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 June 30, 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 July 9, 1998 there were  outstanding  20,995,040  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 JUNE 30, 1998


PART I                       FINANCIAL INFORMATION                   Page

<S>                     <C>                                          <C>
Item 1.                 Financial Statements:

                        Balance Sheets as of June 30, 1998
                        and December 31, 1997                          3

                        Statements of Operations for the
                        three and six months ended June 30,
                        1998 and 1997                                  4

                        Statements of Cash Flows for the
                        three and six months ended June 30,
                        1998 and 1997                                  5

                        Notes to Financial Statements                  6

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

Item 5.                 Other Information                             12

                        Signature                                     13


</TABLE>



                                        2

<PAGE>



                                NEORX CORPORATION

BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
                                                                                    June 30,     December 31,
                                                                                      1998          1997
                                                                                  -----------   ------------
                                                                                  (unaudited)
                                     ASSETS

CURRENT ASSETS:
<S>                                                                                <C>          <C>      
  Cash and cash equivalents ....................................................   $   1,569    $   1,949
  Short-term investments .......................................................      33,684       31,760
  Prepaids and other ...........................................................       1,275        1,820
                                                                                   ---------    ---------
    Total current assets .......................................................      36,528       35,529
                                                                                   ---------    ---------
FACILITIES AND EQUIPMENT, at cost:
  Leasehold improvements .......................................................       3,260        3,300
  Equipment and furniture ......................................................       4,590        4,023
                                                                                   ---------    ---------
                                                                                       7,850        7,323
  Less: accumulated depreciation and amortization ..............................      (6,806)      (6,642)
                                                                                   ---------    ---------
    Facilities and equipment, net ..............................................       1,044          681
                                                                                   ---------    ---------
OTHER ASSETS ...................................................................         484          111
                                                                                   ---------    ---------
    Total assets ...............................................................   $  38,056    $  36,321
                                                                                   =========    =========


                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable .............................................................   $     760    $     800
  Accrued liabilities ..........................................................         710          911
  Current portion of capital leases ............................................          26           43
                                                                                   ---------    ---------
    Total current liabilities ..................................................       1,496        1,754
LONG-TERM LIABILITIES:
  Convertible subordinated debentures, 9 3/4% ..................................       1,195        1,195
  Capital leases, less current portion .........................................        --              4
                                                                                   ---------    ---------
    Total liabilities ..........................................................       2,691        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 June 30, 1998 and  December 31,  1997(entitled  in
        liquidation to $5,248 at June 30, 1998 and December 31, 1997)
      Convertible  preferred stock,  Series 2, -0- shares issued and outstanding
        at June 30, 1998 and 5,167 shares issued and outstanding at December 31,
        1997
      Convertible  preferred stock,  Series 3, -0- shares issued and outstanding
        at June 30, 1998 and 1,000 shares issued and outstanding at December 31,
        1997 ...................................................................           4            4
  Common Stock, $.02 par value, 60,000,000 shares authorized, 20,995,040 and
    20,707,251 shares issued and outstanding at June 30, 1998 and December 31,
    1997, respectively .........................................................         420          414
  Additional paid-in capital ...................................................     163,155      162,612
  Accumulated deficit ..........................................................    (128,214)    (129,662)
                                                                                   ---------    ---------
    Total shareholders' equity .................................................      35,365       33,368
                                                                                   ---------    ---------
    Total liabilities and shareholders' equity .................................   $  38,056    $  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            Six months
                                                              ended June 30,          ended June 30,
                                                           --------------------    -------------------- 
                                                             1998        1997        1998        1997
                                                           --------    --------    --------    --------

<S>                                                        <C>         <C>         <C>         <C>     
REVENUE ... ............................................   $     10    $  5,335    $  7,548    $  5,347
                                                           --------    --------    --------    --------

OPERATING EXPENSES:

  Research and development .............................      2,259       2,738       4,480       5,390

  General and administrative ...........................      1,368       1,080       2,390       1,974
                                                           --------    --------    --------    --------
    Total operating expenses ...........................      3,627       3,818       6,870       7,364
                                                           --------    --------    --------    --------

Income (loss) from operations ..........................     (3,617)      1,517         678      (2,017)

OTHER INCOME (EXPENSE):
  Investment and interest income .......................        517         444       1,108         782

  Interest expense .....................................        (32)        (34)        (65)        (69)
                                                           --------    --------    --------    --------
Net income (loss) ......................................   $ (3,132)   $  1,927    $  1,721    $ (1,304)
                                                           ========    ========    ========    ========

Preferred stock dividends ..............................       (132)       (702)       (273)     (2,608)
                                                           --------    --------    --------    --------
Net income (loss) applicable to
 common shares .........................................   $ (3,264)   $  1,225    $  1,448    $ (3,912)
                                                           ========    ========    ========    ========

Earnings (loss) per share:

Basic ..................................................   $   (.16)   $    .07    $    .07    $   (.23)
                                                           ========    ========    ========    ========

Diluted ................................................   $   (.16)   $    .07    $    .07    $   (.23)
                                                           ========    ========    ========    ========

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

Basic ..................................................     20,895      16,874      20,807      16,701
                                                           ========    ========    ========    ========

Diluted ................................................     20,895      17,339      21,554      16,701
                                                           ========    ========    ========    ========

</TABLE>






               See accompanying notes to the 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,
                                           --------------------    ---------------------
                                             1998        1997        1998        1997
                                           ---------   --------    --------    ---------
CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                        <C>         <C>         <C>         <C>      
Net income(loss) ......................   $ (3,132)   $  1,927    $  1,721    $ (1,304)
Adjustments to reconcile net income
  (loss) to net cash provided by
  (used in) operating activities:
    Depreciation and amortization ......         89         100         175         196
    (Increase) decrease in prepaids
      and other assets .................       (328)       (125)        149         (60)
    (Decrease) in accounts payable .....        (33)       (364)        (40)       (217)
    (Decrease) in accrued liabilities ..       (376)       (169)       (116)       (153)
                                           --------    --------    --------    --------
Net cash provided by (used in) operating
  activities ...........................     (3,780)      1,369       1,889      (1,538)
                                           --------    --------    --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sales of short-
  term investments .....................     15,687      18,669      33,821      25,565
Purchases of short-term investments ....    (11,332)    (32,379)    (35,745)    (36,894)
Facilities and equipment purchases .....       (266)       (119)       (527)       (261)
Other ..................................          6           6          12          12
                                           --------    --------    --------    --------
Net cash provided by (used in)
  investing activities .................      4,095     (13,823)     (2,439)    (11,578)
                                           --------    --------    --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of common stock .....         --       2,661          --       2,661
Proceeds from sale of preferred stock ..         --       1,970          --      11,460
Repayments of capital lease obligations         (11)        (14)        (21)        (27)
Proceeds from stock options and warrants
 exercised .............................        409           8         447         135
Preferred stock dividends ..............       (256)       (255)       (256)       (255)
                                           --------    --------    --------    --------
Net cash provided by financing
  activities ...........................        142       4,370         170      13,974
                                           --------    --------    --------    --------
Net increase (decrease) in cash
  and cash equivalents
                                                457      (8,084)       (380)        858
Cash and cash equivalents:
Beginning of period ....................      1,112      11,887       1,949       2,945
                                           --------    --------    --------    --------
End of period ..........................   $  1,569    $  3,803    $  1,569    $  3,803
                                           ========    ========    ========    ========

</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 June 30, 1998 and the results of
operations  and cash  flows for the three and six month  periods  ended June 30,
1998 and 1997.

The results of  operations  for the three and six month  periods  ended June 30,
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 June 30, 1998 were as
follows (in thousands):
<TABLE>

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

               Common stock issued                            549
               Preferred stock dividends                     (273)
               Net income                                   1,721
                                                          -------
               Balance June 30, 1998                      $35,365
                                                          =======
</TABLE>


                                        6

<PAGE>



                                NEORX CORPORATION


NOTES TO FINANCIAL STATEMENTS (Continued)

During  the  quarter,  the  Company  issued  138,422  shares of Common  Stock in
exchange for 5,167 shares of Series 2  Convertible  Preferred  Stock  ("Series 2
Preferred  Stock")  and 1,000  shares of Series 3  Convertible  Preferred  Stock
("Series 3 Preferred Stock"). Dividends of $101,240 were also paid on the Series
2 Preferred Stock by issuing 21,038 shares of Common Stock. As of June 30, 1998,
no Series 2 Preferred Stock or Series 3 Preferred Stock remain outstanding.

Note 3.  Earnings (loss) per share:

The following is a reconciliation  of the numerator and denominator of the basic
and diluted earnings (loss) per share  computations for the three months and six
months ended June 30, 1997 and 1998:
<TABLE>
<CAPTION>


                             Three months              Six months
                             ended June 30,          ended June 30,
                          --------------------   ---------------------
                            1998        1997       1998         1997
                          ---------   --------   ---------    --------
<S>                       <C>         <C>         <C>         <C>      
Net Income (loss)......   $ (3,132)   $  1,927    $  1,721    $ (1,304)
Less: Preferred
 stock dividends ......       (132)       (702)       (273)     (2,608)
                          --------    --------    --------    --------
Net Income (loss)
 applicable to basic
 & diluted earnings
 (loss) per share .....   $ (3,264)   $  1,225    $  1,448    $ (3,912)
                          ========    ========    ========    ========

Weighted average
 shares - basic .......     20,895      16,874      20,807      16,701
Dilutive effect of
 options & warrants ...         --         465         747          --
                          --------    --------    --------    --------
Weighted average
 shares - diluted .....     20,895      17,339      21,554      16,701
                          ========    ========    ========    ========
Basic earnings (loss)
 per share ............   $   (.16)   $    .07    $    .07    $   (.23)
                          ========    ========    ========    ========
Diluted earnings (loss)
 per share ............   $   (.16)   $    .07    $    .07    $   (.23)
                          ========    ========    ========    ========
</TABLE>


The  numerator  and  denominator  of  the  basic  and  diluted  loss  per  share
calculations  for the three  months  ended June 30, 1998 were the same,  because
including the effect of options and warrants to purchase an additional 2,354,856
shares  of Common  Stock  would  have been  antidilutive.  Options  to  purchase
1,608,690 additional shares

                                        7

<PAGE>


                                NEORX CORPORATION


NOTES TO FINANCIAL STATEMENTS (Continued)

of Common Stock were outstanding during the three months ended June 30, 1997 but
were not included in the  computation of diluted  earnings per share because the
options'  average  exercise  price of $7.12 was greater than the average  market
price of the  common  shares  of  $4.25.  Warrants  to  purchase  an  additional
1,033,727 shares of Common Stock were outstanding  during the three months ended
June 30, 1997 but were also not included in the computation of diluted  earnings
per share because the  warrants'  average  exercise  price of $13.63 was greater
than the average market price of the common shares of $4.25. Options to purchase
942,589 additional shares of Common Stock were outstanding during the six months
ended June 30, 1998 but were not included in the computation of diluted earnings
per share because the options'  average exercise price of $8.60 was greater than
the  average  market  price of the common  shares of $5.55.  The  numerator  and
denominator  of the basic and diluted  loss per share  calculations  for the six
months  ended  June 30,  1997 were the same,  because  including  the  effect of
options and warrants to purchase an additional  1,747,622 shares of Common Stock
would have been antidilutive.

Shares  issuable  upon  conversion  of the  Company's  Convertible  Subordinated
Debentures,  Series 1 Preferred  Stock,  Series 2  Preferred  Stock and Series 3
Preferred Stock are not included in the calculation of diluted EPS for the three
and six  month  periods  ended  June 30,  1998 and 1997  because  the  effect of
including such shares would have been antidilutive.



                                        8

<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", and
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  capabilities,
competitive and technological developments, and the timing, cost, and successful
continuation of the Company's 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 AND SIX MONTHS  ENDED JUNE 30,  1998  COMPARED TO QUARTER AND SIX MONTHS
ENDED JUNE 30, 1997.

Revenues  for the three  months  ended June 30,  1998 were  $10,000  compared to
$5,335,000  for the three months  ended June 30, 1997.  For the six months ended
June 30, 1998 revenues were $7,548,000 compared to $5,347,000 for the six months
ended June 30, 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.  In the second quarter of 1997 the Company received  $4,000,000
in revenue from Schwarz Pharma for marketing  rights to NeoRx's Biostent product
and $4,000,000  for 698,702  unregistered  shares of NeoRx's  common stock.  The
excess  amount  received  over the fair  market  value  of the  Common  Stock of
$1,333,000 was recorded as revenue.

In May  1998  DuPont  gave one  year's  notice  of  termination  of its  license
agreement  with the Company for the  Verluma(R)  lung  cancer  imaging  product.
Royalties  collected  for  Verluma in 1998 and 1997 were  insignificant  and the
Company  believes that  termination of the licensing  agreement with Dupont will
not have a material impact on future revenues.

                                        9

<PAGE>


                                NEORX CORPORATION


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

Total  operating  expenses for the quarter  ended June 30, 1998  decreased 5% to
$3,627,000  from  $3,818,000 in the quarter June 30, 1997, and for the six month
period  decreased 7% to $6,870,000  from  $7,364,000.  Research and  development
expenses for the quarter ended June 30, 1998  decreased  17% to $2,259,000  from
$2,738,000 for the same time period in 1997.  Research and development  expenses
for the six  months  ended  June  30,  1998  decreased  17% to  $4,480,000  from
$5,390,000.  The  decrease in research  and  development  expenses  both for the
quarter and for the six months is 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 $1,420,000 for the six months ended June 30, 1998. In the first
half of 1997,  the Company's  research and  development  expense  reimbursements
totaled $94,000.

General  and  administrative  expenses  for the  quarter  ended  June  30,  1998
increased 27% to $1,368,000 from $1,080,000 for the quarter ended June 30, 1997.
General  and  administrative  expenses  for the six months  ended June 30,  1998
increased  21% to  $2,390,000  to from  $1,974,000.  General and  administrative
expenses  for the  quarter  and the six  months  ended June 30,  1998  increased
principally  due to increased  expenses  for  personnel  and outside  consulting
services.  These  costs were added to support  increased  research  and  product
development activities.

Investment  and  interest  income for the quarter  increased  to  $517,000  from
$444,000  for the same time period in 1997,  and  increased to  $1,108,000  from
$782,000 for the six months ended June 30,1998 and 1997, respectively.  Interest
income  increased  due to higher  average cash  balances,  which  resulted  from
milestone payments and equity proceeds.

LIQUIDITY AND CAPITAL RESOURCES.

Cash and short-term investments as of June 31, 1998 were $35,253,000 compared to
$33,709,000  at  December  31,  1997.  The  second  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 at least through 1999.  

                                       10

<PAGE>


                                NEORX CORPORATION


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

The Company's working capital and capital requirements will depend upon numerous
factors,  including  results of research and  development  activities,  clinical
trials,   expenses   associated  with  expanding   marketing  and  manufacturing
capabilities,  competitive and technological  developments and the timing,  cost
and successful  continuation of the Company's collaborative  relationships.  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
manufacturing  capabilities.  The  Company  intends to seek  additional  funding
through  public  or  private  equity  financing,   arrangements  with  corporate
collaborators, out-licensing certain technologies, or other sources.

Adequate  funds may not be available  when needed or on terms  acceptable to the
Company.  If funding is insufficient at any time in the future, the Company will
be  forced  to  delay,  reduce  or  eliminate  some or all of its  research  and
development  activities,  clinical  studies and trials,  and  manufacturing  and
administrative programs, dispose of assets or technology, or cease operations.

IMPACT OF YEAR 2000.

The "Year 2000  Problem" is pervasive and complex,  as virtually  every computer
operation  will be affected in some way by the  rollover of the  two-digit  year
value to 00. This issue is whether computer systems will properly recognize date
sensitive  information  when  the year  changes  to  2000.  Systems  that do not
properly  recognize date sensitive  information could generate erroneous data or
cause a system to fail.

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  and  corporate  partners  to
determine the extent to which the Company is vulnerable to those third  parties'
failure to resolve their own Year 2000 issue. There can be no guarantee that the
systems of other  companies  on which the Company  relies will be converted in a
timely  manner,  or that another  company's  failure to convert would not have a
material adverse effect on the Company.  The Company does not anticipate that it
will incur significant  operating  expenses or  be required to invest heavily in

                                       11

<PAGE>


                                NEORX CORPORATION



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

computer  systems  improvement  to be Year 200 compliant.  However,  significant
uncertainty  exists  concerning the potential costs and effects  associated with
Year 2000 compliance.  Any Year 2000 compliance problem of either the Company or
its suppliers and collaborative partners could have a material adverse effect on
the Company's business, financial condition and results of operations.

Item 5. Other Information

In accordance  with the Company's  Bylaws,  a shareholder  proposing to transact
business at the Company's  annual meeting must provide  written notice of such a
proposal,  in the manner provided by the Company's Bylaws,  not fewer than 60 or
more than 90 days prior to the date of such annual  meeting  (or, if the Company
provides less than 70 days notice of such  meeting,  no later than 10 days after
the date of the Company's notice).  In addition,  if the Company receives notice
of a shareholder  proposal after February 23, 1999, the persons named as proxies
in such  proxy  statement  will  have  discretionary  authority  to vote on such
shareholder proposal.



                                       12

<PAGE>


                                NEORX CORPORATION

                                    SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                         NeoRx Corporation
                                         (Registrant)



Date: August 11, 1998                    By: /s/Richard L. Anderson
                                             ----------------------
                                             Richard L. Anderson
                                             Senior Vice President,
                                             Finance and Operations,
                                             (Principal Financial and
                                              Accounting Officer)





                                              13