UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                    FORM 10-Q


(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 1998

                                       OR

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


Commission File number: 0-19750


                           MATRIX PHARMACEUTICAL, INC.
             (Exact name of registrant as specified in its charter)


          Delaware                                                94-2957068
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


34700 Campus Drive, Fremont, California                             94555
(Address of principal executive offices)                          (Zip Code)


       Registrant's telephone number, including area code: (510) 742-9900


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  preceeding 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 ___


Number of shares of Common  Stock,  $.01 par value,  outstanding  as of July 31,
1998: 22,111,586.


<PAGE>


                           MATRIX PHARMACEUTICAL, INC.


                                      INDEX



PART I.  FINANCIAL INFORMATION


Item 1.  Financial   Statements                                         Page No.

         Condensed Consolidated Balance Sheets -
         June 30, 1998 and December 31, 1997                               3

         Condensed Consolidated Statements of Operations -
         Three and Six Months Ended June 30, 1998 and 1997                 4

         Condensed Consolidated Statements of Cash Flows -
         Six Months Ended June 30, 1998 and 1997                           5

         Notes to Condensed Consolidated Financial Statements              6


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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk       10


PART II. OTHER INFORMATION

         Risk Factors                                                     11

Item 4.  Submission of Matters to a Vote of Security Holders              19

Item 6.  Exhibits and Reports on Form 8-K                                 20

         Signatures                                                       21

                                                                          Page 2

<PAGE>


<TABLE>
                                                     MATRIX PHARMACEUTICAL, INC.
                                                    (a development stage company)

                                                Condensed Consolidated Balance Sheets


                                                                                                          (In thousands)

<CAPTION>
                                                                                                    June 30,            December 31,
                                                                                                     1998                   1997
                                                                                                   ---------              ---------
Assets                                                                                            (Unaudited)                (*)
<S>                                                                                                <C>                    <C>      
Current assets:
      Cash and cash equivalents                                                                    $   8,338              $  19,719
      Short-term investments                                                                          63,763                 40,666
      Other current assets                                                                             2,875                  2,128
                                                                                                   ---------              ---------
            Total current assets                                                                      74,976                 62,513

Property and equipment, net                                                                           14,247                 26,742
Non-current investments                                                                                9,980                 19,983
Deposits and other assets, net                                                                         1,057                  1,191
                                                                                                   =========              =========
                                                                                                   $ 100,260              $ 110,429
                                                                                                   =========              =========

Liabilities and Stockholders' Equity

Current liabilities:
      Accounts payable                                                                             $   1,033              $   2,800
      Accruals for special charges                                                                       766                  2,063
      Accrued clinical trial costs                                                                     1,699                  1,788
      Other accrued liabilities                                                                        2,428                  2,681
      Current portion of debt and capital lease obligations                                            2,288                  2,283
                                                                                                   ---------              ---------
            Total current liabilities                                                                  8,214                 11,615
Debt and capital lease obligations, less current portion                                              15,589                 20,248
Deferred other income                                                                                  5,198                  1,913
                                                                                                   ---------              ---------
            Total long-term liabilities                                                               20,787                 22,161

Stockholders' equity
      Capital stock                                                                                  225,257                225,144
      Notes receivable from shareholders                                                              (2,018)                (2,313)
      Other                                                                                             (426)                  (558)
      Deficit accumulated during the development stage                                              (151,554)              (145,620)
                                                                                                   ---------              ---------
            Total stockholders' equity                                                                71,259                 76,653
                                                                                                   ---------              ---------
                                                                                                   $ 100,260              $ 110,429
                                                                                                   =========              =========

<FN>
(*) Derived from audited financial statements.

                                                       See accompanying notes
</FN>

                                                                                                                              Page 3
</TABLE>


<PAGE>


<TABLE>
                                                     MATRIX PHARMACEUTICAL, INC.
                                                    (a development stage company)

                                           Condensed Consolidated Statements of Operations
                                               (In thousands except per share amounts)
                                                             (Unaudited)


<CAPTION>
                                                                          Three Months Ended                  Six Months Ended
                                                                               June 30,                           June 30,
                                                                       1998              1997              1998              1997
                                                                     --------          --------          --------          --------
<S>                                                                  <C>               <C>               <C>               <C>   
Revenues                                                             $   --            $   --            $   --            $   --

Costs and expenses:
   Research and development                                             5,596             7,798            11,101            14,343
   General and administrative                                           1,627             4,791             3,106             8,413
                                                                     --------          --------          --------          --------
     Total costs and expenses                                           7,223            12,589            14,207            22,756

Loss from operations                                                   (7,223)          (12,589)          (14,207)          (22,756)

Gain on sale and leaseback transaction                                   --                --               1,882              --
Interest and other income, net                                          5,312             1,561             6,391             3,227
                                                                     --------          --------          --------          --------
                                                                        5,312             1,561             8,273             3,227
                                                                     --------          --------          --------          --------

Net loss                                                             $ (1,911)         $(11,028)         $ (5,934)         $(19,529)
                                                                     ========          ========          ========          ========

Basic and diluted net loss per common share                          $  (0.09)         $  (0.52)         $  (0.27)         $  (0.92)
                                                                     ========          ========          ========          ========

Weighted average shares used in computing
basic and diluted net loss per common share                            22,003            21,276            21,962            21,267
                                                                     ========          ========          ========          ========

<FN>
                                                       See accompanying notes
</FN>

                                                                                                                              Page 4
</TABLE>

<PAGE>


<TABLE>
                                                     MATRIX PHARMACEUTICAL, INC.
                                                    (a development stage company)

                                           Condensed Consolidated Statements of Cash Flows
                                          Increase (Decrease) in Cash and Cash Equivalents

                                                           (In thousands)

<CAPTION>
                                                                                                          For the Six Months
                                                                                                             Ended June 30
                                                                                                       1998                  1997
                                                                                                     --------              --------
                                                                                                   (Unaudited)           (Unaudited)
<S>                                                                                                  <C>                    <C>     
Cash flows from operating activities:
       Net loss                                                                                      $ (5,934)              (19,529)
       Adjustments to reconcile net loss to
        net cash used by operating activities:
          Depreciation, amortization, and other                                                           985                 1,189
          Gain on sale and leaseback transaction                                                       (5,769)
       Changes in assets and liabilities:
          Inventory                                                                                      --                    (930)
          Deferred other income                                                                         3,285                 2,753
          Other changes in assets and liabilities                                                      (4,064)                 (481)
                                                                                                     --------              --------
           Net cash used by operating activities                                                      (11,497)              (16,998)
Cash flows from investing activities:
       Capital expenditures                                                                              (415)               (1,790)
       Proceeds from sale of fixed assets                                                              17,744                  --
       Investment in securities available-for-sale                                                    (23,763)              (16,000)
       Maturities of investments                                                                       10,669                33,000
                                                                                                     --------              --------
          Cash flows provided by investing activities                                                   4,235                15,210
Cash flows from financing activities:
       Payments on debt and capital lease obligations                                                 (10,659)                 (178)
       Net cash proceeds from issuance of:
          Debt and capital lease financing                                                              6,000                    24
          Capital stock                                                                                   113                   211
          Notes receivable from shareholders                                                              427                  --
                                                                                                     --------              --------
          Cash flows provided (used) by financing activities                                           (4,119)                   57
Net decrease in cash and cash equivalents                                                             (11,381)               (1,731)
Cash and cash equivalents at the beginning of period                                                   19,719                20,138
                                                                                                     --------              --------
Cash and cash equivalents at the end of period                                                       $  8,338                18,407
                                                                                                     ========              ========

<FN>
                                                       See accompanying notes
</FN>

                                                                                                                              Page 5
</TABLE>


<PAGE>


                           MATRIX PHARMACEUTICAL, INC.


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  June 30, 1998


1.       Basis of presentation

                  The condensed  consolidated balance sheet as of June 30, 1998,
         the  condensed  consolidated  statements  of  operations  for the three
         months and six months ended June 30, 1998 and 1997,  and the  condensed
         consolidated statements of cash flows for the six months ended June 30,
         1998 and 1997, have been prepared by the Company, without audit. In the
         opinion of  management,  all  adjustments  (which  include  only normal
         recurring  adjustments)  necessary  to  present  fairly  the  financial
         position,  results of  operations,  and cash flows at June 30, 1998 and
         for all periods  presented have been made.  The condensed  consolidated
         balance  sheet at December  31, 1997 has been  derived from the audited
         financial statements at that date.

                  Certain information and footnote disclosures normally included
         in the  financial  statements  prepared in  accordance  with  generally
         accepted accounting  principles have been condensed or omitted pursuant
         to the Securities and Exchange Commission's rules and regulations.

                  The  condensed   financial   statements   should  be  read  in
         conjunction with the Company's audited financial statements as included
         in the Company's Annual Report on Form 10-K for the year ended December
         31, 1997 as filed with the  Securities  and  Exchange  Commission.  The
         results of  operations  for the three  months and six months ended June
         30, 1998 are not  necessarily  indicative of the results to be expected
         for  any  subsequent  quarter  or for the  entire  fiscal  year  ending
         December 31, 1998.

2.       Principles of consolidation

                  The consolidated  financial statements include the accounts of
         the Company and its wholly owned  subsidiary  after  elimination of all
         material intercompany balances and transactions.

3.       Basic and diluted net loss per common share

                  Basic and  diluted  net loss per common  share is  computed in
         conformance with Statement of Financial  Accounting  Standards No. 128,
         "Earnings  Per Share" ("SFAS 128"),  which the Company  adopted  during
         1997.  Accordingly,  the  weighted  average  number of shares of common
         stock outstanding are used while common stock  equivalents,  consisting
         of stock options and stock rights, are excluded from the computation as
         their impact is anti-dilutive.

4.       Cash and cash  equivalents,  short-term  investments,  and  non-current
         investments

                  The  Company   invests  its  excess  cash  in  government  and
         corporate debt securities. Highly liquid investments with maturities of
         three months or less at the date of  acquisition  are considered by the
         Company to be cash  equivalents.  Investments  with  maturities  beyond
         three months at the date of acquisition and that mature within one year
         from  the  balance   sheet  date  are   considered   to  be  short-term
         investments.  Investments with maturities longer than one year from the
         balance  sheet  date  are  classified  as  short-term   investments  or
         non-current investments based on the Company's intended holding period.

                                                                          Page 6

<PAGE>


                  The Company determines the appropriate  classification of debt
         securities at the time of purchase and reevaluates  such designation as
         of each balance sheet date. Debt securities which are not classified as
         held-to-maturity  and which are not held for resale in  anticipation of
         short-term  market  movements  are  classified  as  available-for-sale.
         Available-for-sale  securities  are  carried  at fair  value,  with the
         unrealized  gains  and  losses,  net of  tax,  reported  in a  separate
         component  of  stockholders'  equity.  Realized  gains and  losses  and
         declines in value  judged to be  other-than-temporary  are  included in
         interest and other income.  The cost of securities sold is based on the
         specific identification method.

5.       Gain on sale and leaseback transaction

                  In March 1998, the Company  completed an agreement with a real
         estate  investment  trust for the sale and  leaseback  of its San Diego
         office/laboratory and manufacturing  facility and an adjacent parcel of
         land. The transaction  was structured as an $18,400,000  purchase and a
         $6,000,000  convertible loan secured by specific  manufacturing related
         building  improvements.  Under the terms of the agreement,  the Company
         will lease the  facility for 13 years with the option to renew up to an
         additional  25 years.  Matrix will pay an average  $2,600,000 in annual
         lease  expense  which will be partially  offset by rental income from a
         portion of the facility currently leased to another  bio-pharmaceutical
         company. Net cash from the lease and loan agreement,  after the payment
         of the existing  mortgage  and escrow and other  related  fees,  totals
         approximately  $14,000,000 and will be used to fund operating  expenses
         and capital purchases.  The total gain on the transaction is $5,769,000
         of which  $1,882,000 has been recognized as an immediate gain while the
         remaining balance is being deferred and will be recorded to income over
         the 13-year lease term.

6.        Litigation settlement

                  In  April  1998,  the  Company  received  $4,000,000  from  an
         insurance  company for the  reimbursement  of legal  expenses  incurred
         during prior years. The payment settles  litigation between the Company
         and the insurer over  coverage  under the Company's  general  liability
         policy.  The payment was recorded to other income in the second quarter
         of 1998.

7.       New accounting pronouncements

                  As  of  January  1,  1998,  the  Company   adopted   Financial
         Accounting   Standards  Board's   Statement  of  Financial   Accounting
         Standards Statement No. 130, Reporting  Comprehensive Income (Statement
         130). Statement 130 establishes new rules for the reporting and display
         of comprehensive  income and its components;  however,  the adoption of
         this   Statement   had  no  impact  on  the  Company's  net  income  or
         shareholders' equity. Statement 130 requires unrealized gains or losses
         on the Company's  available-for-sale  securities  and foreign  currency
         translation   adjustments,   which  prior  to  adoption  were  reported
         separately   in   shareholders'   equity  to  be   included   in  other
         comprehensive   income.  Prior  year  financial  statements  have  been
         reclassified to conform to requirements of Statement 130.

                  During   the   second   quarter   of  1998  and  1997,   total
         comprehensive    loss   amounted   to   $1,936,000   and   $10,830,000,
         respectively.  For the  first  six  months  of  1998  and  1997,  total
         comprehensive    loss   amounted   to   $5,959,000   and   $19,594,000,
         respectively.

                  Effective  January 1, 1998, the Company  adopted the Financial
         Accounting   Standards  Board's   Statement  of  Financial   Accounting
         Standards No. 131,  Disclosures  about  Segments of an  Enterprise  and
         Related  Information ( Statement  131).  Statement 131 superseded  FASB
         Statement  No.  14,  Financial  Reporting  for  Segments  of a Business
         Enterprise. Statement 131 establishes standards for the way that public
         business  enterprises  report  information about operating  segments in
         annual financial  statements and requires that those enterprises report
         selected  information  about  operating  segments in interim  financial
         reports.   Statement  131  also   establishes   standards  for  related
         disclosures  about products and services,  geographic  areas, and major
         customers.  The adoption of Statement 131 did not affect the results of
         operations,   financial   position,   or  the   disclosure  of  segment
         information.

                                                                          Page 7

<PAGE>


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

         This Form 10-Q may  contain,  in  addition to  historical  information,
forward-looking statements,  including without limitation,  statements regarding
the timing and outcome of  regulatory  reviews  and  clinical  trials.  Any such
forward-looking  statements are based on management's  current  expectations and
are  subject  to a number of risks and  uncertainties  that could  cause  actual
results to differ materially from expected results. For additional  information,
including  risk  factors,   such  as  no  assurance  of  regulatory   approvals;
uncertainties  associated  with  clinical  trials;  history  of  losses;  future
profitability uncertain;  additional financing requirements and uncertain access
to capital markets;  limited  manufacturing and sales and marketing  experience;
dependence on sources of supply;  uncertainty  regarding patents and proprietary
rights; rapid technological change and substantial  competition;  uncertainty of
pharmaceutical pricing; no assurance of adequate reimbursement;  dependence upon
qualified and key  personnel;  product  liability  exposure;  limited  insurance
coverage;  hazardous materials and product risks;  volatility of stock price; no
dividends;  anti-takeover provisions; year 2000 compliance, please see the "Risk
Factors"  section included in the Company's 1997 Form 10-K and in this Form 10-Q
as well as other factors discussed below and elsewhere in this report.


Results of Operations

Three Months and Six Months Ended June 30, 1998 and 1997

         Since  the  Company's  inception  in  1985,  the  primary  focus of its
operations has been research and development,  and, to date, it has not received
any revenues from the commercial sale of products.  The Company has a history of
operating  losses and expects to incur  substantial  additional  losses over the
next several years as it continues to develop its products.  For the period from
its inception to June 30, 1998,  the Company has incurred a cumulative  net loss
of $151,554,000.

         The Company  had no revenue in the second  quarters of 1998 and 1997 or
in the first six months of 1998 and 1997.

         Research  and  development  expenses  for the  second  quarter  of 1998
decreased by 28% to $5,596,000  compared to $7,798,000 for the second quarter of
1997.  For the  first six  months of 1998,  research  and  development  expenses
decreased by 23% to $11,101,000  compared to $14,343,000  for the same period in
1997. The decrease was primarily due to lower personnel  costs,  the termination
of clinical trials for AccuSite(TM) Injectable Gel which were in progress during
the first six months of 1997, lower  consulting  expenses and lower purchases of
operation  supplies and materials.  The decrease was partially  offset by higher
depreciation expense from capital leases, and higher building rent expense which
began in the second  quarter of 1998 in  connection  with the sale and leaseback
transaction for the San Diego facility.

         General  and  administrative  expenses  for the second  quarter of 1998
decreased 66% to $1,627,000  compared to  $4,791,000  for the second  quarter of
1997.  For the first six months of 1998,  general  and  administrative  expenses
decreased by 63% to  $3,106,000  compared to  $8,413,000  for the same period in
1997.  The  decreases  were  primarily  due to  lower  litigation-related  legal
expenses,  the absence of  AccuSite-related  product marketing  expenses,  lower
recruiting fees and lower personnel costs.

                                                                          Page 8

<PAGE>


         In March 1998,  the Company  completed an agreement  with a real estate
investment  trust for the sale and leaseback of its San Diego  office/laboratory
and  manufacturing  facility and an adjacent parcel of land. The transaction was
structured as an $18,400,000 purchase and a $6,000,000  convertible loan secured
by specific manufacturing related building improvements.  Under the terms of the
agreement,  the Company  will lease the facility for 13 years with the option to
renew up to an  additional 25 years.  The Company will pay  $2,600,000 in annual
lease and interest expense, which will be partially offset by rental income from
a portion of the facility  currently leased to another  pharmaceutical  company.
Net cash from the sale and loan  agreements,  after the payment of the  existing
mortgage and escrow and other related fees, totals approximately $14,000,000 and
will be used to fund operating expenses and capital  purchases.  The net gain on
the  transaction is $5,769,000 of which  $1,882,000  has been  recognized in the
first  quarter.  The balance  will be deferred  and  recorded as income over the
13-year lease term.

         Net interest and other income  increased by 240% to $5,312,000  for the
second  quarter of 1998 compared to $1,561,000  for the second  quarter of 1997.
For the first six months of 1998, net interest and other income increased by 98%
to $6,391,000  compared to $3,227,000 for the same period in 1997. This increase
was  primarily due to  $4,000,000  received from a settlement  with an insurance
company which was recorded as other income in the second  quarter of 1998.  This
increase  was offset by the  decline  in  interest  income due to lower  average
balances in cash,  cash  equivalents  and  marketable  securities.  In addition,
interest  expense  increased for the second  quarter and the first six months of
1998 as compared to the similar  periods in 1997 as the result of the  equipment
financing obligations which began in the third quarter of 1997.


Liquidity and Capital Resources

         At June 30, 1998,  the Company had  approximately  $82,100,000 in cash,
cash equivalents and marketable securities,  compared to $80,400,000 at December
31, 1997.  The net increase of  $1,700,000 is primarily due to the proceeds from
the sale and leaseback transaction, and from the insurance settlement as well as
interest income and rental income totaling  $20,223,000.  The cash receipts were
offset by cash  disbursements  of approximately  $18,523,000,  used primarily to
fund operating activities and capital purchases.

         In April  1998,  the  Company  received  $4,000,000  from an  insurance
company for the reimbursement of legal expenses incurred during prior years. The
payment  settles  litigation  between the Company and the insurer over  coverage
under the Company's general liability policy.  The payment was recorded as other
income in the second quarter of 1998.

         As discussed  in "Results of  Operations,"  in March 1998,  the Company
completed  an  agreement  with a real estate  investment  trust for the sale and
leaseback of its San Diego  facility and an adjacent  parcel of land and entered
into a loan  agreement.  Net cash  from the sale and loan  agreement,  after the
payment of the  existing  mortgage  and escrow and other  related  fees,  totals
approximately  $14,000,000  and  will be used to  fund  operating  expenses  and
capital purchases.

         In  September  1995,  the  Company  repurchased  from  Medeva  PLC  all
marketing rights related to its AccuSite product for $2,000,000, to be paid over
a period of five  years.  As of June 30,  1998,  the  remaining  balance of this
obligation was $1,500,000.

                                                                          Page 9

<PAGE>


         The Company has financed its operations and capital asset  acquisitions
from its inception through the sale of equity  securities,  interest income, and
capital lease and debt  financing.  The Company expects to finance its continued
operating  requirements  principally  with  cash on  hand as well as  additional
capital  that  may  be  generated   through  equity  and  debt   financings  and
collaborative agreements.

         The Company's  working capital and capital  requirements will depend on
numerous  factors,   including  the  progress  of  the  Company's  research  and
development  programs,  preclinical  testing and clinical trial activities,  the
timing and cost of obtaining regulatory approvals,  the levels of resources that
the  Company  devotes  to  the  development  of   manufacturing   and  marketing
capabilities, technological advances and the status of competitors.

         The Company expects to incur  substantial  additional costs relating to
the continued clinical development of its oncology products,  continued research
and development  programs,  the development of manufacturing  capabilities,  and
general working capital requirements.  The Company anticipates that its existing
and  committed  capital  resources  will enable it to  maintain  its current and
planned  operations at least through  2000.  The Company may require  additional
outside  financing  to  complete  the process of  bringing  current  products to
market,  and there can be no assurance  that such financing will be available on
favorable terms, if at all.

Year 2000 Compliance

         The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive  and complex as virtually  every  computer  operation
will be affected in some way by the  rollover of the two digit year value to 00.
The issue is whether  computer  systems will properly  recognize  date sensitive
information  when  the  year  changes  to  2000.  Systems  that do not  properly
recognize such  information  could generate  erroneous data or cause a system to
fail.

         During 1997,  the Company  installed a new  accounting  system that was
confirmed by the vendor to address the year 2000 related  issues.  However,  the
Company  has not  analyzed  the  external  factors,  such as the impact on those
vendors  adversely  affected by the year 2000 issue,  and has not  assessed  the
related potential effect on the Company's  business,  financial condition or the
Company results of operations.  There can be no assurance that computer  systems
and applications of other companies on which the Company's  operations rely will
be  converted  in a timely  fashion,  or that such failure to correct by another
company would not have a material adverse effect on the Company.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.

                                                                         Page 10

<PAGE>


                           PART II. OTHER INFORMATION

                                  RISK FACTORS


No Assurance of Regulatory Approvals

         The preclinical and clinical testing,  manufacturing,  and marketing of
the  Company's  products  are  subject  to  extensive   regulation  by  numerous
governmental  authorities in the United States and other  countries,  including,
but not  limited  to,  the Food and Drug  Administration  ("FDA").  Among  other
requirements,  FDA  approval of the  Company's  product  candidate,  including a
review of its  manufacturing  processes and production  facilities,  is required
before such product  candidate may be marketed in the United States.  Similarly,
marketing  approval by a foreign  governmental  authority is typically  required
before such products may be marketed in a particular foreign country. Matrix has
no  products  approved by the FDA and  although  Accusite  has been  approved by
foreign  authorities,  Matrix does not expect to achieve  profitable  operations
unless other product  candidates now under  development  receive FDA and foreign
regulatory approval and are thereafter commercialized successfully.

         In order to obtain FDA approval,  the Company must  demonstrate  to the
satisfaction  of the FDA  that  the  Company's  product  candidate  is safe  and
effective for its intended uses and is manufactured in conformity with the FDA's
Good  Manufacturing  Practices  ("GMP")  regulations.  The  Company has had only
limited  experience  in submitting  and pursuing  regulatory  applications.  The
process of obtaining FDA approvals can be costly, time consuming, and subject to
unanticipated  delays.  There can be no assurance  that such  approvals  will be
granted to the Company on a timely basis, or at all.

         The process of obtaining FDA regulatory  approval  involves a number of
steps that, taken together,  may involve seven years or more from the initiation
of clinical trials and require the expenditure of substantial  resources.  Among
other  requirements,  this process  requires that the product undergo  extensive
preclinical  and  clinical  testing  and  that  the  Company  file  a  New  Drug
Application  ("NDA") requesting FDA approval.  When a product contains more than
one  component  that  contributes  to the  product's  effect,  as do some of the
Company's current product  candidates,  the FDA may request that additional data
be submitted in order to demonstrate the  contribution of each such component to
clinical efficacy. In addition,  when there has been a manufacturing change in a
product  component (either in the process by which the component is manufactured
or the site at which it is manufactured) during product  development,  as is the
case with the collagen gel used in the Company's  products,  the FDA may request
that additional data be submitted to demonstrate that the  manufacturing  change
has not affected  the clinical  performance  of the  product.  In addition,  the
manufacturing facilities for a product must be inspected and accepted by the FDA
as being in compliance  with GMP  regulations  prior to approval of the product.
During  the  first  quarter  of  1998,  the  Company  closed  its  manufacturing
facilities in San Jose and Milpitas,  California and consolidated  manufacturing
personnel  at the  Company's  San  Diego  production  facility.  There can be no
assurance that the Company's San Diego  manufacturing  facility will be accepted
by the FDA in the future,  and failure to receive or  maintain  such  acceptance
would have a material adverse effect on the Company's business.

         The Company's analysis of the results of its clinical studies submitted
as part of an NDA is subject to review and  interpretation by the FDA, which may
differ from the Company's analysis. There can be no assurance that the Company's
data or its  interpretation  of data will be accepted  by the FDA. In  addition,
changes in applicable law or FDA policy during the period of product development
and FDA  regulatory  review may result in the delay or rejection of an NDA filed
by the Company.  Any failure to obtain,  or delay in  obtaining,  FDA  approvals
would adversely affect the ability of the Company to market

                                                                         Page 11

<PAGE>


its proposed products.  Moreover, even if FDA approval is granted, such approval
may include significant  limitations on indicated uses for which a product could
be marketed.

         Before and after approval is obtained, a product, its manufacturer, and
the holder of the NDA for the product are  subject to  comprehensive  regulatory
oversight.  Violations of regulatory  requirements  at any stage,  including the
preclinical  and  clinical  testing  process,  the  approval  process  or  after
approval,  may  result in adverse  consequences,  including  the FDA's  delay in
approving  or refusal to approve a product,  withdrawal  of an approved  product
from the  market,  and/or the  imposition  of  criminal  penalties  against  the
manufacturer  and/or the NDA holder.  In addition,  the subsequent  discovery of
previously  unknown  problems  relating  to a  marketed  product  may  result in
restrictions  on  such  product,  manufacturer,  or the  NDA  holder,  including
withdrawal of the product from the market. Also, new government requirements may
be established that could delay or prevent regulatory  approval of the Company's
products under development.

         Matrix  filed  an NDA for  AccuSite  Injectable  Gel for  treatment  of
condyloma  (genital  warts) with the FDA in 1995.  The FDA has issued two action
(non-approvable)  letters with respect to the Company's  application.  An action
letter  received in September 1997 reiterated  concerns  expressed by the FDA in
December 1996 about the safety profile of AccuSite and, in particular, about the
persistence in certain  AccuSite-treated  patients of a bump-like  thickening or
swelling (induration) at the site of injection,  which the agency believes could
indicate an  inflammatory  process.  The Company  believes the clinical data for
AccuSite,  including supplementary data submitted to the agency in March 1997 as
an  amendment  to the NDA,  are  supportive  of the safety and  efficacy  of the
product in this  indication.  The Company  continues  to pursue  approval of the
Accusite NDA. However, the Company does not intend to invest substantial Company
resources  in this  pursuit and believes it is unlikely  that  AccuSite  will be
cleared  for  marketing  in the United  States.  Accordingly,  the  Company  has
indefinitely  suspended  further  development  and  commercialization   programs
related to AccuSite.

         The processes  required by European  regulatory  authorities before the
Company's products can be marketed in Western Europe are similar to those in the
United States.  First,  appropriate  preclinical  laboratory and animal tests as
well as analytical product quality tests must be done, followed by submission of
a clinical trial exemption or similar documentation before human clinical trials
can be  initiated.  Upon  completion  of adequate and  well-controlled  clinical
trials  in  humans  that  establish  that  the  drug  is safe  and  efficacious,
regulatory approval must be obtained from the relevant regulatory authorities.

         AccuSite  has been  approved in  Belgium,  Denmark,  Germany,  Ireland,
Luxembourg,  The Netherlands and the United Kingdom and recommended for approval
in Finland and Italy. A regulatory  decision is expected in 1998 in France.  The
Company is evaluating whether, in the absence of commercialization in the United
States,  it may be cost  effective to market  AccuSite in Europe  through  local
partners.  Commercialization  of AccuSite in Europe would,  in certain  markets,
also require the  negotiation of  satisfactory  pricing with local  governments.
There  can be no  assurance  that the  Company  will  develop  the  distribution
agreements and regulatory approvals,  including pricing approvals, that would be
necessary to commercialize AccuSite in Europe.

Uncertainties Associated with Clinical Trials

         Matrix has conducted  and plans to continue to undertake  extensive and
costly  clinical  testing to assess the safety  and  efficacy  of its  potential
products.  Failure to comply with FDA regulations applicable to clinical testing
can result in delay, suspension, or cancellation of such testing, and/or refusal
by the FDA to accept the results of such  testing.  In addition,  the FDA or the
Company may modify or suspend  clinical  trials at any time if it concludes that
the  subjects or  patients  participating  in such  trials

                                                                         Page 12

<PAGE>


are  being  exposed  to  unacceptable  health  risks.  Further,  there can be no
assurance  that human  clinical  testing will show any current or future product
candidate to be safe and  effective or provide data  suitable for  submission to
the FDA.

         The Company is currently  conducting  multiple  clinical  trials in the
United States and certain  foreign  countries,  including four ongoing Phase III
trials.  The rate of completion of the  Company's  clinical  trials is dependent
upon, among other factors, the rate of patient enrollment. Patient enrollment is
a function of many factors,  including the size of the patient  population,  the
nature of the  protocol,  the  proximity  of patients to clinical  sites and the
eligibility  criteria  for the study.  The Company has  experienced  slower than
planned  accrual of patients in its ongoing Phase III trials.  Further delays in
completing  enrollment in these trials or delays in other  clinical  studies may
result in increased costs and delays, which could have a material adverse effect
on the Company. Generally, similar considerations apply to clinical testing that
is  subject  to  regulatory  oversight  by foreign  authorities  and/or  that is
intended to be used in connection with foreign marketing applications.

History of Losses; Future Profitability Uncertain

         Matrix was incorporated in 1985 and has experienced  significant losses
since that date.  As of June 30, 1998,  the  Company's  accumulated  deficit was
approximately  $151,554,000.  The Company has not  generated  revenues  from its
products  or product  candidates  and  expects to incur  significant  additional
losses over the next several  years.  In order to achieve a profitable  level of
operations,  the Company must successfully  develop products,  obtain regulatory
approvals for its products, enter into agreements for product  commercialization
outside  the  United  States,  and  develop  an  effective  sales and  marketing
organization in the United States.  No assurance can be given that the Company's
product  development  efforts  will  be  completed,   that  required  regulatory
approvals will be obtained,  that any products will be manufactured and marketed
successfully, or that profitability will be achieved.

Additional Financing Requirements and Uncertain Access to Capital Markets

         The Company has expended and will continue to expend  substantial funds
to complete the research and development of its product candidates.  The Company
may require  additional  funds for these purposes through  additional  equity or
debt  financings,  collaborative  arrangements  with corporate  partners or from
other  sources.  No assurance  can be given that such  additional  funds will be
available on acceptable  terms,  if at all. If adequate  funds are not available
from operations or additional sources of financing, the Company's business could
be materially and adversely  affected.  Based on its current operating plan, the
Company  anticipates  that its existing  capital  resources  will be adequate to
satisfy its  capital  needs  through  2000.  See  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations."

Limited Manufacturing and Sales and Marketing Experience

         The  Company  intends  to  market  and  sell  certain  of  its  product
candidates,  if successfully  developed and approved,  through its own dedicated
sales force in the United States and through pharmaceutical licensees in Europe.
There  can be no  assurance  that  the  Company  will  be able  to  establish  a
successful   direct  sales   organization   or   co-promotion   or  distribution
arrangements.  In addition,  there can be no assurance  that  resources  will be
available to the Company to fund  marketing  and sales  expenses,  many of which
must be incurred  before sales  commence.  Failure to establish a marketing  and
sales  capability in the United States and/or outside the United States may have
a material adverse effect on the Company.

                                                                         Page 13

<PAGE>


         The Company's  ability to conduct clinical trials on a timely basis, to
obtain  regulatory  approvals and to  commercialize  its products will depend in
part upon its ability to manufacture  its products,  either  directly or through
third parties,  at a competitive  cost and in accordance with applicable FDA and
other regulatory  requirements,  including GMP  regulations.  The Company closed
manufacturing facilities in San Jose and Milpitas,  California in March 1998 and
transferred  manufacturing personnel to a research and manufacturing facility in
San  Diego,  California  that  was  acquired  in  1995  to  meet  the  Company's
anticipated  long-term  commercial  scale production  requirements.  The Company
expects that the San Diego  facility and contract  manufacturers  should provide
sufficient  production capacity to meet clinical  requirements.  There can be no
assurance  that the Company will be able to validate  this  facility in a timely
manner or that this  facility  will be adequate  for  Matrix's  long-term  needs
without delaying the Company's  ability to meet product demand or to manufacture
in a cost-effective  manner. Matrix expects to continue to use selected contract
manufacturers,  in addition to its own manufacturing capability, for some or all
of  its  product  components.  Failure  to  establish  additional  manufacturing
capacity on a timely basis may have a material adverse effect on the Company.

Dependence on Sources of Supply

         Several of the materials  used in the Company's  products are available
from a limited  number of  suppliers.  These items,  including  collagen gel and
various bulk drug substances used in the Company's products, have generally been
available to Matrix and others in the  pharmaceutical  industry on  commercially
reasonable  terms.  If the Company's  manufacturing  facilities  are not able to
produce  sufficient  quantities  of collagen gel in accordance  with  applicable
regulations,  the Company would have to obtain  collagen gel from another source
and gain regulatory approval for that source. There can be no assurance that the
Company would be able to locate an alternative,  cost-effective source of supply
of collagen  gel.  Matrix has  negotiated  and intends to continue to  negotiate
supply agreements, as appropriate, for the raw materials and components utilized
in its products. Any interruption of supply could have a material adverse effect
on the Company's ability to manufacture its products,  complete clinical trials,
or commercialize  products. In addition,  the Company's ability to commercialize
its  IntraDose  Injectable  Gel product in the United States could be limited by
the issuance in 1996 of a U.S.  patent for cisplatin,  a  chemotherapeutic  drug
that is the active compound in IntraDose, if the newly-issued patent were upheld
and if IntraDose  were found to infringe  that  patent,  and if the Company were
unable to obtain a license  under  that  patent.  See  "--Uncertainty  Regarding
Patents and Proprietary Rights."

Uncertainty Regarding Patents and Proprietary Rights

         The Company's  success  depends in part on its ability to obtain patent
protection  for its  products  and to  preserve  its trade  secrets  and operate
without infringing on the proprietary rights of third parties.  No assurance can
be given that the Company's pending patent applications will be approved or that
any patents will provide  competitive  advantages for the Company's  products or
will not be  successfully  challenged or circumvented  by its  competitors.  The
Company has not  conducted an  exhaustive  patent search and no assurance can be
given  that  patents  do not  exist or could  not be filed  which  would  have a
material  adverse  effect on the  Company's  ability to market its  products  or
maintain its  competitive  position with respect to its products.  The Company's
patents  may not prevent  others  from  developing  competitive  products  using
related  technology.  Other companies that obtain patents  claiming  products or
processes  useful to the  Company  may bring  infringement  actions  against the
Company. As a result, the Company may be required to obtain licenses from others
to develop,  manufacture or market its products.  There can be no assurance that
the Company will be able to obtain any such licenses on commercially  reasonable
terms,  if at all.  The  Company  also relies on trade  secrets and  proprietary
know-how which it seeks to protect, in part, by confidentiality  agreements with
its employees,  consultants,  suppliers and licensees. There can be no assurance
that these agreements will not be breached, that the Company would

                                                                         Page 14

<PAGE>


have adequate  remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently developed by competitors.

         No  assurance  can be given that any patent  issued to, or licensed by,
the Company will provide  protection that has commercial  significance.  In this
regard,  the patent  position of  pharmaceutical  compounds and  compositions is
particularly uncertain.  Even issued patents may later be modified or revoked by
the United States Patent and Trademark Office ("PTO") in proceedings  instituted
by Matrix or others. During the prosecution of the Japanese version of the first
patent  on  the  Company's  base  technology,  the  Company  became  aware  of a
previously unknown prior art reference. This was brought to the attention of the
U.S. PTO in a reexamination  of the U.S.  patent.  The Japanese patent has since
been issued, and the United States patent has been reissued with claims slightly
modified in light of the prior art. The Company believes,  although no assurance
can be given, that the modified claims will not materially  adversely affect the
Company's proprietary protection for its products. In addition, no assurance can
be given that the Company's patents will afford protection  against  competitors
with similar compounds or technologies, that others will not obtain patents with
claims  similar to those covered by the Company's  patents or  applications,  or
that the patents of others will not have an adverse effect on the ability of the
Company to do business.

         In 1996, for instance, a composition-of-matter patent for the cytotoxic
drug  cisplatin  was granted in the United  States to a  pharmaceutical  company
whose use patent on cisplatin as an anti-tumor  agent expired in December  1996.
The Company, on advice of patent counsel,  believes that the Company's IntraDose
product,  which contains cisplatin,  does not infringe this patent and also that
new patent may have been  improperly  awarded and should be found invalid and/or
unenforceable.  However,  if the  new  patent  on  cisplatin  is  upheld  and if
IntraDose were found to infringe that patent, there can be no assurance that the
Company  would  be able to  obtain  a  license  to the  patent  on  commercially
reasonable  terms, if at all, in order to commercialize  IntraDose in the United
States.

         The  Company  believes  that  obtaining  foreign  patents  may be  more
difficult than obtaining domestic patents because of differences in patent laws,
and recognizes that its patent position  therefore may be stronger in the United
States than abroad.  In addition,  the protection  provided by foreign  patents,
once they are obtained, may be weaker than that provided by domestic patents.

Rapid Technological Change and Substantial Competition

         The  pharmaceutical  industry  is  subject  to  rapid  and  substantial
technological   change.   Technological   competition   in  the  industry   from
pharmaceutical and biotechnology companies, universities,  governmental entities
and others  diversifying  into the field is intense and is expected to increase.
Most of these  entities  have  significantly  greater  research and  development
capabilities, as well as substantially more marketing,  financial and managerial
resources  than the  Company,  and  represent  significant  competition  for the
Company.  Acquisitions of, or investments in, competing  biotechnology companies
by large  pharmaceutical  companies could increase such competitors'  financial,
marketing and other  resources.  There can be no assurance that  developments by
others will not render the Company's products or technologies  noncompetitive or
that the  Company  will be able to keep  pace with  technological  developments.
Competitors have developed or are in the process of developing technologies that
are, or in the future may be, the basis for competitive products.  Some of these
products  may have an  entirely  different  approach  or means of  accomplishing
similar therapeutic effects than products being developed by the Company.  These
competing  products  may be more  effective  and less costly  than the  products
developed by the Company.  In addition,  conventional drug therapy,  surgery and
other more familiar  treatments and  modalities  will compete with the Company's
products.

                                                                         Page 15

<PAGE>


         Any product which the Company  succeeds in developing  and for which it
gains  regulatory  approval must then compete for market  acceptance  and market
share. Accordingly,  important competitive factors, in addition to completion of
clinical  testing and the receipt of regulatory  approval,  will include product
efficacy,  safety,  timing and scope of regulatory  approvals,  availability  of
supply,  marketing and sales  capability,  reimbursement  coverage,  pricing and
patent protection.

Uncertainty of Pharmaceutical Pricing; No Assurance of Adequate Reimbursement

         The future  revenues,  profitability,  and  availability of capital for
biopharmaceutical  companies  may be  affected  by  the  continuing  efforts  of
governmental  and third  party  payers to  contain or reduce the costs of health
care through various means.  For example,  in certain foreign markets pricing or
profitability of prescription  pharmaceuticals is subject to government control.
In the United States,  there have been, and the Company  expects that there will
continue to be, a number of federal and state  proposals  to  implement  similar
government   control.   While  the  Company  cannot  predict  whether  any  such
legislative  or  regulatory  proposals  will be  adopted,  the  announcement  or
adoption of such proposals could have a material adverse effect on the Company's
prospects.

         The Company's ability to commercialize  its products  successfully will
depend in part on the extent to which appropriate  reimbursement  levels for the
cost of such  products  and  related  treatment  are  obtained  from  government
authorities,  private health  insurers and other  organizations,  such as health
maintenance   organizations   ("HMOs").   Third-party  payers  are  increasingly
challenging  the prices  charged for medical  products and services.  Also,  the
trend towards managed health care in the United States and the concurrent growth
of organizations  such as HMOs,  which could control or significantly  influence
the  purchase of health  care  services  and  products,  as well as  legislative
proposals to reform health care or reduce  government  insurance  programs,  may
limit  prices the  Company  can charge for its  products.  The cost  containment
measures that health care payers and providers are instituting and the effect of
any health care reform could adversely affect the Company's  ability to sell its
products and may have a material adverse effect on the Company.

Dependence Upon Qualified and Key Personnel

         Because  of the  specialized  nature  of the  Company's  business,  the
Company's ability to maintain its competitive position depends on its ability to
attract and retain qualified  management and scientific  personnel.  Competition
for such  personnel is intense.  There can be no assurance that the Company will
be able to continue to attract or retain such persons.


Product Liability Exposure; Limited Insurance Coverage

         The  Company  faces an  inherent  business  risk of exposure to product
liability  claims in the  event  that the use of  products  during  research  or
commercialization results in adverse effects. While the Company will continue to
take  appropriate  precautions,  there can be no  assurance  that it will  avoid
significant product liability exposure.  The Company maintains product liability
insurance for clinical  studies.  However,  there can be no assurance  that such
coverage  will be  adequate  or that  adequate  insurance  coverage  for  future
clinical or commercial  activities will be available at all, or at an acceptable
cost, or that a product  liability claim would not materially  adversely  affect
the business or financial condition of the Company.

                                                                         Page 16

<PAGE>


Hazardous Materials and Product Risks

         The Company's  research and development  involves the controlled use of
hazardous  materials,  such as  cytotoxic  drugs,  other toxic and  carcinogenic
chemicals and various radioactive compounds.  Although the Company believes that
its safety  procedures for handling and disposing of such materials  comply with
the standards  prescribed by federal,  state and local regulations,  the risk of
accidental  contamination  or injury from these  materials  cannot be completely
eliminated.  In the event of such an accident,  the Company could be held liable
for any damages that result,  and any such  liability  could be  extensive.  The
Company is also  subject to  substantial  regulation  relating  to  occupational
health and safety,  environmental  protection,  hazardous substance control, and
waste management and disposal. The failure to comply with such regulations could
subject the Company to, among other things, fines and criminal liability.

         Certain   chemotherapeutic  agents  employed  by  the  Company  in  its
aqueous-based protein systems, Anhydrous Delivery Vehicles ("ADV"), and regional
delivery technology are known to have toxic side effects, particularly when used
in traditional  methods of  administration.  Each product  incorporating  such a
chemotherapeutic  agent will  require  separate FDA approval as a new drug under
the procedures  specified above.  Bovine collagen is a significant  component of
the Company's protein matrix. Two rare autoimmune  connective tissue conditions,
polymyositis  and  dermatomyositis  ("PM/DM"),  have been  alleged to occur with
increased frequency in patients who have received cosmetic collagen  treatments.
Based  upon  the  occurrence  of these  conditions,  the FDA  requested  a major
manufacturer   of  bovine  collagen   products  for  cosmetic   applications  to
investigate the safety of such uses of its collagen.  In October 1991, an expert
panel  convened  by  the  FDA to  examine  this  issue  found  no  statistically
significant  relationships  between  injectable  collagen and the  occurrence of
autoimmune  disease,  but noted that certain  limitations  in the available data
made it difficult to establish a statistically significant association.

         In addition,  bovine sourced  materials are of some concern  because of
transmission of Bovine Spongiform Encelphalopathy ("BSE"). The Company has taken
all precautions to minimize the risk of  contamination of its collagen with BSE,
including  the  use of  United  States-sourced  cow  hides.  The  Committee  For
Proprietary  Medicinal Products  ("CPMP"),  a steering committee of the European
Medicines Evaluation Agency ("EMEA"),  has classified materials made from bovine
skin products as showing no detectable  infectivity,  indicating minimal risk of
transmission of BSE.

Volatility of Stock Price; No Dividends

         The market prices for securities of biopharmaceutical and biotechnology
companies  (including the Company) have historically been highly volatile,  and,
in addition, the market has from time to time experienced  significant price and
volume  fluctuations  that  are  unrelated  to  the  operating   performance  of
particular   companies.   Future  announcements   concerning  the  Company,  its
competitors  or  other  biopharmaceutical  products,   governmental  regulation,
developments in patent or other proprietary rights, litigation or public concern
as to the safety of  products  developed  by the  Company or others and  general
market  conditions  may have a  significant  effect on the  market  price of the
Common  Stock.  The Company has not paid any cash  dividends on its Common Stock
and does not anticipate paying any dividends in the foreseeable future.

                                                                         Page 17

<PAGE>


Anti-Takeover Provisions

         Certain  provisions of the Company's  Certificate of Incorporation  and
Bylaws  may have the  effect of making it more  difficult  for a third  party to
acquire,  or discouraging a third party from  attempting to acquire,  control of
the Company.  Such provisions could limit the price that certain investors might
be willing to pay in the future for shares of the Company's  Common  Stock.  The
Company's  Board of  Directors  has the  authority  to issue shares of Preferred
Stock  and  to  determine  the  price,  rights,   preferences,   privileges  and
restrictions  of  those  shares  without  any  further  vote  or  action  by the
stockholders.

         The rights of the  holders of Common  Stock will be subject to, and may
be adversely  affected by, the rights of the holders of any Preferred Stock that
may be issued in the future.  The issuance of Preferred  Stock,  while providing
desirable  flexibility  in  connection  with  possible  acquisitions  and  other
corporate  purposes,  could  have the effect of making it more  difficult  for a
third  party to  acquire  a  majority  of the  outstanding  voting  stock of the
Company.  The Company has no present  plans to issue shares of Preferred  Stock.
Certain provisions of Delaware law applicable to the Company could also delay or
make more  difficult  a merger,  tender  offer or proxy  contest  involving  the
Company,  including  Section 203 of the Delaware General  Corporation Law, which
prohibits a Delaware  corporation from engaging in any business combination with
any interested stockholder for a period of three years unless certain conditions
are met.

Year 2000 Compliance

         The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive  and complex as virtually  every  computer  operation
will be affected in some way by the  rollover of the two digit year value to 00.
The issue is whether  computer  systems will properly  recognize  date sensitive
information  when  the  year  changes  to  2000.  Systems  that do not  properly
recognize such  information  could generate  erroneous data or cause a system to
fail.

         During 1997,  the Company  installed a new  accounting  system that was
confirmed by the vendor to address the year 2000 related  issues.  However,  the
Company  has not  analyzed  the  external  factors,  such as the impact on those
vendors  adversely  affected by the year 2000 issue,  and has not  assessed  the
related  potential  effect on the  Company's  business,  financial  condition or
results of  operations.  There can be no  assurance  that  computer  systems and
applications of other  companies on which the Company's  operations rely will be
converted  in a timely  fashion,  or that such  failure  to  correct  by another
company would not have a material adverse effect on the Company.

                                                                         Page 18

<PAGE>


                           MATRIX PHARMACEUTICAL, INC.

PART II                       OTHER INFORMATION


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

The Company's 1998 Annual Meeting of Stockholders  was held on May 18, 1998. The
following  directors,  all of whom served in such capacity prior to the meeting,
were re-elected by the stockholders:


                                             For                     Withheld
                                          ----------                 --------
         Michael D. Casey                 20,301,934                  53,950
         J. Stephan Dolezalek             20,302,584                  53,300
         James R. Glynn                   20,302,534                  53,350
         Marvin E. Jaffe, M.D.            20,291,634                  64,250
         Bradley G. Lorimier              20,300,834                  55,050
         Edward E. Luck                   20,302,634                  53,250
         John E. Lyons                    20,298,934                  56,950
         Julius L. Pericola               20,302,284                  53,600


The following  additional  matter was submitted to the stockholders for vote and
approved at the meeting:

         o    Ratification  of  the  appointment  of  Ernst  and  Young  LLP  as
              independent  auditors  of the  Company  for the fiscal year ending
              December 31, 1998.  Of the total  shares  voting on the  foregoing
              resolution,  20,324,234 voted in favor, 17,565 voted against,  and
              14,085 abstained.

Item 5. Other Information

None

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Item 6. Exhibits and Reports on Form 8-K

                  (a)      Exhibits

                           27.1     Financial Data Schedule

                  (b)      Reports on Form 8-K

                                       There were no Current Reports on Form 8-K
                                  filed during the quarter ended June 30, 1998.

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                           MATRIX PHARMACEUTICAL, INC.


                                    SIGNATURE


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.


                           MATRIX PHARMACEUTICAL, INC.


Date: August 12, 1998                      By: /s/ Michael D. Casey
      -----------------                        ---------------------------------
                                           Michael D. Casey
                                           President and
                                           Chief Executive Officer


                                   Signing  on behalf of the  registrant  and as
                                   principal executive and financial officer

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