##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2008

Or



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

Commission file numbers: 333-144492 and 0-26190





US Oncology Holdings, Inc.

US Oncology, Inc.

(Exact name of registrants as specified in their charters)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-0873619                          
|Delaware                                                       |  | 20-0873619                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

16825 Northchase Drive, Suite 1300

Houston, Texas

77060

(Address of principal executive offices)

(Zip Code)

(832) 601-8766

(Registrants telephone number, including area code)





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 are large accelerated filers, accelerated
filers, or non-accelerated filers. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filers   ̈    Accelerated filers   ̈    Non-accelerated
filers  x

Indicate by check mark whether the Registrants are shell companies
(as defined in Rule 12(b)-2 of the Securities Exchange Act of 1934.)    Yes   ̈    No  x



As of May 5, 2008, 148,661,420 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, 2008

TABLE OF CONTENTS



|                              |  |                                                                                       |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | --
|                              |  | PAGE NO.                                                                             
|PART I. FINANCIAL INFORMATION |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Condensed Consolidated Financial Statements:                                          |  |   
|                              |  |                                                                                      
|                              |  | 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 |  | 31
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |  | 56
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 57
|                              |  |                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 59
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits                                                                              |  | 60
|                              | 
|SIGNATURES                    |  | 63                                                                                   

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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##### Table of Contents

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 31,2008              |           |   | December 31,2007  |   |           | March 31,2008 |  |   | December 31,2007
|ASSETS                                                                                                                                                                  |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|Current assets:                                                                                                                                                         |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|Cash and equivalents                                                                                                                                                    |  | $                          | 140,389   |   |                   | $ | 149,257   |               |  | $ | 140,388          |   |  | $ | 149,256  
|Accounts receivable                                                                                                                                                     |  |                            | 344,203   |   |                   |   | 318,976   |               |  |   | 344,203          |   |  |   | 318,976  
|Other receivables                                                                                                                                                       |  |                            | 97,526    |   |                   |   | 120,285   |               |  |   | 97,526           |   |  |   | 120,285  
|Prepaid expenses and other current assets                                                                                                                               |  |                            | 21,519    |   |                   |   | 26,544    |               |  |   | 19,084           |   |  |   | 22,801   
|Inventories                                                                                                                                                             |  |                            | 93,506    |   |                   |   | 82,822    |               |  |   | 93,506           |   |  |   | 82,822   
|Deferred income taxes                                                                                                                                                   |  |                            | 4,260     |   |                   |   | 7,428     |               |  |   | 4,260            |   |  |   | 4,260    
|Due from affiliates                                                                                                                                                     |  |                            | 69,709    |   |                   |   | 71,021    |               |  |   | 57,853           |   |  |   | 60,295   
|                                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|Total current assets                                                                                                                                                    |  |                            | 771,112   |   |                   |   | 776,333   |               |  |   | 756,820          |   |  |   | 758,695  
|Property and equipment, net                                                                                                                                             |  |                            | 402,983   |   |                   |   | 399,621   |               |  |   | 402,983          |   |  |   | 399,621  
|Service agreements, net                                                                                                                                                 |  |                            | 284,117   |   |                   |   | 223,850   |               |  |   | 284,117          |   |  |   | 223,850  
|Goodwill                                                                                                                                                                |  |                            | 377,270   |   |                   |   | 757,270   |               |  |   | 377,270          |   |  |   | 757,270  
|Other assets                                                                                                                                                            |  |                            | 76,286    |   |                   |   | 79,299    |               |  |   | 66,783           |   |  |   | 69,214   
|                                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|Total assets                                                                                                                                                            |  | $                          | 1,911,768 |   |                   | $ | 2,236,373 |               |  | $ | 1,887,973        |   |  | $ | 2,208,650
|                                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                    |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|Current liabilities:                                                                                                                                                    |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|Current maturities of long-term indebtedness                                                                                                                            |  | $                          | 44,788    |   |                   | $ | 38,613    |               |  | $ | 44,788           |   |  | $ | 38,613   
|Accounts payable                                                                                                                                                        |  |                            | 278,185   |   |                   |   | 242,172   |               |  |   | 278,027          |   |  |   | 241,093  
|Due to affiliates                                                                                                                                                       |  |                            | 179,529   |   |                   |   | 170,432   |               |  |   | 186,362          |   |  |   | 177,265  
|Accrued compensation cost                                                                                                                                               |  |                            | 29,094    |   |                   |   | 30,045    |               |  |   | 29,094           |   |  |   | 30,045   
|Accrued interest payable                                                                                                                                                |  |                            | 11,218    |   |                   |   | 24,949    |               |  |   | 10,600           |   |  |   | 24,949   
|Income taxes payable                                                                                                                                                    |  |                            |          |   |                   |   |          |               |  |   | 7,780            |   |  |   | 6,735    
|Other accrued liabilities                                                                                                                                               |  |                            | 45,681    |   |                   |   | 37,763    |               |  |   | 34,890           |   |  |   | 37,763   
|                                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|Total current liabilities                                                                                                                                               |  |                            | 588,495   |   |                   |   | 543,974   |               |  |   | 591,541          |   |  |   | 556,463  
|                                                                                                                                                                        |  |                            |           |  
|Deferred revenue                                                                                                                                                        |  |                            | 7,663     |   |                   |   | 8,380     |               |  |   | 7,663            |   |  |   | 8,380    
|Deferred income taxes                                                                                                                                                   |  |                            | 8,971     |   |                   |   | 23,289    |               |  |   | 31,352           |   |  |   | 33,532   
|Long-term indebtedness                                                                                                                                                  |  |                            | 1,504,287 |   |                   |   | 1,456,569 |               |  |   | 1,056,498        |   |  |   | 1,031,569
|Other long-term liabilities                                                                                                                                             |  |                            | 34,404    |   |                   |   | 39,492    |               |  |   | 10,796           |   |  |   | 11,166   
|                                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|Total liabilities                                                                                                                                                       |  |                            | 2,143,820 |   |                   |   | 2,071,704 |               |  |   | 1,697,850        |   |  |   | 1,641,110
|                                                                                                                                                                        |  |                            |           |  
|Commitments and contingencies (Note 10)                                                                                                                                 |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|Minority interests                                                                                                                                                      |  |                            | 13,294    |   |                   |   | 13,217    |               |  |   | 13,294           |   |  |   | 13,217   
|Preferred stock Series A, 15,000,000 shares authorized, 13,938,657 shares issued and outstanding, liquidation preference of $299,360,388 and
$294,235,019, respectively |  |                            | 313,299   |   |                   |   | 308,174   |               |  |   |                 |   |  |   |         
|Preferred stock Series A-1, 2,000,000 shares authorized, 1,948,251 shares issued and outstanding, liquidation preference of $45,265,786 and
$44,490,787, respectively   |  |                            | 54,206    |   |                   |   | 53,431    |               |  |   |                 |   |  |   |         
|Stockholders (deficit) equity:                                                                                                                                         |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|Common stock, $0.001 par value, 300,000,000 shares authorized, 148,467,880 and 140,618,380 shares issued and outstanding in 2008 and 2007,
respectively                 |  |                            | 149       |   |                   |   | 141       |               |  |   |                 |   |  |   |         
|Common stock, $0.01 par value, 100 shares authorized, issued and outstanding                                                                                            |  |                            |          |   |                   |   |          |               |  |   | 1                |   |  |   | 1        
|Additional paid-in capital                                                                                                                                              |  |                            |          |   |                   |   |          |               |  |   | 549,766          |   |  |   | 549,186  
|Accumulated other comprehensive loss, net of tax                                                                                                                        |  |                            | (1,523    | ) |                   |   | (1,534    | )             |  |   |                 |   |  |   |         
|Retained (deficit) equity                                                                                                                                               |  |                            | (611,477  | ) |                   |   | (208,760  | )             |  |   | (372,938         | ) |  |   | 5,136    
|                                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|Total stockholders (deficit) equity                                                                                                                                    |  |                            | (612,851  | ) |                   |   | (210,153  | )             |  |   | 176,829          |   |  |   | 554,323  
|                                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          
|                                                                                                                                                                        |  | $                          | 1,911,768 |   |                   | $ | 2,236,373 |               |  | $ | 1,887,973        |   |  | $ | 2,208,650
|                                                                                                                                                                        |  |                            |           |   |                   |   |           |               |  |   |                  |   |  |   |          

The accompanying notes are an integral part of these statements.



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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)



|                                                                |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  
|--------------------------------------------------------------- |  | ---------------------------- | --------- | - | ---------------------------- | - | ------- | ---- |  | - | --------- | - |  | - | ------- | -
|                                                                |  | US Oncology Holdings, Inc.   |           |   | US Oncology, Inc.            |  
|                                                                |  | Three Months Ended March 31, |           |   | Three Months Ended March 31, |  
|                                                                |  | 2008                         |           |   | 2007                         |   |         | 2008 |  |   | 2007      |  
|Product revenue                                                 |  | $                            | 543,261   |   |                              | $ | 481,615 |      |  | $ | 543,261   |   |  | $ | 481,615 |  
|Service revenue                                                 |  |                              | 267,346   |   |                              |   | 250,426 |      |  |   | 267,346   |   |  |   | 250,426 |  
|                                                                |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  
|Total revenue                                                   |  |                              | 810,607   |   |                              |   | 732,041 |      |  |   | 810,607   |   |  |   | 732,041 |  
|Cost of products                                                |  |                              | 532,027   |   |                              |   | 464,665 |      |  |   | 532,027   |   |  |   | 464,665 |  
|Cost of services:                                               |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  
|Operating compensation and benefits                             |  |                              | 130,188   |   |                              |   | 117,349 |      |  |   | 130,188   |   |  |   | 117,349 |  
|Other operating costs                                           |  |                              | 76,796    |   |                              |   | 72,794  |      |  |   | 76,796    |   |  |   | 72,794  |  
|Depreciation and amortization                                   |  |                              | 18,601    |   |                              |   | 17,729  |      |  |   | 18,601    |   |  |   | 17,729  |  
|                                                                |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  
|Total cost of services                                          |  |                              | 225,585   |   |                              |   | 207,872 |      |  |   | 225,585   |   |  |   | 207,872 |  
|                                                                |  |                              |           |  
|Total cost of products and services                             |  |                              | 757,612   |   |                              |   | 672,537 |      |  |   | 757,612   |   |  |   | 672,537 |  
|General and administrative expense                              |  |                              | 20,039    |   |                              |   | 20,276  |      |  |   | 19,988    |   |  |   | 20,235  |  
|Impairment and restructuring charges                            |  |                              | 381,306   |   |                              |   | 7,395   |      |  |   | 381,306   |   |  |   | 7,395   |  
|Depreciation and amortization                                   |  |                              | 7,153     |   |                              |   | 3,364   |      |  |   | 7,153     |   |  |   | 3,364   |  
|                                                                |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  
|                                                                |  |                              | 1,166,110 |   |                              |   | 703,572 |      |  |   | 1,166,059 |   |  |   | 703,531 |  
|Income (loss) from operations                                   |  |                              | (355,503  | ) |                              |   | 28,469  |      |  |   | (355,452  | ) |  |   | 28,510  |  
|Other expense:                                                  |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  
|Interest expense, net                                           |  |                              | (36,279   | ) |                              |   | (31,025 | )    |  |   | (24,200   | ) |  |   | (23,807 | )
|Minority interests                                              |  |                              | (715      | ) |                              |   | (722    | )    |  |   | (715      | ) |  |   | (722    | )
|Loss on early extinguishment of debt                            |  |                              |          |   |                              |   | (12,917 | )    |  |   |          |   |  |   |        |  
|Other income (expense), net                                     |  |                              | (14,638   | ) |                              |   |        |      |  |   | 1,371     |   |  |   |        |  
|                                                                |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  
|Income (loss) before income taxes                               |  |                              | (407,135  | ) |                              |   | (16,195 | )    |  |   | (378,996  | ) |  |   | 3,981   |  
|Income tax benefit (provision)                                  |  |                              | 9,747     |   |                              |   | 609     |      |  |   | 922       |   |  |   | (1,931  | )
|                                                                |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  
|Net income (loss)                                               |  | $                            | (397,388  | ) |                              | $ | (15,586 | )    |  | $ | (378,074  | ) |  | $ | 2,050   |  
|                                                                |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  
|Other comprehensive income (loss):                              |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  
|Change in unrealized gain (loss) on cash flow hedge, net of tax |  |                              | 11        |   |                              |   | (1,533  | )    |  |   |          |   |  |   |        |  
|                                                                |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  
|Comprehensive income (loss)                                     |  | $                            | (397,377  | ) |                              | $ | (17,119 | )    |  | $ | (378,074  | ) |  | $ | 2,050   |  
|                                                                |  |                              |           |   |                              |   |         |      |  |   |           |   |  |   |         |  

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)



|                                                         |  |              |   |  |          |     |   |                          |   |      |                                            |  |   |                 |   |  |       |          |   |  |   |          |  
|-------------------------------------------------------- |  | ------------ | - |  | -------- | --- | - | ------------------------ | - | ---- | ------------------------------------------ |  | - | --------------- | - |  | ----- | -------- | - |  | - | -------- | -
|                                                         |  | SharesIssued |   |  | ParValue |     |   | AdditionalPaid-InCapital |   |      | AccumulatedOtherComprehensiveIncome (Loss) |  |   | RetainedDeficit |   |  | Total |         
|Balance at December 31, 2007                             |  | 140,618      |   |  | $        | 141 |   |                          | $ |     |                                            |  | $ | (1,534          | ) |  | $     | (208,760 | ) |  | $ | (210,153 | )
|                                                         |  |              |   |  |          |    
|Amortization of deferred compensation                    |  |             |   |  |          |    |   |                          |   | 555  |                                            |  |   |                |   |  |       |         |   |  |   | 555      |  
|Exercise of options to purchase common stock, net of tax |  | 25           |   |  |          |    |   |                          |   | 25   |                                            |  |   |                |   |  |       |         |   |  |   | 25       |  
|Restricted stock award issuances                         |  | 8,245        |   |  |          | 9   |   |                          |   |     |                                            |  |   |                |   |  |       | (9       | ) |  |   |         |  
|Forfeiture of restricted stock awards                    |  | (420         | ) |  |          | (1  | ) |                          |   |     |                                            |  |   |                |   |  |       |         |   |  |   | (1       | )
|Accretion of preferred stock dividends                   |  |             |   |  |          |    |   |                          |   | (580 | )                                          |  |   |                |   |  |       | (5,320   | ) |  |   | (5,900   | )
|Change in tax rate applied to loss on interest rate swap |  |             |   |  |          |    |   |                          |   |     |                                            |  |   | 11              |   |  |       |         |   |  |   | 11       |  
|Net loss                                                 |  |             |   |  |          |    |   |                          |   |     |                                            |  |   |                |   |  |       | (397,388 | ) |  |   | (397,388 | )
|                                                         |  |              |   |  |          |     |   |                          |   |      |                                            |  |   |                 |   |  |       |          |   |  |   |          |  
|Balance at March 31, 2008                                |  | 148,468      |   |  | $        | 149 |   |                          | $ |     |                                            |  | $ | (1,523          | ) |  | $     | (611,477 | ) |  | $ | (612,851 | )
|                                                         |  |              |   |  |          |     |   |                          |   |      |                                            |  |   |                 |   |  |       |          |   |  |   |          |  

US ONCOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(unaudited, in
thousands, except share information)



|                                                                                       |  |              |  |          |   |                          |   |                           |  |   |          |   |  |   |          |  
|-------------------------------------------------------------------------------------- |  | ------------ |  | -------- | - | ------------------------ | - | ------------------------- |  | - | -------- | - |  | - | -------- | -
|                                                                                       |  | SharesIssued |  | ParValue |   | AdditionalPaid-InCapital |   | RetainedEarnings(Deficit) |  |   | Total    |  
|Balance at December 31, 2007                                                           |  | 100          |  | $        | 1 |                          | $ | 549,186                   |  | $ | 5,136    |   |  | $ | 554,323  |  
|                                                                                       |  |              |  |          |  
|Amortization of deferred compensation                                                  |  |             |  |          |  |                          |   | 555                       |  |   |         |   |  |   | 555      |  
|Contribution of proceeds from exercise of options to purchase common stock, net of tax |  |             |  |          |  |                          |   | 25                        |  |   |         |   |  |   | 25       |  
|Net loss                                                                               |  |             |  |          |  |                          |   |                          |  |   | (378,074 | ) |  |   | (378,074 | )
|                                                                                       |  |              |  |          |   |                          |   |                           |  |   |          |   |  |   |          |  
|Balance at March 31, 2008                                                              |  | 100          |  | $        | 1 |                          | $ | 549,766                   |  | $ | (372,938 | ) |  | $ | 176,829  |  
|                                                                                       |  |              |  |          |   |                          |   |                           |  |   |          |   |  |   |          |  

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 Ended March 31, |          |   | Three Months Ended March 31, |  
|                                                                                         |  | 2008                         |          |   | 2007                         |   |          | 2008 |  |   | 2007     |  
|Cash flows from operating activities:                                                    |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Net income (loss)                                                                        |  | $                            | (397,388 | ) |                              | $ | (15,586  | )    |  | $ | (378,074 | ) |  | $ | 2,050    |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Depreciation and amortization, including amortization of deferred financing costs        |  |                              | 28,121   |   |                              |   | 23,014   |      |  |   | 27,523   |   |  |   | 22,770   |  
|Impairment and restructuring charges                                                     |  |                              | 381,306  |   |                              |   | 7,395    |      |  |   | 381,306  |   |  |   | 7,395    |  
|Deferred income taxes                                                                    |  |                              | (11,531  | ) |                              |   | (2,236   | )    |  |   | (2,060   | ) |  |   | (3,012   | )
|Non-cash compensation expense                                                            |  |                              | 555      |   |                              |   | 260      |      |  |   | 555      |   |  |   | 260      |  
|(Gain)/Loss on sale of assets                                                            |  |                              | (1,370   | ) |                              |   | 151      |      |  |   | (1,370   | ) |  |   | 151      |  
|Minority interest expense                                                                |  |                              | 726      |   |                              |   | 722      |      |  |   | 726      |   |  |   | 722      |  
|Equity in earnings of joint ventures                                                     |  |                              | (254     | ) |                              |   |         |      |  |   | (254     | ) |  |   |         |  
|Loss on interest rate swap                                                               |  |                              | 16,009   |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Non-cash interest under PIK option                                                       |  |                              | 10,329   |   |                              |   |         |      |  |   |         |   |  |   |         |  
|Loss on early extinguishment of debt                                                     |  |                              |         |   |                              |   | 12,917   |      |  |   |         |   |  |   |         |  
|(Increase) Decrease in:                                                                  |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Accounts and other receivables                                                           |  |                              | (2,468   | ) |                              |   | (15,699  | )    |  |   | (2,468   | ) |  |   | (15,699  | )
|Prepaid expenses and other current assets                                                |  |                              | 3,723    |   |                              |   | (4,544   | )    |  |   | 3,723    |   |  |   | (4,544   | )
|Inventories                                                                              |  |                              | (10,684  | ) |                              |   | (8,918   | )    |  |   | (10,684  | ) |  |   | (8,918   | )
|Other assets                                                                             |  |                              | 5        |   |                              |   | (1,316   | )    |  |   | 5        |   |  |   | (1,053   | )
|Increase (Decrease) in:                                                                  |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Accounts payable                                                                         |  |                              | 35,945   |   |                              |   | 26,319   |      |  |   | 36,866   |   |  |   | 26,331   |  
|Due from/to affiliates                                                                   |  |                              | 10,409   |   |                              |   | 22,568   |      |  |   | 11,539   |   |  |   | 42,201   |  
|Income taxes receivable/payable                                                          |  |                              | 1,794    |   |                              |   | 1,647    |      |  |   | 1,020    |   |  |   | (14,022  | )
|Other accrued liabilities                                                                |  |                              | (14,347  | ) |                              |   | (22,964  | )    |  |   | (17,489  | ) |  |   | (18,307  | )
|                                                                                         |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Net cash provided by operating activities                                                |  |                              | 50,880   |   |                              |   | 23,730   |      |  |   | 50,864   |   |  |   | 36,325   |  
|                                                                                         |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Cash flows from investing activities:                                                    |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Acquisition of property and equipment                                                    |  |                              | (23,624  | ) |                              |   | (17,427  | )    |  |   | (23,624  | ) |  |   | (17,427  | )
|Net payments in affiliation transactions                                                 |  |                              | (36,071  | ) |                              |   |         |      |  |   | (36,071  | ) |  |   |         |  
|Designation of restricted cash                                                           |  |                              | (500     | ) |                              |   |         |      |  |   | (500     | ) |  |   |         |  
|Net proceeds from sale of assets                                                         |  |                              | 2,097    |   |                              |   | 750      |      |  |   | 2,097    |   |  |   | 750      |  
|Distributions from minority interests                                                    |  |                              | 511      |   |                              |   |         |      |  |   | 511      |   |  |   |         |  
|Investment in unconsolidated subsidiary                                                  |  |                              | 171      |   |                              |   |         |      |  |   | 171      |   |  |   |         |  
|Net cash used in investing activities                                                    |  |                              | (57,416  | ) |                              |   | (16,677  | )    |  |   | (57,416  | ) |  |   | (16,677  | )
|                                                                                         |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Cash flows from financing activities:                                                    |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Proceeds from senior floating rate PIK toggle notes, net of issue costs                  |  |                              |         |   |                              |   | 413,300  |      |  |   |         |   |  |   |         |  
|Proceeds from other indebtedness                                                         |  |                              |         |   |                              |   | 665      |      |  |   |         |   |  |   | 665      |  
|Repayment of senior floating rate notes                                                  |  |                              |         |   |                              |   | (256,766 | )    |  |   |         |   |  |   |         |  
|Repayment of term loan                                                                   |  |                              | (1,232   | ) |                              |   | (3,791   | )    |  |   | (1,232   | ) |  |   | (3,791   | )
|Repayment of other indebtedness                                                          |  |                              | (341     | ) |                              |   | (369     | )    |  |   | (341     | ) |  |   | (369     | )
|Debt financing costs                                                                     |  |                              | (16      | ) |                              |   |         |      |  |   |         |   |  |   | (153     | )
|Net distributions to parent                                                              |  |                              |         |   |                              |   |         |      |  |   |         |   |  |   | (54,501  | )
|Repayment of advance to parent                                                           |  |                              |         |   |                              |   |         |      |  |   |         |   |  |   | (150,000 | )
|Distributions to minority interests                                                      |  |                              | (768     | ) |                              |   | (994     | )    |  |   | (768     | ) |  |   | (994     | )
|Payment of dividends on preferred stock                                                  |  |                              |         |   |                              |   | (25,000  | )    |  |   |         |   |  |   |         |  
|Payment of dividends on common stock                                                     |  |                              |         |   |                              |   | (323,580 | )    |  |   |         |   |  |   |         |  
|Proceeds from exercise of stock options                                                  |  |                              | 25       |   |                              |   | 517      |      |  |   |         |   |  |   |         |  
|Contribution of proceeds from exercise of stock options                                  |  |                              |         |   |                              |   |         |      |  |   | 25       |   |  |   | 531      |  
|                                                                                         |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Net cash used in financing activities                                                    |  |                              | (2,332   | ) |                              |   | (196,018 | )    |  |   | (2,316   | ) |  |   | (208,612 | )
|                                                                                         |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Decrease in cash and cash equivalents                                                    |  |                              | (8,868   | ) |                              |   | (188,965 | )    |  |   | (8,868   | ) |  |   | (188,964 | )
|Cash and cash equivalents:                                                               |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Beginning of period                                                                      |  |                              | 149,257  |   |                              |   | 281,768  |      |  |   | 149,256  |   |  |   | 281,766  |  
|                                                                                         |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|End of period                                                                            |  | $                            | 140,389  |   |                              | $ | 92,803   |      |  | $ | 140,388  |   |  | $ | 92,802   |  
|                                                                                         |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Interest paid                                                                            |  | $                            | 37,527   |   |                              | $ | 50,915   |      |  | $ | 37,514   |   |  | $ | 37,681   |  
|Income taxes paid                                                                        |  |                              | 83       |   |                              |   | 37       |      |  |   | 83       |   |  |   | 37       |  
|Non-cash investing and financing transactions:                                           |  |                              |          |   |                              |   |          |      |  |   |          |   |  |   |          |  
|Notes issued in affiliation transaction                                                  |  |                              | 32,677   |   |                              |   |         |      |  |   | 32,677   |   |  |   |         |  

The accompanying notes are an integral part of this statement.



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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 Holdings and its wholly owned subsidiary, Oiler Acquisition Corp., entered into a merger agreement with US Oncology, Inc. (US Oncology) pursuant to
which Oiler Acquisition Corp. was merged with and into 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 that
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 1,247 physicians operating in 472 locations, including 91 radiation oncology facilities in 39 states. US Oncology also provides a broad range of
services to pharmaceutical manufacturers, including product distribution and informational services such as data reporting and analysis.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial reporting and in accordance
with instructions for Form 10-Q and Rule 10.01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by 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 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 February 29, 2008.

NOTE 2  Revenues

The Company derives revenues primarily from (i) comprehensive service agreements with physician practices; (ii) pharmaceutical services agreements with physician practices under the
oncology pharmaceutical services (OPS) model; (iii) fees paid by pharmaceutical companies for services as a group purchasing organization, data services and other manufacturer services and (iv) research 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, 2008 and 2007, the affiliated practices under comprehensive service agreements derived 38.2% and 37.8%, respectively, of their net patient revenue from services
provided under the Medicare program (of which 4.7% and 3.5%, respectively, relate to Medicare managed care) and 3.1% and 3.0%, 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, 2008 and 2007, that payer represented 9.8% and 10.7%, respectively, of such affiliated practices aggregate net revenues. Changes in the payer reimbursement rates, or in affiliated practices payer mix could materially and
adversely affect the Companys revenues.

Erythropoiesis-stimulating agents (ESAs) are widely-used drugs for the treatment
of anemia, which is 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 to treat 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 and are 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



During the three months ended March 31, 2007, the U.S. Food and Drug Administration (the
FDA) issued a public health advisory outlining new safety information, including revised product labeling, about ESAs which it later revised on November 8, 2007. In particular, the FDA highlighted studies that concluded that an
increased risk of death may occur in cancer patients who are not receiving chemotherapy and who are treated with ESAs. Partly in response to such warnings, certain Medicare intermediaries ceased reimbursement for ESAs administered to patients who
are not current or recent chemotherapy recipients at the time of administration. In addition, intermediaries have revised usage guidelines for ESAs in other circumstances. The FDA advisory and subsequent intermediary actions led the Centers for
Medicare & Medicaid Services (CMS) to open a national coverage analysis (NCA), on March 14, 2007, on the use of ESAs for conditions other than advanced kidney disease, which was the first step toward issuing a
proposed national coverage decision. The national coverage decision (NCD) was released on July 30, 2007, and was effective as of that date.

The NCD went significantly beyond limiting coverage for ESAs in patients who are not currently receiving chemotherapy that was referenced in the initial FDA warning discussed above. The NCD includes determinations
that eliminate coverage for anemia not related to cancer treatment. Coverage is also eliminated for patients with certain other risk factors. In circumstances where ESA treatment is reimbursed, the NCD (i) requires that in order to commence ESA
treatment, patients be significantly more anemic than was common practice prior to the NCD; (ii) imposes limitations on the duration of ESA therapy and the circumstances in which it should be continued and (iii) limits dosing and dose
increases in nonresponsive patients.

A number of scientific articles, including several released since the 2007 actions by FDA and CMS,
have concluded that ESAs may in certain situations increase certain side effects and mortality risk due possibly to stimulation of the growth and/or survival of cancer cells in cancer patients. On March 13, 2008, the Oncology Drug Advisory
Committee of the FDA (ODAC) met to further consider the use of ESAs in oncology and has recommended further restrictions on use that are currently being considered by the FDA. These recommended restrictions include that ESA use not be
indicated in patients receiving potentially curative treatments or in patients with metastatic breast cancer and/or cancers of the head and neck. We expect that any action by the FDA based on the ODAC recommendation will occur during the
second quarter of 2008 (see Note 4).

A condensed financial summary of ESAs administered by our network of affiliated physicians is
summarized as follows (in millions):



|                       |  |                             |       |   |      |   |       |  
|---------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                       |  | Three MonthsEnded March 31, |      
|                       |  | 2008                        |       |   | 2007 |  
|Revenue                |  | $                           | 26.9  |   |      | $ | 42.4  |  
|Less: Operating Costs  |  |                             | (16.7 | ) |      |   | (24.1 | )
|                       |  |                             |       |   |      |   |       |  
|Income from Operations |  | $                           | 10.2  |   |      | $ | 18.3  |  
|                       |  |                             |       |   |      |   |       |  

These financial results reflect the combined effect of results from our Medical Oncology Services
segment which relate primarily to usage by practices receiving comprehensive management services and from our Pharmaceutical Services segment which includes purchases by physicians affiliated under the OPS model, as well as distribution and group
purchasing fees received from manufacturers. Because the initial FDA and CMS actions to restrict use occurred in March 2007, the impact of reduced ESA utilization was not reflected in the results for the first quarter of 2007.

Because the use of ESAs relates to specific clinical determinations and the Company does not make clinical decisions for affiliated physicians, analysis
of the financial impact of these restrictions is a complex process. As a result, there is inherent uncertainty in making an estimate or range of estimates as to the ultimate financial impact on the Company. Factors that could significantly
affect the financial impact on the Company include ongoing clinical interpretations of coverage restrictions and risks related to ESA use and whether managed care and other non-governmental payers adopt similar reimbursement limitations. A
significant decline in ESA usage has had a significant adverse affect on the Companys results of operations and, particularly, its Medical Oncology Services and Pharmaceutical Services segments. Decreasing financial performance of affiliated
practices as a result of declining ESA usage also effects their relationship with the Company and, in some instances, has led to increased pressure to amend the terms of their management services agreements. In addition, reduced utilization of
ESAs adversely impacted the Companys ability to continue to receive favorable pricing from ESA manufacturers because purchasing agreements include pricing adjustments based upon specified purchase volumes as well as market share or because
those manufacturers may seek to offset their financial losses through increased pricing. Decreased financial performance may also adversely impact the Companys ability to obtain acceptable credit terms from pharmaceutical manufacturers,
including manufacturers of products other than ESAs.



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##### Table of Contents

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



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.

The Deficit Reduction Act (DRA), passed in February, 2006, contained a provision affecting imaging reimbursement. The technical component of the physician fee schedule for physician-office imaging services
was capped at the Hospital Outpatient Prospective Payment System (HOPPS) rates. Since Congress did not include a provision in the Tax Relief and Healthcare Act of 2006 to revise the DRA Imaging provision, Medicare reimbursement,
effective January 1, 2007, was limited to no more than the HOPPS rates. The impact on US Oncology affiliated practices primarily relates to reduced reimbursement for Positron Emission Tomography (PET), Positron Emission
Tomography/Computerized Tomography (PET/CT) and Computerized Tomography (CT) services. During the three months ended March 31, 2007, the reduced reimbursement for these imaging services reduced pretax income by
approximately $2 million, compared to the corresponding period of 2006. During 2008, the HOPPS rates increased, compared to 2007, resulting in an increase in pretax income in imaging reimbursement of approximately $0.5 million for services provided
during the three months ended March 31, 2008.

In November, 2006, CMS released its Final Rule of the Five-Year Review of Work Relative
Value Units (RVU or Work RVU) under the Physician Fee Schedule and Proposed Changes to the Practice Expense (PE) Methodology (the Final Rule). The Work RVU changes were implemented in full on
January 1, 2007, while the PE methodology changes are being phased in over a four-year period (2007-2010). During the three months ended March 31, 2008 and 2007, this change in reimbursement increased pretax income by $0.4 million and $0.7
million, respectively, over the comparable prior year periods for Medicare non-drug reimbursement.

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 November 1, 2007, CMS issued a physician fee schedule update for 2008 to be set under
the statutory formula and was to be effective as of January 1, 2008. Under the CMS release, the 2008 conversion factor would have been 10.1% lower than the 2007 rates. However, as a result of the Medicare, Medicaid, and SCHIP
Extension Act of 2007, effective for claims with dates of service from January 1, 2008 through June 30, 2008, the update to the conversion factor will be an increase of 0.5% over the 2007 rates; and for claims with dates of service from
July 1, 2008 and after, will revert back to the previous payment methodology (the decrease of 10.1% from 2007 rates) that was outlined in the Final Rule, published in the Federal Register on November 27, 2007. If action is not taken by
Congress to adjust the conversion factor for the last half of 2008, pretax income would be negatively impacted by the 10.1% decrease.

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 23.3% and 26.8% of revenue for the three month periods ended March 31, 2008, and 2007,
respectively.

NOTE 3  Fair Value Measurements

In September, 2006, the FASB issued SFAS No. 157, Fair Value Measurement (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements (see Note 11). Effective January 1, 2008, the Company partially adopted SFAS No. 157 as allowed by the FASB issued Staff Position No. 157-2 (FSP 157-2), which defers
the effective date of SFAS No. 157 for one year for certain non-financial assets and liabilities. Due to the Companys election under FSP 157-2, the Company has applied the provisions of the statement to its disclosures related to assets
and liabilities which are measured at fair value on a recurring basis (at least annually). As a result, SFAS No. 157 currently applies only to the Companys interest rate swap liability.



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



SFAS No. 157 requires disclosures that categorize assets and liabilities measured at fair value
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.

The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of March 31, 2008 (in thousands):



|                            |  |                                |         |   |                                                             |   |                                             |  |   |                                         |   |  |   |  
|--------------------------- |  | ------------------------------ | ------- | - | ----------------------------------------------------------- | - | ------------------------------------------- |  | - | --------------------------------------- | - |  | - | -
|                            |  | Fair Value as ofMarch 31, 2008 |         |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | Significant OtherObservable Inputs(Level 2) |  |   | SignificantUnobservable Inputs(Level 3)
|Assets                      |  | $                              |        |   |                                                             | $ |                                            |  | $ |                                        |   |  | $ | 
|Liabilities                 |  |                                |         |   |                                                             |   |                                             |  |   |                                         |   |  |   |  
|Other accrued liabilities   |  |                                | (10,791 | ) |                                                             |   |                                            |  |   | (10,791                                 | ) |  |   | 
|Other long-term liabilities |  |                                | (20,697 | ) |                                                             |   |                                            |  |   | (20,697                                 | ) |  |   | 
|                            |  |                                |         |   |                                                             |   |                                             |  |   |                                         |   |  |   |  
|Total                       |  | $                              | (31,488 | ) |                                                             | $ |                                            |  | $ | (31,488                                 | ) |  | $ | 
|                            |  |                                |         |   |                                                             |   |                                             |  |   |                                         |   |  |   |  

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, is 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.

NOTE 4  Intangible Assets and Goodwill

Changes
in intangible assets relating to service agreements, customer relationships and goodwill during the three months ended March 31, 2008 consisted of the following (in thousands):



|                               |  |                        |         |   |                            |   |       |          |  |   |          |  
|------------------------------ |  | ---------------------- | ------- | - | -------------------------- | - | ----- | -------- |  | - | -------- | -
|                               |  | ServiceAgreements, net |         |   | CustomerRelationships, net |   |       | Goodwill | 
|Balance at December 31, 2007   |  | $                      | 223,850 |   |                            | $ | 4,242 |          |  | $ | 757,270  |  
|Additions, net                 |  |                        | 65,514  |   |                            |   |      |          |  |   |         |  
|Impairment charge              |  |                        |        |   |                            |   |      |          |  |   | (380,000 | )
|Amortization expense and other |  |                        | (5,247  | ) |                            |   | (125  | )        |  |   |         |  
|                               |  |                        |         |   |                            |   |       |          |  |   |          |  
|Balance at March 31, 2008      |  | $                      | 284,117 |   |                            | $ | 4,117 |          |  | $ | 377,270  |  
|                               |  |                        |         |   |                            |   |       |          |  |   |          |  

The carrying value of goodwill and the carrying value of service agreements are subject to
impairment tests under the requirements of Statement of Financial Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets. In connection with the preparation of the financial statements for the quarter
ended March 31, 2008, and as a result of the continued decline in the financial performance of the Medical Oncology Services segment, the Company assessed the recoverability of goodwill related to that segment. Through strategic initiatives to
diversify operations, the Company has become less dependent on its medical oncology segment as a source of earnings since goodwill was initially recognized in connection with the Merger in August 2004. During the year ended December 31, 2007,
earnings in the medical oncology segment were negatively impacted by reduced coverage for supportive care drugs as a result of revised product labeling issued by the FDA and coverage restrictions imposed by CMS. As a result of declining earnings,
goodwill was tested for impairment during both the quarter ended September 30, 2007 and December 31, 2007 and no impairment was identified. During the quarter ended March 31, 2008, price increases from manufacturers of supportive care
drugs and additional safety concerns related to the use of supportive care drugs continued to reduce their utilization by affiliated physicians and adversely impacted both current and projected operating results



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



for the Medical Oncology Services segment. As a result of these safety concerns, on March 13, 2008, ODAC met to consider the use of these drugs in
oncology and recommended further restrictions that are currently being considered by the FDA (see Note 2). In addition, affiliated physicians may already be changing their ESA use as a result of concerns raised by ODAC, and the USON network is
active in reviewing evidence and adopting appropriate treatment guidelines. These factors, along with a lower market valuation at March 31, 2008 resulting from unstable credit markets, led the Company to recognize a non-cash goodwill impairment
charge in the amount of $380.0 million related to its Medical Oncology Services segment during the quarter ended March 31, 2008. The impairment charge is not expected to result in future cash expenditures. Further, the charge is a non-cash item
that does not impact the financial covenants of US Oncologys senior secured credit facility.

When an impairment is identified, an
impairment charge is necessary to state the carrying value of goodwill at its implied fair value, based upon a hypothetical purchase price allocation assuming the segment was acquired for its estimated fair value. The fair value of the Medical
Oncology Services segment was estimated with the assistance of an independent appraisal that considered the segments recent and expected financial performance as well as a market analysis of transactions involving comparable entities for which
public information is available. Determining the implied fair value of goodwill also requires the identification and valuation of intangible assets that have either increased in value or have been created through the Companys initiatives and
investments since the goodwill was initially recognized. In connection with assessing the impairment charge, the Company identified previously unrecognized intangible assets, as well as increases to the fair value of the recognized management
service agreement intangible assets, which amounted to approximately $160 million in the aggregate. Value assigned to these intangible assets reduced the amount attributable to goodwill in a hypothetical purchase price allocation and, consequently,
increased the impairment charge necessary to state goodwill at its implied fair value by a like amount. In accordance with GAAP, these increases in the fair value of other intangible assets have not been recorded in the Companys consolidated
balance sheet as of March 31, 2008.

Customer relationships, net, are classified as other assets in the accompanying Condensed
Consolidated Balance Sheet. Accumulated amortization relating to service agreements was $38.2 million and $33.0 million at March 31, 2008 and December 31, 2007, respectively.

NOTE 5  Impairment and Restructuring Charges

Impairment and restructuring charges recognized during the three months ended March 31, 2008 and 2007 consisted of the following (in thousands):



|                            |  |                             |         |      |   |      
|--------------------------- |  | --------------------------- | ------- | ---- | - | -----
|                            |  | Three Months EndedMarch 31,
|                            |  | 2008                        |         | 2007
|Goodwill                    |  | $                           | 380,000 |      | $ |     
|Severance                   |  |                             | 1,306   |      |   |     
|Service Agreements, net     |  |                             |        |      |   | 4,325
|Property and Equipment, net |  |                             |        |      |   | 2,512
|Future Lease Obligations    |  |                             |        |      |   | 558  
|                            |  |                             |         |      |   |      
|Total                       |  | $                           | 381,306 |      | $ | 7,395
|                            |  |                             |         |      |   |      

During the three months ended March 31, 2008, the Company recorded an impairment of its
goodwill related to the medical oncology segment of $380.0 million (see Note 4). Also during the period, charges of $1.3 million were recognized primarily related to employee severance for which payment has been made as of April 30, 2008.

During the three months ended March 31, 2007, in two markets in which the Company has affiliated practices, market-specific
conditions resulted in the Company recognizing impairment and restructuring charges amounting to $7.4 million.

In the first market, during
the quarter ended September 30, 2006, state regulators reversed a prior determination and ruled that, under the states certificate of need law, the affiliated practice was required to cease providing radiation therapy services to patients
at a newly constructed cancer center. The Company has appealed this determination and is exploring other options which would make the treatment facility available to radiation therapy patients. These efforts did not advance sufficiently during the
three months ended March 31, 2007, and, therefore, the resumption of radiation services or other recovery of the investment was not considered likely and an impairment charge of $1.6 million was recorded during the three months ended



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



March 31, 2007. During the three months ended March 31, 2008, the Company received a ruling in its appeal, which mandates a rehearing by the state
agency, currently scheduled to occur during the second quarter.

In the second market, financial performance deteriorated as a result of an
excessive cost structure relative to practice revenue. Along with the affiliated practice, the Company restructured the market to establish a base for future growth and to otherwise improve financial performance. During the three months ended
March 31, 2007, the Company recorded impairment and restructuring charges of $5.8 million because, based on anticipated operating results, it did not expect that practice performance would be sufficient to recover the value of certain assets
and the intangible asset associated with the management service agreement in the market.

NOTE 6  Indebtedness

As of March 31, 2008 and December 31, 2007, long-term indebtedness consisted of the following (in thousands):



|                                                |  |               |           |   |                  |   |           |  
|----------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | -
|                                                |  | March 31,2008 |           |   | December 31,2007 |  
|US Oncology, Inc.                               |  |               |           |   |                  |   |           |  
|Senior Secured Credit Facility, due 2011        |  | $             | 470,371   |   |                  | $ | 471,602   |  
|9.0% Senior Notes, due 2012                     |  |               | 300,000   |   |                  |   | 300,000   |  
|10.75% Senior Subordinated Notes, due 2014      |  |               | 275,000   |   |                  |   | 275,000   |  
|9.625% Senior Subordinated Notes, due 2012      |  |               | 3,000     |   |                  |   | 3,000     |  
|Subordinated notes                              |  |               | 34,113    |   |                  |   | 1,606     |  
|Mortgage, capital lease obligations and other   |  |               | 18,802    |   |                  |   | 18,974    |  
|                                                |  |               |           |   |                  |   |           |  
|                                                |  |               | 1,101,286 |   |                  |   | 1,070,182 |  
|Less current maturities                         |  |               | (44,788   | ) |                  |   | (38,613   | )
|                                                |  |               |           |   |                  |   |           |  
|                                                |  | $             | 1,056,498 |   |                  | $ | 1,031,569 |  
|                                                |  |               |           |   |                  |   |           |  
|US Oncology Holdings, Inc.                      |  |               |           |   |                  |   |           |  
|Senior Floating Rate PIK Toggle Notes, due 2012 |  |               | 447,789   |   |                  |   | 425,000   |  
|                                                |  |               |           |   |                  |   |           |  
|                                                |  | $             | 1,504,287 |   |                  | $ | 1,456,569 |  
|                                                |  |               |           |   |                  |   |           |  

Future principal obligations under US Oncologys and Holdings long-term indebtedness as
of March 31, 2008, are as follows (in thousands):



|                         |  |                                |        |      |   |       |  |      |         |      |   |            |  |   |       |  |   |        
|------------------------ |  | ------------------------------ | ------ | ---- | - | ----- |  | ---- | ------- | ---- | - | ---------- |  | - | ----- |  | - | -------
|                         |  | Twelve months ending March 31,
|                         |  | 2009                           |        | 2010 |   | 2011  |  | 2012 |         | 2013 |   | Thereafter
|US Oncology payments due |  | $                              | 44,788 |      | $ | 8,364 |  | $    | 338,216 |      | $ | 413,909    |  | $ | 7,901 |  | $ | 288,108
|Holdings payments due    |  |                                |       |      |   |      |  |      |        |      |   | 447,789    |  |   |      |  |   |       
|                         |  |                                |        |      |   |       |  |      |         |      |   |            |  |   |       |  |   |        
|                         |  | $                              | 44,788 |      | $ | 8,364 |  | $    | 338,216 |      | $ | 861,698    |  | $ | 7,901 |  | $ | 288,108
|                         |  |                                |        |      |   |       |  |      |         |      |   |            |  |   |       |  |   |        

Senior Secured Credit Facility

The senior secured credit facility provides for senior secured financing of up to $660.0 million, consisting of:



| |  |  | a $160.0 million revolving credit facility, including a letter of credit sub-facility and a swingline loan sub-facility that will terminate on August 20,
2010. At March 31, 2008, $133.7 million was available for borrowing. Availability has been reduced by outstanding letters of credit amounting to $26.3 million. At March 31, 2008 and December 31, 2007, no amounts had been borrowed
under the revolving credit facility.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $500.0 million term loan facility with a maturity of August, 2011. The amount outstanding under the term loan was $470.4 million as of March 31, 2008 and
$471.6 million as of December 31, 2007. In April, 2008, the Company repaid $29.4 million of the balance outstanding under the term loan due to requirements under its excess cash flow repayment provision. No additional amounts may be
borrowed under the term loan facility without future amendment to the facility.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



The interest rates applicable to loans, other than swingline loans, under the senior secured credit
facility are, at the Companys option, equal to either an alternate base rate or an adjusted LIBOR for one, two, three or six month interest periods chosen by the Company (or a nine or 12 month period if all lenders agree to make an
interest period of such duration available) in each case, plus an applicable margin percentage. Swingline loans bear interest at the interest rate applicable to alternate base rate revolving loans.

The adjusted LIBOR is based upon offered rates in the London interbank market. The alternate base rate is the greater of (1) the prime rate or
(2) one-half of 1% over the weighted average of the rates on overnight Federal funds transactions as published by the Federal Reserve Bank of New York. Currently, the applicable margin percentage is a percentage per annum equal to
(1) 1.75% for alternate base rate term loans, (2) 2.75% for adjusted LIBOR term loans, (3) 1.75% for alternate base rate revolving loans and (4) 2.75% for adjusted LIBOR revolving loans.

Indebtedness under the senior secured credit facility is guaranteed by all of US Oncologys current restricted subsidiaries (see Note 12), all of US
Oncologys future restricted subsidiaries and by Holdings, and is secured by a first priority security interest in substantially all of US Oncologys existing and future real and personal property, including accounts receivable, inventory,
equipment, general intangibles, intellectual property, investment property, cash and a first priority pledge of US Oncologys capital stock and the capital stock of the guarantor subsidiaries.

The senior secured credit facility requires US Oncology to comply, on a quarterly basis, with certain financial covenants, including a minimum interest
coverage ratio (interest expense divided by EBITDA, as defined by the indenture) and a maximum leverage ratio (indebtedness divided by EBITDA, as defined by the indenture). At March 31, 2008, the Company was required to maintain a minimum
interest coverage ratio of no less than 1.90:1 and a maximum leverage ratio of no more than 5.95:1. As of March 31, 2008, US Oncologys actual interest coverage ratio was 2.32:1 and its actual leverage ratio was 5.08:1. Both of these
covenants become more restrictive (generally on a quarterly basis) and, at maturity in 2011, the minimum interest coverage ratio required will be at least 2.50:1 and the maximum leverage ratio may not be more than 4.75:1. Also, the Company may be
obligated (based on certain leverage thresholds) to make payments on its term loan facility of up to 75% of excess cash flow, as defined. A payment of $29.4 million under this provision was required based on cash flow for the year ended
December 31, 2007 and was paid in April, 2008. In addition, the senior secured credit facility includes various negative covenants, including with respect to indebtedness, liens, investments, permitted businesses and transactions and other
matters, as well as certain customary representations and warranties, affirmative covenants and events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross defaults to certain indebtedness,
certain events of bankruptcy, certain events under ERISA, material judgments, actual or asserted failure of any guaranty or security document supporting the senior secured credit facility to be in full force and effect and change of control. If such
an event of default occurs, the lenders under the senior secured credit facility are entitled to take various actions, including the acceleration of amounts due under the senior secured credit facility and all actions permitted to be taken by a
secured creditor. As of March 31, 2008, the Company is in compliance with the covenants of its indebtedness.

Senior Floating Rate PIK Toggle Notes

During the three months ended March 31, 2007, Holdings, whose principal asset is its investment in US Oncology, issued
$425.0 million of senior floating rate PIK toggle notes, due 2012. A portion of the proceeds of the notes were used to repay Holdings $250.0 million floating rate notes. These notes are senior unsecured obligations of Holdings. Holdings
may elect to pay interest on the Notes entirely in cash, by increasing the principal amount of the Notes (PIK interest), or by paying 50% in cash and 50% by increasing the principal amount of the Notes. Cash interest will accrue on the
Notes at a rate per annum equal to 6-month LIBOR plus the applicable spread. PIK interest will accrue on the Notes at a rate per annum equal to the cash interest rate plus 0.75%. LIBOR will be reset semiannually. The applicable spread is 4.50% and
will increase by 0.50% on March 15, 2009 and increase by another 0.50% on March 15, 2010. The Notes mature on March 15, 2012. The indenture required that the initial interest payment of $21.2 million due September 15, 2007 be
made in cash, which was provided by US Oncology, Inc. in the form of a dividend paid to Holdings. The Company elected to settle the interest payment due March 15, 2008 entirely by increasing the principal amount of the outstanding notes and, on
that date, increased the outstanding principal amount by $22.8 million as settlement for interest due. The Company has elected to pay interest due on September 15, 2008 50% in cash and 50% in kind, which is an alternative available under the
notes. To settle this payment, the Company expects that it will pay $8.1 million in cash and issue an additional $8.9 million in notes. 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.



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



Holdings may redeem all or any of the Notes on or after September 15, 2007 at the redemption
prices set forth below, plus accrued and unpaid interest, if any, to the redemption date:



|                                                               |  |       |  
|-------------------------------------------------------------- |  | ----- | -
|Redemption period                                              |  | Price |  
|On or after September 15, 2007 and prior to September 15, 2008 |  | 100.0 | %
|On or after September 15, 2008 and prior to September 15, 2009 |  | 102.0 | %
|On or after September 15, 2009 and prior to September 15, 2010 |  | 101.0 | %
|On or after September 15, 2010                                 |  | 100.0 | %

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 expects to fund the portion of future semi-annual interest payments that are made in cash on the floating rate PIK toggle notes. The terms of the
existing senior secured credit facility, as well as the indentures governing US Oncologys senior notes and senior subordinated notes, and certain other agreements, restrict it and certain of its subsidiaries from making payments or
transferring assets to Holdings, including dividends, loans or other distributions. Such restrictions include prohibition of dividends in an event of default and limitations on the total amount of dividends paid to Holdings. The senior notes and
senior subordinated notes also require that US Oncology be solvent both at the time, and immediately following, a dividend payment to Holdings. In the event these agreements do not permit US Oncology to provide Holdings with sufficient distributions
to fund interest payments, Holdings would be unable to pay interest on the notes in cash and would instead be required to pay PIK interest. If Holdings is unable to make principal payments on the Holdings Notes when due, Holdings may default on its
notes, unless other sources of funding are available. The amount available under the restricted payments provision is based upon a portion of US Oncologys cumulative net income adjusted upward for certain transactions, primarily the receipt of
equity offering proceeds, and reduced principally by cumulative dividends paid to Holdings, among other transactions. Reductions in the Companys net income would reduce the amount of cash that is available to the Company for debt service and
capital expenditures. Amounts available under this restricted payments provision amounted to approximately $16.2 million as of March 31, 2008. In the event this restricted payments provision is 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 a capital infusion and use such proceeds to satisfy these obligations. There can be no assurance that additional financing, if
available, will be made available on terms that are acceptable to the Company.

Holdings issued the 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.

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. The swap agreement was initially designated as a cash flow hedge against the variability of future cash interest
payments on the Notes. Due to the adverse impact of reduced ESA coverage, 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 entire principal of
the outstanding Notes remains probable. As a result, we discontinued cash flow hedge accounting for this interest rate swap in 2007. When hedge accounting is discontinued because it is determined that the derivative is not highly effective in
offsetting changes in the cash flows of a hedged item, the derivative continues to be carried on the consolidated balance sheet at its fair value, with changes in fair value recognized currently in income. Provided the hedged forecasted transactions
are no longer probable of occurring, the amounts previously recorded in accumulated other comprehensive income (loss) related to the discontinued cash flow hedge are released into the consolidated statement of income when the Companys earnings
are affected by the variability in cash flows of the hedged item or when those transactions become probable of not occurring. As a result of discontinuing cash flow hedge accounting for this instrument, Holdings recognized an unrealized loss of
$16.0 million related to the interest rate swap as Other Expense in its Condensed Consolidated Statement of Operations for the three months ended March 31, 2008 (see Note 3).

As of March 31, 2008, accumulated other comprehensive income (loss) includes $1.5 million, net of tax, related to the interest rate swap which represents the cumulative loss while the
instrument was designated as a cash flow hedge that is associated with future interest payments that cannot be considered probable of not occurring. 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 payments of the Notes and the floating rate debt outstanding under US Oncologys senior secured credit facility.



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



NOTE 7  Stock-Based Compensation

The following disclosures relate to stock incentive plans involving shares of Holdings common stock or options to purchase Holdings common stock. Activity related to Holdings stock-based
compensation is included in the financial statements of US Oncology, as the participants in such plans are employees of US Oncology.

For
all awards issued or modified after the adoption of SFAS 123R, Share-Based Payments(SFAS 123R), by the Company effective January 1, 2006, compensation expense is recognized in the Companys financial statements over the
requisite service period, net of estimated forfeitures, and based on the fair value as of the grant date.

US Oncology Holdings, Inc. 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. 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.
Effective January 1, 2008, the Company amended the Equity Incentive Plan to (i) eliminate the distinction between shares available for grant under restricted common shares and those available for grant under stock options and
(ii) increase the number of shares available for awards from 27,223,966 to 32,000,000. Also on January 1, 2008, the Company awarded 7,882,000 shares of restricted stock to employees, a portion of which related to the cancellation of
2,606,250 employee stock options. The cancellation of options in exchange for restricted shares was accounted for as a modification of the original award. As a result, the unrecognized compensation expense associated with the original award
continues to be recognized over the service period related to the original award. In addition, incremental compensation cost equal to the excess of the fair value of the new award over the fair value of the original award as of the date the new
award was granted, is being recognized over the service period related to the new award. Depending on the individual grants, awards vest either at the grant date or over defined service periods. Based on the individual vesting criteria for each
award, the Company recorded compensation expense of approximately $0.6 million and $0.3 million for the three months ended March 31, 2008 and 2007, respectively, related to restricted stock and stock option awards made under the Equity
Incentive Plan. At March 31, 2008, 2,330,750 shares of restricted stock or stock options were available for future awards.

The
Company granted awards of 8,244,500 restricted shares (which includes the January 1, 2008 awards discussed above) with an aggregate fair value at the time of grant of approximately $12.8 million during the three months ended March 31, 2008
and 150,000 restricted shares with an aggregate fair value at the time of grant of approximately $0.4 million during the three months ended March 31, 2007. Restricted shares vest over a three to five year period from the date of grant. During
the three months ended March 31, 2008, 420,000 restricted shares were forfeited by holders. During the three months ended March 31, 2007, no 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, 2008:



|                                                 |  |                   |  
|------------------------------------------------ |  | ----------------- | -
|                                                 |  | Restricted Shares |  
|Restricted shares outstanding, December 31, 2007 |  | 3,387,000         |  
|Granted                                          |  | 8,244,500         |  
|Vested                                           |  | (66,000           | )
|Forfeited                                        |  | (420,000          | )
|                                                 |  |                   |  
|Restricted shares outstanding, March 31, 2008    |  | 11,145,500        |  
|                                                 |  |                   |  

Compensation expense related to outstanding restricted stock awards is estimated to be $2.8
million, $2.6 million, $2.3 million, 2.1 million and $2.0 million for each of the fiscal years ending December 31, 2008 through 2012. Deferred compensation related to these awards becomes fully amortized during the year ending
December 31, 2013.



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



The following summarizes activity for options awarded under the Equity Incentive Plan for the three
months ended March 31, 2008:



|                                       |  |                             |   |  |                               |      |                                           |    
|-------------------------------------- |  | --------------------------- | - |  | ----------------------------- | ---- | ----------------------------------------- | ---
|                                       |  | Stock Options              
|                                       |  | SharesRepresented byOptions |   |  | WeightedAverage ExercisePrice |      | Weighted AverageRemainingContractual Term
|Options outstanding, December 31, 2007 |  | 3,339,000                   |   |  | $                             | 1.53 |                                           |    
|Granted                                |  | 35,000                      |   |  |                               | 1.55 |                                           |    
|Exercised                              |  | (28,000                     | ) |  |                               | 1.00 |                                           |    
|Cancelled                              |  | (2,606,250                  | ) |  |                               | 1.55 |                                           |    
|Forfeited                              |  | (165,000                    | ) |  |                               | 1.05 |                                           |    
|                                       |  |                             |   |  |                               |      |                                           |    
|Options outstanding, March 31, 2008    |  | 574,750                     |   |  |                               | 1.59 |                                           | 7.7
|                                       |  |                             |   |  |                               |      |                                           |    
|Options exercisable, March 31, 2008    |  | 227,950                     |   |  |                               | 1.25 |                                           | 7.1

At March 31, 2008, 574,750 options to purchase Holdings common stock were outstanding.
Holdings granted 35,000 and 280,000 options to purchase common shares during the three months ended March 31, 2008 and 2007, respectively. The fair value of options awarded during the three months ended March 31, 2008 was estimated at
$0.47 per share using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 3.26%; expected life of five years; expected volatility of 26.9% based on an index of peer companies; and expected dividend yield
of zero. Compensation expense related to options granted during the three months ended March 31, 2008 and 2007 has been recorded based on the fair value as of the grant date and vesting provisions.

Holdings 2004 Director Stock Option Plan

The
Holdings Board of Directors also adopted the US Oncology Holdings 2004 Director Stock Option Plan (the Director Stock Option Plan), which was effective in October, 2004 upon stockholder approval. The total number of shares of
common stock for which options may be granted under the Director Stock Option Plan is 500,000 shares. At March 31, 2008, 46,000 options to purchase Holdings common stock were outstanding and 371,000 options were available for future awards.
Under this plan, each eligible director in office and each eligible director who joined the board after adoption is automatically granted an option, annually, to purchase 5,000 shares of common stock. In addition, each such director is automatically
granted an option, annually, to purchase 1,000 shares of common stock for each board committee on which such director served. As of March 31, 2008, options to purchase 129,000 shares of common stock, net of forfeitures, have been granted to
directors under the Director Stock Option Plan. The options vest six months after the date of grant. During the three months ended March 31, 2008, there were no exercises of options issued under the Director Stock Option Plan.

Holdings Long-Term Cash Incentive Plan

In addition
to stock incentive plans, Holdings adopted the US Oncology Holdings, Inc. 2004 Long-Term Cash Incentive Plan (the 2004 Cash Incentive Plan). As of December 31, 2007, no amounts were available for payment under the 2004 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, 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, 2008 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, 2008, no amounts were available for payment under the 2008 Cash Incentive Plan as such
amounts are generally determined annually based on the Companys earnings for a given fiscal year. Obligations arising under the 2008 Cash Incentive Plan will be recognized in the period when a payment event occurs.



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



NOTE 8  Income Taxes

Holdings effective tax rate was a benefit of 2.4% and 3.8% for the three months ended March 31, 2008 and 2007, respectively. The difference between the effective tax rate for Holdings and US Oncology relates to
the incremental interest expense, a loss on the Companys interest rate swap and general and administrative expenses incurred by Holdings which increase its taxable loss and, consequently, decrease the impact that non-deductible costs have on
its effective tax rate. The three month period ended March 31, 2007 also includes a loss on extinguishment of debt incurred by Holdings.

The effective tax rate for US Oncology, Inc. was 0.2% and 48.5% for the three months ended March 31, 2008 and 2007, respectively. The decrease in the effective tax rate is attributable to the impairment of goodwill in the medical
oncology services segment during the three months ended March 31, 2008. Of the $380.0 million impairment charge $4.0 million is deductible through annual amortization for tax purposes, so there is no tax benefit associated with a significant
portion of the goodwill impairment. 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:



|                                              |  |                             |   |  |                             |   |  |       |   |  |      |  
|--------------------------------------------- |  | --------------------------- | - |  | --------------------------- | - |  | ----- | - |  | ---- | -
|                                              |  | US Oncology Holdings, Inc.  |   |  | US Oncology, Inc.           |  
|                                              |  | Three Months EndedMarch 31, |   |  | Three Months EndedMarch 31, |  
|                                              |  | 2008                        |   |  | 2007                        |   |  | 2008  |   |  | 2007 |  
|U.S. statutory income tax rate                |  | 35.0                        | % |  | 35.0                        | % |  | 35.0  | % |  | 35.0 | %
|Non-deductible expenses(1)                    |  | (32.4                       | ) |  | (4.1                        | ) |  | (34.8 | ) |  | 1.5  |  
|State income taxes, net of federal benefit(2) |  | 0.1                         |   |  | (27.1                       | ) |  | (0.1  | ) |  | 12.0 |  
|Other                                         |  | (0.3                        | ) |  |                            |   |  | 0.1   |   |  |     |  
|                                              |  |                             |   |  |                             |   |  |       |   |  |      |  
|Effective tax rate                            |  | 2.4                         | % |  | 3.8                         | % |  | 0.2   | % |  | 48.5 | %
|                                              |  |                             |   |  |                             |   |  |       |   |  |      |  



|(1) | Includes the impact of the non-deductible goodwill impairment charge.
|--- | ---------------------------------------------------------------------

|(2) | 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 under an income tax of an entity may not be considered in assessing an obligation for margin tax.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At March 31, 2008, the Company had a gross federal net operating loss carryforward benefit of approximately $28.4 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 more likely
than not that the Company will realize all of the benefits of its deferred tax assets. Accordingly, the Company has no valuation allowance established for federal deferred tax assets.

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 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
non-clinical operations, the medical oncology segment provides oncology pharmaceutical services to practices affiliated under comprehensive service agreements. 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 under comprehensive service agreements. The pharmaceutical services
segment distributes oncology pharmaceuticals to our affiliated practices, including practices affiliated under our OPS model, provides pharmaceuticals and counseling services to patients through its oral oncology specialty pharmacy and mail order
business and offers 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.

The tables below present segment results for the three months ended March 31, 2008 and 2007 (in thousands). Income (loss) from
operations of Holdings is identical to those of US Oncology with the exception of nominal administrative expenses:



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|------------------------------------ |  | --------------------------------- | -------- | - | -------------------- | - | ------- | ---------------------- |  | - | -------------- | - |  | -------------- | ------- | - | --------------- | - | ------- | ----- |  | - | -------- | - |  | - | -------- | -
|                                     |  | Three Months Ended March 31, 2008 |         
|                                     |  | MedicalOncologyServices           |          |   | CancerCenterServices |   |         | PharmaceuticalServices |  |   | Research/Other |   |  | CorporateCosts |         |   | Eliminations(1) |   |         | Total | 
|US Oncology, Inc.                    |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Product revenues                     |  | $                                 | 403,314  |   |                      | $ |        |                        |  | $ | 595,870        |   |  | $              |        |   |                 | $ |        |       |  | $ | (455,923 | ) |  | $ | 543,261  |  
|Service revenues                     |  |                                   | 149,441  |   |                      |   | 90,091  |                        |  |   | 14,752         |   |  |                | 13,062  |   |                 |   |        |       |  |   |         |   |  |   | 267,346  |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Total revenues                       |  |                                   | 552,755  |   |                      |   | 90,091  |                        |  |   | 610,622        |   |  |                | 13,062  |   |                 |   |        |       |  |   | (455,923 | ) |  |   | 810,607  |  
|Operating expenses                   |  |                                   | (534,146 | ) |                      |   | (58,976 | )                      |  |   | (587,883       | ) |  |                | (13,929 | ) |                 |   | (19,988 | )     |  |   | 455,923  |   |  |   | (758,999 | )
|Impairment and restructuring charges |  |                                   | (380,080 | ) |                      |   |        |                        |  |   |               |   |  |                |        |   |                 |   | (1,226  | )     |  |   |         |   |  |   | (381,306 | )
|Depreciation and amortization        |  |                                   |         |   |                      |   | (9,337  | )                      |  |   | (1,313         | ) |  |                | (100    | ) |                 |   | (15,004 | )     |  |   |         |   |  |   | (25,754  | )
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations        |  | $                                 | (361,471 | ) |                      | $ | 21,778  |                        |  | $ | 21,426         |   |  | $              | (967    | ) |                 | $ | (36,218 | )     |  | $ |         |   |  | $ | (355,452 | )
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|                                     |  |                                   |          |   |                      |   |        
|US Oncology Holdings, Inc.           |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Operating expenses                   |  | $                                 |         |   |                      | $ |        |                        |  | $ |               |   |  | $              |        |   |                 | $ | (51     | )     |  | $ |         |   |  | $ | (51      | )
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations        |  | $                                 | (361,471 | ) |                      | $ | 21,778  |                        |  | $ | 21,426         |   |  | $              | (967    | ) |                 | $ | (36,269 | )     |  | $ |         |   |  | $ | (355,503 | )
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Goodwill                             |  | $                                 | 28,913   |   |                      | $ | 191,424 |                        |  | $ | 156,933        |   |  | $              |        |   |                 | $ |        |       |  | $ |         |   |  | $ | 377,270  |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|                                     | 
|                                     |  | Three Months Ended March 31, 2007 |         
|                                     |  | MedicalOncologyServices           |          |   | CancerCenterServices |   |         | PharmaceuticalServices |  |   | Research/Other |   |  | CorporateCosts |         |   | Eliminations(1) |   |         | Total | 
|US Oncology, Inc.                    |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Product revenues                     |  | $                                 | 385,355  |   |                      | $ |        |                        |  | $ | 524,804        |   |  | $              |        |   |                 | $ |        |       |  | $ | (428,544 | ) |  | $ | 481,615  |  
|Service revenues                     |  |                                   | 136,553  |   |                      |   | 84,296  |                        |  |   | 16,577         |   |  |                | 13,000  |   |                 |   |        |       |  |   |         |   |  |   | 250,426  |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Total revenues                       |  |                                   | 521,908  |   |                      |   | 84,296  |                        |  |   | 541,381        |   |  |                | 13,000  |   |                 |   |        |       |  |   | (428,544 | ) |  |   | 732,041  |  
|Operating expenses                   |  |                                   | (497,071 | ) |                      |   | (54,778 | )                      |  |   | (518,974       | ) |  |                | (12,527 | ) |                 |   | (20,237 | )     |  |   | 428,544  |   |  |   | (675,043 | )
|Impairment and restructuring charges |  |                                   |         |   |                      |   | (3,070  | )                      |  |   |               |   |  |                |        |   |                 |   | (4,325  | )     |  |   |         |   |  |   | (7,395   | )
|Depreciation and amortization        |  |                                   |         |   |                      |   | (9,529  | )                      |  |   | (1,352         | ) |  |                | (199    | ) |                 |   | (10,013 | )     |  |   |         |   |  |   | (21,093  | )
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations        |  | $                                 | 24,837   |   |                      | $ | 16,919  |                        |  | $ | 21,055         |   |  | $              | 274     |   |                 | $ | (34,575 | )     |  | $ |         |   |  | $ | 28,510   |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|                                     |  |                                   |          |   |                      |   |        
|US Oncology Holdings, Inc.           |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Operating expenses                   |  | $                                 |         |   |                      | $ |        |                        |  | $ |               |   |  | $              |        |   |                 | $ | (41     | )     |  | $ |         |   |  | $ | (41      | )
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations        |  | $                                 | 24,837   |   |                      | $ | 16,919  |                        |  | $ | 21,055         |   |  | $              | 274     |   |                 | $ | (34,616 | )     |  | $ |         |   |  | $ | 28,469   |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  
|Goodwill                             |  | $                                 | 409,322  |   |                      | $ | 191,615 |                        |  | $ | 156,933        |   |  | $              |        |   |                 | $ |        |       |  | $ |         |   |  | $ | 757,870  |  
|                                     |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                 |   |         |       |  |   |          |   |  |   |          |  



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

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, 2008, 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,
|             |  | 2009                           |        | 2010 |   | 2011   |  | 2012 |        | 2013 |   | Thereafter
|Payments due |  | $                              | 75,420 |      | $ | 69,614 |  | $    | 59,396 |      | $ | 49,341     |  | $ | 41,822 |  | $ | 220,820



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



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.

Effective January 1, 2007, the Company guaranteed to one of its affiliated practices that amounts retained by that practice will amount to a minimum of $3.5 million through March 31, 2008. An amendment to this guarantee is
currently under discussion. Additionally, beginning January 1, 2007, the Company guaranteed that a second practice would receive no less than $2.0 million for the year ended December 31, 2007. This guarantee expired December 31, 2007.
During the three months ended March 31, 2008 and 2007, amounts paid under these guarantees amounted to $0.6 million and $1.2 million, respectively.

U.S. Department of Justice Subpoena

During the three months ended December 31, 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 the Companys contracts and relationships with
pharmaceutical manufacturers. The Company has cooperated fully with the DOJ in responding to the subpoena. 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 and anticipates that such resources
will be required on an ongoing basis to fully respond to the subpoena.

The Company has also received requests for information relating to
class action litigation against pharmaceutical manufacturers relating to alleged manipulation of Average Wholesale Price (AWP) and alleged inappropriate marketing practices with respect to AWP.

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 subject 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.

Specifically, during March, 2007, the Company became
aware that it and one of its affiliated practices were the subject of allegations that the practice may have engaged in activities that violate the Federal False Claims Act. These allegations are contained in a qui tam complaint. The details of this
suit are not publicly available or disclosable at the current time since qui tam complaints are filed on a confidential basis with a United States federal court. The DOJ has not yet made a decision on the merits of the whistle-blowers claim.
The Company intends to continue to investigate and vigorously defend itself against this claim. Based upon its present understanding of the nature and scope of the claim and investigation, the Company does not expect this claim to have a material
adverse effect on its operations or financial condition. However, its expectation could change as the Company receives more information.

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.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



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 patients. 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 it or one of the
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 the Company 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 late 2008. 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.

During the three months ended March 31,
2006, the Oklahoma practice represented 4.6% of the Companys consolidated revenue. In October, 2006, the Company sold, for cash, the property, plant and equipment to the practice for an amount that approximated its net book value at the time
of sale.

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, 2008, the total owed to the Company for those
receivables of $22.5 million is reflected on its balance sheet as other noncurrent assets. Currently, approximately $7.9 million is held in an escrowed bank account into which the practice has been making, and is required to continue to make,
monthly deposits. These amounts will be released upon resolution of the litigation. In addition, $7.5 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 $22.5 million receivable recorded in other noncurrent assets at March 31, 2008. Accordingly, the Company expects to realize the amount that it believes to be owed by the practice. However,
realization is subject to a successful conclusion to the litigation with the practice.

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



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



Certificate of Need Regulatory Action

During the three months ended September 30, 2006, one of the Companys affiliated practices in North Carolina lost (through state regulatory action) the ability, currently, to provide
radiation services at its cancer center in Asheville. The practice continues to provide medical oncology services, but is not permitted to use the radiation services area of the center (approximately 18% of the square footage of the cancer center).
The practice appealed the regulatory action and the North Carolina Court of Appeals ruled in favor of the practice on procedural grounds and ordered the state agency to hold a new hearing on its regulatory action. In addition, the Company has
explored other strategic alternatives with respect to radiation oncology and the cancer center space and will continue to do so in the event it is not successful in the regulatory action.

Delays during the three months ended March 31, 2007 in pursuing those strategic alternatives led to uncertainty regarding the form and timing associated with alternatives to a
successful appeal. Consequently, the Company performed impairment testing as of March 31, 2007 and it recorded an impairment charge of $1.6 million relating to a management services agreement asset and equipment in the three months ended
March 31, 2007. (These charges are a component of the impairment losses disclosed in Note 5.) No additional impairment charges relating to this regulatory action have been recorded through March 31, 2008.

As of March 31, 2008, our Consolidated Balance Sheet included net assets in the amount of $1.9 million related to this practice, which includes
primarily working capital in the amount of $1.2 million. 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, 2008, the lease had a remaining term of 18 years and the net present value of minimum future lease payments is approximately $7.0 million. A termination obligation for this lease has not been accrued as the Company has not exhausted
its legal appeals or strategic alternatives that may provide an ability to resume radiation therapy services at this location. Management will continue to monitor this matter.

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.

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.

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 December, 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, (SFAS 141R). SFAS 141R
establishes principles and requirements for how an acquirer recognizes and measures in its financial statements identifiable assets acquired, liabilities assumed, any non-controlling interest in an acquiree and the resulting goodwill. SFAS 141R
also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. This statement is effective for annual reporting periods beginning after December 15, 2008. SFAS 141R is to be
applied prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The Company expects



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



SFAS 141R will have an impact on the Companys accounting for future business combinations once adopted but the effect is dependent upon acquisitions
which may be made in the future.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51, which establishes new standards governing the accounting for and reporting of non-controlling interests (NCIs) in partially-owned subsidiaries and the loss of control of
subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, rather than a liability; that increases and decreases in the
parents ownership interest that leave control intact be treated as equity transactions, rather than as step acquisitions or dilution gains or losses; and that losses of a partially-owned consolidated subsidiary be allocated to the NCI even
when such allocation might result in a deficit balance. This standard also requires changes to certain presentation and disclosure requirements. SFAS No. 160 is effective for annual reporting periods beginning after December 15, 2008. The
provisions of the standard are to be applied to all NCIs prospectively, except for the presentation and disclosure requirements, which are to be applied retrospectively to all periods presented. The Company is currently evaluating the future impact
and disclosures required by this standard.

In September, 2006, the FASB issued SFAS No. 157, Fair Value
Measurement (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Statement does not require new fair value
measurements, however for some entities, the application of this Statement will change current practice. In developing this standard, the FASB considered the need for increased consistency and comparability in fair value measurements and for
expanded disclosures about fair value measurements. Effective January 1, 2008, the Company partially adopted SFAS No. 157 as allowed by the FASB issued Staff Position No. 157-2 (FSP 157-2), which defers the effective date
of SFAS No. 157 for one year for certain non-financial assets and liabilities. Due to the Companys election under FSP 157-2, the Company has applied the provisions of the statement to its disclosures related to assets and liabilities
which are measured at fair value on a recurring basis (at least annually), which for the Company is limited to its interest rate swap. Partial adoption of the standard did not have a material impact on the Companys consolidated results of
operations or financial condition (see Note 3). The provisions of SFAS No. 157 related to other non-financial assets and liabilities, specifically the Companys intangible management service agreements and goodwill assets and its
fixed-rate long-term liabilities, will be effective for the Company on January 1, 2009, and will be applied prospectively. The Company is currently evaluating the impact that these additional SFAS 157 provisions will have on the Companys
consolidated financial statements.

In February, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS 159). SFAS No. 159 permits an entity to choose, at specified election dates, to measure eligible financial instruments and certain other items at fair value that are not currently
required to be measured at fair value. An entity then reports unrealized gains and losses in earnings on items for which the fair value option has been elected, at each subsequent reporting date. Upfront costs and fees related to items for which the
fair value option is elected shall be recognized in earnings as incurred and not deferred. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. SFAS 159 was effective beginning January 1, 2008. We did not apply the fair value option under SFAS 159 and, therefore, the statement did not have an impact on the
Companys consolidated financial statements.

In June 2007, the Financial Accounting Standards Board (FASB) ratified
Emerging Issues Task Force Issue (EITF) No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (EITF 06-11). EITF 06-11 requires companies to recognize a realized
income tax benefit associated with dividends or dividend equivalents paid on nonvested equity-classified employee share-based payment awards that are charged to retained earnings as an increase to additional paid-in capital. EITF 06-11 was effective
beginning January 1, 2008 and was adopted prospectively by the Company as of January 1, 2008 with no material impact on the Companys consolidated financial statements.

In June 2007, the Financial Accounting Standards Board (FASB) ratified Emerging Issues Task Force Issue (EITF) No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and Development Activities (EITF 07-3). EITF 07-3 requires that nonrefundable advance payments for goods and services that will be used or rendered in future
R&D activities pursuant to executory contractual arrangements be deferred and recognized as an expense in the period that the related goods are delivered or services are performed. EITF 07-3 was effective beginning January 1, 2008 and as
the recipient, rather than the payer, of advance payments for clinical research services, EITF 07-3 did not have an impact on the Companys consolidated financial statements.



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging ActivitiesAn Amendment of SFAS No. 133 (SFAS 161). SFAS 161 seeks to improve financial reporting for derivative instruments and hedging activities by requiring enhanced disclosures
regarding the impact on financial position, financial performance, and cash flows. SFAS 161 is effective for the Company on January 1, 2009. The Company is currently in the process of evaluating the new disclosure requirements under SFAS 161.

On May 9, 2008, the FASB issued FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles
(SFAS 162).SFAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity
with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. SFAS 162 is effective 60 days following the SECs approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU
Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. Any effect of applying the provisions of SFAS 162 is to be reported as a change in accounting principle in accordance with FASB
Statement No. 154, Accounting Changes and Error Corrections.Once SFAS 162 is effective, the statement is not expected to have an impact on the Companys consolidated financial statements.



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

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



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



Presented on the following pages are condensed consolidating financial statements for US Oncology,
Inc. (the issuer of the Senior Notes and the Senior Subordinated Notes), the subsidiary guarantors and the non-guarantor subsidiaries as of and for the three months ended March 31, 2008 and 2007. The equity method has been used with respect to
US Oncologys investments in its subsidiaries.

As of March 31, 2008, 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, MDH-USO Management
Company, L.P., and Oregon Cancer Center, Ltd.



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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



US Oncology, Inc.

Condensed Consolidating Balance Sheet

As of March 31, 2008

(unaudited, in thousands, except share information)



|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|---------------------------------------------------------------------------- |  | ------------------------------------- | --------- | - | -------------------- | - | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | ---- |  | - | --------- | -
|                                                                             |  | US Oncology, Inc.(ParentCompany Only) |           |   | SubsidiaryGuarantors |   | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|ASSETS                                                                       |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Current assets:                                                              |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Cash and equivalents                                                         |  | $                                     |          |   |                      | $ | 140,387                   |  | $ | 1            |   |  | $            |         |      |  | $ | 140,388   |  
|Accounts receivable                                                          |  |                                       |          |   |                      |   | 334,228                   |  |   | 9,975        |   |  |              |         |      |  |   | 344,203   |  
|Other receivables                                                            |  |                                       |          |   |                      |   | 97,526                    |  |   |             |   |  |              |         |      |  |   | 97,526    |  
|Prepaid expenses and other current assets                                    |  |                                       | 9         |   |                      |   | 19,075                    |  |   |             |   |  |              |         |      |  |   | 19,084    |  
|Inventories                                                                  |  |                                       |          |   |                      |   | 93,506                    |  |   |             |   |  |              |         |      |  |   | 93,506    |  
|Deferred income taxes                                                        |  |                                       | 4,260     |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 4,260     |  
|Due from affiliates                                                          |  |                                       | 734,276   |   |                      |   |                          |  |   |             |   |  |              | (676,423 | )(a) |  |   | 57,853    |  
|Investment in subsidiaries                                                   |  |                                       | 298,483   |   |                      |   |                          |  |   |             |   |  |              | (298,483 | )(b) |  |   |          |  
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Total current assets                                                         |  |                                       | 1,037,028 |   |                      |   | 684,722                   |  |   | 9,976        |   |  |              | (974,906 | )    |  |   | 756,820   |  
|Property and equipment, net                                                  |  |                                       |          |   |                      |   | 365,161                   |  |   | 37,822       |   |  |              |         |      |  |   | 402,983   |  
|Service agreements, net                                                      |  |                                       |          |   |                      |   | 279,244                   |  |   | 4,873        |   |  |              |         |      |  |   | 284,117   |  
|Goodwill                                                                     |  |                                       |          |   |                      |   | 371,677                   |  |   | 5,593        |   |  |              |         |      |  |   | 377,270   |  
|Other assets                                                                 |  |                                       | 29,656    |   |                      |   | 35,597                    |  |   | 1,530        |   |  |              |          |      |  |   | 66,783    |  
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|                                                                             |  | $                                     | 1,066,684 |   |                      | $ | 1,736,401                 |  | $ | 59,794       |   |  | $            | (974,906 | )    |  | $ | 1,887,973 |  
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                         |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Current liabilities:                                                         |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Current maturities of long-term indebtedness                                 |  | $                                     | 43,690    |   |                      | $ |                          |  | $ | 1,098        |   |  | $            |         |      |  | $ | 44,788    |  
|Accounts payable                                                             |  |                                       |          |   |                      |   | 277,158                   |  |   | 869          |   |  |              |         |      |  |   | 278,027   |  
|Intercompany accounts                                                        |  |                                       | (249,113  | ) |                      |   | 251,821                   |  |   | (2,708       | ) |  |              |         |      |  |   |          |  
|Due to affiliates                                                            |  |                                       | 6,783     |   |                      |   | 847,473                   |  |   | 8,529        |   |  |              | (676,423 | )(a) |  |   | 186,362   |  
|Accrued compensation cost                                                    |  |                                       |          |   |                      |   | 28,541                    |  |   | 553          |   |  |              |         |      |  |   | 29,094    |  
|Accrued interest payable                                                     |  |                                       | 10,600    |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 10,600    |  
|Income taxes payable                                                         |  |                                       | 7,780     |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 7,780     |  
|Other accrued liabilities                                                    |  |                                       |          |   |                      |   | 35,703                    |  |   | (813         | ) |  |              |         |      |  |   | 34,890    |  
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Total current liabilities                                                    |  |                                       | (180,260  | ) |                      |   | 1,440,696                 |  |   | 7,528        |   |  |              | (676,423 | )    |  |   | 591,541   |  
|Deferred revenue                                                             |  |                                       |          |   |                      |   | 7,663                     |  |   |             |   |  |              |         |      |  |   | 7,663     |  
|Deferred income taxes                                                        |  |                                       | 31,352    |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 31,352    |  
|Long-term indebtedness                                                       |  |                                       | 1,038,763 |   |                      |   | 2,224                     |  |   | 15,511       |   |  |              |         |      |  |   | 1,056,498 |  
|Other long-term liabilities                                                  |  |                                       |          |   |                      |   | 7,110                     |  |   | 3,686        |   |  |              |         |      |  |   | 10,796    |  
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Total liabilities                                                            |  |                                       | 889,855   |   |                      |   | 1,457,693                 |  |   | 26,725       |   |  |              | (676,423 | )    |  |   | 1,697,850 |  
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Commitments and contingencies                                                |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Minority interests                                                           |  |                                       |          |   |                      |   |                          |  |   | 13,294       |   |  |              |         |      |  |   | 13,294    |  
|Stockholders equity                                                         |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Common stock, $0.01 par value, 100 shares authorized, issued and outstanding |  |                                       | 1         |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 1         |  
|Additional paid-in capital                                                   |  |                                       | 549,766   |   |                      |   |                          |  |   |             |   |  |              |         |      |  |   | 549,766   |  
|Retained deficit                                                             |  |                                       | (372,938  | ) |                      |   |                          |  |   |             |   |  |              |         |      |  |   | (372,938  | )
|Subsidiary equity                                                            |  |                                       |          |   |                      |   | 278,708                   |  |   | 19,775       |   |  |              | (298,483 | )(b) |  |   |          |  
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|Total stockholders equity                                                   |  |                                       | 176,829   |   |                      |   | 278,708                   |  |   | 19,775       |   |  |              | (298,483 | )    |  |   | 176,829   |  
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  
|                                                                             |  | $                                     | 1,066,684 |   |                      | $ | 1,736,401                 |  | $ | 59,794       |   |  | $            | (974,906 | )    |  | $ | 1,887,973 |  
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |          |      |  |   |           |  



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

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



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##### Table of Contents

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



US Oncology, Inc.

Condensed Consolidating Balance Sheet

As of December 31, 2007

(unaudited, in thousands, except share information)



|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|---------------------------------------------------------------------------- |  | ------------------------------------- | --------- | - | -------------------- | - | ------------------------- |  | - | ------------ | - |  | ------------ | ---------- | ---- |  | - | ---------
|                                                                             |  | US Oncology, Inc.(ParentCompany Only) |           |   | SubsidiaryGuarantors |   | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated
|ASSETS                                                                       |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|Current assets:                                                              |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|Cash and equivalents                                                         |  | $                                     |          |   |                      | $ | 149,255                   |  | $ | 1            |   |  | $            |           |      |  | $ | 149,256  
|Accounts receivable                                                          |  |                                       |          |   |                      |   | 309,030                   |  |   | 9,946        |   |  |              |           |      |  |   | 318,976  
|Other receivables                                                            |  |                                       |          |   |                      |   | 120,285                   |  |   |             |   |  |              |           |      |  |   | 120,285  
|Prepaid expenses and other current assets                                    |  |                                       | 7         |   |                      |   | 22,794                    |  |   |             |   |  |              |           |      |  |   | 22,801   
|Inventories                                                                  |  |                                       |          |   |                      |   | 82,822                    |  |   |             |   |  |              |           |      |  |   | 82,822   
|Deferred income taxes                                                        |  |                                       | 4,260     |   |                      |   |                          |  |   |             |   |  |              |           |      |  |   | 4,260    
|Due from affiliates                                                          |  |                                       | 740,894   |   |                      |   |                          |  |   |             |   |  |              | (680,599   | )(a) |  |   | 60,295   
|Investment in subsidiaries                                                   |  |                                       | 651,999   |   |                      |   |                          |  |   |             |   |  |              | (651,999   | )(b) |  |   |         
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|Total current assets                                                         |  |                                       | 1,397,160 |   |                      |   | 684,186                   |  |   | 9,947        |   |  |              | (1,332,598 | )    |  |   | 758,695  
|Property and equipment, net                                                  |  |                                       |          |   |                      |   | 360,837                   |  |   | 38,784       |   |  |              |           |      |  |   | 399,621  
|Service agreements, net                                                      |  |                                       |          |   |                      |   | 218,832                   |  |   | 5,018        |   |  |              |           |      |  |   | 223,850  
|Goodwill                                                                     |  |                                       |          |   |                      |   | 751,677                   |  |   | 5,593        |   |  |              |           |      |  |   | 757,270  
|Other assets                                                                 |  |                                       | 31,426    |   |                      |   | 36,258                    |  |   | 1,530        |   |  |              |           |      |  |   | 69,214   
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|                                                                             |  | $                                     | 1,428,586 |   |                      | $ | 2,051,790                 |  | $ | 60,872       |   |  | $            | (1,332,598 | )    |  | $ | 2,208,650
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                         |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|Current liabilities:                                                         |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|Current maturities of long-term indebtedness                                 |  | $                                     | 37,550    |   |                      | $ | 95                        |  | $ | 968          |   |  | $            |           |      |  | $ | 38,613   
|Accounts payable                                                             |  |                                       |          |   |                      |   | 240,318                   |  |   | 775          |   |  |              |           |      |  |   | 241,093  
|Intercompany accounts                                                        |  |                                       | (249,113  | ) |                      |   | 251,812                   |  |   | (2,699       | ) |  |              |           |      |  |   |         
|Due to affiliates                                                            |  |                                       | 7,132     |   |                      |   | 841,866                   |  |   | 8,866        |   |  |              | (680,599   | )(a) |  |   | 177,265  
|Accrued compensation cost                                                    |  |                                       |          |   |                      |   | 29,366                    |  |   | 679          |   |  |              |           |      |  |   | 30,045   
|Accrued interest payable                                                     |  |                                       | 24,949    |   |                      |   |                          |  |   |             |   |  |              |           |      |  |   | 24,949   
|Deferred income taxes                                                        |  |                                       | 6,735     |   |                      |   |                          |  |   |             |   |  |              |           |      |  |   | 6,735    
|Other accrued liabilities                                                    |  |                                       |          |   |                      |   | 38,549                    |  |   | (786         | ) |  |              |           |      |  |   | 37,763   
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|Total current liabilities                                                    |  |                                       | (172,747  | ) |                      |   | 1,402,006                 |  |   | 7,803        |   |  |              | (680,599   | )    |  |   | 556,463  
|Deferred revenue                                                             |  |                                       |          |   |                      |   | 8,380                     |  |   |             |   |  |              |           |      |  |   | 8,380    
|Deferred income taxes                                                        |  |                                       | 33,532    |   |                      |   |                          |  |   |             |   |  |              |           |      |  |   | 33,532   
|Long-term indebtedness                                                       |  |                                       | 1,013,478 |   |                      |   | 2,239                     |  |   | 15,852       |   |  |              |           |      |  |   | 1,031,569
|Other long-term liabilities                                                  |  |                                       |          |   |                      |   | 7,435                     |  |   | 3,731        |   |  |              |           |      |  |   | 11,166   
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|Total liabilities                                                            |  |                                       | 874,263   |   |                      |   | 1,420,060                 |  |   | 27,386       |   |  |              | (680,599   | )    |  |   | 1,641,110
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|Commitments and contingencies                                                |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|Minority interests                                                           |  |                                       |          |   |                      |   |                          |  |   | 13,217       |   |  |              |           |      |  |   | 13,217   
|Stockholders equity                                                         |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|Common stock, $0.01 par value, 100 shares authorized, issued and outstanding |  |                                       | 1         |   |                      |   |                          |  |   |             |   |  |              |           |      |  |   | 1        
|Additional paid-in capital                                                   |  |                                       | 549,186   |   |                      |   |                          |  |   |             |   |  |              |           |      |  |   | 549,186  
|Retained earnings                                                            |  |                                       | 5,136     |   |                      |   |                          |  |   |             |   |  |              |           |      |  |   | 5,136    
|Subsidiary equity                                                            |  |                                       |          |   |                      |   | 631,730                   |  |   | 20,269       |   |  |              | (651,999   | )(b) |  |   |         
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|Total stockholders equity                                                   |  |                                       | 554,323   |   |                      |   | 631,730                   |  |   | 20,269       |   |  |              | (651,999   | )    |  |   | 554,323  
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          
|                                                                             |  | $                                     | 1,428,586 |   |                      | $ | 2,051,790                 |  | $ | 60,872       |   |  | $            | (1,332,598 | )    |  | $ | 2,208,650
|                                                                             |  |                                       |           |   |                      |   |                           |  |   |              |   |  |              |            |      |  |   |          



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

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



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---

##### Table of Contents

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued



US Oncology, Inc.

Condensed Consolidating Statement of Operations

For the Three Months Ended March 31, 2008

(unaudited, in thousands)



|                                     |  |                                       |          |   |                      |   |           |                           |  |   |              |   |  |              |         |     |  |   |           |  
|------------------------------------ |  | ------------------------------------- | -------- | - | -------------------- | - | --------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------- | --- |  | - | --------- | -
|                                     |  | US Oncology, Inc.(ParentCompany Only) |          |   | SubsidiaryGuarantors |   |           | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Product revenue                      |  | $                                     |         |   |                      | $ | 532,700   |                           |  | $ | 10,561       |   |  | $            |        |     |  | $ | 543,261   |  
|Service revenue                      |  |                                       |         |   |                      |   | 258,233   |                           |  |   | 9,113        |   |  |              |        |     |  |   | 267,346   |  
|                                     |  |                                       |          |   |                      |   |           |                           |  |   |              |   |  |              |         |     |  |   |           |  
|Total revenue                        |  |                                       |         |   |                      |   | 790,933   |                           |  |   | 19,674       |   |  |              |        |     |  |   | 810,607   |  
|Cost of products                     |  |                                       |         |   |                      |   | 521,685   |                           |  |   | 10,342       |   |  |              |        |     |  |   | 532,027   |  
|Cost of services:                    |  |                                       |          |   |                      |   |           |                           |  |   |              |   |  |              |         |     |  |   |           |  
|Operating compensation and benefits  |  |                                       |         |   |                      |   | 126,069   |                           |  |   | 4,119        |   |  |              |        |     |  |   | 130,188   |  
|Other operating costs                |  |                                       |         |   |                      |   | 75,485    |                           |  |   | 1,311        |   |  |              |        |     |  |   | 76,796    |  
|Depreciation and amortization        |  |                                       |         |   |                      |   | 17,794    |                           |  |   | 807          |   |  |              |        |     |  |   | 18,601    |  
|                                     |  |                                       |          |   |                      |   |           |                           |  |   |              |   |  |              |         |     |  |   |           |  
|Total cost of services               |  |                                       |         |   |                      |   | 219,348   |                           |  |   | 6,237        |   |  |              |        |     |  |   | 225,585   |  
|Total cost of products and services  |  |                                       |         |   |                      |   | 741,033   |                           |  |   | 16,579       |   |  |              |        |     |  |   | 757,612   |  
|General and administrative expense   |  |                                       | 93       |   |                      |   | 19,895    |                           |  |   |             |   |  |              |        |     |  |   | 19,988    |  
|Impairment and restructuring charges |  |                                       |         |   |                      |   | 381,306   |                           |  |   |             |   |  |              |        |     |  |   | 381,306   |  
|Depreciation and amortization        |  |                                       |         |   |                      |   | 7,153     |                           |  |   |             |   |  |              |        |     |  |   | 7,153     |  
|                                     |  |                                       |          |   |                      |   |           |                           |  |   |              |   |  |              |         |     |  |   |           |  
|                                     |  |                                       | 93       |   |                      |   | 1,149,387 |                           |  |   | 16,579       |   |  |              |        |     |  |   | 1,166,059 |  
|                                     |  |                                       |          |   |                      |   |           |                           |  |   |              |   |  |              |         |     |  |   |           |  
|Income (loss) from operations        |  |                                       | (93      | ) |                      |   | (358,454  | )                         |  |   | 3,095        |   |  |              |        |     |  |   | (355,452  | )
|Other income (expense)               |  |                                       |          |   |                      |   |           |                           |  |   |              |   |  |              |         |     |  |   |           |  
|Interest expense, net                |  |                                       | (25,044  | ) |                      |   | 1,186     |                           |  |   | (342         | ) |  |              |        |     |  |   | (24,200   | )
|Minority interests                   |  |                                       |         |   |                      |   | (130      | )                         |  |   | (585         | ) |  |              |        |     |  |   | (715      | )
|Other income                         |  |                                       |         |   |                      |   | 1,371     |                           |  |   |             |   |  |              |        |     |  |   | 1,371     |  
|                                     |  |                                       |          |   |                      |   |           |                           |  |   |              |   |  |              |         |     |  |   |           |  
|Income (loss) before income taxes    |  |                                       | (25,137  | ) |                      |   | (356,027  | )                         |  |   | 2,168        |   |  |              |        |     |  |   | (378,996  | )
|Income tax benefit                   |  |                                       | 922      |   |                      |   |          |                           |  |   |             |   |  |              |        |     |  |   | 922       |  
|Equity in subsidiaries               |  |                                       | (353,859 | ) |                      |   |          |                           |  |   |             |   |  |              | 353,859 | (a) |  |   |          |  
|                                     |  |                                       |          |   |                      |   |           |                           |  |   |              |   |  |              |         |     |  |   |           |  
|Net income (loss)                    |  | $                                     | (378,074 | ) |                      | $ | (356,027  | )                         |  | $ | 2,168        |   |  | $            | 353,859 |     |  | $ | (378,074  | )
|                                     |  |                                       |          |   |                      |   |           |                           |  |   |              |   |  |              |         |     |  |   |           |  



|(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, 2007

(unaudited, in thousands)



|                                     |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|------------------------------------ |  | ------------------------------------- | ------- | - | -------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------- | ---- |  | - | ------- | -
|                                     |  | US Oncology, Inc.(ParentCompany Only) |         |   | SubsidiaryGuarantors |   |         | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Product revenue                      |  | $                                     |        |   |                      | $ | 470,390 |                           |  | $ | 11,225       |   |  | $            |        |      |  | $ | 481,615 |  
|Service revenue                      |  |                                       |        |   |                      |   | 242,134 |                           |  |   | 8,292        |   |  |              |        |      |  |   | 250,426 |  
|                                     |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Total revenue                        |  |                                       |        |   |                      |   | 712,524 |                           |  |   | 19,517       |   |  |              |        |      |  |   | 732,041 |  
|Cost of products                     |  |                                       |        |   |                      |   | 453,835 |                           |  |   | 10,830       |   |  |              |        |      |  |   | 464,665 |  
|Cost of services:                    |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Operating compensation and benefits  |  |                                       |        |   |                      |   | 113,265 |                           |  |   | 4,084        |   |  |              |        |      |  |   | 117,349 |  
|Other operating costs                |  |                                       |        |   |                      |   | 71,648  |                           |  |   | 1,146        |   |  |              |        |      |  |   | 72,794  |  
|Depreciation and amortization        |  |                                       |        |   |                      |   | 16,760  |                           |  |   | 969          |   |  |              |        |      |  |   | 17,729  |  
|                                     |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Total cost of services               |  |                                       |        |   |                      |   | 201,673 |                           |  |   | 6,199        |   |  |              |        |      |  |   | 207,872 |  
|Total cost of products and services  |  |                                       |        |   |                      |   | 655,508 |                           |  |   | 17,029       |   |  |              |        |      |  |   | 672,537 |  
|General and administrative expense   |  |                                       | 88      |   |                      |   | 20,147  |                           |  |   |             |   |  |              |        |      |  |   | 20,235  |  
|Impairment and restructuring charges |  |                                       |        |   |                      |   | 7,395   |                           |  |   |             |   |  |              |        |      |  |   | 7,395   |  
|Depreciation and amortization        |  |                                       |        |   |                      |   | 3,364   |                           |  |   |             |   |  |              |        |      |  |   | 3,364   |  
|                                     |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|                                     |  |                                       | 88      |   |                      |   | 686,414 |                           |  |   | 17,029       |   |  |              |        |      |  |   | 703,531 |  
|                                     |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Income (loss) from operations        |  |                                       | (88     | ) |                      |   | 26,110  |                           |  |   | 2,488        |   |  |              |        |      |  |   | 28,510  |  
|Other income (expense)               |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Interest expense, net                |  |                                       | (24,080 | ) |                      |   | 573     |                           |  |   | (300         | ) |  |              |        |      |  |   | (23,807 | )
|Intercompany interest                |  |                                       | 6,042   |   |                      |   | (6,042  | )                         |  |   |             |   |  |              |        |      |  |   |        |  
|Minority interests                   |  |                                       |        |   |                      |   |        |                           |  |   | (722         | ) |  |              |        |      |  |   | (722    | )
|                                     |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Income (loss) before income taxes    |  |                                       | (18,126 | ) |                      |   | 20,641  |                           |  |   | 1,466        |   |  |              |        |      |  |   | 3,981   |  
|Income tax provision                 |  |                                       | (1,931  | ) |                      |   |        |                           |  |   |             |   |  |              |        |      |  |   | (1,931  | )
|Equity in subsidiaries               |  |                                       | 22,107  |   |                      |   |        |                           |  |   |             |   |  |              | (22,107 | )(a) |  |   |        |  
|                                     |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  
|Net income (loss)                    |  | $                                     | 2,050   |   |                      | $ | 20,641  |                           |  | $ | 1,466        |   |  | $            | (22,107 | )    |  | $ | 2,050   |  
|                                     |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |              |         |      |  |   |         |  



|(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, 2008

(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      |  | $                                     | (31,451 | ) |                      | $ | 81,722  |                           |  | $ | 593          |   |  | $ | 50,864  |  
|                                                         |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|                                                         |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Cash flows from investing activities:                    |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Acquisition of property and equipment                    |  |                                       |        |   |                      |   | (23,889 | )                         |  |   | 265          |   |  |   | (23,624 | )
|Net payments in affiliation transactions                 |  |                                       | 32,677  |   |                      |   | (68,748 | )                         |  |   |             |   |  |   | (36,071 | )
|Designation of restricted cash                           |  |                                       |        |   |                      |   | (500    | )                         |  |   |             |   |  |   | (500    | )
|Net proceeds from sale of assets                         |  |                                       |        |   |                      |   | 2,097   |                           |  |   |             |   |  |   | 2,097   |  
|Distributions from minority interests                    |  |                                       |        |   |                      |   | 511     |                           |  |   |             |   |  |   | 511     |  
|Investment in unconsolidated subsidiary                  |  |                                       |        |   |                      |   | 171     |                           |  |   |             |   |  |   | 171     |  
|                                                         |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Net cash provided by (used in) investing activities      |  |                                       | 32,677  |   |                      |   | (90,358 | )                         |  |   | 265          |   |  |   | (57,416 | )
|                                                         |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Cash flows from financing activities:                    |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Repayment of term loan                                   |  |                                       | (1,232  | ) |                      |   |        |                           |  |   |             |   |  |   | (1,232  | )
|Repayment of other indebtedness                          |  |                                       | (20     | ) |                      |   | (110    | )                         |  |   | (211         | ) |  |   | (341    | )
|Distributions to minority interests                      |  |                                       |        |   |                      |   | (121    | )                         |  |   | (647         | ) |  |   | (768    | )
|Contributions of proceeds from exercise of stock options |  |                                       | 25      |   |                      |   |        |                           |  |   |             |   |  |   | 25      |  
|                                                         |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Net cash used in financing activities                    |  |                                       | (1,227  | ) |                      |   | (231    | )                         |  |   | (858         | ) |  |   | (2,316  | )
|                                                         |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Decrease in cash and cash equivalents                    |  |                                       | (1      | ) |                      |   | (8,867  | )                         |  |   |             |   |  |   | (8,868  | )
|Cash and cash equivalents:                               |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|Beginning of period                                      |  |                                       |        |   |                      |   | 149,255 |                           |  |   | 1            |   |  |   | 149,256 |  
|                                                         |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  
|End of period                                            |  | $                                     | (1      | ) |                      | $ | 140,388 |                           |  | $ | 1            |   |  | $ | 140,388 |  
|                                                         |  |                                       |         |   |                      |   |         |                           |  |   |              |   |  |   |         |  



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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, 2007

(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      |  | $                                     | 208,074  |   |                      | $ | (172,324 | )                         |  | $ | 575          |   |  | $ | 36,325   |  
|                                                         |  |                                       |          |   |                      |   |          |                           |  |   |              |   |  |   |          |  
|Cash flows from investing activities:                    |  |                                       |          |   |                      |   |          |                           |  |   |              |   |  |   |          |  
|Acquisition of property and equipment                    |  |                                       |         |   |                      |   | (17,359  | )                         |  |   | (68          | ) |  |   | (17,427  | )
|Net proceeds from sale of assets                         |  |                                       |         |   |                      |   | 750      |                           |  |   |             |   |  |   | 750      |  
|                                                         |  |                                       |          |   |                      |   |          |                           |  |   |              |   |  |   |          |  
|Net cash used in investing activities                    |  |                                       |         |   |                      |   | (16,609  | )                         |  |   | (68          | ) |  |   | (16,677  | )
|                                                         |  |                                       |          |   |                      |   |          |                           |  |   |              |   |  |   |          |  
|Cash flows from financing activities:                    |  |                                       |          |   |                      |   |          |                           |  |   |              |   |  |   |          |  
|Proceeds from other indebtedness                         |  |                                       |         |   |                      |   |         |                           |  |   | 665          |   |  |   | 665      |  
|Repayment of term loan                                   |  |                                       | (3,791   | ) |                      |   |         |                           |  |   |             |   |  |   | (3,791   | )
|Repayment of other indebtedness                          |  |                                       | (160     | ) |                      |   | (31      | )                         |  |   | (178         | ) |  |   | (369     | )
|Debt financing costs                                     |  |                                       | (153     | ) |                      |   |         |                           |  |   |             |   |  |   | (153     | )
|Repayment of advance to parent                           |  |                                       | (150,000 | ) |                      |   |         |                           |  |   |             |   |  |   | (150,000 | )
|Distributions to minority interests                      |  |                                       |         |   |                      |   |         |                           |  |   | (994         | ) |  |   | (994     | )
|Net distributions to parent                              |  |                                       | (54,501  | ) |                      |   |         |                           |  |   |             |   |  |   | (54,501  | )
|Contributions of proceeds from exercise of stock options |  |                                       | 531      |   |                      |   |         |                           |  |   |             |   |  |   | 531      |  
|                                                         |  |                                       |          |   |                      |   |          |                           |  |   |              |   |  |   |          |  
|Net cash used in financing activities                    |  |                                       | (208,074 | ) |                      |   | (31      | )                         |  |   | (507         | ) |  |   | (208,612 | )
|                                                         |  |                                       |          |   |                      |   |          |                           |  |   |              |   |  |   |          |  
|Decrease in cash and cash equivalents                    |  |                                       |         |   |                      |   | (188,964 | )                         |  |   |             |   |  |   | (188,964 | )
|Cash and cash equivalents:                               |  |                                       |          |   |                      |   |          |                           |  |   |              |   |  |   |          |  
|Beginning of period                                      |  |                                       |         |   |                      |   | 281,766  |                           |  |   |             |   |  |   | 281,766  |  
|                                                         |  |                                       |          |   |                      |   |          |                           |  |   |              |   |  |   |          |  
|End of period                                            |  | $                                     |         |   |                      | $ | 92,802   |                           |  | $ |             |   |  | $ | 92,802   |  
|                                                         |  |                                       |          |   |                      |   |          |                           |  |   |              |   |  |   |          |  

NOTE 13  Subsequent Event

In April, 2008, a tornado struck a medical oncology site at one of the Companys affiliated practices in Suffolk, Virginia. No patients, employees or physicians were seriously injured and
patient care has resumed at another practice site. The Company is in the process of estimating the range of loss, however, at this time, the loss is not expected to be material. As the damaged site is a leased location, the Companys exposure
is limited primarily to equipment damage and the Company expects such losses to be insured.



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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 February 29, 2008, and
subsequent filings.

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 Houston, Texas, supports one of the nations largest cancer treatment and research networks. As of March 31, 2008, our network included:



| |  |  | 1,247 affiliated physicians
| | - |  | ---------------------------



| |  |  | 472 sites of service
| | - |  | --------------------



| |  |  | 79 comprehensive cancer centers and 12 facilities providing radiation therapy only
| | - |  | ----------------------------------------------------------------------------------



| |  |  | A clinical trial program currently managing 64 active clinical trials
| | - |  | ---------------------------------------------------------------------



| |  |  | A pharmaceutical distribution business currently distributing $2.0 billion annually in oncology pharmaceuticals from its 75,000 square foot distribution facility
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

Throughout our network, we aim to enhance efficiency and lower cost structures at our affiliated practices, while
enabling them to continue to deliver quality patient care. The services we provide are designed to increase patient access and advance the delivery of high-quality, community-based cancer care by enabling physicians to provide cancer patients with a
full continuum of care, including professional medical services, chemotherapy infusion, radiation oncology, diagnostic services, access to clinical trials, patient education and other services, often in a single location.

We believe that today, particularly in light of recent changes in Medicare reimbursement and continued pressures on overall reimbursement, the most
successful oncology practices will be those that have a preeminent position in their local market, have diversified beyond medical oncology and have efficient management processes. We believe that our services best position practices to attain these
characteristics. At the same time, the economics of healthcare and the aging of the American population mean that pressures to reduce healthcare costs and increase efficiency of medical practice operations will continue. We believe that
community-based oncology care is the most patient-friendly and cost-effective care available, and we believe that we can continue to enhance practice efficiency within the community setting.

We provide practice management services primarily under comprehensive services agreements in both our medical oncology and cancer center services segments. Financial results relating to these
services are reflected in the appropriate segment. Under comprehensive service agreements with affiliated practices, we provide services designed to encompass all of the non-clinical aspects of practice management. To a lesser extent, we contract
with practices solely for the purchase and management of specialty oncology pharmaceuticals under our oncology pharmaceutical services (OPS) model, which does not encompass all of our other services. OPS revenues are included in our
pharmaceutical services segment. A more complete description of the services we provide to network practices is included in our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange
Commission on February 29, 2008.

An ongoing initiative is expanding our network of affiliated physicians. We plan to grow in three
ways. First, we seek to enter into comprehensive service agreements with practices in new markets and expand those where we already have a regional presence. By seeking new markets we can grow our national presence while taking advantage of the
efficiencies that result from leveraging our existing regional and national infrastructure and capabilities. Second, we intend to grow our OPS network of physicians by continuing to offer and develop our OPS relationships. Third, we intend to expand
our existing markets both by assisting practices with individual physician recruitment and by affiliating with other established practices. On a local level, this helps our affiliated practices solidify their standing in local communities, while
taking advantage of efficiencies that result from leveraging existing local assets and infrastructure.



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In addition to providing services to, and expanding our network of affiliated physicians, we
capitalize on our networks size and scope by providing services to pharmaceutical manufacturers and payers, to improve the delivery of cancer care in America. These services include:



| |  |  | Group Purchasing Organization (GPO) services. We negotiate purchasing contracts with pharmaceutical manufacturers and other vendors, administer the
contracts and provide related services.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pharmaceutical Distribution services. Through our distribution center in Fort Worth, Texas, we supply approximately 95% of pharmaceuticals (in dollar terms)
administered by our network of affiliated practices. We believe our own distribution operation gives us an opportunity to enhance efficiency within our network, and affords us the opportunity to protect the safety and authenticity of drugs used by
our practices as a result of our control of the pharmaceuticals directly from the manufacturer to the patient.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Information, Marketing and Analytical services. We provide a range of data and analytical services relating to purchasing and utilization of pharmaceuticals and
other matters, as well as marketing assistance and other product-related services.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reimbursement Support services. In July, 2006, we acquired AccessMed, a provider of reimbursement hotline and patient assistance programs located in Overland
Park, Kansas, in a stock acquisition for net cash consideration of $31.4 million. The acquisition expands our services offered to pharmaceutical manufacturers and also allows us to centralize the appeals and patient financial assistance processes
for affiliated practices.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Oral Oncology Specialty Pharmacy services. We launched our oral oncology specialty pharmacy and mail order business at our Fort Worth facility on August 1,
2006. This new capability is designed to address the increasing number of new oral chemotherapeutical compounds, as well as the needs of payers seeking to consolidate their pharmaceutical purchasing power to reduce costs. The service is an offering
that is also available to patients outside of our affiliated network practices. In addition to providing patients with pharmaceuticals, we provide patient counseling services that are directed toward appropriate use of medications, monitoring of
side effects and complications and reimbursement issues.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 2008 is to:



| |  |  | Increase the financial strength of network practices by expanding their service offerings, consolidating their local market position and supporting clinical
initiatives that help ensure the continued delivery of high quality and effective cancer care to their patients.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Further enhance the networks ability to deliver high quality cancer care. The Practice Quality and Efficiency (PQE) initiative is being led by
the networks National Policy Board and by various physician committees and task forces. The initiative includes implementing an evidence-based approach to medical decision making, defining the key elements of a comprehensive quality program,
and enhancing practice capacity to treat new patients. The networks evidence-based medicine initiative and oncology-specific electronic medical records system continue to experience strong adoption among physicians and practices.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Introduce Disease Management programs for patients and payers. During 2007, in parallel with the PQE initiative referenced above, the Company initiated a program
designed to provide a comprehensive array of patient support services to improve the quality of the patient experience during treatment and to provide direct patient support facilitating the patients transition to long-term survivorship or
end-of-life care. Our specialty pharmacy business also enables us to integrate oral pharmaceuticals into our management of the overall continuum of care for patients.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expand our national billing and collection service, Oncology Reimbursement Solutions (ORS), which was launched in the fourth quarter of
2007. ORS is designed to better support practices affiliated with us under comprehensive service arrangements and as an additional service offering for affiliated practices under the OPS
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | model and practices that are not part of our network. ORS integrates our patient and third party reimbursement expertise with our AccessMed service, which
assists patients without coverage in finding alternative reimbursement, with the aim of expediting the billing and collection effort, and improving revenue cycle management.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expand our Market Focus Business. Through its Market Focus division, the Company provides a wide array of sophisticated clinical data management services, market
research, marketing and related services for pharmaceutical manufacturers and payers.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Further leverage our pharmaceutical distribution operations. During 2005 we completed development of our pharmaceutical distribution operations as part of our
strategy to broaden the range of services offered to affiliated practices and pharmaceutical manufacturers. We believe that by controlling the distribution channel for pharmaceuticals from manufacturer to patient, we are able to enhance efficiency
within our network, and better ensure the safety and authenticity of drugs used by our practices.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expand oncology pharmaceutical services. The distribution center also provides a platform to further expand our services related to oncology pharmaceuticals. For
example, our oral oncology specialty pharmacy and mail order business launched in August, 2006 allows us to respond to market needs and provide additional value, including patient compliance programs and medication therapy management solutions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Economic Models

We
provide a range of services to our network of affiliated practices with the mission of expanding access to and improving the quality of cancer care in local communities. We provide these services through two economic models: a comprehensive services
model, under which we provide all of our practice management services under a single contract with one fee based on overall performance; and our oncology pharmaceutical services (OPS) model, under which medical oncology practices
contract with the Company to purchase only pharmaceutical services. Most of our revenues, approximately 80.9% during the three months ended March 31, 2008, are derived under the comprehensive services model.

Under most of our comprehensive service agreements, we are compensated under the earnings model. Under that model, we are reimbursed for expenses that we
incur in connection with managing a practice, including rent, pharmaceutical expense and salaries and benefits of non-physician employees of the practices, and are paid an additional fee based upon a percentage of the practices earnings before
income taxes. To further align ours and our affiliated practices economic incentives, these fees are subject to downward adjustments to incentivize the affiliated practices efficient use of capital and efficiency in pharmaceutical
ordering and management through our distribution facility. During the three months ended March 31, 2008, 80.7% of our revenue was derived from comprehensive service agreements related to practices managed under the earnings model. The remainder
of our comprehensive service agreements for our current practices for the three months ended March 31, 2008 are on a fixed management fee basis, as required in some states. Under our comprehensive services model, 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 functions of such practices, while our affiliated physicians control all medical functions.

To help manage the business operations of our affiliated practices under the comprehensive services model and facilitate communication with our
affiliated physicians, each management agreement contemplates a policy board consisting of representatives from the affiliated physician practice and the Company. The boards responsibilities include strategic planning, decision-making and
preparation of an annual budget. 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 all non-medical decisions, including billing, information systems management and marketing.

Under our
OPS agreements which represent 16.0% of revenue during the three months ended March 31, 2008, fees include payment for pharmaceuticals and supplies used by the practice, reimbursement for certain pharmacy-related expenses and payment for the
other services we provide. For example, we may receive a percentage of the cost of pharmaceuticals purchased by a practice or a fee for mixing pharmaceuticals. Rates for our services typically are based on the level of services required by the
practice.



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS - continued



Forward-Looking Statements and Risk Factors

The following statements are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: (i) certain statements, including
possible or assumed future results of operations contained in Managements Discussion and Analysis of Financial Condition and Results of Operations, (ii) any statements contained herein regarding the prospects for any of our
businesses or services and our development activities relating to physician affiliations and cancer centers; (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 Companys reliance on pharmaceuticals for the majority of its revenues, the Companys ability to maintain favorable pharmaceutical pricing and favorable relationships with
pharmaceutical manufacturers and other vendors, concentration of pharmaceutical purchasing and favorable pricing with a limited number of vendors, prescription drug reimbursement, 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 that are similar to Medicare coverage, other changes in the manner patient care is reimbursed or administered, the Companys ability to service its substantial indebtedness and comply with related covenants in debt agreements, the
Companys ability to obtain amendments to its credit facility financial covenants on terms acceptable to it, the Companys ability to fund its operations through operating cash flow or utilization of its existing 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 and enforcement, increases in the cost of providing cancer treatment services and the operations of the Companys affiliated physician practices.

Please refer to our filings with the SEC, including our Annual Report on Form 10-K, filed with the SEC on February 29, 2008, and subsequent filings, 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.

Reimbursement Matters

Pharmaceutical Reimbursement under Medicare

Erythropoiesis-stimulating agents (ESAs) are widely-used drugs for the treatment of anemia, which is 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 to treat 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 and are an alternative to blood
transfusions.

During the three months ended March 31, 2007, the U.S. Food and Drug Administration (the FDA) issued a
public health advisory outlining new safety information, including revised product labeling, about ESAs which was later revised on November 8, 2007. In particular, the FDA highlighted studies that concluded that an increased risk of death may
occur in cancer patients who are not receiving chemotherapy and who are treated with ESAs. Partly in response to such warnings, certain Medicare intermediaries ceased reimbursement for ESAs administered to patients who are not current or recent
chemotherapy recipients at the time of administration. In addition, intermediaries have revised usage guidelines for ESAs in



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other circumstances. The FDA advisory and subsequent intermediary actions led Medicare (Centers for Medicare and Medicaid Services or
CMS) to open a national coverage analysis (NCA), on March 14, 2007, on the use of ESAs for conditions other than advanced kidney disease, which was the first step toward issuing a proposed national coverage decision. The
national coverage decision (NCD) was released on July 30, 2007, and was effective as of that date.

The NCD went
significantly beyond limiting coverage for ESAs in patients who are not currently receiving chemotherapy as discussed above. The NCD includes determinations that eliminate coverage for anemia not related to cancer treatment. Coverage was also
eliminated for patients with certain other risk factors. In circumstances where ESA treatment is reimbursed, the NCD (i) requires that in order to commence ESA treatment, patients be significantly more anemic than was common practice prior to
the NCD; (ii) imposes limitations on the duration of ESA therapy and the circumstances in which it should be continued and (iii) limits dosing and dose increases in nonresponsive patients.

A number of scientific articles, including several released since the 2007 actions by FDA and CMS, have concluded that ESAs may in certain situations
increase certain side effects and mortality risk due possibly to stimulation of the growth and/or survival of cancer cells in cancer patients. On March 13, 2008, the Oncology Drug Advisory Committee of the FDA (ODAC) met to further
consider the use of ESAs in oncology and has recommended further restrictions on use that are currently being considered by the FDA. These recommended restrictions include that ESA use not be indicated in patients receiving potentially
curative treatments or in patients with metastatic breast cancer and/or cancers of the head and neck. We expect that any action by the FDA based on the ODAC recommendation will occur during the second quarter of 2008.

A condensed financial summary of our revenue and operating income attributable to ESAs administered by our network of affiliated physicians is summarized
as follows (in millions):



|                       |  |                             |       |   |      |   |       |  
|---------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                       |  | Three MonthsEnded March 31, |      
|                       |  | 2008                        |       |   | 2007 |  
|Revenue                |  | $                           | 26.9  |   |      | $ | 42.4  |  
|Less: Operating Costs  |  |                             | (16.7 | ) |      |   | (24.1 | )
|                       |  |                             |       |   |      |   |       |  
|Income from Operations |  | $                           | 10.2  |   |      | $ | 18.3  |  
|                       |  |                             |       |   |      |   |       |  

These financial results reflect the combined effect of 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 OPS model, as well as
distribution and group purchasing fees received from manufacturers. Because the initial FDA and CMS actions to restrict use occurred in March 2007, the impact of reduced ESA utilization was not reflected in the results for the first quarter of
2007.

Because the use of ESAs relates to specific clinical determinations and we do not make clinical decisions for affiliated physicians,
analysis of the financial impact of these restrictions is a complex process. As a result, there is inherent uncertainty in making an estimate or range of estimates as to the ultimate financial impact on the Company. Factors that could
significantly affect the financial impact on the Company include ongoing clinical interpretations of coverage restrictions and risks related to ESA use and whether managed care and other non-governmental payers adopt similar reimbursement
limitations. A significant decline in ESA usage has had a significant adverse affect on the Companys results of operations, and, particularly, its Medical Oncology Services and Pharmaceutical Services segments. Decreasing financial performance
of affiliated practices as a result of declining ESA usage also affects their relationship with the Company and, in some instances, has led to increased pressure to amend the terms of their management services agreements. In addition, reduced
utilization of ESAs adversely impacted the Companys ability to continue to receive favorable pricing from ESA manufacturers. Decreased financial performance may also adversely impact the Companys ability to obtain acceptable credit
terms from pharmaceutical manufacturers, including 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.



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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. On
November 1, 2007, CMS issued a physician fee schedule update for 2008 to be set under the statutory formula which was to be effective as of January 1, 2008. Under the CMS release, the 2008 conversion factor would have been 10.1% lower
than the 2007 rates. However, as a result of the Medicare, Medicaid, and SCHIP Extension Act of 2007, effective for claims with dates of service from January 1, 2008 through June 30, 2008, the update to the conversion factor will be
an increase of 0.5% over the 2007 rates; and for claims with dates of service from July 1, 2008 and after, will revert back to the previous payment methodology (the decrease of 10.1% from 2007 rates) that was outlined in the Final Rule,
published in the Federal Register on November 27, 2007. If action is not taken by Congress to adjust the conversion factor for the last half of 2008, pretax income would be negatively impacted by an estimated $4 to $6 million when applied to
annualized reimbursement during the three months ended March 31, 2008. Also, there is a likelihood that if Congress does not revise the conversion factor for dates of service after July 1, 2008, reimbursement for some managed
care contracts linked to Medicare reimbursement may decrease ratably.

In November, 2006, CMS released its Final Rule of the Five-Year
Review of Work Relative Value Units (RVU or Work RVU) under the Physician Fee Schedule and Proposed Changes to the Practice Expense (PE) Methodology (the Final Rule). The Work RVU changes were
implemented in full on January 1, 2007, while the PE methodology changes will be phased in over a four-year period (2007-2010). During the three months ended March 31, 2008 and 2007, this change in reimbursement increased pretax income by
$0.4 million and $0.7 million, respectively, over the comparable prior year periods for Medicare non-drug reimbursement.

Imaging Reimbursement

The Deficit Reduction Act (DRA), passed in February, 2006, contained a provision affecting imaging reimbursement. The technical
component of the physician fee schedule for physician-office imaging services was capped at the Hospital Outpatient Prospective Payment System (HOPPS) rates. Since Congress did not include a provision in the Tax Relief and Healthcare Act
of 2006 to revise the DRA Imaging provision, Medicare reimbursement, effective January 1, 2007, was limited to no more than the HOPPS rates. The impact on US Oncology affiliated practices primarily relates to reduced reimbursement for Positron
Emission Tomography (PET), Positron Emission Tomography/Computerized Tomography (PET/CT) and Computerized Tomography (CT) services. During the three months ended March 31, 2007, the reduced reimbursement for
these imaging services reduced pretax income by approximately $2 million, compared to the corresponding period of 2006. During 2008, the HOPPS rates increased, compared to 2007, resulting in an increase in pretax income in imaging reimbursement of
approximately $0.5 million for services provided during the three months ended March 31, 2008.

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; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



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



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Summary

In 2008, significant attention will be focused on the issues surrounding supportive care drugs and on Congress activity related to physician reimbursement under Medicare. On July 30, 2007, CMS issued a final coverage
determination regarding reimbursement for ESAs. In addition, the ODAC meeting held in March, 2008, may result in further changes to ESA labeling. For the first half of 2008, Congress temporarily increased the conversion factor for calculating
Medicare reimbursement for physician services. However, if Congress does not revise the formula-driven conversion factor between now and June 30, 2008, the Company estimates a decrease in pretax income of $4 to $6 million for the six
months ending 2008.

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 and litigation. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates under different assumptions or conditions.

In addition, as circumstances change, we may revise the basis of our estimates accordingly. For example, in the past we have recorded charges to reflect revisions in our valuation of accounts
receivable as a result of actual collection patterns. We maintain decentralized billing systems and continue to upgrade and modify those systems. We take this into account as we evaluate the realizability of receivables and record appropriate
reserves, based upon the risks of collection inherent in such a structure. In the event subsequent collections are higher or lower than our estimates, results of operations in subsequent periods could be either positively or negatively impacted as a
result of such prior estimates. This risk is particularly relevant for periods in which there is a significant shift in reimbursement from large payers, such as the changes in Medicare reimbursement. As a result of declining profitability and lower
market valuations, the Company recorded an impairment charge of $380.0 million related to goodwill in its Medical Oncology Services segment (see Results of OperationsImpairment and Restructuring Charges).

Refer to the Critical Accounting Policies and Estimates section of our Annual Report on Form 10-K filed with the SEC on February 29,
2008, and subsequent filings, 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, stock-based compensation, impairment of long-lived assets, and volume-based
pharmaceutical rebates.

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 assure you that future changes in
accounting rules would not require us to make retrospective application to our financial statements.

In December, 2007, the FASB issued
SFAS No. 141 (revised 2007), Business Combinations, (SFAS 141R). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements identifiable assets
acquired, liabilities assumed, any non-controlling interest in an acquiree and the resulting goodwill. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination.
This statement is effective for annual reporting periods beginning after December 15, 2008. SFAS 141R is to be applied prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The Company
expects SFAS 141R will have an impact on the Companys accounting for future business combinations once adopted but the effect is dependent upon acquisitions which may be made in the future.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB
No. 51, which establishes new standards governing the accounting for and reporting of non-controlling interests (NCIs) in partially-owned subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard



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indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, rather than a liability;
that increases and decreases in the parents ownership interest that leave control intact be treated as equity transactions, rather than as step acquisitions or dilution gains or losses; and that losses of a partially owned consolidated
subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also requires changes to certain presentation and disclosure requirements. SFAS No. 160 is effective for annual reporting periods
beginning after December 15, 2008. The provisions of the standard are to be applied to all NCIs prospectively, except for the presentation and disclosure requirements, which are to be applied retrospectively to all periods presented. The
Company is currently evaluating the future impact and disclosures required by this standard.

In September, 2006, the FASB issued SFAS
No. 157, Fair Value Measurement (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Statement
does not require new fair value measurements, however for some entities, the application of this Statement will change current practice. In developing this standard, the FASB considered the need for increased consistency and comparability in fair
value measurements and for expanded disclosures about fair value measurements. Effective January 1, 2008, the Company partially adopted SFAS No. 157 as allowed by the FASB issued Staff Position No. 157-2 (FSP 157-2), which
defers the effective date of SFAS No. 157 for one year for certain non-financial assets and liabilities. Due to the Companys election under FSP 157-2, the Company has applied the provisions of the statement to its disclosures related to
assets and liabilities which are measured at fair value on a recurring basis (at least annually), which for the Company is limited to its interest rate swap. Partial adoption of the standard did not have a material impact on the Companys
consolidated results of operations or financial condition (see Note 3). The provisions of SFAS No. 157 related to other non-financial assets and liabilities, specifically the Companys intangible management service agreements and goodwill
assets and its fixed-rate long-term liabilities, will be effective for the Company on January 1, 2009, and will be applied prospectively. The Company is currently evaluating the impact that these additional SFAS 157 provisions will have on the
Companys consolidated financial statements.

In February, 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS 159). SFAS No. 159 permits an entity to choose, at specified election dates, to measure eligible financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. An entity then reports unrealized gains and losses in earnings on items for which the fair value option has been elected, at each subsequent reporting date. Upfront costs and fees related to items for
which the fair value option is elected shall be recognized in earnings as incurred and not deferred. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and liabilities. SFAS 159 was effective beginning January 1, 2008. We did not apply the fair value option under SFAS and, therefore, the statement did not have an impact on the
Companys consolidated financial statements.

In June 2007, the Financial Accounting Standards Board (FASB) ratified
Emerging Issues Task Force Issue (EITF) No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (EITF 06-11). EITF 06-11 requires companies to recognize a realized
income tax benefit associated with dividends or dividend equivalents paid on nonvested equity-classified employee share-based payment awards that are charged to retained earnings as an increase to additional paid-in capital. EITF 06-11 was effective
beginning January 1, 2008 and was adopted prospectively as of January 1, 2008 with no material impact on the Companys consolidated financial statements.

In June 2007, the Financial Accounting Standards Board (FASB) ratified Emerging Issues Task Force Issue (EITF) No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or
Services Received for Use in Future Research and Development Activities (EITF 07-3). EITF 07-3 requires that nonrefundable advance payments for goods and services that will be used or rendered in future R&D activities
pursuant to executory contractual arrangements be deferred and recognized as an expense in the period that the related goods are delivered or services are performed. EITF 07-3 was effective beginning January 1, 2008 and as the recipient, rather
than the payer, of advance payments for clinical research services, EITF 07-3 did not have an impact on the Companys consolidated financial statements.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities  An Amendment of SFAS No. 133 (SFAS
161). SFAS 161 seeks to improve financial reporting for derivative instruments and hedging activities by requiring enhanced disclosures regarding the impact on financial position, financial performance, and cash flows. SFAS 161 is effective
for the Company on January 1, 2009. The Company is currently in the process of evaluating the new disclosure requirements under SFAS 161.

On May 9, 2008, the FASB issued FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162).SFAS 162 is intended to improve financial reporting by identifying a
consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities.
SFAS 162 is effective 60 days following the SECs approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles. Any effect of applying the



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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



provisions of SFAS 162 is to be reported as a change in accounting principle in accordance with FASB Statement No. 154, Accounting Changes and Error
Corrections.Once SFAS 162 is effective, the statement is not expected to have an impact on the Companys consolidated financial statements.

Discussion of Non-GAAP Information

In this report, the Company uses the term EBITDA which represents earnings
before interest, taxes, depreciation and amortization (including amortization of stock-based compensation), minority interest and other income (expense). EBITDA is not calculated in accordance with generally accepted accounting principles in the
United States (GAAP); rather it is derived from relevant items in the Companys GAAP-based financial statements. A reconciliation of EBITDA to the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) and
the Condensed Consolidated Statement of Cash Flows is included in this quarterly report.

We believe EBITDA is 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 as a key indicator 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. The Companys senior secured credit facility also requires that we comply on a quarterly basis with certain financial
covenants that include EBITDA as a financial measure. Management believes that EBITDA is useful to investors, since it provides investors with additional information that is not directly available in a GAAP presentation.

As a non-GAAP measure, EBITDA should not be viewed as an alternative to the Companys income or loss from operations, as an indicator of operating
performance, or the Companys cash flow from operations as a measure of liquidity. For example, EBITDA does 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 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 capital expenditure or contractual commitments; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------



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

Despite these limitations, management believes that EBITDA provides 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 as supplemental information for comparative purposes and for analyzing compliance with the Companys loan covenants.

In
all events, EBITDA is not intended to be a substitute 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, 2008 and 2007, respectively, we have affiliated with the following number of physicians (including those under OPS agreements), by specialty:



|                                  |  |           |  |      
|--------------------------------- |  | --------- |  | -----
|                                  |  | March 31,
|                                  |  | 2008      |  | 2007 
|Medical oncologists/hematologists |  | 1,039     |  | 885  
|Radiation oncologists             |  | 154       |  | 148  
|Other oncologists                 |  | 54        |  | 44   
|                                  |  |           |  |      
|Total physicians                  |  | 1,247     |  | 1,077
|                                  |  |           |  |      

The following tables set forth changes in the number of physicians affiliated with the Company
under both comprehensive and OPS agreements:



|                                           |  |                             |   |  |      |  
|------------------------------------------ |  | --------------------------- | - |  | ---- | -
|Comprehensive Service Agreements(1)        |  | Three Months EndedMarch 31, |  
|                                           |  | 2008                        |   |  | 2007 |  
|Affiliated physicians, beginning of period |  | 903                         |   |  | 879  |  
|Physician practice affiliations            |  | 54                          |   |  | 2    |  
|Recruited physicians                       |  | 5                           |   |  | 8    |  
|Retiring/Other                             |  | (11                         | ) |  | (12  | )
|                                           |  |                             |   |  |      |  
|Affiliated physicians, end of period       |  | 951                         |   |  | 877  |  
|                                           |  |                             |   |  |      |  



|                                               |  |                             |   |  |       |  
|---------------------------------------------- |  | --------------------------- | - |  | ----- | -
|Oncology Pharmaceutical Services Agreements(2) |  | Three Months EndedMarch 31, |  
|                                               |  | 2008                        |   |  | 2007  |  
|Affiliated physicians, beginning of period     |  | 296                         |   |  | 188   |  
|Physician practice affiliations                |  | 12                          |   |  | 16    |  
|Physician practice separations                 |  | (5                          | ) |  | (4    | )
|Retiring/Other                                 |  | (7                          | ) |  |      |  
|                                               |  |                             |   |  |       |  
|Affiliated physicians, end of period           |  | 296                         |   |  | 200   |  
|                                               |  |                             |   |  |       |  
|Total affiliated physicians                    |  | 1,247                       |   |  | 1,077 |  
|                                               |  |                             |   |  |       |  



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

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



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



|                                                  |  |                             |  |      |  
|------------------------------------------------- |  | --------------------------- |  | ---- | -
|                                                  |  | Three Months EndedMarch 31, | 
|                                                  |  | 2008                        |  | 2007 |  
|Cancer Centers, beginning of period               |  | 77                          |  | 80   |  
|Cancer Centers opened                             |  | 2                           |  |     |  
|Cancer Centers closed                             |  |                            |  | (1   | )
|                                                  |  |                             |  |      |  
|Cancer Centers, end of period                     |  | 79                          |  | 79   |  
|                                                  |  |                             |  |      |  
|Radiation oncology-only facilities, end of period |  | 12                          |  | 11   |  
|                                                  |  |                             |  |      |  
|Total Radiation Oncology Facilities(1)            |  | 91                          |  | 90   |  
|                                                  |  |                             |  |      |  
|PET Systems(2)                                    |  | 34                          |  | 34   |  
|                                                  |  |                             |  |      |  



|(1) | Includes 82 and 78 sites utilizing IMRT and/or IGRT
technology at March 31, 2008 and 2007, respectively.
|--- | --------------------------------------------------------------------------------------------------------

|(2) | Includes 22 and 16 PET/CT systems at March 31, 2008 and
2007, respectively.
|--- | ---------------------------------------------------------------------------

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



|                                                   |  |                             |  |      
|-------------------------------------------------- |  | --------------------------- |  | -----
|                                                   |  | Three Months EndedMarch 31,
|                                                   |  | 2008                        |  | 2007 
|Per Operating Day Statistics:                      |  |                             |  |      
|Medical oncology visits                            |  | 10,572                      |  | 9,806
|Radiation treatments                               |  | 2,731                       |  | 2,736
|IMRT treatments (included in radiation treatments) |  | 628                         |  | 571  
|PET scans                                          |  | 193                         |  | 171  
|CT scans                                           |  | 761                         |  | 707  
|                                                   |  |                            
|Per Operating Day Same Store Statistics:           |  |                             |  |      
|Medical oncology visits                            |  | 9,872                       |  | 9,551
|Radiation treatments                               |  | 2,599                       |  | 2,673
|IMRT treatments (included in radiation treatments) |  | 556                         |  | 553  
|PET scans                                          |  | 168                         |  | 161  
|CT scans                                           |  | 682                         |  | 661  
|New patients enrolled in research studies          |  | 996                         |  | 761  



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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 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, |      
|                                     |  | 2008                        |           |   | 2007                        |       |    | 2008 |   |         | 2007 | 
|Product revenue                      |  | $                           | 543,261   |   |                             | 67.0  | %  |      | $ | 481,615 |      |  | 65.8  | %  |  | $ | 543,261   |   |  | 67.0  | %  |  | $ | 481,615 |   |  | 65.8  | %
|Service revenue                      |  |                             | 267,346   |   |                             | 33.0  |    |      |   | 250,426 |      |  | 34.2  |    |  |   | 267,346   |   |  | 33.0  |    |  |   | 250,426 |   |  | 34.2  |  
|                                     |  |                             |           |   |                             |       |    |      |   |         |      |  |       |    |  |   |           |   |  |       |    |  |   |         |   |  |       |  
|Total revenue                        |  |                             | 810,607   |   |                             | 100.0 |    |      |   | 732,041 |      |  | 100.0 |    |  |   | 810,607   |   |  | 100.0 |    |  |   | 732,041 |   |  | 100.0 |  
|                                     |  |                             |           |   |                             |       |    |      |   |         |      |  |       |    |  |   |           |   |  |       |    |  |   |         |   |  |       |  
|Cost of products                     |  |                             | 532,027   |   |                             | 65.6  |    |      |   | 464,665 |      |  | 63.5  |    |  |   | 532,027   |   |  | 65.6  |    |  |   | 464,665 |   |  | 63.5  |  
|Cost of services:                    |  |                             |           |   |                             |       |    |      |   |         |      |  |       |    |  |   |           |   |  |       |    |  |   |         |   |  |       |  
|Operating compensation and benefits  |  |                             | 130,188   |   |                             | 16.1  |    |      |   | 117,349 |      |  | 16.0  |    |  |   | 130,188   |   |  | 16.1  |    |  |   | 117,349 |   |  | 16.0  |  
|Other operating costs                |  |                             | 76,796    |   |                             | 9.5   |    |      |   | 72,794  |      |  | 9.9   |    |  |   | 76,796    |   |  | 9.5   |    |  |   | 72,794  |   |  | 9.9   |  
|Depreciation and amortization        |  |                             | 18,601    |   |                             | 2.2   |    |      |   | 17,729  |      |  | 2.4   |    |  |   | 18,601    |   |  | 2.2   |    |  |   | 17,729  |   |  | 2.4   |  
|                                     |  |                             |           |   |                             |       |    |      |   |         |      |  |       |    |  |   |           |   |  |       |    |  |   |         |   |  |       |  
|Total cost of services               |  |                             | 225,585   |   |                             | 27.8  |    |      |   | 207,872 |      |  | 28.3  |    |  |   | 225,585   |   |  | 27.8  |    |  |   | 207,872 |   |  | 28.3  |  
|Total cost of products and services  |  |                             | 757,612   |   |                             | 93.4  |    |      |   | 672,537 |      |  | 91.8  |    |  |   | 757,612   |   |  | 93.4  |    |  |   | 672,537 |   |  | 91.8  |  
|General and administrative expense   |  |                             | 20,039    |   |                             | 2.5   |    |      |   | 20,276  |      |  | 2.8   |    |  |   | 19,988    |   |  | 2.5   |    |  |   | 20,235  |   |  | 2.8   |  
|Impairment and restructuring charges |  |                             | 381,306   |   |                             | 47.0  |    |      |   | 7,395   |      |  | 1.0   |    |  |   | 381,306   |   |  | 47.0  |    |  |   | 7,395   |   |  | 1.0   |  
|Depreciation and amortization        |  |                             | 7,153     |   |                             | 1.0   |    |      |   | 3,364   |      |  | 0.5   |    |  |   | 7,153     |   |  | 1.0   |    |  |   | 3,364   |   |  | 0.5   |  
|                                     |  |                             |           |   |                             |       |    |      |   |         |      |  |       |    |  |   |           |   |  |       |    |  |   |         |   |  |       |  
|Total costs and expenses             |  |                             | 1,166,110 |   |                             | 143.9 |    |      |   | 703,572 |      |  | 96.1  |    |  |   | 1,166,059 |   |  | 143.9 |    |  |   | 703,531 |   |  | 96.1  |  
|                                     |  |                             |           |   |                             |       |    |      |   |         |      |  |       |    |  |   |           |   |  |       |    |  |   |         |   |  |       |  
|Income (loss) from operations        |  |                             | (355,503  | ) |                             | (43.9 | )  |      |   | 28,469  |      |  | 3.9   |    |  |   | (355,452  | ) |  | (43.9 | )  |  |   | 28,510  |   |  | 3.9   |  
|Other expense:                       |  |                             |           |   |                             |       |    |      |   |         |      |  |       |    |  |   |           |   |  |       |    |  |   |         |   |  |       |  
|Interest expense, net                |  |                             | (36,279   | ) |                             | (4.5  | )  |      |   | (31,025 | )    |  | (4.2  | )  |  |   | (24,200   | ) |  | (3.0  | )  |  |   | (23,807 | ) |  | (3.3  | )
|Minority interests                   |  |                             | (715      | ) |                             | (0.1  | )  |      |   | (722    | )    |  | (0.1  | )  |  |   | (715      | ) |  | (0.1  | )  |  |   | (722    | ) |  | (0.1  | )
|Loss on early extinguishment of debt |  |                             |          |   |                             |      |    |      |   | (12,917 | )    |  | (1.8  | )  |  |   |          |   |  |      |    |  |   |        |   |  |      |  
|Other income (expense)               |  |                             | (14,638   | ) |                             | (1.8  | )  |      |   |        |      |  |      |    |  |   | 1,371     |   |  | 0.2   |    |  |   |        |   |  |      |  
|                                     |  |                             |           |   |                             |       |    |      |   |         |      |  |       |    |  |   |           |   |  |       |    |  |   |         |   |  |       |  
|Income (loss) before income taxes    |  |                             | (407,135  | ) |                             | (50.3 | )  |      |   | (16,195 | )    |  | (2.2  | )  |  |   | (378,996  | ) |  | (46.8 | )  |  |   | 3,981   |   |  | 0.5   |  
|Income tax benefit (provision)       |  |                             | 9,747     |   |                             | 1.2   |    |      |   | 609     |      |  | 0.1   |    |  |   | 922       |   |  | 0.1   |    |  |   | (1,931  | ) |  | (0.3  | )
|                                     |  |                             |           |   |                             |       |    |      |   |         |      |  |       |    |  |   |           |   |  |       |    |  |   |         |   |  |       |  
|Net income (loss)                    |  | $                           | (397,388  | ) |                             | (49.1 | )% |      | $ | (15,586 | )    |  | (2.1  | )% |  | $ | (378,074  | ) |  | (46.7 | )% |  | $ | 2,050   |   |  | 0.2   | %
|                                     |  |                             |           |   |                             |       |    |      |   |         |      |  |       |    |  |   |           |   |  |       |    |  |   |         |   |  |       |  

In the following discussion, we address the results of operations of US Oncology and Holdings.
With the exception of incremental interest expense associated with its floating rate notes, loss on early extinguishment of debt and nominal administrative expenses, 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, later in this discussion, (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:



| |  |  | Comprehensive service fee revenues. Under our comprehensive service agreements, 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 based upon a percentage of the practices earnings before income taxes, subject to certain adjustments.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Oncology pharmaceutical services fees. Under our OPS agreements, we bill practices for services rendered. These revenues include payment for all of the
pharmaceutical agents used by the practice for which we pay the pharmaceutical manufacturers 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 pharmaceutical service fees. We receive fees from pharmaceutical companies for acting as a group purchasing organization
(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 service agreements and our OPS 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 service agreements 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 accrued practice expenses and our accrued fees from accrued 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, 2008 and 2007 (in thousands):



|                                  |  |                              |          |   |      |   |          |        |  |      |  
|--------------------------------- |  | ---------------------------- | -------- | - | ---- | - | -------- | ------ |  | ---- | -
|                                  |  | Three Months Ended March 31, |          |   |      |  
|                                  |  | 2008                         |          |   | 2007 |   |          | Change | 
|Medical oncology services         |  | $                            | 552,755  |   |      | $ | 521,908  |        |  | 5.9  | %
|Cancer center services            |  |                              | 90,091   |   |      |   | 84,296   |        |  | 6.9  |  
|Pharmaceutical services           |  |                              | 610,622  |   |      |   | 541,381  |        |  | 12.8 |  
|Research and other services       |  |                              | 13,062   |   |      |   | 13,000   |        |  | 0.5  |  
|Eliminations(1)                   |  |                              | (455,923 | ) |      |   | (428,544 | )      |  | 6.4  |  
|                                  |  |                              |          |   |      |   |          |        |  |      |  
|Total revenue                     |  | $                            | 810,607  |   |      | $ | 732,041  |        |  | 10.7 | %
|                                  |  |                              |          |   |      |   |          |        |  |      |  
|As a percentage of total revenue: |  |                              |          |   |      |   |          |        |  |      |  
|Medical oncology services         |  |                              | 68.2     | % |      |   | 71.3     | %      |  |      |  
|Cancer center services            |  |                              | 11.1     |   |      |   | 11.5     |        |  |      |  
|Pharmaceutical services           |  |                              | 75.3     |   |      |   | 74.0     |        |  |      |  
|Research and other services       |  |                              | 1.6      |   |      |   | 1.8      |        |  |      |  
|Eliminations(1)                   |  |                              | (56.2    | ) |      |   | (58.6    | )      |  |      |  
|                                  |  |                              |          |   |      |   |          |        |  |      |  
|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.In the first quarter of 2008,
medical oncology services revenue increased $30.9 million, or 5.9 percent, from the first quarter of 2007. The revenue increase reflects an increase in daily visits and growth in our network of affiliated medical oncologists. Partially offsetting
the increase in daily visits was a reduction in the utilization of supportive care drugs due to restrictions on their use and an increase in the distribution operating efficiency pool, which decreases management fees.



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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 in the first quarter of 2008 was $90.1
million, an increase of $5.8 million, or 6.9 percent. The increase reflects increasing diagnostic volumes over the same period in the prior year. Additionally, radiation treatment volumes continue to shift toward advanced targeted radiation
therapies, such as image-guided radiation therapy (IGRT) and brachytherapy administered by network physicians, both of which are reimbursed at higher rates than conventional radiation therapy.

Pharmaceutical Services.Pharmaceutical services revenue in the first quarter of 2008 was $610.6 million, an increase of $69.2 million, or 12.8
percent, over the first quarter of 2007. The revenue increase is primarily due to the net addition of 170 medical oncologists affiliated through comprehensive service and oncology pharmaceutical services (OPS) agreements since the close
of the first quarter of 2007. Since the first quarter of 2007, our network of affiliated medical oncologists has grown by 16 percent. The addition of physicians was partially offset by lower usage of certain supportive care drugs.

Operating Costs

Operating costs include cost of
products and services, as well as depreciation and amortization related to our operating assets, and are presented in the tables below (in thousands):



|                                    |  |                              |         |   |      |   |         |        |  |      |  
|----------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | ------ |  | ---- | -
|                                    |  | Three Months Ended March 31, |         |   |      |  
|                                    |  | 2008                         |         |   | 2007 |   |         | Change | 
|Cost of products                    |  | $                            | 532,027 |   |      | $ | 464,665 |        |  | 14.5 | %
|Cost of services:                   |  |                              |         |   |      |   |         |        |  |      |  
|Operating compensation and benefits |  |                              | 130,188 |   |      |   | 117,349 |        |  | 10.9 |  
|Other operating costs               |  |                              | 76,796  |   |      |   | 72,794  |        |  | 5.5  |  
|Depreciation and amortization       |  |                              | 18,601  |   |      |   | 17,729  |        |  | 4.9  |  
|                                    |  |                              |         |   |      |   |         |        |  |      |  
|Total cost of services              |  |                              | 225,585 |   |      |   | 207,872 |        |  | 8.5  |  
|                                    |  |                              |         |   |      |   |         |        |  |      |  
|Total cost of products and services |  | $                            | 757,612 |   |      | $ | 672,537 |        |  | 12.7 |  
|                                    |  |                              |         |   |      |   |         |        |  |      |  
|As a percentage of revenue:         |  |                              |         |   |      |   |         |        |  |      |  
|Cost of products                    |  |                              | 65.6    | % |      |   | 63.5    | %      |  |      |  
|Cost of services:                   |  |                              |         |   |      |   |         |        |  |      |  
|Operating compensation and benefits |  |                              | 16.1    |   |      |   | 16.0    |        |  |      |  
|Other operating costs               |  |                              | 9.5     |   |      |   | 9.9     |        |  |      |  
|Depreciation and amortization       |  |                              | 2.2     |   |      |   | 2.4     |        |  |      |  
|                                    |  |                              |         |   |      |   |         |        |  |      |  
|Total cost of services              |  |                              | 27.8    |   |      |   | 28.3    |        |  |      |  
|                                    |  |                              |         |   |      |   |         |        |  |      |  
|Total cost of products and services |  |                              | 93.4    | % |      |   | 91.8    | %      |  |      |  
|                                    |  |                              |         |   |      |   |         |        |  |      |  

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 OPS model in our pharmaceutical services segment. Product costs increased 14.5% over the three month period ended
March 31, 2007, a rate in excess of revenue growth over the corresponding period. As a percentage of revenue, cost of products was 65.6% and 63.5% in the three months ended March 31, 2008 and 2007, respectively. Contributing to the
increase compared to prior year is lower utilization of supportive care drugs in the medical oncology services segment as well as increased supportive care drug pricing that became effective during the first quarter of 2008.

Cost of Services. Cost of services includes compensation and benefits of our operating-level employees and employees of our affiliated practices
other than physicians. Cost of services also includes other operating costs such as rent, utilities, repairs and maintenance, insurance and other direct operating costs. As a percentage of revenue, cost of services was 27.8% and 28.3% in the three
months ended March 31, 2008 and 2007, respectively, which reflects the leverage of our cost structure on an expanding revenue base and efforts to reduce avoidable costs.

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.).



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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



|                                     |  |                              |         |   |      |   |        |        |  |      |   
|------------------------------------ |  | ---------------------------- | ------- | - | ---- | - | ------ | ------ |  | ---- | --
|                                     |  | Three Months Ended March 31, |         |   |      |  
|(in thousands)                       |  | 2008                         |         |   | 2007 |   |        | Change | 
|General and administrative expense   |  | $                            | 19,988  |   |      | $ | 20,235 |        |  | (1.2 | )%
|Impairment and restructuring charges |  |                              | 381,306 |   |      |   | 7,395  |        |  | nm   |   
|Depreciation and amortization        |  |                              | 7,153   |   |      |   | 3,364  |        |  | nm   |   
|Interest expense, net                |  |                              | 24,200  |   |      |   | 23,807 |        |  | 1.7  |   
|Other (income) expense               |  |                              | (1,371  | ) |      |   |       |        |  | nm   |   
|Minority interests                   |  |                              | 715     |   |      |   | 722    |        |  | (1.0 | ) 
|                                     |  |                              |        
|As a percentage of revenue:          |  |                              |         |   |      |   |        |        |  |      |   
|General and administrative expense   |  |                              | 2.5     | % |      |   | 2.8    | %      |  |      |   
|Impairment and restructuring charges |  |                              | 47.0    |   |      |   | 1.0    |        |  |      |   
|Depreciation and amortization        |  |                              | 1.0     |   |      |   | 0.5    |        |  |      |   
|Interest expense, net                |  |                              | 3.0     |   |      |   | 3.3    |        |  |      |   
|Other (income) expense               |  |                              | (0.2    | ) |      |   |       |        |  |      |   
|Minority interests                   |  |                              | 0.1     |   |      |   | 0.1    |        |  |      |   

General and Administrative. General and administrative expense was $20.0 million for the
three months ended March 31, 2008 and $20.2 million for the same period in 2007. General and administrative expense during the three months ended March 31, 2008 was lower than the comparable prior year period due primarily to lower
personnel costs as well as the completion of our financial information system upgrade that took place during 2007. General and administrative expense represented 2.5% and 2.8% of revenue, respectively, for the three months ended March 31, 2008
and 2007.

Impairment and Restructuring Charges.

Impairment and restructuring charges recognized during the three months ended March 31, 2008 and 2007 consisted of the following amounts (in thousands):



|                            |  |                              |         |      |   |      
|--------------------------- |  | ---------------------------- | ------- | ---- | - | -----
|                            |  | Three Months Ended March 31,
|                            |  | 2008                         |         | 2007
|Goodwill                    |  | $                            | 380,000 |      | $ |     
|Severance                   |  |                              | 1,306   |      |   |     
|Service Agreements, net     |  |                              |        |      |   | 4,325
|Property and Equipment, net |  |                              |        |      |   | 2,512
|Future Lease Obligations    |  |                              |        |      |   | 558  
|                            |  |                              |         |      |   |      
|Total                       |  | $                            | 381,306 |      | $ | 7,395
|                            |  |                              |         |      |   |      

In connection with the preparation of the financial statements for the quarter ended
March 31, 2008, and as a result of the continued decline in the financial performance of the Medical Oncology Services segment, we assessed the recoverability of goodwill related to that segment. Through strategic initiatives to diversify
operations, we have become less dependent on our medical oncology segment as a source of earnings since goodwill was initially recognized in connection with the Merger in August 2004. For 2004, medical oncology services represented approximately 70
percent of our earnings with the remaining 30 percent generated through radiation oncology, diagnostics and pharmaceutical services. During the three months ended March 31, 2008, these services, as well as recently developed service offerings
constitute approximately 75 percent of our earnings with medical oncology services decreasing to approximately 25 percent. During the year ended December 31, 2007, earnings in the medical oncology segment were negatively impacted by reduced
coverage for supportive care drugs as a result of revised product labeling issued by the FDA and coverage restrictions imposed by CMS. As a result of declining earnings, goodwill was tested for impairment during both the quarter ended
September 30, 2007 and December 31, 2007 and no impairment was identified. During the quarter ended March 31, 2008, price increases from manufacturers of



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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



supportive care drugs and additional safety concerns related to the use of supportive care drugs continued to reduce their utilization by our affiliated
physicians and adversely impacted both current and projected operating results for our Medical Oncology Services segment. As a result of these safety concerns, on March 13, 2008, ODAC met to consider the use of these drugs in oncology and
recommended further restrictions that are currently being considered by the FDA. In addition, affiliated physicians may already be changing their ESA use as a result of concerns raised by ODAC, and the USON network is active in reviewing evidence
and adopting appropriate treatment guidelines. These factors, along with a lower market valuation at March 31, 2008 resulting from unstable credit markets, led us to recognize a non-cash goodwill impairment charge in the amount of $380.0
million related to our Medical Oncology Services segment during the quarter ended March 31, 2008. The impairment charge is not expected to result in future cash expenditures. Further, the charge is a non-cash item that does not impact the
financial covenants of US Oncologys senior secured credit facility.

When an impairment is identified, an impairment charge is
necessary to state the carrying value of goodwill at its implied fair value, based upon a hypothetical purchase price allocation assuming the segment was acquired for its estimated fair value. The fair value of the Medical Oncology Services segment
was estimated with the assistance of an independent appraisal that considered the segments recent and expected financial performance as well as a market analysis of transactions involving comparable entities for which public information is
available. Determining the implied fair value of goodwill also requires the identification and valuation of intangible assets that have either increased in value or have been created through our initiatives and investments since the goodwill was
initially recognized. In connection with assessing the impairment charge, we identified previously unrecognized intangible assets, as well as increases to the fair value of the recognized management service agreement intangible assets, which
amounted to approximately $160 million in the aggregate. Value assigned to these intangible assets reduced the amount attributable to goodwill in a hypothetical purchase price allocation and, consequently, increased the impairment charge necessary
to state goodwill at its implied fair value by a like amount. In accordance with GAAP, these increases in the fair value of intangible assets have not been recorded in our consolidated balance sheet as of March 31, 2008.

Also during the three months ended March 31, 2008, charges of $1.3 million were recognized primarily related to employee severance costs for which
payment has been made as of April 30, 2008.

During the three months ended March 31, 2007, we recognized impairment and
restructuring charges amounting to $7.4 million. In the large majority of our markets, we believe our strategies of practice consolidation, diversification and process improvement continue to be effective. In a small number of markets, however,
specific local factors have prevented effective implementation of our strategies and practice performance has suffered. Specifically, in two markets in which we have affiliated practices, these market-specific conditions resulted in recognizing
impairment and restructuring charges.

In the first market, during the quarter ended September 30, 2006, state regulators reversed a
prior determination and ruled that, under the states certificate of need law, the affiliated practice was required to cease providing radiation therapy services to patients at a newly constructed cancer center. The Company has appealed this
determination and is exploring other options which would make the treatment facility available to radiation therapy patients. These efforts did not advance sufficiently during the three months ended March 31, 2007, and, therefore, the
resumption of radiation services or other recovery of the investment was not considered likely and an impairment charge of $1.6 million was recorded during the three months ended March 31, 2007. During the first quarter of 2008, the Company
received a ruling in its appeal, which mandates a rehearing by the state agency, which is currently scheduled to occur during the second quarter.

In the second market, financial performance deteriorated as a result of an excessive cost structure relative to practice revenue. Along with the affiliated practice, the Company restructured the market to establish a base for future growth
and to otherwise improve financial performance. During the three months ended March 31, 2007, the Company recorded impairment and restructuring charges of $5.8 million because, based on anticipated operating results, it did not expect that
practice performance would be sufficient to recover the value of certain assets and the intangible asset associated with the management service agreement in the market.

Depreciation and Amortization. Depreciation and amortization expense increased $3.8 million for the three months ended March 31, 2008 over the three months ended March 31, 2007, which reflects
amortization of comprehensive service agreement intangibles for newly affiliated practices in the current period and the amortization of costs associated with our financial system upgrade that occurred in 2007.

Interest. Interest expense, net, increased to $24.2 million during the three months ended March 31, 2008 from $23.8 million in the comparable
period of prior year as decreasing LIBOR rates were more than offset by lower interest income earned on short term investments.



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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



Income Taxes. The effective tax rate for US Oncology, Inc. was 0.2% and 48.5% for the three
months ended March 31, 2008 and 2007, respectively. The decrease in the effective tax rate is attributable to the impairment of goodwill in the medical oncology services segment during the three months ended March 31, 2008. Of the $380.0
million impairment charge $4.0 million is deductible through annual amortization for tax purposes, so there is no tax benefit associated with a significant portion of the goodwill impairment.

Net Income (Loss). Net loss for the three months ended March 31, 2008 was $378.1 million, compared to net income of $2.1 for the three months ended March 31, 2007.

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)                       |  | 2008                         |        | 2007 |   | Change | 
|General and administrative expense   |  | $                            | 51     |      | $ | 41     |  | 24.4 | %
|Interest expense, net                |  |                              | 12,079 |      |   | 7,218  |  | 67.3 |  
|Other expense                        |  |                              | 16,009 |      |   |       |  |     |  
|Loss on early extinguishment of debt |  |                              |       |      |   | 12,917 |  |     |  

General and Administrative. In addition to the general and administrative expenses incurred
by US Oncology, Holdings incurred general and administrative expenses of $51 thousand and $41 thousand during the three months ended March 31, 2008 and 2007, 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 $12.1 million during the three months ended
March 31, 2008 and $7.2 million for the three months ended March 31, 2007. The increase in incremental interest expense when comparing the three months ended March 31, 2008 to the same period in 2007 reflects the refinancing of the
Holdings Notes on March 15, 2007 which resulted in increased interest expense on the $175.0 million incremental borrowings. In addition, the interest payment due in March, 2008 on the Holdings Notes was settled in kind. Under this election, the
interest rate is increased by 75 basis points over the interest rate which would have been applied if the payment was settled in cash.

Other Income (Expense).During the three months ended March 31, 2008, Holdings recognized an unrealized loss of $16.0 million related to its interest rate swap due to decreasing 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.

Loss on
Debt Extinguishment.In connection with refinancing of Holdings indebtedness during the three months ended March 31, 2007, we recognized a $12.9 million extinguishment loss related to payment of 2.0% call premium, interest during a 30 day
call period, and the write off of unamortized issuance costs related to the retired debt.

Income Taxes. Holdings effective tax rate
was a benefit of 2.4% and 3.8% for the three months ended March 31, 2008 and 2007, 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, decrease the impact that non-deductible costs have on its effective tax rate. The three month period ended March 31, 2007 also
includes a loss on extinguishment of debt incurred by Holdings.

Net Income (Loss). Holdings incremental net loss for the
three months ended March 31, 2008 and 2007 was $19.3 million and $17.6 million, 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



Liquidity and Capital Resources

The following table summarizes the working capital and long-term indebtedness of Holdings and US Oncology as of March 31, 2008 (in thousands).



|                       |  |          |           |             |   |          
|---------------------- |  | -------- | --------- | ----------- | - | ---------
|                       |  | Holdings |           | US Oncology
|Current assets         |  | $        | 771,112   |             | $ | 756,820  
|Current liabilities    |  |          | 588,495   |             |   | 591,541  
|                       |  |          |           |             |   |          
|Net working capital    |  | $        | 182,617   |             | $ | 165,279  
|                       |  |          |           |             |   |          
|Long-term indebtedness |  | $        | 1,504,287 |             | $ | 1,056,498
|                       |  |          |           |             |   |          

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. 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, 2008 (in thousands).



|                                          |  |          |         |   |             |   |         |  
|----------------------------------------- |  | -------- | ------- | - | ----------- | - | ------- | -
|                                          |  | Holdings |         |   | US Oncology |  
|Net cash provided by operating activities |  | $        | 50,880  |   |             | $ | 50,864  |  
|Net cash used in investing activities     |  |          | (57,416 | ) |             |   | (57,416 | )
|Net cash used in financing activities     |  |          | (2,332  | ) |             |   | (2,316  | )
|                                          |  |          |         |   |             |   |         |  
|Net decrease in cash and equivalents      |  |          | (8,868  | ) |             |   | (8,868  | )
|Cash and equivalents:                     |  |          |         |   |             |   |         |  
|December 31, 2007                         |  |          | 149,257 |   |             |   | 149,256 |  
|                                          |  |          |         |   |             |   |         |  
|March 31, 2008                            |  | $        | 140,389 |   |             | $ | 140,388 |  
|                                          |  |          |         |   |             |   |         |  

Cash Flows from Operating Activities

During the three months ended March 31, 2008, we generated $50.9 million in cash flow from operations compared to $23.7 million during the three months ended March 31, 2007. The
increase in operating cash flow in 2008 was primarily due to improved receivable collections during the current year and the election to pay interest due March 15, 2008 on the Holdings notes, in kind.

Cash Flows from Investing Activities

During the
three months ended March 31, 2008, we used $57.4 million for investing activities. The investments consisted primarily of $23.6 million in capital expenditures, including $11.8 million relating to the development and construction of cancer
centers. Capital expenditures for maintenance capital expenditures were $11.7 million. Also during the three months ended March 31, 2008, we funded $36.0 million in cash consideration as well as $32.7 million in notes issued to affiliating
physicians.

During the three months ended March 31, 2007, we used $16.7 million for investing activities. The investments consisted
primarily of $17.4 million in capital expenditures, including $9.2 million relating to the development and construction of cancer centers. Capital expenditures for maintenance capital expenditures were $7.2 million.

Cash Flows from Financing Activities

During the
three months ended March 31, 2008, $2.3 million was used in financing activities which relates primarily to repayments made on the senior secured credit facility. An additional payment of $29.4 million due under the excess cash flow
provision of our senior secured facility was paid in April, 2008.



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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, 2007, $196.0 million was used in financing activities
which primarily relates to a $425.0 million floating rate PIK toggle note offering (the Notes) by Holdings completed in March 2007. Proceeds from the Notes were used to repay the existing $250.0 million floating rate notes
(Holdings Notes) and, after payment of $11.7 million in transaction fees and expenses, a $158.6 million dividend to common and preferred shareholders. In addition, proceeds received in December 2006 from a private placement of preferred
and common stock, along with cash on hand, were used to pay a $190.0 million dividend in January 2007, to shareholders of record immediately prior to the offering.

The payment of interest on the Holdings Notes is financed through receipt of periodic dividends from US Oncology to Holdings. Cash flow used by US Oncology for financing activities also includes distributions of $13.9
million to its parent company to finance the payment of interest obligations on the Holdings Notes and dividends to the Companys shareholders. The terms of our existing senior secured credit facility, as well as the indentures governing the
senior notes and senior subordinated notes, and certain other agreements, restrict US Oncology and certain subsidiaries from making payments or transferring assets to Holdings, including dividends, loans or other distributions. Such restrictions
include prohibition of dividends in an event of default and limitations on the total amount of dividends paid to Holdings. In the event these agreements, or other considerations, do not permit US Oncology to provide Holdings with sufficient
distributions to fund interest and principal payments on the Holdings Notes when due, we may default on the notes, unless other sources of funding are available.

Amounts available under the restricted payments provision of our senior subordinated note agreements amounted to approximately $16.2 million as of March 31, 2008. We elected to settle the interest due
March 15, 2008 entirely by increasing the principal amount of the outstanding notes. For the interest due September 15, 2008, we elected to pay 50% in cash and 50% in kind. We expect to pay $8.1 million in cash and to issue $8.9 million in
notes to settle the interest due in September. The interest rate applied to the portion settled in kind is increased by 75 basis points over the rate applied to the portion settled in cash. We expect that there will be sufficient restricted payments
available to service cash interest on 50% of the outstanding Notes, which is an alternative available under the terms of the Notes.

Earnings before
Interest, Taxes, Depreciation and Amortization

EBITDA represents earnings before interest and other expense, net, taxes,
depreciation, and amortization (including amortization of stock-based compensation), minority interest, and other income (expense). EBITDA is not calculated in accordance with generally accepted accounting principles in the United States
(GAAP); rather it is derived from relevant items in our GAAP-based financial statements. A reconciliation of 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 is 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 as a key indicator to evaluate liquidity and financial condition, both with respect to the
business as a whole and with respect to individual sites in our 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, 2008, our senior secured credit facility required that we maintain an interest coverage ratio (interest expense divided by EBITDA, as defined by the indenture) of at least 1.90:1 and a leverage ratio (indebtedness divided by EBITDA,
as defined by the indenture) of no more than 5.95:1. Both of these covenants become more restrictive over time and, at maturity in 2011, the minimum interest coverage ratio required will be at least 2.50:1 and the maximum leverage ratio may not be
more than 4.75:1. For more information regarding our use of EBITDA and its 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 EBITDA of US Oncology Holdings, Inc., with the exception of nominal incremental expenses and a
$12.9 million loss on extinguishment of debt in the three months ended March 31, 2007, is substantially identical to the EBITDA of US Oncology, Inc. 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 or used in 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, |  
|                                          |  | 2008                        |          |   | 2007                        |   |         | 2008 |  |   | 2007     |  
|Net income (loss)                         |  | $                           | (397,388 | ) |                             | $ | (15,586 | )    |  | $ | (378,074 | ) |  | $ | 2,050   |  
|Interest expense, net                     |  |                             | 36,279   |   |                             |   | 31,025  |      |  |   | 24,200   |   |  |   | 23,807  |  
|Income tax (benefit) provision            |  |                             | (9,747   | ) |                             |   | (609    | )    |  |   | (922     | ) |  |   | 1,931   |  
|Depreciation and amortization             |  |                             | 25,754   |   |                             |   | 21,093  |      |  |   | 25,754   |   |  |   | 21,093  |  
|Amortization of stock compensation        |  |                             | 555      |   |                             |   | 260     |      |  |   | 555      |   |  |   | 260     |  
|Minority interest expense                 |  |                             | 715      |   |                             |   | 722     |      |  |   | 715      |   |  |   | 722     |  
|Other income (expense)                    |  |                             | 14,638   |   |                             |   |        |      |  |   | (1,371   | ) |  |   |        |  
|                                          |  |                             |          |   |                             |   |         |      |  |   |          |   |  |   |         |  
|EBITDA                                    |  |                             | (329,194 | ) |                             |   | 36,905  |      |  |   | (329,143 | ) |  |   | 49,863  |  
|Impairment and restructuring charges      |  |                             | 381,306  |   |                             |   | 7,395   |      |  |   | 381,306  |   |  |   | 7,395   |  
|Loss on early extinguishment of debt      |  |                             |         |   |                             |   | 12,917  |      |  |   |         |   |  |   |        |  
|Changes in assets and liabilities         |  |                             | 36,831   |   |                             |   | (835    | )    |  |   | 24,039   |   |  |   | 7,817   |  
|Deferred income taxes                     |  |                             | (11,531  | ) |                             |   | (2,236  | )    |  |   | (2,060   | ) |  |   | (3,012  | )
|Interest expense, net                     |  |                             | (36,279  | ) |                             |   | (31,025 | )    |  |   | (24,200  | ) |  |   | (23,807 | )
|Income tax benefit (provision)            |  |                             | 9,747    |   |                             |   | 609     |      |  |   | 922      |   |  |   | (1,931  | )
|                                          |  |                             |          |   |                             |   |         |      |  |   |          |   |  |   |         |  
|Net cash provided by operating activities |  | $                           | 50,880   |   |                             | $ | 23,730  |      |  | $ | 50,864   |   |  | $ | 36,325  |  
|                                          |  |                             |          |   |                             |   |         |      |  |   |          |   |  |   |         |  



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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 for our operating segments for the three months ended March 31, 2008 and
2007 (in thousands):



|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|---------------------------------------- |  | --------------------------------- | -------- | - | -------------------- | - | ------- | ---------------------- |  | - | -------------- | - |  | -------------- | ------- | - | ---------------- | - | ------- | ----- |  | - | -------- | - |  | - | -------- | -
|                                         |  | Three Months Ended March 31, 2008 |         
|                                         |  | MedicalOncologyServices           |          |   | CancerCenterServices |   |         | PharmaceuticalServices |  |   | Research/Other |   |  | CorporateCosts |         |   | Eliminations (1) |   |         | Total | 
|US Oncology, Inc.                        |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Product revenues                         |  | $                                 | 403,314  |   |                      | $ |        |                        |  | $ | 595,870        |   |  | $              |        |   |                  | $ |        |       |  | $ | (455,923 | ) |  | $ | 543,261  |  
|Service revenues                         |  |                                   | 149,441  |   |                      |   | 90,091  |                        |  |   | 14,752         |   |  |                | 13,062  |   |                  |   |        |       |  |   |         |   |  |   | 267,346  |  
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Total revenues                           |  |                                   | 552,755  |   |                      |   | 90,091  |                        |  |   | 610,622        |   |  |                | 13,062  |   |                  |   |        |       |  |   | (455,923 | ) |  |   | 810,607  |  
|                                         |  |                                   |          |   |                      |   |        
|Operating expenses                       |  |                                   | (534,146 | ) |                      |   | (68,313 | )                      |  |   | (589,196       | ) |  |                | (14,029 | ) |                  |   | (34,992 | )     |  |   | 455,923  |   |  |   | (784,753 | )
|Impairment and restructuring             |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|charges                                  |  |                                   | (380,080 | ) |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | (1,226  | )     |  |   |         |   |  |   | (381,306 | )
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations            |  |                                   | (361,471 | ) |                      |   | 21,778  |                        |  |   | 21,426         |   |  |                | (967    | ) |                  |   | (36,218 | )     |  |   |         |   |  |   | (355,452 | )
|                                         |  |                                   |          |   |                      |   |        
|Add back:                                |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Depreciation and amortization            |  |                                   |         |   |                      |   | 9,337   |                        |  |   | 1,313          |   |  |                | 100     |   |                  |   | 15,004  |       |  |   |         |   |  |   | 25,754   |  
|Amortization of stock-based compensation |  |                                   |         |   |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | 555     |       |  |   |         |   |  |   | 555      |  
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|EBITDA                                   |  | $                                 | (361,471 | ) |                      | $ | 31,115  |                        |  | $ | 22,739         |   |  | $              | (867    | ) |                  | $ | (20,659 | )     |  | $ |         |   |  | $ | (329,143 | )
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|                                         |  |                                   |          |   |                      |   |        
|US Oncology Holdings, Inc.               |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Operating expenses                       |  | $                                 |         |   |                      | $ |        |                        |  | $ |               |   |  | $              |        |   |                  | $ | (51     | )     |  | $ |         |   |  | $ | (51      | )
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|EBITDA                                   |  | $                                 | (361,471 | ) |                      | $ | 31,115  |                        |  | $ | 22,739         |   |  | $              | (867    | ) |                  | $ | (20,710 | )     |  | $ |         |   |  | $ | (329,194 | )
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  



|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|---------------------------------------- |  | --------------------------------- | -------- | - | -------------------- | - | ------- | ---------------------- |  | - | -------------- | - |  | -------------- | ------- | - | ---------------- | - | ------- | ----- |  | - | -------- | - |  | - | -------- | -
|                                         |  | Three Months Ended March 31, 2007 |         
|                                         |  | MedicalOncologyServices           |          |   | CancerCenterServices |   |         | PharmaceuticalServices |  |   | Research/Other |   |  | CorporateCosts |         |   | Eliminations (1) |   |         | Total | 
|US Oncology, Inc.                        |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Product revenues                         |  | $                                 | 385,355  |   |                      | $ |        |                        |  | $ | 524,804        |   |  | $              |        |   |                  | $ |        |       |  | $ | (428,544 | ) |  | $ | 481,615  |  
|Service revenues                         |  |                                   | 136,553  |   |                      |   | 84,296  |                        |  |   | 16,577         |   |  |                | 13,000  |   |                  |   |        |       |  |   |         |   |  |   | 250,426  |  
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Total revenues                           |  |                                   | 521,908  |   |                      |   | 84,296  |                        |  |   | 541,381        |   |  |                | 13,000  |   |                  |   |        |       |  |   | (428,544 | ) |  |   | 732,041  |  
|                                         |  |                                   |          |   |                      |   |        
|Operating expenses                       |  |                                   | (497,071 | ) |                      |   | (64,307 | )                      |  |   | (520,326       | ) |  |                | (12,726 | ) |                  |   | (30,250 | )     |  |   | 428,544  |   |  |   | (696,136 | )
|Impairment and restructuring             |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|charges                                  |  |                                   |         |   |                      |   | (3,070  | )                      |  |   |               |   |  |                |        |   |                  |   | (4,325  | )     |  |   |         |   |  |   | (7,395   | )
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Income (loss) from operations            |  |                                   | 24,837   |   |                      |   | 16,919  |                        |  |   | 21,055         |   |  |                | 274     |   |                  |   | (34,575 | )     |  |   |         |   |  |   | 28,510   |  
|                                         |  |                                   |          |   |                      |   |        
|Add back:                                |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Depreciation and amortization            |  |                                   |         |   |                      |   | 9,529   |                        |  |   | 1,352          |   |  |                | 199     |   |                  |   | 10,013  |       |  |   |         |   |  |   | 21,093   |  
|Amortization of stock-based compensation |  |                                   |         |   |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | 260     |       |  |   |         |   |  |   | 260      |  
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|EBITDA                                   |  | $                                 | 24,837   |   |                      | $ | 26,448  |                        |  | $ | 22,407         |   |  | $              | 473     |   |                  | $ | (24,302 | )     |  | $ |         |   |  | $ | 49,863   |  
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|                                         |  |                                   |          |   |                      |   |        
|US Oncology Holdings, Inc.               |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|Operating expenses                       |  | $                                 |         |   |                      | $ |        |                        |  | $ |               |   |  | $              |        |   |                  | $ | (41     | )     |  | $ |         |   |  | $ | (41      | )
|Loss on extinguishment of debt           |  |                                   |         |   |                      |   |        |                        |  |   |               |   |  |                |        |   |                  |   | (12,917 | )     |  |   |         |   |  |   | (12,917  | )
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  
|EBITDA                                   |  | $                                 | 24,837   |   |                      | $ | 26,448  |                        |  | $ | 22,407         |   |  | $              | 473     |   |                  | $ | (37,260 | )     |  | $ |         |   |  | $ | 36,905   |  
|                                         |  |                                   |          |   |                      |   |         |                        |  |   |                |   |  |                |         |   |                  |   |         |       |  |   |          |   |  |   |          |  



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

Below is a discussion of EBITDA generated by our three 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. Excluding impairment charges (see Results of Operations  Impairment and Restructuring Charges), Medical Oncology Services EBITDA for the three
months ended March 31, 2008 decreased $6.3 million, or 25.4 percent, compared to the three months ended March 31, 2007, of which a $1.7 million decrease in management fees relates to



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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



our program to promote continued support of pharmaceutical services initiatives. The remaining decrease relates primarily to a reduction in earnings from the
use of supportive care drugs by affiliated medical oncologists and amendments to management services contracts.

Cancer Center
Services. Cancer Center Services EBITDA for the three months ended March 31, 2008 was $31.1 million, representing an increase of $4.7 million, or 17.6 percent, over the three months ended March 31, 2007. The increase reflects
increasing diagnostic procedures over the same period in the prior year. Additionally, radiation volumes continue to shift toward advanced targeted radiation therapies, such as image guided radiation therapy (IGRT) and brachytherapy
administered by network physicians, which are reimbursed at higher rates than conventional radiation therapy. In addition, the three months ended March 31, 2007 included $3.1 million in impairment and restructuring charges (see Results of
Operations  Impairment and Restructuring Charges).

Pharmaceutical Services.Pharmaceutical services EBITDA was $22.7
million for the three months ended March 31, 2008, an increase of $0.3 million over the three months ended March 31, 2007, which reflects the increase in physicians affiliated through comprehensive service and oncology pharmaceutical
services agreements offset by the impact of reduced ESA utilization.

Anticipated Capital Requirements

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



| |  |  | Payments made for acquisition of assets and additional consideration, if any, in connection with new practice affiliations and business combinations. During the
first quarter of 2008, we paid $36.0 million in cash consideration for practice affiliations.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Purchases of real estate and medical equipment for the development of new cancer centers, as well as installation of upgraded and replacement medical equipment
at existing centers.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | Payments made for possible acquisitions to support strategic initiatives.
| | - |  | -------------------------------------------------------------------------



| |  |  | Funding of working capital, including purchases of pharmaceuticals when pricing opportunities are available or to obtain certain rebates and discounts under
contracts with volume-based thresholds.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Investments in information systems, including systems related to our electronic medical record product, iKnowMed.
| | - |  | -----------------------------------------------------------------------------------------------------------------

For all of 2008, we anticipate spending $90 to $110 million for the development of cancer centers, purchase of clinical equipment and investments in
information systems.

As of May 6, 2008, we had cash and cash equivalents of $148.0 million. Also as of May 6, 2008, we had
$133.7 million available under our $160.0 million revolving credit facility which had been reduced by outstanding letters of credit, totaling $26.3 million. In the event that cash on hand combined with amounts available under the credit facility are
insufficient to fund the Companys anticipated working capital requirements, we may be required to obtain additional financing. There can be no assurance that additional financing, if available, will be made available on terms that are
acceptable to the Company.

We expect to fund our current capital needs with (i) cash on hand, and cash flow generated from
operations, (ii) borrowings under the $160 million 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 expenditure plans could be adversely impacted by poor operating performance, resulting in reduced cash flow from operations. 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.



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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



Indebtedness

We have a significant amount of indebtedness. On March 31, 2008 we had aggregate indebtedness of approximately $1.5 billion of which $1,101.3 million (including current maturities of $44.8 million) represents
obligations of US Oncology, Inc., and $447.8 million represents an obligation of Holdings. Current maturities include $29.4 million due under the excess cash flow provision of our senior secured facility (see below) that was paid in April,
2008. We are currently in compliance with restrictive covenants of our indebtedness.

Financial Covenants

The senior secured 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 minimum interest coverage ratio test and a maximum leverage ratio test, which become more restrictive over time. The reduced usage of supportive care drugs by oncologists as a result of product
safety risks and coverage restrictions adversely impacted our revenues, net income, cash flow and EBITDA. See Reimbursement Matters  Pharmaceutical Reimbursement under Medicare for more detail. On November 30, 2007, we
amended our senior secured credit facility to increase the maximum leverage and decrease the minimum interest coverage ratios required under the facility. The amended terms provide flexibility as the Company responds to the adverse impact of reduced
ESA reimbursement. In addition, the amendment increased our ability to invest in future growth by increasing capital available for physician affiliations and other investments, and included other revisions necessary to support diversification into
additional service offerings. In connection with the amendment, the LIBOR spread on outstanding borrowings increased from 225 basis points to 275 basis points and consenting lenders were paid an amendment fee of 25 basis points. The aggregate
amendment fee paid was approximately $1.5 million and was capitalized as a debt issuance cost to be amortized over the remaining term of the senior secured facility. At March 31, 2008, our minimum interest coverage ratio was 1.90:1 and our
maximum leverage ratio was 5.95:1. The ratios become more restrictive (generally on a quarterly basis) and, at maturity in 2011, the minimum interest coverage ratio required will be at least 2.50:1 and the maximum leverage ratio may not be more than
4.75:1.

Excess Cash Flow Sweep

The
Company may be obligated (based on certain leverage thresholds) to make payments on its term loan facility of up to 75% of excess cash flow. Excess cash flow, as defined by the credit agreement, is approximately equal to operating cash
flow, as presented in our statement of cash flows, less capital expenditures, consideration paid in affiliation transactions, principal repayments of indebtedness, restricted payments (primarily distributions from US Oncology, Inc. to US Oncology
Holdings, Inc.) and cash paid for taxes. The payment required for the year ended December 31, 2007 under this provision was $29.4 million and was paid in April, 2008.

Holdings Notes

During the quarter ended March 31, 2007, Holdings, whose principal asset is its
investment in US Oncology, issued $425.0 million of senior floating rate PIK toggle notes, due 2012. A portion of the proceeds of the notes were used to repay Holdings $250.0 million floating rate notes. These notes are senior unsecured
obligations of Holdings. Holdings may elect to pay interest on the Notes entirely in cash, by increasing the principal amount of the Notes (PIK interest), or by paying 50% in cash and 50% by increasing the principal amount of the Notes.
Cash interest will accrue on the Notes at a rate per annum equal to 6-month LIBOR plus the applicable spread. PIK interest will accrue on the Notes at a rate per annum equal to the cash interest rate plus 0.75%. LIBOR will be reset semiannually. The
applicable spread is 4.50% and will increase by 0.50% on March 15, 2009 and increase by another 0.50% on March 15, 2010. The Notes mature on March 15, 2012. The indenture required that the initial interest payment of $21.2 million due
September 15, 2007 be made in cash, which was provided by US Oncology, Inc. in the form of a dividend paid to Holdings. We elected to settle the interest payment due March 15, 2008 entirely by increasing the principal amount of the
outstanding notes and, on that date, increased the outstanding principal amount by $22.8 million as settlement for interest due. The Company has elected to pay interest due on September 15, 2008 50% in cash and 50% in kind. To settle this
payment, the Company expects that it will pay $8.1 million in cash and issue an additional $8.9 million in notes. The interest rate applied to the portion settled in kind is increased by 75 basis points over the rate applied to the portion settled
in cash. 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.



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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



US Oncologys senior notes and senior subordinated notes also limit its ability to make
restricted payments from US Oncology, including dividends paid by US Oncology to Holdings. As of March 31, 2008, US Oncology has the ability to make approximately $16.2 million in restricted payments, which amount increases based upon 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. 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 its Senior Unsecured Floating Rate PIK Toggle 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. Based on its financial projections, which include the adverse impact of reduced ESA coverage, and due to limitations on the
restricted payments that will be available to service Notes imposed by the indebtedness of US Oncology, Inc., the Company no longer believes that payment of cash interest on the entire principal of the outstanding Notes remains probable. In the
event this restricted payments provision is 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 a capital infusion and use such
proceeds to satisfy these obligations. There can be no assurance that additional financing, if available, will be made available on terms that are 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 creditworthy commercial financial institutions and believe that the risk of counterparty nonperformance is inconsequential.

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. The swap agreement was initially designated as a cash flow hedge against the variability of cash future interest payments on the Notes. Due to the adverse impact of reduced ESA coverage, 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 entire principal of the outstanding Notes remains probable. As a result, we discontinued cash flow hedge
accounting for this interest rate swap in 2007. When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the cash flows of a hedged item, the derivative continues to be
carried on the consolidated balance sheet at its fair value, with changes in fair value recognized currently in income. Provided the hedged forecasted transactions are no longer probable of occurring, the amounts previously recorded in accumulated
other comprehensive income (loss) related to the discontinued cash flow hedge are released into the consolidated statement of income when the Companys earnings are affected by the variability in cash flows of the hedged item or when those
transactions become probable of not occurring.

As a result of discontinuing cash flow hedge accounting for the interest rate swap, the
Company recorded an unrealized loss of $16.0 million during the quarter ended March 31, 2008. The Companys consolidated balance sheet includes a liability of $31.5 million to reflect the fair market value of the interest rate swap as of
that date.

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 factor 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. An increase in future interest rates of 1.00 percent would increase (in the Companys favor) the fair value of the of the interest rate swap by $14.1 million and a decrease in future interest rates of 1.00 percent
negatively impact its fair value by the same amount. Because a portion of the Companys indebtedness, approximately $493.2 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 rate changes 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 related 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 on 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 Notes issued in kind for interest (that must be settled in cash at a future date) will increase or decrease based on market interest rates in
the same



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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



manner as if cash had been paid for interest. Although cash flow hedge accounting treatment is no longer applied to the interest rate swap, we believe the
swap, economically, remains a hedge against the variability in a portion of interest payments of the Notes and the floating rate debt outstanding under US Oncologys senior secured credit facility.

At March 31, 2008, accumulated other comprehensive income (loss) includes $1.5 million related to the interest rate swap which represents the
activity while the instrument was designated as a cash flow hedge that is associated with future interest payments that cannot be considered probable of not occurring.

Inflation

The healthcare industry is labor intensive. Wages and other expenses increase during
periods of inflation and when labor shortages occur in the marketplace. In addition, suppliers pass along rising costs or reduced consumption to us in the form of higher prices. We have implemented cost control measures to curtail increases in
operating costs and expenses. We cannot predict our ability to cover or offset future cost increases.



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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 Principal 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 Principal Financial Officer concluded that our disclosure controls and procedures are effective and designed to
provide reasonable assurance that the information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. For the purpose of this review,
disclosure controls and procedures means controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that we file or submit is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that we
file or submit is accumulated and communicated to management, including our principal executive officer, principal financial officer and principal accounting officer, as appropriate to allow timely decisions regarding required disclosure.

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.

Management previously acknowledged
its responsibility for internal controls and seeks to continue to improve those controls. The Company was first subject to certain requirements of Section 404, including inclusion of managements report on internal control over financial
reporting, when it filed its annual report for the fiscal year ending December 31, 2007 on Form 10-K as filed on February 29, 2008. The annual report does not include an attestation report of the Companys registered public
accounting firm regarding internal control over financial reporting. 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 annual report. The independent registered accounting firms assessment of internal controls and its report thereon is first required with respect to the
fiscal year ending December 31, 2008.



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



PART II  Other Information



|Item 1. | Legal Proceedings
|------- | -----------------

Professional Liability and Reimbursement
Related Claims

The provision of medical services by our affiliated practices entails an inherent risk of professional liability claims.
We do 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, we 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 we and our practices maintain insurance coverage, successful malpractice, regulatory or product liability
claims asserted against us or one of the practices in excess of insurance coverage could have a material adverse effect on us.

U.S. Department of
Justice Subpoena

During the fourth quarter of 2005, we received a subpoena from the United States Department of Justices Civil
Litigation Division (DOJ) requesting a broad range of information about us and our business, generally in relation to our contracts and relationships with pharmaceutical manufacturers. We have cooperated fully with the DOJ in responding
to the subpoena. At the present time, the DOJ has not made any allegation of wrongdoing on the part of the Company. However, we cannot provide assurance that such an allegation or litigation will not result from this investigation. While we believe
that we are operating and have operated our business in compliance with law, including with respect to the matters covered by the subpoena, we cannot provide assurance that the DOJ will not make a determination that wrongdoing has occurred. In
addition, we have devoted significant resources to responding to the DOJ subpoena and anticipate that such resources will be required on an ongoing basis to fully respond to the subpoena.

We have also received requests for information relating to class action litigation against pharmaceutical manufacturers relating to alleged manipulation of Average Wholesale Price
(AWP) and alleged inappropriate marketing practices with respect to AWP.

Qui Tam Suits

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

Specifically, during March 2007, we became aware that we and one of our affiliated practices are the subject of allegations that the practice may have
engaged in activities that violate the Federal False Claims Act. These allegations are contained in a qui tam complaint. The details of this suit are not publicly available or disclosable at the current time since qui tam complaints are filed on a
confidential basis with a United States federal court. The DOJ has not yet made a decision on the merits of the whistle-blowers claim. We intend to continue to investigate and vigorously defend ourselves against this claim. Based upon our
present understanding of the nature and scope of the claim and investigation, we do not expect this claim to have a material adverse effect on our operations or financial condition. However, our expectation could change as we receive more
information.

In previous qui tam suits which we have 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 our alleged actions and alleged actions of an affiliated practice. Because the affiliated practices are separate legal entities not controlled by us, such claims necessarily involve a more complicated, higher cost
defense, and may adversely impact the relationship between the practices and us. If the individuals who file complaints and/or the United States were to prevail in these claims against us, 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 us, including potential limitations in future participation in governmental reimbursement programs. In addition, addressing complaints and
government investigations requires us to devote significant financial and other resources to the process, regardless of the ultimate outcome of the claims.



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Breach of Contract Claims

We and our network physicians are defendants in a number of lawsuits involving employment and other disputes and breach of contract claims. In addition, we are involved from time to time in disputes with, and claims
by, our affiliated practices against us.

We are also involved in litigation with a practice in Oklahoma that was affiliated with us under
the net revenue model until April, 2006. While we were still affiliated with the practice, we 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 we have breached the service agreement and that our 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. We believe that our service agreement is lawful and enforceable and that we are operating in accordance with applicable law. As a result of alleged breaches of the service agreement by the
practice, we 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. We expect these hearings to occur in late 2008. Because of the need for further proceedings, we believe 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 us. In any event, as with any complex litigation, we anticipate that this dispute may take several years
to resolve.

During the three months ended March 31, 2006, the Oklahoma practice represented 4.6% of our consolidated revenue. In
October, 2006, we sold, for cash, the property, plant and equipment to the practice for an amount that approximated its net book value at the time of sale.

As a result of the ongoing litigation, we have been unable to collect on a timely basis a receivable owed to us relating to accounts receivable purchased by us under the service agreement and amounts for reimbursement
of expenses paid by us on the practices behalf. At March 31, 2008, the total receivable owed to us of $22.5 million is reflected on our balance sheet as other noncurrent assets. Currently, approximately $7.9 million is held in an escrowed
bank account into which the practice has been making, and is required to continue to make, monthly deposits. These amounts will be released upon resolution of the litigation. In addition, approximately $7.5 million is being held in a bank account
that has been frozen pending the outcome of related litigation regarding that account. In addition, we have filed a security lien on the receivables of the practice. We believe that the amounts held in the bank accounts combined with the receivables
of the practice in which we have filed a security lien represent adequate collateral to recover the $22.5 million receivable recorded in other noncurrent assets at March 31, 2008. Accordingly, we expect to realize the amount that we believe to
be owed by the practice. However, realization is subject to a successful conclusion to the litigation with the practice, and we cannot assure you as to when the litigation will be finally concluded or as to what the ultimate outcome of the
litigation will be. We expect to continue to incur expenses in connection with our litigation with the practice.

We intend to vigorously
pursue our claims, including claims for any costs and expenses that we incur as a result of the termination of the service agreement and to defend against the practices allegations that we breached the agreement and that the agreement is
unenforceable. However, we cannot provide assurance as to what the outcome of the litigation will be, or, even if we prevail in the litigation, whether we will be successful in recovering the full amount, or any, of our costs associated with the
litigation and termination of the service agreement.

Assessing our 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.



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Certificate of Need Regulatory Action

During the third quarter of 2006, one of our affiliated practices in North Carolina lost (through state regulatory action) the ability, currently, to provide radiation services at its cancer
center in Asheville. The practice continues to provide medical oncology services, but is not permitted to use the radiation services area of the center (approximately 18% of the square footage of the cancer center). The practice appealed the
regulatory action and the North Carolina Court of Appeals ruled in favor of the practice on procedural grounds and ordered the state agency to hold a new hearing on its regulatory action. In addition, we have explored other strategic alternatives
with respect to radiation oncology and the cancer center space and will continue to do so in the event we are not successful in the regulatory action.

Delays during the three months ended March 31, 2007 in pursuing those strategic alternatives led to uncertainty regarding the form and timing associated with alternatives to a successful
appeal. Consequently, we performed impairment testing as of March 31, 2007 and we recorded an impairment charge of $1.6 million relating to a management services agreement asset and equipment during the three months ended
March 31, 2007. (These charges are a component of the impairment losses disclosed in Results of Operations  Impairment and Restructuring Charges in Managements Discussion and Analysis of Financial Condition and
Results of Operations.) No additional impairment charges relating to this regulatory action have been recorded through March 31, 2008.

As of March 31, 2008, our Consolidated Balance Sheet included net assets in the amount of $1.9 million related to this practice, which includes primarily working capital in the amount of $1.2 million. The construction of the cancer
center in which the practice operates was financed as an operating lease and, as such, is not recorded on our balance sheet. At March 31, 2008, the lease had a remaining term of 18 years and the net present value of minimum future lease
payments is approximately $7.0 million. A termination obligation for this lease has not been accrued as we have not exhausted our legal appeals or strategic alternatives that may provide an ability to resume radiation therapy services at this
location. Management will continue to monitor this matter.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

Effective February 1, 2008, Bruce D. Broussard was elected to serve as a director of each of US Oncology, Inc. and US Oncology Holdings, Inc. by written consent of holders of a majority of outstanding shares of each of them.

Effective January 1, 2008, US Oncology Holdings, Inc. adopted amendments to its 2004 Equity Incentive Plan, which were approved by
written consent of holders of a majority of outstanding shares of US Oncology Holdings, Inc.



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|Item 6. | Exhibits
|------- | --------



|            |  |                                                                                                                                                                                                                                                                                                                                                                                
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                    
|3.11        |  | Second 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        |  | Form of 9% Senior Note due 2012 (included in Exhibit 4.7)                                                                                                                                                                                                                                                                                                                      
|            | 
|4.84        |  | First Supplemental Indenture, dated as of August 20, 2004, among US Oncology, Inc., the Guarantors named therein and LaSalle Bank National Association, as Trustee                                                                                                                                                                                                             
|            | 
|4.94        |  | Indenture, dated as of August 20, 2004, among Oiler Acquisition Corp. and LaSalle Bank National Association, as Trustee                                                                                                                                                                                                                                                        
|            | 
|4.104       |  | Form of 103/4% Senior Note due 2014 (included in Exhibit 4.11)                                                                                                                                                                                                                                                                                                                 
|            | 
|4.114       |  | First Supplemental Indenture, dated as of August 20, 2004, among US Oncology, Inc., the Guarantors named therein and LaSalle Bank National Association, as Trustee                                                                                                                                                                                                             
|            | 
|4.124       |  | Registration Rights Agreement, dated as of August 4, 2004, among Oiler Acquisition Corp. and Citigroup Global Markets Inc., as representative for the Initial
Purchasers                                                                                                                                                                                                       
|            | 
|4.134       |  | Accession Agreement, dated as of August 20, 2004, among the Guarantors listed therein                                                                                                                                                                                                                                                                                          
|            | 
|4.141       |  | Stock Purchase Agreement, dated as of December 21, 2006                                                                                                                                                                                                                                                                                                                        
|            | 
|4.151       |  | Amended and Restated Stockholders Agreement, dated as of December 21, 2006                                                                                                                                                                                                                                                                                                     
|            | 
|4.161       |  | Amended and Restated Registration Rights Agreement, dated as of December 21, 2006                                                                                                                                                                                                                                                                                              
|            | 
|10.14       |  | Credit Agreement, dated as of August 20, 2004, among US Oncology Holdings, Inc., US Oncology, Inc., the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent
and Collateral Agent, Wachovia Bank, National Association, as Syndication Agent, and Citicorp North America, Inc., as Documentation Agent                                                    
|            | 
|10.25       |  | Amendment No. 1, dated as of March 17, 2005, to the Credit Agreement, dated as of August 20, 2004, among US Oncology Holdings, Inc., US Oncology, Inc., the Lenders party
thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Wachovia Bank, National Association, as Syndication Agent, and Citicorp North America, Inc., as Documentation Agent
|            | 
|10.34       |  | Guarantee and Collateral Agreement, dated as of August 20, 2004, among US Oncology Holdings, Inc., US Oncology, Inc., the Subsidiaries of US Oncology, Inc. identified therein
and JPMorgan Chase Bank, N.A., as Collateral Agent                                                                                                                                              
|            | 
|10.44       |  | Form of Executive Employment Agreement, dated as between US Oncology Holdings, Inc., US Oncology, Inc. and each of its executive officers                                                                                                                                                                                                                                      



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.44   |  | Form of Restricted Stock Agreement under the Amended and Restated 2004 Equity Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 
|10.5   |  | Form of Unit Grant, under the 2008 Long-Term Cash Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 
|10.64   |  | US Oncology Holdings, Inc. Equity Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 
|10.711  |  | US Oncology Holdings, Inc. Amended and Restated 2004 Equity Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 
|10.84   |  | US Oncology Holdings, Inc. Long-Term Cash Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 
|10.911  |  | US Oncology Holdings, Inc. 2008 Long-Term Cash Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 
|10.104  |  | US Oncology Holdings, Inc. 2004 Director Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 
|10.116  |  | Amendment No. 2 dated as of November 15, 2005, to the Credit Agreement dated as of August 20, 2004, as amended as of March 17, 2005, among US Oncology Holdings, Inc., a Delaware
corporation, US Oncology, Inc., a Delaware corporation, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Wachovia Bank, National Association, as Syndication Agent, and Citicorp North America, Inc.,
as Documentation Agent.                                                      
|        | 
|10.127  |  | Incremental Facility Amendment and Amendment No. 3 dated as of July 10, 2006, to the Credit Agreement dated as of August 20, 2004, as amended as of March 17, 2005, and November 15, 2005,
among US Oncology Holdings, Inc., a Delaware corporation, US Oncology, Inc., a Delaware corporation, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Wachovia Bank, National Association, as
Syndication Agent, and Citicorp North America, Inc., as Documentation Agent.
|        | 
|10.131  |  | Amendment No. 4 dated as of December 21, 2006, among US Oncology Holdings, Inc., a Delaware corporation, US Oncology, Inc., a Delaware corporation, the Subsidiary Loan Parties (as
defined in the Credit Agreement) party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.                                                                                                                                                                                                   
|        | 
|10.149  |  | Amendment No. 5 dated as of March 1, 2007, among US Oncology Holdings, Inc., a Delaware corporation, US Oncology, Inc., a Delaware corporation, the Subsidiary Loan Parties (as defined in
the Credit Agreement) party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.                                                                                                                                                                                                       
|        | 
|10.1510 |  | Amendment No. 6 dated as of November 30, 2007, to the Credit Agreement Dated as of August 20, 2004, as Amended as of March 17, 2005, among US Oncology Holdings, Inc., a Delaware
corporation , US Oncology, Inc., a Delaware Corporation , the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Wachovia Bank, National Association, as Syndication Agent, and Citicorp North America,
Inc., as Documentation Agent.                                                    
|        | 
|148     |  | Code of Ethics                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 
|31.1   |  | Certification of Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 
|31.2   |  | Certification of Principal Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 
|32.1   |  | Certification of Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 
|32.2   |  | Certification of Principal 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.
|- | ------------------------------------------------------------------------------------------------------------------



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|4 | Filed as an exhibit to the registration statement on Form S-4 of US Oncology, Inc. on December 17,
2004.
|- | --------------------------------------------------------------------------------------------------------

|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 an Exhibit to the 8-K filed by US Oncology Holdings, Inc. on January 7, 2008, and incorporated herein
by reference.
|-- | ----------------------------------------------------------------------------------------------------------------------------

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



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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 14, 2008: |  | By:                            |  | /s/ Vicki H. Hitzhusen                                     
|                    |  |                                |  | Vicki H. Hitzhusen,                                        
|                    |  |                                |  | Chief Accounting Officer                                   
|                    |  |                                |  | (duly authorized signatory and principal financial officer)



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