<PAGE>

================================================================================
 
                      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 [NO FEE REQUIRED]
     
               For the Quarterly Period Ended September 30, 1996
               
                                      OR

    (  )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

             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
       of incorporation or organization)             Identification No.)

            3400 Research Forest Drive, The Woodlands, Texas 77381
          (Address of principal executive office)         (Zip Code)

      Registrant's telephone number, including area code:  (713) 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, 1996
           ---------------                    --------------------------------- 
     Common Stock, $.001 par value                    14,557,089 shares

================================================================================

<PAGE>
 
                         ARONEX PHARMACEUTICALS, INC.
                      QUARTERLY PERIOD SEPTEMBER 30, 1996

                                     INDEX

<TABLE>
<CAPTION>
 
 
PART I.         FINANCIAL INFORMATION
                ---------------------
<S>                          <C>                                                                      <C>
                                                                                                      PAGE
                                                                                                      ----  
Item 1  Financial Statements..........................................................................  3
 
        Balance Sheets - December  31, 1995 and September  30, 1996 (unaudited).......................  4
 
        Statements of Operations:
        Nine Months ended September 30, 1995 and September 30, 1996
        (unaudited) and for the Period from Inception (June 13, 1986)
        through September 30, 1996 (unaudited)........................................................  5
 
        Statements of Cash Flows:
        Nine Months ended September 30, 1995 and September 30, 1996
        (unaudited) and for the Period from Inception (June 13, 1986)
        through September 30, 1996  (unaudited)......................................................   6
 
        Notes to Financial Statements - September 30, 1996...........................................   7
 
Item 2  Management's Discussion and Analysis of Financial
         Condition and Results of  Operations........................................................   9
 
PART II         OTHER INFORMATION
                ------------------
 
Item 6  Exhibits and Reports on Form 8-K.............................................................  12
 
SIGNATURES...........................................................................................  13

EXHIBITS

</TABLE> 

                                       2
<PAGE>
 
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,
1995 included in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1995, as amended, 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)

                                 BALANCE SHEETS
                 (ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

                                  A S S E T S
<TABLE>
<CAPTION>
                                                                                                       SEPTEMBER 30,
                                                                           DECEMBER 31,                    1996
                                                                               1995                     (UNAUDITED)
                                                                           -------------              ----------------
<S>                                                                           <C>                        <C>
Current assets:
 Cash and cash equivalents...............................................      $  7,781                    $  5,539              
 Short-term investments..................................................         2,480                      35,411              
 Accounts receivable - affiliates........................................           345                         175              
 Accrued interest receivable.............................................             9                         524              
 Prepaid expenses and other assets.......................................           279                         170              
                                                                               --------                    --------              
  Total current assets...................................................        10,894                      41,819              
                                                                                                                                 
Long-term investments....................................................         1,754                       1,762              
Furniture, equipment and leasehold improvements, net.....................         2,832                       2,320              
Investment in affiliate..................................................            50                          --              
                                                                               --------                    --------              
  Total assets...........................................................      $ 15,530                    $ 45,901              
                                                                               ========                    ========
 
                               L I A B I L I T I E S  A N D   S T O C K H O L D E R S '  E Q U I T Y
 
Current liabilities:
 Accounts payable and accrued expenses...................................      $  1,478                    $  1,212           
 Accrued payroll.........................................................           161                         120           
 Note payable - related party............................................            --                       2,000           
 Current portion of notes payable - related party........................            87                          --           
 Current portion of other notes payable..................................           211                         211           
 Current portion of obligations under capital leases.....................            25                          17           
                                                                               --------                    --------           
  Total current liabilities                                                       1,962                       3,560            
 
Long-term obligations:
 Notes payable - related party, net of current portion...................           211                          --
 Other notes payable, net of current portion.............................           446                         291
 Obligations under capital leases, net of current portion................            41                          31
 Deferred revenue........................................................           876                         298
                                                                               --------                    --------
  Total long-term obligations............................................         1,574                         620
 
Commitments and contingencies
Stockholders' equity:
 Preferred stock $.001 par value, 10,000,000 shares authorized,
  none issued and outstanding............................................            --                          --
 Common stock $.001 par value, 75,000,000 shares authorized
  10,380,056 and 14,557,089 shares issued and outstanding, respectively..            10                          15
 Additional paid-in capital..............................................        56,342                      93,808
 Common stock warrants...................................................         1,488                         970
 Treasury stock..........................................................           (11)                        (11)
 Deferred compensation...................................................        (1,536)                     (2,347)
 Unrealized loss on investments..........................................          (116)                       (109)
 Deficit accumulated during development stage............................       (44,183)                    (50,605)
                                                                               --------                    --------
  Total stockholders' equity.............................................        11,994                      41,721
                                                                               --------                    --------
 Total liabilities and stockholders' equity..............................      $ 15,530                    $ 45,901
                                                                               ========                    ========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>
 
                         ARONEX PHARMACEUTICALS, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                           STATEMENTS OF OPERATIONS
            (ALL AMOUNTS IN THOUSANDS, EXCEPT LOSS PER SHARE DATA)
                                  (UNAUDITED)



<TABLE>
<CAPTION>
  
                                                                                                                PERIOD FROM
                                                                                                                 INCEPTION
                                                                                                              (JUNE 13, 1986)
                                                           NINE MONTHS ENDED           THREE MONTHS ENDED         THROUGH
                                                             SEPTEMBER 30,                 SEPTEMBER 30         SEPTEMBER 30,
                                                       1995               1996           1995         1996          1996
                                                      ------             --------      -------      -------     ------------
<S>                                              <C>                 <C>                  <C>             <C>       <C>
 
Revenues:
    Research and development
      grants and contracts...............           $    491              $ 1,811         $   200   $   803         $  3,240
    Interest income......................                289                1,065              76       595            3,005
                                                    --------              -------         -------   -------         --------
              Total revenues                             780                2,876             276     1,398            6,245
                                                    --------              -------         -------   -------         --------
 
Expenses:
    Research and development.............              5,452                7,814           1,910     2,969           36,599
    Purchase of in-process
      research and development...........              7,419                  191           7,419        --            8,574
    General and administrative...........              1,534                1,197             718       426           10,740
    Interest expense.....................                144                   96              46        25              937
                                                    --------              -------         -------   -------         --------
              Total expenses.............             14,549                9,298          10,093     3,420           56,850
                                                    --------              -------         -------   -------         --------
Net loss.................................           $(13,769)             $(6,422)        $(9,817)  $(2,022)        $(50,605)
                                                    ========              =======         =======   =======         ========
 
Loss per share...........................             $(2.50)              $(0.51)         $(1.61)   $(0.14)
                                                    ========              =======         =======   =======
Weighted average shares used in
    computing loss per share.............              5,515               12,539           6,082    14,542
 
</TABLE>



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

                                       5
<PAGE>
 
                          ARONEX PHARMACEUTICALS, INC
                         (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF CASH FLOWS
                           (ALL AMOUNTS IN THOUSANDS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                        PERIOD FROM
                                                                                                         INCEPTION
                                                                                                      (JUNE 13, 1986)
                                                                            NINE MONTHS ENDED              THROUGH
                                                                              SEPTEMBER 30,               SEPTEMBER 30,
                                                                           1995            1996               1996
                                                                           -------       --------      -----------------
<S>                                                                         <C>           <C>           <C>
Cash flows from operating activities:
  Net loss.........................................................          $(13,769)     $ (6,422)           $(50,605)
  Adjustments to reconcile net loss to net cash provided by
   (used in) operating activities-
     Depreciation and amortization.................................               524           729               2,680
     Compensation expense related to stock and stock options.......               291           476               2,565
     Charge for purchase of in-process research and development....             7,419           191               8,574
     Changes in assets and liabilities-                                                                  
      Decrease (increase) in accrued interest receivable,                                                
       prepaid expenses and other assets...........................               188          (406)               (509)
      Increase (decrease) in accrued payroll,                                                            
       accounts payable and accrued expenses.......................               393          (307)              1,259
      Decrease (increase) in accounts receivable - affiliates......                47           170                (175)
      Increase (decrease) in deferred revenue......................               276          (578)                (55)
     Accrued interest payable converted to stock...................                --            --                  97
                                                                             --------      --------            --------
       Net cash used in operating activities.......................            (4,631)       (6,147)            (36,169)
                                                                                                         
Cash flows from investing activities:                                                                    
  Net sales (purchases) of investments.............................             6,894       (32,931)            (31,430)
  Purchase of furniture, equipment and leasehold                                                         
   improvements....................................................               (92)         (217)             (3,730)
  Unrealized gain (loss) on investment.............................               143             8                (108)
  Acquisition costs, net of cash received of $947,000..............              (222)          (26)               (296)
  Loss in affiliate................................................               225            50                 500
  Investment in affiliate..........................................                --            --                (500)
                                                                             --------      --------            --------
        Net cash provided by (used in) investing activities........             6,948       (33,116)            (35,564)
                                                                                                         
Cash flows from financing activities:                                                                    
  Proceeds from notes payable and capital leases...................                64         2,000               4,672
  Repayment of notes payable and principal payments under                                                
    capital lease obligations......................................              (232)         (471)             (2,123)
  Purchase of treasury stock.......................................                --            --                 (11)
  Proceeds from issuance of stock..................................                14        35,492              74,734
                                                                             --------      --------            --------
        Net cash provided by (used in) financing activities........              (154)       37,021              77,272
                                                                             --------      --------            --------
Net increase (decrease) in cash and cash equivalents...............             2,163        (2,242)              5,539
Cash and cash equivalents at beginning of period...................             1,426         7,781                  --
                                                                             --------      --------            --------

Cash and cash equivalents at end of period.........................          $  3,589      $  5,539            $  5,539
                                                                             ========      ========            ========

Supplemental disclosures of cash flow information:
  Cash paid during the period for interest.........................          $    144      $     96            $    828
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, 1996
                                  (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 revenues in
the future.  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 the 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 mid-
1998.  Accordingly, there can be no assurance of the Company's future success.

          The balance sheet at September 30, 1996 and the related statements of
operations and cash flows for the nine month periods ending September 30, 1996
and 1995 and the period from inception (June 13, 1986) through September 30,
1996 are unaudited.  These interim financial statements should be read in
conjunction with the December 31, 1995 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.

          Certain reclassifications have been made to December 31, 1995 balances
to conform to current year presentation.

2.  CASH, CASH EQUIVALENTS AND INVESTMENTS

          The Company has adopted Statement of Financial Accounting Standards
No. 115 ("SFAS 115"), Accounting for Certain Investments in Debt and Equity
Securities.  Debt and equity securities that the Company has the intent and
ability to hold to maturity are classified as "held to maturity" and reported at
amortized cost.  Debt and equity securities that are held for current resale are
classified as "trading securities" and reported at fair value with unrealized
gains and losses included in earnings.  Debt and equity securities not
classified as either "securities held to maturity" or "trading securities" are
classified as "securities available for sale" and reported at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate
component of stockholders' equity.  The adoption of SFAS 115 did not have a
material effect on the Company's financial position or results of operations.

          Cash and cash equivalents include money market accounts and
investments with an original maturity of less than three months.  All securities
held to maturity consist of high-grade commercial securities and U.S. Government
backed securities with a maturity date of less than one year and have a carrying
value which approximates fair market value and cost. Available for sale
securities are U.S. mortgage backed securities with various maturity dates over
the next several years that have an amortized cost of $1,871,000, a fair market
value of $1,762,000 and a gross unrealized loss of $109,000 at September 30,
1996.  The Company currently has no trading securities.

                                       7
<PAGE>
 
                          ARONEX PHARMACEUTICALS, INC
                         (A DEVELOPMENT STAGE COMPANY)



3.        FEDERAL INCOME TAXES
 
          At December 31, 1995, the Company had net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $57.1 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
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.
The Company has not made any income tax payments since inception.

4.        NOTE PAYABLE - AFFILIATE

          In September 1996, the Company received a $2.0 million advance on a
$5.0 million equity milestone investment from Genzyme Corporation, the Company's
corporate partner, for the development of the anti-cancer agent Atragen/TM/
(formerly Tretinoin L.F.).  The advance is secured by a promissory note bearing
interest at 9 percent per annum.  If the related milestone is not met, the note
plus accrued interest is payable on September 13, 1997.

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.        SETTLEMENT

          In August 1995, the Company was named as a defendant in a lawsuit
filed by certain common stockholders of Oncologix seeking damages as a result of
the merger with Oncologix.  Plaintiffs contend that the provision of the merger
whereby common stockholders obtained no consideration is contrary to law and
damaging to them.  Plaintiffs sought prior injunctive relief to prevent
consummation of the merger, but this relief was denied by the District Court.
In July 1996, the Company resolved this matter and the lawsuit was dismissed
without a material adverse effect on the accompanying financial statements.  An
expense relating to this settlement has been recorded in the purchase of in-
process research and development.

                                       8
<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 $50.6 million through September 30, 1996.  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.  On September 11, 1995, Aronex acquired Oncologix,
Inc. ("Oncologix") and Triplex Pharmaceutical Corporation ("Triplex") in a
three-way merger (the "Mergers"), which were accounted for under the purchase
method of accounting.  The financial data prior to September 11, 1995 discussed
below represent the operations and balance sheet data of Aronex, while the
financial data from and after September 11, 1995 discussed below represent the
combined operations and balance sheet data of the merged companies.

          THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995

          Revenues from research and development grants and contracts were
$803,000 and $200,000 for the three months ended September 30, 1996 and 1995,
respectively, an increase of $603,000.  Research and development grants and
contracts were $1,811,000 and $491,000 for the nine months ended September 30,
1996 and 1995, respectively, an increase of $1,320,000. These increases were due
to the increase in development revenue from RGene Therapeutics, Inc. ("RGene"),
an affiliate of the Company, to $269,000 for the nine months ended September 30,
1996 from $191,000 for the corresponding period in 1995; recognition of $378,000
in revenues during the third quarter of 1996 relating to pharmaceutical
development work performed in connection with the Company's collaborative
agreement with Genzyme Corporation ("Genzyme") directed at developing and
commercializing Atragen/TM/ (formerly TretinoinLF); revenues of $900,000 from
Hoechst Marion Roussel Inc. ("Hoechst") for the nine months ended September 30,
1996; and $73,000 from Small Business Innovative Research ("SBIR") grants for
the nine months ended September 30, 1996.  The Company received no revenue from
Hoechst or SBIR grants in the first nine months of 1995 because these grants and
contracts were obtained as a result of the Mergers. Additionally, the Company
did not recognize any revenue relating to the Genzyme contract in the first nine
months of 1995 as the amounts were being deferred in accordance with the
Company's collaborative agreement.
 
          Interest income was $595,000 and $76,000 for the three  months ended
September 30, 1996 and 1995, respectively, an increase of $519,000.  Interest
income was $1,065,000 and $289,000 for the nine months ended September 30, 1996
and 1995, respectively, an increase of $776,000. These increases were primarily
due to an increase of funds available for investment in 1996 resulting from cash
received from the exercise of warrants and the completion of a stock offering in
May 1996.

          Research and development expenses were $2,969,000 and $1,910,000 for
the three months ended September 30, 1996 and 1995, respectively, an increase of
$1,059,000.  Research and development expenses were $7,814,000 and $5,452,000
for the nine months ended September 30, 1996 and 1995, respectively, an
increase of $2,362,000.  These increases were primarily due to the addition of
Triplex's research department following the Mergers and increased clinical
investigation costs relating to the Company's Nyotran/TM/ and Zintevir/TM/
products.

          Purchase of in-process research and development represents charges
incurred in connection with the Mergers in September 1995.  The Company incurred
a non-cash charge of $7,419,000 in September 1995 and additional charges of
$191,000 in 1996 including the non-cash settlement of a lawsuit that had been
filed by certain common stockholders of Oncologix.

          General and administrative expenses were $426,000 and $718,000 for the
three months ended September 30, 1996 and 1995, respectively, a decrease of
$292,000.  General and administrative expenses were $1,197,000 and $1,534,000
for the

                                       9
<PAGE>
 
nine months ended September 30, 1996 and 1995, respectively, a decrease of
$337,000.  These decreases were primarily a result of $250,000 in non-recurring
operating expenses incurred on behalf of Oncologix paid by the Company pursuant
to the terms of the Oncologix merger agreement in 1995 and a decrease in salary
and personnel costs from 1995 due to severance pay for the Company's former
president in the prior year.

          Interest expense was $25,000 and $46,000 for the three months ended
September 30, 1996 and 1995, respectively, a decrease of $21,000.  Interest
expense was $96,000 and $144,000 for the nine months ended September 30, 1996
and 1995, respectively, a decrease of $48,000.  These decreases in interest
expense resulted primarily from a decrease in the amount of laboratory equipment
obtained through leases and promissory notes payable.

          Net loss was $2,022,000 and $9,817,000 for the three months ended
September 30, 1996 and 1995, respectively, a decrease of $7,795,000.  Net loss
for the nine months ended September 30, 1996 and 1995, respectively, was
$6,422,000 and $13,769,000, a decrease of $7,347,000.  These decreases were due
mainly to the $7,419,000 charge in the third quarter of 1995 for the purchase of
in-process research and development resulting from the mergers with Triplex and
Oncologix.

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 $74.7 million
from the sale of equity securities from its inception through September 30,
1996.  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 Atragen/TM/, 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, the Company raised net proceeds of
approximately $11.5 million in a public offering of Common Stock. From October
1995 through September 30, 1996, the Company received aggregate net proceeds of
approximately $5.3 million from the exercise of certain warrants issued in the
Mergers.  In September 1995, the Company's cash and securities held to maturity
increased by approximately $6.7 million as a result of its merger with Triplex.
In May 1996, the Company received net proceeds of approximately $32.1 million in
a public offering of Common Stock.

          Since its inception, the Company has recognized an aggregate of
approximately $3.2 million from research and development revenue grants and
contracts.  A substantial portion of this revenue over the past two years
resulted from the collaborative agreements with RGene and Hoechst.  As a result
of RGene's merger with Targeted Genetics Corporation in June 1996, Aronex
expects that the collaborative development work being performed for RGene will
decrease substantially over the next few months.  The agreement with Hoechst
terminates at the end of 1996 unless the parties agree to renew it.  No
assurance can be given that the agreement will be renewed.  Hoechst recently
completed a merger with Marion Merrell Dow Pharmaceuticals, Inc. and has
indicated that it is re-evaluating its collaborative arrangements.

          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 $6.1 million
and $4.6 million was used in operating activities during the first nine months
of 1996 and 1995, respectively.  The Company had cash, cash-equivalents and
investments of $42.7 million as of September 30, 1996, consisting primarily of
cash in banks and money market accounts, commercial securities and U.S.
government securities.

          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 mid-1998.  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
Company's ability to satisfy certain milestones under its current collaborative
arrangements with Genzyme and Hoechst; 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; the costs of filing, prosecuting and
defending and enforcing any patent claims and other

                                       10
<PAGE>
 
intellectual property rights; and changes in economic, regulatory or competitive
conditions or 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.

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/A for the
year ended December 31, 1995, as amended, and "-- Liquidity and Capital
Resources" included elsewhere in this report.

                                       11
<PAGE>
 
PART II.         OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

 (a)  Exhibits
      --------

      10.1  Amendment No. 2 to License and Development Agreement between Aronex
            Pharmaceuticals, Inc. and Genzyme Corporation.

      10.2  Amendment No. 2 to Stock Purchase Agreement between Aronex
            Pharmaceuticals, Inc. and Genzyme Corporation.

      10.3  Promissory note payable to Genzyme Corporation dated 
            September 13, 1996.

      11.1  Statement regarding computation of per share earnings.

      27.1  Financial Data Schedule.

 (b)  Reports on Form 8-K
      -------------------

      None

                                       12
<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 24, 1996           By:/S/JAMES M. CHUBB
                                      --------------------
                                   James M. Chubb, Ph.D.
                                   President and Chief Executive Officer



Dated:   October 24, 1996          By:/S/TERANCE A. MURNANE
                                      ------------------------
                                   Terance A. Murnane
                                   Controller

                                       13