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                       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 September 30, 1997
                                       OR
    (  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

              For the transition period from _________ to _________
                           Commission File No. 0-20111
                          ARONEX PHARMACEUTICALS, INC.
             (Exact name of Registrant as specified in its charter)

               Delaware                                76-0196535
     (State or other jurisdiction          (I.R.S. Employer Identification No.)
   of incorporation or organization)
       
           3400 Research Forest Drive, The Woodlands, Texas 77381-4223
                (Address of principal executive office) (Zip Code)
        Registrant's telephone number, including area code: (281) 367-1666

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
                                  Yes (X) No( )
         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock as of the latest practicable date.
                   Class                       Outstanding at September 30, 1997
       Common Stock, $.001 par value                    15,421,809 shares

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<PAGE>




                          ARONEX PHARMACEUTICALS, INC.
                       Quarterly Period September 30, 1997

                                      INDEX
                                                                            Page

FACTORS AFFECTING FORWARD LOOKING STATEMENTS.................................. 3

PART I.    Financial Information

Item 1 Financial Statements................................................... 3

       Balance Sheets - December 31, 1996 and September 30, 1997 (unaudited).. 4

       Statements of Operations:
           Nine months Ended September 30, 1996 and September 30, 1997
           (unaudited) and for the Period from Inception (June 13, 1986) 
           through September 30, 1997 (unaudited)............................  5

       Statements of Cash Flows:
           Nine months Ended  September 30, 1996 and September 30, 1997 
           (unaudited) and for the Period from Inception (June 13, 1986)
            through September 30, 1997 (unaudited)...........................  6

       Notes to Financial Statements - September 30, 1997....................  7

Item 2 Management's Discussion and Analysis of Financial
         Condition and Results of Operations................................. 10


PART II.   Other Information

Item 6 Exhibits and Reports on Form 8-K...................................... 13


SIGNATURES        ........................................................... 14






                                                      - 2-

<PAGE>


                          ARONEX PHARMACEUTICALS, INC.
                          (A development stage company)

                  FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

         This   Quarterly   Report  on  Form  10-Q   includes   "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
words  "anticipate,"  "believe,"  "expect,"  "estimate,"  "project"  and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks, uncertainties and assumptions.  Should one or more
of these risks or uncertainties  materialize,  or should underlying  assumptions
prove  incorrect,  actual results may vary  materially  from those  anticipated,
believed,  expected,  estimated or projected.  For additional discussion of such
risks, uncertainties and assumptions, see "Item 1. Business - Manufacturing," "-
Sales and Marketing," "Patents,  Proprietary Rights and Licenses," "- Government
Regulation," "- Competition"  and "- Additional  Business Risks" included in the
Company's  Annual Report on Form 10-K for the year ended  December 31, 1996, and
"Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations"  and "- Liquidity and Capital  Resources"  included  elsewhere in
this report.

PART I.           FINANCIAL INFORMATION

Item 1.       Financial Statements

     The following unaudited financial statements have been prepared pursuant to
the rules and  regulations of the Securities  and Exchange  Commission.  Certain
information  and  note  disclosures   normally   included  in  annual  financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company  believes that the disclosures  made herein are adequate to make the
information presented not misleading.  These financial statements should be read
in  conjunction  with the financial  statements  for the year ended December 31,
1996  included in the  Company's  Annual  Report on Form 10-K for the year ended
December  31,  1996,  filed  pursuant  to Section 13 or 15(d) of the  Securities
Exchange Act of 1934.

     The  information  presented in the  accompanying  financial  statements  is
unaudited,  but in the opinion of management,  reflects all  adjustments  (which
include only normal  recurring  adjustments)  necessary  to present  fairly such
information.




                                                      - 3-

<PAGE>


                                           ARONEX PHARMACEUTICALS, INC.
                                           (A development stage company)
<TABLE>

                                                  BALANCE SHEETS
                                   (All amounts in thousands, except share data)


                                                      ASSETS
<CAPTION>

                                                                                                      September 30,
                                                                                    December 31,           1997
                                                                                        1996            (Unaudited)
Current Assets:
<S>                                                                              <C>                <C>          
  Cash and cash equivalents...............................................       $      4,179       $       1,921
  Short-term investments..................................................             30,414              29,080
  Accounts receivable.....................................................                162                 250
  Prepaid expenses and other assets.......................................                579                 625
                                                                                 ------------       -------------
       Total current assets...............................................             35,334              31,876

Long-term investments.....................................................              6,795               1,737
Furniture, equipment and leasehold improvements...........................              2,152               1,639
Other assets..............................................................                 --                 336
                                                                                 ------------       -------------
       Total assets.......................................................       $     44,281       $      35,588
                                                                                 ============       =============

                                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable and accrued expenses...................................       $      1,191       $       1,368
  Accrued payroll.........................................................                126                 160
  Advance from Genzyme....................................................              2,000               2,000
  Current portion of notes payable........................................                325                 221
  Current portion of obligations under capital leases.....................                 16                  16
                                                                                 ------------       -------------
       Total current liabilities..........................................              3,658               3,765

Long-term obligations:
  Notes payable, net of current portion...................................                121                  --
  Obligations under capital leases, net of current portion................                 25                  13
                                                                                 ------------       -------------
       Total long-term obligations........................................                146                  13


Commitments and contingencies

Stockholder's equity
  Preferred stock $.001 par value, 5,000,000 shares authorized,
       none issued and outstanding........................................                  --                 --
  Common stock $.001 par value, 30,000,000 shares
       authorized, 14,597,247 and 15,421,809 shares
       issued and outstanding, respectively...............................                  15                 15
  Additional paid-in capital..............................................              93,742             96,456
  Common stock warrants...................................................                 968                968
  Treasury stock..........................................................                 (11)               (11)
  Deferred compensation...................................................              (1,949)            (1,021)
  Unrealized loss on investments..........................................                 (75)              (106)
  Deficit accumulated during development stage ...........................             (52,213)           (64,491)
                                                                                 -------------      -------------
       Total stockholders' equity.........................................              40,477             31,810
                                                                                 -------------      -------------
Total liabilities and stockholders' equity................................       $      44,281      $      35,588
                                                                                 =============      =============
</TABLE>

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

                                                      - 4-

<PAGE>
<TABLE>


                                           ARONEX PHARMACEUTICALS, INC.
                                           (A development stage company)


                                             STATEMENTS OF OPERATIONS
                              (All amounts in thousands, except loss per share data)
                                                    (Unaudited)

<CAPTION>

                                                                                                           Period
                                                                                                            from
                                                                                                          Inception
                                                                                                          (June 13,
                                                                                                            1986)
                                                 Nine Months Ended             Three Months Ended          through
                                                    September 30,                 September 30,           Sept. 30,
                                                 1996          1997            1996          1997            1997
                                              ---------     ----------      ---------      ---------     -----------
Revenues:
<S>                                           <C>           <C>             <C>            <C>           <C>        
   Interest Income.......................     $   1,065     $    1,632      $     595      $     510     $     5,155
   Research and development
        Grants and contracts.............         1,811            591            803            275           4,800
                                              ---------     ----------      ---------      ---------     -----------
Total revenues...........................         2,876          2,223          1,398            785           9,955
                                              ---------     ----------      ---------      ---------     -----------

Expenses:
   Research and development..............         7,814          9,864          2,969          3,213          49,007
   Purchase of in-process
        research and development.........           191          3,000             --          3,000          11,625
   General and administrative............         1,197          1,477            426            546          12,640
   Interest expense and other............            96            160             25             10           1,174
                                              ---------     ----------      ---------      ---------     -----------
            Total expenses...............         9,298         14,501          3,420          6,769          74,446
                                              ---------     ----------      ---------      ---------     -----------
Net loss    .............................     $  (6,422)    $  (12,278)     $  (2,022)     $  (5,984)    $   (64,491)
                                              ==========    ===========     ==========     ==========    ============

Loss per share...........................     $   (0.51)    $    (0.83)     $   (0.14)     $   (0.40)

Weighted average shares used in
   Computing loss per share..............        12,539         14,714         14,542         14,848
</TABLE>
















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

                                                      - 5-
<PAGE>
<TABLE>
                                           ARONEX PHARMACEUTICALS, INC.
                                           (A development stage company)

                                             STATEMENTS OF CASH FLOWS
                                            (All amounts in thousands)
                                                    (Unaudited)
<CAPTION>
                                                                                     Period from
                                                                                      Inception
                                                                                   (June 13, 1986)
                                                                Nine Months Ended      through
                                                                  September 30,     September 30,
                                                                1996        1997        1997
                                                              --------    --------    --------
Cash flows from operating activities:
<S>                                                           <C>         <C>         <C>      
  Net loss ................................................   $ (6,422)   $(12,278)   $(64,491)
  Adjustments to reconcile net loss to net cash provided by
      (used in) operating activities-
         Depreciation and amortization ....................        729         652       3,539
         Loss on disposal of assets .......................       --           107         107
         Compensation expense related to stock and
            stock options .................................        476         400       3,042
         Charge for purchase of in-process research
             and development ..............................        191       3,000      11,547
         Unrealized gain (loss) on investment .............          8         (31)       (106)
         Acquisition costs, net of cash received ..........        (26)       --          (270)
         Loss in affiliate ................................         50        --           500
         Accrued interest payable converted to stock ......       --          --            97
         Changes in assets and liabilities:
            Increase in prepaid expenses and other assets .       (322)        (45)       (439)
            Decrease (increase) in accounts receivable ....         86         (88)       (250)
            Increase (decrease) in accounts payable
               and accrued expenses .......................       (307)        211       1,455
            Increase (decrease) in deferred revenue .......       (578)       --          (353)
                                                              --------    --------    --------
      Net cash used in operating activities ...............     (6,115)     (8,072)    (45,622)

Cash flows from investing activities:
  Net sales (purchases) of investments ....................    (32,931)      6,392     (25,082)
  Purchase of furniture, equipment and leasehold
      improvements ........................................       (217)       (280)     (4,049)
  Proceeds from sale of assets ............................       --            34          34
  Increase in other assets ................................       --          (336)       (336)
  Investment in affiliate .................................       --          --          (500)
                                                              --------    --------    --------
      Net cash provided by (used in) financing activities .    (33,148)      5,810     (29,933)

Cash flows from financing activities:
  Proceeds from notes payable and capital leases ..........      2,000        --         4,672
  Repayment of notes payable and principal payments
      under capital lease obligations .....................       (471)       (237)     (2,423)
  Purchase of treasury stock ..............................       --          --           (11)
  Proceeds from issuance of stock .........................     35,492         241      75,238
                                                              --------    --------    --------
      Net cash provided by (used in) financing activities .     37,021           4      77,476
                                                              --------    --------    --------
  Net increase (decrease) in cash and cash equivalents ....     (2,242)     (2,258)      1,921
  Cash and cash equivalents at beginning of period ........      7,781       4,179        --
                                                              --------    --------    --------

  Cash and cash equivalents at end of period ..............   $  5,539    $  1,921    $  1,921
                                                              ========    ========    ========

  Supplemental disclosures of cash flow information:
      Cash paid during the period for interest ............   $     96    $     52    $    900

  Supplemental schedule of noncash financing activities
      Conversion of notes payable and accrued interest to
         common stock .....................................   $   --      $   --      $  3,043
</TABLE>

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



                                                      - 6-

<PAGE>


                                           ARONEX PHARMACEUTICALS, INC.
                                           (A development stage company)

                                           NOTES TO FINANCIAL STATEMENTS
                                                September 30, 1997
                                                    (Unaudited)

1.   Organization and Basis of Presentation

     Aronex  Pharmaceuticals,  Inc. ("Aronex" or the "Company") was incorporated
in Delaware on June 13, 1986 and merged with Triplex Pharmaceutical  Corporation
("Triplex")  and Oncologix,  Inc.  ("Oncologix")  effective  September 11, 1995.
Aronex is a development stage company which has devoted substantially all of its
efforts to  research  and  product  development  and has not yet  generated  any
significant revenues, nor is there any assurance of significant future revenues.
In addition, the Company expects to continue to incur losses for the foreseeable
future  and  there  can be no  assurance  that the  Company  will  complete  the
transition  from a  development  stage  company to  successful  operations.  The
research and  development  activities  engaged in by the Company  involve a high
degree of risk and  uncertainty.  The  ability of the  Company  to  successfully
develop,  manufacture and market its proprietary products is dependent upon many
factors.  These factors include, but are not limited to, the need for additional
financing,   attracting  and  retaining  key  personnel  and  consultants,   and
successfully  developing  manufacturing,  sales and  marketing  operations.  The
Company's  ability to develop these  operations may be impacted by uncertainties
related  to  patents  and  proprietary  technologies,  technological  change and
obsolescence,  product  development,  competition,  government  regulations  and
approvals, health care reform and product liability exposure.  Additionally, the
Company is reliant upon  collaborative  arrangements  for research,  contractual
agreements with corporate  partners,  and its exclusive license  agreements with
M.D.  Anderson  Cancer Center ("MD Anderson") and an affiliate of Baylor College
of Medicine  ("Baylor").  Further,  during the period  required to develop these
products,  the Company will require  additional funds which may not be available
to it. The Company  expects that its existing cash  resources will be sufficient
to fund its cash requirements through early 1999.  Accordingly,  there can be no
assurance of the Company's future success.

     The balance  sheet at  September  30, 1997 and the  related  statements  of
operations  and cash flows for the nine month period  ending  September 30, 1997
and 1996 and the period from  inception  (June 13, 1986)  through  September 30,
1997  are  unaudited.  These  interim  financial  statements  should  be read in
conjunction  with the December 31, 1996 financial  statements and related notes.
The unaudited interim financial statements reflect all adjustments which are, in
the opinion of  management,  necessary  for a fair  statement of results for the
interim periods  presented and all such  adjustments  are of a normal  recurring
nature.  Interim  results are not  necessarily  indicative of results for a full
year.

2.   Accounting Policies

     In January 1997, the Financial  Accounting Standards Board issued Statement
of Financial  Accounting  Standards No. 128,  "Earnings per share" ("SFAS 128").
Management  believes  that this  statement  will have no material  effect on its
financial statements.

     Certain  reclassifications  have been made to December  31,1996 balances to
conform to current year presentation.

3.   Cash, Cash Equivalents and Investments

     Cash and cash  equivalents  include money market  accounts and  investments
with an original  maturity of less than three months. At September 30, 1997, all
short-term  investments are held to maturity securities consisting of high-grade
commercial paper and U. S. Government backed securities with a carrying value of
$29,080,000,  which  approximates  fair market value and cost.  At September 30,
1997 all long-term  investments are available for sale securities which are U.S.
mortgage  backed  securities  with various  maturity dates over the next several
years  that  have an  amortized  cost of  $1,843,000,  a fair  market  value  of
$1,737,000  and a gross  unrealized  loss of $106,000 at September 30, 1997. The
Company currently has no trading securities.



                                                      - 7-

<PAGE>


                                           ARONEX PHARMACEUTICALS, INC.
                                           (A development stage company)

                                     NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4.   Federal Income Taxes

     At  December  31,  1996,   the  Company  had  net  operating  loss  ("NOL")
carryforwards  for federal income tax purposes of  approximately  $66.9 million.
The Tax  Reform  Act of 1986  provided  a  limitation  on the use of NOL and tax
credit  carryforwards  following  certain ownership changes that could limit the
Company's  ability  to  utilize  these NOLs and tax  credits.  Accordingly,  the
Company's  ability to utilize  its NOLs and tax credit  carryforwards  to reduce
future taxable  income and tax  liabilities  may be limited.  As a result of the
1995  mergers  with  Triplex  and  Oncologix  a change in  control as defined by
federal income tax law occurred,  causing the use of these  carryforwards  to be
limited and possibly  eliminated.  Additionally  because U.S. tax laws limit the
time during which NOLs and the tax credit  carryforwards  may be applied against
future taxable income and tax  liabilities,  the Company may not be able to take
full advantage of its NOLs and tax credit  carryforwards  for federal income tax
purposes.  The carryforwards will begin to expire in 2001 if not otherwise used.
A valuation  allowance has been established to offset the Company's deferred tax
assets as the Company has had losses since  inception.  The Company has not made
any income tax payments since inception.

5.   Reverse Stock Split

     At a special Meeting of Stockholders held on May 24,1996,  the stockholders
of the Company  approved a one-for-  two reverse  split of the Common Stock (the
"Reverse  Split").  The Reverse  Split  became  effective  with the filing of an
amendment to the Company's  Certificate  of  Incorporation  on July 1, 1996. The
accompanying  financial  statements  have been  restated  to give  effect to the
Reverse Split.

6.   Building Lease

     In April  1997,  the  Company  signed a lease for a new  building  with its
current landlord,  under which, the Company has committed to lease 30,000 square
feet for ten years at  approximately  $2.00 per square foot per month and to pay
certain  construction costs. The Company expects to occupy this lease space late
in 1997 or early in 1998.

7.   Contingent Stock Rights

     In  connection  with the  Triplex  merger  agreement,  the  Company  issued
contingent rights (the "Triplex  Contingent Stock Rights") to the former Triplex
stock and options holders entitling them to receive  additional shares of Common
Stock upon the occurrence of certain events. The Triplex Contingent Stock Rights
entitle the former  Triplex stock and option holders to receive shares of Common
Stock  with an  aggregate  fair  market  value at the time of  issuance  of $5.0
million  (subject to certain  adjustments) if the Company either (i) enters into
an agreement on or before  September  11, 1997 with respect to the  licensing of
ZintevirTM  whereby  the Company  receives  at least $5.0  million in cash or an
unconditional  binding commitment for at least $5.0 million or (ii) obtains data
from  clinical  trials of  ZintevirTM  on or before  September 11, 2000 that the
Company's  Board of Directors  determines  to be  sufficient  to file an NDA. In
addition,  the Triplex Contingent Stock Rights entitled the former Triplex stock
and option  holders to receive  shares of Common  Stock with an  aggregate  fair
market  value at the time of  issuance  of $3.0  million if the  Company did not
receive a minimum of $5.0 million in equity  milestone  payments from Genzyme on
or before September 11, 1997 with respect to the development of AtragenTM. In no
event,  however,  shall more than  3,500,097  shares of Common Stock (subject to
adjustments in the event of stock splits, stock dividends or reclassification of
the Common Stock) be issued pursuant to the Triplex Contingent Stock Rights. The
Company did not  receive the minimum  equity  milestone  payments  from  Genzyme
contemplated by the Triplex Contingent Stock Rights.  Accordingly,  on September
11,  1997,  the  Company  issued  686,472  shares of  Common  Stock  under  such
Contingent  Stock  Rights with an  aggregate  fair  market  value at the time of
issuance of  $3,000,000  and  recorded a  corresponding  non-cash  research  and
development expense of $3,000,000 in the third quarter of 1997.


                                                      - 8-

<PAGE>


                                           ARONEX PHARMACEUTICALS, INC.
                                           (A development stage company)

8.   Employment Agreement

     In September 1997 the Company  entered into a non-binding  letter of intent
with Geoffrey Cox, Ph.D.  under which Dr. Cox has agreed to become the Company's
Chairman of the Board and Chief Executive Officer.  The Company intends to enter
into an  employment  agreement  with Dr.  Cox under  which it  expects  to incur
certain obligations relating to his hiring and retention.

                                                      - 9-

<PAGE>



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

Results of Operations

     Overview

     Since its inception in 1986, Aronex Pharmaceuticals,  Inc. ("Aronex" or the
"Company") has primarily devoted its resources to fund research,  drug discovery
and development.  The Company has been unprofitable to date and expects to incur
substantial  operating  losses  for the next  several  years as it  expends  its
resources for product research and development, preclinical and clinical testing
and regulatory  compliance.  The Company has sustained  losses of  approximately
$64.5 million through  September 30, 1997. The Company has financed its research
and development  activities and operations  primarily through public and private
offerings  of  securities.  The  Company's  operating  results  have  fluctuated
significantly  during  each  quarter,  and the  Company  anticipates  that  such
fluctuations,  largely  attributable to varying commitments and expenditures for
clinical trials and research and development, will continue for the next several
years.

     Three and Nine Month Periods Ended September 30, 1997 and 1996

     Revenues from research and  development  grants and contracts were $275,000
and  $803,000  for  the  three  months  ended   September  30,  1997  and  1996,
respectively,  a decrease  of  $528,000.  Research  and  development  grants and
contracts were $591,000 and  $1,811,000 for the nine months ended  September 30,
1997 and 1996, respectively,  a decrease of $1,220,000. These decreases were due
to the following:  (i) no revenues from Hoechst Marion Roussel, Inc. ("Hoechst")
in 1997  compared to $900,000 for the nine months ended  September  30, 1996, as
the agreement  terminated at the end of 1996; (ii) no Small Business  Innovative
Research  ("SBIR") grant revenue in 1997 compared to $73,000 for the nine months
ended  September 30, 1997 and (iii) a decrease in the  development  revenue from
Targeted  Genetics  Incorporated  ("Targeted")  to $166,000  for the nine months
ended  September  30, 1997 from $460,000 for the  corresponding  period in 1996.
This three year agreement with Targeted ended in the second quarter of 1997. The
decreases in research and development revenues were partially offset by $150,000
in revenue in the first  quarter of 1997 from the  Company's  license  agreement
with  Boehringer  Mannheim GmbH and $250,000 in the third quarter of 1997 from a
new licensing  agreement with Genzyme Corporation  ("Genzyme")  relating to gene
therapy.

     Interest  income was  $510,000  and  $595,000  for the three  months  ended
September 30, 1997 and 1996, respectively,  a decrease of $85,000. This decrease
was due to the decrease in funds  available for investment in 1997 when compared
to the same period in 1996.  Interest  income was  $1,632,000 and $1,065,000 for
the nine months ended September 30, 1997 and 1996, respectively,  an increase of
$567,000.  This increase was primarily due to an increase of funds available for
investment  during the first half of 1997  resulting from cash received from the
completion of a stock offering in May 1996.

     Research and  development  expenses were  $3,213,000 and $2,969,000 for the
three months ended  September  30, 1997 and 1996,  respectively,  an increase of
$244,000.  Research and development  expenses were $9,864,000 and $7,814,000 for
the nine months ended September 30, 1997 and 1996, respectively,  an increase of
$2,050,000.  These  increases were primarily due to an increase of $1,040,000 in
medical  affairs and  pharmaceutical  development  salaries  and payroll  costs,
including  costs  relating to the hiring of a Vice  President of  Pharmaceutical
Development  and Operations  and a Senior Vice President of Medical  Affairs and
Chief  Medical  Officer,  an increase of  $752,000 in drug  manufacturing  costs
relating  mainly to  NyotranTM  and  ZintevirTM  and an  increase of $825,000 in
outside  pharmacology  studies  relating mainly to NyotranTM and AtragenTM.  The
increases were partially  offset by a decrease of $828,000 in research  expenses
as the majority of the Company's  internal  research  efforts were eliminated in
the second  quarter of 1997.  The Company's  decision to eliminate such research
efforts was related in part to the termination of research funding from Hoechst.

     In-process  research and development  represents  costs incurred during the
nine month  period  ended  September  30,  1996  related to the 1995  mergers of
Triplex Pharmaceutical Corporation ("Triplex") and Oncologix,

                                                      - 10-

<PAGE>



Inc.("Oncologix")  with  subsidiaries  of  the  Company,  and  consists  of  the
settlement of a lawsuit that had been filed by certain  common  stockholders  of
Oncologix.

     In-process  research and  development  costs of $3,000,000  incurred in the
third  quarter  of 1997  relates  to the  issuance  of  Common  Stock  under the
contingent  rights issued in the Triplex merger to the former holders of Triplex
stock and options.  The Company  issued 686,472 shares of Common Stock under the
contingent rights with an aggregate fair market value at the time of issuance of
$3,000,000  and  recorded a  corresponding  non-cash  research  and  development
expense of $3,000,000 in the third quarter of 1997.  The issuance of such shares
under the contingent  rights was required because equity  milestone  payments of
$5,000,000  were not received  from  Genzyme  relating to AtragenTM on or before
September 11, 1997. See Note 7 of Notes to Financial Statements.

     General and  administrative  expenses  were  $546,000  and $426,000 for the
three months ended  September  30, 1997 and 1996,  respectively,  an increase of
$120,000. General and administrative expenses were $1,477,000 and $1,197,000 for
the nine months ended September 30, 1997 and 1996, respectively,  an increase of
$280,000.  These  increases  were  primarily  due to an  increase of $246,000 in
salaries,  deferred stock option  compensation and payroll costs, which includes
several new positions and a related increase in operating costs.

     Interest  expense and other was  $10,000  and $25,000 for the three  months
ended  September 30, 1997 and 1996,  respectively,  a decrease of $15,000.  This
decrease was due to the reduction in the amount of capital lease obligations and
indebtedness  related  to the  acquisition  of  laboratory  equipment.  Interest
expense and other was $160,000  and $96,000 for the nine months ended  September
30,  1997 and 1996,  respectively,  an increase  of  $64,000.  This  increase in
interest expense and other resulted  primarily from a loss on disposal of assets
of $107,000 in the quarter  ended June 30, 1997 that related to the  disposition
of  equipment  and  leasehold  improvements  that  had  been  used  in  research
activities  which were  eliminated.  This  increase  was  partially  offset by a
decrease in interest expense resulting from a reduction in the amount of capital
lease  obligations  and  indebtedness  relating to the acquisition of laboratory
equipment.

     Net loss was $5,984,000 and $2,022,000 for the three months ended September
30, 1997 and 1996,  respectively,  an increase of  $3,962,000.  Net loss for the
nine months ended September 30, 1997 and 1996, respectively, was $12,278,000 and
$6,422,000,  an increase of  $5,856,000.  These  increases were primarily due to
$3,000,000 of purchase of  in-process  research and  development  expense in the
third quarter which resulted from the issuance of Common Stock under the Triplex
contingent stock rights and an increase in research and development expenses.

Liquidity and Capital Resources

     Since its  inception,  the Company's  primary  source of cash has been from
financing  activities,  which  have  consisted  primarily  of  sales  of  equity
securities.  The Company has raised an aggregate of approximately  $75.2 million
from the sale of equity  securities  from its  inception  through  September 30,
1997.  In July 1992,  the Company  raised net  proceeds of  approximately  $10.7
million in the initial public  offering of its Common Stock.  In September 1993,
the Company entered into a collaborative  agreement with Genzyme relating to the
development  and  commercialization  of AtrogenTM,  in connection with which the
Company  received  net proceeds of  approximately  $4.5 million from the sale of
Common Stock to Genzyme.  In November 1993 and May 1996,  the Company raised net
proceeds  of  approximately  $11.5 and $32.1  million,  respectively,  in public
offerings of Common Stock.  From October 1995 through  September  30, 1997,  the
Company received  aggregate net proceeds of approximately  $6.5 million from the
exercise of certain warrants issued in its 1995 merger with Oncologix, Inc. From
its inception  until  September 30, 1997, the Company also received an aggregate
of $4.5  million  cash  from  collaborative  arrangements  and SBIR  grants.  In
September 1995, the Company's cash and securities held to maturity  increased by
approximately  $6.7  million  as a  result  of  its  1995  merger  with  Triplex
Pharmaceutical Corporation.


                                                     - 11-

<PAGE>

     The Company's primary use of cash to date has been in operating  activities
to fund research and  development,  including  preclinical  studies and clinical
trials, and general and administrative  expenses.  Cash of $8.1 million and $6.1
million was used in  operating  activities  during the first nine months of 1997
and 1996,  respectively.  The Company had cash,  cash-equivalents and short-term
and long-term  investments of $32.7 million as of September 30, 1997, consisting
primarily of cash and money market accounts, United States government securities
and investment grade commercial paper.

     The Company has experienced  negative cash flows from operations  since its
inception  and  has  funded  its   activities  to  date  primarily  from  equity
financings. The Company has expended, and will continue to require,  substantial
funds to continue research and development,  including  preclinical  studies and
clinical trials of its products,  and to commence sales and marketing efforts if
FDA and other  regulatory  approvals are obtained.  The Company expects that its
existing capital  resources will be sufficient to fund its capital  requirements
through  early  1999.  Thereafter,  the Company  will need to raise  substantial
additional  capital to fund its operations.  The Company's capital  requirements
will depend on many  factors,  including  the  problems,  delays,  expenses  and
complications   frequently  encountered  by  development  stage  companies;  the
progress of the Company's research, development and clinical trial programs; the
extent and terms of any future collaborative research, manufacturing,  marketing
or other  funding  arrangements;  the costs and  timing  of  seeking  regulatory
approvals of the Company's products;  the Company's ability to obtain regulatory
approvals;  the success of the Company's sales and marketing programs;  costs of
filing,  prosecuting  and  defending  and  enforcing any patent claims and other
intellectual property rights; and changes in economic, regulatory or competitive
conditions of the Company's  planned  business.  Estimates about the adequacy of
funding for the Company's activities are based on certain assumptions, including
the assumption that testing and regulatory  procedures relating to the Company's
products can be conducted at  projected  costs.  There can be no assurance  that
changes in the Company's research and development plans, acquisitions,  or other
events will not result in accelerated or unexpected expenditures. To satisfy its
capital  requirements,  the  Company may seek to raise  additional  funds in the
public or private capital  markets.  The Company's  ability to raise  additional
funds in the public or private markets will be adversely affected if the results
of its current or future clinical trials are not favorable. The Company may seek
additional   funding  through  corporate   collaborations  and  other  financing
vehicles.  There can be no assurance  that any such funding will be available to
the Company on favorable  terms or at all. If adequate  funds are not available,
the Company may be required to curtail significantly one or more of its research
or  development  programs,  or it  may  be  required  to  obtain  funds  through
arrangements with future  collaborative  partners or others that may require the
Company to relinquish rights to some or all of its technologies or products.  If
the Company is successful in obtaining additional  financing,  the terms of such
financing may have the effect of diluting or adversely affecting the holdings or
the rights of the holders of the Company's Common Stock.



                                                      - 12-

<PAGE>



PART II.          OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

     (a) Exhibits

      10.1    Employment Agreement between the Company and Janet Walter.

      11.1 Statement regarding computation of per share earnings.

      27.1    Financial data schedule.

     (b) Reports on Form 8-K

         None


                                                      - 13-

<PAGE>





                                                    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.



                          ARONEX PHARMACEUTICALS, INC.




Dated:     October 28, 1997             By:/S/JAMES M. CHUBB
                                        James M. Chubb, Ph.D.
                                        President and Chief Executive Officer







Dated:     October 28, 1997             By:/S/TERANCE A. MURNANE
                                        Terance A. Murnane
                                        Controller

                                                      - 14-