<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-Q


(Mark One)

 X    Quarterly  Report  pursuant  to  Section  13 or 15(d) X of the  Securities
---   Exchange Act of 1934 for the Quarterly Period ended JUNE 30, 1997 or

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


Commission File 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 July 28, 1997 there were  outstanding  17,315,679  shares of the Company's
common stock, $.02 par value.


<PAGE>



                               TABLE OF CONTENTS

                        QUARTERLY REPORT ON FORM 10-Q
                     FOR THE QUARTER ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
PART I                  FINANCIAL INFORMATION                            Page
<S>                 <C>                                                   <C>
Item 1.             Financial Statements:

                    Balance Sheets as of June 30, 1997
                    and December 31, 1996                                  3

                    Statements of Operations for the
                    three and six month periods ended
                    June 30, 1997 and 1996                                 4

                    Statements of Cash Flows for the
                    three and six month periods ended
                    June 30, 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                                     11

Item 2.             Changes in Securities                                  *

Item 3.             Defaults Upon Senior Securities                        *

Item 4.             Submission of Matters to a
                    Vote of Security Holders                              11

Item 5.             Other Information                                      *

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

                    Signatures                                            12

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



                                      NEORX CORPORATION



BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
                                                             June 30,         December 31,
                                                               1997               1996
                                                            ----------        ------------
                                                            (unaudited)

                                           ASSETS

CURRENT ASSETS:
<S>                                                           <C>               <C>     
  Cash and cash equivalents                                   $  3,803          $  2,945
  Short-term investments                                        26,651            15,322
  Inventories                                                      643               600
  Prepaids and other                                               818               845
                                                               -------           -------
    Total current assets                                        31,915            19,712
                                                               -------           -------

FACILITIES AND EQUIPMENT, at cost:
  Equipment and furniture                                        4,001             3,744
  Leasehold improvements                                         3,241             3,237
                                                               -------           -------
                                                                 7,242             6,981
  Less: accumulated depreciation and amortization               (6,491)           (6,295)
                                                               -------           -------
    Facilities and equipment, net                                  751               686
                                                               -------           -------

OTHER ASSETS                                                       112               112
                                                               -------           -------
                                                              $ 32,778          $ 20,510
                                                               =======           =======


                            LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                            $  1,018          $  1,235
  Accrued liabilities                                              981               910
  Current portion of capital leases                                 41                44
                                                               -------           -------
    Total current liabilities                                    2,040             2,189
                                                               -------           -------

NON-CURRENT LIABILITIES:
  Convertible subordinated debentures, 9 3/4%                    1,195             1,195
  Capital leases, less current portion                              22                47
                                                               -------           -------
    Total non-current liabilities                                1,217             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, 119,000 and -0-
        shares issued and outstanding, respectively                  7                 4
   Common stock, $.02 par value, 60,000,000 shares authorized,
    17,248,000 and 16,451,000 shares issued and outstanding,
    respectively                                                   345               329
  Additional paid-in capital                                   157,124           140,789
  Accumulated deficit                                         (127,955)         (124,043)
                                                               -------           -------
    Total shareholders' equity                                  29,521            17,079
                                                               -------           -------
                                                              $ 32,778          $ 20,510
                                                               =======           =======
</TABLE>



                             See notes to financial statements.

                                              3

<PAGE>




                                       NEORX CORPORATION




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




                                          Three months                Six months
                                          Ended June 30,             Ended June 30,
                                        ------------------         ------------------
                                         1997        1996           1997        1996
                                        ------      ------         ------      ------

<S>                                    <C>         <C>            <C>         <C>    
REVENUES                               $ 5,335     $     -        $ 5,347     $    21
                                        ------      ------         ------      ------

OPERATING EXPENSES:

  Research and development               2,738       2,446          5,390       5,124

  General and administrative             1,080       1,080          1,974       2,184
                                        ------      ------         ------      ------

    Total operating expenses             3,818       3,526          7,364       7,308
                                        ------      ------         ------      ------

Income(loss) from operations             1,517      (3,526)        (2,017)     (7,287)

OTHER INCOME (EXPENSE):
  Investment and interest income           444         296            782         593

  Interest expense                         (34)        (34)           (69)        (71)
                                        ------      ------         ------      ------

Net income(loss)                       $ 1,927     $(3,264)       $(1,304)    $(6,765)
                                        ======      ======         ======      ======

Preferred stock dividends                 (702)       (211)        (2,608)       (402)
                                        ------      ------         ------      ------

Net income(loss) applicable to
 common shares                         $ 1,225     $(3,475)       $(3,912)    $(7,167)
                                        ======      ======         ======      ======

Net income(loss) per common share      $   .07     $  (.23)       $  (.23)    $  (.47)
                                        ======      ======         ======      ======

Weighted average common shares
  outstanding                           16,874      15,416         16,701      15,185
                                        ======      ======         ======      ======

</TABLE>














                              See notes to financial statements.



                                               4

<PAGE>



                                       NEORX CORPORATION

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

                                               Three months            Six months
                                               Ended June 30,         Ended June 30,
                                             ------------------     -----------------
                                              1997        1996       1997       1996
                                             ------      ------     ------     ------

CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                         <C>         <C>        <C>        <C>     
Net income(loss)                            $  1,927    $(3,264)   $ (1,304)  $(6,765)
                                             -------     ------     -------    ------
Adjustments to reconcile net income(loss)
  to net cash provided by (used in)
  operating activities:
    Depreciation and amortization                100        102         196       200
    (Increase) in inventories                   (143)       (25)        (43)      (47)
    (Increase) decrease in prepaids
      and other assets                            18         57         (17)      (99)
    (Decrease) in accounts payable
      and accrued liabilities                   (533)      (102)       (370)     (417)
    Compensation expense on stock awards
      and options                                  -          -           -       139
    Common stock issued for services               -          -           -       241
                                             -------     ------     -------    ------

Net cash provided by (used in) operating
  activities                                   1,369     (3,232)     (1,538)   (6,748)
                                             -------     ------     -------    ------

CASH FLOWS FROM INVESTING ACTIVITIES:

(Purchases of) proceeds from short-
  term investments, net                      (13,710)      4,909    (11,329)   (5,887)
Facilities and equipment purchases              (119)      (105)       (261)     (143)
Other                                              6          -          12        54
                                             -------     ------     -------    ------
Net cash provided by (used in)
  investing activities                       (13,823)     4,804     (11,578)   (5,976)
                                             -------     ------     -------    ------

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of common stock             2,661          -       2,661     5,771
Proceeds from sales of preferred
  stock                                        1,970          -      11,460     4,425
Repayments of capital lease
  obligations                                    (14)       (13)        (27)      (24)
Proceeds from stock options
  exercised                                        8         35         135       204
Preferred stock dividends                       (255)       (254)      (255)     (254)
                                             -------      ------    -------    ------
Net cash provided by (used in)
  financing activities                         4,370       (232)     13,974    10,122
                                             -------     ------     -------    ------

Net increase (decrease) in cash
  and cash equivalents                        (8,084)     1,340         858    (2,602)
Cash and cash equivalents:

Beginning of period                           11,887      3,240       2,945     7,182
                                             -------     ------     -------    ------

End of period                               $  3,803    $ 4,580    $  3,803   $ 4,580
                                             =======     ======     =======    ======

</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 June 30, 1997 and the results of
operations  and cash  flows for the three and six month  periods  ended June 30,
1997 and 1996.

The results of  operations  for the three and six month  periods  ended June 30,
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 operations.

                                      6

<PAGE>


                              NEORX CORPORATION


NOTES TO FINANCIAL STATEMENTS (continued)

In the 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 June 30, 1997 were as
follows (in thousands):
<TABLE>
<CAPTION>
 
            <S>                                             <C>    
            Balance December 31, 1996                       $17,079

            Preferred stock issued                           13,578
            Common stock issued                               2,776
            Preferred stock dividends                        (2,608)
            Net loss                                         (1,304)
                                                            -------

            Balance June 30, 1997                           $29,521
                                                            =======
</TABLE>

The Company entered into an agreement with Schwarz Pharma AG ("Schwarz  Pharma")
on March 31, 1997 that provides  Schwarz Pharma with North American and European
marketing rights to Biostent(R) iN exchange for milestone  payments and fees. In
May 1997,  the Company  received  $4,000,000  from Schwarz  Pharma for marketing
rights to NeoRx's  Biostent  product in North America and Europe and  $4,000,000
for  699,000  unregistered  shares of NeoRx  Common  Stock.  The  excess  amount
received  over the fair  market  value of the  Common  Stock of  $1,333,000  was
recorded as revenue.

In 1997, the Company sold Series 3 Convertible  Preferred Stock,  $.02 par value
(the  "Series  3  Stock")  at a  stated  value  of $100  per  share  in  private
transactions.  On March 31, 1997 and April 1, 1997, the Company sold 100,000 and
20,0000  shares  and  received  net  proceeds  of  $9,490,000  and   $1,970,000,
respectively.  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 with the formula  described below.  Non-cash dividend
charges of $1,765,000 and $353,000 were  recognized by the Company in March 1997
and April  1997,  respectively,  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
        
                                        7

<PAGE>


                              NEORX CORPORATION



NOTES TO FINANCIAL STATEMENTS (continued)

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,  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.


                                      8

<PAGE>


                              NEORX CORPORATION


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

QUARTER AND SIX MONTHS  ENDED JUNE 30,  1997  COMPARED TO QUARTER AND SIX MONTHS
ENDED JUNE 30, 1996.

For the quarter ended June 30, 1997, revenues earned were $5,335,000; there were
no revenues for the same quarter of 1996. For the six months ended June 30, 1997
revenues were  $5,347,000  compared to $21,000 for the six months ended June 30,
1996.  The  increase in revenues was due to an  $8,000,000  payment from Schwarz
Pharma. The Company received $4,000,000 from Schwarz Pharma for marketing rights
to NeoRx's  Biostent  product in North  America  and Europe and  $4,000,000  for
699,000  unregistered  shares of NeoRx Common Stock.  The excess amount received
over the fair market  value of the Common  Stock of  $1,333,000  was recorded as
revenue.

Total  operating  expenses for the quarter  ended June 30, 1997  increased 8% to
$3,818,000  from  $3,526,000 in the quarter ended June 30, 1996, and for the six
month  period  increased  1%  to  $7,364,000  from   $7,308,000.   Research  and
development expenses increased 12% to $2,738,000 from $2,446,000 for the quarter
ended  June 30,  1996  and  1995,  respectively,  and for the six  month  period
increased 5% to $5,390,000 from $5,124,000.  The increases in both the three and
six month  periods were  primarily  due to increases in salaries and  materials.
General and  administrative  expenses  remained  unchanged at $1,080,000 for the
quarters  ended June 30, 1997 and June 30,  1996,  and for the six month  period
decreased  10% to  $1,974,000  from  $2,184,000.  The decrease for the six month
period  was  principally  due to a  reduction  in other  expenses  and a smaller
executive staff.

Investment and interest income increased to $444,000 from $296,000 for the three
months  ended June 30, 1997 and 1996,  respectively,  and  increased to $782,000
from $593,000 for the six months ended June 30, 1997 and 1996, respectively. The
increases in both the three and six month periods were due to the recognition of
income from the increase in short-term investments.

The Company  reported net income of  $1,927,000  for the quarter  ended June 30,
1997 compared to a net loss of  $3,264,000  for the quarter ended June 30, 1996.
For the six months ended June 30, 1997, the net loss was $1,304,000  compared to
a net loss of $6,765,000 in the 1996 period.

                                      9

<PAGE>


                              NEORX CORPORATION

LIQUIDITY AND CAPITAL RESOURCES.

On May 27,  1997,  the  Company  received  $4,000,000  from  Schwarz  Pharma for
marketing  rights to NeoRx's  Biostent  product in North  America and Europe and
$4,000,000  for 699,000  unregistered  shares of NeoRx Common Stock.  The excess
amount received over the fair market value of the Common Stock of $1,333,000 was
recorded as revenue.

The Company  expects that its capital  resources and  investment  income will be
sufficient  to finance its  currently  anticipated  working  capital and capital
requirements  into the second quarter of 1999. The Company's working capital and
capital asset 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.

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.

                                      10

<PAGE>


                              NEORX CORPORATION


                          PART II - OTHER INFORMATION

Item 1.     Legal Proceedings

IN RE BLECH SECURITIES LITIGATION

On June 6, 1996, the United States  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.

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

The following  matter was voted upon at the 1997 Annual Meeting of  Shareholders
held May 13, 1997.

AMENDMENT TO THE RESTATED 1994 STOCK OPTION PLAN.

The  shareholders  amended the  Restated  1994 Stock Option Plan to increase the
number  of  shares  issuable   thereunder  from  2,500,000  to  4,000,000.   The
shareholders  voted 4,758,042  votes in favor of the amendment,  2,985,753 votes
against and 73,368 votes abstained.

Item 6.   Exhibits and Reports on Form 8-K

      (a) Exhibits:
            None

      (b) Reports on Form 8-K:

            Current  Report  on Form 8-K  dated  April  11,  1997 for  Change of
            Accountants to KPMG Peat Marwick LLP; and

            Current  Report on Form 8-K dated June 11,  1997 for Sales of Equity
            Securities to Schwarz Pharma AG Pursuant to Regulation S.




                                      11

<PAGE>


                              NEORX CORPORATION

                                  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: July 30, 1997               By: /S/RICHARD L. ANDERSON
                                      ----------------------
                                      Richard L. Anderson
                                      Authorized Officer and
                                      Senior Vice President,
                                      Chief Financial Officer,
                                      Secretary and Treasurer





                                      12