SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

(Mark One)

[X]   Quarterly Report pursuant to Section 13 or 15(d)
      of the Securities Exchange Act of 1934 for the Quarterly
      Period ended MARCH 31, 1997 or

[ }   Transition  Report  pursuant  to  Section  13 or 15(d)  of the  Securities
      Exchange  Act of 1934 for the  transition  period  from  _____________  to
      _______________.


Commission File Number 0-16614

                               NeoRx Corporation
            (Exact Name of Registrant as Specified in its Charter)

        WASHINGTON                                         91-1261311
(State or other jurisdiction of                           (IRS Employer
 incorporation or organization)                         Identification No.)

             410 West Harrison Street,  Seattle, Washington 98119
            (Address of Principal Executive Offices)     (Zip Code)

      Registrant's telephone number, including area code: (206) 281-7001



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
                                  ---         ---
Applicable only to corporate issuers:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of the latest practicable date.

As of May 7, 1997 there were outstanding  16,517,963 million  shares of the
Company's Common Stock, $.02 par value.

                                      

<PAGE>
<TABLE>
<CAPTION>
                              TABLE OF CONTENTS

                        QUARTERLY REPORT ON FORM 10-Q
                     FOR THE QUARTER ENDED MARCH 31, 1997


PART I                  FINANCIAL INFORMATION                           Page

<S>                 <C>                                                   <C>  
Item 1.             Financial Statements:
                    Balance Sheets as of March 31, 1997
                    and December 31, 1996                                  3

                    Statements of Operations for the
                    three months ended March 31, 1997
                    and 1996                                               4

                    Statements of Cash Flows for the
                    three months ended March 31, 1997
                    and 1996                                               5

                    Notes to Financial Statements                          6

Item 2.             Management's Discussion and Analysis
                    of Results of Operations and
                    Financial Condition                                    9

Item 3.             Quantitative and Qualitative
                    Disclosure About Market Risks                          *


PART II             OTHER INFORMATION

Item 1.             Legal Proceedings                                    10

Item 2.             Changes in Securities                                  *

Item 3.             Defaults Upon Senior Securities                        *

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

Item 5.             Other Information                                    11

Item 6.             Exhibits and Reports on Form 8-K                     11

                    Signatures                                           12

</TABLE>

* No information is provided due to inapplicability of the item.

                                      2

<PAGE>
<TABLE>
<CAPTION>




                                      NEORX CORPORATION


BALANCE SHEETS
(in thousands, except share data)
                                                              March 31,       December 31,
                                                                1997              1996
                                                             -----------      ------------
                                                             (unaudited)
                                           ASSETS

CURRENT ASSETS:
<S>                                                           <C>                <C>    
  Cash and cash equivalents                                   $ 11,887           $ 2,945
  Short-term investments                                        12,941            15,322
  Inventories                                                      500               600
  Prepaids and other                                               842               845
                                                               -------           -------
    Total current assets                                        26,170            19,712
                                                               -------           -------

FACILITIES AND EQUIPMENT, at cost:
  Equipment and furniture                                        3,882             3,744
  Leasehold improvements                                         3,241             3,237
                                                               -------           -------
                                                                 7,123             6,981
  Less: accumulated depreciation and amortization               (6,391)           (6,295)
                                                               -------           -------
    Facilities and equipment, net                                  732               686
                                                               -------           -------

OTHER ASSETS                                                       112               112
                                                               -------           -------
                                                              $ 27,014          $ 20,510
                                                               =======           =======


                            LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                            $  1,382          $  1,235
  Accrued liabilities                                            1,055               910
  Current portion of capital leases                                 42                44
                                                               -------           -------
    Total current liabilities                                    2,479             2,189
                                                               -------           -------

NON-CURRENT LIABILITIES:
  Convertible subordinated debentures, 9 3/4%                    1,195             1,195
  Capital leases, less current portion                              36                47
                                                               -------           -------
    Total non-current liabilities                                1,231             1,242
                                                               -------           -------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
  Series preferred stock, $.02 par value,
    3,000,000 shares authorized:
      Convertible exchangeable preferred stock, Series 1,
        208,000 shares issued and outstanding,
      Convertible preferred stock, Series 2, 5,000 and 7,000
        shares issued and outstanding, respectively, and
      Convertible preferred stock, Series 3, 100,000 and -0-
        shares issued and outstanding, respectively                  6                 4
  Common stock, $.02 par value,
    60,000,000 shares authorized,
    16,515,000 and 16,451,000 shares
    issued and outstanding, respectively                           331               329
  Additional paid-in capital                                   152,147           140,789
   Accumulated deficit                                        (129,180)         (124,043)
                                                               -------           -------
    Total shareholders' equity                                  23,304            17,079
                                                               -------           -------
                                                              $ 27,014          $ 20,510
                                                               =======           =======
</TABLE>



                             See notes to financial statements.

                                              3

<PAGE>

<TABLE>
<CAPTION>





                                     NEORX CORPORATION




STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)



                                                        Three months ended
                                                             MARCH 31,
                                                     --------------------------  
                                                      1997               1996
                                                     -------           --------

REVENUES:

<S>                                                  <C>               <C>    
 Contract revenues and fees                          $    12           $    21
                                                      ------            ------

OPERATING EXPENSES:

  Research and development                             2,652             2,678

  General and administrative                             894             1,104
                                                      ------            ------

    Total operating expenses                           3,546             3,782
                                                      ------            ------

Loss from operations                                  (3,534)           (3,761)

OTHER INCOME (EXPENSE):

  Investment and interest income, net                    338               297

  Interest expense                                       (35)              (37)
                                                      ------            ------

 Net loss                                            $(3,231)          $(3,501)
                                                      ======            ======

Preferred stock dividends                             (1,906)             (191)
                                                      ------            ------

Net loss applicable to common shares                 $(5,137)          $(3,692)
                                                      ======            ======

Net loss per common share                            $  (.31)          $  (.25)
                                                      ======            ======

Weighted average common
   shares outstanding                                 16,481            14,996
                                                      ======            ======

</TABLE>











                            See notes to financial statements.

                                            4

<PAGE>
<TABLE>
<CAPTION>



                                     NEORX CORPORATION


STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

                                                        Three months ended
                                                            MARCH 31,
                                                     --------------------------  
                                                       1997              1996
                                                     --------          -------- 
CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                  <C>              <C>      
Net loss                                             $(3,231)         $ (3,501)

Adjustments to reconcile net
  loss to net cash used in
  operating activities:
    Depreciation and amortization                         96                98
    (Increase) decrease in inventories                   100               (22)
    (Increase) in prepaids and
      other assets                                       (35)             (156)
    (Decrease) increase in accounts
      payable and accrued liabilities                    163              (315)
    Compensation expense on stock awards
      and options                                          -               139
    Common Stock issued for services                       -               241
                                                      ------           -------
Net cash used in operating
  activities                                          (2,907)           (3,516)
                                                      ------           -------

CASH FLOWS FROM INVESTING ACTIVITIES:

(Purchases of) proceeds from short-
  term investments, net                                2,381           (10,796)
Facilities and equipment purchases                      (142)              (38)
Other                                                      6                54
                                                      ------           -------
Net cash provided by (used in)
  investing activities                                 2,245           (10,780)
                                                      ------           -------

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of common stock
  and warrants                                             -             5,771
Proceeds from sale of preferred stock                  9,490             4,425
Proceeds from capital lease obligations                    -                 -
Repayments of capital lease obligations                  (13)              (11)
Proceeds from stock options exercised                    127               169
                                                      ------           -------

                                                       9,604            10,354
                                                      ------           -------
Net increase (decrease) in cash
  and cash equivalents                                 8,942            (3,942)
Cash and cash equivalents:

Beginning of period                                    2,945             7,182
                                                      ------            ------

End of period                                        $11,887           $ 3,240
                                                      ======            ======


</TABLE>







                            See notes to financial statements.

                                            5

<PAGE>





                               NEORX CORPORATION


NOTES TO FINANCIAL STATEMENTS

1.    Basis of Presentation

The interim financial statements contained herein 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  are  adequate  to make the
information presented not misleading.  These financial statements should be read
in conjunction  with the Company's annual report on Form 10-K for the year ended
December 31, 1996.

Certain  reclassifications  were made to the 1996  financial  statements to make
them comparable with the 1997 presentation.

In the opinion of  management,  the  interim  financial  statements  reflect all
adjustments,  consisting only of normal recurring  accruals necessary to present
fairly the Company's  financial position as of March 31, 1997 and the results of
operations  and cash flows for the three month  periods ended March 31, 1997 and
1996.

The results of  operations  for the three month  period ended March 31, 1997 are
not necessarily indicative of the expected operating results for the full year.

2.  New Accounting Standard

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards  No. 128 ("SFAS  128"),  "Earnings  Per Share",
effective for financial  statements  for periods ending after December 15, 1997.
SFAS 128 specifies the computation,  presentation,  and disclosure  requirements
for earnings per share,  and will simplify the computation of earnings per share
for many companies eliminating calculation provisions which were required by the
prior earnings per share accounting standard.  For entities with complex capital
structures,  the statement  requires dual  presentation  of both  Basic Earnings
Per Share and Diluted Earnings Per Share on the face of the statement of opera-
tions. In the

                                      6

<PAGE>


                              NEORX CORPORATION


NOTES TO FINANCIAL STATEMENTS (continued)

opinion of management,  the adoption of SFAS 128 will not have a material effect
on the Company's calculation of earnings per share.

3.    Shareholders' Equity

Changes in shareholders' equity from December 31, 1996 to March 31, 1997 were as
follows (in thousands):
<TABLE>

            <S>                                 <C>    
            Balance December 31, 1996           $17,079

            Preferred stock issued               11,255
            Common stock issued                     107
            Preferred stock dividends            (1,906)
            Net loss                             (3,231)
                                                 -------
             Balance March 31, 1997              $23,304
                                                 =======
</TABLE>

In March 1997, the Company sold 100,000 shares of Series 3 Convertible Preferred
Stock, $.02 par value (the "Series 3 Stock") at a stated value of $100 per share
in a private transaction,  and received net proceeds of $9,490,000. The Series 3
Stock is  redeemable  at the  option  of the  Company  in the  first  two  years
following  issuance  of the  Series 3 Stock at $117.65  per share  plus  accrued
dividends and interest;  two years following issuance of the Series 3 Stock, any
remaining  outstanding  Series 3 Stock  will be  converted  to  Common  Stock in
accordance the formula described below. A non-cash dividend charge of $1,765,000
was  recognized by the Company in March 1997 for the amount of the excess of the
conversion value over the stated value.

Holders of the Series 3 Stock are  entitled to receive  cumulative  dividends at
the rate of 7% per annum compounded quarterly on the $100 per share stated value
of the Series 3 Stock.  The dividend is payable,  in cash or Common Stock at the
Company's  option,  quarterly  or at the time the Series 3 Stock is  redeemed or
converted into Common Stock.  Each share of the Series 3 Stock is convertible in
the first two years  following  issuance  of the Series 3 Stock at the option of
the holder into the number of shares of Common Stock  determined by dividing the
$100  stated  value of the  Series 3 Stock by 85% of the  average  stock  market
closing bid price of the Common  Stock for the five  trading days ending one day
prior to the day of conversion,  but not less than $3.93 nor more than $6.42 per
share,

                                      7

<PAGE>


                              NEORX CORPORATION


NOTES TO FINANCIAL STATEMENTS (continued)

plus accrued  dividends and interest.  The holders of the Series 3 Stock have no
voting rights except in limited  circumstances.  The Series 3 Stock ranks junior
to the Company's  Convertible  Exchangeable  Preferred Stock, Series 1, and on a
parity with the Company's Series 2 Convertible  Preferred Stock as to dividends,
distributions and payments in liquidation.

In January 1996,  the Company  issued  370,000 shares of Common Stock and 47,000
shares of Series 2 Convertible  Preferred  Stock,  $.02 par value,  in a private
transaction, and received net proceeds of $6,640,000.



                                      8

<PAGE>


                              NEORX CORPORATION


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

QUARTER ENDED MARCH 31, 1997 COMPARED TO QUARTER ENDED MARCH 31, 1996.

Revenues  for the three  months  ended March 31, 1997 were  $12,000  compared to
$21,000 for the three months ended March 31, 1996.

Total  operating  expenses for the quarter ended March 31, 1997  decreased 6% to
$3,546,000  from  $3,782,000 in the quarter  ended March 31, 1996.  Research and
development  expenses  for the  quarter  ended March 31,  1997  decreased  1% to
$2,652,000 from $2,678,000.  General and administrative expenses for the quarter
ended March 31, 1997  decreased 19% to $894,000 from  $1,104,000 for the quarter
ended March 31,1996, principally due to reduced compensation expense in 1997 and
a noncash charge resulting from accelerated vesting of a stock option in 1996.

Investment and interest income  increased to $338,000 from $297,000 and interest
expense was $35,000  and $37,000 for the three  months  ended March 31, 1997 and
1996, respectively.

LIQUIDITY AND CAPITAL RESOURCES.

In March 1997, the Company raised  $9,490,000 from the sale of 100,000 shares of
Series  3  Convertible  Preferred  Stock.  During  1996,  the  Company  received
$10,437,000 from the sale of 834,000 shares of Common Stock and 47,000 shares of
Series 2 Convertible
Preferred Stock.

The Company  expects  that its capital  resources  and  interest  income will be
sufficient  to finance its  currently  anticipated  working  capital and capital
requirements  through the first quarter of 1999. The Company's  working  capital
and capital requirements will depend upon numerous factors, including results of
research and development  activities,  clinical trials,  the levels of resources
that  the  Company   devotes  to  establishing   and  expanding   marketing  and
manufacturing  capabilities,  competitive and technological developments and the
timing and cost of relationships with parties to collaborative  agreements.  The
Company will need to raise substantial  additional funds to conduct research and
development  activities,  preclinical  studies and clinical trials  necessary to
bring its potential products to market,  and to establish  marketing and limited
manufacturing capabilities. The Company intends to

                                      9

<PAGE>


                              NEORX CORPORATION


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

seek   additional   funding   through  public  or  private  equity   financings,
arrangements with corporate  collaborators or other sources.  Adequate funds may
not be available when needed or on terms acceptable to the Company.

When  used in this  report,  the  words  "expects",  "anticipates"  and  similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain  risks and  uncertainties  such as those  factors  stated
above that could cause actual results to differ materially from those projected.
See "Important  Factors Regarding  Forward-Looking  Statements" in the Company's
Form 10-K for the year ended  December 31, 1996.  Readers are  cautioned  not to
place undue reliance on these forward-looking statements, which speak only as of
the date of this report. Readers are also urged to carefully review and consider
the various  disclosures made by the Company which advise interested  parties of
certain  factors which affect the Company's  business  detailed in the Company's
Securities and Exchange Commission filings and those described from time to time
in the Company's press releases and other communications. The Company undertakes
no obligation to publicly release the results of any revisions to these forward-
looking statements that may be made to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.


                          PART II - OTHER INFORMATION

Item 1.     Legal Proceedings

IN RE BLECH SECURITIES LITIGATION

On June 6, 1996, the United State  District  Court for the Southern  District of
New York dismissed claims against NeoRx in a purported class action suit against
David  Blech,  D. Blech & Co.  and a number of other  defendants,  including  11
publicly traded biotechnology  companies,  of which one was NeoRx, that had been
named in an  amended  complaint  on March  27,  1995.  The  plaintiffs  have not
appealed the order.  On July 26, 1996,  the  plaintiffs  filed a second  amended
pleading  which did not include any claims  against the Company.  NeoRx is not a
defendant in the subject suit.



                                      10

<PAGE>


                              NEORX CORPORATION


Item 5.  Other Information

DEVELOPMENT, DISTRIBUTION AND SUPPLY AGREEMENT BETWEEN NEORX
CORPORATION AND SCHWARZ PHARMA AG

On March 31, 1997, the Company  entered into an agreement with Schwarz Pharma AG
("Schwarz  Pharma") in which Schwarz Pharma received  exclusive rights to market
NeoRx's  Biostent(TM)  product  in  North  America  and  Europe.  NeoRx  retains
manufacturing  rights on a  worldwide  basis and  retains  marketing  rights for
territories  outside North America and Europe. In exchange,  Schwarz Pharma will
fund the future  development  of the  product  and NeoRx will  receive up to $30
million in license fees and milestone payments depending on product development.
NeoRx will also receive  royalties based on future sales as well as profits from
manufacturing the product.


Item 6.   Exhibits and Reports on Form 8-K
      (a) Exhibits:
<TABLE>
<CAPTION>
                                                            Sequentially
Exhibit                                                      Numbered
Number            EXHIBIT                                       Page
--------          -----------------------------------       -------------

<CAPTION>
<S>               <C>                                             <C>                               
  10              * Development, Distribution and
                    Supply Agreement between NeoRx
                    Corporation and Schwarz Pharma
                    AG  dated March 31, 1997                      13
</TABLE>


      (b) Reports on Form 8-K:
          No report on Form 8-K has been filed during the quarter for which this
          Form 10-Q is filed.

* Portions  of  this  exhibit  have  been  omitted  pursuant  to a  request  for
  confidential treatment.

                                      11