##### Table of Contents





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 March 31, 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  x

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  x

As of May 5, 2010, 422,968,506 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 MARCH 31, 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 Stockholders Equity (Deficit)                   |  | 5       
|                              |  | Condensed Consolidated Statements of Cash Flows                                       |  | 6       
|                              |  | Notes to Condensed Consolidated Financial Statements                                  |  | 7       
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations |  | 29      
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |  | 54      
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 55      
|                              |  |                                                                                      
|Item 1A.                      |  | Risk Factors                                                                          |  | 55      
|                              |  |                                                                                      
|Item 4.                       |  | Reserved                                                                              |  | 55      
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits                                                                              |  | 56      
|                              | 
|SIGNATURES                    |  | 58                                                                                   

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. |  
|                                                                                                                                                        |  | March 31,2010              |           |   | December 31,2009  |   |           | March 31,2010 |  |   | December 31,2009 |  
|ASSETS                                                                                                                                                  |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Current assets:                                                                                                                                         |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Cash and equivalents                                                                                                                                    |  | $                          | 141,213   |   |                   | $ | 161,811   |               |  | $ | 141,088          |   |  | $ | 161,589   |  
|Accounts receivable                                                                                                                                     |  |                            | 372,982   |   |                   |   | 349,659   |               |  |   | 372,982          |   |  |   | 349,659   |  
|Other receivables                                                                                                                                       |  |                            | 37,946    |   |                   |   | 30,928    |               |  |   | 37,946           |   |  |   | 30,928    |  
|Prepaid expenses and other current assets                                                                                                               |  |                            | 25,580    |   |                   |   | 20,818    |               |  |   | 25,535           |   |  |   | 20,818    |  
|Inventories                                                                                                                                             |  |                            | 120,051   |   |                   |   | 152,642   |               |  |   | 120,051          |   |  |   | 152,642   |  
|Deferred income taxes                                                                                                                                   |  |                            | 12,136    |   |                   |   | 12,136    |               |  |   | 6,002            |   |  |   | 6,002     |  
|Due from affiliates                                                                                                                                     |  |                            | 43,528    |   |                   |   | 48,052    |               |  |   | 26,133           |   |  |   | 30,699    |  
|                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Total current assets                                                                                                                                    |  |                            | 753,436   |   |                   |   | 776,046   |               |  |   | 729,737          |   |  |   | 752,337   |  
|Property and equipment, net                                                                                                                             |  |                            | 397,118   |   |                   |   | 404,928   |               |  |   | 397,118          |   |  |   | 404,928   |  
|Service agreements, net                                                                                                                                 |  |                            | 247,784   |   |                   |   | 251,397   |               |  |   | 247,784          |   |  |   | 251,397   |  
|Goodwill                                                                                                                                                |  |                            | 378,917   |   |                   |   | 377,270   |               |  |   | 378,917          |   |  |   | 377,270   |  
|Other assets                                                                                                                                            |  |                            | 78,416    |   |                   |   | 78,586    |               |  |   | 73,694           |   |  |   | 73,259    |  
|                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Total assets                                                                                                                                            |  | $                          | 1,855,671 |   |                   | $ | 1,888,227 |               |  | $ | 1,827,250        |   |  | $ | 1,859,191 |  
|                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|                                                                                                                                                        |  |                            |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                          |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Current liabilities:                                                                                                                                    |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Current maturities of long-term indebtedness                                                                                                            |  | $                          | 11,427    |   |                   | $ | 10,579    |               |  | $ | 11,427           |   |  | $ | 10,579    |  
|Accounts payable                                                                                                                                        |  |                            | 284,680   |   |                   |   | 279,948   |               |  |   | 284,500          |   |  |   | 279,788   |  
|Due to affiliates                                                                                                                                       |  |                            | 113,460   |   |                   |   | 110,888   |               |  |   | 113,460          |   |  |   | 110,888   |  
|Accrued compensation cost                                                                                                                               |  |                            | 53,553    |   |                   |   | 50,775    |               |  |   | 53,553           |   |  |   | 50,775    |  
|Accrued interest payable                                                                                                                                |  |                            | 13,993    |   |                   |   | 40,373    |               |  |   | 13,993           |   |  |   | 40,373    |  
|Income taxes payable                                                                                                                                    |  |                            | 5,663     |   |                   |   | 4,702     |               |  |   | 3,474            |   |  |   | 3,114     |  
|Other accrued liabilities                                                                                                                               |  |                            | 49,586    |   |                   |   | 51,450    |               |  |   | 31,963           |   |  |   | 33,691    |  
|                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Total current liabilities                                                                                                                               |  |                            | 532,362   |   |                   |   | 548,715   |               |  |   | 512,370          |   |  |   | 529,208   |  
|                                                                                                                                                        |  |                            |           |  
|Deferred revenue                                                                                                                                        |  |                            | 3,828     |   |                   |   | 4,636     |               |  |   | 3,828            |   |  |   | 4,636     |  
|Deferred income taxes                                                                                                                                   |  |                            | 12,747    |   |                   |   | 12,711    |               |  |   | 36,627           |   |  |   | 36,658    |  
|Long-term indebtedness                                                                                                                                  |  |                            | 1,577,317 |   |                   |   | 1,568,242 |               |  |   | 1,067,630        |   |  |   | 1,074,288 |  
|Other long-term liabilities                                                                                                                             |  |                            | 34,566    |   |                   |   | 44,796    |               |  |   | 17,240           |   |  |   | 15,739    |  
|                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Total liabilities                                                                                                                                       |  |                            | 2,160,820 |   |                   |   | 2,179,100 |               |  |   | 1,637,695        |   |  |   | 1,660,529 |  
|                                                                                                                                                        |  |                            |           |  
|Commitments and contingencies (Note 10)                                                                                                                 |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|                                                                                                                                                        |  |                            |           |  
|Stockholders (deficit) equity:                                                                                                                         |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Common stock, $0.001 par value, 500,000,000 shares authorized, 422,943,505 and 422,951,505 shares issued and outstanding in 2010
and 2009, respectively |  |                            | 423       |   |                   |   | 423       |               |  |   |                 |   |  |   |          |  
|Common stock, $0.01 par value, 100 shares authorized, issued and outstanding                                                                            |  |                            |          |   |                   |   |          |               |  |   | 1                |   |  |   | 1         |  
|Additional paid-in capital                                                                                                                              |  |                            | 109,386   |   |                   |   | 108,723   |               |  |   | 543,460          |   |  |   | 551,986   |  
|Accumulated deficit                                                                                                                                     |  |                            | (430,116  | ) |                   |   | (415,624  | )             |  |   | (369,064         | ) |  |   | (368,930  | )
|                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Total Company stockholders (deficit) equity                                                                                                            |  |                            | (320,307  | ) |                   |   | (306,478  | )             |  |   | 174,397          |   |  |   | 183,057   |  
|Noncontrolling interests                                                                                                                                |  |                            | 15,158    |   |                   |   | 15,605    |               |  |   | 15,158           |   |  |   | 15,605    |  
|                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Total stockholders (deficit) equity                                                                                                                    |  |                            | (305,149  | ) |                   |   | (290,873  | )             |  |   | 189,555          |   |  |   | 198,662   |  
|                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |           |  
|Total liabilities and stockholders (deficit) equity                                                                                                    |  | $                          | 1,855,671 |   |                   | $ | 1,888,227 |               |  | $ | 1,827,250        |   |  | $ | 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 EndedMarch 31, |         |   | Three Months EndedMarch 31, |  
|                                                          |  | 2010                        |         |   | 2009                        |   |         | 2010 |  |   | 2009    |  
|Product revenue                                           |  | $                           | 589,047 |   |                             | $ | 563,080 |      |  | $ | 589,047 |   |  | $ | 563,080 |  
|Service revenue                                           |  |                             | 291,415 |   |                             |   | 279,481 |      |  |   | 291,415 |   |  |   | 279,481 |  
|                                                          |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Total revenue                                             |  |                             | 880,462 |   |                             |   | 842,561 |      |  |   | 880,462 |   |  |   | 842,561 |  
|                                                          |  |                             |         |  
|Cost of products                                          |  |                             | 581,787 |   |                             |   | 551,585 |      |  |   | 581,787 |   |  |   | 551,585 |  
|                                                          |  |                             |         |  
|Cost of services:                                         |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Operating compensation and benefits                       |  |                             | 141,879 |   |                             |   | 137,640 |      |  |   | 141,879 |   |  |   | 137,640 |  
|Other operating costs                                     |  |                             | 82,680  |   |                             |   | 80,696  |      |  |   | 82,680  |   |  |   | 80,696  |  
|Depreciation and amortization                             |  |                             | 17,488  |   |                             |   | 17,565  |      |  |   | 17,488  |   |  |   | 17,565  |  
|                                                          |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Total cost of services                                    |  |                             | 242,047 |   |                             |   | 235,901 |      |  |   | 242,047 |   |  |   | 235,901 |  
|                                                          |  |                             |         |  
|Total cost of products and services                       |  |                             | 823,834 |   |                             |   | 787,486 |      |  |   | 823,834 |   |  |   | 787,486 |  
|General and administrative expense                        |  |                             | 19,720  |   |                             |   | 18,171  |      |  |   | 19,634  |   |  |   | 18,131  |  
|Impairment and restructuring charges                      |  |                             | 812     |   |                             |   | 1,409   |      |  |   | 812     |   |  |   | 1,409   |  
|Depreciation and amortization                             |  |                             | 8,266   |   |                             |   | 7,533   |      |  |   | 8,266   |   |  |   | 7,533   |  
|                                                          |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|                                                          |  |                             | 852,632 |   |                             |   | 814,599 |      |  |   | 852,546 |   |  |   | 814,559 |  
|                                                          |  |                             |         |  
|Income from operations                                    |  |                             | 27,830  |   |                             |   | 27,962  |      |  |   | 27,916  |   |  |   | 28,002  |  
|                                                          |  |                             |         |  
|Other expense:                                            |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Interest expense, net                                     |  |                             | (35,904 | ) |                             |   | (33,009 | )    |  |   | (27,445 | ) |  |   | (22,622 | )
|Loss on interest rate swap                                |  |                             | (5,144  | ) |                             |   | (763    | )    |  |   |        |   |  |   |        |  
|Other income, net                                         |  |                             | 230     |   |                             |   |        |      |  |   | 230     |   |  |   |        |  
|                                                          |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Income (loss) before income taxes                         |  |                             | (12,988 | ) |                             |   | (5,810  | )    |  |   | 701     |   |  |   | 5,380   |  
|Income tax benefit (provision)                            |  |                             | (574    | ) |                             |   | 1,111   |      |  |   | 95      |   |  |   | (3,604  | )
|                                                          |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Net income (loss)                                         |  |                             | (13,562 | ) |                             |   | (4,699  | )    |  |   | 796     |   |  |   | 1,776   |  
|Less: Net income attributable to noncontrolling interests |  |                             | (930    | ) |                             |   | (759    | )    |  |   | (930    | ) |  |   | (759    | )
|                                                          |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Net income (loss) attributable to the Company             |  | $                           | (14,492 | ) |                             | $ | (5,458  | )    |  | $ | (134    | ) |  | $ | 1,017   |  
|                                                          |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  

The accompanying notes are an integral part of these statements.



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US ONCOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)

(unaudited, in thousands)



|                                             |  |                                         |   |  |          |     |                          |   |                    |  |   |                         |   |  |       |        |   |  |   |          |  
|-------------------------------------------- |  | --------------------------------------- | - |  | -------- | --- | ------------------------ | - | ------------------ |  | - | ----------------------- | - |  | ----- | ------ | - |  | - | -------- | -
|                                             |  | US Oncology Holdings, Inc. Shareholders |   |  |          |     |                          |   |                   
|                                             |  | SharesIssued                            |   |  | ParValue |     | AdditionalPaid-InCapital |   | AccumulatedDeficit |  |   | NoncontrollingInterests |   |  | Total |       
|                                             |  |                                         |   |  |          |    
|Balance at December 31, 2009                 |  | 422,951                                 |   |  | $        | 423 |                          | $ | 108,723            |  | $ | (415,624                | ) |  | $     | 15,605 |   |  | $ | (290,873 | )
|                                             |  |                                         |   |  |          |    
|Share-based compensation                     |  |                                        |   |  |          |    |                          |   | 646                |  |   |                        |   |  |       |       |   |  |   | 646      |  
|Exercise of options to purchase common stock |  | 12                                      |   |  |          |    |                          |   | 17                 |  |   |                        |   |  |       |       |   |  |   | 17       |  
|Restricted stock award issuances             |  | 100                                     |   |  |          |    |                          |   |                   |  |   |                        |   |  |       |       |   |  |   |         |  
|Forfeiture of restricted stock awards        |  | (120                                    | ) |  |          |    |                          |   |                   |  |   |                        |   |  |       |       |   |  |   |         |  
|Distributions to noncontrolling interests    |  |                                        |   |  |          |    |                          |   |                   |  |   |                        |   |  |       | (1,377 | ) |  |   | (1,377   | )
|Net income (loss)                            |  |                                        |   |  |          |    |                          |   |                   |  |   | (14,492                 | ) |  |       | 930    |   |  |   | (13,562  | )
|                                             |  |                                         |   |  |          |     |                          |   |                    |  |   |                         |   |  |       |        |   |  |   |          |  
|                                             |  |                                         |   |  |          |    
|Balance at March 31, 2010                    |  | 422,943                                 |   |  | $        | 423 |                          | $ | 109,386            |  | $ | (430,116                | ) |  | $     | 15,158 |   |  | $ | (305,149 | )
|                                             |  |                                         |   |  |          |     |                          |   |                    |  |   |                         |   |  |       |        |   |  |   |          |  

US ONCOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(unaudited, in thousands, except share information)



|                                          |  |                               |  |          |   |                          |   |         |                    |  |   |                         |   |  |       |        |   |  |   |         |  
|----------------------------------------- |  | ----------------------------- |  | -------- | - | ------------------------ | - | ------- | ------------------ |  | - | ----------------------- | - |  | ----- | ------ | - |  | - | ------- | -
|                                          |  | US Oncology, Inc. Shareholder |  |          |   |                          |   |         |                   
|                                          |  | SharesIssued                  |  | ParValue |   | AdditionalPaid-InCapital |   |         | AccumulatedDeficit |  |   | NoncontrollingInterests |   |  | Total |       
|                                          |  |                               |  |          |   |                         
|Balance at December 31, 2009              |  | 100                           |  | $        | 1 |                          | $ | 551,986 |                    |  | $ | (368,930                | ) |  | $     | 15,605 |   |  | $ | 198,662 |  
|                                          |  |                               |  |          |   |                         
|Share-based compensation                  |  |                              |  |          |  |                          |   | 646     |                    |  |   |                        |   |  |       |       |   |  |   | 646     |  
|Dividend paid                             |  |                              |  |          |  |                          |   | (9,172  | )                  |  |   |                        |   |  |       |       |   |  |   | (9,172  | )
|Distributions to noncontrolling interests |  |                              |  |          |  |                          |   |        |                    |  |   |                        |   |  |       | (1,377 | ) |  |   | (1,377  | )
|Net income (loss)                         |  |                              |  |          |  |                          |   |        |                    |  |   | (134                    | ) |  |       | 930    |   |  |   | 796     |  
|                                          |  |                               |  |          |   |                          |   |         |                    |  |   |                         |   |  |       |        |   |  |   |         |  
|                                          |  |                               |  |          |   |                         
|Balance at March 31, 2010                 |  | 100                           |  | $        | 1 |                          | $ | 543,460 |                    |  | $ | (369,064                | ) |  | $     | 15,158 |   |  | $ | 189,555 |  
|                                          |  |                               |  |          |   |                          |   |         |                    |  |   |                         |   |  |       |        |   |  |   |         |  

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.           |  
|                                                                                         |  | Three Months EndedMarch 31, |         |   | Three Months EndedMarch 31, |  
|                                                                                         |  | 2010                        |         |   | 2009                        |   |         | 2010 |  |   | 2009    |  
|Cash flows from operating activities:                                                    |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Net income (loss)                                                                        |  | $                           | (13,562 | ) |                             | $ | (4,699  | )    |  | $ | 796     |   |  | $ | 1,776   |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Depreciation and amortization, including amortization of deferred financing costs        |  |                             | 27,923  |   |                             |   | 27,468  |      |  |   | 27,320  |   |  |   | 26,871  |  
|Impairment and restructuring charges                                                     |  |                             | 812     |   |                             |   | 1,409   |      |  |   | 812     |   |  |   | 1,409   |  
|Deferred income taxes                                                                    |  |                             | 36      |   |                             |   | (2,502  | )    |  |   | (31     | ) |  |   | 5,380   |  
|Non-cash compensation expense                                                            |  |                             | 646     |   |                             |   | 569     |      |  |   | 646     |   |  |   | 569     |  
|Gain on sale of assets                                                                   |  |                             | (655    | ) |                             |   |        |      |  |   | (655    | ) |  |   |        |  
|Equity in earnings of joint ventures                                                     |  |                             | (158    | ) |                             |   | (609    | )    |  |   | (158    | ) |  |   | (609    | )
|Loss on interest rate swap                                                               |  |                             | 5,144   |   |                             |   | 763     |      |  |   |        |   |  |   |        |  
|Non-cash interest under PIK election                                                     |  |                             | 7,908   |   |                             |   | 9,313   |      |  |   |        |   |  |   |        |  
|(Increase) Decrease in:                                                                  |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Accounts and other receivables                                                           |  |                             | (30,720 | ) |                             |   | (7,049  | )    |  |   | (30,720 | ) |  |   | (7,049  | )
|Prepaid expenses and other current assets                                                |  |                             | (4,038  | ) |                             |   | (2,977  | )    |  |   | (3,993  | ) |  |   | (2,977  | )
|Inventories                                                                              |  |                             | 32,591  |   |                             |   | 20,674  |      |  |   | 32,591  |   |  |   | 20,674  |  
|Other assets                                                                             |  |                             |        |   |                             |   | 19      |      |  |   |        |   |  |   | 19      |  
|Increase (Decrease) in:                                                                  |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Accounts payable                                                                         |  |                             | 5,584   |   |                             |   | 15,705  |      |  |   | 5,564   |   |  |   | 15,804  |  
|Due from/to affiliates                                                                   |  |                             | 7,118   |   |                             |   | (5,896  | )    |  |   | 7,160   |   |  |   | (6,033  | )
|Income taxes receivable/payable                                                          |  |                             | 961     |   |                             |   | 1,429   |      |  |   | 360     |   |  |   | (1,737  | )
|Other accrued liabilities                                                                |  |                             | (34,894 | ) |                             |   | (26,654 | )    |  |   | (25,710 | ) |  |   | (23,070 | )
|                                                                                         |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Net cash provided by operating activities                                                |  |                             | 4,696   |   |                             |   | 26,963  |      |  |   | 13,982  |   |  |   | 31,027  |  
|                                                                                         |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Cash flows from investing activities:                                                    |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Acquisition of property and equipment                                                    |  |                             | (12,855 | ) |                             |   | (16,047 | )    |  |   | (12,855 | ) |  |   | (16,047 | )
|Net payments in affiliation transactions                                                 |  |                             | (1,514  | ) |                             |   |        |      |  |   | (1,514  | ) |  |   |        |  
|Investment in joint venture                                                              |  |                             | (82     | ) |                             |   |        |      |  |   | (82     | ) |  |   |        |  
|Net payments for acquisition of business                                                 |  |                             | (4,367  | ) |                             |   |        |      |  |   | (4,367  | ) |  |   |        |  
|Distributions from unconsolidated subsidiaries                                           |  |                             | 1,159   |   |                             |   | 705     |      |  |   | 1,159   |   |  |   | 705     |  
|                                                                                         |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Net cash used in investing activities                                                    |  |                             | (17,659 | ) |                             |   | (15,342 | )    |  |   | (17,659 | ) |  |   | (15,342 | )
|                                                                                         |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Cash flows from financing activities:                                                    |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Repayment of other indebtedness                                                          |  |                             | (6,173  | ) |                             |   | (6,448  | )    |  |   | (6,173  | ) |  |   | (6,448  | )
|Debt financing costs                                                                     |  |                             | (102    | ) |                             |   |        |      |  |   | (102    | ) |  |   |        |  
|Net distributions to parent                                                              |  |                             |        |   |                             |   |        |      |  |   | (9,172  | ) |  |   | (4,064  | )
|Distributions to noncontrolling interests                                                |  |                             | (1,377  | ) |                             |   | (806    | )    |  |   | (1,377  | ) |  |   | (806    | )
|Proceeds from exercise of stock options                                                  |  |                             | 17      |   |                             |   |        |      |  |   |        |   |  |   |        |  
|                                                                                         |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Net cash used in financing activities                                                    |  |                             | (7,635  | ) |                             |   | (7,254  | )    |  |   | (16,824 | ) |  |   | (11,318 | )
|                                                                                         |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Increase (Decrease) in cash and cash equivalents                                         |  |                             | (20,598 | ) |                             |   | 4,367   |      |  |   | (20,501 | ) |  |   | 4,367   |  
|Cash and cash equivalents:                                                               |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Beginning of period                                                                      |  |                             | 161,811 |   |                             |   | 104,477 |      |  |   | 161,589 |   |  |   | 104,476 |  
|                                                                                         |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|End of period                                                                            |  | $                           | 141,213 |   |                             | $ | 108,844 |      |  | $ | 141,088 |   |  | $ | 108,843 |  
|                                                                                         |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Interest paid                                                                            |  | $                           | 52,140  |   |                             | $ | 36,653  |      |  | $ | 52,129  |   |  | $ | 36,641  |  
|Income taxes refunded                                                                    |  |                             | (420    | ) |                             |   | (53     | )    |  |   | (420    | ) |  |   | (53     | )
|Non-cash investing and financing transactions:                                           |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Notes issued for interest paid-in-kind                                                   |  |                             | 15,733  |   |                             |   | 18,865  |      |  |   |        |   |  |   |        |  

The accompanying notes
are an integral part of these statements.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 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 1,338 physicians operating in 505 locations, including
101 radiation oncology facilities in 38 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 generally accepted accounting principles 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, except for the adoption of the accounting standards discussed in Note 11, and considered necessary for a fair presentation 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 whereas 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 March 31, 2010 and 2009, the affiliated practices under comprehensive service agreements derived 40.3% and 39.4%, respectively, of their net patient revenue from services provided under the Medicare program (of which 7.0% and 6.4%,
respectively, relate to Medicare managed care) and 4.0% and 3.5%, respectively, from services provided under state Medicaid programs. Capitation revenues were less than 1% of total net patient revenue in both periods. One additional payer, depending
on the quarter, may represent more or less than 10% of the aggregate net revenues of affiliated practices under comprehensive service agreements. During the three months ended March 31, 2010 and 2009, that payer represented 9.7% and 10.1%,
respectively, 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 caused by chemotherapy, as well as anemia in cancer patients who are not currently receiving chemotherapy. ESAs are administered to increase levels of healthy red blood cells as
an alternative to blood transfusions.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



On July 30, 2007, the Centers for Medicare and Medicaid Services (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 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 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 Risk
Evaluation and Mitigation Strategy (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. Operating income attributable to ESAs administered by our network of affiliated physicians was $4.3 million and $5.6 million during the three months ended March 31, 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. The impact of the REMS is not yet known as prescribing patterns are changing now that the REMS is in effect.

Decreasing financial performance of affiliated practices as a result of declining ESA usage also affects their relationship with us 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 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.

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 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.

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.

On October 30, 2009, CMS announced final changes to policies and payment rates for services
to be furnished during 2010 by physicians and nonphysician practitioners who are paid under the Medicare physician fee schedule. Under the statutory formula, the conversion factor for 2010 was estimated to decrease by 21.3% unless Congress again
enacted superseding legislation. In addition, CMS projected that changes to policies and payment rates for 2010 would result in a 1% decrease (6% decrease in 2013 under 4-year phase-in) in overall payments to the specialty of hematology/oncology and
a 1% decrease (5% decrease in 2013) in overall payments to the specialty of radiation oncology. To date, there have been three extensions approved by Congress and signed by President Obama delaying the 21.3% payment reduction. The most recent,
approved by Congress and signed by the president on April 15, 2010, is the Continuing Extension Act of 2010 (H.R. 4851) which delays the payment reduction until May 31, 2010. The most recent extension was retroactive to April 1, 2010.



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##### Table of Contents

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



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 25.0% and 25.1% of revenue for the three month periods ended March 31, 2010, and 2009, respectively. Set forth below is selected, unaudited financial information for Texas
Oncology (in thousands):



|                                     |  |                             |         |      |   |        
|------------------------------------ |  | --------------------------- | ------- | ---- | - | -------
|                                     |  | Three Months EndedMarch 31,
|                                     |  | 2010                        |         | 2009
|                                     |  |                            
|Revenue of Texas Oncology, P.A.      |  | $                           | 220,128 |      | $ | 211,503
|Less: Reimbursement of expenses      |  |                             | 207,447 |      |   | 201,270
|                                     |  |                             |         |      |   |        
|Earnings component of management fee |  | $                           | 12,681  |      | $ | 10,233 
|                                     |  |                             |         |      |   |        

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
$6.4 million and a decrease in future interest rates of 1.00 percent would negatively impact its fair value by the same amount. As of March 31, 2010, $84.7 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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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



The following table summarizes the assets and liabilities measured at fair value on a
recurring basis as of March 31, 2010 (in thousands):



|                            |  |                                |        |                                                              |   |                                             |  |                                         |        |  |   |  
|--------------------------- |  | ------------------------------ | ------ | ------------------------------------------------------------ | - | ------------------------------------------- |  | --------------------------------------- | ------ |  | - | -
|                            |  | Fair Value as ofMarch 31, 2010 |        | Quoted Prices inActive Markets forIdentical 
Assets(Level 1) |   | Significant OtherObservable Inputs(Level 2) |  | SignificantUnobservable Inputs(Level 3)
|Assets                      |  | $                              |       |                                                              | $ |                                            |  | $                                       |       |  | $ | 
|                            |  |                                |        |                                                             
|Liabilities                 |  |                                |        |                                                              |   |                                             |  |                                         |        |  |   |  
|Other accrued liabilities   |  |                                | 17,563 |                                                              |   |                                            |  |                                         | 17,563 |  |   | 
|Other long-term liabilities |  |                                | 11,356 |                                                              |   |                                            |  |                                         | 11,356 |  |   | 
|                            |  |                                |        |                                                              |   |                                             |  |                                         |        |  |   |  
|Total                       |  | $                              | 28,919 |                                                              | $ |                                            |  | $                                       | 28,919 |  | $ | 
|                            |  |                                |        |                                                              |   |                                             |  |                                         |        |  |   |  

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 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 months ended March 31, 2010 and 2009 as follows (in thousands):



|                            |  |                             |        |   |      |   |      |  
|--------------------------- |  | --------------------------- | ------ | - | ---- | - | ---- | -
|                            |  | Three Months EndedMarch 31, |       
|                            |  | 2010                        |        |   | 2009 |  
|Other income (expense), net |  | $                           | (5,144 | ) |      | $ | (763 | )

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 three months ended
March 31, 2010 consisted of the following (in thousands):



|                                                                                           |  |                       |         |   |                           |   |       |            |  |          |     |                           |   |         |               |   |          |   |  |   |        
|------------------------------------------------------------------------------------------ |  | --------------------- | ------- | - | ------------------------- | - | ----- | ---------- |  | -------- | --- | ------------------------- | - | ------- | ------------- | - | -------- | - |  | - | -------
|                                                                                           |  | ServiceAgreements,net |         |   | CustomerRelationships,net |   |       | Trademarks |  | Goodwill |     | AccumulatedImpairmentLoss |   |         | Goodwill, net
|Balance at December 31, 2009                                                               |  | $                     | 251,397 |   |                           | $ | 3,244 |            |  | $        |    |                           | $ | 757,270 |               | $ | (380,000 | ) |  | $ | 377,270
|Additions                                                                                  |  |                       | 1,514   |   |                           |   | 2,180 |            |  |          | 510 |                           |   | 1,647   |               |   |         |   |  |   | 1,647  
|Amortization expense and other                                                             |  |                       | (5,127  | ) |                           |   | (160  | )          |  |          |    |                           |   |        |               |   |         |   |  |   |       
|                                                                                           |  |                       |         |   |                           |   |       |            |  |          |     |                           |   |         |               |   |          |   |  |   |        
|Balance at March 31, 2010                                                                  |  | $                     | 247,784 |   |                           | $ | 5,264 |            |  | $        | 510 |                           | $ | 758,917 |               | $ | (380,000 | ) |  | $ | 378,917
|                                                                                           |  |                       |         |   |                           |   |       |            |  |          |     |                           |   |         |               |   |          |   |  |   |        
|                                                                                           |  |                       |         |   |                           |  
|Average of straight-line based amortization period remaining in years as of March 31, 2010 |  |                       | 12      |   |                           |   | 7     |            |  |          | n/a |                           |   | n/a     |               |   |          |   |  |   |        

Customer relationships, net, are classified as other assets in the accompanying Condensed
Consolidated Balance Sheet. Accumulated amortization relating to service agreements was $78.4 million and $73.4 million at March 31, 2010 and December 31, 2009, respectively. The amortization expense of amortizable intangible assets
for the three months ended March 31, 2010 was $5.0 million, and the estimated amortization expense for the five succeeding years approximates $20 million per year.

During the three months ended March 31, 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.



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##### Table of Contents

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



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 three months ended March 31, 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 ended March 31, 2010 and 2009 consisted of the following (in
thousands):



|                        |  |                              |     |      |   |      
|----------------------- |  | ---------------------------- | --- | ---- | - | -----
|                        |  | Three Months Ended March 31,
|                        |  | 2010                         |     | 2009
|Severance costs         |  | $                            | 720 |      | $ | 1,242
|Service agreements, net |  |                              |    |      |   | 150  
|Other, net              |  |                              | 92  |      |   | 17   
|                        |  |                              |     |      |   |      
|Total                   |  | $                            | 812 |      | $ | 1,409
|                        |  |                              |     |      |   |      

During the three months ended March 31, 2010, the
Company recorded $0.7 million of severance charges for involuntary terminations. These charges will be paid through the first quarter of 2011.

During the three months ended March 31, 2009, the Company recorded $1.2 million of severance charges related to certain corporate
personnel in connection with efforts to further reduce costs. In addition, an unamortized service agreement intangible was impaired for $0.2 million related to a practice which converted from a comprehensive services model to a targeted physician
services relationship.

NOTE 6  Indebtedness

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



|                                                |  |           |           |   |              |   |           |  
|----------------------------------------------- |  | --------- | --------- | - | ------------ | - | --------- | -
|                                                |  | March 31, |           |   | December 31, |  
|                                                |  | 2010      |           |   | 2009         |  
|                                                |  |          
|US Oncology, Inc.                               |  |           |           |   |              |   |           |  
|9.125% Senior Secured Notes, due 2017           |  | $         | 760,043   |   |              | $ | 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                              |  |           | 20,271    |   |              |   | 25,945    |  
|Mortgage, capital lease obligations and other   |  |           | 20,743    |   |              |   | 21,242    |  
|                                                |  |           |           |   |              |   |           |  
|                                                |  |           | 1,079,057 |   |              |   | 1,084,867 |  
|Less current maturities                         |  |           | (11,427   | ) |              |   | (10,579   | )
|                                                |  |           |           |   |              |   |           |  
|                                                |  |           | 1,067,630 |   |              |   | 1,074,288 |  
|                                                |  |           |           |   |              |   |           |  
|                                                |  |          
|US Oncology Holdings, Inc.                      |  |           |           |   |              |   |           |  
|Senior Floating Rate PIK Toggle Notes, due 2012 |  |           | 509,687   |   |              |   | 493,954   |  
|                                                |  |           |           |   |              |   |           |  
|                                                |  | $         | 1,577,317 |   |              | $ | 1,568,242 |  
|                                                |  |           |           |   |              |   |           |  



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



Future principal obligations under US Oncologys and Holdings long-term
indebtedness as of March 31, 2010, are as follows (in thousands):



|                         |  |                                |        |      |   |         |  |      |       |      |   |            |  |   |         |  |   |        
|------------------------ |  | ------------------------------ | ------ | ---- | - | ------- |  | ---- | ----- | ---- | - | ---------- |  | - | ------- |  | - | -------
|                         |  | Twelve months ending March 31,
|                         |  | 2011                           |        | 2012 |   | 2013    |  | 2014 |       | 2015 |   | Thereafter
|US Oncology payments due |  | $                              | 11,427 |      | $ | 8,295   |  | $    | 8,371 |      | $ | 2,063      |  | $ | 281,316 |  | $ | 782,542
|Holdings payments due    |  |                                |       |      |   | 509,687 |  |      |      |      |   |           |  |   |        |  |   |       
|                         |  |                                |        |      |   |         |  |      |       |      |   |            |  |   |         |  |   |        
|                         |  | $                              | 11,427 |      | $ | 517,982 |  | $    | 8,371 |      | $ | 2,063      |  | $ | 281,316 |  | $ | 782,542
|                         |  |                                |        |      |   |         |  |      |       |      |   |            |  |   |         |  |   |        

Financial Covenants

At March 31, 2010, we were in compliance with the financial covenants of our indebtedness. The senior secured revolving credit
facility contains the most restrictive 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 March 31, 2010, the terms of the senior secured revolving credit facility required that we maintain a maximum leverage ratio of 7.00:1. As of March 31, 2010, the maximum leverage ratio, as calculated under the terms of the senior
secured revolving credit facility, was 4.66:1. 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.

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 March 31, 2010, availability had been reduced by outstanding
letters of credit amounting to $30.4 million and $89.6 million was available for borrowing. At March 31, 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 an increase of 0.50% 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 three months ended March 31, 2010 and 2009, the Company elected to PIK interest on the Holdings Notes and total interest expense was $8.5 million and $10.4 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 101% of the redemption prices if redeemed prior to September 15, 2010 and at 100% of the redemption prices if redeemed on or after September 15, 2010.

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
March 31, 2010, US Oncology has the ability to make approximately $17.4 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 such as the $25.1 million loss on early extinguishment of debt in 2009. Delaware law also requires that US Oncology be solvent
both at



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



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. Based on projected LIBOR interest rates as of March 31, 2010, there will be available funds under the restricted payments provision in order to service, at a minimum,
the estimated interest rate swap obligations through the end of 2010. 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. We expect to issue $17.1 million in notes to settle the interest due in September, 2010. In addition, we are required to pay $9.9 million to settle the obligation
under our interest rate swap agreement for the interest period ending September 15, 2010. During the three months ended March 31, 2010, US Oncology paid dividends in the amount of $9.2 million to Holdings to finance obligations related to
the Holdings Notes and interest rate 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:



|                                                         |  |                     |         |                        |   |                |  |            |         |  |   |        
|-------------------------------------------------------- |  | ------------------- | ------- | ---------------------- | - | -------------- |  | ---------- | ------- |  | - | -------
|                                                         |  | As of
March 31,2010 |         | As of
December 31,2009
|                                                         |  | CarryingAmount      |         | Fair Value             |   | CarryingAmount |  | Fair Value
|                                                         |  | (in thousands)     
|9.125% Senior Secured Notes, due
2017(a)                 |  | $                   | 775,000 |                        | $ | 811,813        |  | $          | 775,000 |  | $ | 804,063
|10.75% Senior Subordinated Notes, due 2014               |  |                     | 275,000 |                        |   | 286,358        |  |            | 275,000 |  |   | 287,375
|Holdings Senior Floating Rate PIK Toggle Notes, due 2012 |  |                     | 509,687 |                        |   | 482,928        |  |            | 493,954 |  |   | 456,907



| | (a) | Does not include $15.0 million unamortized original issue discount balance.
| | --- | ---------------------------------------------------------------------------

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.



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



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 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 approximately $0.6 million during each of the three month periods ended March 31, 2010 and
2009, related to restricted stock and stock option awards made under the Equity Incentive Plan. At March 31, 2010, 1,377,219 shares of either restricted stock or stock options and 12,397,681 shares of stock options were available for future
awards.

The Company granted awards of 100,000 restricted shares with an aggregate fair value at the time of grant of less
than $0.1 million during the three months ended March 31, 2010 and 250,000 restricted shares with an aggregate fair value at the time of grant of approximately $0.1 million during the three months ended March 31, 2009. Restricted shares
vest over a three to five year period from the date of grant. During the three months ended March 31, 2010 there were no restricted shares forfeited by holders, and during the three months ended March 31, 2009, 211,500 restricted shares
were forfeited by holders.

The following summarizes activity for restricted shares awarded under the Equity Incentive Plan
for the three months ended March 31, 2010:



|                                                 |  |                   |  
|------------------------------------------------ |  | ----------------- | -
|                                                 |  | Restricted Shares |  
|                                                 | 
|Restricted shares outstanding, December 31, 2009 |  | 10,869,851        |  
|Granted                                          |  | 100,000           |  
|Vested                                           |  | (2,144,697        | )
|                                                 |  |                   |  
|Restricted shares outstanding, March 31, 2010    |  | 8,825,154         |  
|                                                 |  |                   |  

The following summarizes activity for options awarded under the Equity Incentive Plan for the three months
ended March 31, 2010:



|                                    |  |                             |   |  |                                |      |                                            |    
|----------------------------------- |  | --------------------------- | - |  | ------------------------------ | ---- | ------------------------------------------ | ---
|                                    |  | Stock Options              
|                                    |  | SharesRepresented byOptions |   |  | WeightedAverage 
ExercisePrice |      | Weighted 
AverageRemainingContractual Term
|                                    |  |                             |  
|Balance, December 31, 2009          |  | 13,319,050                  |   |  | $                              | 1.50 |                                            |    
|Exercised                           |  | (12,000                     | ) |  |                                | 1.43 |                                            |    
|Forfeited                           |  | (12,000                     | ) |  |                                | 0.89 |                                            |    
|                                    |  |                             |   |  |                                |      |                                            |    
|Balance, March 31, 2010             |  | 13,295,050                  |   |  |                                | 1.50 |                                            | 9.4
|                                    |  |                             |   |  |                                |      |                                            |    
|Options exercisable, March 31, 2010 |  | 362,350                     |   |  |                                | 1.41 |                                            | 5.3

At March 31, 2010,
13,295,050 options to purchase Holdings common stock were outstanding. During the three months ended March 31, 2010 and 2009, there were no options granted to purchase common shares. 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).

Under the Amended Director Plan, each eligible director at the effective date of the Director Stock Option Plan is automatically granted
an option to purchase 5,000 shares of common stock at fair value. In addition, each such director is



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



automatically granted an option to purchase 1,000 shares of common stock for each board committee on which such director served. 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 March 31, 2010, options to purchase 209,000 shares of common stock, net of
forfeitures, have been granted to directors under the Amended Director Plan with exercise prices ranging from $0.23 to $2.72. At March 31, 2010, 126,000 options to purchase Holdings common stock were outstanding. The options vest six months
after the date of grant. During the three months ended March 31, 2010, there were no exercises of options issued under the Amended Director Plan. Through March 31, 2010, 136,000 shares of restricted common stock have been granted to
directors under the Amended Director Plan. At March 31, 2010, 136,000 shares of restricted common stock were outstanding. At March 31, 2010, 655,000 shares were available for future awards under the Amended Director Plan.

NOTE 8  Income Taxes

The effective tax rate for the three months ended March 31, 2010 and 2009 was as follows (dollars in thousands):



|                                                                          |  |                              |         |    |                              |   |        |      |  |   |      |   |  |   |        |  
|------------------------------------------------------------------------- |  | ---------------------------- | ------- | -- | ---------------------------- | - | ------ | ---- |  | - | ---- | - |  | - | ------ | -
|                                                                          |  | US Oncology Holdings, Inc.   |         |    | US Oncology, Inc.            |  
|                                                                          |  | Three Months Ended March 31, |         |    | Three Months Ended March 31, |  
|                                                                          |  | 2010                         |         |    | 2009                         |   |        | 2010 |  |   | 2009 |  
|                                                                          |  |                              |         |   
|Income (loss) before income taxes                                         |  | $                            | (12,988 | )  |                              | $ | (5,810 | )    |  | $ | 701  |   |  | $ | 5,380  |  
|                                                                          |  |                              |         |   
|Less: Income before income taxes attributable to noncontrolling interests |  |                              | (930    | )  |                              |   | (759   | )    |  |   | (930 | ) |  |   | (759   | )
|                                                                          |  |                              |         |    |                              |   |        |      |  |   |      |   |  |   |        |  
|                                                                          |  |                              |         |   
|Income (loss) before income taxes attributable to the Company             |  | $                            | (13,918 | )  |                              | $ | (6,569 | )    |  | $ | (229 | ) |  | $ | 4,621  |  
|                                                                          |  |                              |         |    |                              |   |        |      |  |   |      |   |  |   |        |  
|                                                                          |  |                              |         |   
|Income tax benefit (provision) attributable to the Company                |  | $                            | (574    | )  |                              | $ | 1,111  |      |  | $ | 95   |   |  | $ | (3,604 | )
|                                                                          |  |                              |         |    |                              |   |        |      |  |   |      |   |  |   |        |  
|                                                                          |  |                              |         |   
|Effective tax rate attributable to the Company                            |  |                              | (4.1    | )% |                              |   | 16.9   | %    |  |   | 41.5 | % |  |   | 78.0   | %
|                                                                          |  |                              |         |    |                              |   |        |      |  |   |      |   |  |   |        |  

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.



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



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 March 31, |        |   | Three Months Ended March 31, |      
|                                              |  | 2010                         |        |   | 2009                         |       |    | 2010 |   |       | 2009 | 
|                                              |  |                              |        |   |                              |       |    |     
|U.S. statutory income tax rate                |  | $                            | 4,871  |   |                              | 35.0  | %  |      | $ | 2,299 |      |  | 35.0 | % |  | $ | 80   |   |  | 35.0   | % |  | $ | (1,617 | ) |  | 35.0 | %
|Non-deductible expenses                       |  |                              | (237   | ) |                              | (1.7  | )  |      |   | (254  | )    |  | (3.9 | ) |  |   | (237 | ) |  | (103.8 | ) |  |   | (254   | ) |  | 5.5  |  
|State income taxes, net of federal benefit(1) |  |                              | 68     |   |                              | 0.5   |    |      |   | (482  | )    |  | (7.4 | ) |  |   | (349 | ) |  | (152.9 | ) |  |   | (565   | ) |  | 12.2 |  
|Reserve for uncertain tax positions           |  |                              |       |   |                              |      |    |      |   | (600  | )    |  | (9.1 | ) |  |   |     |   |  |       |   |  |   | (600   | ) |  | 13.1 |  
|Valuation allowance                           |  |                              | (5,276 | ) |                              | (37.9 | )  |      |   |      |      |  |     |   |  |   |     |   |  |       |   |  |   |       |   |  |     |  
|Other(2)                                      |  |                              |       |   |                              |      |    |      |   | 148   |      |  | 2.3  |   |  |   | 601  |   |  | 263.2  |   |  |   | (568   | ) |  | 12.2 |  
|                                              |  |                              |        |   |                              |       |    |      |   |       |      |  |      |   |  |   |      |   |  |        |   |  |   |        |   |  |      |  
|                                              |  |                              |        |   |                              |       |    |     
|Effective tax benefit (provision)(3)          |  | $                            | (574   | ) |                              | (4.1  | )% |      | $ | 1,111 |      |  | 16.9 | % |  | $ | 95   |   |  | 41.5   | % |  | $ | (3,604 | ) |  | 78.0 | %
|                                              |  |                              |        |   |                              |       |    |      |   |       |      |  |      |   |  |   |      |   |  |        |   |  |   |        |   |  |      |  



|(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 three months ended March 31, 2010, an adjustment was made in the interim financial statements to increase the income tax benefit for US
Oncology, Inc. to the effective tax rate on the estimated results for the year ended December 31, 2010.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | For the three months ended March 31, 2010, the annual effective tax rate for US Oncology Holdings, 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. As a result, in the interim financial statements, taxes were provided for based on the actual results for the three months ended
March 31, 2010 rather than an estimated effective tax rate for the fiscal year.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At March 31,
2010, the Company had a gross federal net operating loss carryforward benefit of approximately $127.6 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 $21.7 million against it federal deferred tax assets as of March 31, 2010.

As of March 31,
2010, the Company had an accrual for uncertain tax positions of $2.7 million which is generally expected to settle within the next twelve months.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



The tables below present segment results for the three months ended March 31, 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 March 31, 2010 |         
|                                     |  | MedicalOncologyServices           |          |   | CancerCenterServices |   |         | PharmaceuticalServices |  |   | Research/Other |   |  | CorporateCosts |         |   | Eliminations 
(1) |   |         | Total | 
|US Oncology, Inc.                    |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|Product revenues                     |  | $                                 | 435,570  |   |                      | $ |        |                        |  | $ | 602,960        |   |  | $              |        |   |                   | $ |        |       |  | $ | (449,483 | ) |  | $ | 589,047  |  
|Service revenues                     |  |                                   | 159,563  |   |                      |   | 98,274  |                        |  |   | 15,259         |   |  |                | 18,319  |   |                   |   |        |       |  |   |         |   |  |   | 291,415  |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|Total revenues                       |  |                                   | 595,133  |   |                      |   | 98,274  |                        |  |   | 618,219        |   |  |                | 18,319  |   |                   |   |        |       |  |   | (449,483 | ) |  |   | 880,462  |  
|Operating expenses                   |  |                                   | (577,118 | ) |                      |   | (64,748 | )                      |  |   | (595,712       | ) |  |                | (18,250 | ) |                   |   | (19,635 | )     |  |   | 449,483  |   |  |   | (825,980 | )
|Impairment and restructuring charges |  |                                   | (92      | ) |                      |   |        |                        |  |   |               |   |  |                |        |   |                   |   | (720    | )     |  |   |         |   |  |   | (812     | )
|Depreciation and amortization        |  |                                   |         |   |                      |   | (9,815  | )                      |  |   | (591           | ) |  |                | (59     | ) |                   |   | (15,289 | )     |  |   |         |   |  |   | (25,754  | )
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations        |  | $                                 | 17,923   |   |                      | $ | 23,711  |                        |  | $ | 21,916         |   |  | $              | 10      |   |                   | $ | (35,644 | )     |  | $ |         |   |  | $ | 27,916   |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|                                     |  |                                   |          |   |                      |   |        
|US Oncology Holdings, Inc.           |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|Operating expenses                   |  | $                                 |         |   |                      | $ |        |                        |  | $ |               |   |  | $              |        |   |                   | $ | (86     | )     |  | $ |         |   |  | $ | (86      | )
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations        |  | $                                 | 17,923   |   |                      | $ | 23,711  |                        |  | $ | 21,916         |   |  | $              | 10      |   |                   | $ | (35,730 | )     |  | $ |         |   |  | $ | 27,830   |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|Goodwill                             |  | $                                 | 28,913   |   |                      | $ | 191,424 |                        |  | $ | 158,580        |   |  | $              |        |   |                   | $ |        |       |  | $ |         |   |  | $ | 378,917  |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  



|(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).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|------------------------------------ |  | --------------------------------- | -------- | - | -------------------- | - | ------- | ---------------------- |  | - | -------------- | - |  | -------------- | ------- | - | ----------------- | - | ------- | ----- |  | - | -------- | - |  | - | -------- | -
|                                     |  | Three Months Ended March 31, 2009 |         
|                                     |  | MedicalOncologyServices           |          |   | CancerCenterServices |   |         | PharmaceuticalServices |  |   | Research/Other |   |  | CorporateCosts |         |   | Eliminations 
(1) |   |         | Total | 
|US Oncology, Inc.                    |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|Product revenues                     |  | $                                 | 429,162  |   |                      | $ |        |                        |  | $ | 562,430        |   |  | $              |        |   |                   | $ |        |       |  | $ | (428,512 | ) |  | $ | 563,080  |  
|Service revenues                     |  |                                   | 152,768  |   |                      |   | 92,317  |                        |  |   | 15,173         |   |  |                | 19,223  |   |                   |   |        |       |  |   |         |   |  |   | 279,481  |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|Total revenues                       |  |                                   | 581,930  |   |                      |   | 92,317  |                        |  |   | 577,603        |   |  |                | 19,223  |   |                   |   |        |       |  |   | (428,512 | ) |  |   | 842,561  |  
|Operating expenses                   |  |                                   | (565,371 | ) |                      |   | (61,059 | )                      |  |   | (555,237       | ) |  |                | (16,766 | ) |                   |   | (18,131 | )     |  |   | 428,512  |   |  |   | (788,052 | )
|Impairment and restructuring charges |  |                                   | (167     | ) |                      |   |        |                        |  |   |               |   |  |                |        |   |                   |   | (1,242  | )     |  |   |         |   |  |   | (1,409   | )
|Depreciation and amortization        |  |                                   |         |   |                      |   | (9,376  | )                      |  |   | (707           | ) |  |                | (80     | ) |                   |   | (14,935 | )     |  |   |         |   |  |   | (25,098  | )
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations        |  | $                                 | 16,392   |   |                      | $ | 21,882  |                        |  | $ | 21,659         |   |  | $              | 2,377   |   |                   | $ | (34,308 | )     |  | $ |         |   |  | $ | 28,002   |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|                                     |  |                                   |          |   |                      |   |        
|US Oncology Holdings, Inc.           |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|Operating expenses                   |  | $                                 |         |   |                      | $ |        |                        |  | $ |               |   |  | $              |        |   |                   | $ | (40     | )     |  | $ |         |   |  | $ | (40      | )
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations        |  | $                                 | 16,392   |   |                      | $ | 21,882  |                        |  | $ | 21,659         |   |  | $              | 2,377   |   |                   | $ | (34,348 | )     |  | $ |         |   |  | $ | 27,962   |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                   |   |         |       |  |   |          |   |  |   |          |  
|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



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 March 31, 2010, total future minimum lease payments, including escalation provisions and leases with
entities affiliated with practices, are as follows (in thousands):



|             |  |                                |        |      |   |        |  |      |        |      |   |            |  |   |        |  |   |        
|------------ |  | ------------------------------ | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | - | ------ |  | - | -------
|             |  | Twelve months ending March 31,
|             |  | 2011                           |        | 2012 |   | 2013   |  | 2014 |        | 2015 |   | Thereafter
|Payments due |  | $                              | 85,644 |      | $ | 78,903 |  | $    | 71,011 |      | $ | 62,297     |  | $ | 53,056 |  | $ | 277,771

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 relates to an ongoing investigation being
conducted by that office regarding the manufacturers sales and marketing practices. The Company intends to fully cooperate with the request. At the present time, the U.S. Attorney 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 U.S. Attorney will not make a determination that wrongdoing has occurred. We have devoted significant resources responding to the subpoena and
anticipate that such resources will be required on an ongoing basis to fully respond.

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.

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.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



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 2010. 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
March 31, 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 $14.8 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 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 March 31, 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.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



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. During the three months ended March 31, 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 is pending. As a
result, the practice resumed diagnostic services in September, 2008 and radiation services in February, 2009.

The
construction of the cancer center in which the practice operates was financed as an operating lease and, as such, is not recorded on the Companys balance sheet. At March 31, 2010, the lease had a remaining term of 16 years and the
net present value of minimum future lease payments is approximately $7.1 million.

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.

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.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



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 three months ended March 31, 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 March 31, 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.

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.

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.

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 the 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 March 31, 2010 and December 31, 2009 and for the three months ended March 31, 2010 and 2009.
The equity method has been used with respect to US Oncologys investments in its subsidiaries.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



As of March 31, 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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



US Oncology, Inc.

Condensed Consolidating Balance Sheet

As of March 31, 2010

(unaudited, in thousands, except share information)



|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|---------------------------------------------------------------------------- |  | -------------------------------------- | --------- | - | -------------------- | - | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | --------- | -
|                                                                             |  | US Oncology, 
Inc.(ParentCompany Only) |           |   | SubsidiaryGuarantors |   | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|ASSETS                                                                       |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Current assets:                                                              |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Cash and equivalents                                                         |  | $                                      |          |   |                      | $ | 140,490                   |  | $ | 598          |   |  | $            |         |      |  | $ | 141,088   |  
|Accounts receivable                                                          |  |                                        |          |   |                      |   | 365,668                   |  |   | 7,314        |   |  |              |         |      |  |   | 372,982   |  
|Other receivables                                                            |  |                                        |          |   |                      |   | 37,946                    |  |   |             |   |  |              |         |      |  |   | 37,946    |  
|Prepaid expenses and other current assets                                    |  |                                        | 798       |   |                      |   | 23,794                    |  |   | 943          |   |  |              |         |      |  |   | 25,535    |  
|Inventories                                                                  |  |                                        |          |   |                      |   | 120,051                   |  |   |             |   |  |              |         |      |  |   | 120,051   |  
|Deferred income taxes                                                        |  |                                        | 6,002     |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 6,002     |  
|Due from affiliates                                                          |  |                                        | 473,500   |   |                      |   |                          |  |   |             |   |  |              | (447,367 | )(a) |  |   | 26,133    |  
|Investment in subsidiaries                                                   |  |                                        | 532,949   |   |                      |   |                          |  |   |             |   |  |              | (532,949 | )(b) |  |   |          |  
|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Total current assets                                                         |  |                                        | 1,013,249 |   |                      |   | 687,949                   |  |   | 8,855        |   |  |              | (980,316 | )    |  |   | 729,737   |  
|Property and equipment, net                                                  |  |                                        |          |   |                      |   | 353,323                   |  |   | 43,795       |   |  |              |         |      |  |   | 397,118   |  
|Service agreements, net                                                      |  |                                        |          |   |                      |   | 245,088                   |  |   | 2,696        |   |  |              |         |      |  |   | 247,784   |  
|Goodwill                                                                     |  |                                        |          |   |                      |   | 373,324                   |  |   | 5,593        |   |  |              |         |      |  |   | 378,917   |  
|Other assets                                                                 |  |                                        | 24,819    |   |                      |   | 47,236                    |  |   | 1,639        |   |  |              |         |      |  |   | 73,694    |  
|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|                                                                             |  | $                                      | 1,038,068 |   |                      | $ | 1,706,920                 |  | $ | 62,578       |   |  | $            | (980,316 | )    |  | $ | 1,827,250 |  
|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|LIABILITIES AND EQUITY                                                       |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Current liabilities:                                                         |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Current maturities of long-term indebtedness                                 |  | $                                      | 9,503     |   |                      | $ | 429                       |  | $ | 1,495        |   |  | $            |         |      |  | $ | 11,427    |  
|Accounts payable                                                             |  |                                        |          |   |                      |   | 283,735                   |  |   | 765          |   |  |              |         |      |  |   | 284,500   |  
|Intercompany accounts                                                        |  |                                        | (248,738  | ) |                      |   | 257,639                   |  |   | (8,901       | ) |  |              |         |      |  |   |          |  
|Due to affiliates                                                            |  |                                        |          |   |                      |   | 547,667                   |  |   | 13,160       |   |  |              | (447,367 | )(a) |  |   | 113,460   |  
|Accrued compensation cost                                                    |  |                                        |          |   |                      |   | 53,121                    |  |   | 432          |   |  |              |         |      |  |   | 53,553    |  
|Accrued interest payable                                                     |  |                                        | 13,993    |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 13,993    |  
|Income taxes payable                                                         |  |                                        | 3,474     |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 3,474     |  
|Other accrued liabilities                                                    |  |                                        | 1         |   |                      |   | 31,743                    |  |   | 219          |   |  |              |         |      |  |   | 31,963    |  
|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Total current liabilities                                                    |  |                                        | (221,767  | ) |                      |   | 1,174,334                 |  |   | 7,170        |   |  |              | (447,367 | )    |  |   | 512,370   |  
|Deferred revenue                                                             |  |                                        |          |   |                      |   | 3,828                     |  |   |             |   |  |              |         |      |  |   | 3,828     |  
|Deferred income taxes                                                        |  |                                        | 36,627    |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 36,627    |  
|Long-term indebtedness                                                       |  |                                        | 1,048,811 |   |                      |   | 2,071                     |  |   | 16,748       |   |  |              |         |      |  |   | 1,067,630 |  
|Other long-term liabilities                                                  |  |                                        |          |   |                      |   | 13,909                    |  |   | 3,331        |   |  |              |         |      |  |   | 17,240    |  
|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Total liabilities                                                            |  |                                        | 863,671   |   |                      |   | 1,194,142                 |  |   | 27,249       |   |  |              | (447,367 | )    |  |   | 1,637,695 |  
|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Commitments and contingencies                                                |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Equity                                                                       |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Common stock, $0.01 par value, 100 shares authorized, issued and outstanding |  |                                        | 1         |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 1         |  
|Additional paid-in capital                                                   |  |                                        | 543,460   |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 543,460   |  
|Accumulated deficit                                                          |  |                                        | (369,064  | ) |                      |   |                          |  |   |             |   |  |              |         |      |  |   | (369,064  | )
|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Total Company stockholders equity                                           |  |                                        | 174,397   |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 174,397   |  
|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Noncontrolling interests                                                     |  |                                        |          |   |                      |   |                          |  |   | 15,158       |   |  |              |         |      |  |   | 15,158    |  
|Subsidiary equity                                                            |  |                                        |          |   |                      |   | 512,778                   |  |   | 20,171       |   |  |              | (532,949 | )(b) |  |   |          |  
|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Total equity                                                                 |  |                                        | 174,397   |   |                      |   | 512,778                   |  |   | 35,329       |   |  |              | (532,949 | )    |  |   | 189,555   |  
|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|                                                                             |  | $                                      | 1,038,068 |   |                      | $ | 1,706,920                 |  | $ | 62,578       |   |  | $            | (980,316 | )    |  | $ | 1,827,250 |  
|                                                                             |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  



|(a) | Elimination of intercompany balances
|--- | ------------------------------------

|(b) | Elimination of investment in subsidiaries
|--- | -----------------------------------------



-23-



---

##### Table of Contents

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



US Oncology, Inc.

Condensed Consolidating Balance Sheet

As of December 31, 2009

(in thousands, except share information)



|                                                                            |  |                                        |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |           |  
|--------------------------------------------------------------------------- |  | -------------------------------------- | --------- | - | -------------------- | - | ------------------------- |  | - | ------------ | - |  | ------------ | ---------- | ---- |  | - | --------- | -
|                                                                            |  | US Oncology, 
Inc.(ParentCompany Only) |           |   | SubsidiaryGuarantors |   | Non-guarantorSubsidiaries |  |   | 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
|--- | -----------------------------------------



-24-



---

##### Table of Contents

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



US Oncology, Inc.

Condensed Consolidating Statement of Operations

For the Three Months Ended March 31, 2010

(unaudited, in thousands)



|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|--------------------------------------------------------- |  | -------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | ------- | -
|                                                          |  | US Oncology, 
Inc.(ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Product revenue                                           |  | $                                      |        |   |                      | $ | 581,415 |                           |  | $ | 7,632        |   |  | $            |        |      |  | $ | 589,047 |  
|Service revenue                                           |  |                                        |        |   |                      |   | 285,179 |                           |  |   | 6,236        |   |  |              |        |      |  |   | 291,415 |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Total revenue                                             |  |                                        |        |   |                      |   | 866,594 |                           |  |   | 13,868       |   |  |              |        |      |  |   | 880,462 |  
|Cost of products                                          |  |                                        |        |   |                      |   | 574,249 |                           |  |   | 7,538        |   |  |              |        |      |  |   | 581,787 |  
|Cost of services:                                         |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Operating compensation and benefits                       |  |                                        |        |   |                      |   | 139,118 |                           |  |   | 2,761        |   |  |              |        |      |  |   | 141,879 |  
|Other operating costs                                     |  |                                        |        |   |                      |   | 82,262  |                           |  |   | 418          |   |  |              |        |      |  |   | 82,680  |  
|Depreciation and amortization                             |  |                                        |        |   |                      |   | 16,268  |                           |  |   | 1,220        |   |  |              |        |      |  |   | 17,488  |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Total cost of services                                    |  |                                        |        |   |                      |   | 237,648 |                           |  |   | 4,399        |   |  |              |        |      |  |   | 242,047 |  
|Total cost of products and services                       |  |                                        |        |   |                      |   | 811,897 |                           |  |   | 11,937       |   |  |              |        |      |  |   | 823,834 |  
|General and administrative expense                        |  |                                        | 129     |   |                      |   | 19,505  |                           |  |   |             |   |  |              |        |      |  |   | 19,634  |  
|Impairment and restructuring charges                      |  |                                        |        |   |                      |   | 812     |                           |  |   |             |   |  |              |        |      |  |   | 812     |  
|Depreciation and amortization                             |  |                                        |        |   |                      |   | 8,266   |                           |  |   |             |   |  |              |        |      |  |   | 8,266   |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|                                                          |  |                                        | 129     |   |                      |   | 840,480 |                           |  |   | 11,937       |   |  |              |        |      |  |   | 852,546 |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Income (loss) from operations                             |  |                                        | (129    | ) |                      |   | 26,114  |                           |  |   | 1,931        |   |  |              |        |      |  |   | 27,916  |  
|Other income (expense)                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Interest expense, net                                     |  |                                        | (27,199 | ) |                      |   | 194     |                           |  |   | (440         | ) |  |              |        |      |  |   | (27,445 | )
|Other income (expense), net                               |  |                                        |        |   |                      |   | 230     |                           |  |   |             |   |  |              |        |      |  |   | 230     |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Income (loss) before income taxes                         |  |                                        | (27,328 | ) |                      |   | 26,538  |                           |  |   | 1,491        |   |  |              |        |      |  |   | 701     |  
|Income tax benefit (provision)                            |  |                                        | 95      |   |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | 95      |  
|Equity in subsidiaries                                    |  |                                        | 28,029  |   |                      |   |        |                           |  |   |             |   |  |              | (28,029 | )(a) |  |   |        |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net income                                                |  |                                        | 796     |   |                      |   | 26,538  |                           |  |   | 1,491        |   |  |              | (28,029 | )    |  |   | 796     |  
|Less: Net income attributable to noncontrolling interests |  |                                        | (930    | ) |                      |   | (624    | )                         |  |   | (306         | ) |  |              | 930     | (a)  |  |   | (930    | )
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net income (loss) attributable to the Company             |  | $                                      | (134    | ) |                      | $ | 25,914  |                           |  | $ | 1,185        |   |  | $            | (27,099 | )    |  | $ | (134    | )
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  



|(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



US Oncology, Inc.

Condensed Consolidating Statement of Operations

For the Three Months Ended March 31, 2009

(unaudited, in thousands)



|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|--------------------------------------------------------- |  | -------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | ------- | -
|                                                          |  | US Oncology, 
Inc.(ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Product revenue                                           |  | $                                      |        |   |                      | $ | 555,072 |                           |  | $ | 8,008        |   |  | $            |        |      |  | $ | 563,080 |  
|Service revenue                                           |  |                                        |        |   |                      |   | 274,009 |                           |  |   | 5,472        |   |  |              |        |      |  |   | 279,481 |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Total revenue                                             |  |                                        |        |   |                      |   | 829,081 |                           |  |   | 13,480       |   |  |              |        |      |  |   | 842,561 |  
|Cost of products                                          |  |                                        |        |   |                      |   | 543,740 |                           |  |   | 7,845        |   |  |              |        |      |  |   | 551,585 |  
|Cost of services:                                         |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Operating compensation and benefits                       |  |                                        |        |   |                      |   | 135,181 |                           |  |   | 2,459        |   |  |              |        |      |  |   | 137,640 |  
|Other operating costs                                     |  |                                        |        |   |                      |   | 80,276  |                           |  |   | 420          |   |  |              |        |      |  |   | 80,696  |  
|Depreciation and amortization                             |  |                                        |        |   |                      |   | 16,498  |                           |  |   | 1,067        |   |  |              |        |      |  |   | 17,565  |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Total cost of services                                    |  |                                        |        |   |                      |   | 231,955 |                           |  |   | 3,946        |   |  |              |        |      |  |   | 235,901 |  
|Total cost of products and services                       |  |                                        |        |   |                      |   | 775,695 |                           |  |   | 11,791       |   |  |              |        |      |  |   | 787,486 |  
|General and administrative expense                        |  |                                        | 87      |   |                      |   | 18,044  |                           |  |   |             |   |  |              |        |      |  |   | 18,131  |  
|Impairment and restructuring charges                      |  |                                        |        |   |                      |   | 1,409   |                           |  |   |             |   |  |              |        |      |  |   | 1,409   |  
|Depreciation and amortization                             |  |                                        |        |   |                      |   | 7,533   |                           |  |   |             |   |  |              |        |      |  |   | 7,533   |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|                                                          |  |                                        | 87      |   |                      |   | 802,681 |                           |  |   | 11,791       |   |  |              |        |      |  |   | 814,559 |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Income (loss) from operations                             |  |                                        | (87     | ) |                      |   | 26,400  |                           |  |   | 1,689        |   |  |              |        |      |  |   | 28,002  |  
|Other income (expense)                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Interest expense, net                                     |  |                                        | (22,475 | ) |                      |   | 275     |                           |  |   | (422         | ) |  |              |        |      |  |   | (22,622 | )
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Income (loss) before income taxes                         |  |                                        | (22,562 | ) |                      |   | 26,675  |                           |  |   | 1,267        |   |  |              |        |      |  |   | 5,380   |  
|Income tax benefit (provision)                            |  |                                        | (3,604  | ) |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | (3,604  | )
|Equity in subsidiaries                                    |  |                                        | 27,942  |   |                      |   |        |                           |  |   |             |   |  |              | (27,942 | )(a) |  |   |        |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net income                                                |  |                                        | 1,776   |   |                      |   | 26,675  |                           |  |   | 1,267        |   |  |              | (27,942 | )    |  |   | 1,776   |  
|Less: Net income attributable to noncontrolling interests |  |                                        | (759    | ) |                      |   | (549    | )                         |  |   | (210         | ) |  |              | 759     | (a)  |  |   | (759    | )
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net income attributable to the Company                    |  | $                                      | 1,017   |   |                      | $ | 26,126  |                           |  | $ | 1,057        |   |  | $            | (27,183 | )    |  | $ | 1,017   |  
|                                                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  



|(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



US Oncology, Inc.

Condensed Consolidating Statement of Cash Flows

For the Three Months Ended March 31, 2010

(unaudited, in thousands)



|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|--------------------------------------------------- |  | -------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | - | ------- | -
|                                                    |  | US Oncology, 
Inc.(ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-guarantorSubsidiaries |  |   | Consolidated |  
|Cash flows from operating activities:               |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Net cash provided by (used in) operating activities |  | $                                      | 14,948  |   |                      | $ | (2,727  | )                         |  | $ | 1,761        |   |  | $ | 13,982  |  
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|                                                    |  |                                        |         |  
|Cash flows from investing activities:               |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Acquisition of property and equipment               |  |                                        |        |   |                      |   | (12,358 | )                         |  |   | (497         | ) |  |   | (12,855 | )
|Net payments in affiliation transactions            |  |                                        |        |   |                      |   | (1,514  | )                         |  |   |             |   |  |   | (1,514  | )
|Investment in joint venture                         |  |                                        |        |   |                      |   | (82     | )                         |  |   |             |   |  |   | (82     | )
|Net payments for acquisition of business            |  |                                        |        |   |                      |   | (4,367  | )                         |  |   |             |   |  |   | (4,367  | )
|Distributions from unconsolidated subsidiaries      |  |                                        |        |   |                      |   | 1,159   |                           |  |   |             |   |  |   | 1,159   |  
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Net cash used in investing activities               |  |                                        |        |   |                      |   | (17,162 | )                         |  |   | (497         | ) |  |   | (17,659 | )
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|                                                    |  |                                        |         |  
|Cash flows from financing activities:               |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Repayment of other indebtedness                     |  |                                        | (5,674  | ) |                      |   | (108    | )                         |  |   | (391         | ) |  |   | (6,173  | )
|Debt financing costs                                |  |                                        | (102    | ) |                      |   |        |                           |  |   |             |   |  |   | (102    | )
|Distributions to noncontrolling interests           |  |                                        |        |   |                      |   |        |                           |  |   | (1,377       | ) |  |   | (1,377  | )
|Net distributions to parent                         |  |                                        | (9,172  | ) |                      |   |        |                           |  |   |             |   |  |   | (9,172  | )
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Net cash used in financing activities               |  |                                        | (14,948 | ) |                      |   | (108    | )                         |  |   | (1,768       | ) |  |   | (16,824 | )
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|                                                    |  |                                        |         |  
|Decrease in cash and cash equivalents               |  |                                        |        |   |                      |   | (19,997 | )                         |  |   | (504         | ) |  |   | (20,501 | )
|Cash and cash equivalents:                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Beginning of period                                 |  |                                        |        |   |                      |   | 160,487 |                           |  |   | 1,102        |   |  |   | 161,589 |  
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|End of period                                       |  | $                                      |        |   |                      | $ | 140,490 |                           |  | $ | 598          |   |  | $ | 141,088 |  
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  



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##### Table of Contents

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  continued



US Oncology, Inc.

Condensed Consolidating Statement of Cash Flows

For the Three Months Ended March 31, 2009

(unaudited, in thousands)



|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|--------------------------------------------------- |  | -------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | - | ------- | -
|                                                    |  | US Oncology, 
Inc.(ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-guarantorSubsidiaries |  |   | Consolidated |  
|Cash flows from operating activities:               |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Net cash provided by operating activities           |  | $                                      | 10,390  |   |                      | $ | 19,608  |                           |  | $ | 1,029        |   |  | $ | 31,027  |  
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|                                                    |  |                                        |         |  
|Cash flows from investing activities:               |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Acquisition of property and equipment               |  |                                        |        |   |                      |   | (15,862 | )                         |  |   | (185         | ) |  |   | (16,047 | )
|Net payments in affiliation transactions            |  |                                        | (109    | ) |                      |   | 109     |                           |  |   |             |   |  |   |        |  
|Distributions from unconsolidated subsidiaries      |  |                                        |        |   |                      |   | 465     |                           |  |   | 240          |   |  |   | 705     |  
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Net cash provided by (used in) investing activities |  |                                        | (109    | ) |                      |   | (15,288 | )                         |  |   | 55           |   |  |   | (15,342 | )
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|                                                    |  |                                        |         |  
|Cash flows from financing activities:               |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Repayment of other indebtedness                     |  |                                        | (6,217  | ) |                      |   | 47      |                           |  |   | (278         | ) |  |   | (6,448  | )
|Distributions to noncontrolling interests           |  |                                        |        |   |                      |   |        |                           |  |   | (806         | ) |  |   | (806    | )
|Net distributions to parent                         |  |                                        | (4,064  | ) |                      |   |        |                           |  |   |             |   |  |   | (4,064  | )
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Net cash provided by (used in) financing activities |  |                                        | (10,281 | ) |                      |   | 47      |                           |  |   | (1,084       | ) |  |   | (11,318 | )
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|                                                    |  |                                        |         |  
|Increase in cash and cash equivalents               |  |                                        |        |   |                      |   | 4,367   |                           |  |   |             |   |  |   | 4,367   |  
|Cash and cash equivalents:                          |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Beginning of period                                 |  |                                        |        |   |                      |   | 104,475 |                           |  |   | 1            |   |  |   | 104,476 |  
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|End of period                                       |  | $                                      |        |   |                      | $ | 108,842 |                           |  | $ | 1            |   |  | $ | 108,843 |  
|                                                    |  |                                        |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  



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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

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 March 31, 2010, our network included:



| |  |  | 1,338 affiliated physicians under comprehensive strategic alliances and targeted physician services arrangements
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | 505 sites of service operated by physicians under comprehensive strategic alliances and targeted physician services arrangements
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | 85 comprehensive cancer centers and 16 facilities providing radiation therapy only
| | - |  | ----------------------------------------------------------------------------------



| |  |  | A research network currently managing 88 active clinical trials
| | - |  | ---------------------------------------------------------------



| |  |  | A pharmaceutical distribution business currently distributing $2.4 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 a member of the US Oncology network. We have also developed other tools for
physicians such as the Oncology Portal which was launched during the third quarter of 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. 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 through a more flexible Targeted Physician Services offering. Benefits of joining the United Network of US Oncology under either model include, among
other services, access to:



| |  |  | Physician governance and collaboration via nationwide virtual tumor boards, innovative technology, disease-specific committees and face-to-face
networking meetings,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Payer quality services which enable pay for performance and the ability to report on the quality of care,
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | Ongoing education and shared best practices,
| | - |  | --------------------------------------------



| |  |  | Evidence-based clinical guidelines (Level I Pathways) developed by physician-led teams of oncology experts and supported by randomized double-blind
trials published in peer-reviwed journals,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Safe and effective drug supplies, protected through e-Pedigree technology,
| | - |  | --------------------------------------------------------------------------



| |  |  | Clinical research opportunities from Phase I through Phase IV, and
| | - |  | ------------------------------------------------------------------



| |  |  | Oncology-specific electronic health record (EHR) system.
| | - |  | --------------------------------------------------------



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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 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 with a centrally managed and efficient system for the clinical development of new therapies from Phase I through IV. This research network is led by
industry-leading cancer experts in all major tumor types and offers access to an unparalleled national sampling of 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:



| |  |  | Continue to aggregate physicians into our network through 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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, Innovent, iKnowMed and Research) into a targeted physician services offering. This offering
is intended to complement the comprehensive strategic alliances model address the needs of mid-size practices (five to fifteen physicians) and is available as a suite of services customized to each practices priorities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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



| |  |  | 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 personalized treatment information based on peer-reviewed clinical research.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On May 3, we launched a national branding program, United, to increase the patient and medical community awareness of the breadth
and depth of the Company in multiple aspects of the cancer care continuum. United program messaging showcases how US Oncology works with physicians, patients, hospitals, payers and policy-makers to expand patient access to high-quality,
community-based cancer care. The campaign is targeted to patients, cancer care advocates, oncologists and referring physicians and utilizes an integrated media plan per target audience including print, on-line, search engine marketing, national
public radio and a new US Oncology consumer-focused web site. The goals of the campaign are focused on expanding our network of physicians and helping our affiliated practices grow by differentiating them in their local markets.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expand Innovent Oncology, a service launched in 2008 that is specifically designed to bring physicians and payers together to provide the highest
clinical quality while better managing the total cost of care through evidence-based treatment protocols and patient support services. This service addresses the payers need to avoid the unnecessary costs of care while ensuring the highest
level of clinical quality by offering a comprehensive solution to the key cost drivers in cancer care: variable treatments, debilitating side effects that lead to emergency room visits and hospitalizations between treatments, and end of life
treatment issues.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 three months ended March 1, 2010 and 2009, 80.0%
and 81.2% of our revenue, respectively, were derived from comprehensive strategic alliances. Under most of our comprehensive strategic alliances, we are compensated under the earnings model. Under that 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 16.3% and 14.8% of our revenue during the three months ended March 31, 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.



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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



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 and specifically, its 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 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
| | - |  | -----------------------------------------------------------------------



| |  |  | 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, 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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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS  continued



Reimbursement Matters

Pharmaceutical Reimbursement under Medicare

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 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 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. Operating income attributable to ESAs administered by our network of affiliated physicians was $4.3 million and $5.6 million during the three months ended March 31, 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.

While the impact to operating income has decreased from prior periods, we believe it is not currently possible
to estimate the full impact of the REMS as prescribing patterns are changing now that the REMS is in effect. We believe a possible impact of the REMS could be further significant reductions in ESA utilization. Decreased financial performance of
affiliated practices as a result of declining ESA usage 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.

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.



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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



On October 30, 2009, CMS announced final changes to policies and payment rates for
services to be furnished during 2010 by physicians and nonphysician practitioners who are paid under the Medicare physician fee schedule. Under the statutory formula, the conversion factor for 2010 was estimated to decrease by 21.3% unless Congress
again enacted superseding legislation. In addition, CMS projected that changes to policies and payment rates for 2010 would result in a 1% decrease (6% decrease in 2013 under 4-year phase-in) in overall payments to the specialty of
hematology/oncology and a 1% decrease (5% decrease in 2013) in overall payments to the specialty of radiation oncology.

To
date, there have been three extensions approved by Congress and signed by President Obama delaying the 21.3% payment reduction. The most recent, approved by Congress and signed by the president on April 15, 2010, is the Continuing Extension Act
of 2010 (H.R. 4851) which delays the payment reduction until May 31, 2010. The most recent extension was retroactive to April 1, 2010 and it is not expected that the technical application of the SGR cut to claims from April 1 through
April 14 will have any practical impact on Medicare physician payments. Under the provisions, if Congress fails to act to avert the scheduled fee reduction, EBITDA could be reduced by approximately $7 to $9 million. However, we continue to
expect that the Congress, in the long run, will act to avert the SGR cut with a flat or marginally higher conversion factor. If such legislation is enacted, we currently estimate the impact to 2010 EBITDA of changes to CMS policies and payment rates
will be approximately $1 million to $2 million.

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 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;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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



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.

We expect increased responsibilities of private payers will further pressure unit payments to
providers from the private sector. These cost reduction pressures and incentives around Accountable Care Organizations (ACOs), may also increase competitive pressure on US Oncology from hospitals. While we currently believe 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 matters.

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.
| | - |  | ----------------------------------------------------------------------------------------------------------------

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.



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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 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 in Medicare 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 March 31, 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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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

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 March 31, 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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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 March 31, 2010 and 2009, respectively, we have affiliated with the following number of physicians (including those under
targeted physician services agreements), by specialty:



|                                  |  |           |  |      
|--------------------------------- |  | --------- |  | -----
|                                  |  | March 31,
|                                  |  | 2010      |  | 2009 
|Medical oncologists/hematologists |  | 1,083     |  | 987  
|Radiation oncologists             |  | 165       |  | 158  
|Other physicians                  |  | 90        |  | 82   
|                                  |  |           |  |      
|Total physicians                  |  | 1,338     |  | 1,227
|                                  |  |           |  |      

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:



|                                                          |  |                              |   |  |       |  
|--------------------------------------------------------- |  | ---------------------------- | - |  | ----- | -
|                                                          |  | Three Months EndedMarch 
31, |  
|                                                          |  | 2010                         |   |  | 2009  |  
|Comprehensive Service
Agreements(1)                       |  |                              |   |  |       |  
|Affiliated physicians, beginning of period                |  | 1,010                        |   |  | 979   |  
|Physician practice affiliations                           |  | 9                            |   |  | 30    |  
|Recruited physicians                                      |  | 7                            |   |  | 10    |  
|Retiring/Other                                            |  | (3                           | ) |  | (25   | )
|Net conversions to/from TPS agreements                    |  |                             |   |  | (4    | )
|                                                          |  |                              |   |  |       |  
|Affiliated physicians, end of period                      |  | 1,023                        |   |  | 990   |  
|                                                          |  |                              |   |  |       |  
|                                                          | 
|                                                          |  | Three Months 
EndedMarch 31, |  
|                                                          | 
|                                                          |  | 2010                         |   |  | 2009  |  
|Targeted Physician Services
Agreements(2)                 |  |                              |   |  |       |  
|Affiliated physicians, beginning of period                |  | 300                          |   |  | 232   |  
|Physician practice affiliations                           |  | 20                           |   |  | 20    |  
|Physician practice separations                            |  | (4                           | ) |  | (19   | )
|Retiring/Other                                            |  | (1                           | ) |  |      |  
|Net conversions to/from comprehensive strategic alliances |  |                             |   |  | 4     |  
|                                                          |  |                              |   |  |       |  
|Affiliated physicians, end of period                      |  | 315                          |   |  | 237   |  
|                                                          |  |                              |   |  |       |  
|                                                          |  |                             
|Affiliated physicians, end of period                      |  | 1,338                        |   |  | 1,227 |  
|                                                          |  |                              |   |  |       |  



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

| | (2) | Operations related to targeted physician services agreements are included in the pharmaceutical services 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



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



|                                                  |  |                              |  |      |  
|------------------------------------------------- |  | ---------------------------- |  | ---- | -
|                                                  |  | Three Months 
EndedMarch 31, | 
|                                                  | 
|                                                  |  | 2010                         |  | 2009 |  
|Cancer Centers, beginning of period               |  | 83                           |  | 80   |  
|Cancer Centers
opened(1)                          |  | 1                            |  | 1    |  
|Cancer Centers reorganized(2)                     |  | 1                            |  |     |  
|Cancer Centers closed                             |  |                             |  | (1   | )
|                                                  |  |                              |  |      |  
|Cancer Centers, end of period                     |  | 85                           |  | 80   |  
|                                                  |  |                              |  |      |  
|                                                  |  |                             
|Radiation oncology-only facilities, end of period |  | 16                           |  | 15   |  
|                                                  |  |                              |  |      |  
|Total Radiation Oncology Facilities(3)            |  | 101                          |  | 95   |  
|                                                  |  |                              |  |      |  
|Linear Accelerators(2)                            |  | 127                          |  | 120  |  
|                                                  |  |                              |  |      |  
|PET Systems(4)                                    |  | 39                           |  | 38   |  
|                                                  |  |                              |  |      |  
|CT Scanners(5)                                    |  | 67                           |  | 63   |  
|                                                  |  |                              |  |      |  



| | (1) | Texas Oncology Grapevine facility and Cancer Centers of North Carolina in Asheville during the three months ended March 31, 2010 and 2009,
respectively
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Includes facility recategorized from radiation-only to integrated cancer center
| | --- | -------------------------------------------------------------------------------

| | (3) | Includes 99 and 92 sites utilizing IMRT technology at March 31, 2010 and 2009, respectively. Of the sites utilizing IMRT technology, 53 and 50
sites also have IGRT capabilities at March 31, 2010 and 2009, respectively.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Includes 30 and 27 PET/CT systems at March 31, 2010 and 2009, respectively.
| | --- | ---------------------------------------------------------------------------

| | (5) | 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 Ended
|                                                          | March 31,
|                                                          |           | 2010               |  | 2009  
|Average Per Operating Day Statistics:(1)                  |           |                    |  |       
|Medical oncology visits                                   |           | 11,300             |  | 11,274
|Total patient visits                                      |           | 11,927             |  | 11,876
|Total new patients                                        |           | 1,200              |  | 1,155 
|New cancer patients                                       |           | 647                |  | 630   
|Radiation treatments                                      |           | 2,749              |  | 2,678 
|Targeted treatments (included in radiation treatments)(2) |           | 810                |  | 730   
|PET scans                                                 |           | 224                |  | 219   
|CT scans                                                  |           | 818                |  | 818   



| | (1) | Average per day operating statistics 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 table sets 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 EndedMarch 31, |         |   | Three Months EndedMarch 31, |      
|(in thousands)                                            |  | 2010                        |         |   | 2009                        |       |     | 2010 |   |         | 2009 | 
|Product revenue                                           |  | $                           | 589,047 |   |                             | 66.9  | %   |      | $ | 563,080 |      |  | 66.8  | %   |  | $ | 589,047 |   |  | 66.9  | % |  | $ | 563,080 |   |  | 66.8  | %
|Service revenue                                           |  |                             | 291,415 |   |                             | 33.1  |     |      |   | 279,481 |      |  | 33.2  |     |  |   | 291,415 |   |  | 33.1  |   |  |   | 279,481 |   |  | 33.2  |  
|                                                          |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  
|Total revenue                                             |  |                             | 880,462 |   |                             | 100.0 |     |      |   | 842,561 |      |  | 100.0 |     |  |   | 880,462 |   |  | 100.0 |   |  |   | 842,561 |   |  | 100.0 |  
|                                                          |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  
|                                                          |  |                             |         |   |                             |       |     |     
|Cost of products                                          |  |                             | 581,787 |   |                             | 66.1  |     |      |   | 551,585 |      |  | 65.5  |     |  |   | 581,787 |   |  | 66.1  |   |  |   | 551,585 |   |  | 65.5  |  
|Cost of services:                                         |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  
|Operating compensation and benefits                       |  |                             | 141,879 |   |                             | 16.1  |     |      |   | 137,640 |      |  | 16.3  |     |  |   | 141,879 |   |  | 16.1  |   |  |   | 137,640 |   |  | 16.3  |  
|Other operating costs                                     |  |                             | 82,680  |   |                             | 9.4   |     |      |   | 80,696  |      |  | 9.6   |     |  |   | 82,680  |   |  | 9.4   |   |  |   | 80,696  |   |  | 9.6   |  
|Depreciation and amortization                             |  |                             | 17,488  |   |                             | 2.0   |     |      |   | 17,565  |      |  | 2.1   |     |  |   | 17,488  |   |  | 2.0   |   |  |   | 17,565  |   |  | 2.1   |  
|                                                          |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  
|Total cost of services                                    |  |                             | 242,047 |   |                             | 27.5  |     |      |   | 235,901 |      |  | 28.0  |     |  |   | 242,047 |   |  | 27.5  |   |  |   | 235,901 |   |  | 28.0  |  
|                                                          |  |                             |         |   |                             |       |     |     
|Total cost of products and services                       |  |                             | 823,834 |   |                             | 93.6  |     |      |   | 787,486 |      |  | 93.5  |     |  |   | 823,834 |   |  | 93.6  |   |  |   | 787,486 |   |  | 93.5  |  
|                                                          |  |                             |         |   |                             |       |     |     
|General and administrative expense                        |  |                             | 19,720  |   |                             | 2.2   |     |      |   | 18,171  |      |  | 2.2   |     |  |   | 19,634  |   |  | 2.2   |   |  |   | 18,131  |   |  | 2.2   |  
|Impairment and restructuring charges                      |  |                             | 812     |   |                             | 0.1   |     |      |   | 1,409   |      |  | 0.2   |     |  |   | 812     |   |  | 0.1   |   |  |   | 1,409   |   |  | 0.2   |  
|Depreciation and amortization                             |  |                             | 8,266   |   |                             | 0.9   |     |      |   | 7,533   |      |  | 0.8   |     |  |   | 8,266   |   |  | 0.9   |   |  |   | 7,533   |   |  | 0.8   |  
|                                                          |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  
|Total costs and expenses                                  |  |                             | 852,632 |   |                             | 96.8  |     |      |   | 814,599 |      |  | 96.7  |     |  |   | 852,546 |   |  | 96.8  |   |  |   | 814,559 |   |  | 96.7  |  
|                                                          |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  
|                                                          |  |                             |         |   |                             |       |     |     
|Income from operations                                    |  |                             | 27,830  |   |                             | 3.2   |     |      |   | 27,962  |      |  | 3.3   |     |  |   | 27,916  |   |  | 3.2   |   |  |   | 28,002  |   |  | 3.3   |  
|                                                          |  |                             |         |   |                             |       |     |     
|Other expense:                                            |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  
|Interest expense, net                                     |  |                             | (35,904 | ) |                             | (4.1  | )   |      |   | (33,009 | )    |  | (3.9  | )   |  |   | (27,445 | ) |  | (3.1  | ) |  |   | (22,622 | ) |  | (2.7  | )
|Loss on interest rate swap                                |  |                             | (5,144  | ) |                             | (0.6  | )   |      |   | (763    | )    |  | (0.1  | )   |  |   |        |   |  |      |   |  |   |        |   |  |      |  
|Other income (expense)                                    |  |                             | 230     |   |                             |      |     |      |   |        |      |  |      |     |  |   | 230     |   |  |      |   |  |   |        |   |  |      |  
|                                                          |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  
|Income (loss) before income taxes                         |  |                             | (12,988 | ) |                             | (1.5  | )   |      |   | (5,810  | )    |  | (0.7  | )   |  |   | 701     |   |  | 0.1   |   |  |   | 5,380   |   |  | 0.6   |  
|Income tax benefit (provision)                            |  |                             | (574    | ) |                             |      |     |      |   | 1,111   |      |  | 0.1   |     |  |   | 95      |   |  |      |   |  |   | (3,604  | ) |  | (0.4  | )
|                                                          |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  
|Net income (loss)                                         |  |                             | (13,562 | ) |                             | (1.5  | )   |      |   | (4,699  | )    |  | (0.6  | )   |  |   | 796     |   |  | 0.1   |   |  |   | 1,776   |   |  | 0.2   |  
|                                                          |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  
|Less: Net income attributable to noncontrolling interests |  |                             | (930    | ) |                             | (0.1  | )   |      |   | (759    | )    |  | (0.1  | )   |  |   | (930    | ) |  | (0.1  | ) |  |   | (759    | ) |  | (0.1  | )
|                                                          |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  
|Net income (loss) attributable to the Company             |  | $                           | (14,492 | ) |                             | (1.6  | ) % |      | $ | (5,458  | )    |  | (0.7  | ) % |  | $ | (134    | ) |  |      | % |  | $ | 1,017   |   |  | 0.1   | %
|                                                          |  |                             |         |   |                             |       |     |      |   |         |      |  |       |     |  |   |         |   |  |       |   |  |   |         |   |  |       |  

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 fees. 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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



| |  |  | GPO, data and other service fees. We receive fees from pharmaceutical companies for acting as a GPO for our affiliated practices and 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 ended March 31, 2010 and 2009 (in thousands):



|                                  |  |                             |          |   |      |   |          |        |  |      |  
|--------------------------------- |  | --------------------------- | -------- | - | ---- | - | -------- | ------ |  | ---- | -
|                                  |  | Three Months EndedMarch 31, |          |   |      |  
|                                  |  | 2010                        |          |   | 2009 |   |          | Change | 
|Medical oncology services         |  | $                           | 595,133  |   |      | $ | 581,930  |        |  | 2.3  | %
|Cancer center services            |  |                             | 98,274   |   |      |   | 92,317   |        |  | 6.5  |  
|Pharmaceutical services           |  |                             | 618,219  |   |      |   | 577,603  |        |  | 7.0  |  
|Research and other services       |  |                             | 18,319   |   |      |   | 19,223   |        |  | (4.7 | )
|Eliminations(1)                   |  |                             | (449,483 | ) |      |   | (428,512 | )      |  | (4.9 | )
|                                  |  |                             |          |   |      |   |          |        |  |      |  
|Total revenue                     |  | $                           | 880,462  |   |      | $ | 842,561  |        |  | 4.5  | %
|                                  |  |                             |          |   |      |   |          |        |  |      |  
|                                  |  |                            
|As a percentage of total revenue: |  |                             |          |   |      |   |          |       
|Medical oncology services         |  |                             | 67.6     | % |      |   | 69.1     | %      |  |      |  
|Cancer center services            |  |                             | 11.2     |   |      |   | 11.0     |        |  |      |  
|Pharmaceutical services           |  |                             | 70.2     |   |      |   | 68.6     |        |  |      |  
|Research and other services       |  |                             | 2.1      |   |      |   | 2.3      |        |  |      |  
|Eliminations(1)                   |  |                             | (51.1    | ) |      |   | (51.0    | )      |  |      |  
|                                  |  |                             |          |   |      |   |          |        |  |      |  
|Total revenue                     |  |                             | 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.For the three months ended March 31,
2010, medical oncology services revenue increased $13.2 million, or 2.3 percent, from the three months ended March 31, 2009 despite inclement weather reducing patient volumes. The revenue growth reflects higher medical oncology visits due
primarily to additional medical oncologists affiliated through our comprehensive strategic alliance arrangements and increased revenue per patient visit due to a changing mix in services provided by these physicians.



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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



Cancer Center Services. Cancer center services revenue for the three months ended
March 31, 2010 was $98.3 million, an increase of $6.0 million, or 6.5 percent, from the three months ended March 31, 2009. The increase reflects a growing network of oncologists and investments in radiation and diagnostic equipment
resulting in higher radiation treatment and diagnostic scan volumes which more than offset the impact of inclement weather in the current quarter. The revenue increase also reflects a continued shift toward advanced radiation therapies which are
reimbursed at higher rates.

Pharmaceutical Services.Pharmaceutical Services revenue during the three months ended
March 31, 2010 was $618.2 million, an increase of $40.6 million, or 7.0 percent, from the three months ended March 31, 2009. The revenue increase is primarily due to 96 additional medical oncologists affiliated through comprehensive
strategic alliances and targeted physician services arrangements since the first quarter of 2009.

Research and Other
Services. Research and other services revenue during the three months ended March 31, 2010 was $18.3 million, a decrease of $0.9 million, or 4.7 percent, compared to the same period in 2009. A delay in one large study resulted in fewer
patients being enrolled in research studies compared to the same period in 2009.

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 March 31, |         |   |      |  
|                                    |  | 2010                         |         |   | 2009 |   |         | Change | 
|Cost of products                    |  | $                            | 581,787 |   |      | $ | 551,585 |        |  | 5.5  | %
|Cost of services:                   |  |                              |         |   |      |   |         |        |  |      |  
|Operating compensation and benefits |  |                              | 141,879 |   |      |   | 137,640 |        |  | 3.1  |  
|Other operating costs               |  |                              | 82,680  |   |      |   | 80,696  |        |  | 2.5  |  
|Depreciation and amortization       |  |                              | 17,488  |   |      |   | 17,565  |        |  | (0.4 | )
|                                    |  |                              |         |   |      |   |         |        |  |      |  
|Total cost of services              |  |                              | 242,047 |   |      |   | 235,901 |        |  | 2.6  |  
|                                    |  |                              |         |   |      |   |         |        |  |      |  
|Total cost of products and services |  | $                            | 823,834 |   |      | $ | 787,486 |        |  | 4.6  |  
|                                    |  |                              |         |   |      |   |         |        |  |      |  
|                                    |  |                              |        
|As a percentage of revenue:         |  |                              |         |   |      |   |         |        |  |      |  
|                                    |  |                              |        
|Cost of products                    |  |                              | 66.1    | % |      |   | 65.5    | %      |  |      |  
|Cost of services:                   |  |                              |         |   |      |   |         |        |  |      |  
|Operating compensation and benefits |  |                              | 16.1    |   |      |   | 16.3    |        |  |      |  
|Other operating costs               |  |                              | 9.4     |   |      |   | 9.6     |        |  |      |  
|Depreciation and amortization       |  |                              | 2.0     |   |      |   | 2.1     |        |  |      |  
|                                    |  |                              |         |   |      |   |         |        |  |      |  
|Total cost of services              |  |                              | 27.5    |   |      |   | 28.0    |        |  |      |  
|                                    |  |                              |         |   |      |   |         |        |  |      |  
|Total cost of products and services |  |                              | 93.6    | % |      |   | 93.5    | %      |  |      |  
|                                    |  |                              |         |   |      |   |         |        |  |      |  

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 5.5% over the three
month period ended March 31, 2009, which is higher than the revenue growth of 4.6% associated with pharmaceutical use from the corresponding period, primarily as a result of price competition impacting operating margins under our oncology
pharmaceutical supply arrangements. As a percentage of revenue, cost of products was 66.1% and 65.5% in the three months ended March 31, 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 27.5% and 28.0% in the three months ended March 31, 2010 and 2009, respectively.



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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



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 EndedMarch 31, |        |   |      |  
|(in thousands)                       |  | 2010                        |        |   | 2009 |   |        | Change | 
|                                     |  |                             |       
|General and administrative expense   |  | $                           | 19,634 |   |      | $ | 18,131 |        |  | 8.3  | %  
|Impairment and restructuring charges |  |                             | 812    |   |      |   | 1,409  |        |  | nm   | (1)
|Depreciation and amortization        |  |                             | 8,266  |   |      |   | 7,533  |        |  | 9.7  |    
|Interest expense, net                |  |                             | 27,445 |   |      |   | 22,622 |        |  | 21.3 |    
|Other (income) expense               |  |                             | (230   | ) |      |   |       |        |  | nm   | (1)
|                                     |  |                             |       
|As a percentage of revenue:          |  |                             |        |   |      |   |        |        |  |      |    
|                                     |  |                             |       
|General and administrative expense   |  |                             | 2.2    | % |      |   | 2.2    | %      |  |      |    
|Impairment and restructuring charges |  |                             | 0.1    |   |      |   | 0.2    |        |  |      |    
|Depreciation and amortization        |  |                             | 0.9    |   |      |   | 0.8    |        |  |      |    
|Interest expense, net                |  |                             | 3.1    |   |      |   | 2.7    |        |  |      |    
|Other (income) expense               |  |                             |       |   |      |   |       |        |  |      |    



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

General and Administrative. General and administrative expense was $19.6 million for the three
months ended March 31, 2010 and $18.1 million for the same period in 2009. General and administrative expense during the three months ended March 31, 2010 was $1.5 million higher than the comparable prior year period due primarily to
consulting costs incurred related to our growth strategies and in preparation to launch our United brand campaign. We expect to continue to incur additional costs related to our branding initiative in future periods. General and
administrative expense represented 2.2% of revenue for the three months ended March 31, 2010 and 2009.

Impairment and
Restructuring Charges.Impairment and restructuring charges recognized during the three months ended March 31, 2010 and 2009 consisted of the following amounts (in thousands):



|                        |  |                              |     |      |   |      
|----------------------- |  | ---------------------------- | --- | ---- | - | -----
|                        |  | Three Months Ended March 31,
|                        |  | 2010                         |     | 2009
|                        |  |                             
|Severance costs         |  | $                            | 720 |      | $ | 1,242
|Service agreements, net |  |                              |    |      |   | 150  
|Other, net              |  |                              | 92  |      |   | 17   
|                        |  |                              |     |      |   |      
|Total                   |  | $                            | 812 |      | $ | 1,409
|                        |  |                              |     |      |   |      

During the three months ended March 31, 2010, the
Company recorded $0.7 million of severance charges related to the involuntary termination of certain corporate personnel. These charges will be paid through the first quarter of 2011.

During the three months ended March 31, 2009, the Company recorded $1.2 million of severance charges related to the involuntary
termination of certain corporate personnel in connection with efforts to further reduce costs. These charges were paid through the second quarter of 2010. In addition, an unamortized service agreement intangible was impaired for $0.2 million related
to a practice that converted from a comprehensive services model to a targeted physician services relationship.



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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



Depreciation and Amortization. Depreciation and amortization expense increased
approximately $0.7 million for the three months ended March 31, 2010 over the three months ended March 31, 2009, which reflects investments made in our corporate infrastructure.

Interest Expense, net. Interest expense, net, increased to $27.4 million during the three months ended March 31, 2010 from
$22.6 million in the comparable period of the prior year 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.

Income Taxes. The income tax provision for US Oncology, Inc. was a tax benefit of $95,000 and a tax expense
of $3.6 million for the three months ended March 31, 2010 and 2009, respectively, due primarily to lower pretax income in the current quarter. In addition, reserves for uncertain tax position were increased during the three months ended
March 31, 2009.

Net Income (Loss) Attributable to the Company. Net loss for the three months ended March 31,
2010 was $0.1 million, compared to net income of $1.0 for the three months ended March 31, 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.



|                                   |  |                              |       |      |   |        |  |       |    
|---------------------------------- |  | ---------------------------- | ----- | ---- | - | ------ |  | ----- | ---
|                                   |  | Three Months Ended March 31, |       |      |  
|(in thousands)                     |  | 2010                         |       | 2009 |   | Change | 
|                                   |  |                              |      
|General and administrative expense |  | $                            | 86    |      | $ | 40     |  | nm    | (1)
|Interest expense, net              |  |                              | 8,459 |      |   | 10,387 |  | (18.6 | ) %
|Loss on interest rate swap         |  |                              | 5,144 |      |   | 763    |  | 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 of $86 thousand and $40 thousand during the three months ended March 31, 2010 and 2009, respectively. These costs primarily represent professional fees required for Holdings to
maintain its corporate existence and comply with the terms of the indenture governing its indebtedness (the Holdings Notes).

Interest Expense, net. In addition to interest expense incurred by US Oncology, Holdings incurred interest related to its
indebtedness. Incremental interest expense was approximately $8.5 million during the three months ended March 31, 2010 and $10.4 million for the three months ended March 31, 2009. The decrease in interest expense when comparing the three
months ended March 31, 2010 to the same period 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.During the three months ended March 31, 2010 and 2009, Holdings recognized an unrealized loss of $5.1 million and $0.8 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. Holdings effective tax rate was a provision of 4.1% and a benefit of 16.9% for the three months ended March 31,
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 on its effective tax rate. In addition, for the three months ended March 31, 2010 and 2009, the annual effective tax rate for US Oncology Holdings, Inc. for
the years ended December 31, 2010 and 2009 could not be reasonably estimated because the Companys estimated pretax income for each of the years approximated breakeven. As a result, in the interim financial statements, taxes have been
provided for based on the actual results for the three months ended March 31, 2010 and 2009 rather than an estimated effective tax rate for the fiscal year.



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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



Net Income (Loss) Attributable to the Company. Holdings incremental net
loss for the three months ended March 31, 2010 and 2009 was $14.4 million and $6.5 million, respectively.

Liquidity and Capital
Resources

The following table summarizes the working capital and long-term indebtedness of Holdings and US Oncology as of
March 31, 2010 (in thousands).



|                       |  |          |           |             |   |          
|---------------------- |  | -------- | --------- | ----------- | - | ---------
|                       |  | Holdings |           | US Oncology
|Current assets         |  | $        | 753,436   |             | $ | 729,737  
|Current liabilities    |  |          | 532,362   |             |   | 512,370  
|                       |  |          |           |             |   |          
|Net working capital    |  | $        | 221,074   |             | $ | 217,367  
|                       |  |          |           |             |   |          
|Long-term indebtedness |  | $        | 1,577,317 |             | $ | 1,067,630
|                       |  |          |           |             |   |          

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 three
months ended March 31, 2010 (in thousands).



|                                          |  |          |         |   |             |   |         |  
|----------------------------------------- |  | -------- | ------- | - | ----------- | - | ------- | -
|                                          |  | Holdings |         |   | US Oncology |  
|Net cash provided by operating activities |  | $        | 4,696   |   |             | $ | 13,982  |  
|Net cash used in investing activities     |  |          | (17,659 | ) |             |   | (17,659 | )
|Net cash used in financing activities     |  |          | (7,635  | ) |             |   | (16,824 | )
|                                          |  |          |         |   |             |   |         |  
|Net decrease in cash and equivalents      |  |          | (20,598 | ) |             |   | (20,501 | )
|Cash and equivalents:                     |  |          |         |   |             |   |         |  
|December 31, 2009                         |  |          | 161,811 |   |             |   | 161,589 |  
|                                          |  |          |         |   |             |   |         |  
|March 31, 2010                            |  | $        | 141,213 |   |             | $ | 141,088 |  
|                                          |  |          |         |   |             |   |         |  

Cash Flows from Operating Activities

During the three months ended March 31, 2010, we generated $4.7 million in cash flow from operations compared to $27.0 million during
the three months ended March 31, 2009. The decrease in operating cash flow in 2010 was primarily due to higher payments during the three months ended March 31, 2010 for semiannual interest on our $775.0 million senior secured notes issued
in June 2009 and for obligations under the Holdings interest rate swap due to lower LIBOR rates.

The operating cash
flow of US Oncology exceeds the operating cash flow of Holdings by $9.3 million for the three months ended March 31, 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 three months ended March 31, 2010, we used $17.7 million for investing activities. Cash flow for investing activities
relate primarily to $12.9 million in capital expenditures, including $3.7 million relating to the development and construction of cancer centers and $9.2 million for maintenance capital expenditures.



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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 three months ended March 31, 2009, we used $15.3 million for investing
activities. Cash flow for investing activities relate primarily to $16.0 million in capital expenditures, including $9.7 million relating to the development and construction of cancer centers and $6.3 million for maintenance capital expenditures.

Cash Flows from Financing Activities

During the three months ended March 31, 2010, $7.6 million was used 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 $9.2 million to its parent company to settle amounts due under its interest
rate swap agreement.

During the three months ended March 31, 2009, $7.3 million was used in financing activities which
relates primarily to the repayments of physician notes issued in connection with practice affiliations. Cash flow used by US Oncology for financing activities also includes a distribution of $4.1 million to its parent company to finance the payment
of interest on the Holdings Notes and to settle amounts due under its interest rate swap agreement.

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 March 31, 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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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, and reconciles EBITDA to 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 EndedMarch
31, |         |   | Three Months EndedMarch 31, |  
|                                          |  | 2010                        |         |   | 2009                        |   |         | 2010 |  |   | 2009    |  
|Net income (loss)                         |  | $                           | (13,562 | ) |                             | $ | (4,699  | )    |  | $ | 796     |   |  | $ | 1,776   |  
|Interest expense, net                     |  |                             | 35,904  |   |                             |   | 33,009  |      |  |   | 27,445  |   |  |   | 22,622  |  
|Income tax (benefit) provision            |  |                             | 574     |   |                             |   | (1,111  | )    |  |   | (95     | ) |  |   | 3,604   |  
|Depreciation and amortization             |  |                             | 25,754  |   |                             |   | 25,098  |      |  |   | 25,754  |   |  |   | 25,098  |  
|Amortization of stock compensation        |  |                             | 646     |   |                             |   | 569     |      |  |   | 646     |   |  |   | 569     |  
|Loss on interest rate swap                |  |                             | 5,144   |   |                             |   | 763     |      |  |   |         |   |  |   |         |  
|Other (income) expense                    |  |                             | (230    | ) |                             |   |        |      |  |   | (230    | ) |  |   |        |  
|                                          |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|                                          |  |                             |         |  
|EBITDA                                    |  |                             | 54,230  |   |                             |   | 53,629  |      |  |   | 54,316  |   |  |   | 53,669  |  
|                                          |  |                             |         |  
|Plus:                                     |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Impairment and restructuring charges      |  |                             | 812     |   |                             |   | 1,409   |      |  |   | 812     |   |  |   | 1,409   |  
|Other non-cash G&A                        |  |                             | 98      |   |                             |   |        |      |  |   | 98      |   |  |   |        |  
|                                          |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|                                          |  |                             |         |  
|Adjusted EBITDA                           |  |                             | 55,140  |   |                             |   | 55,038  |      |  |   | 55,226  |   |  |   | 55,078  |  
|                                          |  |                             |         |  
|Changes in assets and liabilities         |  |                             | (14,002 | ) |                             |   | 6,325   |      |  |   | (13,863 | ) |  |   | (3,205  | )
|Deferred income taxes                     |  |                             | 36      |   |                             |   | (2,502  | )    |  |   | (31     | ) |  |   | 5,380   |  
|Interest expense, net                     |  |                             | (35,904 | ) |                             |   | (33,009 | )    |  |   | (27,445 | ) |  |   | (22,622 | )
|Income tax benefit (provision)            |  |                             | (574    | ) |                             |   | 1,111   |      |  |   | 95      |   |  |   | (3,604  | )
|                                          |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  
|Net cash provided by operating activities |  | $                           | 4,696   |   |                             | $ | 26,963  |      |  | $ | 13,982  |   |  | $ | 31,027  |  
|                                          |  |                             |         |   |                             |   |         |      |  |   |         |   |  |   |         |  



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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



Following is the EBITDA and Adjusted EBITDA for our operating segments for the three months ended
March 31, 2010 and 2009 (in thousands):



|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|----------------------------------------- |  | --------------------------------- | -------- | - | -------------------- | - | ------- | ---------------------- |  | - | -------------- | - |  | -------------- | ------- | - | ---------------- | - | ------- | ----- |  | - | -------- | - |  | - | -------- | -
|                                          |  | Three Months Ended March 31, 2010 |         
|                                          |  | MedicalOncologyServices           |          |   | CancerCenterServices |   |         | PharmaceuticalServices |  |   | Research/Other |   |  | CorporateCosts |         |   | Eliminations (1) |   |         | Total | 
|US Oncology, Inc.                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|                                          |  |                                   |          |   |                      |   |        
|Product revenues                          |  | $                                 | 435,570  |   |                      | $ |        |                        |  | $ | 602,960        |   |  | $              |        |   |                  | $ |        |       |  | $ | (449,483 | ) |  | $ | 589,047  |  
|Service revenues                          |  |                                   | 159,563  |   |                      |   | 98,274  |                        |  |   | 15,259         |   |  |                | 18,319  |   |                  |   |        |       |  |   |         |   |  |   | 291,415  |  
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Total revenues                            |  |                                   | 595,133  |   |                      |   | 98,274  |                        |  |   | 618,219        |   |  |                | 18,319  |   |                  |   |        |       |  |   | (449,483 | ) |  |   | 880,462  |  
|                                          |  |                                   |          |   |                      |   |        
|Operating expenses                        |  |                                   | (577,118 | ) |                      |   | (74,563 | )                      |  |   | (596,303       | ) |  |                | (18,309 | ) |                  |   | (34,924 | )     |  |   | 449,483  |   |  |   | (851,734 | )
|Impairment and restructuring charges      |  |                                   | (92      | ) |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | (720    | )     |  |   |         |   |  |   | (812     | )
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations             |  |                                   | 17,923   |   |                      |   | 23,711  |                        |  |   | 21,916         |   |  |                | 10      |   |                  |   | (35,644 | )     |  |   |         |   |  |   | 27,916   |  
|Add back:                                 |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Depreciation and amortization             |  |                                   |         |   |                      |   | 9,815   |                        |  |   | 591            |   |  |                | 59      |   |                  |   | 15,289  |       |  |   |         |   |  |   | 25,754   |  
|Amortization of stock- based compensation |  |                                   |         |   |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | 646     |       |  |   |         |   |  |   | 646      |  
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|EBITDA                                    |  | $                                 | 17,923   |   |                      | $ | 33,526  |                        |  | $ | 22,507         |   |  | $              | 69      |   |                  | $ | (19,709 | )     |  | $ |         |   |  | $ | 54,316   |  
|Add back:                                 |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Other non-cash G&A                        |  |                                   |         |   |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | 98      |       |  |   |         |   |  |   | 98       |  
|Impairment and restructuring charges      |  |                                   | 92       |   |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | 720     |       |  |   |         |   |  |   | 812      |  
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Adjusted EBITDA                           |  | $                                 | 18,015   |   |                      | $ | 33,526  |                        |  | $ | 22,507         |   |  | $              | 69      |   |                  | $ | (18,891 | )     |  | $ |         |   |  | $ | 55,226   |  
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|US Oncology Holdings, Inc.                |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|                                          |  |                                   |          |   |                      |   |        
|Operating expenses                        |  | $                                 |         |   |                      | $ |        |                        |  | $ |               |   |  | $              |        |   |                  | $ | (86     | )     |  | $ |         |   |  | $ | (86      | )
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|EBITDA                                    |  | $                                 | 18,015   |   |                      | $ | 33,526  |                        |  | $ | 22,507         |   |  | $              | 69      |   |                  | $ | (18,977 | )     |  | $ |         |   |  | $ | 55,140   |  
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|                                          | 
|                                          |  | Three Months Ended March 31, 2009 |         
|                                          |  | MedicalOncologyServices           |          |   | CancerCenterServices |   |         | PharmaceuticalServices |  |   | Research/Other |   |  | CorporateCosts |         |   | Eliminations (1) |   |         | Total | 
|US Oncology, Inc.                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|                                          |  |                                   |          |   |                      |   |        
|Product revenues                          |  | $                                 | 429,162  |   |                      | $ |        |                        |  | $ | 562,430        |   |  | $              |        |   |                  | $ |        |       |  | $ | (428,512 | ) |  | $ | 563,080  |  
|Service revenues                          |  |                                   | 152,768  |   |                      |   | 92,317  |                        |  |   | 15,173         |   |  |                | 19,223  |   |                  |   |        |       |  |   |         |   |  |   | 279,481  |  
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Total revenues                            |  |                                   | 581,930  |   |                      |   | 92,317  |                        |  |   | 577,603        |   |  |                | 19,223  |   |                  |   |        |       |  |   | (428,512 | ) |  |   | 842,561  |  
|                                          |  |                                   |          |   |                      |   |        
|Operating expenses                        |  |                                   | (565,371 | ) |                      |   | (70,435 | )                      |  |   | (555,944       | ) |  |                | (16,846 | ) |                  |   | (33,066 | )     |  |   | 428,512  |   |  |   | (813,150 | )
|Impairment and restructuring charges      |  |                                   | (167     | ) |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | (1,242  | )     |  |   |         |   |  |   | (1,409   | )
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations             |  |                                   | 16,392   |   |                      |   | 21,882  |                        |  |   | 21,659         |   |  |                | 2,377   |   |                  |   | (34,308 | )     |  |   |         |   |  |   | 28,002   |  
|Add back:                                 |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Depreciation and amortization             |  |                                   |         |   |                      |   | 9,376   |                        |  |   | 707            |   |  |                | 80      |   |                  |   | 14,935  |       |  |   |         |   |  |   | 25,098   |  
|Amortization of stock- based compensation |  |                                   |         |   |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | 569     |       |  |   |         |   |  |   | 569      |  
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|EBITDA                                    |  | $                                 | 16,392   |   |                      | $ | 31,258  |                        |  | $ | 22,366         |   |  | $              | 2,457   |   |                  | $ | (18,804 | )     |  | $ |         |   |  | $ | 53,669   |  
|Add back:                                 |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Impairment and restructuring charges      |  |                                   | 167      |   |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | 1,242   |       |  |   |         |   |  |   | 1,409    |  
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Adjusted EBITDA                           |  | $                                 | 16,559   |   |                      | $ | 31,258  |                        |  | $ | 22,366         |   |  | $              | 2,457   |   |                  | $ | (17,562 | )     |  | $ |         |   |  | $ | 55,078   |  
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|US Oncology Holdings, Inc.                |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|                                          |  |                                   |          |   |                      |   |        
|Operating expenses                        |  |                                   |         |   |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | (40     | )     |  |   |         |   |  |   | (40      | )
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|EBITDA                                    |  | $                                 | 16,559   |   |                      | $ | 31,258  |                        |  | $ | 22,366         |   |  | $              | 2,457   |   |                  | $ | (17,602 | )     |  | $ |         |   |  | $ | 55,038   |  
|                                          |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  



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



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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



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. Medical oncology services Adjusted EBITDA for the three months ended March 31, 2010 increased to
$18.0 million from $16.6 million, or 8.8 percent, primarily due to earnings associated with revenue growth and an increase in drug margins in the current quarter, as compared to the prior year quarter, from the conversion of a particular
chemotherapy drug to generic status during the three months ended September 30, 2009. These increases more than offset the impact of inclement weather in the current quarter.

We continue to experience a shift of certain branded single source drugs to generic status. For each generic drug introduced to the
market, earnings temporarily increase because drug costs decline significantly, while reimbursement remains at the branded price for a period of months. However, after reimbursement adjusts, earnings with respect to a generic drug are typically
significantly lower than the earnings from a branded pharmaceutical.

Cancer Center Services. Cancer center services
Adjusted EBITDA increased by $2.3 million, or 7.3 percent, to $33.5 million in the three months ended March 31, 2010 as compared to the same period in 2009. These increases reflect a growing network of oncologists and investments in radiation
and diagnostic equipment resulting in higher radiation treatment and diagnostic scan volumes which more than offset the impact of inclement weather in the current quarter. During the three months ended March 31, 2010, our network operated 127
linear accelerators, 39 PET systems and 67 CT systems, which represents an increase of 7 units, 1 unit and 4 units, respectively, over the first quarter of 2009. The revenue and Adjusted EBITDA increases also reflect a continued shift toward
advanced targeted radiation therapies which are reimbursed at higher rates.

Pharmaceutical Services.Pharmaceutical
services Adjusted EBITDA was $22.5 million for the three months ended March 31, 2010 and $22.4 million as compared to the same period in 2009. Adjusted EBITDA was consistent across these periods as increased investments in personnel and
marketing costs for our United Network strategy offset the impact of revenue growth and higher distribution performance and service fees.

Research and Other Services.Research and other services Adjusted EBITDA during the three months ended March 31, 2010 was
$0.1 million, a decrease of $2.4 million from the three months ended March 31, 2009 primarily due to revisions of 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.

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 $75 to $85 million for the development of cancer centers, purchases of clinical equipment,
investments in information systems and other capital expenditures.

As of May 5, 2010, we had cash and cash equivalents
of $123.8 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). This entire amount is available to be drawn without violating
leverage ratio requirements under financial covenants of the senior secured revolving



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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



credit facility. 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 flow generated from operations, (ii) borrowings under the revolving
credit facility, (iii) lease or purchase money financing for certain equipment purchases and (iv) indebtedness to physicians in connection with new affiliations. 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.

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 March 31, 2010 we had aggregate indebtedness of approximately $1,588.7 million of which $1,079.1 million (including current maturities of $11.4 million) represents obligations of US Oncology, Inc., and
$509.7 million represents an obligation of Holdings.

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



|                                                |  |           |           |   |              |   |           |  
|----------------------------------------------- |  | --------- | --------- | - | ------------ | - | --------- | -
|                                                |  | March 31, |           |   | December 31, |  
|                                                |  | 2010      |           |   | 2009         |  
|US Oncology, Inc.                               |  |           |           |   |              |   |           |  
|9.125% Senior Secured Notes, due 2017           |  | $         | 760,043   |   |              | $ | 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                              |  |           | 20,271    |   |              |   | 25,945    |  
|Mortgage, capital lease obligations and other   |  |           | 20,743    |   |              |   | 21,242    |  
|                                                |  |           |           |   |              |   |           |  
|                                                |  |           | 1,079,057 |   |              |   | 1,084,867 |  
|Less current maturities                         |  |           | (11,427   | ) |              |   | (10,579   | )
|                                                |  |           |           |   |              |   |           |  
|                                                |  |           | 1,067,630 |   |              |   | 1,074,288 |  
|                                                |  |           |           |   |              |   |           |  
|US Oncology Holdings, Inc.                      |  |           |           |   |              |   |           |  
|Senior Floating Rate PIK Toggle Notes, due 2012 |  |           | 509,687   |   |              |   | 493,954   |  
|                                                |  |           |           |   |              |   |           |  
|                                                |  | $         | 1,577,317 |   |              | $ | 1,568,242 |  
|                                                |  |           |           |   |              |   |           |  

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,



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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



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 increase of 0.50% 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 three months ended March 31, 2010 and 2009, the Company elected to PIK interest on the Holdings Notes and total interest expense was $8.5 million and $10.4
million, respectively, which includes cash or PIK interest, as well as 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
March 31, 2010, US Oncology has the ability to make approximately $17.4 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. Based on projected LIBOR interest rates as of March 31, 2010, there will be available funds under the restricted payments provision in order to service, at a minimum,
the estimated interest rate swap obligations through the end of 2010. 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 expect to issue $17.1 million in notes to settle the interest due September 15, 2010. In addition, we expect to pay $9.9 million to settle the obligation under
our interest rate swap agreement for the interest period ending September 15, 2010. During the three months ended March 31, 2010, US Oncology paid dividends in the amount of $9.2 million to Holdings to finance obligations related to the
Holdings Notes and interest rate swap.



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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



Financial Covenants

At March 31, 2010, we were in compliance with the financial covenants of our indebtedness and we expect to remain in compliance
through March 31, 2011. The senior secured revolving credit facility contains the most restrictive 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 March 31, 2010, the terms of the senior secured revolving credit facility required that we maintain a maximum leverage ratio of 7.00:1. As of March 31, 2010, the
maximum leverage ratio, as calculated under the terms of the senior secured revolving credit facility, was 4.66:1. 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.

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. Maturities during the year ending December 31, 2012 include $509.7 million of currently outstanding US Oncology Holdings, Inc. Floating Rate PIK Toggle Notes. Based on LIBOR rates as of March 31, 2010, if the
Company were to settle all future interest payments in kind, the principal balance of the Notes would be approximately $580 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 alternatives. There can be no assurance that additional financing, if available, will be made on terms acceptable to the Company.

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 $5.1 million and $0.8 million
during the three months ended March 31, 2010 and 2009, respectively. The Companys consolidated balance sheet as of March 31, 2010 and December 31, 2009 includes a liability of $28.9 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 ofMarch 31, 2010 |        | Fair Value as ofDecember 31, 2009
|Liabilities                 |  |                                |        |                                   |   |       
|Other accrued liabilities   |  | $                              | 17,563 |                                   | $ | 17,742
|Other long-term liabilities |  |                                | 11,356 |                                   |   | 15,204
|                            |  |                                |        |                                   |   |       
|Total                       |  | $                              | 28,919 |                                   | $ | 32,946
|                            |  |                                |        |                                   |   |       



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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 addition, we expect to pay $9.9 million to settle the obligation under our interest
rate swap agreement for the six 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 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 $3.1 million and $3.4 million for the three months ended March 31, 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 $6.4 million and a decrease in future interest rates of 1.00 percent would negatively
impact its fair value by the same amount. Because a portion of the Companys indebtedness, approximately $84.7 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 include an attestation report of the Companys registered
public accounting firm regarding internal control over financial reporting. Until the current fiscal year, managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit the Company to provide only managements report in the Companys annual report.



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



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 10, 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. 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.



|Item 4. | Reserved
|------- | --------

Removed and reserved.



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



|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                                                                                                                                                                                                                                                                                                 
|            | 
|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



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



|       |  |                                                                                                                                                                                                                                              
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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: May 7, 2010: |  |  |  | By:                                                                                                             |  | /s/ Michael A. Sicuro
| |  |                    |  |  |  | Michael A. Sicuro,                                                                                             
| |  |                    |  |  |  | Executive Vice President and Chief Financial Officer(duly authorized signatory and principal financial officer)
| |  |                    |  | 
| |  | Date: May 7, 2010: |  |  |  | By:                                                                                                             |  | /s/ Kevin F. Krenzke 
| |  |                    |  |  |  | Kevin F. Krenzke,                                                                                              
| |  |                    |  |  |  | Chief Accounting Officer                                                                                       
| |  |                    |  |  |  | (principal accounting officer)                                                                                 



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