayment of other indebtedness                |  |                                        | (5,756)  |  |                          |   | (231)    |                             |  |   | (1,169)      |  |  |   | (7,156)  | 
|Debt financing costs                           |  |                                        | (145)    |  |                          |   | -        |                             |  |   | -            |  |  |   | (145)    | 
|Distributions to noncontrolling interests      |  |                                        | -        |  |                          |   | -        |                             |  |   | (3,496)      |  |  |   | (3,496)  | 
|Net distributions to parent                    |  |                                        | (19,672) |  |                          |   | -        |                             |  |   | -            |  |  |   | (19,672) | 
|                                               |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 
|Net cash used in financing activities          |  |                                        | (25,573) |  |                          |   | (231)    |                             |  |   | (4,665)      |  |  |   | (30,469) | 
|                                               |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 
|                                               |  |                                        |          | 
|Decrease in cash and cash equivalents          |  |                                        | -        |  |                          |   | (1,859)  |                             |  |   | (811)        |  |  |   | (2,670)  | 
|Cash and cash equivalents:                     |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 
|Beginning of period                            |  |                                        | -        |  |                          |   | 160,487  |                             |  |   | 1,102        |  |  |   | 161,589  | 
|                                               |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 
|End of period                                  |  | $                                      | -        |  |                          | $ | 158,628  |                             |  | $ | 291          |  |  | $ | 158,919  | 
|                                               |  |                                        |          |  |                          |   |          |                             |  |   |              |  |  |   |          | 



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)





US Oncology,
Inc.

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2009

(unaudited, in thousands)



|                                               |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 
|---------------------------------------------- |  | -------------------------------------- | --------- |  | ------------------------ | - | -------- | --------------------------- |  | - | ------------ |  |  | - | --------- | 
|                                               |  | US Oncology, 
Inc.(ParentCompany Only) |           |  | Subsidiary    Guarantors |   |          | Non-guarantor  Subsidiaries |  |   | Consolidated | 
|Cash flows from operating activities:          |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 
|Net cash provided by operating activities      |  | $                                      | 28,609    |  |                          | $ | 102,774  |                             |  | $ | 4,648        |  |  | $ | 136,031   | 
|                                               |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 
|                                               |  |                                        |           | 
|Cash flows from investing activities:          |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 
|Acquisition of property and equipment          |  |                                        | -         |  |                          |   | (63,629) |                             |  |   | (3,067)      |  |  |   | (66,696)  | 
|Proceeds from contract separations             |  |                                        |           |  |                          |   | 132      |                             |  |   |              |  |  |   | 132       | 
|Payments in affiliation transactions           |  |                                        | (389)     |  |                          |   | (4,136)  |                             |  |   | -            |  |  |   | (4,525)   | 
|Distributions from unconsolidated subsidiaries |  |                                        | -         |  |                          |   | 2,704    |                             |  |   | 805          |  |  |   | 3,509     | 
|Investments in unconsolidated subsidiaries     |  |                                        | -         |  |                          |   | (7,895)  |                             |  |   | 105          |  |  |   | (7,790)   | 
|                                               |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 
|Net cash used in investing activities          |  |                                        | (389)     |  |                          |   | (72,824) |                             |  |   | (2,157)      |  |  |   | (75,370)  | 
|                                               |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 
|                                               |  |                                        |           | 
|Cash flows from financing activities:          |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 
|Proceeds from Senior Secured Notes             |  |                                        | 758,926   |  |                          |   | -        |                             |  |   | -            |  |  |   | 758,926   | 
|Repayment of term loan                         |  |                                        | (436,666) |  |                          |   | -        |                             |  |   | -            |  |  |   | (436,666) | 
|Repayment of Senior Notes                      |  |                                        | (311,578) |  |                          |   | -        |                             |  |   | -            |  |  |   | (311,578) | 
|Repayment of other indebtedness                |  |                                        | (6,650)   |  |                          |   | (1,891)  |                             |  |   | (864)        |  |  |   | (9,405)   | 
|Debt financing costs                           |  |                                        | (21,188)  |  |                          |   | -        |                             |  |   | -            |  |  |   | (21,188)  | 
|Net distributions to parent                    |  |                                        | (11,064)  |  |                          |   | -        |                             |  |   | -            |  |  |   | (11,064)  | 
|Distributions to noncontrolling interests      |  |                                        | -         |  |                          |   | -        |                             |  |   | (1,627)      |  |  |   | (1,627)   | 
|                                               |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 
|Net cash used in financing activities          |  |                                        | (28,220)  |  |                          |   | (1,891)  |                             |  |   | (2,491)      |  |  |   | (32,602)  | 
|                                               |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 
|                                               |  |                                        |           | 
|Increase in cash and cash equivalents          |  |                                        | -         |  |                          |   | 28,059   |                             |  |   | -            |  |  |   | 28,059    | 
|Cash and cash equivalents:                     |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 
|Beginning of period                            |  |                                        | -         |  |                          |   | 104,475  |                             |  |   | 1            |  |  |   | 104,476   | 
|                                               |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 
|End of period                                  |  | $                                      | -         |  |                          | $ | 132,534  |                             |  | $ | 1            |  |  | $ | 132,535   | 
|                                               |  |                                        |           |  |                          |   |          |                             |  |   |              |  |  |   |           | 

NOTE 13  Subsequent Events

On November 1, 2010, US Oncology Holdings, Inc. (the Company) entered into an Agreement and Plan of Merger (the Merger Agreement) with McKesson Corporation
(McKesson), Utah Acquisition Corporation, a wholly owned subsidiary of McKesson (Merger Sub), and Utah Stockholders Agent LLC, as Stockholders Agent, providing for the merger of Merger Sub with and into the
Company (the Merger).

The Merger Agreement provides for a $2,160,000,000 enterprise value for the Company. The
equity proceeds will be determined by subtracting from such enterprise value indebtedness of the Company, transaction expenses, certain change of control and severance-related payments to employees and certain tax benefits and by adding to such
enterprise value a cash credit amount of $198,900,000. The equity holders have provided certain post closing indemnification rights to McKesson.

Consummation of the Merger is subject to customary conditions, including without limitation (i) the expiration or termination of applicable antitrust waiting periods, and (ii) the absence of any
law, order or injunction prohibiting the Merger. Moreover, McKessons obligation to consummate the Merger is subject to certain other conditions, including without limitation (i) the accuracy of the Companys representations and
warranties (subject to a material adverse effect qualifier), (ii) the Companys



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)



compliance with its covenants and agreements contained in the Merger Agreement (subject to customary materiality qualifiers), (iii) no material adverse effect having occurred since
December 31, 2009 and (iv) the Company having caused the delivery of redemption notices with respect to the Companys outstanding public bonds.

Either the Company or McKesson may terminate the Merger Agreement if the Merger has not occurred by December 31, 2010, provided that either such party may extend such termination date to
April 30, 2011 if the closing has not occurred due to the failure of any antitrust related waiting periods to have expired.

Under the terms of the Merger Agreement, substantially all of the Companys debt is required to be repaid, including the Senior Floating Rate PIK Toggle Notes due 2012 issued by US Oncology Holdings,
Inc., and the 9.125% Senior Secured Notes due 2017 and 10.75% Senior Subordinated Notes due 2014, both issued by US Oncology, Inc. At closing, the Company intends to deposit a portion of the proceeds with a trustee to redeem this indebtedness,
including the principal amount, any accrued and unpaid interest, premiums under make-whole or call provisions and call period interest as required by the respective indentures. These amounts will reduce proceeds available to the stockholders of US
Oncology Holdings, Inc. Assuming the Merger closes on December 31, 2010, the Company estimates its extinguishment loss associated with this indebtedness will be approximately $250 million, which includes premiums under make-whole and call
provisions, call period interest and the write-off of unamortized deferred transaction costs and issuance discounts. This estimate may change based upon the date the Merger closes and the finalization of premiums associated with early retirement.

Consummation of the Merger represents a payment event as defined in the Holdings Long-Term Cash Incentive Plan (2008
Cash Incentive Plan). The Merger also represents a payment event under the Companys Long-Term Research Commitment Award which was established in 2009 to align the incentives and activities of the Companys contract research
organization and affiliated practices participating in cancer research. In addition, the Compensation Committee of the Board of Directors of Holdings has approved additional transaction-related payments to management and directors. In the aggregate,
amounts paid to participants in these plans is estimated to be approximately $33.7 million upon closing.



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

ITEM 2.     MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The
following discussion should be read in conjunction with the financial statements, related notes, and other financial information appearing elsewhere in this report. In addition, see Forward-Looking Statements and Risk Factors included in
our Annual Report on Form 10-K, filed with the SEC on March 4, 2010. Unless otherwise noted, references to EBITDA and Adjusted EBITDA have the meaning set forth under Discussion of Non-GAAP Information.

General

US Oncology
Holdings, Inc. (Holdings) was formed in March, 2004. Currently, its principal assets are 100% of the shares of common stock of US Oncology, Inc. (US Oncology). Holdings and US Oncology and their subsidiaries are collectively
referred to as the Company. US Oncology, headquartered in The Woodlands, Texas, supports one of the nations largest cancer treatment and research networks. As of September 30, 2010, our network included:



| |  |  | 1,392 affiliated physicians under comprehensive strategic alliances and targeted physician services arrangements
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | 517 sites of service operated by physicians under comprehensive strategic alliances and targeted physician services arrangements
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | 84 comprehensive cancer centers and 15 facilities providing radiation therapy only
| | - |  | ----------------------------------------------------------------------------------



| |  |  | A research network currently managing 97 active clinical trials
| | - |  | ---------------------------------------------------------------



| |  |  | A pharmaceutical distribution business currently distributing $2.5 billion annually in oncology pharmaceuticals
| | - |  | ---------------------------------------------------------------------------------------------------------------

Our mission is to enable physicians to provide the right treatment, at the right time, for the right patient. We strive to expand and
improve patient access to high quality, integrated and advanced cancer care by working closely with physicians, manufacturers and payers to improve the safety, efficiency and effectiveness of the cancer care delivery system. We know that to realize
our mission of enhancing patient access to advanced care, we must maintain a dual emphasis on cost containment and quality improvement. Pursuit of this mission involves strategic initiatives at both the local level, where cancer care is delivered to
patients, and at the national level to address the needs of commercial and governmental payers, pharmaceutical manufacturers and other industry customers.

We believe declining reimbursement and increasing operating costs have resulted in a trend toward professional management of physician groups. Since our inception, we have worked with local physician
groups to enable affiliated practices to offer state of the art care to cancer patients in outpatient settings, including professional medical services, chemotherapy infusion, radiation oncology services, access to clinical trials, laboratory
services, diagnostic radiology, pharmacy services and patient education. In addition, we work with affiliated groups to improve practice performance through optimizing reimbursement, implementing Lean Six-Sigma operating processes, recruiting
physicians, providing customized electronic medical records and information systems, and obtaining nationally negotiated supply arrangements. We also assist affiliated groups through the development of relationship-building programs targeted to
referring physicians, and through local and national branding campaigns that communicate the benefits of being affiliated with US Oncology. We have also developed other tools for physicians such as the Oncology Portal which was launched in 2009. The
portal is a web-based cancer care community to provide oncologists and clinicians a platform to collaborate, share best practices and gain industry insight and education.

In 2010, we continue to work with existing affiliated physicians, and seek to enter into new affiliations, to increase the financial strength of network practices and support their clinical initiatives.
It is the scale of our physician and patient population that allows us to realize volume efficiencies for the network and a variety of additional industry customers. Affiliated physicians may tailor their business relationship with us from a suite
of solutions ranging from customized targeted physician services to a long-term strategic alliance of comprehensive management solutions. Under a comprehensive strategic alliance model, we provide all of our practice management products and services
under a single contract with one fee typically based on the practices financial performance. Under our more flexible targeted physician services model, physicians purchase a narrower suite of services based on the types of services required by
the practice.



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





In May, 2010, we
launched the United Network of US Oncology, offering independent oncology practices the opportunity to join the Company either through a comprehensive strategic alliance relationship or though a more flexible targeted physician services offering.
Benefits to patients of physicians in the United Network of US Oncology under either model may include, among other services, evidence-based medicine guidelines, access to new therapies through innovative clinical trials, and multi-disciplined
integrated cancer care that combines radiation and chemotherapy, often in a single location, in local communities.

The launch
of the United Network was supported by the Companys UNITED brand campaign which includes integrated internet advertising and ad placements in major media outlets, as well as clinical journals that target oncologists and referring
physicians. UNITED was designed to complement the Companys United in Healing campaign which is offered in partnership with affiliated oncology practices. United in Healing connects community-based cancer
care practices to the United Network of US Oncology through ads and promotional materials that help the local practice leverage the US Oncology national branding campaign.

In 2010, we expect our services will increasingly be offered through targeted arrangements where a subset of our comprehensive services, including supplying oncology pharmaceuticals, disease management,
electronic medical records and research can be obtained separately on a fee for service basis. These targeted arrangements are designed to meet the needs of oncology practices that may not be well-suited for a comprehensive management arrangement
but still value a narrower scope of our services.

In addition to assisting physicians in addressing the challenges faced by
their practices, we will continue to use the insight gained from working with these practices to assist payers and pharmaceutical manufacturers improve patient access to high quality cancer care and the effectiveness of the care delivery system.

Our reimbursement expertise helps providers, payers and pharmaceutical manufacturers realize cost efficiency and
predictability in a largely unpredictable field of medicine. Innovent Oncology addresses the need to avoid the unnecessary costs of care while ensuring the highest level of clinical quality. Innovent Oncology combines Level I Pathways,
evidence-based treatment protocols developed by network physicians for commonly-treated cancers, with iKnowMed, our electronic medical records system that supports the review of treatment patterns and outcomes. Innovent Oncology includes
oncologist-directed disease management and robust patient support services, such as experienced oncology nurses and standardized educational materials, to aid in patient understanding of treatment protocols and potential side-effects to help reduce
occurrences of avoidable medical interventions. Innovent Oncology also assists patients with incurable or late-stage disease with end-of-life planning to meet their individual physical, mental, social and spiritual needs. Appropriate advanced care
planning avoids unnecessary treatments that both diminish the patients quality of life and consume healthcare resources in an inefficient manner.

US Oncology also works with pharmaceutical manufacturers in the development and commercialization of oncology pharmaceuticals. The US Oncology Research Network provides pharmaceutical manufacturers access
to a network led by cancer experts in all major tumor types and an unparalleled ability to nationally sample patients. In addition, AccessMed® provides patient financial assistance and product support services to assist pharmaceutical manufacturers commercializing their products while our Healthcare
Informatics business collects and analyzes data to provide significant insight into drug performance and patient outcomes for ongoing product development and evaluation. Our distribution center increases the safety of drugs through a
state-of-the-art e-Pedigree technology that tracks drug therapies from the manufacturer to the practice, ensuring that drugs administered to patients by our affiliated physicians are genuine and unadulterated.

We continue to work with the physician leadership in the network to identify opportunities to improve the quality of cancer care. The
focus of these efforts in 2010 is to:



| |  |  | Aggregate physicians into our network by providing our services through comprehensive and targeted relationships that suit the needs of prospective
physician customers. These efforts will include:
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Continuing to grow our network of affiliated physicians. We seek to enter into comprehensive strategic alliances with practices in new markets and
those where we already have a regional presence. Entering new markets grows our national presence while taking advantage of the efficiencies that result from leveraging our existing regional and national infrastructure and capabilities. We intend to
expand our existing markets both by assisting practices with individual physician recruitment and by affiliating with already established practices. We also will assist affiliated groups to improve the efficiency of their practice operations through
implementation of Lean Six-Sigma operating processes to improve the patient experience, revenue cycle processes and drug management.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





| | ¡ |  | Continue to deliver services through targeted physician services arrangements for physicians desiring access to a narrower suite of our services. We
expect the demand for professional management of physician groups will continue and therefore we package four key services (Oncology Pharmaceutical Services, Payer Quality Services, iKnowMed and Research) into a targeted physician services offering.
This offering is intended to complement the comprehensive strategic alliances model to address the needs of practices as a suite of services customized to each practices priorities. Services offered to Oncology Pharmaceutical Services
customers include (i) drug contracting and drug distribution services, (ii) drug management services such as supporting inventory management, drug charge capture, and analysis of chemotherapy regimens, (iii) revenue cycle tools and
information such as billing and coding courses for practice staff, patient assistance support resources and web-based applications to better manage denials and reduce practice bad debt, and (iv) clinical and nursing tools. In addition,
with membership in the United Network of US Oncology, the targeted physician services relationship brings additional value to physicians including increased participation in the United Networks mission of advancing the science of cancer care
and working to realign reimbursement policy to recognize and reward high-quality, evidence-based cancer care.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expand Payer Quality Services (PQS), which is US Oncologys physician-centric approach that allows us to help payers address the
variable cost and quality of cancer care through evidence-based medicine, patient support services and advance care planning. PQS encompasses three approaches to support physicians in this manner which include a practice-based approach,
network-based approach and payer-based approach. Innovent Oncology serves as the payer-based approach and is specifically designed to bring physicians and payers together to provide the highest clinical quality while better managing the total cost
of care. We expect PQS to improve the ability of community oncology practices to operate successfully in an environment that is moving towards value-based reimbursement.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Grow our services to pharmaceutical manufacturers. We work with pharmaceutical manufacturers in the development and commercialization of oncology
pharmaceuticals. Our Healthcare Informatics business collects and analyzes data to provide significant insight into drug performance and patient outcomes for ongoing product development and evaluation. The US Oncology Research network provides
pharmaceutical manufacturers with a centrally managed and efficient system for the clinical development of new therapies from Phase I through IV.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expand access to information resources for physicians and patients. In 2009, we launched the Oncology Portal, a web-based cancer care community to
provide oncologists and clinicians a platform to collaborate, share best practices and gain industry insight and education. In addition, we have recently acquired two organizations as part of our strategy to broaden our clinical resources, The CURE
Media Group and NexCura, LLC. The CURE Media Groups publication, CURE magazine, focuses on recently diagnosed patients and currently has a circulation of 325,000. NexCuras website provides tools used by over 150,000 patients and
caregivers annually to generate reports of personalized treatment options based on peer-reviewed clinical research.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Physician Relationship Models

Comprehensive Strategic Alliance

Under our comprehensive services model known as a comprehensive strategic alliance, we own or lease all of the real and personal property used by our affiliated practices. In addition, we generally manage
the non-medical business operations of our affiliated practices and facilitate communication with our affiliated physicians. Each management agreement contemplates a policy board consisting of representatives from us and the affiliated physician
practice. The responsibilities of each board include strategic planning, decision-making and preparation of an annual budget for that practice. While both we and the affiliated practice have an equal vote in matters before the policy board, the
practice physicians are solely responsible for all medical decisions, including the hiring and termination of physicians. We are responsible for non-medical decisions, including facilities management and information systems management.

During the nine months ended September 30, 2010 and 2009, 78.5% and 80.7% of our revenue, respectively, were derived from
comprehensive strategic alliances. The change from prior year reflects the growth of physicians affiliated under targeted arrangements. Under most of our comprehensive strategic alliances, we are compensated under the earnings model. Under that



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued



model, we account for all expenses that we incur in connection with managing a practice, including rent, pharmaceutical expenses, and salaries and benefits of non-physician employees of the
practices, and are paid a management fee based on a percentage of the practices earnings before income taxes, subject to certain adjustments. Our other comprehensive strategic alliances are on a fixed management fee basis, as required in some
states.

Targeted Physician Services

Our services are increasingly being offered through targeted arrangements where a subset of the services offered through our comprehensive management agreements are provided separately to oncologists on a
fee- for- service basis. Targeted physician services represented 17.7% and 15.5% of our revenue during the nine months ended September 30, 2010 and 2009, respectively, which was primarily fees for payment for pharmaceuticals and supplies used
by the practice and reimbursement for certain pharmacy-related expenses. A smaller portion of our revenue from targeted arrangements was payment for the other services we provide. Rates for our services typically are based on the level of services
desired by the practice.

Recent Developments

On November 1, 2010, US Oncology Holdings, Inc. (the Company) entered into an Agreement and Plan of Merger (the Merger Agreement) with McKesson Corporation
(McKesson), Utah Acquisition Corporation, a wholly owned subsidiary of McKesson (Merger Sub), and Utah Stockholders Agent LLC, as Stockholders Agent, providing for the merger of Merger Sub with and into the
Company (the Merger).

The Merger Agreement provides for a $2,160,000,000 enterprise value for the Company. The
equity proceeds will be determined by subtracting from such enterprise value indebtedness of the Company, transaction expenses, certain change of control and severance-related payments to employees and certain tax benefits and by adding to such
enterprise value a cash credit amount of $198,900,000. The equity holders have provided certain post closing indemnification rights to McKesson.

Consummation of the Merger is subject to customary conditions, including without limitation (i) the expiration or termination of applicable antitrust waiting periods, and (ii) the absence of any
law, order or injunction prohibiting the Merger. Moreover, McKessons obligation to consummate the Merger is subject to certain other conditions, including without limitation (i) the accuracy of the Companys representations and
warranties (subject to a material adverse effect qualifier), (ii) the Companys compliance with its covenants and agreements contained in the Merger Agreement (subject to customary materiality qualifiers), (iii) no material adverse
effect having occurred since December 31, 2009 and (iv) the Company having caused the delivery of redemption notices with respect to the Companys outstanding public bonds.

Either the Company or McKesson may terminate the Merger Agreement if the Merger has not occurred by December 31, 2010, provided that
either such party may extend such termination date to April 30, 2011 if the closing has not occurred due to the failure of any antitrust related waiting periods to have expired.

Under the terms of the Merger Agreement, substantially all of the Companys debt is required to be repaid, including the Senior
Floating Rate PIK Toggle Notes due 2012 issued by US Oncology Holdings, Inc., and the 9.125% Senior Secured Notes due 2017 and 10.75% Senior Subordinated Notes due 2014, both issued by US Oncology, Inc. At closing, the Company intends to deposit a
portion of the proceeds with a trustee to redeem this indebtedness, including the principal amount, any accrued and unpaid interest, premiums under make-whole or call provisions and call period interest as required by the respective indentures.
These amounts will reduce proceeds available to the stockholders of US Oncology Holdings, Inc. Assuming the Merger closes on December 31, 2010, the Company estimates its extinguishment loss associated with this indebtedness will be
approximately $250 million, which includes premiums under make-whole and call provisions, call period interest and the write-off of unamortized deferred transaction costs and issuance discounts. This estimate may change based upon the date the
Merger closes and the finalization of premiums associated with early retirement.

Consummation of the Merger represents a
payment event as defined in the Holdings Long-Term Cash Incentive Plan (2008 Cash Incentive Plan). The Merger also represents a payment event under the Companys Long-Term Research Commitment Award which was established in 2009 to
align the incentives and activities of the Companys contract research organization and affiliated practices participating in cancer research. In addition, the Compensation Committee of the Board of Directors of Holdings has approved additional
transaction-related payments to management and directors. In the aggregate, amounts paid to participants in these plans is estimated to be approximately $33.7 million upon closing.



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Forward-Looking Statements and
Risk Factors

The following statements are or may constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995: (i) certain statements, including possible or assumed future results of operations contained in Managements Discussion and Analysis of Financial Condition and Results of Operations,
(ii) any statements contained herein regarding the prospects for any of our businesses or services and our development activities relating to physician affiliations, cancer centers, new service offerings and changes in reimbursement;
(iii) any statements preceded by, followed by or that include the words believes, expects, anticipates, intends, estimates, plans or similar expressions; and
(iv) other statements contained herein regarding matters that are not historical facts.

Our business and results of
operations are subject to risks and uncertainties, many of which are beyond managements ability to control or predict. Because of these risks and uncertainties, actual results may differ materially from those expressed or implied by such
forward-looking statements, and investors are cautioned not to place undue reliance on such statements, which speak only as of the date thereof. Such risks and uncertainties include:



| |  |  | the impact of healthcare reform in the United States, including the recently passed Patient Protection and Affordable Care Act and Health Care and
Education Reconciliation Act of 2010, and the related impact on cancer care
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the impact of a recession in the U.S. or global economy
| | - |  | -------------------------------------------------------



| |  |  | the Companys reliance on pharmaceuticals for the majority of its revenues and its ability to maintain favorable pricing, credit terms, and
relationships with pharmaceutical manufacturers and other vendors
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | concentration of pharmaceutical purchasing and favorable pricing with a limited number of vendors
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | governmental reimbursement for patient care, such as reimbursement for ESAs, and other reimbursement under Medicare (including reimbursement for
radiation and diagnostic services)
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reimbursement for medical services by non-governmental payers and cost-containment efforts by such payers, including whether such payers adopt
coverage guidelines regarding ESAs or pharmaceutical reimbursement methodologies that are similar to Medicare coverage
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | other changes in the manner patient care is reimbursed or administered
| | - |  | ----------------------------------------------------------------------



| |  |  | continued migration to generic alternatives for branded pharmaceuticals or potential eliminations of generic alternatives
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | the decisions of employers to increase the financial responsibility of individuals under health insurance programs afforded to their employees
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys ability to service its substantial indebtedness and comply with related covenants in debt agreements
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys ability to fund its operations through operating cash flow or utilization of its credit facility or its ability to obtain
additional financing on acceptable terms
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys ability to implement strategic initiatives
| | - |  | --------------------------------------------------------



| |  |  | the Companys ability to maintain good relationships with existing practices and expand into new markets and development of existing markets,
modifications to, and renegotiation of, existing economic arrangements
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys ability to complete cancer centers and PET facilities currently in development and its ability to recover investments in cancer
centers
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | government regulation, investigation and enforcement
| | - |  | ----------------------------------------------------



| |  |  | increases in the cost of providing cancer treatment services
| | - |  | ------------------------------------------------------------



| |  |  | the operations of the Companys affiliated physician practices, and potential impairments that could result from declining market valuations or
poor operating performance
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Please refer to our filings with the SEC, including our Annual Report on Form
10-K, filed with the SEC on March 4, 2010, Quarterly Reports on Form 10-Q and other documents filed from time to time with the SEC, for a more extensive discussion of factors that could cause actual results to differ materially from our
expectations.

The cautionary statements contained or referred to in this report should be considered in connection with any
written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We do not undertake any obligation to release any revisions to or to update publicly any forward-looking statements to reflect events or
circumstances after the date thereof or to reflect the occurrence of unanticipated events.



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Reimbursement Matters

Pharmaceutical Reimbursement

Erythropoiesis-stimulating agents (ESAs) are drugs used for the treatment of anemia, a condition that occurs when the level of healthy red blood cells in the body becomes too low, thus
inhibiting the bloods ability to carry oxygen. Many cancer patients suffer from anemia either as a result of their disease or as a result of the treatments they receive for their cancer. ESAs have historically been used by oncologists to treat
anemia. ESAs are administered to increase levels of healthy red blood cells as an alternative to blood transfusions.

On
July 30, 2007, CMS issued a NCD establishing criteria for reimbursement by Medicare for ESA usage which led to a significant decline in utilization of these drugs by oncologists, including those affiliated with us. In addition, the Oncologic
Drugs Advisory Committee (ODAC) met on March 13, 2008, to further consider the use of ESAs in oncology. Based upon the ODAC findings, on July 30, 2008, the U.S. Food and Drug Administration (FDA) published a final
new label for the ESA drugs Aranesp and Procrit. Unlike the NCD from CMS, which governs reimbursement (rather than prescribing) for Medicare beneficiaries only, the label indication directs appropriate physician prescribing and applies to all
patients and payers.

The FDA also mandated implementation of a Risk Evaluation and Mitigation Strategy (REMS) for
ESAs. A proposed REMS for ESAs was filed by ESA manufacturers with the FDA in August, 2008 and became effective on March 24, 2010. The REMS is focused on ESA prescribing guidelines and includes additional patient consent/education requirements,
medical guides and physician registration requirements. The REMS also outlines additional procedural steps that will be necessary for qualified physicians to order and prescribe ESAs for their patients.

The decline in ESA usage has had a significant adverse affect on the Companys results of operations, particularly on its medical
oncology services and pharmaceutical services segments. Prescribing patterns may continue to change now that the REMS has been in effect for several months, a possible impact of which could be further significant reductions in ESA utilization.
During the current periods, however, operating income attributable to ESAs administered by our network of affiliated physicians remained relatively stable at $5.3 million and $5.6 million during the three months ended September 30, 2010 and
2009, respectively, and $14.6 million and $16.3 million during the nine months ended September 30, 2010 and 2009, respectively. The operating income reflects results from our medical oncology services segment which relate primarily to the
administration of ESAs by practices receiving comprehensive management services and from our pharmaceutical services segment which includes purchases by physicians affiliated under the targeted physician services model, as well as distribution and
group purchasing fees received from manufacturers for pharmaceuticals purchased by physicians affiliated under both of these arrangements.

Decreased financial performance of affiliated practices as a result of further declining ESA usage, if any, could also have an effect on their relationship with us and lead to increased pressure to amend
the terms of their management services agreements. In addition, reduced utilization of ESAs may adversely impact our ability to continue to receive favorable pricing from ESA manufacturers. Decreased financial performance may also adversely impact
our ability to obtain acceptable credit terms from pharmaceutical manufacturers, including pharmaceutical manufacturers of products other than ESAs.

We expect continued payer scrutiny of the side effects of supportive care products and other drugs that represent significant costs to payers. Such scrutiny by payers or additional scientific data could
lead to future restrictions on usage or reimbursement for other pharmaceuticals as a result of payer or FDA action or reductions in usage as a result of the independent determination of oncologists practicing in our network. Any such reduction could
have an adverse effect on our business. In our evidence-based medicine initiative, affiliated physicians continually review emerging scientific information to develop clinical pathways for use in oncology and remain engaged with payers in
determining optimal usage for all pharmaceuticals.

In July, 2010, the ODAC of the FDA voted to recommend
removal of certain indications for use in treating breast cancer from the Avastin® (bevacizumab) label. The FDA
is expected to make a decision on the ODAC recommendation in December, 2010. While the FDA often follows the recommendations of its advisory committees, it is not required to do so. Factors that could significantly affect the financial impact on the
Company include future actions of the FDA and, if applicable, ongoing clinical interpretations of the revised label. We are currently evaluating the impact on future earnings if this recommendation is adopted. However, our evaluation remains ongoing
and we are unable to estimate the financial impact at this time.



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Reimbursement for Physician
Services

Medicare reimbursement for physician services is based on a fee schedule, which establishes payment for a
given service, in relation to actual resources used in providing the service, through the application of relative value units (RVUs). The resources used are converted into a dollar amount of reimbursement through a conversion
factor, which is updated annually by CMS, based on a formula.

In late 2009, CMS announced payment rates for services to be
furnished under the 2010 physician fee schedule. Under the provisions, the current Sustainable Growth Rate (SGR) formula for setting aggregate Physician Fee Schedule spending would reduce payment for physician services by 21.3%.
Historically, Congress has intervened and through the budgetary process provided funding to prevent significant reductions in reimbursement rates. Most recently, The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of
2010 (H.R. 3962), which was signed into law on June 25, 2010, delays the payment reduction until November 30, 2010 and includes a 2.2 percent increase in the conversion factor for services provided from June 1, 2010 through
November 30, 2010. H.R. 3962 also included rate change adjustments related to the Geographic Practice Cost Index retroactive to services provided beginning January 1, 2010. If reimbursement under H.R. 3962 were to remain in effect until
December 31, 2010, EBITDA for the current year would increase by approximately $3.0 million as compared to reimbursement in effect prior to passage. The SGR remains scheduled to reduce by 21.3 percent effective December 1, 2010. If
Congress fails to act and avert this reduction, approximately $1 million of the potential H.R. 3962 increase would not be realized in 2010. However, we expect that the Congress, in the long run, will continue to act to avert the SGR cut with a flat
or marginally higher conversion factor.

Healthcare Reform

Two elements of legislation were passed under the Obama administrations healthcare reform agenda. The Patient Protection and Affordable Care Act was signed into law on March 23, 2010 and the
Health Care and Education Reconciliation Act of 2010 was signed into law on March 30, 2010. These new laws include a large number of health-related provisions to take effect over the next four years, including expanding Medicaid
eligibility, requiring most individuals to have health insurance, establishing new regulations on health plans, establishing health insurance exchanges, and modifying certain payment systems to encourage more cost-effective care and a reduction of
inefficiencies and waste, including through new tools to address fraud and abuse.

The provisions of the legislation most
relevant to the Company are summarized as follows:



| |  |  | Spends $940 billion over 10 years to expand health insurance coverage; to approximately 95% of legal residents under the age of 65;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Decreases the federal debt by $138 billion over 10 years;
| | - |  | ---------------------------------------------------------



| |  |  | Expands Medicaid to 133% of the Federal Poverty Level  $29,327 for a family of four;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Creates state-based web portals, or exchanges to assist consumers purchasing plans based on this individual market;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | Creates new government subsidies for the purchase of health insurance on a sliding scale up to 400% of the Federal Poverty Level  $88,200 for
a family of four;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Creates a new government mandate on individuals to purchase health insurance with penalties for individuals who do not have coverage;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Requires insurance companies to issue coverage to all individuals regardless of health status and prohibits discrimination based on preexisting
conditions and health status;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Eliminates yearly and lifetime limits on the amount of coverage plans provide;
| | - |  | ------------------------------------------------------------------------------



| |  |  | Requires insurance company coverage of the routine costs of care for patients enrolled in clinical trials;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Creates an Accountable Care Organization (ACO)/Medicare shared savings program framework in which providers, including networks of group practices,
who take accountability for the costs and quality of care of their patient populations will share in savings that accrue to the Medicare program;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





| |  |  | Creates a new Medicare Innovation Center that is charged with testing new payment models including models that align nationally-recognized,
evidence-based guidelines of cancer care with Medicare payment incentives in the areas of treatment planning and follow-up care planning for Medicare beneficiaries with cancer, including the identification of gaps in current quality measures; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Funds the new spending with reimbursement cuts to Medicare Advantage plans, hospitals, nursing homes, home health agencies, other providers with
formulaic updates, advanced medical imaging, and new taxes on expensive health insurance plans (Cadillac plans), health insurers, drug manufacturers, medical device makers, and high income taxpayers.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following items were not included in the recent legislation:



| |  |  | Cut Medicare payments for medical oncology, radiation oncology, office-administered drugs, PET or PET/CT imaging;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | Creation of a new government-run health plan or public plan option to compete with private insurers in the individual and small group market;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A mandate on employers to provide health insurance to their employees; however, if even one employee receives a subsidy through the new exchanges,
firms with more than 50 employees would have to pay a fine equal to $2,000 for every person on their payroll;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A permanent solution for the Medicare physician payment Sustainable Growth Rate (SGR) formula; and
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | A new Medicare benefit for advanced care planning discussions between physicians and patients.
| | - |  | ----------------------------------------------------------------------------------------------

We continue to believe that we are well-positioned throughout healthcare reform in the United States. We also continue to believe that
increased government spending as required by the legislation, coupled with existing and growing federal budget deficits, will create future reimbursement pressures on providers as the government attempts to slow spending increases in healthcare and
other entitlement programs.

Increased responsibilities of private payers would pressure unit payments to providers from the
private sector. These cost reduction pressures and incentives around ACOs, would also increase competitive pressure on US Oncology from hospitals. While the reform legislation itself is neutral to positive for the Company, its failure to
substantively address intensifying systemic cost and financing issues creates further pressure on us to implement our strategic plans aimed at these issues.

General Reimbursement Matters

Other reimbursement matters that could
impact our future results include the risk factors described herein, as well as:



| |  |  | the extent to which non-governmental payers change their reimbursement rates or implement other initiatives, such as pay for performance, or change
benefit structures;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in practice performance or behavior, including the extent to which physicians continue to administer drugs to Medicare patients, or changes
in our contracts with physicians;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in our cost structure or the cost structure of affiliated practices, including any change in the prices our affiliated practices pay for
drugs;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in our business, including new cancer centers, PET system installations or otherwise expanding operations of affiliated physician groups;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in patient responsibility to pay for cancer treatment as a result of employer benefit plan design, rising unemployment or other related
factors; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any other changes in reimbursement or practice activity that are unrelated to the prescription drug legislation.
| | - |  | ----------------------------------------------------------------------------------------------------------------



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Critical Accounting Policies
and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our
unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial statements. The preparation of these
financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate
these estimates, including those related to accounts receivable, intangible assets, goodwill, accrued expenses, income taxes, and contingencies. We base our estimates on historical experience and various other assumptions that we believe to be
reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates under
different assumptions or conditions.

In addition, as circumstances change, we may revise the basis of our estimates
accordingly. For example, in the past we have recorded charges to reflect revisions in our valuation of accounts receivable as a result of actual collection patterns. We maintain decentralized billing systems and continue to upgrade and modify those
systems. We take this into account as we evaluate the realizability of receivables and record appropriate reserves, based upon the risks of collection inherent in such a structure. In the event subsequent collections are higher or lower than our
estimates, results of operations in subsequent periods could be either positively or negatively impacted as a result of such prior estimates. This risk is particularly relevant for periods in which there is a significant shift in reimbursement from
large payers, such as the changes previously discussed under Pharmaceutical Reimbursement.

Refer to the Critical
Accounting Policies and Estimates section of our Annual Report on Form 10-K filed with the SEC on March 4, 2010, for a discussion of our critical accounting policies. Management believes such critical accounting policies affect the more
significant judgments and estimates used in the preparation of our consolidated condensed financial statements. These critical accounting policies include our policy for recognition of revenue from affiliated practices, valuation of accounts
receivable, impairment of long-lived assets, volume-based pharmaceutical rebates and accounting for income taxes.

Impairment of Long-Lived
Assets

As of September 30, 2010 our consolidated balance sheet includes goodwill in the amount of $378.9 million, of
which $28.9 million, $191.4 million and $158.6 million was associated with the medical oncology services, cancer center services and pharmaceutical services segments, respectively.

We assess the recoverability of goodwill on an annual basis or more frequently if events or circumstances indicate the carrying value of
goodwill may not be recoverable. In our most recent annual assessment, during the fourth quarter of 2009, the Company estimated that the fair values of its medical oncology services, cancer center services and pharmaceutical services segments
exceeded their carrying values by approximately $142.0 million, $47.0 million and $445.0 million, respectively.

A future
decline in the operating performance or increase in the capital requirements of the cancer center services segment could result in an impairment of goodwill related to this segment. Factors that could contribute to a decline in operating performance
would include, but are not limited to, a reduction in reimbursement for radiation therapy and diagnostic services by third party payers (including governmental and commercial payers), an increase in operating costs such as compensation or utilities,
or a reduction in our management fees under comprehensive management agreements. Additionally, increasing capital requirements as a result of escalating equipment or financing costs or investments in new technology could negatively impact the
segments estimated fair value such that an impairment of its goodwill may be deemed to have occurred. We continue to address the negative factors that could result in an impairment of goodwill related to this segment. However, future adverse
changes in actual or anticipated operating results, economic factors and/or market multiples used to estimate the fair value of the Company, could result in future non-cash impairment charges. Because measuring an impairment charge requires the
identification and valuation of intangible assets that have either increased in value or have been created since the goodwill was initially recognized, it is not possible to estimate the impact of the impairment charge that would be recorded if the
estimated fair value of the cancer center services segment were to decline below its carrying value. We perform our annual goodwill assessment as of the beginning of the fourth quarter, however if events or circumstances change that we conclude
would more likely than not reduce the fair value of our cancer center services segment below its carrying amount, we would perform impairment testing before that date.

Recent Accounting Pronouncements

From time to time, the FASB, the SEC and
other regulatory bodies seek to change accounting rules, including rules applicable to our business and financial statements. We cannot provide assurance that future changes in accounting rules would not require us to make restatements of previously
filed financial information. Information regarding new accounting pronouncements is included in Note 11 to the condensed financial statements.



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Discussion of Non-GAAP
Information

In this quarterly report, we use the terms EBITDA which represent earnings before interest, taxes,
depreciation, amortization (including amortization of stock-based compensation), noncontrolling interest and other income (expense) and Adjusted EBITDA which is EBITDA before impairment and restructuring charges, loss on early
extinguishment of debt and other non-cash charges. EBITDA and Adjusted EBITDA are not calculated in accordance with GAAP; rather they are derived from relevant items in our GAAP-based financial statements. A reconciliation of EBITDA and Adjusted
EBITDA to the unaudited Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) and the unaudited Condensed Consolidated Statement of Cash Flows is included in this quarterly report.

We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating the value of companies in general, and in evaluating the
liquidity of companies with debt service obligations and their ability to service their indebtedness. Management uses EBITDA and Adjusted EBITDA as key indicators to evaluate liquidity and financial condition, both with respect to the business as a
whole and with respect to individual sites in the US Oncology network. At September 30, 2010, our Senior Secured Revolving Credit Facility required that we comply on a quarterly basis with certain financial covenants, which include EBITDA as a
financial measure. Management believes that EBITDA and Adjusted EBITDA are useful to investors, since they provide investors with additional information not directly available in a GAAP presentation.

As non-GAAP measures, EBITDA and Adjusted EBITDA should not be viewed as alternatives to the Companys income from operations, as an
indicator of operating performance, or our cash flow from operations as a measure of liquidity. For example, EBITDA and Adjusted EBITDA do not reflect:



| |  |  | the Companys significant interest expense, or the cash requirements necessary to service interest and principal payments on the Companys
indebtedness;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | cash requirements for the addition or replacement of capital assets being depreciated and amortized, which typically must be replaced in the future,
even though deprecation and amortization are non-cash charges;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in, or cash equivalents available for, the Companys working capital needs;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | the Companys cash expenditures, or future requirements, for other expenditures, such as payments that may be made as consideration to
affiliating physicians joining our network, or contractual commitments; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the fact that other companies may calculate EBITDA or Adjusted EBITDA differently than we do, which may limit its usefulness as a comparative
measure.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

Despite these limitations, management believes that EBITDA and Adjusted EBITDA provide investors
and analysts with a useful measure of liquidity and financial condition unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. Management compensates for these
limitations by relying primarily on the Companys GAAP results and using EBITDA and Adjusted EBITDA as supplemental information for comparative purposes and for analyzing compliance with loan covenants.

In all events, EBITDA and Adjusted EBITDA are not intended to be substitutes for GAAP measures. Investors are advised to review such
non-GAAP measures in conjunction with GAAP information provided by us.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Results of Operations

As of September 30, 2010 and 2009, respectively, we have affiliated with the following number of physicians
(including those under targeted physician services agreements), by specialty:



|                                  |  |               |       |  |      |  |       |  |  | 
|--------------------------------- |  | ------------- | ----- |  | ---- |  | ----- |  |  | 
|                                  |  | September 30, |       |  |     
|                                  |  | 2010          |       |  | 2009 |  |       | 
|Medical oncologists/hematologists |  |               | 1,127 |  |      |  | 1,061 |  | 
|Radiation oncologists             |  |               | 164   |  |      |  | 164   |  | 
|Other oncologists and physicians  |  |               | 101   |  |      |  | 85    |  | 
|                                  |  |               |       |  |      |  |       |  | 
|Total physicians                  |  |               | 1,392 |  |      |  | 1,310 |  | 
|                                  |  |               |       |  |      |  |       |  | 

The following tables set forth changes in the number of physicians affiliated with the
Company under both comprehensive strategic alliances and targeted physician services agreements:



Comprehensive Strategic Alliance
Agreements(1)

Three Months Ended    September 
30,


Nine Months Ended    September 
30,2010


2009


2010


2009Affiliated physicians, beginning of period


1,004



989



1,010



979Physician practice affiliations


7



9



23



49Physician practice separations(2)


-



-



(9
)


-Recruited physicians


29



30



42



46Retiring/Other


(22
)


(13
)


(43
)


(51
)Net conversions (to)/from TPS/OPS agreements(3)


(9
)


-



(14
)


(8
)Affiliated physicians, end of period


1,009



1,015



1,009



1,015Oncology Pharmaceutical and Targeted Physician Services Agreements(4)Affiliated physicians, beginning of period


320



247



300



232Physician practice affiliations


59



56



88



101Physician practice separations(5)


(7
)


(11
)


(17
)


(35
)Retiring/Other(5)


(1
)


3



(2
)


(11
)Net conversions (to)/from comprehensive strategic alliance agreements(3)


12



-



14



8Affiliated physicians, end of period


383



295



383



295Affiliated physicians, end of period


1,392



1,310



1,392



1,310




| | (1) | Operations related to comprehensive strategic alliance agreements are included in the medical oncology and cancer center services segments.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The nine months ended September 30, 2010 consist of three practices including a two physician practice in which both physicians retired and
another practice in which several physicians converted to TPS agreements.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Although conversions generally occur within the same reporting period, the three months ended September 30, 2010 include three physicians from
a CSA practice that disaffiliated during the three months ended June 30, 2010 who rejoined under TPS agreements.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Operations related to TPS/OPS agreements are included in the pharmaceutical services segment. OPS practices are a subset of TPS practices who choose
to only access limited services and are not considered members in the United Network of US Oncology.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | The third quarter of 2009 includes a year-to-date reclassification of 3 physicians who were part of physician practice separations rather than
retirements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





The following
table sets forth the number of radiation oncology facilities and PET systems managed by us:



|                                                     |  |                                 |     |   |                                |  |     |      |  |  |      |   |  |  |     |  
|---------------------------------------------------- |  | ------------------------------- | --- | - | ------------------------------ |  | --- | ---- |  |  | ---- | - |  |  | --- | -
|                                                     |  | Three Months EndedSeptember 30, |     |   | Nine Months EndedSeptember 30, | 
|                                                     |  | 2010                            |     |   | 2009                           |  |     | 2010 |  |  | 2009 |  
|                                                     |  |                                 |     |  
|Cancer Centers, beginning of period                  |  |                                 | 84  |   |                                |  | 79  |      |  |  | 83   |   |  |  | 80  |  
|                                                     |  |                                 |     |  
|Cancer Centers opened                                |  |                                 | 1   |   |                                |  | 2   |      |  |  | 2    |   |  |  | 3   |  
|                                                     |  |                                 |     |  
|Cancer Centers closed(1)                             |  |                                 | (1  | ) |                                |  | -   |      |  |  | (2   | ) |  |  | (2  | )
|                                                     |  |                                 |     |  
|Other(2)                                             |  |                                 | -   |   |                                |  | -   |      |  |  | 1    |   |  |  | -   |  
|                                                     |  |                                 |     |   |                                |  |     |      |  |  |      |   |  |  |     |  
|                                                     |  |                                 |     |  
|Cancer Centers, end of period                        |  |                                 | 84  |   |                                |  | 81  |      |  |  | 84   |   |  |  | 81  |  
|                                                     |  |                                 |     |   |                                |  |     |      |  |  |      |   |  |  |     |  
|                                                     |  |                                 |     |  
|Radiation oncology-only facilities, end of period(2) |  |                                 | 15  |   |                                |  | 17  |      |  |  | 15   |   |  |  | 17  |  
|                                                     |  |                                 |     |   |                                |  |     |      |  |  |      |   |  |  |     |  
|                                                     |  |                                 |     |  
|Total Radiation Oncology Facilities(3)               |  |                                 | 99  |   |                                |  | 98  |      |  |  | 99   |   |  |  | 98  |  
|                                                     |  |                                 |     |   |                                |  |     |      |  |  |      |   |  |  |     |  
|                                                     |  |                                 |     |  
|Linear Accelerators(4)                               |  |                                 | 122 |   |                                |  | 124 |      |  |  | 122  |   |  |  | 124 |  
|                                                     |  |                                 |     |   |                                |  |     |      |  |  |      |   |  |  |     |  
|                                                     |  |                                 |     |  
|PET Systems(4), (5)                                  |  |                                 | 37  |   |                                |  | 39  |      |  |  | 37   |   |  |  | 39  |  
|                                                     |  |                                 |     |   |                                |  |     |      |  |  |      |   |  |  |     |  
|                                                     |  |                                 |     |  
|CT Scanners(6)                                       |  |                                 | 65  |   |                                |  | 65  |      |  |  | 65   |   |  |  | 65  |  
|                                                     |  |                                 |     |   |                                |  |     |      |  |  |      |   |  |  |     |  



| | (1) | The three months and nine months ended September 30, 2010, include one cancer center related to a practice that converted to a TPS arrangement.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Other includes a facility recategorized from radiation-only to integrated cancer center.
| | --- | ----------------------------------------------------------------------------------------

| | (3) | Includes 96 and 95 sites utilizing IMRT technology at September 30, 2010 and 2009, respectively. Of the sites utilizing IMRT technology, 54 and
48 sites also have IGRT capabilities at September 30, 2010 and 2009, respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | The three months and nine months ended September 30, 2010, include a decrease of 1 linear accelerator and 2 PET systems related to physicians
converting to a TPS arrangement which purchased their medical assets from us upon conversion.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Includes 32 and 29 PET/CT systems at September 30, 2010 and 2009, respectively.
| | --- | -------------------------------------------------------------------------------

| | (6) | Excludes PET/CT systems which are classified as PET systems above.
| | --- | ------------------------------------------------------------------

The following table sets forth key operating statistics as a measure of the volume of services provided by our practices affiliated under
comprehensive strategic alliances:



|                                                       |  |                                 |        |  |                                |  |        |      |  |  |        |  |  |  |        | 
|------------------------------------------------------ |  | ------------------------------- | ------ |  | ------------------------------ |  | ------ | ---- |  |  | ------ |  |  |  | ------ | 
|                                                       |  | Three Months EndedSeptember 30, |        |  | Nine Months EndedSeptember 30, | 
|Average Per Operating Day Statistics:(1)               |  | 2010                            |        |  | 2009                           |  |        | 2010 |  |  | 2009   | 
|Medical oncology visits                                |  |                                 | 11,127 |  |                                |  | 11,220 |      |  |  | 11,290 |  |  |  | 11,225 | 
|Total patient visits                                   |  |                                 | 11,735 |  |                                |  | 11,838 |      |  |  | 11,907 |  |  |  | 11,830 | 
|Total new patients                                     |  |                                 | 1,197  |  |                                |  | 1,173  |      |  |  | 1,191  |  |  |  | 1,159  | 
|New cancer patients                                    |  |                                 | 633    |  |                                |  | 624    |      |  |  | 634    |  |  |  | 624    | 
|Radiation treatments                                   |  |                                 | 2,614  |  |                                |  | 2,779  |      |  |  | 2,697  |  |  |  | 2,745  | 
|Targeted treatments (included in radiation treatments) |  |                                 | 790    |  |                                |  | 761    |      |  |  | 808    |  |  |  | 756    | 
|PET scans                                              |  |                                 | 214    |  |                                |  | 225    |      |  |  | 220    |  |  |  | 223    | 
|CT scans                                               |  |                                 | 786    |  |                                |  | 846    |      |  |  | 810    |  |  |  | 840    | 



| | (1) | Average per day operating statistics for the nine months ended September 30, 2010 have not been adjusted to reflect disruptions due to inclement
weather during the three months ended March 31, 2010. | 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 

| | (2) | Includes IMRT, IGRT, mammosite, brachytherapy and stereotactic radiosurgery treatments. | 
| | --- | --------------------------------------------------------------------------------------- | 



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





The following
tables set forth the percentages of revenue represented by certain items reflected in our Condensed Consolidated Statement of Operations and Comprehensive Income (Loss). The following information should be read in conjunction with our unaudited
condensed consolidated financial statements and notes thereto included elsewhere herein.



|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       |  |  | 
|------------------------------------ |  | --------------------------------------------------- | -------- | -------------------------- | ----- | ------------------------------- | ----- | ----------------- | ----- | ---- |  | - | -------- |  | ----- |  | ----- | - | ----- |  |  |  |  | - | -------- |  | ----- |  | ----- | - | ----- |  |  | - | -------- |  | ----- |  | ----- | - | ----- |  |  | 
|                                     |  |                                                     |          | US Oncology Holdings, Inc. |       |                                 |       | US Oncology, Inc.
|                                     |  | Three Months EndedSeptember 30,                     |          |                            |       | Three Months EndedSeptember 30,
|(in thousands)                       |  | 2010                                                |          | 2009                       |       |                                 |       | 2010              |       | 2009
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |         
|Product revenue                      |  | $                                                   | 647,509  |                            |       |                                 | 68.8  | %                 |       |      |  | $ | 608,035  |  |       |  | 67.5  | % |       |  |  |  |  | $ | 647,509  |  |       |  | 68.8  | % |       |  |  | $ | 608,035  |  |       |  | 67.5  | % |       | 
|Service revenue                      |  |                                                     | 293,179  |                            |       |                                 | 31.2  |                   |       |      |  |   | 293,419  |  |       |  | 32.5  |   |       |  |  |  |  |   | 293,179  |  |       |  | 31.2  |   |       |  |  |   | 293,419  |  |       |  | 32.5  |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       | 
|Total revenue                        |  |                                                     | 940,688  |                            |       |                                 | 100.0 |                   |       |      |  |   | 901,454  |  |       |  | 100.0 |   |       |  |  |  |  |   | 940,688  |  |       |  | 100.0 |   |       |  |  |   | 901,454  |  |       |  | 100.0 |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |         
|Cost of products                     |  |                                                     | 642,966  |                            |       |                                 | 68.4  |                   |       |      |  |   | 596,208  |  |       |  | 66.1  |   |       |  |  |  |  |   | 642,966  |  |       |  | 68.4  |   |       |  |  |   | 596,208  |  |       |  | 66.1  |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |         
|Cost of services:                    |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       | 
|Operating compensation and benefits  |  |                                                     | 140,561  |                            |       |                                 | 14.9  |                   |       |      |  |   | 140,321  |  |       |  | 15.6  |   |       |  |  |  |  |   | 140,561  |  |       |  | 14.9  |   |       |  |  |   | 140,321  |  |       |  | 15.6  |   |       | 
|Other operating costs                |  |                                                     | 83,130   |                            |       |                                 | 8.8   |                   |       |      |  |   | 84,824   |  |       |  | 9.4   |   |       |  |  |  |  |   | 83,130   |  |       |  | 8.8   |   |       |  |  |   | 84,824   |  |       |  | 9.4   |   |       | 
|Depreciation and amortization        |  |                                                     | 17,408   |                            |       |                                 | 1.9   |                   |       |      |  |   | 19,090   |  |       |  | 2.1   |   |       |  |  |  |  |   | 17,408   |  |       |  | 1.9   |   |       |  |  |   | 19,090   |  |       |  | 2.1   |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       | 
|Total cost of services               |  |                                                     | 241,099  |                            |       |                                 | 25.6  |                   |       |      |  |   | 244,235  |  |       |  | 27.1  |   |       |  |  |  |  |   | 241,099  |  |       |  | 25.6  |   |       |  |  |   | 244,235  |  |       |  | 27.1  |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |         
|Total cost of products and services  |  |                                                     | 884,065  |                            |       |                                 | 94.0  |                   |       |      |  |   | 840,443  |  |       |  | 93.2  |   |       |  |  |  |  |   | 884,065  |  |       |  | 94.0  |   |       |  |  |   | 840,443  |  |       |  | 93.2  |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |         
|General and administrative expense   |  |                                                     | 19,033   |                            |       |                                 | 2.0   |                   |       |      |  |   | 18,913   |  |       |  | 2.1   |   |       |  |  |  |  |   | 18,992   |  |       |  | 2.0   |   |       |  |  |   | 18,792   |  |       |  | 2.1   |   |       | 
|Impairment and restructuring charges |  |                                                     | 3,252    |                            |       |                                 | 0.3   |                   |       |      |  |   | 4,117    |  |       |  | 0.5   |   |       |  |  |  |  |   | 3,252    |  |       |  | 0.3   |   |       |  |  |   | 4,117    |  |       |  | 0.5   |   |       | 
|Depreciation and amortization        |  |                                                     | 8,025    |                            |       |                                 | 0.9   |                   |       |      |  |   | 7,700    |  |       |  | 0.8   |   |       |  |  |  |  |   | 8,025    |  |       |  | 0.9   |   |       |  |  |   | 7,700    |  |       |  | 0.8   |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       | 
|Total costs and expenses             |  |                                                     | 914,375  |                            |       |                                 | 97.2  |                   |       |      |  |   | 871,173  |  |       |  | 96.6  |   |       |  |  |  |  |   | 914,334  |  |       |  | 97.2  |   |       |  |  |   | 871,052  |  |       |  | 96.6  |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |         
|Income from operations               |  |                                                     | 26,313   |                            |       |                                 | 2.8   |                   |       |      |  |   | 30,281   |  |       |  | 3.4   |   |       |  |  |  |  |   | 26,354   |  |       |  | 2.8   |   |       |  |  |   | 30,402   |  |       |  | 3.4   |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |         
|Other income (expense):              |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       | 
|Interest expense, net                |  |                                                     | (36,730) |                            |       |                                 | (3.9) |                   |       |      |  |   | (37,627) |  |       |  | (4.2) |   |       |  |  |  |  |   | (28,109) |  |       |  | (3.0) |   |       |  |  |   | (28,016) |  |       |  | (3.1) |   |       | 
|Loss on early extinguishment of debt |  |                                                     | -        |                            |       |                                 | -     |                   |       |      |  |   | (3,672)  |  |       |  | (0.4) |   |       |  |  |  |  |   | -        |  |       |  | -     |   |       |  |  |   | (3,672)  |  |       |  | (0.4) |   |       | 
|Loss on interest rate swap           |  |                                                     | (3,605)  |                            |       |                                 | (0.4) |                   |       |      |  |   | (7,596)  |  |       |  | (0.8) |   |       |  |  |  |  |   | -        |  |       |  | -     |   |       |  |  |   | -        |  |       |  | -     |   |       | 
|Other income (expense)               |  |                                                     | (1,215)  |                            |       |                                 | (0.1) |                   |       |      |  |   | -        |  |       |  | -     |   |       |  |  |  |  |   | (1,215)  |  |       |  | (0.1) |   |       |  |  |   | -        |  |       |  | -     |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       | 
|Loss before income taxes             |  |                                                     | (15,237) |                            |       |                                 | (1.6) |                   |       |      |  |   | (18,614) |  |       |  | (2.0) |   |       |  |  |  |  |   | (2,970)  |  |       |  | (0.3) |   |       |  |  |   | (1,286)  |  |       |  | (0.1) |   |       | 
|Income tax benefit (provision)       |  |                                                     | (12)     |                            |       |                                 | -     |                   |       |      |  |   | (764)    |  |       |  | (0.1) |   |       |  |  |  |  |   | 595      |  |       |  | 0.1   |   |       |  |  |   | 1,332    |  |       |  | 0.1   |   |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       | 
|Net income (loss)                    |  |                                                     | (15,249) |                            |       |                                 | (1.6) |                   |       |      |  |   | (19,378) |  |       |  | (2.1) |   |       |  |  |  |  |   | (2,375)  |  |       |  | (0.2) |   |       |  |  |   | 46       |  |       |  | 0.0   |   |       | 
|Less:                                |  | Net income attributable to noncontrolling interests |          |                            | (848) |                                 |       |                   | (0.1) |      |  |   |          |  | (912) |  |       |   | (0.1) |  |  |  |  |   |          |  | (848) |  |       |   | (0.1) |  |  |   |          |  | (912) |  |       |   | (0.1) |  |  | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       |  |  | 
|Net loss attributable to the Company |  | $                                                   | (16,097) |                            |       |                                 | (1.7) | %                 |       |      |  | $ | (20,290) |  |       |  | (2.2) | % |       |  |  |  |  | $ | (3,223)  |  |       |  | (0.3) | % |       |  |  | $ | (866)    |  |       |  | (0.1) | % |       | 
|                                     |  |                                                     |          |                            |       |                                 |       |                   |       |      |  |   |          |  |       |  |       |   |       |  |  |  |  |   |          |  |       |  |       |   |       |  |  |   |          |  |       |  |       |   |       |  |  | 



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





(in thousands)



|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |   |  | 
|------------------------------------ |  | --------------------------------------------------- | --------- | ---- | ------- | ------------------------------ | ----- | ---- | ----- | ---- |  | - | --------- |  | ------- |  | ----- |  | ----- | - |  |  |  | - | --------- |  | ------- |  | ----- |  | ----- | - |  | - | --------- |  | ------- |  | ----- |  | ----- | - |  | 
|                                     |  | US Oncology Holdings, Inc.                          |           |      |         | US Oncology, Inc.             
|                                     |  | Nine Months EndedSeptember 30,                      |           |      |         | Nine Months EndedSeptember 30,
|                                     |  | 2010                                                |           | 2009 |         |                                |       | 2010 |       | 2009
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |          
|Product revenue                      |  | $                                                   | 1,857,286 |      |         |                                | 67.8  |      |       | %    |  | $ | 1,765,687 |  |         |  | 67.2  |  |       | % |  |  |  | $ | 1,857,286 |  |         |  | 67.8  |  |       | % |  | $ | 1,765,687 |  |         |  | 67.2  |  |       | %
|Service revenue                      |  |                                                     | 882,223   |      |         |                                | 32.2  |      |       |      |  |   | 859,975   |  |         |  | 32.8  |  |       |   |  |  |  |   | 882,223   |  |         |  | 32.2  |  |       |   |  |   | 859,975   |  |         |  | 32.8  |  |       |  
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |   |  | 
|Total revenue                        |  |                                                     | 2,739,509 |      |         |                                | 100.0 |      |       |      |  |   | 2,625,662 |  |         |  | 100.0 |  |       |   |  |  |  |   | 2,739,509 |  |         |  | 100.0 |  |       |   |  |   | 2,625,662 |  |         |  | 100.0 |  |       |  
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |   |  | 
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |          
|Cost of products                     |  |                                                     | 1,839,400 |      |         |                                | 67.1  |      |       |      |  |   | 1,730,012 |  |         |  | 65.9  |  |       |   |  |  |  |   | 1,839,400 |  |         |  | 67.1  |  |       |   |  |   | 1,730,012 |  |         |  | 65.9  |  |       |  
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |          
|Cost of services:                    |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |  
|Operating compensation and benefits  |  |                                                     | 423,400   |      |         |                                | 15.5  |      |       |      |  |   | 416,107   |  |         |  | 15.8  |  |       |   |  |  |  |   | 423,400   |  |         |  | 15.5  |  |       |   |  |   | 416,107   |  |         |  | 15.8  |  |       |  
|Other operating costs                |  |                                                     | 252,473   |      |         |                                | 9.2   |      |       |      |  |   | 248,168   |  |         |  | 9.5   |  |       |   |  |  |  |   | 252,473   |  |         |  | 9.2   |  |       |   |  |   | 248,168   |  |         |  | 9.5   |  |       |  
|Depreciation and amortization        |  |                                                     | 52,336    |      |         |                                | 1.9   |      |       |      |  |   | 54,590    |  |         |  | 2.1   |  |       |   |  |  |  |   | 52,336    |  |         |  | 1.9   |  |       |   |  |   | 54,590    |  |         |  | 2.1   |  |       |  
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |   |  | 
|Total cost of services               |  |                                                     | 728,209   |      |         |                                | 26.6  |      |       |      |  |   | 718,865   |  |         |  | 27.4  |  |       |   |  |  |  |   | 728,209   |  |         |  | 26.6  |  |       |   |  |   | 718,865   |  |         |  | 27.4  |  |       |  
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |          
|Total cost of products and services  |  |                                                     | 2,567,609 |      |         |                                | 93.7  |      |       |      |  |   | 2,448,877 |  |         |  | 93.3  |  |       |   |  |  |  |   | 2,567,609 |  |         |  | 93.7  |  |       |   |  |   | 2,448,877 |  |         |  | 93.3  |  |       |  
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |          
|General and administrative expense   |  |                                                     | 59,056    |      |         |                                | 2.2   |      |       |      |  |   | 53,374    |  |         |  | 2.0   |  |       |   |  |  |  |   | 58,863    |  |         |  | 2.2   |  |       |   |  |   | 53,179    |  |         |  | 2.0   |  |       |  
|Impairment and restructuring charges |  |                                                     | 7,333     |      |         |                                | 0.3   |      |       |      |  |   | 5,907     |  |         |  | 0.2   |  |       |   |  |  |  |   | 7,333     |  |         |  | 0.3   |  |       |   |  |   | 5,907     |  |         |  | 0.2   |  |       |  
|Depreciation and amortization        |  |                                                     | 23,250    |      |         |                                | 0.8   |      |       |      |  |   | 22,470    |  |         |  | 0.9   |  |       |   |  |  |  |   | 23,250    |  |         |  | 0.8   |  |       |   |  |   | 22,470    |  |         |  | 0.9   |  |       |  
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |   |  | 
|Total costs and expenses             |  |                                                     | 2,657,248 |      |         |                                | 97.0  |      |       |      |  |   | 2,530,628 |  |         |  | 96.4  |  |       |   |  |  |  |   | 2,657,055 |  |         |  | 97.0  |  |       |   |  |   | 2,530,433 |  |         |  | 96.4  |  |       |  
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |   |  | 
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |          
|Income from operations               |  |                                                     | 82,261    |      |         |                                | 3.0   |      |       |      |  |   | 95,034    |  |         |  | 3.6   |  |       |   |  |  |  |   | 82,454    |  |         |  | 3.0   |  |       |   |  |   | 95,229    |  |         |  | 3.6   |  |       |  
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |          
|Other income (expense):              |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |  
|Interest expense, net                |  |                                                     | (108,776) |      |         |                                | (4.0) |      |       |      |  |   | (102,820) |  |         |  | (3.9) |  |       |   |  |  |  |   | (83,226)  |  |         |  | (3.0) |  |       |   |  |   | (73,122)  |  |         |  | (2.8) |  |       |  
|Loss on early extinguishment of debt |  |                                                     | -         |      |         |                                | -     |      |       |      |  |   | (26,025)  |  |         |  | (1.0) |  |       |   |  |  |  |   | -         |  |         |  | -     |  |       |   |  |   | (26,025)  |  |         |  | (1.0) |  |       |  
|Loss on interest rate swap           |  |                                                     | (11,591)  |      |         |                                | (0.4) |      |       |      |  |   | (10,012)  |  |         |  | (0.4) |  |       |   |  |  |  |   | -         |  |         |  | -     |  |       |   |  |   | -         |  |         |  | -     |  |       |  
|Other income (expense)               |  |                                                     | (1,372)   |      |         |                                | (0.1) |      |       |      |  |   | 37        |  |         |  | -     |  |       |   |  |  |  |   | (1,372)   |  |         |  | (0.1) |  |       |   |  |   | 37        |  |         |  | 0.1   |  |       |  
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |   |  | 
|Loss before income taxes             |  |                                                     | (39,478)  |      |         |                                | (1.5) |      |       |      |  |   | (43,786)  |  |         |  | (1.7) |  |       |   |  |  |  |   | (2,144)   |  |         |  | (0.1) |  |       |   |  |   | (3,881)   |  |         |  | (0.1) |  |       |  
|Income tax benefit (provision)       |  |                                                     | (1,309)   |      |         |                                | -     |      |       |      |  |   | 3,260     |  |         |  | 0.1   |  |       |   |  |  |  |   | (319)     |  |         |  | -     |  |       |   |  |   | (948)     |  |         |  | -     |  |       |  
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |   |  | 
|Net loss                             |  |                                                     | (40,787)  |      |         |                                | (1.5) |      |       |      |  |   | (40,526)  |  |         |  | (1.6) |  |       |   |  |  |  |   | (2,463)   |  |         |  | (0.1) |  |       |   |  |   | (4,829)   |  |         |  | (0.1) |  |       |  
|Less:                                |  | Net income attributable to noncontrolling interests |           |      | (2,794) |                                |       |      | (0.1) |      |  |   |           |  | (2,615) |  |       |  | (0.1) |   |  |  |  |   |           |  | (2,794) |  |       |  | (0.1) |   |  |   |           |  | (2,615) |  |       |  | (0.1) |   |  | 
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |   |  | 
|Net loss attributable to the Company |  | $                                                   | (43,581)  |      |         |                                | (1.6) |      |       | %    |  | $ | (43,141)  |  |         |  | (1.7) |  |       | % |  |  |  | $ | (5,257)   |  |         |  | (0.2) |  |       | % |  | $ | (7,444)   |  |         |  | (0.2) |  |       | %
|                                     |  |                                                     |           |      |         |                                |       |      |       |      |  |   |           |  |         |  |       |  |       |   |  |  |  |   |           |  |         |  |       |  |       |   |  |   |           |  |         |  |       |  |       |   |  | 

In the following discussion, we address the results of operations of US Oncology and Holdings.
With the exception of expenses associated with its separate capitalization, nominal administrative expenses and the related tax effects, the results of operations of Holdings are identical to those of US Oncology. Therefore, discussion related to
revenue, cost of products and cost of services is identical for both companies. Beginning with the discussion of corporate costs (which includes interest and general and administrative expense) we first address the results of US Oncology, since it
incurs the substantial portion of such expenses. Following the discussion of US Oncology, we separately address the incremental costs incurred by Holdings.

We derive revenue primarily in four areas:



| |  |  | Management fees from comprehensive strategic alliances. Under our comprehensive strategic alliances, we recognize revenues equal to the
reimbursement we receive for all expenses we incur in connection with managing a practice plus an additional management fee (typically based upon a percentage of the practices earnings before income taxes, subject to certain adjustments).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Service fees from targeted physician services agreements. Under our targeted physician services agreements, we earn revenue from affiliated
practices for products delivered and services rendered. These revenues include payment for all of the pharmaceutical agents purchased by the practice and a service fee for the pharmacy-related services we provide.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Group purchasing organization (GPO), data and other service fees. We receive fees from pharmaceutical companies for acting as a
GPO for our affiliated practices and through offerings such as Healthcare Informatics for providing informational and other services to pharmaceutical companies. GPO fees are typically based upon the volume of drugs purchased by the practices. Fees
for other services include amounts paid for data we collect, compile and analyze, as well as fees for other services we provide to pharmaceutical companies, including reimbursement support.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





| |  |  | Clinical research fees. We receive fees for clinical research services from pharmaceutical and biotechnology companies. These fees are
separately negotiated for each study and typically include a management fee, per patient accrual fees and fees for achieving various study milestones.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A portion of our revenue under our comprehensive strategic alliances and our targeted physician services agreements with affiliated practices is derived from sales of pharmaceutical products and is
reported as product revenues. Our remaining revenues are reported as service revenues. Physician practices that enter into comprehensive strategic alliances with us receive a broad range of services and receive pharmaceutical products. These
products and services represent multiple deliverables rendered under a single contract, with a single fee. We have analyzed the component of the contract attributable to the provision of products (pharmaceuticals) and the component of the contract
attributable to the provision of services and attributed fair value to each component.

We retain all amounts we collect in
respect of practice receivables. On a monthly basis, we calculate what portion of their revenues our affiliated practices are entitled to retain by subtracting practice expenses and our fees from their revenues. We pay practices this remainder in
cash, which they use primarily for physician compensation. The amounts retained by physician groups are excluded from our revenue, because they are not part of our fees. By paying physicians on a cash basis for accrued amounts, we assist in
financing their working capital.

Revenue

The following tables reflect our revenue by segment for the three months and nine months ended September 30, 2010 and 2009 (in thousands):



|                                  |  |                                  |           |   |      |   |           |                                 |  |  |       |   |  |      |             |   |        |   |             |   |  |  |       |  
|--------------------------------- |  | -------------------------------- | --------- | - | ---- | - | --------- | ------------------------------- |  |  | ----- | - |  | ---- | ----------- | - | ------ | - | ----------- | - |  |  | ----- | -
|                                  |  | Three Months Ended September 30, |           |   |      |   |           | Nine Months Ended September 30, |  |  |       |  
|                                  |  | 2010                             |           |   | 2009 |   |           | Change                          |  |  | 2010  |   |  | 2009 |             |   | Change |  
|                                  |  |                                  |           |   |      |  
|Medical oncology services         |  | $                                | 615,648   |   |      | $ | 610,349   |                                 |  |  | 0.9   | % |  | $    | 1,824,526   |   |        | $ | 1,797,837   |   |  |  | 1.5   | %
|Cancer center services            |  |                                  | 95,038    |   |      |   | 99,457    |                                 |  |  | (4.4) |   |  |      | 292,788     |   |        |   | 288,917     |   |  |  | 1.3   |  
|Pharmaceutical services           |  |                                  | 704,841   |   |      |   | 645,465   |                                 |  |  | 9.2   |   |  |      | 1,978,445   |   |        |   | 1,847,229   |   |  |  | 7.1   |  
|Research and other services       |  |                                  | 19,910    |   |      |   | 17,087    |                                 |  |  | 16.5  |   |  |      | 58,093      |   |        |   | 54,780      |   |  |  | 6.0   |  
|Eliminations(1)                   |  |                                  | (494,749) |   |      |   | (470,904) |                                 |  |  | (5.1) |   |  |      | (1,414,343) |   |        |   | (1,363,101) |   |  |  | (3.8) |  
|                                  |  |                                  |           |   |      |   |           |                                 |  |  |       |   |  |      |             |   |        |   |             |   |  |  |       |  
|Total revenue                     |  | $                                | 940,688   |   |      | $ | 901,454   |                                 |  |  | 4.4   | % |  | $    | 2,739,509   |   |        | $ | 2,625,662   |   |  |  | 4.3   | %
|                                  |  |                                  |           |   |      |   |           |                                 |  |  |       |   |  |      |             |   |        |   |             |   |  |  |       |  
|                                  | 
|As a percentage of total revenue: |  |                                  |           |   |     
|                                  |  |                                  |           |   |      |  
|Medical oncology service          |  |                                  | 65.4      | % |      |   | 67.7      | %                               |  |  |       |   |  |      | 66.6        | % |        |   | 68.5        | % |  |  |       |  
|Cancer center services            |  |                                  | 10.1      |   |      |   | 11.0      |                                 |  |  |       |   |  |      | 10.7        |   |        |   | 11.0        |   |  |  |       |  
|Pharmaceutical services           |  |                                  | 74.9      |   |      |   | 71.6      |                                 |  |  |       |   |  |      | 72.2        |   |        |   | 70.4        |   |  |  |       |  
|Research and other services       |  |                                  | 2.1       |   |      |   | 1.9       |                                 |  |  |       |   |  |      | 2.1         |   |        |   | 2.1         |   |  |  |       |  
|Eliminations(1)                   |  |                                  | (52.5)    |   |      |   | (52.2)    |                                 |  |  |       |   |  |      | (51.6)      |   |        |   | (52.0)      |   |  |  |       |  
|                                  |  |                                  |           |   |      |   |           |                                 |  |  |       |   |  |      |             |   |        |   |             |   |  |  |       |  
|Total revenue                     |  |                                  | 100.0     | % |      |   | 100.0     | %                               |  |  |       |   |  |      | 100.0       | % |        |   | 100.0       | % |  |  |       |  
|                                  |  |                                  |           |   |      |   |           |                                 |  |  |       |   |  |      |             |   |        |   |             |   |  |  |       |  



| | (1) | Eliminations represent the sale of pharmaceuticals from our distribution center (pharmaceutical services segment) to our affiliated practices
(medical oncology segment).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Medical Oncology Services. Medical oncology services revenue for the
three months ended September 30, 2010 was $615.6 million, an increase of $5.3 million, or 0.9 percent, from the three months ended September 30, 2009. The revenue growth was primarily due to a 1.4 percent increase in new cancer patients
and a 2.0 percent increase in total new patients, as well as an increase in physicians within specialties providing services with higher reimbursement such as surgery. Revenue growth associated with higher volumes was partially offset by lower
reimbursement due primarily to generally lower utilization by members of commercial health plans as well as the impact of a generic alternative for Eloxatin becoming available in the third quarter of 2009.

Medical oncology services revenue for the nine months ended September 30, 2010 was $1,824.5 million, an increase of $26.7 million,
or 1.5 percent, from the nine months ended September 30, 2009 despite inclement weather reducing patient volumes during the first quarter of 2010. The revenue growth reflects higher medical oncology visits and increased revenue per patient
visit due to a changing mix in services provided by the physicians.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Cancer Center
Services. Cancer center services revenue for the three months ended September 30, 2010 was $95.0 million, a decrease of $4.4 million, or 4.4 percent, from the three months ended September 30, 2009. The decrease in revenue reflects a
6.1 percent decline in radiation treatments and diagnostic scans reflecting trends toward lower use of health services by commercially-insured patients (as discussed above), as well as the conversion of some practices to TPS arrangements, physician
turnover within existing practices, competition in certain markets and the use of advanced treatment options which require fewer sessions than conventional radiation. The revenue decrease associated with lower treatment volumes was partially offset
by the continuing shift toward advanced therapies which include intensity modulated radiation therapy (IMRT), image guided radiation therapy (IGRT) and stereotactic radiosurgery (SRS), which are reimbursed at
higher rates. During the third quarter of 2010, IMRT represented 28 percent of total radiation treatments compared to 26 percent for the same period in 2009.

Cancer center services revenue for the nine months ended September 30, 2010 was $292.8 million, an increase of $3.9 million, or 1.3 percent, from the nine months ended September 30, 2009. The
increase reflects a continued shift toward advanced radiation therapies partially offset by lower radiation treatment and diagnostic scan volumes as discussed in the quarterly comparison above.

Pharmaceutical Services.Pharmaceutical services revenue during the three months ended September 30, 2010 was $704.8 million,
an increase of $59.4 million, or 9.2 percent, from the three months ended September 30, 2009. The revenue increase is primarily due to 66 net additional medical oncologists affiliated through comprehensive strategic alliances and targeted
physician services arrangements since the third quarter of 2009.

Pharmaceutical services revenue during the nine months ended
September 30, 2010 was $1,978.4 million, an increase of $131.2 million, or 7.1 percent, from the nine months ended September 30, 2009 for the reasons discussed in the quarterly comparison above.

Research and Other Services. Research and other services revenue during the three months ended September 30, 2010 was $19.9
million, an increase of $2.8 million, or 16.5 percent, compared to the same period in 2009 as the current period includes revenues from our new contract research organization that started generating revenues at the end of 2009, as well as revenues
associated with our recent acquisitions of CURE Media Group and NexCura.

Research and other services revenue during the nine
months ended September 30, 2010 was $58.1 million, an increase of $3.3 million, or 6.0 percent, compared to the same period in 2009. Research and other services revenue for the nine months ended September 30, 2010 also includes an out of
period billing adjustment of approximately $1.0 million related to services rendered during the year ended December 31, 2009 which were billed to sponsors during the three months ended June 30, 2010 for currently ongoing trials.

Operating Costs

Operating costs including depreciation and amortization related to our operating assets, and are presented in the tables below (in thousands):





|                                    |  |                                  |         |  |  |  |   |      |  |   |         |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      |           |  |  |  |   |        |  |   |           |  |  |  |   |  |  |  |      |   |  |  |   | 
|----------------------------------- |  | -------------------------------- | ------- |  |  |  | - | ---- |  | - | ------- |  |  | ------------------------------- | - |  |  |  | ---- | ---- |  |  | - |  |  | ---- | --------- |  |  |  | - | ------ |  | - | --------- |  |  |  | - |  |  |  | ---- | - |  |  | - | 
|                                    |  | Three Months Ended September 30, |         |  |  |  |   |      |  |   |         |  |  | Nine Months Ended September 30, |   |  |  |  |      |      |  |  |   | 
|                                    |  | 2010                             |         |  |  |  |   | 2009 |  |   |         |  |  | Change                          |   |  |  |  |      | 2010 |  |  |   |  |  | 2009 |           |  |  |  |   | Change |  |   |           | 
|Cost of products                    |  | $                                | 642,966 |  |  |  |   |      |  | $ | 596,208 |  |  |                                 |   |  |  |  | 7.8  |      |  |  | % |  |  | $    | 1,839,400 |  |  |  |   |        |  | $ | 1,730,012 |  |  |  |   |  |  |  | 6.3  |   |  |  | % | 
|Cost of services:                   |  |                                  |         |  |  |  |   |      |  |   |         |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      |           |  |  |  |   |        |  |   |           |  |  |  |   |  |  |  |      |   |  |  |   | 
|Operating compensation and benefits |  |                                  | 140,561 |  |  |  |   |      |  |   | 140,321 |  |  |                                 |   |  |  |  | 0.2  |      |  |  |   |  |  |      | 423,400   |  |  |  |   |        |  |   | 416,107   |  |  |  |   |  |  |  | 1.8  |   |  |  |   | 
|Other operating costs               |  |                                  | 83,130  |  |  |  |   |      |  |   | 84,824  |  |  |                                 |   |  |  |  | (2.0 | )    |  |  |   |  |  |      | 252,473   |  |  |  |   |        |  |   | 248,168   |  |  |  |   |  |  |  | 1.7  |   |  |  |   | 
|Depreciation and amortization       |  |                                  | 17,408  |  |  |  |   |      |  |   | 19,090  |  |  |                                 |   |  |  |  | (8.8 | )    |  |  |   |  |  |      | 52,336    |  |  |  |   |        |  |   | 54,590    |  |  |  |   |  |  |  | (4.1 | ) |  |  |   | 
|                                    |  |                                  |         |  |  |  |   |      |  |   |         |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      |           |  |  |  |   |        |  |   |           |  |  |  |   |  |  |  |      |   |  |  |   | 
|Total cost of services              |  |                                  | 241,099 |  |  |  |   |      |  |   | 244,235 |  |  |                                 |   |  |  |  | (1.3 | )    |  |  |   |  |  |      | 728,209   |  |  |  |   |        |  |   | 718,865   |  |  |  |   |  |  |  | 1.3  |   |  |  |   | 
|                                    |  |                                  |         |  |  |  |   |      |  |   |         |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      |           |  |  |  |   |        |  |   |           |  |  |  |   |  |  |  |      |   |  |  |   | 
|Total cost of products and services |  | $                                | 884,065 |  |  |  |   |      |  | $ | 840,443 |  |  |                                 |   |  |  |  | 5.2  |      |  |  | % |  |  | $    | 2,567,609 |  |  |  |   |        |  | $ | 2,448,877 |  |  |  |   |  |  |  | 4.8  |   |  |  | % | 
|                                    |  |                                  |         |  |  |  |   |      |  |   |         |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      |           |  |  |  |   |        |  |   |           |  |  |  |   |  |  |  |      |   |  |  |   | 
|                                    |  |                                  |         |  |  |  |   |      |  |   |         | 
|As a percentage of revenue:         |  |                                  |         |  |  |  |   |      |  |   |         |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      |           |  |  |  |   |        |  |   |           |  |  |  |   |  |  |  |      |   |  |  |   | 
|                                    |  |                                  |         |  |  |  |   |      |  |   |         | 
|Cost of products                    |  |                                  | 68.4    |  |  |  | % |      |  |   | 66.1    |  |  |                                 | % |  |  |  |      |      |  |  |   |  |  |      | 67.1      |  |  |  | % |        |  |   | 65.9      |  |  |  | % |  |  |  |      |   |  |  |   | 
|Cost of services:                   |  |                                  |         |  |  |  |   |      |  |   |         |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      |           |  |  |  |   |        |  |   |           |  |  |  |   |  |  |  |      |   |  |  |   | 
|Operating compensation and benefits |  |                                  | 14.9    |  |  |  |   |      |  |   | 15.6    |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      | 15.5      |  |  |  |   |        |  |   | 15.8      |  |  |  |   |  |  |  |      |   |  |  |   | 
|Other operating costs               |  |                                  | 8.8     |  |  |  |   |      |  |   | 9.4     |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      | 9.2       |  |  |  |   |        |  |   | 9.5       |  |  |  |   |  |  |  |      |   |  |  |   | 
|Depreciation and amortization       |  |                                  | 1.9     |  |  |  |   |      |  |   | 2.1     |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      | 1.9       |  |  |  |   |        |  |   | 2.1       |  |  |  |   |  |  |  |      |   |  |  |   | 
|                                    |  |                                  |         |  |  |  |   |      |  |   |         |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      |           |  |  |  |   |        |  |   |           |  |  |  |   |  |  |  |      |   |  |  |   | 
|Total cost of services              |  |                                  | 25.6    |  |  |  |   |      |  |   | 27.1    |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      | 26.6      |  |  |  |   |        |  |   | 27.4      |  |  |  |   |  |  |  |      |   |  |  |   | 
|                                    |  |                                  |         |  |  |  |   |      |  |   |         |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      |           |  |  |  |   |        |  |   |           |  |  |  |   |  |  |  |      |   |  |  |   | 
|Total cost of products and services |  |                                  | 94.0    |  |  |  | % |      |  |   | 93.2    |  |  |                                 | % |  |  |  |      |      |  |  |   |  |  |      | 93.7      |  |  |  | % |        |  |   | 93.3      |  |  |  | % |  |  |  |      |   |  |  |   | 
|                                    |  |                                  |         |  |  |  |   |      |  |   |         |  |  |                                 |   |  |  |  |      |      |  |  |   |  |  |      |           |  |  |  |   |        |  |   |           |  |  |  |   |  |  |  |      |   |  |  |   | 



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Cost of
Products. Cost of products consists primarily of oncology pharmaceuticals and supplies used by affiliated practices in our medical oncology services segment and sold to practices affiliated under the targeted physician services arrangements in
our pharmaceutical services segment. Product costs increased 7.8% and 6.3% over the three and nine month periods ended September 30, 2010, which is higher than the revenue growth of 6.5% and 5.2% associated with pharmaceutical use from the
corresponding periods, respectively, primarily as a result of competition impacting operating margins under our oncology pharmaceutical supply arrangements, as well as drug costs increasing. As a percentage of revenue, cost of products was 68.4% and
66.1% in the three months ended September 30, 2010 and 2009, respectively, and 67.1% and 65.9% in the nine months ended September 30, 2010 and 2009, respectively.

Cost of Services. Cost of services includes compensation and benefits related to our operations, including non-physician employees of our affiliated practices. Cost of services also includes other
operating costs such as rent, utilities, repairs and maintenance, insurance, depreciation and amortization and other operating costs related to providing services to our affiliated physician network and to other customers. As a percentage of
revenue, cost of services was 25.6% and 27.1% in the three months ended September 30, 2010 and 2009, respectively, and 26.6% and 27.4% in the nine months ended September 30, 2010 and 2009, respectively. The percentage decrease from prior
year reflects an increase in revenues from targeted physician service arrangements. Unlike our comprehensive strategic alliance models, we do not incur and then subsequently receive reimbursement for operating costs of the targeted physician
services practice, and as such, those additional practice expenses are not included in cost of services.

Corporate Costs and Net Income
(US Oncology, Inc.)

Corporate costs include general and administrative expenses, depreciation and amortization related to
corporate assets and interest expense. Corporate costs of US Oncology, Inc. are presented in the table below. Incremental corporate costs of US Oncology Holdings, Inc. are addressed in a separate discussion below entitled Corporate Costs and
Net Income (Loss) (US Oncology Holdings, Inc.).



|                                     |  |                                  |        |   |      |   |        |                                 |  |  |      |     |  |      |        |   |        |   |        |   |  |  |      |    
|------------------------------------ |  | -------------------------------- | ------ | - | ---- | - | ------ | ------------------------------- |  |  | ---- | --- |  | ---- | ------ | - | ------ | - | ------ | - |  |  | ---- | ---
|                                     |  | Three Months Ended September 30, |        |   |      |   |        | Nine Months Ended September 30, |  |  |      |    
|(in thousands)                       |  | 2010                             |        |   | 2009 |   |        | Change                          |  |  | 2010 |     |  | 2009 |        |   | Change |  
|                                     |  |                                  |        |   |      |  
|General and administrative expense   |  | $                                | 18,992 |   |      | $ | 18,792 |                                 |  |  | 1.1  | %   |  | $    | 58,863 |   |        | $ | 53,179 |   |  |  | 10.7 | %  
|Impairment and restructuring charges |  |                                  | 3,252  |   |      |   | 4,117  |                                 |  |  | nm   | (1) |  |      | 7,333  |   |        |   | 5,907  |   |  |  | nm   | (1)
|Depreciation and amortization        |  |                                  | 8,025  |   |      |   | 7,700  |                                 |  |  | 4.2  |     |  |      | 23,250 |   |        |   | 22,470 |   |  |  | 3.5  |    
|Interest expense, net                |  |                                  | 28,109 |   |      |   | 28,016 |                                 |  |  | 0.3  |     |  |      | 83,226 |   |        |   | 73,122 |   |  |  | 13.8 |    
|Loss on early extinguishment of debt |  |                                  | -      |   |      |   | 3,672  |                                 |  |  | nm   | (1) |  |      | -      |   |        |   | 26,025 |   |  |  | nm   | (1)
|Other (income) expense               |  |                                  | 1,215  |   |      |   | -      |                                 |  |  | nm   | (1) |  |      | 1,372  |   |        |   | (37)   |   |  |  | nm   | (1)
|                                     |  |                                  |        |   |      |  
|As a percentage of revenue:          |  |                                  |        |   |      |   |        |                                 |  |  |      |     |  |      |        |   |        |   |        |   |  |  |      |    
|                                     |  |                                  |        |   |      |  
|General and administrative expense   |  |                                  | 2.0    | % |      |   | 2.1    | %                               |  |  |      |     |  |      | 2.2    | % |        |   | 2.0    | % |  |  |      |    
|Impairment and restructuring charges |  |                                  | 0.3    |   |      |   | 0.5    |                                 |  |  |      |     |  |      | 0.3    |   |        |   | 0.2    |   |  |  |      |    
|Depreciation and amortization        |  |                                  | 0.9    |   |      |   | 0.8    |                                 |  |  |      |     |  |      | 0.8    |   |        |   | 0.9    |   |  |  |      |    
|Interest expense, net                |  |                                  | 3.0    |   |      |   | 3.1    |                                 |  |  |      |     |  |      | 3.0    |   |        |   | 2.8    |   |  |  |      |    
|Loss on early extinguishment of debt |  |                                  | -      |   |      |   | 0.4    |                                 |  |  |      |     |  |      | -      |   |        |   | 1.0    |   |  |  |      |    
|Other (income) expense               |  |                                  | 0.1    |   |      |   | -      |                                 |  |  |      |     |  |      | 0.1    |   |        |   | (0.1)  |   |  |  |      |    



| | (1) | Not meaningful
| | --- | --------------

General and Administrative. General and administrative expense was $19.0 million for the three months ended September 30, 2010 and $18.8 million for the same period in 2009. General and
administrative expense during the three months ended September 30, 2010 was $0.2 million higher than the comparable prior year period due primarily to higher marketing and branding costs associated with our UNITED campaign which
launched in May 2010, which were partially offset by lower professional fees associated with 2009 consulting costs related to accelerating the Companys growth strategies. We expect to continue to incur additional costs related to our branding
initiative in future periods. In addition, higher personnel costs during the three months ended September 30, 2010 related to personnel to support our strategic initiatives and merit increases that became effective during the second quarter
were offset by a reduction in our annual incentive compensation expense to reflect current performance relative to the target.



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





During the nine
months ended September 30, 2010 and 2009, general and administrative expense was $58.9 million and $53.2 million, respectively, or $5.7 million higher than the comparable prior year period. The increase reflects higher marketing and branding
costs as noted in the quarterly comparison, as well as personnel costs to complement our growth strategies.

General and
administrative expense represented 2.0% and 2.1% of revenue for the three months ended September 30, 2010 and 2009 and 2.2% and 2.0% of revenue for the nine months ended September 30, 2010 and 2009, respectively.

Impairment and Restructuring Charges. Impairment and restructuring charges recognized during the three months and nine months
ended September 30, 2010 and 2009 consisted of the following amounts (in thousands):



|                        |  |                                  |       |  |                                 |   |       |      |  |   |       |  |  |   |       | 
|----------------------- |  | -------------------------------- | ----- |  | ------------------------------- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                        |  | Three Months Ended September 30, |       |  | Nine Months Ended September 30, |  
|                        |  | 2010                             |       |  | 2009                            |   |       | 2010 |  |   | 2009  | 
|Severance costs         |  | $                                | 3,059 |  |                                 | $ | 4,117 |      |  | $ | 4,524 |  |  | $ | 5,731 | 
|Service agreements, net |  |                                  | -     |  |                                 |   | -     |      |  |   | 2,523 |  |  |   | 150   | 
|Other, net              |  |                                  | 193   |  |                                 |   | -     |      |  |   | 286   |  |  |   | 26    | 
|                        |  |                                  |       |  |                                 |   |       |      |  |   |       |  |  |   |       | 
|Total                   |  | $                                | 3,252 |  |                                 | $ | 4,117 |      |  | $ | 7,333 |  |  | $ | 5,907 | 
|                        |  |                                  |       |  |                                 |   |       |      |  |   |       |  |  |   |       | 

We recorded severance charges related to employee separations of corporate personnel of $3.1 million and
$4.1 million during the three months ended September 30, 2010 and 2009, respectively, and $4.5 million and $5.7 million during the nine months ended September 30, 2010 and 2009, respectively. Our severance-related liabilities of $5.4
million as of September 30, 2010, will be paid through the fourth quarter of 2011.

In addition, the nine months ended
September 30, 2010 and 2009, include impairment charges related to service agreement intangibles of $2.5 million and $0.2 million, respectively, related to practices which converted either from a comprehensive strategic alliance model to a
targeted physician services relationship or separated from the network.

Depreciation and Amortization. Depreciation
and amortization expense increased by approximately $0.3 million and $0.8 million for the three months and nine months ended September 30, 2010, respectively, from the comparable periods in 2009. During the three months ended June 30,
2010, we recorded an adjustment which reduced depreciation expense for the nine months ended September 30, 2010 by $1.1 million related to certain leasehold improvements that had been incorrectly depreciated beyond their historical cost. The
historical cost of these leasehold improvements had been reduced as a result of previously receiving a partial cost reimbursement related to these assets from the affiliated practice conducting operations in this location.

Interest Expense, net. For the three month period ending September 30, 2010 and 2009, the interest expense, net was $28.1
million and $28.0 million, respectively. Interest expense, net, increased to $83.2 million during the nine months ended September 30, 2010 from $73.1 million in the comparable period of the prior year. These increases are due primarily to the
higher fixed interest rate on our 9.125% Senior Secured Notes which were issued in the second quarter of 2009 to refinance our 9% Senior Notes and Senior Secured Credit Facility.

Loss on Early Extinguishment of Debt.In connection with replacing the revolving credit facility in August 2009, and refinancing
of the $436.7 million senior secured term loan facility and the $300 million 9.0% senior notes in June 2009, we recognized a $3.7 million and $26.0 million extinguishment loss during the three months and nine months ended September 30, 2009.
These losses primarily relate to payment of a call premium and call period interest on the senior notes, the write off of unamortized issuance costs related to the retired debt and certain transaction costs.

Income Taxes. The effective tax rate for US Oncology, Inc. was a tax benefit of 15.6% and 60.6% for the three months ended
September 30, 2010 and 2009, respectively. For the three months ended September 30, 2010, the effective tax rate was less than the statutory rate due to the impact of non-deductible expenses and certain state income taxes, particularly the
Texas margin tax whose determination does not consider deductions allowed in the determination of Federal taxable income. For the three months ended September 30, 2009, the effective tax rate was greater than the statutory rate primarily due to
adjustment of deferred state tax balances based on the Companys analysis of state jurisdictional filings.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





The effective tax
rate for US Oncology, Inc. was a tax provision of 6.5% and 14.6% for the nine months ended September 30, 2010 and 2009, respectively, despite reporting a loss before income taxes, due to the impact of non-deductible expenses and an income tax
expense related to the Texas margin tax.

Net Income (Loss) Attributable to the Company. For the three months ended
September 30, 2010 and 2009, US Oncology, Inc. recorded a net loss of $3.2 million and $0.9 million, respectively. Net loss for the nine months ended September 30, 2010 was $5.3 million, compared to net loss of $7.4 million for the nine
months ended September 30, 2009.

Corporate Costs and Net Income (Loss) (US Oncology Holdings, Inc.)

The following table summarizes the incremental costs incurred by US Oncology Holdings, Inc. as compared to the costs incurred by US
Oncology, Inc. (in thousands):



|                                   |  |                                  |       |  |      |   |       |        |  |                                 |        |  |      |     |  |      |        |  |        |   |        |  |  |  |        |  |  |    
|---------------------------------- |  | -------------------------------- | ----- |  | ---- | - | ----- | ------ |  | ------------------------------- | ------ |  | ---- | --- |  | ---- | ------ |  | ------ | - | ------ |  |  |  | ------ |  |  | ---
|                                   |  | Three Months Ended September 30, |       |  |      |   |       |        |  | Nine Months Ended September 30, |        |  |      |     |  |     
|                                   |  | 2010                             |       |  | 2009 |   |       | Change |  |                                 |        |  | 2010 |     |  | 2009 |        |  | Change |   |        | 
|                                   |  |                                  |       |  |      |   |       |        |  |                                 |        |  |      |     |  |      |        |  |        |   |        |  |  |  |        |  |  |    
|General and administrative expense |  | $                                | 41    |  |      | $ | 121   |        |  |                                 | nm     |  |      | (1) |  | $    | 193    |  |        | $ | 195    |  |  |  | nm     |  |  | (1)
|Interest expense, net              |  |                                  | 8,621 |  |      |   | 9,611 |        |  |                                 | (10.3) |  |      |     |  |      | 25,550 |  |        |   | 29,698 |  |  |  | (14.0) |  |  |    
|Loss on interest rate swap         |  |                                  | 3,605 |  |      |   | 7,596 |        |  |                                 | nm     |  |      | (1) |  |      | 11,591 |  |        |   | 10,012 |  |  |  | nm     |  |  | (1)



| | (1) | Not meaningful
| | --- | --------------

General and Administrative. In addition to the general and administrative expenses incurred by US Oncology, Holdings incurred general and administrative expenses in the three months ended
September 30, 2010 of $41 thousand and $0.1 million in the three months ended September 30, 2009. Holdings recorded $0.2 million during each of the nine month periods ended September 30, 2010 and 2009. These costs primarily represent
professional fees required for Holdings to maintain its corporate existence and comply with the terms of the indenture governing its separate indebtedness (the Holdings Notes).

Interest Expense, net. In addition to interest expense incurred by US Oncology, Holdings incurred interest related to its
indebtedness. During the three months ended September 30, 2010 and 2009, the interest expense was $8.6 million and $9.6 million, respectively. Incremental interest expense was approximately $25.6 million during the nine months ended
September 30, 2010 and $29.7 million for the nine months ended September 30, 2009. The decrease in interest expense compared to the same periods in 2009 reflects the lower market LIBOR rates which are the basis for variable interest due on
the Holdings Notes. The benefit of lower market interest rates was partially offset by increasing indebtedness as the Company elected to settle interest on the Holdings Notes in kind.

Loss on Interest Rate Swap. For the three months ending September 30, 2010 and 2009, Holdings recognized an unrealized loss
of $3.6 million and $7.6 million, respectively. During the nine months ended September 30, 2010 and 2009, Holdings recognized an unrealized loss of $11.6 million and $10.0 million, respectively, related to its interest rate swap due to
decreases in projected LIBOR rates. Because the interest rate swap is not accounted for as a cash flow hedge, changes in fair value attributable to the instrument are reported currently in earnings.

Income Taxes. For the three months ended September 30, 2010 and 2009, Holdings effective tax rate was a tax provision of 0.1%
and of 3.9%, respectively. Holdings effective tax rate was a tax provision of 3.1% and a tax benefit of 7.0% for the nine months ended September 30, 2010 and 2009, respectively. The difference between the effective tax rate for Holdings and US
Oncology relates to the incremental interest expense, loss on interest rate swap and general and administrative expenses incurred by Holdings which increase its taxable loss and, consequently, change the impact of non-deductible costs and certain
state income taxes on its effective tax rate. Additionally, Holdings has recorded a valuation allowance to reduce its deferred tax assets to their estimated realizable value.

For the three and nine months ended September 30, 2009 and 2010, the effective tax rate was less than the Federal statutory rate primarily due to a valuation allowance established on the net deferred
tax assets of US Oncology Holdings, Inc.

Net Income (Loss) Attributable to the Company. Holdings incremental net
loss for the three months ended September 30, 2010 and 2009 was $12.9 million and $19.4 million, respectively. For the nine months ended September 30, 2010, Holdings incremental net loss was $38.3 million and the incremental net loss
for the nine months ended September 30, 2009, was $35.7



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued



million. Net loss for the nine months ended September 30, 2010 includes the impact of correcting two accounting errors (see discussion in Research and Other Services and
Depreciation and Amortization above) which increased income (loss) before income taxes by $2.1 million.

Liquidity and Capital
Resources

The following table summarizes the working capital and long-term indebtedness of Holdings and US Oncology as of
September 30, 2010 (in thousands):



|                       |  |          |           |  |             |   |           | 
|---------------------- |  | -------- | --------- |  | ----------- | - | --------- | 
|                       |  | Holdings |           |  | US Oncology |  
|Current assets         |  | $        | 750,672   |  |             | $ | 726,861   | 
|Current liabilities    |  |          | 511,949   |  |             |   | 493,351   | 
|                       |  |          |           |  |             |   |           | 
|Net working capital    |  | $        | 238,723   |  |             | $ | 233,510   | 
|                       |  |          |           |  |             |   |           | 
|                       |  |         
|Long-term indebtedness |  | $        | 1,594,223 |  |             | $ | 1,067,479 | 
|                       |  |          |           |  |             |   |           | 

The principal difference between the net working capital of Holdings and US Oncology relates to higher
income taxes payable reported by US Oncology, Inc., which is included in the US Oncology Holdings, Inc. consolidated group for federal income tax reporting purposes partially offset by current accruals on Holdings interest rate swap
obligation. For purposes of its separate financial statements, US Oncologys provision for income taxes has been computed on the basis that it filed a separate federal income tax return together with its subsidiaries.

The following table summarizes the statement of cash flows of Holdings and US Oncology for the nine months ended September 30, 2010
(in thousands).



|                                          |  |          |          |  |             |   |          | 
|----------------------------------------- |  | -------- | -------- |  | ----------- | - | -------- | 
|                                          |  | Holdings |          |  | US Oncology |  
|Net cash provided by operating activities |  | $        | 53,952   |  |             | $ | 73,330   | 
|Net cash used in investing activities     |  |          | (45,531) |  |             |   | (45,531) | 
|Net cash used in financing activities     |  |          | (10,763) |  |             |   | (30,469) | 
|                                          |  |          |          |  |             |   |          | 
|Net decrease in cash and equivalents      |  |          | (2,342)  |  |             |   | (2,670)  | 
|Cash and equivalents:                     |  |          |          |  |             |   |          | 
|December 31, 2009                         |  |          | 161,811  |  |             |   | 161,589  | 
|                                          |  |          |          |  |             |   |          | 
|September 30, 2010                        |  | $        | 159,469  |  |             | $ | 158,919  | 
|                                          |  |          |          |  |             |   |          | 

Cash Flows from Operating Activities

During the nine months ended September 30, 2010, Holdings generated $54.0 million in cash flow from operations compared to $125.3 million during the nine months ended September 30, 2009. The
decrease in operating cash flow in 2010 was due primarily to higher payments for pharmaceuticals in 2010 reflecting working capital investments required at the end of the third quarter under a new direct drug supply agreement (as further described
under Anticipated Capital Requirements). In addition, cash flow decreased compared to the prior year period due to higher payments during the nine months ended September 30, 2010 for obligations under the Holdings interest
rate swap and incremental interest on the 9.125% fixed rate $775.0 million Senior Secured Notes over the $436.7 million LIBOR based term loan facility and $300 million 9.0% fixed rate senior notes that were refinanced in 2009.

The operating cash flow of US Oncology exceeds the operating cash flow of Holdings by $19.4 million for the nine months ended
September 30, 2010. The difference relates to dividends paid by US Oncology to Holdings to enable Holdings to service interest obligations related to its senior floating rate notes and interest rate swap. The dividends are considered to be
financing transactions by US Oncology as they represent distributions paid to its parent company, which were ultimately used to settle operating costs of Holdings.

Cash Flows from Investing Activities

During the nine months ended
September 30, 2010, we used $45.5 million for investing activities. Cash flow for investing activities relate primarily to $45.9 million in capital expenditures, including $20.1 million relating to the development and construction of cancer
centers and $25.8 million for maintenance capital expenditures.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





During the nine
months ended September 30, 2009, we used $75.4 million for investing activities. Cash flow for investing activities relate primarily to $66.7 million in capital expenditures, including $50.5 million relating to the development and construction
of cancer centers and $16.2 million for maintenance capital expenditures.

Cash Flows from Financing Activities

During the nine months ended September 30, 2010, US Oncology Holdings, Inc used $10.8 million in financing activities which relates
primarily to the repayments for physician notes issued in connection with practice affiliations in prior years. Cash flow used by US Oncology for financing activities also includes a distribution of $19.7 million to its parent company to settle
amounts due under its interest rate swap agreement and senior floating rate notes.

During the nine months ended
September 30, 2009, $21.5 million was used in financing activities which relates primarily to the $775.0 million offering of 9.125% Senior Secured Notes completed in September 2009. Proceeds from the offering along with cash on hand were used
to repay the $436.7 million senior secured term loan facility maturing in 2010 and 2011 and the $300 million 9.0% senior notes due 2012. Cash flow used by US Oncology for financing activities also includes a distribution of $11.1 million to its
parent company to settle amounts due under its interest rate swap agreement and senior floating rate notes.

Earnings before Interest,
Taxes, Depreciation and Amortization

EBITDA represents earnings before interest and other expense, net, taxes,
depreciation, and amortization (including amortization of stock-based compensation), noncontrolling interest, and other income (expense) and Adjusted EBITDA which is EBITDA before impairment and restructuring charges, loss on early
extinguishment of debt and other non-cash charges. EBITDA and Adjusted EBITDA are not calculated in accordance with generally accepted accounting principles in the United States (GAAP); rather they are derived from relevant items in our
GAAP-based financial statements. A reconciliation of EBITDA and Adjusted EBITDA to the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) and the Condensed Consolidated Statement of Cash Flows is included in this
document.

We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating the value of companies in general, and
in evaluating the liquidity of companies with debt service obligations and their ability to service their indebtedness. Management uses EBITDA and Adjusted EBITDA as key indicators to evaluate liquidity and financial condition, both with respect to
the business as a whole and with respect to individual sites in the US Oncology network. Our senior secured credit facility also requires that we comply on a quarterly basis with certain financial covenants that include EBITDA as a financial
measure. As of September 30, 2010, our senior secured revolving credit facility required that we maintain a leverage ratio (indebtedness divided by EBITDA, as defined by the indenture) of no more than 7.00:1. This covenant becomes more
restrictive over time and, at maturity in 2012, the maximum leverage ratio may not be more than 6.00:1. For more information regarding our use of EBITDA and Adjusted EBITDA and their limitations, see Discussion of Non-GAAP Information.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





The following
table reconciles net income (loss) as shown in the Companys Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) to EBITDA, Adjusted EBITDA, and net cash provided by operating activities as shown in the Companys
Condensed Consolidated Statement of Cash Flows (in thousands):



|                                                    |  |                                 |           |  |      |   |                                 |  |  |      |  |   |          |  |  |   |          | 
|--------------------------------------------------- |  | ------------------------------- | --------- |  | ---- | - | ------------------------------- |  |  | ---- |  | - | -------- |  |  | - | -------- | 
|                                                    |  | US Oncology Holdings, Inc.      |           |  |      |   | US Oncology, Inc.               | 
|                                                    |  | Three Months EndedSeptember 30, |           |  |      |   | Three Months EndedSeptember 30, | 
|                                                    |  | 2010                            |           |  | 2009 |   |                                 |  |  | 2010 |  |   | 2009     | 
|                                                    |  |                                 |           |  |     
|Net income (loss)                                   |  | $                               | (15,249)  |  |      | $ | (19,378)                        |  |  |      |  | $ | (2,375)  |  |  | $ | 46       | 
|Interest expense, net                               |  |                                 | 36,730    |  |      |   | 37,627                          |  |  |      |  |   | 28,109   |  |  |   | 28,016   | 
|Income tax (benefit) provision                      |  |                                 | 12        |  |      |   | 764                             |  |  |      |  |   | (595)    |  |  |   | (1,332)  | 
|Depreciation and amortization                       |  |                                 | 25,433    |  |      |   | 26,790                          |  |  |      |  |   | 25,433   |  |  |   | 26,790   | 
|Amortization of stock compensation                  |  |                                 | 520       |  |      |   | 735                             |  |  |      |  |   | 520      |  |  |   | 735      | 
|Loss on interest rate swap                          |  |                                 | 3,605     |  |      |   | 7,596                           |  |  |      |  |   | -        |  |  |   | -        | 
|Other income (expense)                              |  |                                 | 1,215     |  |      |   | -                               |  |  |      |  |   | 1,215    |  |  |   | -        | 
|                                                    |  |                                 |           |  |      |   |                                 |  |  |      |  |   |          |  |  |   |          | 
|EBITDA                                              |  |                                 | 52,266    |  |      |   | 54,134                          |  |  |      |  |   | 52,307   |  |  |   | 54,255   | 
|                                                    |  |                                 |           |  |     
|Plus:                                               |  |                                 |           |  |      |   |                                 |  |  |      |  |   |          |  |  |   |          | 
|Loss on early extinguishment of debt                |  |                                 | -         |  |      |   | 3,672                           |  |  |      |  |   | -        |  |  |   | 3,672    | 
|Impairment and restructuring charges                |  |                                 | 3,252     |  |      |   | 4,117                           |  |  |      |  |   | 3,252    |  |  |   | 4,117    | 
|Other non-cash G&A                                  |  |                                 | 97        |  |      |   | 98                              |  |  |      |  |   | 97       |  |  |   | 98       | 
|                                                    |  |                                 |           |  |      |   |                                 |  |  |      |  |   |          |  |  |   |          | 
|Adjusted EBITDA                                     |  |                                 | 55,615    |  |      |   | 62,021                          |  |  |      |  |   | 55,656   |  |  |   | 62,142   | 
|                                                    |  |                                 |           |  |     
|Changes in assets and liabilities                   |  |                                 | (31,044)  |  |      |   | 32,221                          |  |  |      |  |   | (29,164) |  |  |   | 28,735   | 
|Deferred income taxes                               |  |                                 | 37        |  |      |   | -                               |  |  |      |  |   | (1,133)  |  |  |   | (1,717)  | 
|Interest expense, net                               |  |                                 | (36,730)  |  |      |   | (37,627)                        |  |  |      |  |   | (28,109) |  |  |   | (28,016) | 
|Income tax benefit (provision)                      |  |                                 | (12)      |  |      |   | (764)                           |  |  |      |  |   | 595      |  |  |   | 1,332    | 
|                                                    |  |                                 |           |  |      |   |                                 |  |  |      |  |   |          |  |  |   |          | 
|Net cash provided by (used in) operating activities |  | $                               | (12,134)  |  |      | $ | 55,851                          |  |  |      |  | $ | (2,155)  |  |  | $ | 62,476   | 
|                                                    |  |                                 |           |  |      |   |                                 |  |  |      |  |   |          |  |  |   |          | 
|                                                    |  |                                 |          
|                                                    |  | US Oncology Holdings, Inc.      |           |  |      |   | US Oncology, Inc.               | 
|                                                    |  | Nine Months EndedSeptember 30,  |           |  |      |   | Nine Months EndedSeptember 30,  | 
|                                                    |  | 2010                            |           |  | 2009 |   |                                 |  |  | 2010 |  |   | 2009     | 
|                                                    |  |                                 |           |  |     
|Net income (loss)                                   |  | $                               | (40,787)  |  |      | $ | (40,526)                        |  |  |      |  | $ | (2,463)  |  |  | $ | (4,829)  | 
|Interest expense, net                               |  |                                 | 108,776   |  |      |   | 102,820                         |  |  |      |  |   | 83,226   |  |  |   | 73,122   | 
|Income tax (benefit) provision                      |  |                                 | 1,309     |  |      |   | (3,260)                         |  |  |      |  |   | 319      |  |  |   | 948      | 
|Depreciation and amortization                       |  |                                 | 75,586    |  |      |   | 77,060                          |  |  |      |  |   | 75,586   |  |  |   | 77,060   | 
|Amortization of stock compensation                  |  |                                 | 1,789     |  |      |   | 1,571                           |  |  |      |  |   | 1,789    |  |  |   | 1,571    | 
|Loss on interest rate swap                          |  |                                 | 11,591    |  |      |   | 9,975                           |  |  |      |  |   | -        |  |  |   | -        | 
|Other income (expense)                              |  |                                 | 1,372     |  |      |   | -                               |  |  |      |  |   | 1,372    |  |  |   | (37)     | 
|                                                    |  |                                 |           |  |      |   |                                 |  |  |      |  |   |          |  |  |   |          | 
|EBITDA                                              |  |                                 | 159,636   |  |      |   | 147,640                         |  |  |      |  |   | 159,829  |  |  |   | 147,835  | 
|                                                    |  |                                 |           |  |     
|Plus:                                               |  |                                 |           |  |      |   |                                 |  |  |      |  |   |          |  |  |   |          | 
|Loss on early extinguishment of debt                |  |                                 | -         |  |      |   | 26,025                          |  |  |      |  |   | -        |  |  |   | 26,025   | 
|Impairment and restructuring charges                |  |                                 | 7,333     |  |      |   | 5,907                           |  |  |      |  |   | 7,333    |  |  |   | 5,907    | 
|Other non-cash G&A                                  |  |                                 | 293       |  |      |   | 163                             |  |  |      |  |   | 293      |  |  |   | 163      | 
|                                                    |  |                                 |           |  |      |   |                                 |  |  |      |  |   |          |  |  |   |          | 
|Adjusted EBITDA                                     |  |                                 | 167,262   |  |      |   | 179,735                         |  |  |      |  |   | 167,455  |  |  |   | 179,930  | 
|                                                    |  |                                 |           |  |     
|Changes in assets and liabilities                   |  |                                 | (3,335)   |  |      |   | 51,200                          |  |  |      |  |   | (9,117)  |  |  |   | 29,832   | 
|Deferred income taxes                               |  |                                 | 110       |  |      |   | (6,034)                         |  |  |      |  |   | (1,463)  |  |  |   | 339      | 
|Interest expense, net                               |  |                                 | (108,776) |  |      |   | (102,820)                       |  |  |      |  |   | (83,226) |  |  |   | (73,122) | 
|Income tax benefit (provision)                      |  |                                 | (1,309)   |  |      |   | 3,260                           |  |  |      |  |   | (319)    |  |  |   | (948)    | 
|                                                    |  |                                 |           |  |      |   |                                 |  |  |      |  |   |          |  |  |   |          | 
|Net cash provided by operating activities           |  | $                               | 53,952    |  |      | $ | 125,341                         |  |  |      |  | $ | 73,330   |  |  | $ | 136,031  | 
|                                                    |  |                                 |           |  |      |   |                                 |  |  |      |  |   |          |  |  |   |          | 



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Following is the
EBITDA and Adjusted EBITDA for our operating segments for the three months and nine months ended September 30, 2010 and 2009 (in thousands):



|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|----------------------------------------- |  | ------------------------------------- | --------- |  | -------------------- | - | -------- | ---------------------- |  | - | -------------- |  |  | -------------- | -------- |  | --------------- | - | -------- | ----- |  | - | --------- |  |  | - | --------- | 
|                                          |  |                                       |           | 
|                                          |  | Three Months Ended September 30, 2010 |          
|                                          |  |                                       |           | 
|US Oncology, Inc.                         |  | MedicalOncologyServices               |           |  | CancerCenterServices |   |          | PharmaceuticalServices |  |   | Research/Other |  |  | CorporateCosts |          |  | Eliminations(1) |   |          | Total | 
|                                          |  |                                       |           | 
|                                          |  |                                       |           |  |                      |   |         
|Product revenues                          |  | $                                     | 453,472   |  |                      | $ | -        |                        |  | $ | 688,786        |  |  | $              | -        |  |                 | $ | -        |       |  | $ | (494,749) |  |  | $ | 647,509   | 
|Service revenues                          |  |                                       | 162,176   |  |                      |   | 95,038   |                        |  |   | 16,055         |  |  |                | 19,910   |  |                 |   | -        |       |  |   | -         |  |  |   | 293,179   | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Total revenues                            |  |                                       | 615,648   |  |                      |   | 95,038   |                        |  |   | 704,841        |  |  |                | 19,910   |  |                 |   | -        |       |  |   | (494,749) |  |  |   | 940,688   | 
|                                          |  |                                       |           |  |                      |   |         
|Operating expenses                        |  |                                       | (597,642) |  |                      |   | (71,629) |                        |  |   | (683,263)      |  |  |                | (18,240) |  |                 |   | (35,057) |       |  |   | 494,749   |  |  |   | (911,082) | 
|Impairment and restructuring charges      |  |                                       | (4)       |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | (3,248)  |       |  |   | -         |  |  |   | (3,252)   | 
|Income (loss) from operations             |  |                                       | 18,002    |  |                      |   | 23,409   |                        |  |   | 21,578         |  |  |                | 1,670    |  |                 |   | (38,305) |       |  |   | -         |  |  |   | 26,354    | 
|                                          |  |                                       |           |  |                      |   |         
|Add back:                                 |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Depreciation and amortization             |  |                                       | -         |  |                      |   | 8,527    |                        |  |   | 788            |  |  |                | 53       |  |                 |   | 16,065   |       |  |   | -         |  |  |   | 25,433    | 
|Amortization of stock- based compensation |  |                                       | -         |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | 520      |       |  |   | -         |  |  |   | 520       | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|EBITDA                                    |  | $                                     | 18,002    |  |                      | $ | 31,936   |                        |  | $ | 22,366         |  |  | $              | 1,723    |  |                 | $ | (21,720) |       |  | $ | -         |  |  | $ | 52,307    | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Add back:                                 |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Other non-cash G&A                        |  |                                       | -         |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | 97       |       |  |   | -         |  |  |   | 97        | 
|Impairment and restructuring charges      |  |                                       | 4         |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | 3,248    |       |  |   | -         |  |  |   | 3,252     | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Adjusted EBITDA                           |  | $                                     | 18,006    |  |                      | $ | 31,936   |                        |  | $ | 22,366         |  |  | $              | 1,723    |  |                 | $ | (18,375) |       |  | $ | -         |  |  | $ | 55,656    | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|                                          |  |                                       |           |  |                      |   |         
|US Oncology Holdings, Inc.                |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|                                          |  |                                       |           |  |                      |   |         
|Operating expenses                        |  | $                                     | -         |  |                      | $ | -        |                        |  | $ | -              |  |  | $              | -        |  |                 | $ | (41)     |       |  | $ | -         |  |  | $ | (41)      | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Adjusted EBITDA                           |  | $                                     | 18,006    |  |                      | $ | 31,936   |                        |  | $ | 22,366         |  |  | $              | 1,723    |  |                 | $ | (18,416) |       |  | $ | -         |  |  | $ | 55,615    | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|                                          | 
|                                          |  |                                       |           | 
|                                          |  | Three Months Ended September 30, 2009 |          
|                                          |  |                                       |           | 
|US Oncology, Inc.                         |  | MedicalOncologyServices               |           |  | CancerCenterServices |   |          | PharmaceuticalServices |  |   | Research/Other |  |  | CorporateCosts |          |  | Eliminations(1) |   |          | Total | 
|                                          |  |                                       |           | 
|                                          |  |                                       |           |  |                      |   |         
|Product revenues                          |  | $                                     | 450,202   |  |                      | $ | -        |                        |  | $ | 628,737        |  |  | $              | -        |  |                 | $ | -        |       |  | $ | (470,904) |  |  | $ | 608,035   | 
|Service revenues                          |  |                                       | 160,147   |  |                      |   | 99,457   |                        |  |   | 16,728         |  |  |                | 17,087   |  |                 |   | -        |       |  |   | -         |  |  |   | 293,419   | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Total revenues                            |  |                                       | 610,349   |  |                      |   | 99,457   |                        |  |   | 645,465        |  |  |                | 17,087   |  |                 |   | -        |       |  |   | (470,904) |  |  |   | 901,454   | 
|                                          |  |                                       |           |  |                      |   |         
|Operating expenses                        |  |                                       | (591,204) |  |                      |   | (74,739) |                        |  |   | (620,503)      |  |  |                | (17,060) |  |                 |   | (34,333) |       |  |   | 470,904   |  |  |   | (866,935) | 
|Impairment and restructuring charges      |  |                                       | 1         |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | (4,118)  |       |  |   | -         |  |  |   | (4,117)   | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Income (loss) from operations             |  |                                       | 19,146    |  |                      |   | 24,718   |                        |  |   | 24,962         |  |  |                | 27       |  |                 |   | (38,451) |       |  |   | -         |  |  |   | 30,402    | 
|                                          |  |                                       |           |  |                      |   |         
|Loss on early extinguishment of debt      |  |                                       | -         |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | (3,672)  |       |  |   | -         |  |  |   | (3,672)   | 
|Add back:                                 |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Depreciation and amortization             |  |                                       | -         |  |                      |   | 10,695   |                        |  |   | 392            |  |  |                | 64       |  |                 |   | 15,639   |       |  |   | -         |  |  |   | 26,790    | 
|                                          |  |                                       |           |  |                      |   |         
|Amortization of stock- based compensation |  |                                       | -         |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | 735      |       |  |   | -         |  |  |   | 735       | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|EBITDA                                    |  | $                                     | 19,146    |  |                      | $ | 35,413   |                        |  | $ | 25,354         |  |  | $              | 91       |  |                 | $ | (25,749) |       |  | $ | -         |  |  | $ | 54,255    | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Add back:                                 |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Loss on early extinguishment of debt      |  |                                       | -         |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | 3,672    |       |  |   | -         |  |  |   | 3,672     | 
|Other non-cash G&A                        |  |                                       | -         |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | 98       |       |  |   | -         |  |  |   | 98        | 
|Impairment and restructuring              |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|charges                                   |  |                                       | (1)       |  |                      |   | -        |                        |  |   | -              |  |  |                | -        |  |                 |   | 4,118    |       |  |   | -         |  |  |   | 4,117     | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Adjusted EBITDA                           |  | $                                     | 19,145    |  |                      | $ | 35,413   |                        |  | $ | 25,354         |  |  | $              | 91       |  |                 | $ | (17,861) |       |  | $ | -         |  |  | $ | 62,142    | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|                                          |  |                                       |           |  |                      |   |         
|US Oncology Holdings, Inc.                |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|                                          |  |                                       |           |  |                      |   |         
|Operating expenses                        |  | $                                     | -         |  |                      | $ | -        |                        |  | $ | -              |  |  | $              | -        |  |                 | $ | (121)    |       |  | $ | -         |  |  | $ | (121)     | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 
|Adjusted EBITDA                           |  | $                                     | 19,145    |  |                      | $ | 35,413   |                        |  | $ | 25,354         |  |  | $              | 91       |  |                 | $ | (17,982) |       |  | $ | -         |  |  | $ | 62,021    | 
|                                          |  |                                       |           |  |                      |   |          |                        |  |   |                |  |  |                |          |  |                 |   |          |       |  |   |           |  |  |   |           | 



|(1) | Eliminations represent the sale of pharmaceuticals from the distribution center (pharmaceutical services segment) to the practices affiliated under
comprehensive service agreements (medical oncology segment).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



-60-



---

##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|----------------------------------------- |  | ------------------------------------ | ----------- |  | -------------------- | - | --------- | ---------------------- |  | - | -------------- |  |  | -------------- | -------- |  | --------------- | - | --------- | ----- |  | - | ----------- |  |  | - | ----------- | 
|                                          |  |                                      |             | 
|                                          |  | Nine Months Ended September 30, 2010 |            
|                                          |  |                                      |             | 
|US Oncology, Inc.                         |  | MedicalOncologyServices              |             |  | CancerCenterServices |   |           | PharmaceuticalServices |  |   | Research/Other |  |  | CorporateCosts |          |  | Eliminations(1) |   |           | Total | 
|                                          |  |                                      |             | 
|                                          |  |                                      |             |  |                      |   |          
|Product revenues                          |  | $                                    | 1,340,137   |  |                      | $ | -         |                        |  | $ | 1,931,492      |  |  | $              | -        |  |                 | $ | -         |       |  | $ | (1,414,343) |  |  | $ | 1,857,286   | 
|Service revenues                          |  |                                      | 484,389     |  |                      |   | 292,788   |                        |  |   | 46,953         |  |  |                | 58,093   |  |                 |   | -         |       |  |   | -           |  |  |   | 882,223     | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Total revenues                            |  |                                      | 1,824,526   |  |                      |   | 292,788   |                        |  |   | 1,978,445      |  |  |                | 58,093   |  |                 |   | -         |       |  |   | (1,414,343) |  |  |   | 2,739,509   | 
|                                          |  |                                      |             |  |                      |   |          
|Operating expenses                        |  |                                      | (1,769,125) |  |                      |   | (220,806) |                        |  |   | (1,913,796)    |  |  |                | (55,611) |  |                 |   | (104,727) |       |  |   | 1,414,343   |  |  |   | (2,649,722) | 
|Impairment and restructuring charges      |  |                                      | (2,619)     |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | (4,714)   |       |  |   | -           |  |  |   | (7,333)     | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Income (loss) from operations             |  |                                      | 52,782      |  |                      |   | 71,982    |                        |  |   | 64,649         |  |  |                | 2,482    |  |                 |   | (109,441) |       |  |   | -           |  |  |   | 82,454      | 
|                                          |  |                                      |             |  |                      |   |          
|Add back:                                 |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Depreciation and amortization             |  |                                      | -           |  |                      |   | 27,487    |                        |  |   | 2,062          |  |  |                | 173      |  |                 |   | 45,864    |       |  |   | -           |  |  |   | 75,586      | 
|Amortization of stock- based compensation |  |                                      | -           |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | 1,789     |       |  |   | -           |  |  |   | 1,789       | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|EBITDA                                    |  | $                                    | 52,782      |  |                      | $ | 99,469    |                        |  | $ | 66,711         |  |  | $              | 2,655    |  |                 | $ | (61,788)  |       |  | $ | -           |  |  | $ | 159,829     | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Add back:                                 |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Other non-cash G&A                        |  |                                      | -           |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | 293       |       |  |   | -           |  |  |   | 293         | 
|Impairment and restructuring charges      |  |                                      | 2,619       |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | 4,714     |       |  |   | -           |  |  |   | 7,333       | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Adjusted EBITDA                           |  | $                                    | 55,401      |  |                      | $ | 99,469    |                        |  | $ | 66,711         |  |  | $              | 2,655    |  |                 | $ | (56,781)  |       |  | $ | -           |  |  | $ | 167,455     | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|                                          |  |                                      |             |  |                      |   |          
|US Oncology Holdings, Inc.                |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|                                          |  |                                      |             |  |                      |   |          
|Operating expenses                        |  | $                                    | -           |  |                      | $ | -         |                        |  | $ | -              |  |  | $              | -        |  |                 | $ | (193)     |       |  | $ | -           |  |  | $ | (193)       | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Adjusted EBITDA                           |  | $                                    | 55,401      |  |                      | $ | 99,469    |                        |  | $ | 66,711         |  |  | $              | 2,655    |  |                 | $ | (56,974)  |       |  | $ | -           |  |  | $ | 167,262     | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|                                          | 
|                                          |  |                                      |             | 
|                                          |  | Nine Months Ended September 30, 2009 |            
|                                          |  |                                      |             | 
|US Oncology, Inc.                         |  | MedicalOncologyServices              |             |  | CancerCenterServices |   |           | PharmaceuticalServices |  |   | Research/Other |  |  | CorporateCosts |          |  | Eliminations(1) |   |           | Total | 
|                                          |  |                                      |             | 
|                                          |  |                                      |             |  |                      |   |          
|Product revenues                          |  | $                                    | 1,329,256   |  |                      | $ | -         |                        |  | $ | 1,799,532      |  |  | $              | -        |  |                 | $ | -         |       |  | $ | (1,363,101) |  |  | $ | 1,765,687   | 
|Service revenues                          |  |                                      | 468,581     |  |                      |   | 288,917   |                        |  |   | 47,697         |  |  |                | 54,780   |  |                 |   | -         |       |  |   | -           |  |  |   | 859,975     | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Total revenues                            |  |                                      | 1,797,837   |  |                      |   | 288,917   |                        |  |   | 1,847,229      |  |  |                | 54,780   |  |                 |   | -         |       |  |   | (1,363,101) |  |  |   | 2,625,662   | 
|                                          |  |                                      |             |  |                      |   |          
|Operating expenses                        |  |                                      | (1,744,915) |  |                      |   | (217,359) |                        |  |   | (1,775,689)    |  |  |                | (51,075) |  |                 |   | (98,589)  |       |  |   | 1,363,101   |  |  |   | (2,524,526) | 
|Impairment and restructuring charges      |  |                                      | (176)       |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | (5,731)   |       |  |   | -           |  |  |   | (5,907)     | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Income (loss) from operations             |  |                                      | 52,746      |  |                      |   | 71,558    |                        |  |   | 71,540         |  |  |                | 3,705    |  |                 |   | (104,320) |       |  |   | -           |  |  |   | 95,229      | 
|                                          |  |                                      |             |  |                      |   |          
|Loss on early extinguishment of debt      |  |                                      | -           |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | (26,025)  |       |  |   | -           |  |  |   | (26,025)    | 
|Add back:                                 |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Depreciation and amortization             |  |                                      | -           |  |                      |   | 29,711    |                        |  |   | 1,566          |  |  |                | 210      |  |                 |   | 45,573    |       |  |   | -           |  |  |   | 77,060      | 
|Amortization of stock- based compensation |  |                                      | -           |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | 1,571     |       |  |   | -           |  |  |   | 1,571       | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|EBITDA                                    |  | $                                    | 52,746      |  |                      | $ | 101,269   |                        |  | $ | 73,106         |  |  | $              | 3,915    |  |                 | $ | (83,201)  |       |  | $ | -           |  |  | $ | 147,835     | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Add back:                                 |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Loss on early extinguishment of debt      |  |                                      | -           |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | 26,025    |       |  |   | -           |  |  |   | 26,025      | 
|Other non-cash G&A                        |  |                                      | -           |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | 163       |       |  |   | -           |  |  |   | 163         | 
|Impairment and restructuring charges      |  |                                      | 176         |  |                      |   | -         |                        |  |   | -              |  |  |                | -        |  |                 |   | 5,731     |       |  |   | -           |  |  |   | 5,907       | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Adjusted EBITDA                           |  | $                                    | 52,922      |  |                      | $ | 101,269   |                        |  | $ | 73,106         |  |  | $              | 3,915    |  |                 | $ | (51,282)  |       |  | $ | -           |  |  | $ | 179,930     | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|                                          |  |                                      |             |  |                      |   |          
|US Oncology Holdings, Inc.                |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|                                          |  |                                      |             |  |                      |   |          
|Operating expenses                        |  | $                                    | -           |  |                      | $ | -         |                        |  | $ | -              |  |  | $              | -        |  |                 | $ | (195)     |       |  | $ | -           |  |  | $ | (195)       | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 
|Adjusted EBITDA                           |  | $                                    | 52,922      |  |                      | $ | 101,269   |                        |  | $ | 73,106         |  |  | $              | 3,915    |  |                 | $ | (51,477)  |       |  | $ | -           |  |  | $ | 179,735     | 
|                                          |  |                                      |             |  |                      |   |           |                        |  |   |                |  |  |                |          |  |                 |   |           |       |  |   |             |  |  |   |             | 



|(1) | Eliminations represent the sale of pharmaceuticals from the distribution center (pharmaceutical services segment) to the practices affiliated under
comprehensive service agreements (medical oncology segment).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Below is a
discussion of EBITDA and Adjusted EBITDA generated by our four primary operating segments. Please refer to Results of Operations for a discussion of our consolidated results presented in accordance with generally accepted accounting
principles.

Medical Oncology Services. Adjusted EBITDA for the three months ended September 30, 2010 decreased to
$18.0 million from $19.1 million, or by 5.9 percent, primarily due to lower reimbursement associated with a changing payer mix (as previously discussed under Results of Operations  Revenue) as well as the impact of drug costs
increasing prior to reimbursement increases from governmental and commercial payers. These factors were partially offset by the benefit of lower drug costs for the generic alternative for Eloxatin as compared to the third quarter of 2009 when the
generic alternative was available for only a portion of the period.

Adjusted EBITDA for the nine months ended
September 30, 2010 increased to $55.4 million from $52.9 million, or 4.7% percent, primarily due to higher patient volumes and revenue related to the addition of oncologists and physicians within other specialties, such as surgery, with
services that are reimbursed at higher rates. The benefit of increasing volumes and expanded specialties was partially offset by inclement weather during the three months ended March 31, 2010. During the current period, the benefit of the
temporary conversion of Eloxatin to generic status was offset by other drug costs increasing in advance of reimbursement.

As
generic drugs are introduced to the market, earnings temporarily increase because drug costs decline significantly but reimbursement tied to Average Sales Price (ASP), including Medicare, remains at the branded price for a period of
approximately six months. However, after ASP-based reimbursement adjusts, earnings with respect to a generic drug are typically lower than the earnings from a branded pharmaceutical. In the case of Eloxatin, a patent lawsuit was settled in
April 2010 requiring pharmaceutical companies to stop selling the drug in generic form after June 30, 2010.

Cancer
Center Services. Cancer center services Adjusted EBITDA for the three months ended September 30, 2010 decreased to $31.9 million from $35.4 million, or 9.8 percent, due primarily to the revenue decline previously discussed under
Results of Operations  Revenue. However, Adjusted EBITDA declined by approximately $1.0 million less than revenue reflecting the Companys initiatives to improve practice efficiency.

Adjusted EBITDA for the nine months ended September 30, 2010 decreased to $99.5 million from $101.3 million, or 1.8% percent. This
decrease reflects higher operating costs in the first half of the year partially offset by the revenue increase resulting from shifting utilization toward more advanced technologies (as previously discussed under Results of Operations 
Revenue).

Pharmaceutical Services.Pharmaceutical services Adjusted EBITDA was $22.4 million for the three
months ended September 30, 2010 compared to $25.4 million in the same period of 2009 and $66.7 million for the nine months ended September 30, 2010 and $73.1 million as compared to the same period in 2009. The EBITDA decrease for the three
month and nine month periods reflects investments supporting our United Network strategy, lower GPO fees primarily due to generic purchasing and lower margins on TPS arrangements. Informatics earnings also decreased from the third quarter of 2009
due, in part, to increased sales force and marketing investments.

Research and Other Services.Adjusted EBITDA during
the three months ended September 30, 2010 was $1.7 million, an increase of $1.6 million from the three months ended September 30, 2009 due to the revenue growth associated with the new contract research organization as well as our recent
acquisitions of CURE Media Group and NexCura. In addition, EBITDA increased due to lower investments associated with developing business initiatives, such as Innovent and our physician web portal, which are beginning to mature.

Adjusted EBITDA for the nine months ended September 30, 2010 was $2.7 million, a decrease of $1.3 million from the nine months ended
September 30, 2009. Research and other services revenue for the nine months ended September 30, 2010 includes an out of period billing adjustment approximately $1.0 million related to services rendered during the year ended
December 31, 2009 which were billed to sponsors during the three months ended June 30, 2010. The year-to-date decrease is primarily due to revisions to incentive plans made in the prior year with the purpose of aligning interests to focus
on expanding the existing research network, launching a contract research organization and creating long-term value.



-62-



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Anticipated Capital
Requirements

We currently expect our principal uses of funds in the near future to be the following:



| |  |  | Debt service requirements on our outstanding indebtedness;
| | - |  | ----------------------------------------------------------



| |  |  | Payments for acquisition of assets and additional consideration in connection with new practice affiliations under comprehensive service agreements,
as well as payments to purchase real estate and medical equipment for the development of new cancer centers, and to install upgraded or replacement of medical equipment at existing centers;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Investments in information systems, including investments to support strategic initiatives, capital investments in new businesses, such as Innovent,
iKnowMed or for potential business acquisitions; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Funding of working capital.
| | - |  | ---------------------------

For all of 2010, we anticipate spending $70 to $80 million for the development of cancer centers, purchases of clinical equipment, investments in information systems and other capital expenditures.

During the second quarter, we received notice from one of our largest pharmaceutical distributors that our current
arrangement would be cancelled and renegotiated effective September 20, 2010. Consequently we assessed all options to provide our physician network with products obtained through this distributor, and executed an agreement to obtain these
products directly from the manufacturer. We believe this relationship will aid in our physician aggregation strategy through improved purchasing economics and strengthen our commercial relationships for other strategic initiatives.

We expect that our liquidity will be reduced by approximately $120 million based upon the manufacturers payment terms and minimum
inventory requirements. However, we anticipate our EBITDA will increase by approximately $10 million as a result of improved economics under the new arrangement. In addition, we temporarily invested approximately $90 million in the third and
fourth quarters of 2010 for large drug purchases to obtain availability of certain generic product and lower costs on other branded products over the remainder of 2010. We paid approximately $60 million related to these investments in the third
quarter and the remainder was paid in October 2010. We expect substantially all of the inventory acquired in these transactions to be consumed by affiliated practices by early 2011. Because we rely, in part, on credit terms provided by vendors to
finance our working capital needs, our liquidity could be further reduced in the event suppliers reduce, or eliminate, credit terms currently made available to the Company.

As of November 3, 2010, we had cash and cash equivalents of $67.5 million and $89.6 million available under our $120.0 million revolving credit facility (which had been reduced by outstanding letters
of credit, totaling $30.4 million). We monitor the credit worthiness of financial institutions that participate in our credit facility and periodically test the availability of funds through short-term advances under the facility. However, there is
no assurance that all such lenders will fund future borrowing requests for amounts currently available under our senior secured revolving credit facility in accordance with the terms of the facility. In the event that cash on hand, combined with
amounts available under the senior secured revolving credit facility, is insufficient to fund our anticipated working capital requirements or we are unable to utilize our existing credit facility to finance our operations, we would be required to
seek alternative funding. There can be no assurance that additional funding would be available to us on terms that we consider acceptable.

We expect to fund our current capital needs with (i) cash on hand and cash generated from operations, (ii) borrowings under the revolving credit facility, (iii) lease or purchase money
financing for certain equipment purchases, (iv) indebtedness under new borrowing and to physicians in connection with new affiliations and (v) equity infusions from current or additional sponsors. Our success in implementing our capital
plans could be adversely impacted by poor operating performance which may result in decreased cash flow from operations and reduced credit availability under purchase money, lease or vendor payment terms. In addition, to the extent that poor
performance or other factors impact our compliance with financial and other covenants under our revolving credit facility, our ability to borrow under that facility or to find other financing sources could be limited. Furthermore, capital at
financing terms satisfactory to management may be limited, due to market conditions or operating performance of institutions that participate in our senior secured revolving credit facility to satisfy their financial commitments to us.



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





The Company and
its subsidiaries, affiliates (subject to certain limitations imposed by existing indebtedness) or significant shareholders, in their sole discretion, may from time to time, purchase, redeem, exchange or retire any of the Companys outstanding
debt in open market purchases (privately negotiated or open market transactions) or otherwise. Such transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Indebtedness

We have a significant amount of indebtedness. On September 30, 2010 we had aggregate indebtedness of approximately $1,605.6 million
of which $1,078.8 million (including current maturities of $11.3 million) represents obligations of US Oncology, Inc., and $526.7 million represents an obligation of Holdings.

As of September 30, 2010 and December 31, 2009, the Companys long-term indebtedness consisted of the following (in thousands):



|                                                |  |                   |           |  |                  |   |           | 
|----------------------------------------------- |  | ----------------- | --------- |  | ---------------- | - | --------- | 
|                                                |  | September 30,2010 |           |  | December 31,2009 |  
|                                                |  |                  
|US Oncology, Inc.                               |  |                   |           |  |                  |   |           | 
|9.125% Senior Secured Notes, due 2017(a)        |  |                   | 760,790   |  |                  |   | 759,680   | 
|10.75% Senior Subordinated Notes, due 2014      |  |                   | 275,000   |  |                  |   | 275,000   | 
|9.625% Senior Subordinated Notes, due 2012      |  |                   | 3,000     |  |                  |   | 3,000     | 
|Subordinated notes                              |  |                   | 20,189    |  |                  |   | 25,945    | 
|Mortgage, capital lease obligations and other   |  |                   | 19,842    |  |                  |   | 21,242    | 
|                                                |  |                   |           |  |                  |   |           | 
|                                                |  |                   | 1,078,821 |  |                  |   | 1,084,867 | 
|Less current maturities                         |  |                   | (11,342)  |  |                  |   | (10,579)  | 
|                                                |  |                   |           |  |                  |   |           | 
|                                                |  |                   | 1,067,479 |  |                  |   | 1,074,288 | 
|                                                |  |                   |           |  |                  |   |           | 
|US Oncology Holdings, Inc.                      |  |                   |           |  |                  |   |           | 
|Senior Floating Rate PIK Toggle Notes, due 2012 |  |                   | 526,744   |  |                  |   | 493,954   | 
|                                                |  |                   |           |  |                  |   |           | 
|                                                |  | $                 | 1,594,223 |  |                  | $ | 1,568,242 | 
|                                                |  |                   |           |  |                  |   |           | 



|(a) | Includes $14.2 million unamortized original issue discount balance.
|--- | -------------------------------------------------------------------

Our financing arrangements are described in more detail in Note 7 to our Consolidated Financial Statements included our Annual
Report on Form 10-K filed with the SEC on March 4, 2010.

The Senior Secured Revolving Credit Facility, the Senior
Secured Notes due 2017 and the Senior Subordinated Notes due 2014 contain affirmative and negative covenants including the maintenance of certain financial ratios, restrictions on sales, leases or other dispositions of property, restrictions on
other indebtedness, prohibitions on the payment of dividends and other customary restrictions. Events of default under the Senior Secured Notes and the unsecured notes include cross-defaults to all material indebtedness, including each of those
financings as well as hedging obligations under the interest rate swap. Substantially all of our assets, including certain real property, are pledged as security on a second lien basis under the Senior Secured Notes.

Holdings Notes

On
March 15, 2007, Holdings, whose principal asset is its investment in US Oncology, issued $425.0 million of senior floating rate PIK toggle notes, due March 15, 2012 (the Holdings Notes). These notes are senior unsecured
obligations of Holdings. Holdings may elect to pay interest on the Holdings Notes entirely in cash, by increasing the principal amount of the Holdings Notes (PIK interest), or by paying 50% in cash and 50% by increasing the principal
amount of the Holdings Notes. Cash interest accrues on the Holdings Notes at a rate per annum equal to 6-month LIBOR plus the applicable spread. PIK interest accrues on the Holdings Notes at a rate per annum equal to the cash interest rate plus
0.75%. The Company must make an election regarding whether subsequent interest payments will be made in cash or through PIK interest prior to the start of the applicable interest period. The applicable cash interest spread is 5.50% and reflects the
final scheduled spread increase of 0.50% which was effective on March 15, 2010. The impact of scheduled spread increases is recognized as interest expense on a straight line basis to reflect a constant spread over the term of the Holdings
Notes. During the nine months ended



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued



September 30, 2010 and 2009, the Company elected to PIK interest on the Holdings Notes and total interest expense was $25.6 million and $29.7 million, respectively, which includes cash or PIK
interest, interest related to spread increases, and the amortization of debt issuance costs.

Because Holdings principal
asset is its investment in US Oncology, US Oncology provides funds to service Holdings indebtedness through payment of dividends to Holdings. US Oncologys senior secured notes and senior subordinated notes limit its ability to make
restricted payments from US Oncology, including dividends paid by US Oncology to Holdings. As of September 30, 2010, US Oncology has the ability to make approximately $6.3 million in restricted payments, which amount increases based on capital
contributions to US Oncology, Inc. and by 50 percent of US Oncologys net income and is reduced by i) the amount of any restricted payments made and ii) net losses of US Oncology, excluding certain non-cash charges. Delaware law also requires
that US Oncology be solvent both at the time, and immediately following, a dividend payment to Holdings. Because Holdings relies on dividends from US Oncology to fund cash interest payments on the Holdings Notes, in the event that such restrictions
prevent US Oncology from paying such a dividend, Holdings would be unable to pay interest on the notes in cash and would instead be required to pay PIK interest.

In connection with issuing the Holdings Notes, Holdings entered into an interest rate swap agreement, with a notional amount of $425.0 million, fixing the LIBOR base rate at 4.97% through maturity in
2012. Unlike interest on the Holdings Notes, which may be settled in cash or through the issuance of additional notes, payments due to the swap counterparty must be made in cash. As a result of the current and projected low interest rate
environment, and the related expectation that Holdings will continue to be net payer on the interest rate swap, the Company believes that cash payments for the interest rate swap obligations will reduce the availability under the restricted payments
provisions in US Oncologys indebtedness to a level that additional payments for cash interest for the Holdings Notes may not be prudent and therefore, no longer remain probable. The Companys annual payment obligations on the interest
rate swap increase by $4.3 million for each 1.00% that the fixed interest rate of 4.97% paid to the counterparty exceeds the variable interest rate received from the counterparty. Similarly, the Companys annual payment obligations on the
interest rate swap decrease by $4.3 million when the difference between the fixed interest rate paid to the counterparty and the variable interest rate received from the counterparty reduces by 1.00%. In the event amounts available under the
restricted payments provision are insufficient for the Company to service interest on the Holdings Notes, including any obligation related to the interest rate swap, the Company may be required to arrange additional financing or a capital infusion
and use such proceeds to satisfy these obligations. There can be no assurance that additional financing or a capital infusion, if available, will be made on terms that are acceptable to the Company. We issued $17.1 million in notes to settle the
interest due on September 15, 2010. In addition, we paid $9.9 million to settle the obligation under our interest rate swap agreement for the interest period ending September 15, 2010. During the nine months ended September 30, 2010,
US Oncology paid dividends in the amount of $19.7 million to Holdings to finance obligations related to the Holdings Notes and interest rate swap. For the interest period due in March 2011, we expect to issue $17.6 million in notes to settle the
interest and to pay $9.6 million to settle the swap obligation.

The Companys swap obligation due March 15, 2011 of
$9.6 million is greater than the restricted payment availability of $6.3 million at September 30, 2010. The amount available for the restricted payment on March 15, 2011 will be based on financial results through December 31, 2010
and, if earnings through that date do not increase availability to a sufficient amount, US Oncology will be required to obtain a capital contribution to fund its obligation related to the swap.

Financial Covenants

At
September 30, 2010, we were in compliance with the financial covenants of our indebtedness. The senior secured revolving credit facility contains the most restrictive financial maintenance covenants related to our indebtedness and requires US
Oncology to comply, on a quarterly basis, with certain financial covenants, including a maximum leverage ratio test, which becomes more restrictive over time. At September 30, 2010, the terms of the senior secured revolving credit facility
required that we maintain a maximum leverage ratio of 7.00:1. As of September 30, 2010, the maximum leverage ratio, as calculated under the terms of the senior secured revolving credit facility, was 4.92:1. The ratio becomes more restrictive
(generally semiannually beginning in 2011) and, at maturity in 2012, the maximum leverage ratio may not be more than 6.00:1. Our ability to access the senior secured revolving credit facility may be limited if we are not able to maintain compliance
with these covenants through the facilitys maturity in August 2012.



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued





Scheduled Maturities

Based on our financial projections, the Company will not be able to satisfy all scheduled maturities through cash on hand
and cash generated through operations. The Company expects future interest payments will also be settled in kind for the foreseeable future. Maturities during the year ending December 31, 2012 include $526.7 million of currently outstanding US
Oncology Holdings, Inc. Floating Rate PIK Toggle Notes. Based on LIBOR rates as of September 30, 2010, if the Company were to settle all future interest payments in kind, the principal balance of the Notes would be approximately $580.0 million
upon maturity in March 2012.

We anticipate that we will be dependent upon our ability to obtain external capital to satisfy
the Holdings Notes maturing in March 2012. The Company intends to seek additional financing to satisfy its capital needs by accessing the public or private equity markets, refinancing these obligations through issuance of new indebtedness, modifying
the terms of existing indebtedness or through a combination of these, or other, alternatives. There can be no assurance that additional financing, if available, will be made on terms acceptable to the Company.

On November 1, 2010, the Company entered into an Agreement and Plan of Merger with McKesson Corporation pursuant to which
substantially all of the Companys indebtedness would be retired. See Recent Developments.

Interest Rate Swap

We manage our debt portfolio to achieve an overall desired position of fixed and variable rates and may employ interest
rate swaps to achieve that goal. The major risks from interest rate derivatives include changes in the interest rates affecting the fair value of such instruments and the creditworthiness of the counterparty in such transactions. We engage in
interest rate swap transactions only with commercial financial institutions we believe to be creditworthy. In connection with issuing the Notes, Holdings entered into an interest rate swap agreement, with a notional amount of $425.0 million, fixing
the LIBOR base rate at 4.97% through maturity in 2012. Our interest rate swap counterparty is a subsidiary of Wachovia Corporation, which has been acquired by Wells Fargo & Company. Although we believe that our swap counterparty remains
creditworthy, we cannot provide assurance that we are not at risk of counterparty default.

The swap agreement was initially
designated as a cash flow hedge against the variability of cash future interest payments on the Holdings Notes. Based on our financial projections, and due to limitations on the restricted payments that will be available to service the Notes, we no
longer believe that payment of cash interest on the Holdings Notes remains probable and have discontinued cash flow hedge accounting for this instrument.

The Company recorded an unrealized loss of $11.6 million and $10.0 million during the nine months ended September 30, 2010 and 2009, respectively. The Companys consolidated balance sheet as of
September 30, 2010 and December 31, 2009 includes a liability of $25.4 million and $32.9 million, respectively, to reflect the fair market value of the interest rate swap as of that date and is classified as follows (in thousands):



| |                             |  |   |                                        |  |  |                                   |        |  | 
| | --------------------------- |  | - | -------------------------------------- |  |  | --------------------------------- | ------ |  | 
| |                             |  |   | Fair Value as of    September 30, 2010 |  |  | Fair Value as ofDecember 31, 2009 |       
| | Liabilities                 |  |   |                                        |  |  |                                   |        | 
| | Other accrued liabilities   |  | $ | 17,703                                 |  |  | $                                 | 17,742 | 
| | Other long-term liabilities |  |   | 7,720                                  |  |  |                                   | 15,204 | 
| |                             |  |   |                                        |  |  |                                   |        | 
| | Total                       |  | $ | 25,423                                 |  |  | $                                 | 32,946 | 
| |                             |  |   |                                        |  |  |                                   |        | 

In addition, during the third quarter ending September 30, 2010, we paid $9.9 million to settle the
obligation under our interest rate swap agreement for the nine month period ending September 15, 2010.

The fair value of
the interest rate swap is estimated based upon the expected future cash settlements, as reported by the counterparty, using observable market information. The most significant factors in estimating the value of the interest rate swap is the
assumption made regarding the future interest rates that will be used to establish the variable rate payments to be received by the Company and the discount rate used to determine the present value of those estimated future payments. The Company
considers both counterparty credit risk and its own credit risk when estimating the fair market value of the interest rate swap. Because of negative differential between the current (and projected) LIBOR rate and the fixed interest rate paid by



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued



the Company, counterparty credit risk is assessed to be minimal and did not impact the fair value of the interest rate swap. The Company also assesses its own credit risk in the valuation of its
obligation under the interest rate swap using Company-specific market information. The most significant market information considered was the credit spread between the Holdings Notes, an instrument with a similar credit profile and term as the
interest rate swap, and the like-term treasury spread (as an estimate of a risk free rate). As a result of evaluating the Companys nonperformance risk, the estimated fair value of the interest rate swap was reduced by $2.7 million and $3.4
million for the nine months ended September 30, 2010 and year ended December 31, 2009, respectively. An increase in future LIBOR rates of 1.00 percent would increase (in the Companys favor) the fair value of the of the interest rate
swap by $3.7 million and a decrease in future interest rates of 1.00 percent would negatively impact its fair value by $2.6 million. Because a portion of the Companys indebtedness, approximately $101.7 million, remains exposed to changes in
variable interest rates, movements that favorably impact the fair market value of the interest rate swap may increase the interest expense associated with our indebtedness that remains subject to variable interest rate risk.

Because the fair market value of the interest rate swap is based upon expectations of future interest rates, changes in its fair value
reflect the anticipation of future rates that are not reflected in the carrying value of our indebtedness or interest expense for the period. As a result, changes in the fair market value of the interest rate swap that relate to expectations of
future interest rates are recorded currently in earnings and are not offset by changes in the fair market of our indebtedness or changes in interest expense for the current period. Cash settlements related to the interest rate swap are established
semiannually to coincide with the determination of the variable interest rate associated with the Holdings Notes.

The Company
does not believe the election to pay all or a portion of the interest due on the Holdings Notes in kind results in the instrument no longer being an economically effective hedge because the notional principal of Holdings Notes issued to pay interest
will increase or decrease based on market interest rates in the same manner as if cash had been paid for interest.



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.





ITEM 
4. CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the
participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a  15 as of the end of
the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to
the Company (including its consolidated subsidiaries) required to be included in our periodic SEC filings.

There was no change
in internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The annual report for the fiscal year ending December 31, 2010 will not include an attestation report of the Companys
registered public accounting firm regarding internal control over financial reporting pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act signed by President Obama on July 21, 2010, which permanently exempts companies that
qualify as either a Non-Accelerated Filer or Smaller Reporting Company from the requirement to obtain an external auditor attestation on the effectiveness of internal financial reporting. On September 21, 2010, the SEC amended their rules to
reflect the provisions of this Act. The Company will continue to provide managements report in the Companys annual report.



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PART II  Other
Information

Item 1. Legal Proceedings

In the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations, charges and
proceedings, including, but not limited to, those relating to regulatory, commercial, employment, employee benefit and securities matters. Descriptions of certain legal proceedings to which the Company is a party are contained in Note 11,
Commitments and Contingencies, to the unaudited interim condensed consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q and are incorporated by reference herein. In June 2010, the North Carolina Court
of Appeals ruled unanimously in favor of the practice which allows the practice to continue providing diagnostic scans and radiation therapy for patients. Also, in October 2010, the U.S. Attorneys Office, Eastern District of New York, notified
the Company that its obligations under the subpoena relating to its contracts and relationships with a pharmaceutical manufacturer have been satisfied, and the matter considered closed. Other than these rulings during the year, there have been no
significant developments related to the aforementioned legal proceedings in the current quarter.

Item 1A.
Risk Factors

The following is an update to Item 1A  Risk Factors contained in our 2009 Form 10-K. For
additional risk factors that could cause actual results to differ materially from those anticipated, please refer to our 2009 Form 10-K. We caution the reader that these risk factors may not be exhaustive. We operate in a continually changing
business environment, and new risk factors emerge from time to time. Management cannot predict new risk factors, nor can it assess the impact, if any, of these risk factors on our business or the extent to which any factor or combination of factors
may impact our business.

Our acquisitions, restructurings or divestitures may not be successful.

We have recently consummated acquisitions of businesses, including our acquisitions of CURE Media Group and NexCura, LLC, and we
anticipate that we may, from time to time, acquire additional businesses, assets or securities of companies that we believe would provide a strategic fit with our business. Acquisitions involve numerous risks, including potential exposure to unknown
liabilities of acquired companies and the possible loss of key employees and customers of the acquired business. We will also need to integrate acquired businesses with our existing operations. We cannot assure you that we will effectively
assimilate these businesses or their service offerings into our operations or realize anticipated synergies. Integrating the operations and personnel of acquired companies into our existing operations or separating from our existing operations the
operations and personnel of businesses of which we may divest could result in difficulties, significant expense and accounting charges, disrupt our business or divert managements time and attention. In connection with the integration of
acquired operations or the conduct of our overall business strategies, we may periodically restructure our businesses and/or sell assets or portions of our business. We may not achieve expected cost savings from restructuring activities or realize
the expected proceeds from sales of assets or portions of our business, and actual charges, costs and adjustments due to restructuring activities may vary materially from our estimates. Additionally, our final determinations and appraisals of the
fair value of assets acquired and liabilities assumed in our acquisitions may vary materially from earlier estimates. We cannot assure you that the fair value of acquired businesses will remain constant.

Transitioning physicians between our relationship models may result in impairment losses.

From time to time, physicians within our network may convert the relationship model under which they are affiliated with the Company to a
different offering that is more aligned with the services they value. In some instances, physicians affiliated under targeted services arrangements expand their relationship to a comprehensive strategic alliance. In other instances,
physicians affiliated through a comprehensive strategic alliance may seek to transition to a targeted arrangement. With respect to practices affiliated under comprehensive strategic alliances, we may have recorded an intangible asset associated
with our contractual management agreement. Although we continue to generate cash flow through targeted relationships, our service agreement intangible asset may be impaired in the event that contract is terminated in connection with a physician
practice transitioning to an alternative relationship.



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Item 
4. Reserved

Removed and reserved.

Item 6. Exhibits



|             |        |  |             |                                                                                                                                                                                                 
|------------ | ------ |  | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  No. |        |  | Description
|             |       
|             | 3.114  |  |             | Third Amended and Restated Certificate of Incorporation of US Oncology Holdings, Inc.                                                                                                           
|             |       
|             | 3.22   |  |             | Bylaws of US Oncology Holdings, Inc.                                                                                                                                                            
|             |       
|             | 4.12   |  |             | Indenture, dated as of March 13, 2007, between US Oncology Holdings, Inc. and LaSalle Bank National Association as Trustee                                                                      
|             |       
|             | 4.22   |  |             | Form of Senior Floating Rate PIK Toggle Note due 2012 (included in Exhibit 4.1)                                                                                                                 
|             |       
|             | 4.33   |  |             | Indenture, dated as of February 1, 2002, among US Oncology, Inc., the Guarantors named therein and JP Morgan Chase Bank as Trustee                                                              
|             |       
|             | 4.44   |  |             | Form of 95/8% Senior Subordinated Note due 2012 (included in Exhibit 4.4)                                                                                                                       
|             |       
|             | 4.54   |  |             | First Supplemental Indenture, dated as of August 20, 2004, among US Oncology, Inc., the Guarantors named therein and JP Morgan Chase Bank as Trustee                                            
|             |       
|             | 4.64   |  |             | Indenture, dated as of August 20, 2004, among Oiler Acquisition Corp. and LaSalle Bank National Association, as Trustee                                                                         
|             |       
|             | 4.74   |  |             | First Supplemental Indenture, dated as of August 20, 2004, among US Oncology, Inc., the Guarantors named therein and LaSalle Bank National Association, as
Trustee                              
|             |       
|             | 4.84   |  |             | Indenture, dated as of August 20, 2004, among Oiler Acquisition Corp. and LaSalle Bank National Association, as Trustee                                                                         
|             |       
|             | 4.94   |  |             | Form of 103/4% Senior Subordinated Note due 2014 (included in Exhibit 4.11)                                                                                                                     
|             |       
|             | 4.104  |  |             | First Supplemental Indenture, dated as of August 20, 2004, among US Oncology, Inc., the Guarantors named therein and LaSalle Bank National Association, as
Trustee                              
|             |       
|             | 4.114  |  |             | Accession Agreement, dated as of August 20, 2004, among the Guarantors listed therein                                                                                                           
|             |       
|             | 4.121  |  |             | Amended and Restated Stockholders Agreement, dated as of December 21, 2006                                                                                                                      
|             |       
|             | 4.131  |  |             | Amended and Restated Registration Rights Agreement, dated as of December 21, 2006                                                                                                               
|             |       
|             | 4.1412 |  |             | Form of 9.125% Senior Secured Notes due 2017                                                                                                                                                    
|             |       
|             | 4.1512 |  |             | Indenture, dated June 18, 2009 between the Company, the Subsidiary Guarantors named therein and Wilmington Trust FSB, as trustee                                                                
|             |       
|             | 4.1612 |  |             | Registration Rights Agreement dated June 4, 2009 between the Company, the Subsidiary Guarantors named therein and Morgan Stanley & Co. Incorporated, as representative of the
initial purchasers
|             |       
|             | 10.111 |  |             | Form of Executive Employment Agreement, dated as of November 1, 2008, among US Oncology Holdings, Inc., US Oncology, Inc. and each of its executive
officers.                                   
|             |       
|             | 10.24  |  |             | Form of Restricted Stock Agreement                                                                                                                                                              
|             |       
|             | 10.34  |  |             | Form of Unit Grant                                                                                                                                                                              
|             |       
|             | 10.44  |  |             | US Oncology Holdings, Inc. Amended and Restated 2004 Equity Incentive Plan                                                                                                                      
|             |       
|             | 10.54  |  |             | US Oncology Holdings, Inc. 2008 Long-Term Cash Incentive Plan                                                                                                                                   



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| |        |  |  |                                                                                                                                                                                                                                                                                                                                                               
| | ------ |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       
| | 10.613 |  |  | Credit Agreement, dated as of August 26, 2009, among US Oncology Holdings, Inc., US Oncology, Inc., the Lenders party thereto, Deutsche Bank Trust Company Americas, as
Administrative Agent and Collateral Agent, Morgan Stanley Senior Funding, Inc. and Wells Fargo Bank, N.A., as Syndication Agents, and JPMorgan Chase Bank, N.A. as Documentation Agent
| |       
| | 10.713 |  |  | Guarantee and Collateral Agreement, dated as of August 26, 2009, among US Oncology Holdings, Inc., US Oncology, Inc., the subsidiaries of US Oncology, Inc. identified therein, and
Deutsche Bank Trust Company Americas, as Collateral Agent                                                                                                                 
| |       
| | 10.814 |  |  | US Oncology Holdings, Inc. Amendment No. 1 to the Amended and Restated 2004 Equity Incentive Plan                                                                                                                                                                                                                                                             
| |       
| | 10.914 |  |  | US Oncology Holdings, Inc. Amended and Restated Director Stock Option and Restricted Stock Award Plan                                                                                                                                                                                                                                                         
| |       
| | 148    |  |  | Code of Ethics                                                                                                                                                                                                                                                                                                                                                
| |       
| | 31.1  |  |  | Certification of Chief Executive Officer                                                                                                                                                                                                                                                                                                                      
| |       
| | 31.2  |  |  | Certification of Chief Financial Officer                                                                                                                                                                                                                                                                                                                      
| |       
| | 32.1  |  |  | Certification of Chief Executive Officer                                                                                                                                                                                                                                                                                                                      
| |       
| | 32.2  |  |  | Certification of Chief Financial Officer                                                                                                                                                                                                                                                                                                                      



|1 | Filed as an Exhibit to the 8-K filed by US Oncology Holdings, Inc. on December 27, 2006, and incorporated herein by reference.
|- | ------------------------------------------------------------------------------------------------------------------------------



|2 | Filed as an Exhibit to the 8-K filed by US Oncology Holdings, Inc. on March 16, 2007, and incorporated herein by reference.
|- | ---------------------------------------------------------------------------------------------------------------------------



|3 | Filed as Exhibit 3 to the 8-K filed by US Oncology, Inc. on February 5, 2002 and incorporated herein by reference.
|- | ------------------------------------------------------------------------------------------------------------------



|4 | Filed as an Exhibit to the 8-K filed by US Oncology Holdings, Inc. on January 7, 2008.
|- | --------------------------------------------------------------------------------------



|5 | Filed as Exhibit 10.1 to the 8-K filed by US Oncology, Inc. on March 29, 2005, and incorporated herein by reference.
|- | --------------------------------------------------------------------------------------------------------------------



|6 | Filed as an Exhibit to the 8-K filed by US Oncology, Inc. on November 21, 2005, and incorporated herein by reference.
|- | ---------------------------------------------------------------------------------------------------------------------



|7 | Filed as an Exhibit to the 8-K filed by US Oncology, Inc. on July 13, 2006, and incorporated herein by reference.
|- | -----------------------------------------------------------------------------------------------------------------



|8 | Filed as Exhibit 14 to the Registrants Form 10-K for the year ended December 31, 2005 and incorporated herein by reference.
|- | ----------------------------------------------------------------------------------------------------------------------------



|9 | Filed as Exhibit 10 to the 8-K filed by US Oncology Holdings, Inc. on March 16, 2007, and incorporated herein by reference.
|- | ---------------------------------------------------------------------------------------------------------------------------



|10 | Filed as Exhibit 10 to the 8-K filed by US Oncology Holdings, Inc. on December 4, 2007, and incorporated herein by reference.
|-- | -----------------------------------------------------------------------------------------------------------------------------



|11 | Filed as Exhibit 10.4 to the Registrants Form 10-K for the year ended December 31, 2008 and incorporated herein by reference.
|-- | ------------------------------------------------------------------------------------------------------------------------------



|12 | Filed as an Exhibit to the 8-K filed by US Oncology Holdings, Inc. on June 18, 2009, and incorporated herein by reference.
|-- | --------------------------------------------------------------------------------------------------------------------------



|13 | Filed as an Exhibit to the 8-K filed by US Oncology Holdings, Inc. on August 28, 2009, and incorporated herein by reference.
|-- | ----------------------------------------------------------------------------------------------------------------------------



|14 | Filed as an Exhibit to the 8-K filed by US Oncology Holdings, Inc. on October 7, 2009, and incorporated herein by reference.
|-- | ----------------------------------------------------------------------------------------------------------------------------



| | Filed herewith.
|- | ---------------



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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

SIGNATURES

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



| |  |                        |  |                                                                                                             |  |                     
| |  | ---------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | --------------------
| |  |                        |  | US ONCOLOGY HOLDINGS, INC. AND                                                                             
| |  |                        |  | US ONCOLOGY, INC.                                                                                          
| |  |                        | 
| |  | Date: November 5, 2010 |  | By:                                                                                                         |  | /s/ David W. Young  
| |  |                        |  | David W. Young, Interim Chief Financial Officer (duly authorized signatory and
principal financial officer)
| |  |                        | 
| |  | Date: November 5, 2010 |  | By:                                                                                                         |  | /s/ Kevin F. Krenzke
| |  |                        |  | Kevin F. Krenzke, Chief Accounting Officer (principal accounting
officer)                                  



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