<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 for the Quarterly
         Period ended March 31, 1998 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 April 13, 1998 there were outstanding  20,738,900  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, 1998

<S>                          <C>                                            <C>

PART I                              FINANCIAL INFORMATION                   Page

Item 1.                      Financial Statements:

                             Balance Sheets as of March 31, 1998
                             and December 31, 1997                           3

                             Statements of Operations for the
                             three months ended March 31, 1998
                             and 1997                                        4

                             Statements of Cash Flows for the
                             three months ended March 31, 1998
                             and 1997                                        5

                             Notes to Financial Statements                   6

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

Item 3.                      Quantitative and Qualitative
                             Disclosure About Market Risks                   *

                             Signature                                      10

* No information is provided due to inapplicability of this item.
</TABLE>

                                        2

<PAGE>


                                NEORX CORPORATION

BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
                                                                                   March 31,   December 31,
                                                                                     1998         1997
                                                                                  ----------   ------------
                                                                                  (unaudited)
                                     ASSETS

CURRENT ASSETS:
<S>                                                                                <C>          <C>
  Cash and cash equivalents ....................................................   $   1,112    $   1,949
  Short-term investments .......................................................      38,039       31,760
  Prepaids and other ...........................................................         947        1,820
                                                                                   ---------    ---------
    Total current assets .......................................................      40,098       35,529
                                                                                   ---------    ---------
FACILITIES AND EQUIPMENT, at cost:
  Leasehold improvements .......................................................       3,260        3,300
  Equipment and furniture ......................................................       4,324        4,023
                                                                                   ---------    ---------
                                                                                       7,584        7,323
  Less: accumulated depreciation and amortization ..............................      (6,723)      (6,642)
                                                                                   ---------    ---------
    Facilities and equipment, net ..............................................         861          681
                                                                                   ---------    ---------
OTHER ASSETS ...................................................................         496          111
                                                                                   ---------    ---------
    Total assets ...............................................................   $  41,455    $  36,321
                                                                                   =========    =========


                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable .............................................................   $     793    $     800
  Accrued liabilities ..........................................................       1,312          911
  Current portion of capital leases ............................................          35           43
                                                                                   ---------    ---------
    Total current liabilities ..................................................       2,140        1,754
LONG-TERM LIABILITIES:
  Convertible subordinated debentures, 9 3/4% ..................................       1,195        1,195
  Capital leases, less current portion .........................................           2            4
                                                                                   ---------    ---------
    Total liabilities ..........................................................       3,337        2,953
                                                                                   ---------    ---------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
  Series preferred stock, $.02 par value,
    3,000,000 shares authorized:
      Convertible  exchangeable preferred stock, Series 1, 208,240 shares issued
        and  outstanding  at March 31, 1998 and  December 31,  1997(entitled  in
        liquidation to $5,375 at March 31, 1998 and $5,248 at December 31, 1997)
      Convertible preferred stock, Series 2, 5,167 shares issued and outstanding
        at March 31, 1998 and December 31, 1997 (entitled in liquidation to $517
        at March 31, 1998 and December 31, 1997)
      Convertible preferred stock, Series 3, 1,000 shares issued and outstanding
        at March 31, 1998 and December 31, 1997 (entitled in liquidation to $100
        at March 31, 1998 and December 31, 1997) ..............................           4            4
  Common stock,  $.02 par value,  60,000,000 shares  authorized,  20,733,539 and
    20,707,251 shares issued and outstanding
    at March 31, 1998 and December 31, 1997, respectively ......................         415          414
  Additional paid-in capital ...................................................     162,649      162,612
  Accumulated deficit ..........................................................    (124,950)    (129,662)
                                                                                   ---------    ---------
    Total shareholders' equity .................................................      38,118       33,368
                                                                                   ---------    ---------
    Total liabilities and shareholders' equity .................................   $  41,455    $  36,321
                                                                                   =========    =========
</TABLE>



               See accompanying notes to the financial statements.
                                        3

<PAGE>

                                NEORX CORPORATION




STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>



                                                                           Three months ended
                                                                                March 31,
                                                                           -------------------
                                                                             1998        1997
                                                                           -------     -------
REVENUE:

<S>                                                                        <C>         <C>
 Contract revenues and fees ............................................   $  7,538    $     12
                                                                           --------    --------
OPERATING EXPENSES:

  Research and development .............................................      2,221       2,652

  General and administrative ...........................................      1,022         894
                                                                           --------    --------
    Total operating expenses ...........................................      3,243       3,546
                                                                           --------    --------
Income (loss) from operations ..........................................      4,295      (3,534)

OTHER INCOME (EXPENSE):

  Investment and interest income, net ...................................       591         338

  Interest expense ......................................................       (33)        (35)
                                                                           --------    --------
 Net income (loss) .....................................................   $  4,853    $ (3,231)
                                                                           ========    ========

Preferred stock dividends ..............................................       (141)     (1,906)
                                                                           --------    --------
Net income (loss) applicable to common shares ..........................   $  4,712    $ (5,137)
                                                                           ========    ========


Earnings (loss) per share:

  Basic ................................................................   $    .23    $   (.31)
                                                                           ========    ========
  Diluted ..............................................................   $    .22    $   (.31)
                                                                           ========    ========

Shares used in calculation of earnings (loss) per share:

  Basic ................................................................     20,719      16,481
                                                                           ========    ========
  Diluted ..............................................................     21,583      16,481
                                                                           ========    ========
</TABLE>



               See accompanying notes to the financial statements.

                                        4

<PAGE>



                                NEORX CORPORATION


STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>

                                                                            Three months ended
                                                                                 March 31,
                                                                           --------------------
                                                                             1998        1997
                                                                           -------     --------
CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                                        <C>         <C>
Net income (loss) ......................................................   $  4,853    $ (3,231)
Adjustments  to  reconcile  net  income  (loss)
 to net cash  used in  operating activities:
   Depreciation and amortization .......................................         86          96
   Decrease in prepaids and other assets ...............................        477          65
   (Decrease) increase in accounts payable .............................         (7)        147
   Increase in accrued liabilities .....................................        260          16
                                                                           --------    --------
Net cash provided by (used in) operating
  activities ...........................................................      5,669      (2,907)
                                                                           --------    --------
 CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sales of short-term investments ..........................     18,133       6,896
Purchases of short-term investments ....................................    (24,412)     (4,515)
Facilities and equipment purchases .....................................       (261)       (142)
Other ..................................................................          6           6
                                                                           --------    --------
Net cash (used in) provided by investing
  activities ...........................................................     (6,534)      2,245
                                                                           --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of preferred stock ..................................         --       9,490
Repayments of capital lease obligations ................................        (10)        (13)
Proceeds from stock options exercised ..................................         38         127
                                                                           --------    --------
Net cash provided by financing activities ..............................         28       9,604
                                                                           --------    --------
Net increase (decrease) in cash
  and cash equivalents .................................................       (837)      8,942
Cash and cash equivalents:
Beginning of period ....................................................      1,949       2,945
                                                                           --------    --------
End of period ..........................................................   $  1,112    $ 11,887
                                                                           ========    ========



</TABLE>



               See accompanying notes to the 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, 1997.

Certain  reclassifications  were made to the 1997  financial  statements to make
them comparable with the 1998 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, 1998 and the results of
operations  and cash flows for the three month  periods ended March 31, 1998 and
1997.

The results of  operations  for the three month  period ended March 31, 1998 are
not necessarily indicative of the expected operating results for the full year.

2. Shareholders' Equity

Changes in shareholders' equity from December 31, 1997 to March 31, 1998 were as
follows (in thousands):
<TABLE>

                  <S>                                          <C>
                  Balance December 31, 1997                    $33,368

                  Common stock issued                               38
                  Preferred stock dividends                       (141)
                  Net income                                     4,853
                                                               -------
                  Balance March 31, 1998                       $38,118
                                                               =======

</TABLE>

                                        6

<PAGE>



                                NEORX CORPORATION

NOTES TO FINANCIAL STATEMENTS (Continued)

3.  Revenue

In January  1998,  the Company  received a  $7,000,000  milestone  payment  from
Janssen  Pharmaceutica  NV ("Janssen"),  a wholly owned  subsidiary of Johnson &
Johnson  Inc.,  reflecting  Janssen's  decision  to  begin  Phase II  trials  of
Avicidin(R)  cancer therapy  product as part of the agreement  entered into with
Janssen in August 1997.

Note 4.  Earnings per Share ("EPS")

The following is a reconciliation  of the numerator and denominator of the basic
and diluted EPS computations for the three months ended March 31, 1998:
<TABLE>
<CAPTION>

                                               Weighted             Income
                               Income        Average Shares        Per Share
                             (Numerator)      (Denominator)          Amount
                            ------------     ---------------       ---------
<S>                         <C>                 <C>                 <C>
Net income ..............   $ 4,852,863
Less:
 Preferred stock
 dividends ..............      (140,623)
                             ----------
Basic EPS ...............   $ 4,712,240         20,719,064          $  .23
                                                                      ====
Dilutive Effect of
 options, warrants and
 convertible preferred
 stock, Series 2 and
 Series 3 ...............        13,726            864,152
                             ----------         ----------
Diluted EPS .............   $ 4,725,966         21,583,216          $  .22
                             ==========         ==========            ====
</TABLE>

Options to purchase 943,824  additional  shares of Common Stock were outstanding
during  the three  months  ended  March 31,  1998 but were not  included  in the
computation of diluted EPS because the options'  average exercise price of $8.61
was greater  than the average  market price of the common  shares of $5.44.  The
numerator  and  denominator  of the basic and diluted EPS  calculations  for the
three  months  ended March 31, 1997 were the same,  as  including  the effect of
options and warrants to purchase an additional  4,127,253 shares of Common Stock
would have been antidilutive.

Shares  issuable  upon  conversion  of The  Company's  Convertible  Subordinated
Debentures and Series 1 Preferred  Stock are not included in the  calculation of
diluted  EPS for the three  months  ended  March 31,  1998 and 1997  because the
effect of including such shares would be antidilutive.

                                        7

<PAGE>



                                NEORX CORPORATION

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

This discussion contains forward-looking  statements that are subject to certain
risks and  uncertainties  that could cause actual  results to differ  materially
from those  projected.  The words  "believe","expect",  "intend",  "anticipate",
variations  of such  words  and  similar  expressions  identify  forward-looking
statements,  but  their  absence  does  not mean the  statement  is not  forward
looking.  Factors that could affect the Company's actual results include,  among
other things, results of research and development  activities,  clinical trials,
expenses  associated  with  expanding  marketing and  manufacturing  capability,
competitive  and   technological   developments  and  the  timing  and  cost  of
collaborative relationships. Reference is made to the Company's Annual Report on
Form 10-K filed with the  Commission  for a more  detailed  description  of such
factors.   Readers  are  cautioned   not  to  place  undue   reliance  on  these
forward-looking statements,  which speak only as of the date of this report. The
Company  undertakes  no  obligation  to update  publicly  any  forward-looking
statement to reflect new information,  events or circumstances after the date of
this report or to reflect the occurrence of unanticipated  events.
 
Quarter  ended March 31, 1998  compared to quarter  ended March 31,  1997. 

Revenues for the three months ended March 31, 1998 were  $7,538,000  compared to
$12,000 for the three months ended March 31, 1997. In January 1998,  the Company
received  a  $7,000,000   milestone   payment  from  Janssen   Pharmaceutica  NV
("Janssen"),  a  subsidiary  of Johnson & Johnson,  Inc.,  reflecting  Janssen's
decision to begin Phase II trials of Avicidin(R) cancer therapy product.

Total  operating  expenses for the quarter ended March 31, 1998  decreased 9% to
$3,243,000  from  $3,546,000 for the quarter ended March 31, 1997.  Research and
development  expenses  for the quarter  ended March 31,  1998  decreased  16% to
$2,221,000  from  $2,652,000  for the same time  period in 1997,  as a result of
increased research and development reimbursements.  The Company receives expense
reimbursements  related to the Avicidin(R) and Biostent(R) programs.  Reimbursed
research and development  expenses  totaled $562,000 for the quarter ended March
31,  1998.  In the first  quarter  of 1997,  the  Company  had no  research  and
development expense reimbursements.

General  and  administrative  expenses  for the  quarter  ended  March 31,  1998
increased 14% to $1,022,000  from $894,000 for the quarter ended March 31, 1997,
principally  due to increased  expenses  for  personnel  and outside  consulting
services.

                                        8
<PAGE>

                                NEORX CORPORATION

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

Investment and interest income  increased to $591,000 from $338,000 and interest
expense was $33,000  and $35,000 for the three  months  ended March 31, 1998 and
1997,  respectively.  Interest  income  increased  due to  higher  average  cash
balances which resulted from milestone payments and equity sales.

Liquidity and capital resources.

Cash and short-term  investments as of March 31, 1998 were $39,151,000  compared
to $33,709,000 at December 31, 1997 and $24,828,000 at March 31, 1997. The first
quarter balance of cash and short-term  investments increased due to the receipt
of a  $7,000,000  milestone  payment from  Janssen in January  1998,  reflecting
Janssen's  decision  to begin  Phase II trials  of  Avicidin(R)  cancer  therapy
product.

The Company  expects  that its capital  resources  and  interest  income will be
sufficient  to finance its  currently  anticipated  working  capital and capital
requirements   through  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 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.

Impact of Year 2000.

In 1997 the Company  initiated the installation of a new accounting  system that
is compliant with the year 2000  requirements and is currently  evaluating other
systems  for  Year  2000  concerns.   The  Company  has  not  initiated   formal
communications  with its significant  suppliers to determine the extent to which
the Company is vulnerable to those third parties' failure to remediate their own
Year 2000 issue.  There can be no guarantee that the systems of other  companies
on which the Company relies will be timely converted, or that failure to convert
by another company would not have a material adverse effect on the Company.


                                      9

<PAGE>


                                NEORX CORPORATION


Item 3.  Quantitative and Qualitative Disclosure About Market Risks

Not applicable.



                                   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.

                                                  NeoRx Corporation
                                                  (Registrant)



Date: May 8, 1998                                 By: /s/Richard L. Anderson
                                                      ----------------------
                                                      Richard L. Anderson
                                                      Senior Vice President,
                                                      Finance and Operations,
                                                      Chief Financial Officer
                                                      (Principal Financial and
                                                      Accounting Officer)





                                       10