<PAGE>

--------------------------------------------------------------------------------

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-K
      (MARK ONE)
          X       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2001
                                       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 0-22147

                               ILEX ONCOLOGY, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                  DELAWARE                          74-2699185
       (STATE OR OTHER JURISDICTION OF           (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)           IDENTIFICATION NO.)

           4545 HORIZON HILL BLVD.
             SAN ANTONIO, TEXAS                        78229
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)          (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (210) 949-8200

                                   ----------

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

  TITLE OF EACH CLASS:                     NAME OF EXCHANGE ON WHICH REGISTERED:
  --------------------                     -------------------------------------
  COMMON STOCK,                            NATIONAL ASSOCIATION OF SECURITIES
  $.01 PAR VALUE                           DEALERS AUTOMATED QUOTATION SYSTEM

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
                                                                    ----

         INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES  X  NO    .
                                              ---    ---

         INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K.    .
                             ---

         THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK AS OF
FEBRUARY 28, 2002 IS 32,374,311.

         THE AGGREGATE MARKET VALUE OF THE STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF FEBRUARY 28, 2002 WAS APPROXIMATELY $421 MILLION.

                      DOCUMENTS INCORPORATED BY REFERENCE

         PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE
REGISTRANT'S 2002 ANNUAL MEETING OF STOCKHOLDERS, TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION NOT LATER THAN APRIL 30, 2002, ARE
INCORPORATED BY REFERENCE INTO PART III OF THIS FORM 10-K.
<PAGE>

ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------

This Annual Report on Form 10-K contains certain forward-looking statements as
such term is defined in the Private Securities Litigation Reform Act of 1995 and
information relating to the Company and its subsidiaries that are based on the
beliefs of the Company's management as well as assumptions made by and
information currently available to the Company's management. When used in this
report, the words anticipate, believe, estimate, expect and intend and words or
phrases of similar import, as they relate to the Company or its subsidiaries or
Company management, are intended to identify forward-looking statements. Such
statements reflect the current risks, uncertainties and assumptions related to
certain factors including, without limitations, risks associated with
preclinical and clinical developments in the biopharmaceutical industry in
general and in ILEX's compounds under development in particular; the potential
failure of the Company's compounds under development to prove safe and effective
for treatment of disease; uncertainties inherent in the early stage of the
Company's compounds under development; failure to successfully implement or
complete clinical trials; failure to receive market clearance from regulatory
agencies for our compounds under development; management's ability to implement
strategic initiatives; the ability of the Company to predict its future expenses
and capital needs; the development of competing products; the ability of the
Company to combine its disparate research capabilities and translate them into
clinical drug development programs; uncertainties related to the Company's
dependence on and relationships with third parties and partners; general
economic and market conditions; risks inherent in the biopharmaceutical
industry; stock price volatility; variability of license, royalty and other
revenue; risks related to the outcome of litigation and claims made against us;
risks related to the market acceptance of CAMPATH; uncertainties related to
protection of our intellectual property; rapid technological change could render
our technologies obsolete; one-time events and those risks described herein, in
the Company's Form S-3 filed November 15, 2001, as amended (Commission file
#333-72396) and in other filings made by the Company with the SEC. Based upon
changing conditions, should any one or more of these risks or uncertainties
materialize, or should any underlying assumptions prove incorrect, actual
results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. The Company does not intend to update
these forward-looking statements.

         In this Annual Report on Form 10-K, "ILEX," the "Company," "we," "our"
or "us" refer to ILEX Oncology, Inc. and its wholly owned subsidiaries, "common
stock" refers to ILEX's common stock, par value $0.01 per share.

                                     PART I.

ITEM 1. BUSINESS

SUMMARY

We are building a product-driven oncology-focused pharmaceutical company by
developing and commercializing a portfolio of novel treatments for both early
and late stage cancers. We are leveraging our core competencies in clinical drug
development to identify, develop and commercialize our proprietary product
candidates. Our lead product, CAMPATH, has been approved in the United States
and Europe for treating patients with refractory chronic lymphocytic leukemia
and is distributed by Schering AG (Schering) and its U.S. subsidiary, Berlex
Laboratories, Inc. (Berlex). In addition, we have five oncology product
candidates in clinical trials, three others that we are considering for further
clinical development, as well as several active preclinical programs. To date,
we have built this pipeline primarily through the licensing and acquisition of
promising drug candidates. In addition to our clinical development programs, we
conduct drug discovery research, translational research and preclinical studies
in the fields of angiogenesis inhibition, signal transduction, molecular
receptor chemistry and targeted medicinal phosphonate chemistry. CAMPATH was
developed in a 50/50 partnership with Leukosite Inc. (Leukosite), formed in
1997. Millennium Pharmaceuticals, Inc. (Millennium) acquired Leukosite and
Leukosite's interests in the Partnership two years later. In December 2001, we
acquired Millennium's equity interest in ILEX Pharmaceuticals, L.P. (formerly
known as Millennium & ILEX Partners, L.P. (the Partnership). We acquired
Millennium's interest because we believe the transaction will have a positive
impact on our income statement and will enable us to more effectively develop
CAMPATH in possible indications such as other leukemias, lymphomas and multiple
sclerosis. In addition, we will have the opportunity to enhance
commercialization by co-promoting CAMPATH in the U.S. with our development and
marketing partner, Berlex.

We have incurred losses since inception and had an accumulated deficit through
December 31, 2001, of $237.3 million. Our losses have resulted primarily from
product development activities, including licensing of products and product and
corporate acquisitions for which we incur in-process research and development
expenses, and related administrative expenses. We expect to continue to incur
operating losses for the foreseeable future. With the exception of CAMPATH, none
of our other drug candidates has been approved for sale. Our revenue for the
foreseeable future will be limited to our product development for CAMPATH,
contract research services (CRO) revenue, interest income and other
miscellaneous income. Our portion of the profit or loss generated by the sale of
CAMPATH is reflected in our Consolidated Statements of Operations as equity in
income (losses) of research and development partnership. We have historically
accounted for CAMPATH development activities as follows:

     o   ILEX operating revenue included product development revenue we receive
         from the Partnership;



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2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------


     o   ILEX research and development expenses include all of our development
         costs for CAMPATH, which are largely offset by the Partnership's
         revenue we receive, and;

     o   The Partnership's income (losses) is reported on our Consolidated
         Statements of Operations as equity in income (losses) of research and
         development partnerships.


Our CRO business generates revenue by performing services for pharmaceutical and
biotechnology companies. The terms of our contracts vary in term from several
months to several years, or completion of the project, and generally may be
terminated upon notice of 60 to 90 days by either party. We recognize revenue
with respect to our services either on a percentage-of-completion or
fee-for-service basis as work is performed. In February 2001, ILEX announced its
intent to focus its in-house drug development capabilities on its own
proprietary products, including those being jointly developed with partners. As
a result, we have begun approximately a two to three-year transition out of the
fee-for-service CRO business. We will continue to recognize revenue from current
client projects, but we do not intend to take on any new fee-for-service
contracts, except where we can obtain an ownership interest. We anticipate
transitioning certain ILEX Services employees to develop the Company's own
products. We believe that our oncology expertise enables us to effectively
manage the drug development process and increases the probability of obtaining
regulatory approval.

OUR PRODUCT CANDIDATE PIPELINE

         In addition to CAMPATH, our product candidate pipeline includes
oncology compounds at various stages of development, with significant
therapeutic targets and unique mechanisms of action. The following chart
identifies the clinical progress of these product candidates as of December 31,
2001.

<Table>
<Caption>

                                                                                                          MARKETING RIGHTS
                 PRODUCT                                                                        ---------------------------------
                CANDIDATE              TARGET           INDICATIONS                    STATUS      UNITED STATES         OTHER
        ------------------------    ------------    ----------------------           ---------- ------------------   ------------
<S>                                 <C>             <C>                              <C>        <C>                  <C>
        CAMPATH(R)                  CD52            Chronic lymphocytic
                                                    leukemia                         Marketed         Berlex         Schering AG(1)
                                                    Other hematologic
                                                    indications                      Phase II
                                                    Multiple sclerosis               Phase II

        Eflornithine                Ornithine       Superficial bladder              Phase III         ILEX               ILEX
                                    Decarboxylase   cancer

        CLOFAREX(TM)                DNA             Acute leukemias                  Phase II        ILEX(2)         Bioenvision(2)
        (Clofarabine)                               Pediatric leukemias              Phase II
                                                    Solid tumors                     Preclinical

        APOMINE(TM)                 Farnesoid X     Melanoma                         Phase II          ILEX               ILEX
                                    receptor
                                                    Breast cancer                    Phase II
                                                    Osteoporosis                     Preclinical

        ILX-651                     Tubulin         Solid tumors                     Phase I           ILEX               ILEX

        NM-3                        VEGF            Solid tumors                     Phase I           ILEX               ILEX
</Table>


----------

(1)      Schering AG holds worldwide rights except in Japan and East Asia, which
         were retained by the Partnership.

(2)      ILEX holds marketing rights in North America and Bioenvision Inc. holds
         marketing rights in the rest of the world, excluding Japan and
         Southeast Asia.

CAMPATH

         CAMPATH is a humanized monoclonal antibody that binds to a specific
target, CD52, on cell surfaces leading the body's immune system to destroy
malignant cells. CAMPATH was launched in May 2001 in the United States and in
August 2001 in Europe. Our marketing partner, Schering, reported CAMPATH had
generated net sales of approximately $27.1 million through December 31, 2001.
CAMPATH is also being evaluated in more than 40 additional oncology trials for
the treatment of various lymphatic and hematologic cancers. In addition, we are
conducting clinical trials of CAMPATH in autoimmune diseases such as multiple
sclerosis.




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2001 ANNUAL REPORT ON FORM 10-K
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Eflornithine

         Eflornithine is an orally bioavailable compound that has demonstrated
the ability to block ornithine decarboxylase, an enzyme that is known to promote
carcinogenesis. In Phase II trials Eflornithine exhibited the ability to reduce
the severity of premalignant lesions and thereby help prevent such lesions from
progressing to cancer. In collaboration with the National Cancer Institute, we
are conducting a Phase III trial to evaluate Eflornithine as a treatment for
patients at risk for recurrence of superficial bladder cancer. We expect to
complete this trial in late 2003.

CLOFAREX

         CLOFAREX is a second-generation nucleoside analogue that interrupts the
metabolism of cancer cells. It is in the same class as fludarabine, cladribine
and gemcitabine, all approved oncology drugs. In preclinical studies CLOFAREX
was determined to be more potent than fludarabine and cladribine in colon and in
blood borne cancers. In Phase I trials CLOFAREX induced complete remissions in
some adult and pediatric patients with acute leukemias who had failed
conventional treatments. Phase II trials are on-going in patients with various
types of leukemia. We plan to pursue trials in both pediatric and adult patients
with acute leukemias and to develop an oral formulation to treat solid tumors,
such as colon cancer.

APOMINE

     APOMINE is an orally bioavailable bisphosphonate ester that targets the
nuclear farnesoid X receptor in order to induce apoptosis selectively in cancer
cells. APOMINE was well tolerated in Phase I trials and demonstrated anti-tumor
activity in patients with melanoma and ovarian cancer. A Phase II trial is
currently underway in patients with melanoma. We believe APOMINE may also have
applications in certain bone diseases, including osteoporosis.

ILX-651

         ILX-651 is a second-generation synthetic dolastatin pentapeptide
derivative that targets tubulin and interrupts cell mitosis with a different
mechanism of action than taxanes. In preclinical studies, ILX-651 was determined
to have potent anti-tumor activity against a wide range of solid tumor types,
including tumors that are resistant to treatment with taxanes. We recently began
Phase I trials with this compound.

NM-3

         NM-3 is an orally bioavailable inhibitor of vascular endothelial growth
factor (VEGF) transcription and other growth factors involved in endothelial
cell proliferation. Of all the angiogenic factors that lead to the formation of
new blood vessels, VEGF is considered to be one of the most important.
Preclinical studies have determined that NM-3 inhibits growth in a variety of
tumor models, both as a stand-alone therapy and as a radiation and chemotherapy
sensitizer. We are currently conducting Phase I trials with this compound.

Drug Discovery and Preclinical Programs

         In addition to our product candidates in clinical trials, we have a
number of preclinical programs, including angiogenesis inhibitors and signal
transduction inhibitors. We have identified a product candidate, a synthetic
peptide, which is scheduled to begin clinical trials in 2002.

OUR TARGET MARKET

         We are currently focused primarily on the oncology market. Cancer
encompasses a large number of discrete diseases that afflict many different
parts of the human body. The diversity of cancer diseases and their overall
prevalence create a large need for new and improved treatments. It is estimated
that one in three Americans will be diagnosed with cancer, making it the second
leading cause of death in the United States. The worldwide oncology drug market
was estimated at $25.0 billion in 2000, representing 9% growth from 1999. We
have chosen to focus initially on the oncology market because there is a great
need for more effective treatments and we believe that oncology clinical trials
are often smaller, regulatory approvals can be expedited, and favorable pricing
and reimbursement terms are often available.



                                       3
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2001 ANNUAL REPORT ON FORM 10-K
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         In addition to oncology, we continually evaluate our product candidates
for applicability to other disease indications. For example, we believe CAMPATH
may prove effective in treating multiple sclerosis and APOMINE may prove
effective in treating osteoporosis.

OUR STRATEGY

         Our strategic vision is to be a product-driven oncology-focused
pharmaceutical company. We plan to achieve this vision through our aggressive
pursuit of commercializing the product candidates in our pipeline. The key
elements of our strategy to accomplish this objective are to:

     o   Establish CAMPATH as an effective treatment for hematologic
         malignancies and autoimmune diseases. By broadening the approved label
         indications, we can greatly increase our target markets for CAMPATH.
         Together with Schering, we are sponsoring or supporting, more than 40
         post-marketing trials to evaluate CAMPATH in these other indications.

     o   Build a diversified pipeline of product candidates. We are developing a
         broad pipeline of product candidates that are in various stages of
         clinical and preclinical development. We believe this strategy
         increases the likelihood that we will successfully develop commercially
         viable pharmaceutical products. Our approach is intended to reduce our
         exposure to the impact of any single product failure and increase our
         flexibility to eliminate programs we deem less promising.

     o   License or otherwise acquire complementary products or technologies. In
         addition to our internal drug discovery efforts, we plan to continue
         expanding our product candidate pipeline by identifying and evaluating
         potential products and technologies developed by third parties that we
         believe fit within our overall pipeline strategy. For example, since
         1999 we have acquired Convergence Pharmaceuticals, Inc. (Convergence)
         and Symphar. These acquisitions continue to add valuable product
         candidates to our pipeline.

     o   Retain greater U.S. commercialization rights. We intend to continue to
         retain the rights to commercialize our product candidates in the United
         States and to establish commercial arrangements with other companies
         outside the United States.

     o   Leverage our core development capabilities. We believe that by
         leveraging the expertise we have acquired conducting clinical trials,
         our networks of clinical investigators and our regulatory expertise we
         can better identify innovative drug candidates and design clinical
         trials aimed at obtaining expedited marketing approval.

OUR INTELLECTUAL PROPERTY

         Patents and other proprietary rights are vital to our business. Our
policy is to seek appropriate patent protection both in the United States and
abroad for our proprietary technologies. In addition to seeking our own patents,
we enter into license agreements with various pharmaceutical companies and
research, educational and governmental institutions to obtain patent rights from
them to develop and potentially sell products which use the compounds and
technologies protected by those patents.

         CAMPATH is protected by composition of matter patents issued in the
United States, Europe, Australia, Canada and New Zealand, which expire between
2009 and 2015, with the U.S. patent expiring in 2015. Patent applications for
CAMPATH are pending in Denmark, Japan and South Africa. The European patent for
CAMPATH was issued in February 1989 and the United States patent in December
1998. We both own and have licensed United States issued patents on the
formulation and/or use of Eflornithine that expire between 2008 and 2017. In
addition, we have filed or have rights to license patent applications for the
use of Eflornithine alone and in combination with other drugs to treat and to
prevent various cancers. APOMINE is covered by issued composition of matter and
method of use patents.

         Additionally, we have a worldwide license for ILX-651, including
composition of matter patent coverage, which is filed in over 40 countries,
including a United States patent expiring at the end of 2015. CLOFAREX has
worldwide patent protection, including both composition of matter and cancer
treatment method coverage, expiring between 2008 and 2014 in the United States.



                                       4
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ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
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         In addition to the 36 United States patents and approximately 265
foreign patents we have licensed from others, we own approximately 15 issued
patents in the United States and approximately 40 issued foreign patents. We
also have approximately 10 pending patent applications in the United States and
approximately 50 foreign applications and we have licensed from others the
rights to approximately 20 United States pending patent applications and
approximately 190 foreign pending patent applications.

OUR PEOPLE

         As a leading drug development organization, we have demonstrated our
ability to achieve aggressive development milestones, as well as meet regulatory
requirements in both the United States and Europe. We have approximately 310
employees, primarily conducting drug discovery, preclinical research and
clinical drug development. We have approximately 42 scientists in Boston,
Massachusetts and Geneva, Switzerland focused on angiogenesis inhibition, signal
transduction, molecular receptor chemistry and other innovative technologies.

         Our drug development organization is comprised of approximately 189
employees, 147 of whom, are located principally in San Antonio, Texas and near
London, England. Of the approximately 189 employees conducting research and
development, 44 have doctorate degrees.

         Our experienced management team has extensive pharmaceutical expertise
and is focused on the short- and long-term success of ILEX. We also enjoy access
to an extensive worldwide network of oncology thought leaders and scientific
advisors.

RECENT DEVELOPMENTS

         CAMPATH was developed in a 50/50 partnership with Leukosite formed in
1997. Millennium acquired Leukosite and Leukosite's interests in the Partnership
two years later. ILEX has served as a general partner of the Partnership since
its inception through a company equally owned originally with Leukosite and then
Millennium. On behalf of the Partnership, we conducted the clinical trials on
CAMPATH and played a key role in obtaining regulatory approval of CAMPATH in the
United States and Europe. In October 2001, we entered into a definitive
agreement to give us sole ownership of the Partnership by acquiring Millennium's
partnership interests in the Partnership. The terms of the agreement include an
initial cash payment of $20.0 million and an additional $120.0 million in
scheduled payments over the next three years, $20.0 million of which may be paid
in shares of our common stock. In addition, in the event sales of CAMPATH in the
United States exceed certain sales levels beginning in 2005, Millennium will be
entitled to additional payments based on these incremental sales. The
transaction closed on December 31, 2001.

STRATEGIC ALLIANCES

         ILEX intends to develop and commercialize its own products by
eventually forming its own sales, marketing and distribution capabilities.
However, in some instances we may form corporate partnerships with larger
pharmaceutical companies, particularly for development of non-oncology uses and
for commercialization outside the U.S. In a typical partnership arrangement, a
corporate partner may bear the substantial cost of clinical development,
scale-up production, U.S. Food and Drug Administration (FDA) approval and
marketing.

         We continue to work closely with prestigious cancer research
institutions and groups that give us access to top oncology clinical expertise.
Our Board of Directors includes Daniel Von Hoff, M.D., past president of the
American Association for Cancer Research and current Director of the University
of Arizona, where research in pancreatic cancer is performed. Joseph Bailes,
M.D., is currently Executive Vice President, Clinical Affairs at U.S. Oncology,
Inc. and is past president of the American Society of Clinical Oncology. In
addition, we have a strong relationship with CTRC Research Foundation (CTRC
Research), one of our largest stockholders. CTRC Research operates one of the
largest oncology Phase I trial organizations in the U.S. We have strong
historical ties with US Oncology, one of the largest oncology physician practice
management organizations in the U.S., whose physicians see approximately 14% of
the new cancer patients in the U.S. annually. Our strong relationships with
these groups give us potential access to a significant number of patients for
enrollment into clinical trials.

CTRC Research

         We began operations in 1994 after the transfer of drug development
programs, intellectual property rights and commercial opportunities from CTRC
Research. CTRC Research was formed as part of a program begun by Cancer Therapy
and Research Center of South Texas, or CTRC, a regional cancer treatment and
research center located in San Antonio, Texas. CTRC was founded in 1972 and
today, in conjunction with the University of Texas Health Science Center at San
Antonio (UTHSCSA), is an NCI-designated




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Comprehensive Cancer Center, one of two in the state of Texas. Under the
leadership of Charles Coltman, Jr., M.D., one of the founders of the Company,
CTRC has become known for its expertise in clinical research. Dr. Coltman is
also Chairman of the Southwest Oncology Group. Dr. Von Hoff, also one of the
founders of the Company and a member of our Research Advisory Panel, served as
Director of Research at CTRC from 1988 to 1999. In 1991, under the direction of
Dr. Von Hoff, CTRC established the Institute for Drug Development, or IDD, under
a Program Agreement with the UTHSCSA, with the mission of accelerating the
development of oncology drugs. Primarily through the efforts of Dr. Von Hoff,
IDD has since established one of the largest groups in the U.S. for conducting
Phase I clinical trials of oncology drugs. CTRC and CTRC Research and their
related entities have had some level of participation in the clinical
development of a majority of the U.S. anticancer drugs developed over the past
ten years. At January 31, 2002, CTRC owned approximately 7% of the Company's
outstanding shares of common stock.

Schering AG

         In August 1999, the Partnership and Schering entered into a
distribution and development agreement that grants Schering exclusive worldwide
marketing and distribution rights to CAMPATH, except in Japan and East Asia,
where the Partnership has retained rights.

POTENTIAL FUTURE ALLIANCES AND COLLABORATIONS

         In the ordinary course of its business, the Company investigates,
evaluates and discusses with others the potential creation of strategic
collaborations, and the acquisition of businesses, technologies and compounds
that complement the Company's business. Although the Company currently has no
definitive understandings or agreements with respect to any such strategic
collaboration or acquisition, the Company is continually engaged in discussions
with parties which may either singly or in the aggregate materially impact the
Company's business, financial condition and results of operations. No assurance
can be given, however, that any such strategic collaboration or acquisition will
be made or, if made, that it will prove to be successful.

IN-LICENSING AGREEMENTS

         As a part of its business strategy, the Company actively seeks to
expand its product portfolio. Historically, these acquisitions have been in the
form of exclusive licensing arrangements.

         The Company's in-license agreements (the Licenses) generally require
the Company to undertake and pursue with diligence and best efforts the
development of the compounds and technologies licensed and to report on a
regular basis on the Company's development, progress and plans. Each of the
Licenses requires payments of royalties on sales of products covered by the
License and, in several instances, minimum annual royalties. Under most of the
Licenses, the licensor has the first right to sue for infringement of, and
defend invalidity charges against, the licensed patents. All of the Licenses
provide that the licensor or sublicensor may terminate all or a portion of the
license or sublicense in the event of the Company's default in its obligations,
including the obligations to diligently pursue and apply best efforts to the
development of the licensed compound or technology, and, in some instances, in
the event of the Company's insolvency or bankruptcy.

         In addition, certain Licenses will automatically terminate if the
Company does not achieve certain development milestones by specified dates or,
in lieu thereof, make payments extending such dates. If we default under any of
these license agreements, we may lose our right to market and sell any products
based on the licensed technology. Losing our marketing and sales rights would
materially harm our business and financial condition. The Company believes it
has complied in all material respects with the terms of all of its Licenses to
date. The Company intends to continue its licensing program and to engage in
compound acquisitions with a primary focus on clinical stage oncology compounds.
There can be no assurance that any such licenses or acquisitions will be on
terms similar to the Licenses or favorable to the Company.

         The Company's agreements with its strategic corporate partners
typically provide that, in the event the Company is required to pay a royalty to
a third party in order to market a product in any country because of a
third-party patent in such country, a portion of any such payments may be
credited by the Company against royalties payable to the partner. In addition,
if a product containing the compound subject to the agreement is introduced into
any country in which patent rights do not exist, and sales of such competing
product exceed certain specified percentages of unit sales of the Company's
products, then the royalty rates are subject to reduction. Subject to certain
exceptions, the obligation to pay royalties with respect to net sales in a
specific country typically continues for the life of the patent or ten years
from commercial sale if no patent exists.




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ORPHAN DRUG STATUS

         Pursuant to the Orphan Drug Act of 1983 (the Orphan Drug Act), the FDA
may designate a drug intended to treat a rare disease or condition as an orphan
drug. A rare disease or condition is one which affects fewer than 200,000 people
in the United States, or which affects more than 200,000 people but for which
the cost of development and distribution of the drug will not be recovered from
sales of the drug in the United States. Upon approval of a New Drug Application
(NDA) for an orphan drug, such drug may be eligible for exclusive marketing
rights in the United States for designated and approved indications for seven
years. Orphan drugs may also be eligible for federal income tax credits for
certain clinical trial expenses. CAMPATH and CLOFAREX have been granted orphan
drug status.

         The Company may receive marketing exclusivity for an orphan drug only
if it is the sponsor of the first NDA approved for the drug for an indication
for which the drug was designated as an orphan drug prior to the approval of
such NDA. Therefore, unlike patent protection, orphan drug status does not
prevent other manufacturers from attempting to develop the drug for the
designated indication or from obtaining NDA approval prior to approval of the
Company's NDA. If another sponsor's NDA for the same drug and the same
indication is approved first, that sponsor is entitled to exclusive marketing
rights if that sponsor has received orphan drug designation for the drug. In
that case, the FDA would be prohibited from approving the Company's application
to market the product for the relevant indication for a period of seven years.
If another sponsor's NDA for the same drug and the same indication is approved
first, but that drug has not been designated as an orphan drug, the FDA would
still be permitted to approve the Company's NDA without the exclusivity provided
by orphan drug status.

         The Company believes that some of its products may qualify for
designation as orphan drugs. There can be no assurance, however, that such other
products will receive orphan drug status. Moreover, possible amendment of the
Orphan Drug Act by the United States Congress and possible reinterpretation by
the FDA are frequently discussed. Legislation to limit exclusivity in some
respects was passed by Congress, but vetoed by the President in 1990. FDA
regulations reflecting certain other limitations and procedures went into effect
in January 1993. Therefore, there is no assurance as to the precise scope of
protection that may be afforded by orphan drug status in the future, or that the
current level of exclusivity and tax credits will remain in effect.

ILEX SERVICES

         In February 2001, ILEX announced its intent to focus its in-house drug
development capabilities on its own proprietary products, including those being
jointly developed with partners. As a result, we have begun approximately a two
to three-year transition out of the fee-for-service CRO business. We will
continue to recognize revenue from current client projects, but we do not intend
to take on any new fee-for-service contracts, except where we can obtain an
ownership interest. We anticipate transitioning certain ILEX Services employees
to develop the Company's own products. We believe that our oncology expertise
enables us to effectively manage the drug development process and increases the
probability of obtaining regulatory approval.

PATENTS, TRADEMARKS AND TRADE SECRETS

         Patents and other proprietary rights are vital to our business. Our
policy is to seek appropriate patent protection both in the U.S. and abroad for
our proprietary technology. With the acquisition of Symphar, our patent
portfolio now includes approximately 49 issued patents, including 13 patents in
the U.S. In addition to seeking our own patents, we enter into license
agreements with various pharmaceutical companies and research, educational and
governmental institutions to obtain patent rights from them to develop and
potentially sell products which use the compounds and technologies protected by
those patents.

         Our compounds acquired pursuant to in-licensing arrangements are
normally protected by patents obtained or applied for by our licensors. This
includes U.S. patents, U.S. patent applications and foreign patents and patent
applications. We have not conducted in-depth validity and infringement studies
on the patents and patent applications that we have in-licensed from major
biotechnology and pharmaceutical companies, and it is possible that these
patents or patent applications will be challenged or will not provide protection
for our compounds.

     CAMPATH is protected by patents issued in the U.S., European major market
countries, Australia, Canada and New Zealand, which expire between 2009 and
2015. Patent applications for CAMPATH are pending in Denmark, Japan and South
Africa. The European patent was issued in February 1989 and the U.S. patent in
December 1998. We have licensed U.S. issued patents on the use of Eflornithine
that expire between 2008 and 2017. In addition, we have filed patent
applications for the use of Eflornithine alone and in combination with other
drugs to treat and to prevent various cancers and in certain novel formulations.
Eflornithine currently does not have composition of matter patent protection,
but we have applied for orphan drug designation. APOMINE(TM) is covered by an
issued composition of matter patent. In addition, numerous patent applications
have been filed on our portfolio of angiogenesis inhibitors including one issued
patent in the U.S.


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Through the acquisition of Symphar, now ILEX Research S.A., the Company obtained
approximately 50 issued patents and over 100 pending patent applications in the
U.S. and abroad in oncology, lipid metabolism and bone anabolism covering both
novel compositions and methods of use.

         Additionally, as a result of an agreement with BASF Pharma (BASF), ILEX
has acquired a worldwide license for ILX-651 including composition of matter
patent coverage, which is filed in 43 countries, including the U.S. patent
expiring at the end of 2015. CLOFAREX has worldwide patent protection licensed
to Bioenvision, Inc. by Southern Research Institute including both composition
of matter and cancer treatment method coverage expiring between 2008 and 2014 in
the U.S.

         The patent positions of biotechnology and pharmaceutical companies are
generally uncertain and involve complex legal and factual issues. No assurance
can be given that any patent issued to or licensed by us will provide protection
that has commercial significance. We cannot assure you that:

o    our patents will afford protection against competitors with similar
     compounds or technologies;

o    our patent applications will issue;

o    others will not obtain patents claiming aspects similar to those
     covered by our patents or applications;

o    the patents of others will not have an adverse effect on our ability to
     do business; or

o    the patents issued to or licensed by us will not be infringed,
     challenged, invalidated or circumvented.

         Moreover, we believe that obtaining foreign patents may, in some cases,
be more difficult than obtaining domestic patents because of differences in
patent laws. We also recognize that our patent position may generally be
stronger in the U.S. than abroad. Conversely, the protection provided by foreign
patents may be weaker than that provided by domestic patents.

         CAMPATH(TM), MABCAMPATH(TM) and PROCAMPATH(TM) are trademarks of the
Partnership. We have filed for trademark protection on various other product
candidates in the development pipeline, including worldwide filings for APOMINE.
Additionally, we anticipate we will have additional filings on new product
candidates entering development as they progress through the development
process.

         We also rely upon unpatented trade secrets and improvements, unpatented
know-how and continuing technological innovation to develop and maintain our
competitive position. We generally protect this information with confidentiality
agreements that provide that all confidential information developed or made
known to others during the course of their employment, consulting or business
relationship with us shall be kept confidential except in specified
circumstances. Agreements with employees provide that all inventions conceived
by the individual while employed by us are our exclusive property. We cannot
guarantee, however, that these agreements will be honored, that we will have
adequate remedies for breach if they are not honored or that our trade secrets
will not otherwise become known or be independently discovered by competitors.

COMPETITION

Product Development

         The pharmaceutical industry is characterized by rapidly evolving
technology and intense competition. Many companies of all sizes, including a
number of large pharmaceutical companies as well as several specialized
biotechnology companies, are developing cancer drugs similar to ours. There are
products on the market that will compete directly with the products that we are
seeking to develop. In addition, colleges, universities, governmental agencies
and other public and private research institutions will continue to conduct
research and are becoming more active in seeking patent protection and licensing
arrangements to collect license fees, milestone payments and royalties in
exchange for license rights to technologies that they have developed, some of
which may directly compete with our technologies. These companies and
institutions also compete with us in recruiting qualified scientific personnel.
Many of our competitors have substantially greater financial, research and
development, human and other resources than do we. Furthermore, large
pharmaceutical companies have significantly more experience than we do in
preclinical testing, human clinical trials and regulatory approval procedures.
Our competitors may:

o    develop safer and more effective products than ours;

o    obtain patent protection or intellectual property rights that limit our
     ability to commercialize products; or

o    commercialize products earlier than we can.

         We expect technology developments in our industry to continue to occur
at a rapid pace. Commercial developments by our competitors may render some or
all of our potential products obsolete or non-competitive, which would
materially harm our business and financial condition.


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GOVERNMENT REGULATION

         The design, research, development, testing, manufacture, labeling,
promotion, marketing, advertising and distribution of drug products are
extensively regulated by the FDA in the U.S. and similar regulatory bodies in
other countries. The regulatory process is similar for a BLA and an NDA, except
that applications for biologics are submitted to the Center for Biologics
Evaluation Research, and applications for small molecules are submitted to the
Center for Drug Evaluation and Research. The steps ordinarily required before a
new drug may be marketed in the U.S., which are similar to steps required in
most other countries, include:

o    preclinical laboratory tests, preclinical studies in animals, formulation
     studies and the submission to the FDA of an IND application;

o    adequate and well-controlled clinical trials to establish the safety and
     efficacy of the drug for each indication;

o    the submission of a BLA/NDA to the FDA; and

o    FDA review and approval of the BLA/NDA.

         Preclinical tests include laboratory evaluation of product chemistry
toxicity and formulation, as well as animal studies. The results of preclinical
testing are submitted to the FDA as part of an IND application. A 30-day waiting
period after the filing of each IND application is required prior to the
commencement of clinical testing in humans. At any time during this 30-day
period or at any time thereafter, the FDA may halt proposed or ongoing clinical
trials until the FDA authorizes trials under specified terms. The IND
application process may be extremely costly and substantially delay development
of our products. Moreover, positive results of preclinical tests will not
necessarily indicate positive results in subsequent clinical trials.

         Clinical trials to support BLA/NDAs are typically conducted in three
sequential phases, although the phases may overlap. During Phase I, the initial
introduction of the drug into healthy human subjects or patients, the drug is
tested to assess metabolism, pharmacokinetics and pharmacological actions and
safety, including side effects associated with increasing doses. Phase II
usually involves studies in a limited patient population to:

o    assess the efficacy of the drug in specific, targeted indications;

o    assess dosage tolerance and optimal dosage; and

o    identify possible adverse effects and safety risks.

         If a compound is found to be potentially effective and to have an
acceptable safety profile in Phase II evaluations, Phase III trials are
undertaken to further demonstrate clinical efficacy and to further test for
safety within an expanded patient population at geographically dispersed
clinical trial sites.

         After successful completion of the required clinical trials, a BLA/NDA
is generally submitted. The FDA may request additional information before
accepting a BLA/NDA for filing, in which case the application must be
resubmitted with the additional information. Once the submission has been
accepted for filing, the FDA reviews the application and responds to the
applicant. The review process is often significantly extended by FDA requests
for additional information or clarification. The FDA may refer the BLA/NDA to an
appropriate advisory committee for review, evaluation and recommendation as to
whether the application should be approved, but the FDA is not bound by the
recommendation of an advisory committee.

         If FDA evaluations of the BLA/NDA and the manufacturing facilities are
favorable, the FDA may issue an approval letter or an approvable letter. An
approvable letter will usually contain a number of conditions that must be met
in order to secure final approval of the BLA/NDA and authorization of commercial
marketing of the drug for certain indications. The FDA may also refuse to
approve the BLA/NDA or issue a not approvable letter, outlining the deficiencies
in the submission and often requiring additional testing or information.

         The manufacturers of approved products and their manufacturing
facilities are subject to continual review and periodic inspections. Because we
currently intend to contract with third parties for commercial scale
manufacturing of our products, our ability to control compliance with FDA
requirements will be limited.

         Approved drugs and manufacturing facilities are subject to ongoing
compliance requirements. Identification of certain side effects or the
occurrence of manufacturing problems after any of our drugs are on the market
could cause subsequent withdrawal of approval, reformulation of the drug, and
additional preclinical studies or clinical trials.



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         Outside the U.S., our ability to market our products will also be
contingent upon receiving marketing authorizations from the appropriate
regulatory authorities. The foreign regulatory approval process includes all of
the complexities associated with FDA approval described above. The requirements
governing the conduct of clinical trials and marketing authorization vary widely
from country to country. At present, foreign marketing authorizations are
applied for at a national level, although within the European Union, or the EU,
procedures are available to companies wishing to market a product in more than
one member state.

         Under a new regulatory system in the EU, marketing authorizations may
be submitted at either a centralized, a decentralized or a national level. The
centralized procedure is mandatory for the approval of biotechnology products
and high technology products and available at the applicant's option for other
products. The centralized procedure provides for the grant of a single marketing
authorization that is valid in all EU member states. The decentralized procedure
is available for all medicinal products that are not subject to the centralized
procedure. The decentralized procedure provides for mutual recognition of
national approval decisions, changes existing procedures for national approvals
and establishes procedures for coordinated EU actions on products, suspensions
and withdrawals. Under this procedure, the holder of a national marketing
authorization for which mutual recognition is sought may submit an application
to one or more EU member states, certify that the dossier is identical to that
on which the first approval was based or explain any differences and certify
that identical dossiers are being submitted to all member states for which
recognition is sought. Within 90 days of receiving the application and
assessment report, each EU member state must decide whether to recognize
approval. The procedure encourages member states to work with applicants and
other regulatory authorities to resolve disputes concerning mutual recognition.
Lack of objection of a given country within 90 days automatically results in
approval from the member state.

         We will choose the appropriate route of European regulatory filing to
accomplish the most rapid regulatory approvals. However, the chosen regulatory
strategy may not secure regulatory approvals or approvals of the chosen product
indications. The Partnership filed for European regulatory approval for the use
of CAMPATH for chronic lymphocytic leukemia (CLL) in parallel with its U.S. and
Canadian regulatory filings. One element of our strategy is to develop
chemoprevention agents that may prevent the progression of cancer. The clinical
development path for chemoprevention agents is uncertain and may require
long-term clinical studies.

PRODUCT LIABILITY AND INSURANCE

     Our business involves the risk of product liability claims. We have not
experienced any product liability claims to date. We maintain product liability
insurance related to CAMPATH with coverage limits of $25.0 million per
occurrence and an annual aggregate maximum of $25.0 million and $5.0 million per
occurrence and an annual aggregate maximum of $5.0 million related to all of our
other products. There can be no assurance that product liability claims will not
exceed such insurance coverage limits, which could have a materially adverse
effect on our business, financial condition or results of operations, or that
such insurance will continue to be available on commercially reasonable terms,
if at all.

                            ADDITIONAL BUSINESS RISKS

WE HAVE A LIMITED OPERATING HISTORY AND WE EXPECT TO CONTINUE TO GENERATE LOSSES
FOR THE FORESEEABLE FUTURE.

         We began operations in October 1994 and have only a limited operating
history upon which you can evaluate our business. We have incurred losses every
year since we began operations. As of December 31, 2001, our accumulated deficit
was approximately $237.3 million, including net losses of approximately $121.0
million, $39.0 million and $46.1 million for the years ended December 31, 2001,
2000 and 1999, respectively. We have recognized only minimal revenues from
product sales to date, and it is possible that significant revenues from product
sales will never be achieved. Even if we do achieve significant revenues from
product sales, we expect to incur significant operating losses over the next
several years. It is possible that we will never achieve profitable operations.

WE MAY BE UNABLE TO OBTAIN ADDITIONAL CAPITAL IF NEEDED TO ACCELERATE OUR
PRODUCT CANDIDATE DEVELOPMENT OR FOR LICENSING OR ACQUISITION OPPORTUNITIES.

         We believe that our existing capital will fund our activities for at
least the next year. We may use these existing resources more quickly if we
decide to accelerate the development of our pipeline or because of changes in
our research and development programs, potential licenses or acquisitions,
commercialization plans or other factors affecting our operating expenses or
capital expenditures. We may not be able to obtain any future funds that we
require, either in the public or private markets or otherwise, on acceptable
terms, or at all.

         If adequate funds are not available, we may have to delay, scale back
or eliminate one or more of our development programs, or obtain funds by
entering into more arrangements with collaborative partners or others that may
require us to relinquish rights to certain of our products or technologies that
we would not otherwise relinquish.



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CAMPATH IS A NEW ONCOLOGY TREATMENT, AND IT MAY NOT GAIN SIGNIFICANT MARKET
ACCEPTANCE AMONG PHYSICIANS, PATIENTS AND THE MEDICAL COMMUNITY.

         CAMPATH received regulatory approval from the FDA in May 2001 and from
the European Commission in July 2001. In order for CAMPATH to be successful we,
and our marketing partner, Schering will need to increase the awareness and
acceptance of CAMPATH among physicians, patients and the medical community.
Although Schering has already launched sales of CAMPATH in the United Kingdom
and Germany, it may take two years or longer for Schering to launch sales in
every country in the European Union. It is too early to determine if CAMPATH
will achieve significant market acceptance.

         Although CAMPATH is the only product that has been approved by the FDA
and the European Commission for treating chronic lymphocytic leukemia in
patients who have failed fludarabine therapy, there are other products that
compete with CAMPATH. Patients with chronic lymphocytic leukemia are generally
treated with alkylating agents first, and, if that treatment fails, then with
fludarabine. In addition, Rituxan is also used to treat patients with chronic
lymphocytic leukemia. IDEC Pharmaceuticals and Genentech market Rituxan in the
United States and have substantially greater financial and marketing resources
than do we. Doctors may prescribe any of these products to a patient with
chronic lymphocytic leukemia. Alkylating agents, such as chlorambucil, are
generally generic products which can be produced and sold less expensively than
CAMPATH .

BECAUSE WE HAVE LIMITED MANUFACTURING CAPABILITIES, WE ARE DEPENDENT ON
THIRD-PARTY MANUFACTURERS TO MANUFACTURE PRODUCTS FOR US. WE MAY BE REQUIRED TO
INCUR SIGNIFICANT COSTS AND DEVOTE SIGNIFICANT EFFORTS TO ESTABLISH OUR OWN
MANUFACTURING CAPABILITIES.

         We have limited manufacturing experience and no commercial scale
manufacturing capabilities. In order to continue to develop products, apply for
regulatory approvals and, ultimately, commercialize additional products, we need
to develop, contracts for or otherwise arrange for the necessary manufacturing
capabilities.

         We currently rely on third parties to produce material for preclinical
testing purposes and clinical trials and expect to continue to do so in the
future. We rely on Boehringer Ingelheim (BI) as the sole source manufacturer of
CAMPATH. The agreement contains a minimum purchase quantity of $3.1 million for
2002 to avoid a contractual surcharge. Management is confident that the minimum
purchase quantity will be satisfied.

         There are a limited number of manufacturers that operate under the
FDA's current good manufacturing practices (cGMP) capable of manufacturing for
us. As a result we have experienced some difficulty finding manufacturers with
adequate capacity for our anticipated future needs. If we are unable to arrange
for third party manufacturing on commercially reasonable terms, we may not be
able to complete development of our product candidates or market them on a
timely basis, if at all.

         Reliance on third party manufacturers entails risks to which we would
not be subject if we manufactured products ourselves, including reliance on the
third party for regulatory compliance and quality assurance, the possibility of
breach of the manufacturing agreement by the third party and the possibility of
termination or non-renewal of the agreement by the third party, based on its
business priorities, at a time that is costly or inconvenient for us. If our
third party manufacturers fail to maintain regulatory compliance, our product
supply will be interrupted resulting in lost or delayed revenues and delayed
clinical trials.

         Drug manufacturing facilities are subject to continual review and
periodic inspection and manufacturing modifications. Domestic manufacturing
facilities are subject to biennial inspections by the FDA, and foreign
facilities are inspected by the FDA less frequently. Both domestic and foreign
facilities must comply with the FDA's cGMP, and other regulations. In complying
with these regulations, manufacturers must spend funds, time and effort in the
areas of production, record keeping, personnel and quality control to ensure
full compliance. The FDA stringently applies regulatory standards for
manufacturing. Failure to comply with any of these post-approval requirements
can result in, among other things, warning letters, product seizures, recalls,
fines, injunctions, suspensions or revocations of marketing licenses, operating
restrictions and criminal prosecutions. This could interrupt our supply for our
marketed products and for our clinical trials.

WE HAVE LIMITED MARKETING CAPABILITIES AND WE ARE CURRENTLY DEPENDENT UPON THIRD
PARTIES TO SELL AND MARKET CAMPATH. WE WILL BE REQUIRED TO INCUR SIGNIFICANT
EXPENSE TO DEVELOP OUR OWN MARKETING CAPABILITIES.

         We have no direct experience in pharmaceutical product marketing, sales
or distribution. To achieve commercial success for any product, we must either
develop a marketing and sales force or contract with another party to perform
those services for us. We depend on Schering and its U.S. affiliate, Berlex
Laboratories, to market or sell CAMPATH. Our reliance on Schering subjects us to
various risks. The terms of our contract with Schering may not be favorable to
us in the future. The amount and timing of resources dedicated by Schering to
marketing CAMPATH is not within our control, and Schering may not commit enough
resources to




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marketing CAMPATH. Schering could develop, independently or with a third party,
a drug that competes with CAMPATH. Schering may not perform its obligations as
expected and our revenues will be decreased or delayed if Schering breaches or
terminates its agreement with us. A dispute may arise between Schering, and us,
which would be both expensive and time-consuming and may result in additional
delays or decreased revenues for us. We will need to develop a marketing and
sales force with sufficient technical expertise and distribution capability,
which will require substantial expenditures and management resources. The
creation of infrastructure to commercialize pharmaceutical products is an
expensive and time-consuming process, and we may be unable to develop the
necessary marketing, sales and distribution capabilities.

OUR COMPETITORS MAY DEVELOP PRODUCTS SUPERIOR TO THOSE WE ARE DEVELOPING.

         The technological areas in which we work evolve at a rapid pace. Our
future success depends upon our ability to compete in the research, development
and commercialization of products and technologies in oncology, our area of
focus. Many of our competitors have substantially greater research and
development capabilities and experience and greater manufacturing, marketing,
financial and managerial resources than do we. These competitors may develop
products that are superior to those we are developing and render our products or
technologies non-competitive or obsolete. In addition, we may not be able to
keep pace with technological change.

     Significant competitive factors determining whether we will be able to
compete successfully include:

o    efficacy and safety of our product candidates;

o    timing and scope of regulatory approvals;

o    product availability;

o    marketing and sales capabilities;

o    reimbursement coverage from insurance companies and others;

o    degree of clinical benefits of our product candidates relative to their
     costs;

o    method of administering a product;

o    price; and

o    patent protection.

THERE ARE POTENTIAL LIMITATIONS ON THIRD-PARTY REIMBURSEMENT AND OTHER
PRICING-RELATED MATTERS THAT COULD REDUCE SALES OF OUR PRODUCTS AND MAY DELAY OR
IMPAIR OUR ABILITY TO GENERATE SIGNIFICANT REVENUES.

         The business and financial condition of pharmaceutical and
biotechnology companies will continue to be affected by the efforts of
government and third-party payors to reduce the cost of health care through
various means. In the United States, there have been, and we expect that there
will continue to be, a number of legislative proposals aimed at changing the
nation's healthcare system. In certain foreign markets, pricing or profitability
of prescription pharmaceuticals is subject to government control. In particular,
individual pricing negotiations are often required in many countries of the
European Union, irrespective of separate government approval to market a drug.

         Although third-party reimbursement is currently not an issue for us,
there is a risk that reimbursement will not be available in the future for our
products or will not be adequate. If government entities and third-party payors
do not provide adequate reimbursement levels, then our revenues will be
adversely affected and could cause our stock price to decline.

THE GENERAL BUSINESS CLIMATE IS UNCERTAIN AND WE DO NOT KNOW HOW THIS WILL
IMPACT OUR BUSINESS.

Over the past year, there have been dramatic changes in economic conditions and
the general business climate has been negatively impacted. Indices of the United
States securities stock markets have fallen precipitously and consumer
confidence has waned. Accordingly, many economists theorize that the United
States is either in, or about to enter, a recession. Compounding the general
unease about the current business climate is the still unknown economic and
political impact of September 11, 2001 terrorist attacks in




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New York, Washington, D.C. and Pennsylvania. We are unable to predict how these
factors may affect our business.

WE DO BUSINESS INTERNATIONALLY AND ARE SUBJECT TO ADDITIONAL POLITICAL, ECONOMIC
AND REGULATORY UNCERTAINTIES.

         We may not be able to operate successfully in any foreign market. We
currently conduct drug discovery research in our laboratory in Geneva,
Switzerland. We also conduct drug development operations near London, England.
Schering sells CAMPATH in the United Kingdom and Germany and intends to sell
CAMPATH in as many as 17 European countries. We believe that, because the
pharmaceutical industry is global in nature, international activities will
continue to be a significant part of our future business activities and that a
substantial portion of our revenues will be derived from outside the United
States. Foreign regulatory agencies often establish standards different from
those in the United States, and an inability to obtain foreign regulatory
approvals on a timely basis could have an adverse effect on our business. Our
international operations may be limited or disrupted by:

     o   imposition of government controls;

     o   political or economic instability;

     o   trade restrictions;

     o   changes in tariffs;

     o   restrictions on repatriating profits;

     o   taxation; and

     o   difficulties in staffing and managing international operations.

Also, our business may be adversely affected by fluctuations in currency
exchange rates.

WE MAY BE UNSUCCESSFUL IN OUR EFFORTS TO EXPAND THE NUMBER AND SCOPE OF
AUTHORIZED USES OF CAMPATH, WHICH WOULD HAMPER SALES GROWTH AND MAKE IT MORE
DIFFICULT FOR US TO ATTAIN PROFITABILITY.

         CAMPATH is approved for sale in the United States and Europe for use by
patients with refractory chronic lymphocytic leukemia. Under current FDA
regulations, we are limited in our ability to promote the use of CAMPATH outside
of this approved indication.

         We are conducting clinical trials to examine whether or not CAMPATH can
be used to treat indications other than refractory chronic lymphocytic leukemia.
Additional trials in these indications are necessary before we can apply to
expand the authorized uses of CAMPATH. We do not know whether these trials will
demonstrate safety and efficacy, or if they do, whether we will succeed in
receiving regulatory approval to market CAMPATH for additional indications. If
the results of these trials are negative, or if adverse experiences are reported
in these trials or otherwise in connection with the use of CAMPATH by patients,
this could adversely affect existing regulatory approvals, undermine physician
and patient comfort with the product, reduce sales of the product and diminish
the acceptance of CAMPATH in the hematological and autoimmune markets. Even if
the results of these trials are positive, the impact on sales of CAMPATH may be
minimal unless they are accepted by the medical community and we are able to
obtain regulatory approval to expand the authorized use of CAMPATH. FDA
regulations restrict our ability to communicate the results of additional
clinical trials to patients, and to a lesser extent, physicians, without first
obtaining approval from the FDA to expand the authorized uses for this product.




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IF WE ARE NOT ABLE TO DEMONSTRATE THE SAFETY AND EFFICACY OF OUR PRODUCT
CANDIDATES IN CLINICAL TRIALS OR IF OUR CLINICAL TRIALS ARE DELAYED, WE WILL NOT
BE ABLE TO OBTAIN REGULATORY APPROVAL, OR REGULATORY APPROVAL WILL BE DELAYED,
TO MARKET THESE DRUGS.

         Clinical testing is a long, expensive and uncertain process. With the
exception of CAMPATH, no regulatory agency has approved any of our product
candidates and the data we collect from our clinical trials may not be
sufficient to support approval. Our clinical trials may not be completed on
schedule and the FDA may never approve our product candidates for commercial
sale. Furthermore, even if initially positive preclinical studies or clinical
trial results are achieved, it is possible that we will obtain different results
in the later clinical trials. Drugs in late stages of clinical development may
fail to show the desired safety and efficacy traits despite having progressed
through initial clinical testing. For example, positive results in early Phase I
or Phase II trials may not be repeated in larger Phase II or Phase III trials.

ALL OF OUR PRODUCT CANDIDATES ARE SUBJECT TO THE RISKS OF FAILURE INHERENT IN
DRUG DEVELOPMENT.

         Many of our research and development programs are at an early stage. In
addition to the risks described above, there is a possibility that none of our
product candidates will or can:

     o   meet applicable regulatory standards;

     o   be manufactured or produced economically and on a large scale;

     o   be a commercially viable drug; or

     o   be successfully marketed, particularly if a third party introduces an
         equivalent or superior product.

DELAYS IN PATIENT ENROLLMENT FOR CLINICAL TRIALS COULD INCREASE COSTS AND DELAY
REGULATORY APPROVALS.

         The rate of completion of our clinical trials will depend on the rate
of patient enrollment. Substantial competition to enroll patients in clinical
trials has delayed some of our clinical trials in the past. In addition, recent
improvements in existing drug therapy, particularly for some cancers, may make
it more difficult for us to enroll patients in our clinical trials as the
patient population may choose to enroll in clinical trials sponsored by other
companies or choose alternative therapies. Delays in patient enrollment can
result in increased development costs and delays in regulatory approvals.

IF WE FAIL TO COMPLY WITH EXTENSIVE REGULATIONS ENFORCED BY THE FDA AND ITS
FOREIGN COUNTERPARTS, THE COMMERCIALIZATION OF OUR PRODUCT CANDIDATES WOULD BE
PREVENTED OR DELAYED.

         Our products are subject to extensive government regulations related to
development, clinical trials, manufacturing and commercialization. The process
of obtaining FDA and foreign regulatory marketing and pricing approvals is
costly, time-consuming, uncertain and subject to unanticipated delays. For
example, although CAMPATH has been approved for marketing in 17 European
countries, to market future products in Europe we must apply to the European
Commission for marketing approval. After receiving marketing approval, we then
must mutually agree on a pricing structure with each country's regulatory
authority prior to launching sales in that particular country. We are unable to
predict how long this process will take.

         The FDA will refuse to approve an application if it believes that
applicable regulatory criteria are not satisfied. The FDA may also require
additional testing for safety and efficacy. Foreign regulatory authorities may
also refuse to accept an application or grant any marketing approval.

         The FDA and European Commission approvals for CAMPATH require us to
conduct a post-approval clinical trial comparing the safety and efficacy of
CAMPATH to that of chlorambucil, an alkylating agent that is a frontline
treatment for chronic lymphocytic leukemia. Alkylating agents work by disrupting
the DNA structure and are believed to be effective in treating chronic
lymphocytic leukemia. The post-approval clinical trial and report must be
completed by 2006. If we discover adverse safety or efficacy data, our marketing
approvals may be revoked.

IF ANY OF OUR LICENSE AGREEMENTS FOR INTELLECTUAL PROPERTY UNDERLYING A PRODUCT
CANDIDATE IS TERMINATED, WE MAY LOSE OUR RIGHTS TO DEVELOP OR MARKET THAT
PRODUCT.

         We have licensed intellectual property, including patents, patent
applications and know-how, from pharmaceutical companies, research institutions
and others, including the intellectual property underlying CAMPATH,
Eflornithine, CLOFAREX, NM-3 and ILX-651.



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         Each licensor has the power to terminate its agreement with us if we
fail to meet our obligations under that license. We may not be able to meet our
obligations under these license agreements. Generally, we have to diligently
develop and commercialize the compounds we have licensed and make milestone
payments.

         If we default under any of these license agreements, we may lose our
right to market and sell any products based on the licensed technology. If we
were to lose our marketing and sales rights to a compound, we would not be able
to replace the resources we used in developing the compound, and we will have to
spend additional time and capital resources in finding a replacement product
candidate.

WE MAY NOT BE ABLE TO OBTAIN EFFECTIVE PATENTS TO PROTECT OUR TECHNOLOGIES FROM
USE BY OTHER COMPANIES, AND PATENTS OF OTHER COMPANIES COULD PREVENT US FROM
DEVELOPING OR MARKETING OUR OTHER PRODUCT CANDIDATES.

         Our success will depend to a significant degree on our ability to:

     o   obtain, maintain and enforce patents;

     o   license rights to patents from third parties;

     o   protect trade secrets; and

     o   operate without infringing on the proprietary rights of others.

         It is possible that we will not develop technologies, drugs or
processes that result in obtaining a patent. It is also possible that our patent
position will not provide sufficient protection against competitors, or that
patents issued to or licensed by us will be infringed or will be challenged,
invalidated or circumvented. Competitors may develop products which compete
against our products but fall outside the scope of our patents. In addition,
competitors may have filed patent applications, may have been issued patents or
may obtain additional patents and proprietary rights relating to technologies,
drugs and processes that compete with our technologies, drugs and processes.

         If we infringe on the intellectual property rights of others, we will
have to either obtain a license for the use of these intellectual property
rights, or terminate our use of these rights. We may not be able to obtain
licenses to use the technology on commercially reasonable terms, or at all.

         We also rely on trade secret protection for our unpatented proprietary
technology. Trade secrets are difficult to protect. Other parties could
independently develop substantially equivalent proprietary information and
techniques or gain access to our trade secrets.

         We have attempted to prevent the disclosure and use of our know-how and
trade secrets by entering into confidentiality agreements with our employees,
consultants and third parties. However, there are risks that:

     o   these parties will not honor our confidentiality agreements;

     o   others will independently develop equivalent or superior technologies;

     o   disputes will arise concerning the ownership of intellectual property
         or the applicability of confidentiality obligations; or

     o   disclosure of our trade secrets will occur regardless of these
         contractual protections.

         We often work with consultants and research collaborators at
universities and other research organizations. If any of these consultants or
research collaborators use intellectual property owned by others as part of
their work with us, disputes may arise between us and these other parties as to
which one of us has the rights to intellectual property related to or resulting
from the work done.

         Costly litigation might be necessary to protect our orphan drug
designations or patent positions, or to determine the scope and validity of
third-party proprietary rights. It is possible that we will not have the
required resources to pursue such litigation or to protect our patent rights. An
adverse outcome in litigation with respect to the validity of any of our patents
could subject us to significant liabilities to third parties, require disputed
rights to be licensed from third parties or require us to cease using a product
or



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technology. Any of these results could materially harm our business and
financial condition.

IF THE USE OF OUR PRODUCTS HARMS PEOPLE, WE MAY BE SUBJECT TO COSTLY AND
DAMAGING PRODUCT LIABILITY CLAIMS OR CLAIMS OF INDIVIDUALS PARTICIPATING IN OUR
CLINICAL TRIALS.

         We face exposure to product liability claims in the event that the use
of any of our products is alleged to have harmed someone. Although we have
taken, and continue to take, what we believe are appropriate precautions, there
is a risk that we will not be able to avoid significant product liability
exposure.

In addition to product liability claims, we may be liable for claims of
individuals who participate in the clinical trials of our product candidates.
Many of these patients are already critically ill. The waivers we obtain from
these individuals may not be enforceable and may not protect us from liability
or the costs of the resulting litigation.

     We currently have product liability insurance related to CAMPATH with
coverage limits of $25.0 million per occurrence and $25.0 million in the
aggregate for the year and $5.0 million per occurrence and in the aggregate for
the year related to all other products. There is a risk that our insurance will
not be sufficient to cover any product liability or clinical trials claims.
There is also a risk that adequate insurance coverage will not be available in
the future at acceptable prices. The successful assertion of an uninsured
product liability claim against us could cause us to incur a significant expense
or could adversely affect our product development. In addition, regardless of
merit or eventual outcome, product liability claims may result in decreased
demand for the applicable product or our products in general and in injury to
our general reputation.

WE ARE SUBJECT TO INFLUENCE FROM EXECUTIVE OFFICERS, DIRECTORS AND SENIOR
MANAGEMENT, AND WE HAVE ADOPTED A SHAREHOLDER RIGHTS PLAN WHICH COULD DISCOURAGE
OR PREVENT STOCKHOLDERS FROM SELLING THEIR SHARES AT A PREMIUM.

         Our rights plan provides, among other things, that if a person or group
attempts to acquire 20% or more of our common stock on terms not approved by our
Board of Directors, stockholders will be entitled to purchase additional shares
of our stock at 50% of the then-current market price. These purchase rights
would cause substantial dilution to a person or group that acquires or attempts
to acquire 20% or more of our common stock in this manner and, as a result,
could delay or prevent a change in control or other transaction that could
provide our stockholders with a premium over the then-prevailing market price of
their shares or which might otherwise be in their best interests.

         Our executive officers, directors (and their affiliates) and senior
management, in the aggregate, beneficially owned or controlled approximately
12.8% of our outstanding common stock at January 31, 2002 and therefore have the
ability to exercise substantial influence over the outcome of most stockholders'
actions, including the election of the members of the Board of Directors and
approval of any change in control transaction. This concentration of ownership
could have an adverse effect on the price of our common stock or have the effect
of delaying or preventing a change in control or other transaction that could
provide our stockholders with a premium over the then-prevailing market price of
their shares or which might otherwise be in their best interests.

ITEM 2. PROPERTIES

         In July 2000, we entered into a lease that expires in November 2008 for
our corporate headquarters consisting of approximately 86,000 square feet of
office space in San Antonio, Texas.

         We lease approximately 21,000 square feet of office and laboratory
space, and operates a 7,200-square-foot manufacturing facility located in San
Antonio that has been designed to produce multi-kilogram lot sizes of anticancer
compounds under cGMP. The design of this facility, prepared by ILEX staff, has
been reviewed by the Regional Compliance Office of the FDA and found to be
suitable for production of bulk drugs. The manufacturing facility is owned by a
non-profit corporation controlled by CTRC Research and the Texas Research Park
Foundation, and provides for the payment by us of fixed monthly rent plus a
percentage of gross sales generated from the facility. These two organizations
obtained a grant to build the facility from the Economic Development
Administration. We have a 15-year lease to the facility with three
five-year-extension options. The lease expires in December 2010.

         Our subsidiary, ILEX Research Products Division, formerly Convergence
Pharmaceuticals, Inc., leases approximately 9,800 square feet of office and
research space in Boston, Massachusetts. The lease expires in July 2004.
Additionally, we have approximately 2,600 square feet of leased office space in
Guildford, utilized by its subsidiary, ILEX Services Limited. Our subsidiary
ILEX Research, S.A., formerly Symphar, S.A., leases approximately 31,000 square
feet of office and research space in Geneva, Switzerland expiring between 2002
and 2005. We also lease approximately 7,200 square feet of office and research
space in Annapolis, Maryland. In February 2002, we decided to cease operations
at this facility and we plan to sublease the property for the remainder of the
lease term.



                                       16
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         Our facility has sufficient capacity to manufacture the materials
necessary to satisfy the requirements for conducting clinical trials of our
current products in development. We will be required to expand its manufacturing
facilities or to contract with other manufacturers in the event there is a need
for commercial quantities of our compounds.

ITEM 3. LEGAL PROCEEDINGS

         On August 16, 2000, Cytokine Pharmasciences, Inc. (CPI),
successor-in-interest to Cytokine Networks, Inc. (CNI), filed a lawsuit against
Convergence, doing business as ILEX Products Research Division, a Delaware
corporation and wholly owned indirect subsidiary of ILEX Oncology, Inc., and
Glenn Rice, Ph.D. (Dr. Rice) in the Superior Court Department of Trial Court of
the Commonwealth of Massachusetts. The lawsuit claims were settled effective
July 2, 2001 and the lawsuit has been dismissed with prejudice. The settlement
had an immaterial financial effect on the Company's consolidated financial
statements. There is no future impact related to the lawsuit or settlement on
the consolidated financial statements of ILEX.

         In addition to the above, the Company is involved in various claims,
legal actions and regulatory proceedings arising in the ordinary course of
business. The Company believes it is unlikely that the final outcome of any of
the claims or proceedings to which the Company is a party will have a material
adverse effect on the Company's financial position or results of operations.
However, due to the inherent uncertainty of litigation, there can be no
assurance that the resolution of any particular claim or proceeding would not
have a material adverse effect on the Company's results of operations for the
period in which such resolution occurred.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.



                                       17
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ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------

PART II.


ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

         As of February 28, 2002, the Company had approximately 5,800 beneficial
holders of common stock, including approximately 195 record holders. The
Company's common stock is traded on the Nasdaq National Market under the symbol
ILXO. The following table sets forth, for the calendar periods indicated, the
range of high and low closing prices for the Company's common stock, as reported
by the Nasdaq National Market:


<Table>
<Caption>

                                          2001                        2000
                                -----------------------     -----------------------
                                  High           Low          High           Low
                                ---------     ---------     ---------     ---------
<S>                             <C>           <C>           <C>           <C>
First Quarter                   $   32.31     $   11.00     $   54.13     $   21.63
Second Quarter                      31.14         13.50         40.50         15.91
Third Quarter                       30.79         18.40         44.50         24.00
Fourth Quarter                      31.35         20.14         40.19         20.14
</Table>

         These price quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions. The Company's common stock began trading February 20, 1997. The
closing price of the Company's common stock on February 28, 2002 was $14.87.

         The Company has never paid dividends on its common stock and
anticipates that it will not pay such dividends in the foreseeable future.



                                       18
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--------------------------------------------------------------------------------

ITEM 6. SELECTED FINANCIAL DATA

         The following selected financial information relating to the Company
has been taken or derived from the audited financial statements, notes related
thereto and other records of the Company. The statements of operations and
balance sheets as of and for the years ended December 31, 2001, 2000, 1999,
1998, and 1997 have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report on those statements. The selected
financial information should be read in conjunction with the Company's financial
statements, including the notes thereto, and Management's Discussion and
Analysis of Financial Condition and Results of Operations.

<Table>
<Caption>

                                                                                   Years Ended
                                                                                  December 31,
                                                       ---------------------------------------------------------------------
                                                         2001           2000           1999           1998            1997
                                                       ---------      ---------      ---------      ---------      ---------
                                                                     (in thousands, except per share data)
<S>                                                    <C>            <C>            <C>            <C>            <C>
SUMMARY OF OPERATING STATEMENT DATA:
Revenue:
    Product development                                $   3,994      $   3,381      $   4,646      $   4,622      $   5,027
    Contract research services                            20,650         24,204         13,457          9,650          5,903
    Licensing fees                                            --             --             --             --            300
                                                       ---------      ---------      ---------      ---------      ---------
        Total revenue                                     24,644         27,585         18,103         14,272         11,230
Operating expenses:
    Research and development costs                        33,798         24,419         16,219         12,684          6,590
    Licensing costs                                       10,281          6,116             10          3,443            150
    Direct costs of research services                     15,007         19,920         13,227         10,875          4,587
    General and administrative                            13,467          7,568          4,063          4,354          6,691
    In-process research and development                   86,112         14,562         11,124             --             --
    Special charges                                           --             --         13,882             --             --
                                                       ---------      ---------      ---------      ---------      ---------
         Total operating expenses                        158,665         72,585         58,525         31,356         18,018
                                                       ---------      ---------      ---------      ---------      ---------
Operating loss                                          (134,021)       (45,000)       (40,422)       (17,084)        (6,788)
Other income (expense):
    Interest income and other, net                         9,995         11,747          1,700          1,850          2,583
    Equity in income (losses) of research and
     development partnerships and contract research
     affiliate                                             3,094         (5,370)        (7,134)        (5,994)        (4,477)
    Minority interest in consolidated subsidiary              --           (262)           (82)            --             --
                                                       ---------      ---------      ---------      ---------      ---------
Loss before income taxes                                (120,932)       (38,885)       (45,938)       (21,228)        (8,682)
    Provision for foreign income taxes                       (22)            97           (117)            --             --
                                                       ---------      ---------      ---------      ---------      ---------
Net loss                                               $(120,954)     $ (38,982)     $ (46,055)     $ (21,228)     $  (8,682)
                                                       =========      =========      =========      =========      =========
Basic and diluted net loss per share(1)                $   (4.48)     $   (1.61)     $   (3.04)     $   (1.71)     $   (0.72)
                                                       =========      =========      =========      =========      =========
Weighted average number of shares of common stock
and common stock equivalents outstanding                  27,011         24,285         15,144         12,450         12,118
                                                       =========      =========      =========      =========      =========

BALANCE SHEET DATA:
         Cash, cash equivalents and investments in
             marketable securities(2)                  $ 278,246      $ 202,772      $  89,126      $  26,025      $  42,646
         Working capital                                 104,966        152,922         77,226         23,942         33,089
         Total assets                                    368,907        216,356        100,706         42,688         55,311
         Long-term debt                                   70,041             --             --             --             --
         Accumulated deficit                            (237,274)      (116,320)       (77,338)       (31,283)       (10,055)
         Total stockholders' equity                      221,028        196,005         84,579         35,904         51,076
</Table>


---------

(1)   See Note 2 of Notes to Consolidated Financial Statements for information
      concerning the computation of net loss per share.

(2)   Includes cash, cash equivalents, short and long term investments, and all
      restricted investments.



                                       19
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--------------------------------------------------------------------------------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         The following discussion is included to describe the Company's
financial position and results of operations for each of the previous three
years in the period ended December 31, 2001. The Consolidated Financial
Statements and notes thereto contain detailed information that should be
referred to in conjunction with this discussion.

GENERAL

We are building a product-driven oncology-focused pharmaceutical company by
developing and commercializing a portfolio of novel treatments for both early
and late stage cancers. We are leveraging our core competencies in clinical drug
development to identify, develop and commercialize our proprietary product
candidate pipeline. Our lead product, CAMPATH, has been approved in the United
States and Europe for treating patients with refractory chronic lymphocytic
leukemia and is distributed by Schering AG (Schering) and its U.S. subsidiary,
Berlex Laboratories, Inc. (Berlex). In addition, we have five oncology product
candidates in clinical trials, three others that we are considering for further
clinical development as well as several active preclinical programs. To date, we
have built this pipeline primarily through the licensing and acquisition of
promising drug candidates. In addition to our clinical development programs, we
conduct drug discovery research, translational research and preclinical studies
in the fields of angiogenesis inhibition, molecular receptor chemistry and
targeted medicinal phosphonate chemistry. CAMPATH was developed in a 50/50
partnership with Leukosite Inc., formed in 1997. Millennium Pharmaceuticals,
Inc. (Millennium) acquired Leukosite and Leukosite's interests in the
Partnership two years later. In December 2001, we acquired Millennium's equity
interest in the Partnership. We acquired Millennium's interest because we
believe the transaction will have a positive impact on our income statement and
will enable us to more effectively develop CAMPATH in other indications such as
other leukemias, lymphomas and multiple sclerosis. In addition, we will have the
opportunity to enhance commercialization by co-promoting CAMPATH in the U.S.
with our development and marketing partner, Berlex.

         We have incurred losses since inception and had an accumulated deficit
through December 31, 2001 of $237.3 million. Our losses have resulted primarily
from product development activities, including in-licensing of products for
which we pay fees, and related administrative expenses. We expect to continue to
incur operating losses for the foreseeable future.

         Our revenue for the foreseeable future will be limited to product
development and product royalty revenue for CAMPATH, interest income, and other
miscellaneous income. CAMPATH was developed in partnership with Millennium
Pharmaceuticals, Inc. (Millennium) through Millennium & ILEX Partners, L.P. (the
Partnership). Most of the development of CAMPATH has been conducted by us on
behalf of the Partnership. The Partnership pays us for these services. We have
historically accounted for these CAMPATH development activities as follows:

o    our operating revenue includes product development revenue we receive from
     the Partnership;

o    our research and development expenses include all of the development costs
     for CAMPATH, which are largely offset by the Partnership's revenue we
     receive; and

o    our actual share of CAMPATH sales and marketing expenses and development
     costs is reported as equity in income (losses) of research and development
     partnership.

         Our contract research organization (CRO) business generates revenue by
performing services for companies within the pharmaceutical and biotechnology
industries. The terms of our contracts vary, ranging from several months to
three years, or completion of the project, and generally may be terminated upon
notice of 60 to 90 days by our customers. We recognize revenue with respect to
our services either on a percentage-of-completion or fee-for-service basis as
work is performed. The CRO business performs all of the development services for
ILEX Products; however, our consolidated CRO revenue does not include any
amounts related to the services provided to ILEX Products. In February 2001, we
announced our intention to transition out of the CRO business.

         We completed a pivotal clinical trial in patients with chronic
lymphocytic leukemia (CLL) for our most advanced product candidate, CAMPATH. We
submitted a Biologics License Application (BLA) to the U.S. Food and Drug
Administration (FDA) for CAMPATH(alemtuzumab) in December 1999. The application
was accepted for filing in February 2000, and the FDA returned a complete
response letter to the partnership in June 2000. The Partnership submitted a
response to the FDA in August 2000. In December 2000, CAMPATH was reviewed by
the



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--------------------------------------------------------------------------------

Oncologic Drugs Advisory Committee (ODAC) and was recommended for accelerated
approval. We received a class I response letter from the FDA in February 2001,
indicating the timeframe for accelerated approval was being extended into the
second quarter of 2001. CAMPATH received U.S. regulatory approval for marketing
in May 2001.

         Additionally, the Marketing Authorization Application for CAMPATH was
accepted for review in April 2000 by the European Agency for the Evaluation of
Medicinal Products (EMEA). The application, which was submitted in late March of
2000, was reviewed under the EMEA's centralized procedure, required for
biotechnology products. The EMEA's Committee on Proprietary Medicinal Products
(CPMP) issued a positive opinion in March 2001 to recommend approval under
exceptional circumstances of MABCAMPATH(TM), the trademark for CAMPATH in
Europe. The European Commission ratified the opinion and issued a Marketing
Authorization in July 2001. Under this authorization, the Partnership have been
granted a single license for marketing MabCAMPATH in the 15 member states of the
European Union and received national licenses in two additional countries,
Iceland and Norway. In August 1999, the partnership licensed worldwide marketing
rights (except for Japan and East Asia) for CAMPATH to Schering AG.

         In November 2001, we completed an underwritten public offering of our
common stock pursuant to which we sold 5.75 million shares. The number of shares
sold includes the underwriters' exercise of their overallotment option.
Proceeds, net of offering costs, to the Company from this offering were
approximately $128.9 million, which includes the reissuance of our 39,000
treasury shares. The net proceeds of this offering will be used in the next two
years to fund a portion of the acquisition of Millennium's partnership interest
in the Partnership. The balance of the net proceeds will be used to expand
clinical trials and preclinical research; to fund research and development
programs; for potential licenses or other acquisitions of complementary
technologies or products; for general corporate purposes and for working
capital.

         On October 29, 2001, we entered into an agreement with Millennium
Pharmaceuticals, Inc. to purchase Millennium's 50% interest in the Partnership
for a total purchase price of approximately $127.6 million based on the net
present value of the required cash payments, discounted at 6.5%, our estimated
incremental borrowing rate. The terms of the agreement included an initial cash
payment of $20.0 million and an additional $120.0 million in scheduled payments
to Millennium over the next three years, of which $20.0 million may be paid with
our common stock.

         In March 2001, we entered a definitive agreement to co-develop
CLOFAREX, a nucleoside analog, with Bioenvision Inc. We paid $1.1 million upon
execution of the agreement and may be required to make future payments in
accordance with the agreement if certain drug development milestones are met. In
clinical studies, CLOFAREX has shown promise as a potential new treatment for
patients with hematological malignancies, including acute lymphocytic leukemia
(ALL) and acute myelogenous leukemia (AML), and in preclinical studies, for
solid tumors. We are taking the lead role in developing CLOFAREX in the U.S. and
Canada, where it will have exclusive manufacturing and marketing rights in
exchange for an in-licensing fee, milestone payments and royalties. Bioenvision
will retain the lead role in developing the compound in Europe and elsewhere,
where it will have exclusive manufacturing and marketing rights and we will have
rights to royalties.

         In February 2001, we acquired Symphar and its research platform in
targeted medicinal chemistry and nuclear receptor biology, which has led to drug
candidates in several therapeutic fields, including cancer and bone disease, an
important complement to our oncology pipeline. The Symphar acquisition, combined
with our preclinical angiogenesis inhibition program in Boston, gives us the
strong capability to translate early-stage research leads into clinical drug
development programs. Under the terms of the agreement, we acquired Symphar for
$28.9 million, including $15.0 million in cash and 521,121 shares of our common
stock.

         In July 2000, we entered into an agreement with BASF Pharma (BASF) for
an exclusive, worldwide license of ILX-651, a synthetic pentapeptide analog of
dolastatin. We filed an Investigational New Drug (IND) application in late 2000
and expects to begin human clinical trials shortly. We incurred $4.0 million in
license issue fees as of December 31, 2000, of which $1.0 million was paid
during the third quarter of 2000, and $3.0 million was paid in cash in the first
quarter of 2001. We recorded a license fee expense accrual of $6.2 million in
2001 and this amount was paid in January 2002. We may be required to make future
license maintenance fees in either cash or common stock in accordance with the
agreement if certain drug development and time based milestones are met.

         In March 2000, ILEX Services, Inc. signed a multi-year services
agreement with British Biotech plc (British Biotech) to provide contracted drug
development services to complete the ongoing clinical development of British
Biotech's drug, marimastat, in North America.



                                       21
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--------------------------------------------------------------------------------


         In March 2000, we sold 3.0 million shares of common stock at $45.0 per
share to selected institutional and other accredited investors in a private
placement. Gross proceeds to the Company were approximately $135.0 million. Net
proceeds to us were approximately $127.0 million.

         In September 1999, ILEX Services sold $5.0 million of its preferred
stock (initially convertible beginning in September 2000, or earlier upon the
occurrence of certain events, into 290,867 shares of our common stock) to
IMPATH, Inc. In November 2000, IMPATH elected to convert its convertible
preferred stock to shares of our common stock.

         In July 1999, we acquired Convergence Pharmaceuticals, Inc.
(Convergence) of Boston, Massachusetts, a privately held research-based
pharmaceutical company with an emerging portfolio of angiogenesis and DNA repair
inhibitors. The terms of the agreement called for us to issue shares in exchange
for Convergence's assets, as well as potentially issue earn-out shares, if
certain development milestones are met. Under the terms of the agreement, we
acquired Convergence in exchange for one million shares of our common stock. The
total aggregate purchase price was approximately $10.0 million. The first
milestone for the earn-out shares is defined as the initiation of treatment of
the first patient following initiation of a Phase I trial of one of the
Convergence compounds in the United States or Europe which, according to the
agreement, had to occur no later than December 31, 2001. The first milestone was
met in the fourth quarter of 2000. The value of the common stock issued in
connection with the achievement of the first milestone related to the
acquisition was calculated using a fair value of $29.125 per share. This per
share fair value represents the closing price of our stock on the date the first
milestone was achieved. This additional purchase price of approximately $14.6
was expensed as in-process research and development costs. The second milestone
for the earn-out shares is defined as the initiation of treatment of the first
patient following initiation of a Phase II trial of one of the Convergence
compounds in the United States or Europe, which must occur no later than
December 31, 2002. We expect to issue the shares in connection with the
achievement of the second milestone in 2002.

CRITICAL ACCOUNTING POLICIES

         We believe that our most critical accounting issues include revenue
recognition and cost estimation on certain contracts for which we use a
percentage-of-completion method of accounting and the process of determining the
amount of in-process research and development obtained in an acquisition.

         The percentage-of-completion accounting method is applied by our
fee-for-service CRO business. Approximately 26% of total revenue was recognized
under the percentage-of-completion method of accounting during 2001. This method
relies on the estimated total cost and revenues at completion, and we believe
that dependable estimates can be made during contract performance. Management
reviews these estimates periodically and any revisions are charged to income in
the period in which the revision is known. If our business conditions were
different, or we used different assumptions in the application of this and other
accounting policies, it is likely that materially different amounts would be
reported in our financial statements. We are currently in the process of exiting
the CRO business and we expect our revenues from the CRO and thus, under the
percentage-of-completion method of accounting to decrease over the next year.

         Amounts recorded as in-process research and development are based upon
assumptions and estimates regarding the amount and timing of projected revenues
and costs as well as the appropriate discount rates and expected trends in
technology. No assurance can be given, however, that the underlying assumptions
used to estimate revenue, development costs or profitability or the events
associated with such projects will transpire as estimated. For these reasons,
actual results may vary from projected results. The most significant and
uncertain assumptions relating to the in-process projects relate to the
projected timing of completion and revenues attributable to each project.

         The following is a discussion of our consolidated financial condition
and results of operations for 2001, 2000 and 1999. It should be read in
conjunction with our Financial Statements, the Notes thereto and other financial
information beginning on page F-1 of this report.



                                       22
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ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------


RESULTS OF OPERATIONS - DECEMBER 31, 2001 AND 2000

OPERATING REVENUES

         Total revenue decreased to $24.6 million in 2001, from approximately
$27.6 million in 2000. The decrease of approximately $3.0 million, or 11%, was
due to our decision to discontinue our fee-for-service CRO business. This
decision was announced in February 2001. We expect our revenue from contract
research services to further decrease as we complete our existing contracts. The
increase in product development revenues of $613,000 reflects an increase in
development revenue for CAMPATH in indications other than CLL.

OPERATING EXPENSES

         Total Operating Expenses. Total operating expenses increased to $158.7
million in 2001 from approximately $72.6 million in 2000. This increase of
approximately $86.1 million, or 119%, is primarily attributable to a $71.5
million increase in in-process research and development costs associated with
our acquisition of Symphar in February 2001 and our acquisition of Millennium's
interest in the Partnership in December 2001. Also contributing to the increase
in total operating expenses are the increases in research and development costs,
licensing costs and general and administrative costs, partially offset by a
decrease in the direct costs of research services. We believe that our research
and development costs will continue to increase in future periods as we expand
our preclinical studies and clinical trials associated with developing our own
proprietary products.

         Research and Development Costs. Research and development costs
increased to $33.8 million in 2001, from approximately $24.4 million in 2000.
This increase of $9.4 million, or 39%, was due to increased development spending
on our product candidates, particularly for CLOFAREX, Eflornithine and ILX-651.
Additionally, research and development costs increased due to the acquisition of
Symphar, our drug discovery research firm in Geneva, Switzerland.

         Licensing costs. Licensing costs increased to $10.3 million in 2001
from $6.1 million in 2000 or an increase of $4.2 million or 69%. The primary
reason for the increase is a license fee expense accrual of $6.2 million related
to an exclusive, worldwide license from Knoll AG (BASF Pharma) for ILX-651, a
synthetic pentapeptide analog of dolastatin. Additionally, a payment of $1.1
million was made to Bioenvision upon our execution of a license agreement to
acquire U.S. rights to CLOFAREX, a nucleoside analog. We may be required to make
future payments in accordance with these agreements if certain drug development
and time-based milestones are met.

         In-process Research and Development. In process research and
development increased to $86.1 million in 2001 from $14.6 million in 2000. This
increase if $71.5 million or 490% was due to the acquisitions of Symphar in
February 2001 and Millennium's interest in the Partnership in December 2001.
In-process research and development charges associated with the Symphar
acquisition were $26.1 million, while such charges related to the acquisition of
the 50% interest in the Partnership was $60.0 million.

         General and Administrative Costs. General and administrative costs
increased to $13.5 million in 2001, from approximately $7.6 million in 2000.
This increase of $5.9 million, or 78%, was due in part to our transition out of
the fee-for-service CRO business, and the corresponding transition of our
internal resources to focus on new business opportunities, build strategic
relationships and develop our proprietary product candidates. The costs
associated with these management and business development activities were
previously included in direct costs of research services and are now reflected
in general and administrative costs. Additionally, we incurred $1.6 million in
professional and legal fees, recorded a reserve of $750,000 for office space
that is no longer being utilized and, incurred a non-cash compensation charge
for an employee incentive program.

         Direct Cost of Research Services. Direct costs of research services
expense decreased to $15.0 million in 2001, from $19.9 million in 2000. This
decrease of $4.9 million, or 25%, is attributable to the decrease in revenue
from these services. Our margins have increased as a result of shifting various
resources from the CRO business to our own products. We expect that direct costs
of research services will continue to decline as our remaining contracts are
completed.



                                       23
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--------------------------------------------------------------------------------


OPERATING LOSS

         The loss from operations increased to $134.0 million in 2001, from
$45.0 million in 2000. This increase of $89.0 million, or 198%, is primarily
attributable to the increase in in-process research and development expenses.
Also contributing to the increased operating loss is an increase in research and
development and licensing costs for our own proprietary products.

EQUITY IN INCOME (LOSSES) OF RESEARCH AND DEVELOPMENT PARTNERSHIP AND CONTRACT
RESEARCH AFFILIATE

         Equity in income (losses) in research and development partnership and
contract research affiliate was income of $3.1 million in 2001, compared to a
loss of $5.4 million in 2000, an improvement of $8.5 million. The income for
2001 includes pre-commercialization marketing and selling expenses incurred by
the Partnership, which are offset by the Partnership's portion of global net
earnings for the year. Global net sales of CAMPATH for the year 2001 were $27.1
million.

NET INTEREST INCOME AND OTHER

         Net interest income and other decreased to $10.0 million in 2001, from
approximately $11.7 million in 2000. This decrease of $1.7 million, or 15%, is
attributable to the accrual of a non-cash loss on the impairment of a
held-to-maturity marketable security of $435.0 as well as the decline in
interest rates throughout 2001.

NET LOSS

         Net loss increased $82.0 million in 2001, or 210%, to $121.0 million,
from $39.0 million in 2000. Net loss per share increased $2.87 per share to
$4.48 per share in 2001, from $1.61 per share in 2000. Excluding in-process
research and development expense, net loss increased $10.5 million, or 43%, to
$34.9 million, from $24.4 million in 2000, and net loss per share increased
$0.29 per share to $1.29 per share, from $1.00 per share in 2000.

RESULTS OF OPERATIONS - DECEMBER 31, 2000 AND 1999

OPERATING REVENUES

         Total revenue increased to $27.6 million in 2000, from approximately
$18.1 million in 1999. The increase of approximately $9.5 million, or 52%, was
due to an additional $10.7 million of contract research revenues, partially
offset by a decrease of $1.2 million in product development revenues. The
decrease in product development revenues reflects a decrease in development
revenue for CAMPATH as a result of increased development in 1999 due to the BLA
filing. The $10.7 million increase in contract research services increased
revenues to $24.2 million, compared to $13.5 million in 1999, reflecting an
increase both in the number of contracts in process, as well as in the size and
complexity of the contract research projects.

OPERATING EXPENSES

         Total Operating Expenses. Total operating expenses increased to $72.6
million in 2000 from approximately $58.5 million in 1999. This increase of
approximately $14.1 million, or 24%, is primarily attributable to an increase in
research and development costs, as well as increases in direct costs of research
services, general and administrative expenses, and in-process research and
development. This increase was partially offset by special charges of $13.9
million incurred in 1999. ILEX believes that research and development costs will
continue to increase in future periods as we expand our preclinical studies and
clinical trials associated with developing our own proprietary products,
including those being jointly developed with partners.

         Research and Development Costs. Research and development costs
increased to $24.4 million in 2000, from approximately $16.2 million in 1999.
This increase of $8.2 million, or 51%, was attributable to spending on increased
spending compared to prior year on APOMINE(TM), OXYPRIM, and NM-3.

         Licensing fees. Licensing fees increased to $6.1 million in 2000 from
$10,000 in 1999. The increase of $6.1 million was attributable to spending on
ILX-651 for which we acquired an exclusive worldwide license in July of 2000.



                                       24
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--------------------------------------------------------------------------------


         In-process Research and Development. In connection with the acquisition
of Convergence, the stockholders of Convergence's predecessor can receive an
additional earn-out of up to 1 million shares if certain development milestones
are met. We achieved the first milestone, which was the initiation of treatment
of the first patient following initiation of a Phase I trial of one of our
compounds. As such, we issued 500,000 shares of common stock and recorded a
non-cash charge of $14.6 million during the fourth quarter of 2000. In
connection with the acquisition of Convergence in 1999, we expensed $11.1
million as a charge for the purchase of in-process research and development.

         General and Administrative Costs. General and administrative costs
increased to $7.6 million in 2000, from approximately $4.1 million in 1999. This
increase of $3.5 million, or 85%, was due to an increase in salaries and related
benefits, as well as an increase in leasing expenses for our new corporate
headquarters and a charge of $1.0 million to terminate our previous lease
agreement.

         Direct Cost of Research Services. Direct cost of research services
increased to $19.9 million in 2000, from $13.2 million in 1999. This increase of
$6.7 million, or 51%, was attributable to increases in both the number of
contracts in process as well as the size and complexity of the contract research
projects.

         Special Charges. We incurred special charges of $13.9 million in the
first half of 1999. These charges included $12.3 million in costs associated
with the termination of our agreement with PRN. In July 1997, we entered into a
service agreement with PRN to jointly market our ability to conduct clinical
trials. As part of our arrangement, we issued to PRN 626,788 shares of our
common stock in 1997 and 1998. The value of these shares was recorded as an
intangible asset to be amortized over the term of the relevant agreement.
Effective June 30, 1999, ILEX and PRN terminated the agreement and we issued to
PRN the remaining 629,200 shares of our common stock issuable under this
agreement. We recorded a $12.3 million special charge associated with the value
of such common stock and the write-off, in accordance with Statement of
Financial Accounting Standard No. 121, of the net intangible asset associated
with our arrangement with PRN. We have no further obligation to PRN with respect
to this arrangement.

         The remaining $1.6 million in special charges consisted of a $750,000
accrual for a debt guarantee of an unaffiliated site management organization
which we determined is uncollectible; a $350,000 write-down of computer
equipment; and an approximate $500,000 write-off of an operating lease
commitment for manufacturing equipment which we determined would no longer be
utilized.

OPERATING LOSS

         The loss from operations increased to $45.0 million in 2000, from $40.4
million in 1999. This increase of $4.6 million, or 11%, is partially
attributable to the increased research and development spending related to
CAMPATH as well as an increase of $6.1 million in licensing costs. Also
contributing to the increased operating loss is the increase in the direct costs
of research services as well as an increase in general and administrative
expenses. These increases in 2000 are offset partially by the special charges of
$13.9 million in 1999.

EQUITY IN INCOME (LOSSES) OF RESEARCH AND DEVELOPMENT PARTNERSHIPS AND CONTRACT
RESEARCH AFFILIATE

         Equity in losses in research and development partnerships and contract
research affiliate was $5.4 million in 2000, compared to $7.1 million in 1999, a
decrease in losses of $1.7 million, or 24%, primarily due to $3.3 million in
losses of PFK incurred in 1999, which were partially offset by an increase of
$1.6 million in losses of the Partnership due to pre-launch marketing and
selling expenses incurred in the preparation of CAMPATH commercialization.

NET INTEREST INCOME AND OTHER

         Net interest income increased to $11.7 million in 2000, from
approximately $1.7 million in 1999. This increase of $10.0 million, or 588%, was
attributable to an increase in cash and investment balances as a result of our
private placement in March 2000 as well as our secondary offering in November
1999.

NET LOSS

         Net loss decreased $7.1 million during 2000, or 15%, to $39.0 million,
from $46.1 million in 1999. Net loss per share decreased $1.43 per share to
$1.61 per share in 2000, from $3.04 per share in 1999. Excluding in-process



                                       25
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--------------------------------------------------------------------------------


research and development and special charges, net loss increased $3.4 million,
or 16%, to $24.4 million, from $21.0 million in 1999, and net loss per share
decreased $0.38 per share to $1.01 per share, from $1.39 per share in 1999.

INCOME TAXES

         The availability of the net operating loss (NOL) and credit
carryforwards to reduce U.S. federal taxable income is subject to various
limitations under the Internal Revenue Code of 1986 (the Code), as amended, in
the event of a greater than 50% ownership change as defined in Section 382 of
the Code during the applicable three-year period. As of December 31, 2001, we
had incurred such an ownership change. However, we do not believe that this
change in ownership significantly affects our ability to utilize our NOL and tax
credit carryforwards as of December 31, 2001, because the amount of the
cumulative limitation (based upon our current market capitalization) during the
carryforward period exceeds the total amount of NOL and tax credit
carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

         We historically financed our operations primarily through the sale of
our capital stock, through development and licensing fee revenues provided by
our collaborative partners under our collaborative agreements and through
fee-for-service or participatory revenues pursuant to contracts with our CRO
clients.

         At December 31, 2001, we had cash, cash equivalents, restricted
investments and investments in marketable securities of $278.2 million and
working capital of $105.0 million. Cash, cash equivalents, restricted
investments and investments in marketable securities increased by $75.5 million
primarily as a result of the public offering mentioned above, partially offset
by $23.0 million in net cash used as a result of the acquisitions of Symphar and
the 50% equity interest in the Partnership. Also offsetting the increase in
cash, cash equivalents restricted investments and investments in marketable
securities is the increase in overall operating expenses. We expect to incur
costs of approximately $50.0 million in connection with the development of the
in-process research and development obtained through the acquisition of
Millennium's interest in the Partnership from 2002 through 2008. We also expect
to incur an additional $31.0 million in connection with the acquired in-process
research and development related to the acquisition of ILEX Research S.A.
through 2007.

         In November 2001, we completed an underwritten public offering of our
common stock pursuant to which we sold 5.75 million shares. The number of shares
sold includes the underwriters' exercise of their overallotment option.
Proceeds, net of offering costs, to us from this offering were approximately
$128.9 million, which includes the reissuance of our 39,000 treasury shares. The
net proceeds of this offering will be used in the next two years to fund a
portion of the acquisition of Millennium's partnership interest in the
Partnership. The balance of the net proceeds will be used to expand clinical
trials and preclinical research; to fund research and development programs; for
potential licenses or other acquisitions of complementary technologies or
products; for general corporate purposes and for working capital.

         On October 29, 2001, we announced that we entered into a definitive
agreement to purchase Millennium's 50% equity interest in the Partnership. The
acquisition closed on December 31, 2001. The terms of the agreement include an
initial cash payment of $20.0 million and an additional $120.0 million in
scheduled payments to Millennium over the next three years, of which $20.0
million may be paid with our common stock. In addition, Millennium will be
entitled to royalty payments based on U.S. CAMPATH sales above certain levels
beginning in 2005. We estimate the purchase price at $127.6 million based on the
net present value of the required future cash payments discounted at 6.5%, our
estimated incremental borrowing rate.

         In July 2001, we entered into an agreement with the Dana-Farber Cancer
Institute at Harvard Medical School (DFCI) for an exclusive, worldwide license
for patent rights and technology relating to the MUC1 protein. The agreement
requires us to pay approximately $200.0 in past patent expenses and up to $1.0
million in license fees, payable in a series of payments with the last payment
occurring the second quarter of 2003. As of December 31, 2001, we expensed
approximately $503.0 in license fees and past patent expenses in accordance with
the agreement. We may be required to make future payments in accordance with the
agreement if certain drug development milestones are met.

         In February 2001, we acquired Symphar and its research platform for
approximately $30.0 million, including $15.0 million in cash and 521,121 shares
of our common stock. The agreement specifies that, subject to




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the viability of performance, we agree to fund a minimum operating and capital
budget between $4.0 to $5.0 million annually for each of the next three years.

         In July 2000, we entered into an agreement with Knoll AG (BASF Pharma)
for an exclusive, worldwide license of ILX-651, a synthetic pentapeptide analog
of dolastatin. As of December 31, 2001, we had paid $4.0 million in license
fees. We recorded additional license fee expense of $6.0 million in 2001, in
accordance with the license agreement, that is payable in either cash or
unrestricted stock by January 1, 2002. We may be required to pay future license
maintenance fees in either cash or unrestricted stock in accordance with the
agreement if certain drug development and time-based milestones are met.

         In January 1999, we entered into a development and licensing agreement
for an oncology compound with Eli Lilly and Company (Lilly). Under the terms of
the development and licensing agreement, Lilly has the option to further develop
and commercialize the compound after completion of specified clinical trials
and, if exercised, we are eligible to receive royalties. Should Lilly decide not
to exercise its option, the Company will have to pay Lilly milestone payments
and royalties on sales in addition to a license fee to continue development and
commercialization of the compound.

         In March 2001, we paid $1.1 million to enter a definitive agreement to
co-develop CLOFAREX (clofarabine), a nucleoside analog, with Bioenvision, Inc.
In clinical studies, CLOFAREX has shown promise as a potential new treatment for
patients with hematological malignancies, including acute lymphocytic leukemia
(ALL) and acute myelogenous leukemia (AML), and in preclinical studies, for
solid tumors. We will take the lead role in developing CLOFAREX in the United
States and Canada, where it will have exclusive manufacturing and marketing
rights in exchange for an in-licensing fee, milestone payments and royalties.
Bioenvision will retain the lead role in developing the compound in Europe and
elsewhere, where it will have exclusive manufacturing and marketing rights and
we will have rights to royalties.

         In 1994, we obtained two licensing agreements for oncology compounds
from CTRC Research. During 1995 and 1996, we entered into six additional
licensing agreements. All of the licensing agreements grant us the right to
develop and market the oncology compounds covered by such agreements and to
license the rights to such compounds to other third parties. In addition, we
must also pay royalties upon commercialization of the compounds. Under certain
agreements, we are required to make milestone payments, as defined in the
agreements. At December 31, 2001, five of these licensing agreements had been
terminated or allowed to expire. We have not attained any of the events that
require a milestone payment for the three remaining licensing agreements.

         Our cash requirements are expected to continue to increase each year as
we expand our activities and operations. It is possible we will never be able to
generate significant product revenue or achieve or sustain profitability. We
expect our current funds will be adequate to cover all of our obligations for at
least the next year. Until our business can generate sufficient levels of cash
from product sales, we expect to continue to finance our operations through
existing cash, revenue from collaborative relationships, and proceeds from the
sale of equity securities.

         We plan to continue our policy of investing available funds in
government securities and investment-grade, interest-bearing securities, none of
which matures in more than five years. We do not invest in derivative financial
instruments, as defined by Statement of Financial Accounting Standards No. 133
and 138.

         Our future expenditures and capital requirements will depend on
numerous factors, but not limited to, the progress of our research and
development programs, the progress of our non-clinical and clinical testing, the
magnitude and scope of these activities, the time and costs involved in
obtaining regulatory approvals, the cost of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property rights, competing
technological and market developments, changes in or termination of existing
collaborative arrangements, the ability to establish, maintain and avoid
termination of collaborative arrangements and the purchase of capital equipment
and acquisitions of compounds, technologies or businesses. Our cash requirements
are expected to continue to increase each year as we expand our activities and
operations. As of December 31, 2001, we did not have any material commitments
for capital expenditures. There can be no assurance that we will ever be able to
generate product revenue or achieve or sustain profitability. We expect our
cash, cash equivalents, and marketable securities will be adequate to cover all
of our obligations for the next year.

         In connection with research and development efforts, the Company has
entered into agreements with certain development partners, which generally
expire over several years. The terms of these agreements require the Company to
make payments in either cash or stock if certain drug development or time-based
milestones are met. Total anticipated future commitments under these agreements
are approximately $44.9 million.

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--------------------------------------------------------------------------------

ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations." This statement, which supersedes Accounting Principles Board
Opinion No. 16, "Business Combinations" (APB No. 16) and SFAS No. 38,
"Accounting for Preacquisition Contingencies of Purchased Enterprises," requires
that all business combinations be accounted for by the purchase method. SFAS No.
141 also requires that acquired intangible assets should be recognized as assets
apart from goodwill if they meet one of two specified criteria. Additionally,
the statement adds certain disclosure requirements to those required by APB 16,
including disclosure of the primary reasons for the business combination and the
allocation of the purchase price paid to the assets acquired and liabilities
assumed by major balance sheet caption. This statement is required to be applied
to all business combinations initiated after June 30, 2001. We have adopted SFAS
No. 141.

         In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets". According to this statement, goodwill and intangible assets
with indefinite lives are no longer subject to amortization, but rather the
Company must make an assessment of impairment by applying a fair-value-based
test at least annually. This statement will be effective for fiscal years
beginning after December 15, 2001, and we will therefore adopt SFAS No. 142
beginning January 1, 2002. Under the provisions of SFAS No. 142, the value of
our intangible assets will no longer be subject to amortization but will be
reviewed at least annually for impairment. Management anticipates that the
adoption of SFAS No. 142 will have an immaterial effect on our consolidated
financial statements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Market risk represents the risk of loss that may impact our financial
position, results of operations, or cash flows due to adverse changes in
financial market prices, including interest rate risk, foreign currency exchange
rate risk, commodity price risk, and other relevant market rate or price risks.

         We are exposed to some market risk through interest rates, related to
its investment of its current cash, cash equivalents, restricted investments and
marketable securities of approximately $278.2 million at December 31, 2001.
These funds are generally invested in highly liquid treasury bills, money market
accounts and corporate bonds. As such instruments mature and the funds are
reinvested, we are exposed to changes in market interest rates. This risk is not
considered material and we manage such risk by continuing to evaluate the best
investment rates available for short and long-term high quality investments. We
have not used derivative financial instruments in our investment portfolio.

         Our European operations are denominated in local currency. We have
unhedged transaction exposures in these currencies which are not considered
material. We have not entered into any forward foreign exchange contracts for
speculative, trading or other purposes.

ITEM 8. FINANCIAL STATEMENTS AND SCHEDULES

         The report of our Independent Public Accountants, Consolidated
Financial Statements and Notes to Consolidated Financial Statements appears
herein commencing on page F-1.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         Not Applicable.



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--------------------------------------------------------------------------------

                                    PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information called for by item 10 of Form 10-K is incorporated
herein by reference to such information included in our Proxy Statement for the
2002 Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

         The information called for by item 11 of Form 10-K is incorporated
herein by reference to such information included in our Proxy Statement for the
2002 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information called for by item 12 of Form 10-K is incorporated
herein by reference to such information included in our Proxy Statement for the
2002 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information called for by item 13 of Form 10-K is incorporated
herein by reference to such information included in our Proxy Statement for the
2002 Annual Meeting of Stockholders.






                                       29
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2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------

                                    PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      1.       Financial Statements
                  Index to Financial Statements appears on Page F-1.

(b)      Reports on Form 8-K
         We have recently filed the following Form 8-K's:

                  Dated January 15, 2002, to disclose the purchase of the equity
                  interests in the Millennium & ILEX Partnership held by
                  Millennium Pharmaceuticals, Inc.

                  Dated November 20, 2001, to disclose the Company's entrance
                  into an underwriting agreement to offer 5.75 million shares of
                  common stock for sale.

 (c)              Exhibits

<Table>
<Caption>

EXHIBIT
NUMBER          IDENTIFICATION OF EXHIBIT
------          -------------------------
<S>             <C>

2.1             Plan of Merger and Acquisition Agreement dated July 16, 1999, by
                and among ILEX Oncology, Inc., Convergence Pharmaceuticals,
                Inc., Vikas Sukhatme, Raghuram Kalluri, Ralph Weichselbaum,
                Donald Kufe, Glenn C. Rice, and Tsuyneya Ohno (Incorporated
                herein by reference to Exhibit 2.1 to the Company's Current
                Report on Form 8-K filed July 30, 1999)

2.2             Share Purchase Agreement between the shareholders of Symphar
                S.A., ILEX Oncology, Inc. and ILEX Acquisitions, Inc., effective
                February 13, 2001 (Incorporated herein by reference to Exhibit
                2.1 to the Company's Current Report on Form 8-K filed February
                28, 2001)

2.3             Purchase and Sale Agreement dated October 29, 2001 by and among
                ILEX Oncology, Inc., ILEX Acquisitions, Inc., Millennium
                Pharmaceuticals, Inc, and mHoldings Trust (Incorporated by
                reference to Exhibit 10.1 to the Company's Quarterly Report on
                Form 10-Q filed November 15, 2001)

3.1             Amended and Restated Certificate of Incorporation of the Company
                filed May 31, 2000 (Incorporated herein by reference to Exhibit
                3.1 of the Company's Quarterly Report on Form 10-Q filed August
                8, 2000)

3.2             Bylaws of the Company, as amended (Incorporated herein by
                reference to Exhibit 3.2 of the Company's Registration Statement
                No. 333-17769 on Form S-1 filed December 12, 1996, as amended)

4.1             Specimen of certificate representing Common Stock, $.01 par
                value, of the Company (Incorporated herein by reference to
                Exhibit 4.1 of the Company's Registration Statement No.
                333-17769 on Form S-1 filed December 12, 1996, as amended)

4.2             Rights Agreement dated April 10, 2001 by and between ILEX
                Oncology, Inc. and American Stock Transfer & Trust Co. which
                includes as Exhibit A the Form of Certificate of Designations of
                Series I Preferred Stock, as Exhibit B the Form of Rights
                Certificate and as Exhibit C the Summary of Rights to Purchase
                Common Stock. (Incorporated herein by reference to Exhibit 4.1
                to the Company's Form 8-K filed April 11, 2001)
</Table>



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<Table>
<S>             <C>
10.1            Services Agreement dated November 18, 1994 between CTRC Research
                Foundation and the Company (Incorporated herein by reference to
                Exhibit 10.6 of the Company's Registration Statement No.
                333-17769 on Form S-1 filed December 12, 1996, as amended)

10.2            Covenant Not To Sue dated September 1995 between CTRC Research
                Foundation and the Company (Incorporated herein by reference to
                Exhibit 10.7 of the Company's Registration Statement No.
                333-17769 on Form S-1 filed December 12, 1996, as amended)

10.3            Commercial Industrial Sublease Agreement between TRTF/CTRCRF
                Building Corporation and the Company (Incorporated herein by
                reference to Exhibit 10.11 of the Company's Registration
                Statement No. 333-17769 on Form S-1 filed December 12, 1996, as
                amended)

10.4            Consulting Services Agreement dated March 16, 1995 between the
                Company and Charles A. Coltman, Jr., M.D. (Incorporated herein
                by reference to Exhibit 10.45 of the Company's Registration
                Statement No. 333-17769 on Form S-1 filed December 12, 1996, as
                amended)

10.5            1995 Stock Option Plan for the Company (Incorporated herein by
                reference to Exhibit 10.47 of the Company's Registration
                Statement No. 333-17769 on Form S-1 filed December 12, 1996, as
                amended)

10.6            Second Amended and Restated 1996 Non-Employee Director Stock
                Option Plan for the Company (Incorporated herein by reference to
                Exhibit 10.7 of the Company's Annual Report on Form 10-K filed
                April 2, 2001)

10.7            Form of Non-Employee Director Stock Option Agreement for the
                Company (Incorporated herein by reference to Exhibit 10.49 to
                the Company's Registration Statement No. 333-17769 on Form S-1
                filed December 12, 1996, as amended)

10.8            2000 Employee Stock Compensation Plan for the Company, as
                amended (Incorporated herein by reference to Exhibit 10.9 of the
                Company's Annual Report on Form 10-K filed April 2, 2001)

10.9            2000 Employee Stock Purchase Plan for the Company, as amended
                (Incorporated herein by reference to Exhibit 10.10 of the
                Company's Annual Report on Form 10-K filed April 2, 2001)

10.10           Form of Pledge Agreement between Cancer Therapy and Research
                Center Endowment and each of Gary V. Woods and Ruskin C. Norman,
                M.D. (Incorporated herein by reference to Exhibit 10.55 to the
                Company's Registration Statement No. 333-17769 on Form S-1 filed
                December 12, 1996, as amended)

10.11           Service Agreement dated June 30, 1997, between the Company and
                PRN Research, Inc. (Incorporated herein by reference to Exhibit
                10.4 to the Company's Quarterly Report on Form 10-Q filed August
                14, 1997)

10.12           Drug Development and Commercialization Agreement dated March 27,
                1998, between the Company and The Burnham Institute, Inc.
                (Incorporated herein by reference to Exhibit 10.1 to the
                Company's Quarterly Report on Form 10-Q filed May 15, 1998)

10.13           Office Building Lease Agreement dated April 8, 1998, between the
                Company and N.W.A. Limited Partnership (Incorporated herein by
                reference to Exhibit 10.1 to the Company's Quarterly Report on
                Form 10-Q filed August 14, 1998)
</Table>



                                       31
<PAGE>
ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------

<Table>

<S>             <C>
10.14           Stock Purchase Agreement dated January 22, 1999 between the
                Company and Eli Lilly and Company (incorporated herein by
                reference to Exhibit 10.1 to the Company's Quarterly Report on
                Form 10-Q filed May 17, 1999)

10.15           Registration Rights Agreement dated January 22, 1999 between the
                Company and Eli Lilly and Company (Incorporated herein by
                reference to Exhibit 10.2 to the Company's Quarterly Report on
                Form 10-Q filed May 17, 1999)

10.16           Registration Rights Agreement dated July 16, 1999 among ILEX
                Oncology, Inc., Vikas Sukhatme, Raghuram Kalluri, Ralph
                Weichselbaum, Donald Kufe, Glenn C. Rice, Tsuneya Ohno, Stephen
                Dolezalek, Beth Israel Deaconess Medical Center and Arch
                Development Corporation (incorporated herein by reference to
                Exhibit 10.2 to the Company's Current Report on Form 8-K dated
                July 16, 1999 and filed July 30, 1999)

10.17           Stock Purchase Agreement dated July 16, 1999 by and between ILEX
                Oncology, Inc. and each of the Investors (as defined therein)
                (incorporated herein by reference to Exhibit 10.3 to the
                Company's Quarterly Report on Form 10-Q filed August 16, 1999)

10.18+          Distribution and Development Agreement between Millennium & ILEX
                Partners, L.P. and Schering AG dated August 24, 1999
                (incorporated herein by reference to Exhibit 99.1 to the
                Company's Current Report on Form 8-K/A filed September 21, 1999)

10.19           Letter agreement dated September 9, 1999, between the Company
                and Al J. Jecminek (Incorporated herein by reference to Exhibit
                10.41 to the Company's Annual Report on Form 10-K for the year
                ended December 31, 1999)

10.20           Form of Purchase Agreement between ILEX Oncology, Inc. and each
                Purchaser (Incorporated herein by reference to Exhibit 10.1 to
                the Company's Registration Statement on Form S-3 dated March 8,
                2000 (Registration No. 333-32000))

10.21           Office Lease Agreement dated July 14, 2000, between Orion
                Fountainhead Two Partners, Ltd., and ILEX Oncology, Inc.
                (Incorporated herein by reference to Exhibit 3.1 to the
                Company's Quarterly Report on Form 10-Q filed November 14, 2000)

10.22           Consulting Services Agreement dated July 1, 1997, between the
                Company and Daniel D. Von Hoff, M.D. (Incorporated herein by
                reference to Exhibit 10.61 to the Company's Annual Report on
                Form 10-K for the year ended December 31, 1998)

10.23+          Supply Agreement dated as of June 4, 1999 between Millennium &
                ILEX Partners, L.P. (formerly L&I Partners, L.P.) and Boehringer
                Ingelheim Pharma KG. (Incorporated herein by reference to
                Exhibit 10.25 to the Millennium Pharmaceuticals, Inc. 10-K for
                the fiscal year ending December 31, 1999)

10.24+          License Agreement, dated May 2, 1997, between Millennium & ILEX
                Partners, L.P. (formerly L&I Partners, L.P.) and Millennium
                Pharmaceuticals, Inc (as successor to LeukoSite, Inc.).
                Incorporated by reference to Exhibit 10.17(b) to LeukoSite,
                Inc.'s Registration Statement on Form S-1 (No. 333-30213) filed
                June 27, 1997)

10.25+          First Amended and Restated Agreement of Limited Partnership of
                Millennium & ILEX Partners L.P. (formerly L&I Partners, L.P.)
                (Incorporated herein by reference to Exhibit 10.26 to the
                Millennium Pharmaceuticals, Inc. 10-K for the fiscal year ending
                December 31, 2000).

10.26           Investor Rights Agreement dated February 13, 2001 among ILEX
                Oncology, Inc., Valorous Trading PTE Ltd., Craig Bentzen,
                Jean-Charles Roguet, Mong Lan Nguyen and Eric Neissor.
                (Incorporated herein by reference to Exhibit 10.1 to the
                Company's current Report on Form 8-K filed February 28, 2001)

10.27*          2001 UK Employee Stock Compensation Plan

10.28*          Severance Agreement between ILEX Oncology, Inc. and Richard L.
                Love dated December 31, 2001
</Table>



                                       32
<PAGE>
ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------

<Table>
<S>             <C>
11.1*           Computation of Earnings Per Share

21.1            Subsidiaries of the Company
</Table>

<Table>
<Caption>


                                                      State of               Names Under Which
                Name                                  Incorporation          Doing Business
                ----                                  -------------          --------------
<S>                                                   <C>                    <C>
                ILEX Oncology Services, Inc.          Delaware               ILEX Oncology Services, Inc.
                ILEX Products, Inc.                   Delaware               ILEX Products, Inc.
                Convergence Pharmaceuticals, Inc.     Delaware               ILEX Products Research Division
                ILEX Services Limited                 England and Wales      ILEX Services Limited
                ILEX Oncology Research, S.A.          Geneva, Switzerland    ILEX Oncology Research, S.A.
                ILEX Acquisitions, Inc.               Delaware               ILEX Acquisitions, Inc.
                ILEX Pharmaceuticals L.P.             Delaware               ILEX Pharmaceuticals L.P.
</Table>

<Table>
<S>             <C>
23*             Consent of Arthur Andersen LLP
</Table>

*        Filed herewith.

+        Confidential treatment has been requested with respect to certain
         portions of this exhibit. Omitted portions have been filed separately
         with the Securities and Exchange Commission.



                                       33
<PAGE>
ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the city of San Antonio, Texas,
on March 14, 2002.

                                       ILEX ONCOLOGY, INC.

                                 By:   /s/ Jeffrey H. Buchalter
                                       -----------------------------------------
                                       Jeffrey H. Buchalter
                                       President and Chief Executive Officer
                                       (Principal Executive Officer)

                                 By:   /s/ Michael T. Dwyer
                                       -----------------------------------------
                                       Michael T. Dwyer
                                       Executive Vice President and Chief
                                       Financial Officer
                                       (Chief Financial and Accounting Officer)

Pursuant to the requirements of Section 13 of 15(d) of the Securities Act of
1934, this report has been signed below on March 14, 2002 by the following
persons in the capacities indicated.


<Table>
<Caption>

                 SIGNATURE                                      TITLE
                 ---------                                      -----
<S>                                                <C>
           /s/ Gary V. Woods                       Director, Chairman of the Board



       /s/ Joseph S. Bailes, M.D.                  Director



      /s/ Jason S. Fisherman, M.D.                 Director



          /s/ Richard L. Love                      Director



       /s/ Ruskin C. Norman, M.D.                  Director



      /s/ Daniel D. Von Hoff, M.D.                 Director
</Table>


                                       34



<PAGE>
ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<Table>
<Caption>
                                                                                                                Page
                                                                                                                ----

<S>                                                                                                             <C>
Report of Independent Public Accountants                                                                          F-2

Consolidated Balance Sheets as of December 31, 2001 and 2000                                                      F-3

Consolidated Statements of Operations - For the Years Ended December 31, 2001, 2000 and 1999                      F-5

Consolidated Statements of Stockholders' Equity and Comprehensive Income - For the Years Ended
   December 31, 2001, 2000 and 1999                                                                               F-6

Consolidated Statements of Cash Flows - For the Years Ended December 31, 2001, 2000 and 1999                      F-7

Notes to Consolidated Financial Statements                                                                        F-8
</Table>



                                      F-1
<PAGE>

ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To ILEX Oncology, Inc.:

We have audited the accompanying consolidated balance sheets of ILEX Oncology,
Inc. (a Delaware corporation), and subsidiaries as of December 31, 2001 and
2000, and the related consolidated statements of operations, stockholders'
equity and comprehensive income and cash flows for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ILEX Oncology, Inc. and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

                                                     /s/ ARTHUR ANDERSEN LLP


San Antonio, Texas
February 25, 2002



                                      F-2
<PAGE>

ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------


                           CONSOLIDATED BALANCE SHEETS
               (in thousands, except shares and per share amounts)

<Table>
<Caption>
                                                                                         December 31
                                                                                  -------------------------
                                   ASSETS                                            2001           2000
                                   ------                                         ----------     ----------
<S>                                                                               <C>            <C>

CURRENT ASSETS:
   Cash and cash equivalents                                                      $   84,518     $   18,099
   Investments in marketable securities                                               74,999        136,913
   Restricted investments                                                              1,331          1,635
   Accounts receivable, net of allowance for doubtful accounts of
     $164 and $344 in 2001 and 2000, respectively
       Billed                                                                          4,858          6,155
       Unbilled                                                                          612          2,186
       Employee                                                                          194            154
       Other                                                                             908            126
   Accounts receivable - Schering                                                      3,624             --
   Interest receivable                                                                 3,966          4,368
   Prepaid expenses and other                                                          2,069            975
                                                                                  ----------     ----------

                           Total current assets                                      177,079        170,611
                                                                                  ----------     ----------



NON-CURRENT ASSETS:
   Investments in marketable securities                                              114,619         42,960
   Restricted investments                                                              2,779          3,165
   Investments in and advances to                                                         --         (7,104)
        research and development partnership
   Completed technology asset                                                         64,800             --
   Trademark                                                                           2,800             --
   Assembled workforce, net of accumulated amortization of $87 in 2001                   213             --
   Other assets                                                                          509            248
                                                                                  ----------     ----------

                                                                                     185,720         39,269
                                                                                  ----------     ----------


PROPERTY AND EQUIPMENT, at cost, net of accumulated
   depreciation of $5,669 and $3,763 in 2001 and 2000, respectively                    6,108          6,476
                                                                                  ----------     ----------

                           Total assets                                           $  368,907     $  216,356
                                                                                  ==========     ==========
</Table>


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



                                      F-3
<PAGE>

ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------


                           CONSOLIDATED BALANCE SHEETS
               (in thousands, except shares and per share amounts)

<Table>
<Caption>
                                                                                    December 31
                                                                           ------------------------------
                   LIABILITIES AND STOCKHOLDERS' EQUITY                        2001              2000
                   ------------------------------------                    ------------      ------------
<S>                                                                        <C>               <C>

CURRENT LIABILITIES:
   Accounts payable-
     Related parties                                                       $         35      $         30
     Other                                                                       16,688             6,706
   Accrued subcontractor costs-
     Related parties                                                                337               678
     Other                                                                        2,302             2,181
   Accrued liabilities                                                            4,951             3,671
   Deferred revenue                                                               2,537             4,423
   Advances from Schering                                                         7,704                --
   Note payable                                                                  37,559                --
                                                                           ------------      ------------

               Total current liabilities                                         72,113            17,689
                                                                           ------------      ------------

NON-CURRENT LIABILITIES:
     Deferred revenue                                                             1,103             1,302
     Note payable                                                                70,041                --
     Advances from Schering                                                       2,726                --
     Other non-current liabilities                                                1,896             1,360
                                                                           ------------      ------------
                        Total non-current liabilities                            75,766             2,662
                                                                           ------------      ------------

                        Total liabilities                                       147,879            20,351
                                                                           ------------      ------------

COMMITMENTS AND CONTINGENCIES (see Note 16)


STOCKHOLDERS' EQUITY:
   Convertible preferred stock, $0.01 par value; 20,000,000 shares
     authorized; no shares issued or outstanding                                     --                --
   Common stock, $0.01 par value; 100,000,000 shares authorized;
     32,316,829 and  25,815,243 issued; 32,316,829 and 25,776,243
     shares outstanding in 2001 and 2000, respectively                              323               258
   Additional paid-in capital                                                   458,171           312,687
   Accumulated deficit                                                         (237,274)         (116,320)
   Accumulated other comprehensive loss                                            (192)             (103)
   Less - Treasury stock at cost; 39,000 shares in 2000                              --              (517)
                                                                           ------------      ------------

               Total stockholders' equity                                       221,028           196,005
                                                                           ------------      ------------

               Total liabilities and stockholders' equity                  $    368,907      $    216,356
                                                                           ============      ============
</Table>



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



                                      F-4
<PAGE>

ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------


                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)


<Table>
<Caption>
                                                                                 Years Ended December 31
                                                                       ------------------------------------------
                                                                          2001            2000            1999
                                                                       ----------      ----------      ----------
<S>                                                                    <C>             <C>             <C>

REVENUE:
   Product development                                                 $    3,994      $    3,381      $    4,646
   Contract research services                                              20,650          24,204          13,457
                                                                       ----------      ----------      ----------

                      Total revenue                                        24,644          27,585          18,103
                                                                       ----------      ----------      ----------

OPERATING EXPENSES:
   Research and development costs                                          33,798          24,419          16,219
   Licensing costs                                                         10,281           6,116              10
   Direct costs of research services                                       15,007          19,920          13,227
   General and administrative                                              13,467           7,568           4,063
   In-process research and development                                     86,112          14,562          11,124
   Special charges                                                             --              --          13,882
                                                                       ----------      ----------      ----------

                      Total operating expenses                            158,665          72,585          58,525
                                                                       ----------      ----------      ----------

OPERATING LOSS                                                           (134,021)        (45,000)        (40,422)

OTHER INCOME (EXPENSE):
   Equity in income (losses) of-
     Research and development partnership                                   3,094          (5,370)         (3,824)
     Contract research affiliate                                               --              --          (3,310)
   Interest income and other, net                                           9,995          11,747           1,700
   Minority interest in consolidated subsidiary                                --            (262)            (82)
                                                                       ----------      ----------      ----------

LOSS BEFORE INCOME TAXES                                                 (120,932)        (38,885)        (45,938)

   Provision for foreign income taxes                                         (22)            (97)           (117)
                                                                       ----------      ----------      ----------

NET LOSS                                                               $ (120,954)     $  (38,982)     $  (46,055)
                                                                       ==========      ==========      ==========

BASIC AND DILUTED NET LOSS PER SHARE                                   $    (4.48)     $    (1.61)     $    (3.04)
                                                                       ==========      ==========      ==========

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
                                                                           27,011          24,285          15,144
                                                                       ==========      ==========      ==========
</Table>


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



                                      F-5
<PAGE>

ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                          (in thousands, except shares)

<Table>
<Caption>
                                              Common Stock
                                       -----------------------------                     Receivables
                                                           $0.01         Additional       on Sale of
                                                            Par           Paid-In           Common          Deferred
                                          Shares           Value          Capital           Stock         Compensation
                                       ------------     ------------    ------------     ------------     ------------
<S>                                    <C>              <C>             <C>              <C>              <C>

BALANCES, December 31, 1998              12,613,593              127          67,623              (46)              --
Net loss                                         --               --              --               --               --
Foreign currency translation                     --               --              --               --               --

Comprehensive loss

Issuance of common shares in
 connection with termination of
 a collaborative agreement                  629,200                6           6,286               --               --

Issuance of common shares for
 acquisition of company                   1,000,000               10           9,928               --               --
Issuance of common shares sold in
 connection with collaborative
 agreement for drug compound                218,858                2           2,498               --               --
Exercise of stock options and               500,574                5             874               --               --
 warrants
Options issued for consulting
 agreements                                      --               --           2,167               --           (1,603)
Issuance of common shares in
 private placement, net of
 issuance costs                           2,389,200               24          19,976               --               --
Issuance of common shares in
 secondary offering, net of
 issuance costs                           4,200,000               42          54,469               --               --
Collections on receivables on
 sale of common stock                            --               --              --               46               --
                                       ------------     ------------    ------------     ------------     ------------

BALANCES, December 31, 1999              21,551,425              216         163,821               --           (1,603)
Net loss                                         --               --              --               --               --
Foreign currency translation                     --               --              --               --               --

Comprehensive loss

Exercise of stock options and
 warrants                                   418,787                4           1,975               --               --
Non-cash compensation expense                    --               --             206               --               --
Options issued for consulting
 agreements                                      --               --            (381)              --            1,603
Issuance of common shares in
 private placement, net of
 issuance costs                           3,000,000               30         127,190               --               --
Conversion of subsidiary's
 preferred stock to common stock            290,867                3           4,997               --               --
Issuance of common stock for
 achievement of development                 500,000                5          14,557               --               --
 milestone
Issuance of common stock for
 Employee Stock Purchase Plan                15,164               --             322               --               --
                                       ------------     ------------    ------------     ------------     ------------

BALANCES, December 31, 2000              25,776,243              258         312,687               --               --
Net loss                                         --               --              --               --               --
Foreign currency translation                     --               --              --               --               --

Comprehensive loss

Issuance of common shares for
 acquisition of company                     521,121                5          13,902               --               --
Issuance of common shares for
 employee stock purchase plan                23,148               --             491               --               --
Exercise of stock options and
 warrants                                   246,317                2           2,494               --               --
Non-cash compensation expense                    --               --             266               --               --
Issuance of common shares in
 secondary offering, net of
 issuance costs                           5,750,000               58         128,331               --               --
                                       ------------     ------------    ------------     ------------     ------------
BALANCES, December 31, 2001              32,316,829     $        323    $    458,171     $         --     $         --
                                       ============     ============    ============     ============     ============

<Caption>

                                                                         Accumulated
                                                                            Other
                                        Treasury        Accumulated     Comprehensive
                                          Stock           Deficit       Income (Loss)        Total
                                       ------------     ------------    -------------     ------------
<S>                                    <C>              <C>             <C>               <C>

BALANCES, December 31, 1998                    (517)         (31,283)              --           35,904
Net loss                                         --          (46,055)              --          (46,055)
Foreign currency translation                     --               --               --               --
                                                                                          ------------
Comprehensive loss                                                                             (46,055)
                                                                                          ============
Issuance of common shares in
 connection with termination of
 a collaborative agreement                       --               --               --            6,292

Issuance of common shares for
 acquisition of company                          --               --               --            9,938
Issuance of common shares sold in
 connection with collaborative
 agreement for drug compound                     --               --               --            2,500
Exercise of stock options and                    --               --               --              879
 warrants
Options issued for consulting
 agreements                                      --               --               --              564
Issuance of common shares in
 private placement, net of
 issuance costs                                  --               --               --           20,000
Issuance of common shares in
 secondary offering, net of
 issuance costs                                  --               --               --           54,511
Collections on receivables on
 sale of common stock                            --               --               --               46
                                       ------------     ------------     ------------     ------------

BALANCES, December 31, 1999                    (517)         (77,338)              --           84,579
Net loss                                         --          (38,982)              --          (38,982)
Foreign currency translation                     --               --             (103)            (103)
                                                                                          ------------
Comprehensive loss                                                                             (39,085)
                                                                                          ============
Exercise of stock options and
 warrants                                        --               --               --            1,979
Non-cash compensation expense                    --               --               --              206
Options issued for consulting
 agreements                                      --               --               --            1,222
Issuance of common shares in
 private placement, net of
 issuance costs                                  --               --               --          127,220
Conversion of subsidiary's
 preferred stock to common stock                 --               --               --            5,000
Issuance of common stock for
 achievement of development                      --               --               --           14,562
 milestone
Issuance of common stock for
 Employee Stock Purchase Plan                    --               --               --              322
                                       ------------     ------------     ------------     ------------

BALANCES, December 31, 2000                    (517)        (116,320)            (103)         196,005
Net loss                                         --         (120,954)              --         (120,954)
Foreign currency translation                     --               --              (89)             (89)
                                                                                          ------------
Comprehensive loss                                                                            (121,043)
                                                                                          ============
Issuance of common shares for
 acquisition of company                          --               --               --           13,907
Issuance of common shares for
 employee stock purchase plan                    --               --               --              491
Exercise of stock options and
 warrants                                        --               --               --            2,496
Non-cash compensation expense                    --               --               --              266
Issuance of common shares in
 secondary offering, net of
 issuance costs                                 517               --               --          128,906
                                       ------------     ------------     ------------     ------------
BALANCES, December 31, 2001            $         --     $   (237,274)    $       (192)    $    221,028
                                       ============     ============     ============     ============
</Table>

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



                                      F-6
<PAGE>

ILEX ONCOLOGY, INC.
2001 ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<Table>
<Caption>
                                                                                           Years Ended December 31
                                                                                  ------------------------------------------
                                                                                     2001            2000            1999
                                                                                  ----------      ----------      ----------
<S>                                                                               <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                      $ (120,954)     $  (38,982)     $  (46,055)
    Adjustments to reconcile net loss to net cash used in operating
      activities:
       Depreciation and amortization                                                   2,424           2,521           2,226
       Special charges                                                                    --              --          13,882
       In-process research and development                                            86,112          14,562          11,124
       Net activity of research and development partnerships and                      (3,955)          4,570           4,426
         contract research affiliate
       Deferred income taxes                                                             (73)             --              --
       Minority interest in consolidated subsidiary                                       --             262              82
       Deferred compensation expense for consultants' options                             --           1,222             564
       Non-cash compensation expense                                                     266             206              --
       Loss on investment in marketable securities                                       435              --              --
       Loss on disposal of property and equipment                                        173             134              --
       Changes in operating assets and liabilities:                                       --              --              --
           (Increase) decrease in receivables, net                                     2,927          (4,107)         (3,974)
           Increase in prepaid expenses and other                                       (640)           (590)           (443)
           (Increase) decrease in other non-current assets                              (261)           (106)             75
           Increase (decrease) in accounts payable and accrued liabilities             8,415           5,536             (51)
           Increase (decrease) in accrued subcontractor costs                           (220)            207           1,519
           Increase (decrease)  in deferred revenue                                   (2,085)          2,816             876
           Increase (decrease) in other non-current liabilities                          281             876             (35)
                                                                                  ----------      ----------      ----------

                   Net cash used in operating activities                             (27,155)        (10,873)        (15,784)
                                                                                  ----------      ----------      ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Net activity of marketable securities' transactions                               (10,180)       (135,899)        (25,125)
   Net activity in restricted investments                                                690          (3,125)            170
   Purchase of property and equipment                                                 (1,986)         (4,017)         (1,723)
   Advances to research and development partnership and contract
     research affiliate                                                               (3,369)             --          (1,000)
   Proceeds from sale of property and equipment                                           59              --              --
   Acquisitions, net of cash acquired                                                (22,875)           (136)           (328)
                                                                                  ----------      ----------      ----------

                   Net cash used in investing activities                             (37,661)       (143,177)        (28,006)
                                                                                  ----------      ----------      ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of common stock for cash, net of issuance costs                          128,906         127,220          77,011
   Proceeds from sale of subsidiary's preferred stock                                     --              --           5,000
   Exercise of stock options and warrants                                              2,496           1,979             879
   Payment of cash dividends on subsidiary's preferred stock                              --            (344)             --
   Principal payments for capital lease obligations                                      (78)            (80)             --
   Collections on receivables on sale of common stock                                     --              --              46
   Payment of note payable assumed in acquisition                                         --              --          (1,000)
                                                                                  ----------      ----------      ----------

                   Net cash provided by financing activities                         131,324         128,775          81,936
                                                                                  ----------      ----------      ----------

Effect of Exchange Rate Changes on Cash and Cash Equivalents                             (89)           (103)             --
                                                                                  ----------      ----------      ----------

NET INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS                             $   66,419      $  (25,378)     $   38,146

CASH AND CASH EQUIVALENTS, beginning of year                                          18,099          43,477           5,331
                                                                                  ----------      ----------      ----------

CASH AND CASH EQUIVALENTS, end of year                                            $   84,518      $   18,099      $   43,477
                                                                                  ==========      ==========      ==========
</Table>

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



                                      F-7
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share information, per share information or as
otherwise indicated)

1. ORGANIZATION AND OPERATIONS

ILEX Oncology, Inc., was incorporated in December 1993 under the laws of the
State of Delaware and is a drug development company that is focused on oncology
through its subsidiaries: ILEX Products, Inc. and subsidiaries (ILEX Products)
and ILEX Oncology Services, Inc. and subsidiaries (ILEX Services). ILEX Products
is focused in the areas of identification, development, manufacturing and
regulatory approval of oncology compounds to develop cancer therapeutics and
build a chemoprevention product platform. ILEX Services manages the clinical
trials for our own product candidates, as well as oncology products being
developed by other companies.

The accompanying consolidated financial statements include the accounts of ILEX
Oncology, Inc., and its subsidiaries (collectively, the Company or ILEX). All
significant intercompany transactions and accounts have been eliminated in
consolidation. Certain prior period amounts have been reclassified to conform to
the 2001 presentation.

In December 1996, the Company entered into an agreement with MPI Enterprises,
L.L.C. (MPI) in order to form a drug development joint venture, which has been
fully consolidated in the financial statements (see note 4). In June 1999, ILEX
Services acquired certain assets and liabilities of Pharma Forschung Kaufbeuren
GmbH (PFK), a European contract research affiliate, through its wholly owned
subsidiary, ILEX Services Limited (Services Ltd.), which provides the Company a
location from which European clinical trials are managed and supported in
Guildford, England (see note 4). In July 1999, the Company acquired Convergence
Pharmaceuticals, Inc. (Convergence), a Boston, Massachusetts company, and its
portfolio of angiogenesis inhibitors (see note 6). In March 2000, ILEX Services,
Inc. signed a multi-year services agreement with British Biotech plc (British
Biotech) to provide contracted drug development services to complete the ongoing
clinical development of British Biotech's drug, marimastat, in North America. In
February 2001, the Company purchased Symphar S.A. (Symphar), now ILEX Oncology
Research S.A. (Research S.A.), a research firm located in Geneva, Switzerland
(see Note 6). In December of 2001, the Company acquired Millennium
Pharmaceuticals, Inc.'s (Millennium) 50% equity interest in ILEX
Pharmaceuticals, L.P. ,formerly known as Millennium & ILEX Partners, L.P. (the
Partnership). ILEX now owns 100% of the Partnership, now known as ILEX
Pharmaceuticals, L.P. (see Note 6).

The Company has one marketed product, CAMPATH(R), which was developed within the
Partnership. In August 1999, the Partnership granted Schering AG (Schering)
exclusive distribution and marketing rights to CAMPATH in the United States,
Europe and the rest of the world, other than Japan and East Asia. CAMPATH was
approved for marketing in the United States by the Food and Drug Administration
in May 2001. Berlex Laboratories, Inc., the U.S. affiliate of Schering, is
marketing CAMPATH in the United States. Sales of CAMPATH began in the United
States in May 2001.

The European Commission issued marketing authorization for MabCAMPATH(TM), the
trade name for CAMPATH in Europe, in July 2001. Under this authorization, the
Partnership has the right to market MabCAMPATH in the 15 member states of the
European Union and in two additional countries, Iceland and Norway. Schering
began selling MabCAMPATH in Europe in August 2001.

Additionally, the Company has other drugs in clinical development and several
product candidates in late preclinical research. All product rights are either
acquired or in-licensed. The Company has not generated any revenues from product
sales of these other drugs to date, and there can be no assurance that revenues
from product sales will be achieved. The Company has incurred net losses to date
and its ability to achieve a profitable level of operations in the future will
depend in large part on the ability to complete development of its compounds,
obtain regulatory approvals for such compounds, commercialize these potential
products through marketing agreements with other companies or, if the Company
chooses, market such compounds independently, successfully manufacture such
compounds, and achieve market acceptance of such compounds. There can be no
assurance that the Company will be successful in developing such compounds,
obtaining such approvals, bringing such compounds to market, developing sales,
marketing or distribution capabilities, manufacturing such products or
generating market acceptance.

During 2001, the Company received $128.9 million in net proceeds from a common
stock offering. This transaction provided resources which will be used in the
next two years to fund a portion of the Company's acquisition of Millennium's
partnership interests in the Partnership. The remaining net proceeds will be
used to expand the Company's clinical trials and preclinical research; to fund
our research and development programs; for the note



                                      F-8
<PAGE>

payments associated with our acquisition of Millennium's interest in the
Partnership; for potential licenses or for other acquisitions of complementary
technologies or products; for general corporate purposes; and for working
capital (see Note 8). However, the Company may require substantial additional
funds to conduct research and development, to further develop its potential
pharmaceutical products, and to manufacture and market any pharmaceutical
products that may be developed. The Company expects its capital and operating
expenditures to increase over the next several years. The Company's current
sources of funding are derived from its collaborative agreements with its
strategic partners, existing cash and cash equivalents and investments in
marketable securities. The Company believes that its collaborative agreements
with strategic partners, existing cash and cash equivalents and investments in
marketable securities will satisfy its cash requirements for at least the next
year. There can be no assurance, however, that additional funding will be
available on acceptable terms, if at all.

2. SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition.

   Product Development - Revenues from drug development studies are based on the
   time incurred on such studies.

   Contract Research Services - Revenues from contract research services are
   related to both fixed price and hourly based customer contracts and are
   recognized on a percentage-of-completion basis or as such services are
   performed. Reimbursable out-of-pocket costs incurred related to such
   contracts are netted against revenue.

Current Assets and Current Liabilities. The carrying value of current assets and
current liabilities, excluding investments in marketable securities,
approximates fair value due to the short maturity of these items.

Property and Equipment. Property and equipment are reported at cost and
depreciated over the estimated useful lives of the individual assets using the
straight-line method (see Note 5). Leasehold improvements represent capitalized
employee salaries related to construction and other miscellaneous costs incurred
to bring the leased current Good Manufacturing Practices (cGMP) facility (see
Note 14) into use, as well as improvements made to leased facilities. Leasehold
improvements are amortized over the lesser of the life of the lease or the
useful life of the related property. Expenditures for maintenance and repairs
are charged to expense as incurred. The estimated lives used in computing
depreciation and amortization are as follows:

<Table>
<S>                                                     <C>
        Computer & office equipment                     3 - 10 years
        Lab equipment                                   5 - 10 years
        Leasehold improvements                          2 - 15 years
        Leased equipment                                2 - 3 years
</Table>

Deferred Revenue. Deferred revenue represents advances for services not yet
rendered under contract research services and billings in excess of revenue
recognized, and should be realized within six months to three years.

Investments in Marketable Securities. At December 31, 2001 and 2000, marketable
securities have been categorized as held to maturity and are stated at amortized
cost, as these securities have staggered maturity dates, and management of the
Company does not intend to liquidate these securities before maturity.
Marketable securities with an original maturity of less than one year are
classified on the balance sheet as current assets, while securities with a
maturity of greater than one year are classified as non-current assets. The fair
value of marketable securities is based on currently published market quotations
(see Note 3).

Credit Risk, Major Customer and Supplier. The Company places its excess
temporary cash and cash equivalents in a money market account with high quality
financial institutions. At times, such amounts may be in excess of the Federal
Deposit Insurance Corporation's insurance limit as well as the Securities
Investor Protection Corporation's limit. The Company's accounts receivable are
primarily from pharmaceutical and biotechnology companies. Based on the
Company's evaluation of the collectibility of these accounts receivable, an
allowance for doubtful accounts of $164.0 and $344.0 was necessary at December
31, 2001 and 2000, respectively. The Company believes the exposure to credit
risk related to the remaining accounts receivable is minimal.



                                      F-9
<PAGE>

For the years ended December 31, 2001, 2000 and 1999, the Company's top five
customers accounted for 50%, 50% and 66% of total revenue, respectively. The
following table represents total revenue in excess of 10% from significant
customers:

<Table>
<Caption>
          December 31, 2001      December 31, 2000     December 31, 1999
          -----------------      -----------------     -----------------
<S>       <C>          <C>      <C>          <C>      <C>          <C>
          $3,083        13%      $4,218       15%      $4,569       25%
           3,046        12%       3,323       12%       3,006       17%
           2,355        10%                             1,868       10%
</Table>

Use of Estimates. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those
estimates.

Interest income and other, net. Included in interest income and other, net is
$435.0 related to the accrual of a non-cash loss on the impairment of a held to
maturity marketable security.

Income Taxes. The Company has incurred losses since inception for both book and
tax purposes. The tax provision recorded in 2001, 2000 and 1999 relates to
amounts accrued for the Company's wholly owned subsidiaries which operate in the
United Kingdom and Switzerland.

Statements of Cash Flows. The Company considers all highly liquid investments
with maturities of three months or less at the date of purchase to be cash
equivalents.

Noncash financing and investing activities for the years ended December 31,
2001, 2000 and 1999, include the following:

<Table>
<Caption>
                                                                              2001           2000            1999
                                                                           ----------     ----------     ----------
<S>                                                                        <C>            <C>            <C>

Conversion of subsidiary's preferred stock into common stock               $       --     $    5,000     $       --
Issuance of common stock for Employee Stock Purchase Plan                         491            322             --
Purchase of equipment under capital leases                                         --            273             --
Cashless exercise of warrants                                                      --              2              3
Issuance of common stock to Physician Reliance Network, Inc. (PRN)                 --             --          6,292
Issuance of common stock for acquisitions                                      13,907             --          9,938
Assets acquired in acquisitions                                                72,449             --            774
Liabilities assumed in acquisitions                                            14,179             --          2,199
Settlement of accounts payable through acquisitions                                --             --            566
Liability incurred in connection with acquisition                             107,600             --             --
</Table>

Supplemental disclosures of cash flow information for the years ended December
31, 2001, 2000 and 1999, include the following:

<Table>
<Caption>
                                                         2001           2000           1999
                                                      ----------     ----------     ----------
<S>                                                   <C>            <C>            <C>

     Cash paid during the year for-
         Interest                                     $       17     $        2     $       --
         Foreign income taxes                                 93             98             --
</Table>

Foreign Currency Translation. The Company has wholly owned subsidiaries based in
the United Kingdom and Switzerland. The financial statements of these
subsidiaries were prepared in British pounds and Swiss francs, respectively, and
translated to United States (U.S.) dollars based on the current exchange rate at
the end of the period for the assets and liabilities and a monthly
weighted-average rate for the period in the statements of operations. Such
translation adjustments are included in other comprehensive loss. Gains or
losses on foreign currency transactions are included in direct costs of research
services and in research and development expenses for Services Ltd. and Research
S.A., respectively.

Net Loss Per Share. Basic net loss per share was computed by dividing net loss
by the weighted average number of shares of common stock outstanding during the
year. Diluted net loss per share is equal to basic net loss per share, as the
effect of all common stock equivalents is antidilutive.



                                      F-10
<PAGE>

Accounting Pronouncements. In June 2001, the Financial Accounting Standards
Board (FASB) issued Statements of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations." This statement, which supersedes Accounting Principles
Board Opinion No. 16, "Business Combinations" (APB No. 16) and SFAS No. 38,
"Accounting for Preacquisition Contingencies of Purchased Enterprises," requires
that all business combinations be accounted for by the purchase method. SFAS No.
141 also requires that acquired intangible assets should be recognized as assets
apart from goodwill if they meet one of two specified criteria. Additionally,
the statement adds certain disclosure requirements to those required by APB 16,
including disclosure of the primary reasons for the business combination and the
allocation of the purchase price paid to the assets acquired and liabilities
assumed by major balance sheet caption. This statement is required to be applied
to all business combinations initiated after June 30, 2001. The Company has
adopted SFAS No. 141.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." According to this statement, goodwill and intangible assets with
indefinite lives are no longer subject to amortization, but rather the Company
must make an assessment of impairment by applying a fair-value-based test at
least annually. This statement will be effective for fiscal years beginning
after December 15, 2001, and the Company will therefore adopt SFAS No. 142
beginning January 1, 2002. Under the provisions of SFAS No. 142, the value of
the Company's intangible assets will no longer be subject to amortization but
will be reviewed at least annually for impairment. Management anticipates that
the adoption of SFAS No. 142 will have an immaterial effect on the Company's
consolidated financial statements.

3. INVESTMENTS IN MARKETABLE SECURITIES

Securities held to maturity at December 31, 2001 are summarized as follows:

<Table>
<Caption>
                                                                  GROSS          GROSS
                                                                UNREALIZED     UNREALIZED
                                                 BOOK VALUE       GAINS          LOSSES        FAIR VALUE
                                                 ----------     ----------     ----------      ----------
<S>                                              <C>            <C>            <C>             <C>
Asset-backed securities:
  One year or less                               $   27,966     $      192     $       (2)     $   28,156
  > 1 year and less than 5 years                     23,921              2           (282)         23,641
Government/Agency securities:
  > 1 year and less than 5 years                      9,500             12            (19)          9,493
Municipal bonds:
  One year or less                                    2,000             --             --           2,000
  > 1 year and less than 5 years                      1,449             --             (4)          1,445
Foreign government securities:
  One year or less                                    1,281              3             --           1,284
Corporate securities:
  One year or less                                   43,752            778             (3)         44,527
  > 1 year and  less than 5 years                    79,749            192           (372)         79,569
                                                 ----------     ----------     ----------      ----------
Total securities held to maturity
at December 31, 2001                             $  189,618     $    1,179     $     (682)     $  190,115
                                                 ==========     ==========     ==========      ==========
</Table>



                                      F-11
<PAGE>

Securities held to maturity at December 31, 2000 are summarized as follows:

<Table>
<Caption>
                                                              GROSS          GROSS
                                                            UNREALIZED     UNREALIZED
                                             BOOK VALUE       GAINS          LOSSES        FAIR VALUE
                                             ----------     ----------     ----------      ----------
<S>                                          <C>            <C>            <C>             <C>
Asset-backed securities:
  One year or less                           $   18,262     $       54     $       --      $   18,316
U.S. Treasury securities:
  One year or less                                  275             --             --             275
Foreign government securities:
  One year or less                                3,064              5             --           3,069
  > 1 year less than 5 years                      1,258             15             --           1,273
Corporate securities:
  One year or less                              115,312            317            (73)        115,556
  > 1 year less than 5 years                     41,702            155             (8)         41,849
                                             ----------     ----------     ----------      ----------
Total securities held to maturity at
December 31, 2000                            $  179,873     $      546     $      (81)     $  180,338
                                             ==========     ==========     ==========      ==========
</Table>

During 2001, the Company sold seven corporate securities with a book value of
$26.4 million prior to their stated maturity resulting in a net gain of $129.0,
which is included in interest income and other, net on the Company's
consolidated income statement. The decision to sell these securities was based
upon the decline of credit ratings of such securities. Due to the decline in
these credit ratings, these securities no longer conformed with the Company's
investment policy. The Company has no securities with a maturity date of greater
than five years.

4. INVESTMENTS IN AND ADVANCES TO RESEARCH AND DEVELOPMENT PARTNERSHIP AND
   CONTRACT RESEARCH AFFILIATE

In May 1997, the Company entered into an agreement with LeukoSite, Inc., now
Millennium, for an equally owned joint venture, L&I Partners, L.P., for research
collaboration endeavors. In March 2000, the joint venture changed its name to
Millennium & ILEX Partners, L.P. The Company historically accounted for its
investment in the Partnership using the equity method of accounting. The Company
entered in to an agreement to purchase Millennium's interest in the Partnership
on October 29, 2001 and the transaction was completed on December 31, 2001.
Accordingly, the balance sheet of the Partnership has been consolidated as of
December 31, 2001 (see Note 6).

In August 1999, the Partnership entered into an agreement, which grants Schering
AG (Schering) exclusive marketing and distribution rights to CAMPATH in the
U.S., Europe and the rest of the world except Japan and East Asia, where ILEX
has retained rights. The agreement provides that Schering will advance up to
$30.0 million to the Partnership for the rights to CAMPATH and for the
achievement of certain regulatory milestones. Profits from the sale of CAMPATH
in the U.S. were historically shared equally among ILEX, Millennium and
Schering's U.S. affiliate, Berlex Laboratories, Inc. For sales made outside the
U.S., Schering makes royalty payments to the Partnership approximately
equivalent to the rate of profit sharing in the U.S.

The agreement provides for interest bearing (prime rate plus 1%) advances to the
Partnership of up to $30.0 million in up-front and milestone payments. The
Partnership has received a total of $30.0 million of these payments, with the
final $10.0 million received in 2001. These amounts are included in the
Company's balance sheet as "Advances from Schering". The revenues recorded by
the Partnership are based upon the research and development expenses they
incurred which, pursuant to the distribution agreement, offset the advance
balances due Schering. The services rendered under the agreement are related to
chronic lymphocytic leukemia (CLL) and renal transplant, multiple sclerosis (MS)
development and other oncology services. The advance balance is reduced and
revenue is recognized at an amount equal to 110% of CLL and renal transplant
services and 77% each of MS development and other oncology services. For these
non-CLL indications, a receivable is recognized and revenue is recorded for the
additional 33%. This receivable is included in Accounts receivable - Schering in
the Company's balance sheet at December 31, 2001.



                                      F-12
<PAGE>

The following is summarized financial information for the Partnership:

                     Summarized Income Statement Information

<Table>
<Caption>
                                             2001         2000          1999
                                           --------     --------      --------
<S>                                        <C>          <C>           <C>

     Revenue                               $ 18,072     $  9,670      $  3,750
     Operating expenses                      11,414       19,694        11,339
                                           --------     --------      --------
     Operating income (loss)                  6,658      (10,024)       (7,589)
     Net income (loss)                     $  6,188     $(10,740)     $ (7,686)
                                           ========     ========      ========
</Table>

                      Summarized Balance Sheet Information

<Table>
<Caption>
                                              2000
                                            --------
<S>                                         <C>

         Assets                             $  4,755
         Liabilities                          21,855
                                            --------

         Partners' equity                   $(17,100)
                                            ========
</Table>

On December 31, 2001, the Company purchased Millennium's 50% interest in the
Partnership for a total purchase price of approximately $127.6 million (see Note
6). The assets and liabilities in the summarized financial statements above are
included in the Company's consolidated financial statements, net of any
intercompany eliminations as of December 31, 2001. The balance sheet information
above does not include 2001 amounts as they are consolidated in the Company's
consolidated balance sheet at December 31, 2001.

In September 1997, the Company entered into an agreement with PFK, a German
contract research organization, to purchase a 30% equity interest in PFK. In
1998, the Company purchased an additional 10% equity interest in PFK for a cash
payment of $519.0, bringing the Company's total ownership interest in PFK to
40%. In June 1999, ILEX Services acquired certain assets and liabilities of the
former PFK offices in the United Kingdom through its wholly owned subsidiary,
Services Ltd. The acquisition, for $541.0, was accounted for as a purchase and
provides ILEX Services with a location from which European clinical trials are
managed and supported in Guildford, England. On June 1, 1999, ILEX Services
incurred one-time exit costs of approximately $2.9 million in letter of credit
guarantee funding costs and a write-off of its remaining investment in PFK.
While the Company continues to hold a 40% interest in PFK, management believes
the funding provided to PFK under the letter of credit is uncollectible and,
accordingly, has expensed such amount as additional losses attributable to its
contract research affiliate.

In December 1996, the Company entered into an agreement with MPI, for an equally
owned joint venture, MPILEX, L.L.C. for research collaboration endeavors. At
December 31, 1998, as a result of making contributions to MPILEX in excess of
MPI's contributions, the Company had a majority ownership interest in and
controlling interest of MPILEX. The activity for the venture has been fully
consolidated in the Company's 2000 and 1999 operating results with all
significant intercompany transactions and accounts being eliminated. In December
2000, the Company elected to dissolve the joint venture.

5. PROPERTY AND EQUIPMENT

During 2001 and 2000, the Company disposed of office furniture, equipment,
computers, software and related peripherals with a cost of $716.0 and $1,177.0,
respectively, and a net book value of approximately $232.0 and $134.0. Net loss
for the years ended December 31, 2001 and 2000 includes a loss of $173.0 and
$134.0, respectively, resulting from the disposition of certain furniture and
computer equipment and has been included in operating expenses of the Company.
During 2000, the Company disposed of fully depreciated assets, which consisted
primarily of computers and related peripherals, in the amount of $334.0.
Additionally in 2000, the Company wrote off leasehold improvements with a net
book value of approximately $450.0, which was included in operating expenses.



                                      F-13
<PAGE>

Property and equipment are composed of the following:

<Table>
<Caption>
                                                                     December 31,
                                                                ----------------------
                                                                  2001          2000
                                                                --------      --------
<S>                                                             <C>           <C>

         Computer & office equipment                            $  7,259      $  6,303
         Lab equipment                                             3,008         2,554
         Leased equipment                                            273           273
         Leasehold improvements                                    1,237         1,109
                                                                --------      --------
                                                                  11,777        10,239
         Accumulated depreciation and amortization                (5,669)       (3,763)
                                                                --------      --------
         Net property and equipment                             $  6,108      $  6,476
                                                                ========      ========
</Table>

6. MERGERS AND ACQUISITIONS

The Partnership

On October 29, 2001, the Company announced that it had entered into a definitive
agreement to purchase Millennium's 50% equity interest in the Partnership. The
acquisition closed on December 31, 2001. The terms of the agreement included an
initial cash payment of $20.0 million and an additional $120.0 million in
scheduled payments to Millennium over the next three years, of which $20.0
million may be paid with the Company's common stock. In addition, Millennium
will be entitled to royalty payments based on U.S. CAMPATH sales above certain
levels beginning in 2005. ILEX estimates the purchase price at $127.6 million
based on the net present value of the cash payments discounted at 6.5% (the
prime interest rate plus 1%), the Company's estimated incremental borrowing
rate. The purchase price was allocated to the assets purchased and in-process
research and development costs based upon their respective fair values. The
purchase price was allocated as follows:

<Table>
<S>                                              <C>
Completed technology asset                       $ 64,800
Trademark                                           2,800
In-process research and development                60,000
                                                 --------
Total purchase price                             $127,600
                                                 ========
</Table>

The purchase price was arrived at through negotiations between the Company and
Millennium and was based on a variety of factors, including but not limited to
the prospect for commercializing certain of the assets of the Partnership.

The Company has recorded intangible assets such as purchased technology and a
trademark in the amounts of $64.8 million and $2.8 million, respectively. These
intangible assets will be amortized over 14 years. In connection with the
purchase, the Company acquired additional assets of $14.2 million and additional
liabilities of $13.7 million. In accordance with purchase accounting, the
Company has included the results of operations for the additional 50% interest
in the Partnership as of the date of acquisition.

In connection with the purchase price allocation, $60.0 million was expensed as
a charge for the purchase of in-process research and development. The Company
allocated values to the in-process research and development based on an
independent appraisal of the research and development projects. The income
approach was utilized to develop values for the Company's completed technology
and know-how, in-process research and development and trademark. In assessing
the qualification of the acquired assets as in-process research and development,
the developmental projects were evaluated in the context of SFAS No. 2 and SFAS
No. 86. Such evaluation consisted of a specific review of the efforts, including
the overall objectives of the project, progress toward the objectives and the
uniqueness of the developments of these objectives. Further, each in-process
research and development project was reviewed to determine if technological
feasibility has been achieved. The acquired in-process research and development
was confined to new products/technologies under development that were intended
to address emerging market needs and requirements. No routine efforts to
incrementally refine or enhance existing products or production activities were
included in the acquired in-process research and development. It was determined
that the in-process technologies could only be used for specific and intended
purposes. Due to the specialized nature of the



                                      F-14
<PAGE>

CAMPATH clinical trial programs, management anticipated no alternative future
value from these efforts if the projects were not completed as planned.

As of the acquisition date, the Company was underway with several research and
development programs including post-marketing CLL trials to obtain a second
and/or first line treatments, as well as clinical studies related to new markets
such as non-Hodgkin's lymphoma (NHL), multiple sclerosis (MS) and transplant
indications. In addition to expanding the drug's markets, other R&D projects are
focused on developing an advanced delivery mechanism for all applications.
Projected revenues for in-process R&D cash flows were based on forecasts
provided by ILEX and Schering management. The Company projects generating
revenues from its in-process R&D as early as late 2002 after completion of
certain CLL development programs. Revenues for non-CLL indications are estimated
to begin anywhere from 2002-2004. Revenues are expected to peak in 2010-11 and
decline thereafter. Approximate market share ranges for the respective
indications were: CLL:10-24%; NHL:1-12%; MS: 1-20%; and transplant indications:
5-25%. Costs of revenue and selling, general and administrative expenses were
estimated as a percentage of revenue. Research and development expense was
segregated into a) maintenance R&D and b) development or cost-to-complete R&D.
Maintenance research and development was provided as a part of management's
forecast, which was estimated at $500.0 for 2001 with annual increases of 5%.
These expenses were charged to the in-process R&D cash flows based on their
respective share of overall revenue. Development R&D expense was also projected
by management for each indication.

For the purposes of the independent appraisal, only the economics related to the
lead indications for CAMPATH were considered. These indications are CLL,
non-Hodgkin's lymphoma (NHL), multiple sclerosis (MS) and transplant
indications. At the time of the acquisition, management estimated that the
Company has spent approximately $4.3 million toward all in-process research and
development programs and an additional $50.0 million is expected to be incurred
from 2002 through 2008 to complete on-going developments related to these
programs.

NHL represents approximately 43% of the in-process research and development
value and 23% of the completed technology asset based on discount rates of 27.5%
and 25%, respectively. NHL is a term that describes a collection of lymphomas,
or malignant tumors that develop in the lymphatic system, with different natural
courses, responses to treatment and overall survival rates. Thus far, scientists
have identified more than twenty unique sub-types of NHL. As they continue to
subdivide these malignancies, they will identify new targets for more effective
therapy. Based on management forecast data, the approximate market size in the
U.S. was estimated at over $1.3 billion in 2001 and at nearly $1.6 billion in
2005. As of the date of the acquisition, the project was to generate net cash
inflows no sooner than 2005 and the Company expects to spend an additional $20.0
to $22.0 million in research and development to complete ongoing development
related to the in-process research and development.. As of December 31, 2001,
the Company had not abandoned, nor had any plans to abandon CAMPATH clinical
trial programs related to the NHL indication.

CLL represents approximately 37% of the in-process research and development
value and approximately 77% of the completed technology asset based on discount
rates of 25% for both in-process research and development and the completed
technology asset. CLL is characterized by the abnormal accumulation of a
specific type of leukocyte, eventually leading to bone marrow dysfunction and
enlargement of the lymph nodes, liver and spleen. The Company's current FDA
approval is for third-line treatment of CLL. Preliminary research indicates that
it may be effective as a second-line or even primary agent for the disease.
Based on management's forecast, the breakdown of CLL patient treatments
approximates: third-line treatments (15%); second-line treatments (35%) and
first-line treatments (50%). The approximate CLL market size in the U.S. was
estimated at over $300.0 million in 2001 and is expected to grow to nearly
$400.0 million in 2005. As of the date of the acquisition, the project was
expected to generate net cash inflows no sooner than 2003 and the Company
expects to spend an additional $19.0 million in research and development to
complete ongoing development related to the in-process research and development.
As of December 31, 2001, the Company had not abandoned, nor had any plans to
abandon the CAMPATH clinical trial programs related to second and first-line CLL
treatments.

MS represents approximately 17% of the in-process research and development value
based on a discount rate of 30%. MS is signified by multiple areas of
inflammation and scarring of the myelin in the brain and spinal cord. Myelin is
the tissue that covers and protects nerve fibers. When this occurs, nerve
communication is disrupted. The necessity for early treatment is becoming
increasingly clearer. The message is that early treatment seems to delay
disability presumably by decreasing the injury to the nervous system by MS.
Based on management forecast data,



                                      F-15
<PAGE>

the approximate MS treatment market size in the U.S. was estimated at over
$650.0 million in 2001, increasing to over $750.0 million in 2005. This project
is expected to generate net cash inflows no sooner than 2004 and the Company
expects to spend an additional $17.0 million in research and development to
complete ongoing development related to the in-process research and development.
As of the date of the acquisition, the Company had not abandoned, nor had any
plans to abandon the CAMPATH clinical trial programs related to the MS
indication.

Transplant indications represent approximately 3% of the in-process research and
development value based on a discount rate of 40%. Bone marrow transplants
attempt to cure many different types of cancer and diseases. A bone marrow
transplant in which the bone marrow is donated by an individual, usually a
brother or sister, whose bones marrow genetically matches that of the patient as
closely as possible is called an allogeneic transplant. The number of allogeneic
transplants in the U.S. approximates 7,000 annually. Based on management
forecast data, the approximate allogeneic bone marrow transplant therapy market
size was estimated at over $40.0 million in 2001, growing to nearly $50.0
million in 2005. This project is expected to generate net cash inflows no sooner
than 2003. As of the date of the acquisition, the Company expects to spend an
additional amount of $100.0 to $300.0, to complete ongoing development related
to the in-process research and development. As of December 31, 2001, the Company
had not abandoned, nor had any intentions to abandon the CAMPATH clinical trial
programs related to transplant indications.

A charge was assessed against the oncology projects (CLL and NHL) in-process
research and development cash flows to reflect the leverage of clinical trial
experience gained during the development and approval process for the Company's
current CAMPATH label. Based on a standard rate calculation and review of
comparable industry data, a core charge of 3% was utilized. Other charges
decreasing the in-process research and development cash flows included: i)
profit-sharing expenses to Schering; ii) return on working capital and fixed
assets and iii) return on the trademark intangible asset. According to industry
analyst reports, pharmaceutical product life cycles are generally segmented into
three categories based on several characteristics: short (product revenue peaks
5-7 years post-launch); medium (revenue peaks 8-10 years post-launch); and long
(revenue peaks 12-15 years post-launch). The analysis utilized a medium life
cycle assessing the value of the Company's in-process research and development.
Without successfully completing the in-process research and development
projects, the Company would be unable to realize product revenue for additional
indications.

The Company's completed technology resides in its right to manufacture and
market CAMPATH specifically for patients with B-cell chronic lymphocytic
leukemia who have been treated with alkylating agents and have failed
fludarabine therapy. The current CAMPATH label is considered a third-line
treatment for CLL. Since 1999, the Company has spent over $18.0 million on
CAMPATH development efforts related to the approved indication. Projected
revenue for the completed technology cash flows were based on forecasts provided
by ILEX management. The forecast for the U.S. market was a bottoms-up approach
beginning with the incidence of CLL. The forecast for the non-U.S. market was
provided to ILEX from Schering. Cost of revenue and selling, general and
administrative expenses were projected as a percentage of revenue. These
expenses were charged to the completed technology cash flows based on their
respective share of overall revenue. Other charges decreasing the completed
technology cash flows included: profit sharing expenses to Schering; return on
working capital and fixed assets; and return on the trademark intangible asset.
The discount rate of 20% was used, to reflect the lower level of risk inherent
in the approved CAMPATH label. The projected financial data used in the analysis
included only cash flows attributable to the acquired partnership assets.

The Company trademark value is attributable to CAMPATH and variations thereof,
including MabCAMPATH that is utilized in the European market. The analysis
utilized the relief from royalty method in determining the value of the CAMPATH
trademark. In applying this method, a hypothetical royalty expense is calculated
by applying a reasonable royalty rate to expected revenues. Management
anticipates using the CAMPATH trademark for oncology-related indications.
Non-oncology revenue streams will likely have different branding and marketing.
The trademark analysis considered only the CLL and NHL projected revenues as a
base for the royalty calculation. The analysis considered several different
royalty rate indications in estimating a royalty rate that reflected the CAMPATH
brand's relative characteristics. In addition, an industry accepted general rule
for assessing intangible value was considered. This rule indicates that 25% of
operating income is an appropriate royalty rate for key intellectual property.
After consideration of each indication, a pre-tax royalty of 1% was selected for
the trademark analysis. A discount rate similar to that of the overall Company
was considered appropriate for this analysis.

As of December 31, 2001, the Company had no plans to abandon any of the projects
associated with the above indications. The Company believes that the foregoing
assumptions used in the purchase price allocation were reasonable at the time of
acquisition. No assurance can be given, however, that the underlying assumptions
used to



                                      F-16
<PAGE>

estimate revenue, development costs or profitability or the events associated
with such projects will transpire as estimated. For these reasons, actual
results may vary from projected results. The most significant and uncertain
assumptions relating to the in-process projects relate to the projected timing
of completion and revenues attributable to each project.

Symphar

On February 13, 2001, the Company acquired Symphar, a research firm located in
Geneva, Switzerland. The acquisition has been accounted for using the purchase
method of accounting. Under the terms of the agreement, ILEX acquired Symphar
for approximately $24.0 million, which included cash of $10.0 million, and
521,121 shares of the Company's common stock, the resale of which were
registered with the Securities and Exchange Commission on a registration
statement on Form S-3 on May 1, 2001. The value of the common stock issued in
connection with this merger was calculated using a fair value of $26.6875 per
share. This per share fair value represents the closing price of the Company's
stock on the day the merger was announced. According to the agreement, if
certain criteria are met a $5.0 million cash payment will be made. This payment
was made in December 2001 and the Company expensed this as an additional $5.0
million of in-process research and development.

The Symphar purchase price was allocated to the assets purchased, liabilities
assumed, intangible assets and in-process research and development expense based
upon their respective fair values as follows:

<Table>
<S>                                         <C>
         Current assets                     $  2,744
         Property and equipment                  215
         Intangible asset                        300
         Current liabilities                    (464)
         In-process research and
         development                          26,112
                                            --------
             Total purchase price           $ 28,907
                                            ========
</Table>

The cash portion of the purchase price came from the Company's working capital.
The amount paid by the Company was arrived at through negotiations between the
Company and the shareholders of Symphar and was based on a variety of factors,
including, but not limited to, the prospect for commercializing certain of the
assets of Symphar and the nature of the research-based pharmaceutical industry.
The new entity now operates under the name ILEX Oncology Research, S.A.
Concurrent with the acquisition, Research S.A. entered into a three-year
employment agreement with one of the founders of Symphar. The founder was
granted an option to purchase a total of 30,000 shares of the Company's common
stock under terms of the 2000 Employee Stock Compensation Plan.

Of the $15.0 million cash payment, the Company placed $4.5 million in escrow as
a reserve for possible indemnification against certain future claims. This
amount was included in the purchase price allocation and will be released in
equal installments of $1.5 million every six months following closing for a
period of 18 months provided no claims arise. As of December 31, 2001, $1.5
million has been released from escrow. Under the terms of the agreement, $5.0
million of the purchase price was held as a contingent payment to be released in
the event a legally binding commitment is executed by February 14, 2002 with a
third party acceptable to ILEX to provide research funding of at least $5.0
million for certain non-oncology indications. Upon the execution of an agreement
with a third party, the Company would recognize additional in-process research
and development expense for the $5.0 million contingent payment. The additional
contingent payment was earned in December 2001 and, accordingly, the Company
recorded an additional $5.0 million in-process research and development expense.
The agreement also specifies that, subject to the viability of performance, the
Company agrees to fund a minimum operating and capital budget between $4.0 to
$5.0 million annually for each of the next three years.

Additionally, the Company has recorded an intangible asset in the amount of
$300.0 related to an assembled work force. This asset was amortized throughout
2001 based on an estimated useful life of three years. In accordance with SFAS
No. 142, the Company will cease amortization on January 1, 2002 and will review
the asset for impairment at lease annually. In accordance with purchase
accounting, the Company has included the results of operations for Research S.A.
from the date of acquisition.

In connection with the purchase price allocation, $26.1 million was expensed as
a charge for the purchase of in-process research and development. The Company
allocated values to the in-process research and development based on an
independent appraisal of the research and development projects. The income
approach was the primary



                                      F-17
<PAGE>


technique utilized in valuing the purchased research and development projects.
The value assigned was limited to significant research projects for which
technological feasibility had not been established, including development,
testing and regulatory activities associated with the introduction of Research
S.A.'s projected product launches. The value assigned to purchased in-process
technology was determined by estimating the costs to develop the purchased
in-process technology into commercially viable products, estimating the
resulting net cash flows from the projects and discounting the net cash flows to
their present value. Due to the complexity of the acquired research and
development, the technologies under development could, once completed, only be
economically used for their specific and intended purposes in the targeted
disease segments. If the Company were to fail in its efforts to commercialize
its developmental drug candidates, no alternative economic value is envisioned
at this time. Given the very specific nature of the development, it was
determined that there were no alternative economic uses for the acquired
research and development outside of those originally envisioned by the Company.
The assembled work force was valued using the cost approach. Under this
approach, the work force is valued by calculating the savings realized by the
Company through obtaining a pre-existing, trained and fully efficient operations
and administrative team rather than incurring the costs to assemble and train an
equivalent work force.

The independent appraisal also considered the fact that the existing know-how
diminishes in value over time as new technologies are completed and changes in
market conditions render current products and methodologies obsolete. The
assumptions underlying the cash flow projections used were derived primarily
from investment banking reports, historical results, company records and
discussions with management.

The revenue projection used to value the in-process research and development was
based on estimates of relevant market sizes and growth factors, expected trends
in technology and the nature and expected timing of new product introductions by
the Company, and competitors. Future royalty revenue estimates were aggregated
for the APOMINE cancer indications and Lp(a) inhibitor based on management's
estimate of the following: (i) addressable number of patients in the US market,
(ii) market penetration, (iii) average sales price, (iv) estimate of remaining
worldwide market and (v) the Company's projected royalty rate received from its
partner. The discount rate selected for the in-process technology was 30% for
both APOMINE and Lp(a). Due to the aggressive nature of management's forecast
and the high level of risk associated with the Company achieving the projected
cash flows, the discount rate was calculated using venture capital-type rates of
return. The rate was determined based on analysis of three venture capital
studies utilizing rates appropriate to start-up type companies.

For the purposes of the independent appraisal, only the economics related to
Research S.A.'s lead drug candidates, APOMINE and Lp(a) were considered. It was
determined that forecasting cash flows for Research S.A.'s other developmental
projects was not feasible at the time of acquisition due to their early stage of
development. At the time of acquisition, management estimated that approximately
$14.0 million to $15.0 million had been spent on APOMINE and Lp(a),
respectively, to date, and an additional $17.0 million to $20.0 million is
expected to be incurred to complete clinical testing and gain marketing
approval.

APOMINE, targeted at several cancers, as well as osteoporosis, represented
approximately 45% of the in-process research and development value. As of the
date of the acquisition, the project was expected to be completed and
commercially available in the U.S. no sooner than 2007 for its first cancer
indication, with an estimated cost to complete of approximately $12.0 million to
$14.0 million. Management believes that the Company may be able to license
APOMINE to a major pharmaceutical company or marketing partner and begin
receiving up-front licensing, milestone and collaborative research revenue
resulting in net cash inflows beginning in 2004. Product launches for additional
cancer indications are anticipated between 2008 and 2011. Additionally, the
Company is estimating royalty revenue upon the commercialization of the product
of approximately 8% starting with product launch. As of December 31, 2001, the
Company had not abandoned nor had any plans to abandon APOMINE.

Lp(a), an inhibitor that may lead to a reduction in coronary heart disease,
represented approximately 55% of the in-process research and development value.
As of the date of the acquisition, the Lp(a) project was expected to be
completed and commercially available in the U.S. no sooner than 2007, with an
estimated cost to complete of approximately $5.0 million to $6.0 million.
Management believes that the Company may be able to license its product to a
major pharmaceutical company or marketing partner and begin receiving up-front
licensing, milestone and collaborative research revenue resulting in net cash
inflows beginning in 2005. Additionally, the Company is estimating royalty
revenue upon the commercialization of the product of approximately 8% starting
with product launch. As of December 31, 2001, the Company had not abandoned nor
had any plans to abandon Lp(a).

The Company believes that the foregoing assumptions used in the purchase price
allocation were reasonable at the



                                      F-18
<PAGE>

time of the acquisition. No assurance can be given, however, that the underlying
assumptions used to estimate revenue, development costs or profitability or the
events associated with such projects will transpire as estimated. For these
reasons, actual results may vary from projected results. The most significant
and uncertain assumptions relating to the in-process projects relate to the
projected timing of completion and revenues attributable to each project.

The following table reflects unaudited pro forma combined results of operations
of ILEX and Research S.A. as if the acquisition had occurred on January 1, 2001
and 2000. Included in pro forma results are amortization of the intangible asset
of $100.0 for the each of the years ended December 31, 2001 and 2000. Also
included in the pro forma results is $26.1 million recorded as in-process
research and development for the year ended December 31, 2001. Such pro forma
information is presented for informational purposes only and is not necessarily
indicative of the consolidated results that would have been achieved had the
acquisition actually been consummated at January 1, 2000.

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                          --------------------------
                                                             2001            2000
                                                          ----------      ----------
<S>                                                       <C>             <C>
         Total revenue                                    $   25,039      $   30,682
         Net loss                                           (120,967)        (38,995)
                                                          ==========      ==========
         Basic and diluted net loss per share             $    (4.47)     $    (1.57)
                                                          ==========      ==========
</Table>

Convergence

On July 16, 1999, the Company acquired Convergence of Boston, Massachusetts, now
known as ILEX Products Research Division, a privately held research-based
pharmaceutical company with an emerging portfolio of angiogenesis and DNA repair
inhibitors. The acquisition has been accounted for using the purchase method of
accounting; therefore, the Company has included the results of operations for
Convergence from the date of acquisition. The terms of the agreement called for
the Company to issue shares in exchange for Convergence's assets, as well as
potentially issue earn-out shares, if certain development milestones are met.
Under the terms of the agreement, ILEX acquired Convergence in exchange for one
million shares of the Company's common stock. The value of the original stock
payment issued in connection with this merger was calculated using a fair value
of $9.9375 per share. This per share fair value represents the closing price
when the merger terms were agreed to and announced. The total aggregate purchase
price was approximately $10.0 million. The assumed debt totaling $1.0 million
was called in 1999 and the Company paid the principal sum of this note together
with the accrued interest. The purchase price was allocated to the assets
purchased, liabilities assumed and in-process research and development costs
based upon their respective fair values. The purchase price was allocated as
follows:

<Table>
<S>                                                       <C>
          Current assets                                  $    246
          Property and equipment                               365
          Current liabilities                               (1,797)
          In-process research and development               11,124
                                                          --------
              Total purchase price                        $  9,938
                                                          ========
</Table>

The first milestone for the earn-out shares was defined as the initiation of
treatment of the first patient following initiation of a Phase I trial of one of
the Convergence compounds in the United States or Europe, which must occur no
later than December 31, 2001. The first milestone was met in the fourth quarter
of 2000. The value of the 500,000 shares of common stock issued in connection
with the achievement of the first milestone related to the acquisition was
calculated using a fair value of $ 29.125 per share. This per share fair value
represents the closing price of the Company's stock on the date the first
milestone was achieved. This additional purchase price of approximately $14.6
million (see note 8) was expensed as in-process research and development costs.

The second milestone for the potential earn-out of 500,000 shares is defined as
the initiation of treatment of the first patient following initiation of a Phase
II trial of one of the Convergence compounds in the United States or Europe,
which must occur no later than December 31, 2002. The Company expects to issue
the shares in connection with the achievement of the second milestone in 2002.

Concurrent with the acquisition, the Company entered into four consulting
agreements with the founders of Convergence. The agreements specify compensation
levels and grant the four founders of Convergence the option to purchase a total
of 100,000 shares of the Company's common stock at an exercise price of $9.94.
Previously, the



                                      F-19
<PAGE>

options vested at a rate of 25% per year beginning in July 2000. The fair value
of the options was recorded as deferred compensation as a separate component of
stockholders' equity and adjusted to current market value on a quarterly basis.
Deferred compensation was being amortized to expense over the vesting period of
the options. In April 2000, the Company elected to immediately vest the options
due to the significant earnings fluctuations, which were resulting from the
on-going recalculation of the fair value of these options. The volatility of the
Company's stock price was a major factor contributing to the significant changes
in the fair value calculation. Using an option pricing model, the fair value of
the options was calculated as approximately $1.8 million which resulted in the
recognition of approximately $1.2 million in consulting expense during the first
six months of 2000, and the removal of the deferred compensation balance in the
equity section of the accompanying consolidated balance sheet. At December 31,
1999, the Company had recognized approximately $564.0 in consulting expense.

In performing the purchase price allocation, the Company considered, among other
factors, Convergence's research and development projects that were in process at
the date of acquisition. With regard to the in-process research and development
projects, the Company considered factors such as the stage of development of the
technology at the time of acquisition, the importance of each project to the
overall development plan, alternative future use of the technology and the
projected incremental cash flows from the projects when completed and any
associated risks. Due to their specialized nature, the in-process research and
development projects had no alternative future use, either for re-deployment
elsewhere in the business or in liquidation, in the event the projects failed.

The income approach was the primary technique utilized in valuing the purchased
research and development projects. The value assigned to these projects was
limited because technological feasibility had not been established, including
development, testing and regulatory activities associated with the introduction
of projected product launches. The value assigned to purchased in-process
technology was determined by estimating the costs to develop the purchased
in-process technology into commercially viable products, estimating the
resulting net cash flows from the projects and discounting the net cash flows to
their present value. The independent appraisal also considered the fact that the
existing know-how diminishes in value over time as new technologies are
completed and changes in market conditions render current products and
methodologies obsolete. The assumptions underlying the cash flow projections
used were derived primarily from investment banking reports, historical results,
company records and discussions with management.

Revenue estimates for each in-process research project were developed by
management based on estimates of relevant market sizes and growth factors,
expected trends in technology and the nature and expected timing of new product
introductions by the Company and its competitors. Due to the technological and
economic risks associated with the developmental projects, a discount rate of
between 40% and 100% was used to discount cash flows from the in-process
products. The Company believes that the foregoing assumptions used in the
purchase price allocation were reasonable at the time of the acquisition. No
assurance can be given, however, that the underlying assumptions used to
estimate revenue, development costs or profitability or the events associated
with such research projects will transpire as estimated. For these reasons,
actual results may vary from projected results. The most significant and
uncertain assumptions relating to the in-process research projects relate to the
projected timing of completion and revenues attributable to each research
project.

The purchased research and development projects that were in process at the date
of the acquisition consisted of a family of proprietary anti-angiogenic proteins
and a small-molecule inhibitor. The protein molecule represented approximately
47% of the in-process research and development value, with the small molecule
inhibitor representing the remaining value of approximately 53%. Due to the
aggressive nature of the management's forecast and the high level of risk
associated with the Company achieving the projected cash flows, the discount
rates were calculated using venture capital-type rates of return.

The discount rate for the anti-angiogenic protein was 100% due to the complex
clinical trial process and the fact that the Company must find a pharmaceutical
partner to fund the project, in addition to the speculative nature of the
biotech market and the extreme competition in the cancer market. As of the date
of the acquisition, the project was expected to be completed and commercially
available in the U.S. in 2003. The estimated cost to complete totaled
approximately $5.0 million to $10.0 million, with the Company being responsible
for approximately $1.5 million and the remainder coming from a pharmaceutical
partner. As of December 31, 2001, the Company had not abandoned nor had any
plans to abandon any of the anti-angiogenic proteins, and has not yet obtained a
pharmaceutical partner.

The discount rate for the small-molecule inhibitor was 40%, a lower discount
rate than the anti-angiogenic protein due to the recent progress made prior to
the acquisition and the prospects of clinical trials in the near future. As of
the date of the acquisition, the project was expected to be completed and the
first indication commercially available



                                      F-20
<PAGE>

in the U.S. in 2005, with an estimated cost to complete of approximately $30.0
to 35.0 million. As of December 2001, the Company had not abandoned nor had any
plans to abandon the small-molecule inhibitor.

The following table reflects unaudited pro forma combined results of operations
of ILEX, Convergence and Services Ltd. as if the acquisitions had occurred on
January 1, 1999 (see Note 4). Such pro forma information is presented for
informational purposes only and is not necessarily indicative of the
consolidated results that would have been achieved had the acquisition actually
been consummated at January 1, 1999.

<Table>
<Caption>
                                                        December 31,
                                                        ------------
                                                            1999
                                                          --------
<S>                                                     <C>

         Total revenue                                    $ 18,901
         Net loss                                         $(46,686)
                                                          ========
         Basic and diluted net loss per share             $  (2.98)
                                                          ========
</Table>

7. MINORITY INTEREST

On September 23, 1999, ILEX Services issued 290,867 shares of Series A
convertible preferred stock for $5.0 million to IMPATH, Inc. (IMPATH). The
preferred stock was convertible to the Company's common stock based upon a
computation set forth in the certificate of designation for the preferred stock.
The preferred stock was entitled to liquidation preferences over the ILEX
Services' common stock. The preferred stock was eligible for dividends at an
annual rate of $1.031 per share. Dividends were accrued monthly and were to be
paid to the stockholders annually in arrears beginning in September 2000, when
and as declared by ILEX Services' board of directors. A former member of the
Company's board of directors also served as a member of the board of directors
of IMPATH.

In November 2000, IMPATH elected to convert its convertible preferred stock,
previously reflected as minority interest on the Company's consolidated balance
sheet to 290,867 shares of the Company's common stock.

8. STOCKHOLDERS' EQUITY

In November 2001, the Company completed an underwritten public offering of its
common stock pursuant to which the Company sold 5.75 million shares. The number
of shares sold included the underwriters' exercise of their overallotment
option. Proceeds, net of offering costs, to the Company from this offering were
approximately $128.9 million, which includes the reissuance of the Company's
39,000 treasury shares. The net proceeds of this offering will be used in the
next two years to fund a portion of the acquisition of Millennium's partnership
interest in the Partnership. The balance of the net proceeds will be used to
expand clinical trials and preclinical research; to fund research and
development programs; for potential licenses or other acquisitions of
complementary technologies or products; for general corporate purposes and for
working capital.

On March 30, 2001, the Board of Directors of the Company declared a dividend of
one Preferred Share purchase right (a Right) for each outstanding share of
common stock, par value $.01 per share (the Common Shares), of the Company and
authorized the issuance of one Right for each Common Share which shall become
outstanding between April 20, 2001, the Record Date and the earlier of the
Distribution Date or the final expiration date of the Rights. The dividend was
payable on, April 20, 2001, to the stockholders of record on that date. Each
Right entitles the registered holder to purchase from the Company one
one-thousandth interest in one share of Series I Preferred Stock, par value $.01
per share (the Preferred Shares), of the Company at a price of $120.00 per one
one-thousandth interest in a Preferred Share (the Purchase Price), subject to
adjustment. The Rights will become exercisable ten days after (i) an Acquiring
Party (as defined in the Rights Agreement) accumulates beneficial ownership of
20% or more of the Company's common stock or (ii) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in an Acquiring Party accumulating 20% or
more of the common stock. In the event the Company is, in effect, acquired in a
merger or other business combination transaction or 50% or more of its
consolidated assets or earning power is sold, proper provision will be made so
that each holder of a Right will thereafter generally have the right to receive,
upon the exercise thereof at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company which at the time of
such transaction will have a market value of two times the then current Purchase
Price of the Right.



                                      F-21
<PAGE>

The description and terms of the Rights are set forth in a Rights Agreement
between the Company and American Stock Transfer & Trust Co., as Rights Agent.
The plan was not adopted in response to any unsolicited offer or takeover
attempt. A copy of the Rights Agreement was filed with the Securities and
Exchange Commission as an exhibit to a Current Report on Form 8-K dated April 1,
2001.

In November 2000, as a result of achieving a development milestone related to
the acquisition of Convergence (see Note 6), the Company issued 500,000 shares
of its common stock. In connection therewith, the Company recorded a non-cash
in-process research and development charge of $14.6 million.

In May 2000, ILEX shareholders unanimously approved a proposal to amend the
Company's Amended and Restated Certificate of Incorporation to increase the
number of authorized shares of the Company's common stock from 40.0 million to
100.0 million.

Additionally, in May 2000, the shareholders approved a proposal to ratify the
adoption of the Employee Stock Purchase Plan (the Purchase Plan) of the Company.
The Purchase Plan allows eligible employees to purchase shares of common stock
periodically through their accumulated payroll deductions during offering
periods as defined in the Purchase Plan. Initially, 250,000 shares of common
stock will be available for issuance under the Purchase Plan. Under the Purchase
Plan, 23,148 and 15,164 shares were issued in 2001 and 2000, respectively.

In March 2000, the Company sold 3.0 million shares of its common stock at $45.00
per share to selected institutional and other accredited investors. Gross
proceeds to the Company were approximately $135.0 million. Net proceeds to the
Company were approximately $127.0 million. ILEX is using the proceeds from the
private placement to accelerate its clinical trials and preclinical research,
with a particular focus on its late-stage clinical product candidates and
preclinical angiogenesis inhibitors, as well as for potential acquisitions of
complementary technologies, products and companies and for general corporate
purposes.

In November 1999, the Company completed an underwritten public offering of its
common stock pursuant to which the Company sold 4.2 million shares. The number
of shares sold by the Company includes the underwriters' exercise of their
overallotment option. Proceeds, net of offering costs, to the Company from this
offering were approximately $54.5 million.

In July 1999, the Company completed a $20.0 million private placement of
2,389,200 shares of common stock. The shares were sold at a 15% discount from
the average 30-day trading price prior to closing.

In January 1999, the Company entered into a development and licensing agreement
for an oncology compound with a pharmaceutical company. In March 1999, the
pharmaceutical company purchased $2.5 million of common stock of the Company
(see Note 12).

In December 1998, the Company received 39,000 shares of its own stock from
MPILEX as payment for contract research services rendered by the Company. In
November 2001, in connection with the previously described public offering,
these shares were reissued.

9. STOCK OPTIONS AND STOCK PURCHASE WARRANTS

SFAS No. 123, "Accounting for Stock-Based Compensation" defines a fair value
based method of accounting for employee stock options or similar equity
instruments and encourages all entities to adopt that method of accounting for
all of their employee stock compensation plans. Under the fair value based
method, compensation cost is measured at the grant date based on the value of
the award and is recognized over the service period of the award, which is
usually the vesting period. However, SFAS No. 123 also allows entities to
continue to measure compensation costs for employee stock compensation plans
using the intrinsic value method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25). The Company has adopted SFAS No. 123 and has elected to remain with the
accounting prescribed by APB 25. The Company has made the required disclosures
prescribed by SFAS No. 123.

During 2001, the Company adopted the 2001 UK Stock Option Plan (the UK Plan).
Under the UK Plan, stock options may be granted to key employees and directors
of the Company. The total number of shares of stock with respect to which awards
may be granted under the UK Plan shall be equal to the number of shares reserved
for issuance under the Company's 2000 Employee Stock Compensation Plan (the 2000
Plan). Stock options vest pursuant to the individual stock option agreements,
usually 25% per year beginning one year from the date of grant, with unexercised
options



                                      F-22
<PAGE>

expiring ten years from the date of grant. As of December 31, 2001, 7,400
options had been granted under the UK Plan and all options remain unexercised.

During 1995, the Company adopted a stock option plan (the Plan). Under the Plan,
stock options may be granted to key employees and consultants of the Company as
approved by a committee of the Company's board of directors. Originally, the
Company had reserved 570,904 shares of common stock for issuance in accordance
with the Plan. In May 1998, the Company increased the number of authorized
shares of common stock reserved for issuance under the Plan to 1.8 million.
Stock options vest pursuant to the individual stock option agreements, usually
25% per year beginning one year from the date of grant, with unexercised options
expiring ten years from the date of grant. As of December 31, 2001, options
covering 696,249 shares have been exercised under this plan and options covering
577,124 shares have expired.

In October 1996, the Company adopted a nonemployee directors' stock option plan
(the Directors' Plan). Under the Directors' Plan, each nonemployee director is
granted an option for up to 17,500 shares of common stock upon appointment to
the board. As of December 31, 2001, nonemployee directors had been granted a
total of 184,524 options upon appointment to the board with an exercise price of
between $3.50 and $29.75, which vest at 1/48 per month. Additionally, each
nonemployee director will be eligible to receive up to 6,000 stock options
annually, which will be fully vested at the time of grant and based upon the
participation of the director. As of December 31, 2001, nonemployee directors
had been granted 62,000 of these options for participation with an exercise
price of between $25.89 and $28.00 per share. All options issued under the
Directors' Plan expire ten years from the date of grant. As of December 31,
2001, options covering a total of 38,720 shares have been exercised under the
Directors' Plan and options covering 28,664 shares have been forfeited when
nonemployee directors resigned their positions with the Company.

In May 2000, shareholders approved a proposal to ratify the adoption of the 2000
Plan. The 2000 Plan authorizes a committee of the Board of Directors to issue
options intended to qualify as incentive stock options ("ISOs") as defined in
Section 422 of the Internal Revenue Code of 1986 (the Code), stock options that
are not intended to conform to the requirements of Section 422 of the Code
("Non-ISOs"), and restricted stock awards. The total number of shares of common
stock with respect to which awards may be granted under the 2000 Plan is 3.0
million. Stock options vest pursuant to the individual stock option agreements,
usually 25% per year beginning one year from the date of grant, with unexercised
options expiring ten years from the date of grant. As of December 31, 2001,
11,070 options have been exercised under this plan and options covering 195,460
shares have expired.

In connection with a prior private placement of convertible preferred stock, the
Company issued a warrant for the purchase of 97,044 shares of common stock at
approximately $3.50 per share. In December 1999, a cashless exercise of these
warrants was executed for shares totaling 80,918. As of December 31, 2000, all
outstanding warrants were exercised.

Additionally, in connection with another prior private placement of convertible
preferred stock, the Company issued 355,913 warrants for the purchase of common
stock at approximately $8.76 per share. The value of the warrants issued were
immaterial based on the exercise price of the warrants and the fair value of the
Company's common stock on the date the warrants were issued. As such, no amount
was attributed to the warrants. The warrants may be exercised in whole at any
time or in part from time to time, prior to their expiration in July 2001. The
exercise price of these warrants is subject to an adjustment if the Company
issues common stock subsequent to the date of the warrants at a price per share
less than the exercise price of the warrants. As a result of the Company's
private placement in July 1999 (see note 8), the exercise price of the warrants
was adjusted to $8.71. In July 2001, all outstanding warrants were exercised.

In March 1998, the Company entered into an agreement with a drug development
institute to license a compound for development by the Company. The agreement
called for an initial payment of $250.0 and a warrant to purchase 590,113 shares
of the Company's common stock. Using the Black-Scholes pricing model, the value
of the warrant was determined to be $3,143. In 1999, all outstanding warrants
were exchanged for shares totaling 229,216 via a cashless exercise.



                                      F-23
<PAGE>

A summary of the status of the Company's fixed stock option plans for the years
ended December 31, 2001, 2000 and 1999, and changes during these years on those
dates is presented below:

<Table>
<Caption>
                                              December 31, 2001               December 31, 2000             December 31, 1999
                                          --------------------------     --------------------------     --------------------------
                                                           Weighted                       Weighted                       Weighted
                                                           Average                        Average                        Average
                                                           Exercise                       Exercise                       Exercise
                                            Shares          Price          Shares          Price          Shares          Price
                                          ----------      ----------     ----------      ----------     ----------      ----------
<S>                                       <C>            <C>             <C>            <C>             <C>            <C>

Outstanding, beginning of year             2,476,424      $    21.72      1,293,360      $     9.64      1,192,989      $     8.54
Granted                                    1,208,100           24.91      1,542,198           30.22        477,878           11.02
Exercised                                   (212,772)          11.09       (221,649)           8.93       (184,181)           4.77
Forfeited                                   (318,409)          28.27       (137,485)          24.18       (193,326)          10.91
                                          ----------      ----------     ----------      ----------     ----------      ----------

Outstanding, end of year                   3,153,343      $    22.99      2,476,424      $    21.71      1,293,360      $     9.64
                                          ==========      ==========     ==========      ==========     ==========      ==========

Options exercisable at end of year         1,111,908      $    18.24        725,467      $    12.41        458,050      $     7.67
                                          ==========      ==========     ==========      ==========     ==========      ==========

Weighted average fair value of options
   granted during the year                                $    14.96                     $    18.55                     $     6.27
                                                          ==========                     ==========                     ==========
</Table>

The following table summarizes the information about fixed stock options
outstanding at December 31, 2001:

<Table>
<Caption>
                                    Options Outstanding                  Options Exercisable
                         -----------------------------------------    --------------------------
                                          Weighted                      Number
                                          Average        Weighted     Exercisable      Weighted
                                         Remaining       Average           at          Average
                            Number      Contractual      Exercise     December 31,     Exercise
 Exercise Prices         Outstanding        Life          Price           2001          Price
 ---------------         -----------    -----------     ----------    ------------    ----------
<S>                      <C>            <C>             <C>           <C>             <C>

$ 3.50 - $3.50               128,942      2.1 years     $     3.50        128,942     $     3.50
$ 6.00 - $9.00               169,239      5.5 years     $     7.64        140,873     $     7.56
$ 9.19 - $13.69              391,375      6.7 years     $    10.93        243,722     $    10.66
$13.88 - $20.38              229,727      7.9 years     $    17.33         80,225     $    16.05
$21.26 - $30.25            1,945,643      9.0 years     $    26.84        445,451     $    27.59
$32.25 - $43.00              267,347      8.5 years     $    34.50         67,429     $    34.48
$49.13 - $50.00               21,070      8.2 years     $    49.56          5,266     $    49.56
                          ----------     ----------     ----------     ----------     ----------

                           3,153,343      8.1 years     $    22.99      1,111,908          18.24
                          ==========     ==========     ==========     ==========     ==========
</Table>

Had compensation cost for the Company's stock-based employee compensation plans
been determined based upon a fair value method consistent with SFAS No. 123, the
Company's net loss and loss per share would have been increased to the pro forma
amounts indicated below:

<Table>
<Caption>
                                                             December 31
                                              ------------------------------------------
                                                 2001            2000            1999
                                              ----------      ----------      ----------
<S>                                           <C>             <C>             <C>

        Net loss       As reported            $ (120,954)     $  (38,982)     $  (46,055)

                       Pro forma              $ (128,978)     $  (45,335)     $  (47,376)

        Loss per share As reported            $    (4.48)     $    (1.61)     $    (3.04)

                       Pro forma              $    (4.78)     $    (1.87)     $    (3.13)
</Table>

For options granted in 2001, 2000 and 1999, the fair value of each option grant
was estimated on the date of the grant using the Black-Scholes option pricing
model with the following weighted average assumptions: dividend yield of 0% for
all years; expected volatility of 78.4%, 77.7% and 72.6% in 2001, 2000 and 1999,
respectively; risk free interest rate of 4.0%, 5.9% and 5.9% in 2001, 2000 and
1999, respectively. The expected life of the options granted for 2001, 2000 and
1999 is 4.0, 4.0 and 3.8 years, respectively.



                                      F-24
<PAGE>

10. SPECIAL CHARGES

The Company recorded special charges totaling $13.9 million in the second
quarter of 1999. As discussed below, these charges included the recognition of
$12.3 million of costs associated with the termination of the Company's
agreements with PRN and $1.6 million of charges related to other items.

In July 1997, the Company entered into an assignment agreement and a services
agreement with PRN under which the Company and PRN agreed to jointly market
their clinical trial service capabilities. In accordance with these agreements,
the Company issued 312,188 and 314,600 common shares to PRN in July 1997 and
1998, respectively. The value of the shares issued was recorded as an intangible
asset and was being amortized over the term of the agreements. The Company also
agreed to issue up to an additional 629,200 shares to PRN over a two-year period
if PRN remained in compliance with various provisions of the agreements.
Additionally, 1,255,988 common shares could have been issued over a four-year
period if certain milestones were achieved. Effective June 30, 1999, the Company
and PRN terminated all aspects of the agreements, leaving neither PRN nor ILEX
with any rights, liabilities or obligations to one another under the service
agreement. ILEX terminated the agreement with PRN due to milestone requirements
that would never be achieved and changes in the relationship between the
companies as a result of PRN being acquired by U.S. Oncology. The Company
recorded an approximate $12.3 million special charge associated with the value
of the remaining 629,200 shares issued and the write-off, in accordance with
SFAS No. 121, of the net intangible asset associated with the PRN agreements.
The Company has no further obligation with respect to the assignment agreement
or with respect to the contingent shares under the services agreement.

The remaining $1.6 million in special charges was comprised of a $750.0 accrual
for a debt guarantee of an unaffiliated site management organization which
management determined to be uncollectible, a $350.0 write-down of computer
equipment and an approximate $500.0 write-off of an operating lease commitment
for manufacturing equipment which management has determined will not be
utilized.

11. RELATED-PARTY TRANSACTIONS

CTRC Research Foundation (CTRC Research), a stockholder of the Company, performs
certain administrative and technical support services for the Company. For the
years ended December 31, 2001, 2000 and 1999, the Company paid CTRC Research
approximately $6.0, $47.0 and $190.0, respectively, for these services and
reimbursement of salaries and benefits. As described in Note 14, the Company has
lease agreements with CTRC Research for labs and the cGMP facility. For the
years ended December 31, 2001, 2000 and 1999, the Company paid CTRC Research
approximately $231.0, $248.0 and $439.0, respectively, related to these lease
agreements. At December 31, 2000, the Company had payables to CTRC Research
amounting to $15.0 related to the aforementioned services and lease agreements.
These services are provided at fair value.

U.S. Oncology, Inc. provides clinical trial patients for trials conducted by the
Company on behalf of its CRO sponsors, as well as the Company's own proprietary
product pipeline. Joseph Bailes, M.D., a Director of the Company, is currently
the Executive Vice President, Clinical Affairs at U.S. Oncology.

In May 2001, the Company entered into an agreement with the Arizona Board of
Regents for the University of Arizona for pancreatic cancer research. The
agreement requires the Company to pay approximately $901.0 over the next three
years. As of December 31, 2001, the Company had expensed $300.3 in accordance
with the agreement. Additional amounts paid to the University relate to payments
to investigators. Daniel von Hoff, M.D., a Director of the Company, is the
Director of the Arizona Cancer Center and Professor of Medicine at the
University of Arizona Health Science Center in Tucson.

In March 1995, the Company entered into a subordinated option agreement with
CTRC Research. The agreement gives the Company the subordinated option to
acquire licenses or certain marketable rights, as defined in the agreement,
owned by CTRC Research. The subordinated option for any particular marketable
right is exercisable only after a third party, with which CTRC Research has
contracted, elects not to exercise its primary option on the same marketable
right. The subordinated option agreement expired in fiscal year 2000.

Subcontractors provide the Company with consulting services and preclinical and
clinical testing related to certain of its contracts. Such costs may be included
in either research and developments costs or direct costs of research services
in the accompanying consolidated financial statements.



                                      F-25
<PAGE>

For the years ended December 31, 2001, 2000 and 1999, the Company incurred the
following related party expenses:

<Table>
<Caption>
                                                              December 31
                                               -----------------------------------------
                                                  2001            2000           1999
                                               ----------      ----------     ----------
<S>                                            <C>             <C>            <C>

         CTRC Research                         $      390      $      402     $    1,037
         Director of the Company                      403             365            312
         Stockholders                                 291             264            350
         US Oncology/PRN                              (82)              5            251
         University of Arizona                        485              --             --
         PFK                                           --              --            175
                                               ----------      ----------     ----------
                                               $    1,487      $    1,036     $    2,125
                                               ==========      ==========     ==========
</Table>

At December 31, 2001 and 2000, the following subcontractor costs were payable to
related parties:

<Table>
<Caption>
                                                      December 31
                                               -------------------------
                                                  2001           2000
                                               ----------     ----------
<S>                                            <C>            <C>

         CTRC Research                         $      271     $      343
         US Oncology/PRN                               66            335
                                               ----------     ----------

                                               $      337     $      678
                                               ==========     ==========
</Table>

During 2001, 2000 and 1999, the Company performed contract research services on
behalf of the Partnership, the Company's research and development partnership,
at its standard billing rates. For the years ended December 31, 2001, 2000 and
1999, the Company recorded revenues in the amounts of $3,909, $3,323 and $4,569,
respectively.

12. LICENSING AGREEMENTS

In July 2001, the Company entered into an agreement with the Dana-Farber Cancer
Institute at Harvard Medical School (DFCI) for an exclusive, worldwide license
for patent rights and technology relating to the MUC1 protein. The agreement
requires the Company to pay approximately $200.0 in past patent expenses and up
to $1.0 million in license fees, payable in a series of payments with the last
payment occurring the second quarter of 2003. As of December 31, 2001, the
Company expensed approximately $503.0 in license fees and past patent expenses
in accordance with the agreement. The Company may be required to make future
payments in accordance with the agreement if certain drug development milestones
are met.

In March 2001, ILEX paid $1.1 million to enter a definitive agreement to
co-develop clofarabine, a nucleoside analog, with Bioenvision, Inc.
(Bioenvision). In clinical studies, clofarabine has shown promise as a potential
new treatment for patients with hematological malignancies, including acute
lymphocytic leukemia (ALL) and acute myelogenous leukemia (AML), and in
preclinical studies, for solid tumors. ILEX will take the lead role in
developing clofarabine in the United States and Canada, where it will have
exclusive manufacturing and marketing rights in exchange for an in-licensing
fee, milestone payments and royalties. Bioenvision will retain the lead role in
developing the compound in Europe and elsewhere, where it will have exclusive
manufacturing and marketing rights and the Company will have rights to
royalties.

In July 2000, the Company entered into an agreement with Knoll AG (BASF Pharma)
for an exclusive, worldwide license of ILX-651, a synthetic pentapeptide analog
of dolastatin. As of December 31, 2001, the Company had paid $4.0 million in
license fees. The Company recorded additional license fee expense of $6.0
million in 2001, in accordance with the license agreement, that was paid in cash
in January 2002. The Company may be required to pay future license maintenance
fees in either cash or unrestricted stock in accordance with the agreement if
certain drug development and time-based milestones are met.

In January 1999, the Company entered into a development and licensing agreement
for an oncology compound with Eli Lilly and Company (Lilly). Currently, the
Company and Lilly are analyzing their options as to the compound's continued
development.

In 1998, the Company entered a development agreement with Symphar, a Swiss
company, for the development of APOMINE(TM). In 2000, Symphar and the Company
amended their development agreement to allow the Company to



                                      F-26
<PAGE>

make a cash payment in the amount of $1.0 million in exchange for Symphar's
commitment not to exercise its exclusive right to commercialize APOMINE with any
third party for a period of one year ending April 1, 2001. This payment was
expensed in the second quarter of 2000. In February 2001, the Company acquired
Symphar, now ILEX Research S.A., in exchange for cash and common stock (see note
6).

In 1994, the Company obtained two licensing agreements for oncology compounds
from CTRC Research. During 1995 and 1996, the Company entered into six
additional licensing agreements. All of the licensing agreements grant the
Company the right to develop and market the oncology compounds covered by such
agreements and to license the rights to such compounds to other third parties.
In addition, the Company must also pay royalties upon commercialization of the
compounds. Under certain agreements, the Company is required to make milestone
payments, as defined in the agreements. At December 31, 2001, five of these
licensing agreements had been terminated or allowed to expire. The Company has
not attained any of the events that require a milestone payment for the three
remaining licensing agreements.

13. EMPLOYEE BENEFITS

The Company has an employee benefit plan and trust for certain employees who
meet specified length of service requirements. The plan qualifies under Section
401(k) of the Internal Revenue Code as a salary reduction plan. Employees may
elect to contribute up to 15% of their salary on a before-tax basis. The plan is
a defined contribution plan with employer contributions made solely at the
discretion of the board of directors. For the years ended December 31, 2001,
2000 and 1999, administrative expenses incurred by the Company related to this
plan were not significant. In January 2000, the Company elected to begin making
contributions of up to 3% of an employee's salary. The Company's contributions
to the plan were $418.0 and $357.0 for the years ended December 31, 2001 and
2000, respectively. Employees are immediately fully vested in their
contributions and begin vesting in employer contributions after one year of
service, as defined in the plan document. The Company does not provide
postretirement benefits or postemployment benefits to its employees.

In 2001, The Company adopted the ILEX Oncology Executive Deferred Compensation
Plan (the "Deferred Compensation Plan") effective in 2002. The Deferred
Compensation Plan is a nonqualified deferred compensation plan available to a
select group of ILEX officers and other key employees. The Deferred Compensation
Plan is unfunded for tax purposes and for purposes of Title I of ERISA.
Participation in the Deferred Compensation Plan constitutes a promise by ILEX to
make payments in accordance with the terms of the Plan, and Participants and
beneficiaries shall have the status of general unsecured creditors of the
Company.

14. LEASES

The Company has several noncancelable operating leases for office space,
equipment and the cGMP facility. Rent expense associated with these leases was
approximately $3,999, $3,510 and $1,421 for the years ended December 31, 2001,
2000 and 1999, respectively. One of the leases is with CTRC Research, a related
party (see Note 11).

At December 31, 2001, future minimum lease payments under all leases are as
follows:

<Table>
<Caption>
                                              Related
                                               Party        Other        Total
                                              --------     --------     --------
<S>                                          <C>          <C>          <C>

         Year ending December 31,
           2002                               $    239     $  3,967     $  4,206
           2003                                    245        3,835        4,080
           2004                                    251        2,406        2,657
           2005                                    258        1,988        2,246
           2006                                    265        1,995        2,260
           Thereafter                              945        4,362        5,307
</Table>

In July 2000, the Company entered into an agreement to lease its new corporate
headquarters. The commencement date of the operating lease was October 20, 2000,
with a lease term of eight years. Future minimum lease payments under this new
lease agreement are between $1.2 million and $1.3 million per year through
November 1, 2008. The lease required a deposit of approximately $140.0, which
was recorded as other non-current assets. Additionally, in



                                      F-27
<PAGE>

connection with the lease, the Company maintains a letter of credit, with the
lessor as beneficiary, in the amount of $2.5 million. The letter of credit is
125% collateralized with $3.2 million in restricted cash. As a result of exiting
the previous lease agreement, the Company has accrued a one-time charge of $1.75
million related to an estimate of the Company's remaining lease costs and future
sublease rentals. As of December 31, 2001, the balance remaining was $433.0,
which was included in accrued liabilities and $485.0 included in non-current
liabilities. Future minimum lease payments under these capital leases for 2002
and 2003 are $86.0 and $36.0, respectively.

In 2000, the Company entered into capital lease agreements for office equipment,
with lease terms between 30 and 36 months and minimum lease payments of $7.0 per
month. The Company has recorded $273.0 as capital equipment, and amortization
and interest expense was $105.0 and $13.0, respectively, for the year ended
December 31, 2001 and amortization and interest expense of $10.0 and $2.0 for
the year ended December 31, 2000. At December 31, 2001, the Company had capital
lease obligations of approximately $114.7, including $79.6 payable within one
year.

In February 1996, the Company entered into a noncancelable lease agreement for
equipment to be used in the cGMP facility. The lease required the Company to
make monthly payments of approximately $16.0 and was to expire in 2001. Under
the terms of the agreement, the Company maintained $425.0 in the form of
securities as collateral for the equipment. During 1999, the Company expensed
the remaining balance of the lease commitment (see Note 10). Additionally, in
January 2000, the Company paid the balance of the lease commitment, and the
securities held as collateral were released to the Company.

During 1995, the Company entered into a lease agreement with a non-profit
corporation controlled by CTRC Research and the Texas Research Park Foundation
for the use of the cGMP facility. The cGMP facility allows for the manufacturing
of oncology drugs. Under the terms of the lease agreement, which expires in
2010, the Company is required to make monthly payments, which commenced in 1998.
The payments are based on a fixed monthly rate plus a percentage of gross sales,
as defined in the agreement. This facility has produced no product sales subject
to such payments.

15. INCOME TAXES

As of December 31, 2001, the Company had net operating loss (NOL) carryforwards
of approximately $113.0 million for U.S. federal income tax purposes, which are
available to reduce future taxable income and which will expire in 2010 through
2021. As of December 31, 2001, the Company had federal research and development
credit carryforwards of $2.6 million that will expire in 2011 through 2021.
Included below in "other tax differences, net" is a gross capital loss
carryforward of $2.0 million which will expire in 2004 if not utilized against
capital gains.

In addition, as of December 31, 2001, the Company had Swiss NOLs of
approximately $3.0 million, which are available to reduce future Swiss taxable
income and will expire in 2008. The tax effects of significant temporary
differences representing deferred income tax assets and liabilities are as
follows as of December 31, 2001 and 2000:

<Table>
<Caption>
                                                                               December 31
                                                                          ----------------------
                                                                            2001          2000
                                                                          --------      --------
<S>                                                                       <C>           <C>

         Net operating loss carryforward                                  $ 39,224      $ 28,743
         Carrying value of technology                                       20,400            --
         Expense provisions                                                  2,106           696
         Federal research and development credit carryforwards               2,574         1,366
         Other tax differences, net                                          1,549         2,777
         Valuation allowance                                               (65,853)      (33,582)
                                                                          --------      --------

                      Total deferred income tax assets                    $     --      $     --
                                                                          ========      ========
</Table>

The valuation allowance as of December 31, 2001 and 2000, provides a reserve
against the above deferred tax assets, which were not realizable at that date.

For December 31, 2001 and 2000, the Company's tax provision of $22.0 and $97.0,
respectively, relates solely to foreign operations. The Company has not provided
any U.S. deferred income taxes or UK withholding taxes on the undistributed
earnings of its UK subsidiary based on the determination that such earnings will
be indefinitely reinvested. At December 31, 2001 and 2000, the cumulative
undistributed earnings of this subsidiary



                                      F-28
<PAGE>

were approximately $676.0 and $478.0, respectively. If such earnings were not
considered indefinitely reinvested, deferred U.S. and UK withholding taxes would
have been provided after consideration of foreign tax credits.

The availability of the NOL and credit carryforwards to reduce U.S. federal
taxable income is subject to various limitations under the Code, as amended, in
the event of a greater than 50% ownership change as defined in Section 382 of
the Code during the applicable three-year period. As of December 31, 2001, the
Company had incurred such an ownership change. However, the Company does not
believe that this change in ownership significantly impacts the Company's
ability to utilize its NOL and tax credit carryforwards as of December 31, 2001,
because the amount of the cumulative limitation during the carryforward period
exceeds the total amount of NOL and tax credit carryforwards.

16. COMMITMENTS AND CONTINGENCIES

The Company and its subsidiaries are subject to various claims and assessments
arising out of the ordinary course of business. The Company believes it is
unlikely that the final outcome of any of the claims or proceedings to which the
Company is a party will have a material adverse effect on the Company's
financial position or results of operations. However, due to the inherent
uncertainty of litigation, there can be no assurance that the resolution of any
particular claim or proceeding would not have a material adverse effect on the
Company's results of operations for the period in which such resolution
occurred.

The Company is currently aware of a dispute with a collaborator regarding the
interpretation of certain contractual provisions included in a research and
development agreement. Management of the Company has estimated the potential
loss related to this dispute and has included this amount in accounts payable -
other in the consolidated balance sheet. Management of the Company feels that it
is adequately accrued in the event of a loss related to this dispute. The
Company intends to vigorously assert its position in this matter.

On August 16, 2000, Cytokine Pharmasciences Inc., filed a lawsuit against
Convergence Pharmaceuticals, Inc., a Delaware corporation and wholly owned
indirect subsidiary of the Company, and Glenn Rice, Ph.D. in the Superior Court
Department of Trial Court of the Commonwealth of Massachusetts. The lawsuit
claims were settled effective July 2, 2001 and the lawsuit has been dismissed
with prejudice. The settlement had an immaterial financial effect on the
Company's consolidated financial statements. There is no future impact related
to the lawsuit or settlement on the consolidated financial statements of the
Company.

During 1998, the Company guaranteed a $1.0 million line of credit for Clinical
Research Group, Inc. (CRG). The guarantee gave the Company access to a network
of clinical sites managed by CRG. The guarantee is limited for a period of three
years beginning in May 1998 and ending in May 2001. In June 2001, the company
extended the existing guarantee until June 30, 2002. If the guarantee comes to
redemption, the Company will obtain an ownership interest in CRG in accordance
with the guarantee agreement. Under the terms of the agreement, the Company
maintained $1.25 million in the form of securities as collateral for the
guarantee. During 1999, the Company expensed $750 related to this guarantee as
part of a special charge (see Note 10). At December 31, 2001, the Company had
yet to fund the guarantee, however management believes that it will be funded
during 2002, and is considered uncollectible.

The Company's sole supplier of CAMPATH is BI in Germany. The agreement with BI
contains a minimum purchase quantity, of $3.1 million in 2002, to avoid a
contractual surcharge. Management is confident that the minimum purchase
quantity will be satisfied.

In connection with research and development efforts, the Company has entered
into agreements with certain development partners, which generally expire over
several years. The terms of these agreements require the Company to make
payments in either cash or stock if certain drug development or time-based
milestones are met. Total anticipated future commitments under these agreements
are approximately $44.9 million and are due as follows:

<Table>
<Caption>
                                            Milestone
                                             payments
                                            ----------
<S>                                        <C>

         Year ending December 31,
           2002                             $   11,052
           2003                                 11,400
           2004                                  3,526
           2005                                    200
           Thereafter                           18,700
                                            ----------
           Total                            $   44,878
                                            ==========
</Table>



                                      F-29
<PAGE>

Additionally, the Company is subject to issue additional earn-out shares in
connection with the acquisition of Convergence (see Note 6).

17. NOTE PAYABLE

In connection with the purchase price of Millennium's interest in the
Partnership the Company was obligated to pay approximately $140.0 million. The
first payment of $20.0 million was made on December 31, 2001 and the additional
$120.0 million will be made in scheduled payments over the next three years. The
$107.6 million in the table below represents the present value of the future
payments to be made to Millennium. The Company used an imputed interest rate of
6.5%, which represents the Company's estimated incremental borrowing rate.
Maturities of the note payable are as follows:

<Table>
<Caption>
                                     Future
                                    payments
                                   ----------
<S>                               <C>

         2002                      $   37,559
         2003                          36,122
         2004                          33,919
                                   ----------
         Note payable              $  107,600
                                   ==========
</Table>

18. SEGMENT REPORTING

The Company has two reportable segments: ILEX Products and ILEX Services. ILEX
Products is involved in the development of proprietary compounds for the
treatment and prevention of cancer. ILEX Services provides contract research
services for the development, manufacturing and regulatory approval of oncology
compounds. The Company's reportable segments are strategic business units that
were managed separately during 2001 and 2000 because each business required
different technology and marketing strategies.

The accounting policies of the segments are the same as those of the Company.
The Company evaluates performance based on the profit or loss from operations
before income taxes.

                          Selected Segment Information

<Table>
<Caption>
                                                    ILEX           ILEX
                                                  Services       Products         Total
                                                 ----------     ----------      ----------
<S>                                              <C>            <C>             <C>

For the Year Ended December 31, 2001
Revenue from external customers                  $   20,650     $    3,994      $   24,644
Intersegment revenue                                  1,899             --           1,899
                                                 ----------     ----------      ----------
    Total revenue                                    22,549          3,994          26,543

Direct costs                                         15,956         34,748          50,704
Licensing costs                                          --         10,281          10,281
In-process research and development                      --         86,112          86,112
                                                 ----------     ----------      ----------

Segment operating income (loss)                       6,593       (127,147)       (120,554)

Equity in income of partnerships                         --          3,094           3,094
                                                 ----------     ----------      ----------

Segment net income (loss)                        $    6,593     $ (124,053)     $ (117,460)
                                                 ==========     ==========      ==========

Total Assets                                     $    8,624     $   53,981      $   62,605
   Corporate assets                                                                445,207
   Elimination of intersegment balances                                           (138,905)
                                                                                ----------
Consolidated total assets                                                       $  368,907
                                                                                ==========
</Table>



                                      F-30
<PAGE>

<Table>
<Caption>
                                                    ILEX            ILEX
                                                  Services        Products         Total
                                                 ----------      ----------      ----------
<S>                                              <C>             <C>             <C>
For the Year Ended December 31, 2000
Revenue from external customers                  $   24,204      $    3,381      $   27,585
Intersegment revenue                                 11,558              --          11,558
                                                 ----------      ----------      ----------
    Total revenue                                    35,762           3,381          39,143

Direct costs                                         26,275          29,622          55,897
Licensing costs                                       6,116           6,116
                                                                                 ----------
In-process research and development                      --          14,562          14,562
                                                 ----------      ----------      ----------

Segment operating income (loss)                       9,487         (46,919)        (37,432)

Equity in losses of partnership                          --          (5,370)         (5,370)
                                                 ----------      ----------      ----------

Segment net income (loss)                        $    9,487      $  (52,289)     $  (42,802)
                                                 ==========      ==========      ==========

Total Assets                                     $   11,452      $   (5,741)     $    5,711
   Corporate                                                                        301,020
   Elimination of intersegment balances                                             (90,375)
                                                                                 ----------
Consolidated total assets                                                        $  216,356
                                                                                 ==========

For the Year Ended December 31, 1999
Revenue from external customers                  $   13,457      $    4,646      $   18,103
Intersegment revenue                                 11,322              --          11,322
                                                 ----------      ----------      ----------
    Total revenue                                    24,779           4,646          29,425

Direct costs                                         20,165          20,603          40,768
Licensing costs                                          --              10              10
In-process research and development                      --          11,124          11,124
Special charges                                      12,847               8          12,855
                                                 ----------      ----------      ----------

Segment operating loss                               (8,233)        (27,099)        (35,332)

Equity in losses of partnerships                     (3,310)         (3,824)         (7,134)
                                                 ----------      ----------      ----------

Segment net loss                                 $  (11,543)     $  (30,923)     $  (42,466)
                                                 ==========      ==========      ==========

Total Assets                                     $   17,117      $     (439)     $   16,678
   Corporate assets                                                                 144,011
   Elimination of intersegment balances                                             (59,983)
                                                                                 ----------
Consolidated total assets                                                        $  100,706
                                                                                 ==========
</Table>

          Reconciliation of Segment Information to Consolidated Totals

<Table>
<Caption>
                                                                       For the Years Ended
                                                                            December 31
                                                            ------------------------------------------
                                                               2001            2000            1999
                                                            ----------      ----------      ----------
<S>                                                         <C>             <C>             <C>

Research and Development Costs:
    Reportable ILEX Products segment direct costs           $   34,748      $   29,622      $   20,603
    Elimination of intersegment gross profit                      (950)         (5,203)         (4,384)
                                                            ----------      ----------      ----------
      Consolidated research and development costs           $   33,798      $   24,419      $   16,219
                                                            ==========      ==========      ==========

CRO Costs:
    Reportable ILEX Services segment direct costs           $   15,956      $   26,275      $   20,165
    Elimination of intersegment expenses                          (949)         (6,355)         (6,938)
                                                            ----------      ----------      ----------
       Consolidated direct costs of research services       $   15,007      $   19,920      $   13,227
                                                            ==========      ==========      ==========

Operating net loss:
   Reportable segment operating loss                        $ (120,554)     $  (37,432)     $  (35,332)
   General and administrative expenses                         (13,467)         (7,568)         (4,063)
   Special charges                                                  --              --          (1,027)
                                                            ----------      ----------      ----------

Consolidated operating loss                                 $ (134,021)     $  (45,000)     $  (40,422)
                                                            ==========      ==========      ==========

Net loss-
   Reportable segment net loss                              $ (117,460)     $  (42,802)     $  (42,466)
   General and administrative expenses                         (13,467)         (7,568)         (4,063)
   Special charges                                                  --              --          (1,027)
   Interest income and other, net                                9,995          11,747           1,700
   Minority interest in consolidated subsidiaries                   --            (262)            (82)
   Provision for foreign income taxes                              (22)            (97)           (117)
                                                            ----------      ----------      ----------

Consolidated net loss                                       $ (120,954)     $  (38,982)     $  (46,055)
                                                            ==========      ==========      ==========
</Table>



                                      F-31
<PAGE>

19. QUARTERLY FINANCIAL DATA (UNAUDITED)

The Company's results of operations by quarter for the years ended December 31,
2001 and 2000 were as follows (in thousands, except per share amounts):

<Table>
<Caption>
                                                         2001 Quarter Ended
                              --------------------------------------------------------------------------
                               March 31        June 30       September 30    December 31         Year
                              ----------      ----------     ------------    -----------      ----------
<S>                           <C>             <C>            <C>             <C>              <C>

Revenue                       $    6,308      $    7,011      $    5,829      $    5,496      $   24,644
Operating loss                   (30,509)        (16,073)        (11,799)        (75,640)       (134,021)
Net loss                      $  (28,450)     $  (13,281)     $   (7,448)     $  (71,775)     $ (120,954)
                              ==========      ==========      ==========      ==========      ==========
Net loss per share:
    Basic and diluted         $    (1.09)     $    (0.50)     $    (0.28)     $    (2.47)     $    (4.48)
                              ==========      ==========      ==========      ==========      ==========
</Table>

<Table>
<Caption>
                                                          2000 Quarter Ended
                              --------------------------------------------------------------------------
                               March 31        June 30       September 30    December 31         Year
                              ----------      ----------     ------------    -----------      ----------
<S>                           <C>             <C>            <C>             <C>              <C>

Revenue                       $    6,614      $    7,529      $    7,416      $    6,026      $   27,585
Operating loss                    (4,769)         (6,287)         (9,863)        (24,081)        (45,000)
Net loss                      $   (3,384)     $   (4,544)     $   (8,556)     $  (22,498)     $  (38,982)
                              ==========      ==========      ==========      ==========      ==========
Net loss per share:
    Basic and diluted         $    (0.15)     $    (0.18)     $    (0.34)     $    (0.89)     $    (1.61)
                              ==========      ==========      ==========      ==========      ==========
</Table>



                                      F-32
<PAGE>

20. SUBSEQUENT EVENT (UNAUDITED)

The Company has decided to terminate one of its lease agreements. The
termination was effective in March 2002. Management of the Company believes that
they are adequately accrued for the costs to be incurred in connection with this
transaction.




                                      F-33
<PAGE>

                               INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NUMBER          DESCRIPTION
-------         -----------
<S>             <C>

2.1             Plan of Merger and Acquisition Agreement dated July 16, 1999, by
                and among ILEX Oncology, Inc., Convergence Pharmaceuticals,
                Inc., Vikas Sukhatme, Raghuram Kalluri, Ralph Weichselbaum,
                Donald Kufe, Glenn C. Rice, and Tsuyneya Ohno (Incorporated
                herein by reference to Exhibit 2.1 to the Company's Current
                Report on Form 8-K filed July 30, 1999)

2.2             Share Purchase Agreement between the shareholders of Symphar
                S.A., ILEX Oncology, Inc. and ILEX Acquisitions, Inc., effective
                February 13, 2001 (Incorporated herein by reference to Exhibit
                2.1 to the Company's Current Report on Form 8-K filed February
                28, 2001)

2.3             Purchase and Sale Agreement dated October 29, 2001 by and among
                ILEX Oncology, Inc., ILEX Acquisitions, Inc., Millennium
                Pharmaceuticals, Inc., and mHoldings Trust (Incorporated by
                reference to Exhibit 10.1 to the Company's Quarterly Report on
                Form 10-Q filed November 15, 2001)

3.1             Amended and Restated Certificate of Incorporation of the Company
                filed May 31, 2000 (Incorporated herein by reference to Exhibit
                3.1 of the Company's Quarterly Report on Form 10-Q filed August
                8, 2000)

3.2             Bylaws of the Company, as amended (Incorporated herein by
                reference to Exhibit 3.2 of the Company's Registration Statement
                No. 333-17769 on Form S-1 filed December 12, 1996, as amended)

4.1             Specimen of certificate representing Common Stock, $.01 par
                value, of the Company (Incorporated herein by reference to
                Exhibit 4.1 of the Company's Registration Statement No.
                333-17769 on Form S-1 filed December 12, 1996, as amended)

4.2             Rights Agreement dated April 10, 2001 by and between ILEX
                Oncology, Inc. and American Stock Transfer & Trust Co. which
                includes as Exhibit A the Form of Certificate of Designations of
                Series I Preferred Stock, as Exhibit B the Form of Rights
                Certificate and as Exhibit C the Summary of Rights to Purchase
                Common Stock. (Incorporated herein by reference to Exhibit 4.1
                to the Company's Form 8-K filed April 11, 2001)
</Table>


<PAGE>

<Table>
<S>             <C>
10.1            Services Agreement dated November 18, 1994 between CTRC Research
                Foundation and the Company (Incorporated herein by reference to
                Exhibit 10.6 of the Company's Registration Statement No.
                333-17769 on Form S-1 filed December 12, 1996, as amended)

10.2            Covenant Not To Sue dated September 1995 between CTRC Research
                Foundation and the Company (Incorporated herein by reference to
                Exhibit 10.7 of the Company's Registration Statement No.
                333-17769 on Form S-1 filed December 12, 1996, as amended)

10.3            Commercial Industrial Sublease Agreement between TRTF/CTRCRF
                Building Corporation and the Company (Incorporated herein by
                reference to Exhibit 10.11 of the Company's Registration
                Statement No. 333-17769 on Form S-1 filed December 12, 1996, as
                amended)

10.4            Consulting Services Agreement dated March 16, 1995 between the
                Company and Charles A. Coltman, Jr., M.D. (Incorporated herein
                by reference to Exhibit 10.45 of the Company's Registration
                Statement No. 333-17769 on Form S-1 filed December 12, 1996, as
                amended)

10.5            1995 Stock Option Plan for the Company (Incorporated herein by
                reference to Exhibit 10.47 of the Company's Registration
                Statement No. 333-17769 on Form S-1 filed December 12, 1996, as
                amended)

10.6            Second Amended and Restated 1996 Non-Employee Director Stock
                Option Plan for the Company (Incorporated herein by reference to
                Exhibit 10.7 of the Company's Annual Report on Form 10-K filed
                April 2, 2001)

10.7            Form of Non-Employee Director Stock Option Agreement for the
                Company (Incorporated herein by reference to Exhibit 10.49 to
                the Company's Registration Statement No. 333-17769 on Form S-1
                filed December 12, 1996, as amended)

10.8            2000 Employee Stock Compensation Plan for the Company, as
                amended (Incorporated herein by reference to Exhibit 10.9 of the
                Company's Annual Report on Form 10-K filed April 2, 2001)

10.9            2000 Employee Stock Purchase Plan for the Company, as amended
                (Incorporated herein by reference to Exhibit 10.10 of the
                Company's Annual Report on Form 10-K filed April 2, 2001)

10.10           Form of Pledge Agreement between Cancer Therapy and Research
                Center Endowment and each of Gary V. Woods and Ruskin C. Norman,
                M.D. (Incorporated herein by reference to Exhibit 10.55 to the
                Company's Registration Statement No. 333-17769 on Form S-1 filed
                December 12, 1996, as amended)

10.11           Service Agreement dated June 30, 1997, between the Company and
                PRN Research, Inc. (Incorporated herein by reference to Exhibit
                10.4 to the Company's Quarterly Report on Form 10-Q filed August
                14, 1997)

10.12           Drug Development and Commercialization Agreement dated March 27,
                1998, between the Company and The Burnham Institute, Inc.
                (Incorporated herein by reference to Exhibit 10.1 to the
                Company's Quarterly Report on Form 10-Q filed May 15, 1998)

10.13           Office Building Lease Agreement dated April 8, 1998, between the
                Company and N.W.A. Limited Partnership (Incorporated herein by
                reference to Exhibit 10.1 to the Company's Quarterly Report on
                Form 10-Q filed August 14, 1998)
</Table>



<PAGE>

<Table>

<S>             <C>
10.14           Stock Purchase Agreement dated January 22, 1999 between the
                Company and Eli Lilly and Company (incorporated herein by
                reference to Exhibit 10.1 to the Company's Quarterly Report on
                Form 10-Q filed May 17, 1999)

10.15           Registration Rights Agreement dated January 22, 1999 between the
                Company and Eli Lilly and Company (Incorporated herein by
                reference to Exhibit 10.2 to the Company's Quarterly Report on
                Form 10-Q filed May 17, 1999)

10.16           Registration Rights Agreement dated July 16, 1999 among ILEX
                Oncology, Inc., Vikas Sukhatme, Raghuram Kalluri, Ralph
                Weichselbaum, Donald Kufe, Glenn C. Rice, Tsuneya Ohno, Stephen
                Dolezalek, Beth Israel Deaconess Medical Center and Arch
                Development Corporation (incorporated herein by reference to
                Exhibit 10.2 to the Company's Current Report on Form 8-K dated
                July 16, 1999 and filed July 30, 1999)

10.17           Stock Purchase Agreement dated July 16, 1999 by and between ILEX
                Oncology, Inc. and each of the Investors (as defined therein)
                (incorporated herein by reference to Exhibit 10.3 to the
                Company's Quarterly Report on Form 10-Q filed August 16, 1999)

10.18+          Distribution and Development Agreement between Millennium & ILEX
                Partners, L.P. and Schering AG dated August 24, 1999
                (incorporated herein by reference to Exhibit 99.1 to the
                Company's Current Report on Form 8-K/A filed September 21, 1999)

10.19           Letter agreement dated September 9, 1999, between the Company
                and Al J. Jecminek (Incorporated herein by reference to Exhibit
                10.41 to the Company's Annual Report on Form 10-K for the year
                ended December 31, 1999)

10.20           Form of Purchase Agreement between ILEX Oncology, Inc. and each
                Purchaser (Incorporated herein by reference to Exhibit 10.1 to
                the Company's Registration Statement on Form S-3 dated March 8,
                2000 (Registration No. 333-32000))

10.21           Office Lease Agreement dated July 14, 2000, between Orion
                Fountainhead Two Partners, Ltd., and ILEX Oncology, Inc.
                (Incorporated herein by reference to Exhibit 3.1 to the
                Company's Quarterly Report on Form 10-Q filed November 14, 2000)

10.22           Consulting Services Agreement dated July 1, 1997, between the
                Company and Daniel D. Von Hoff, M.D. (Incorporated herein by
                reference to Exhibit 10.61 to the Company's Annual Report on
                Form 10-K for the year ended December 31, 1998)

10.23+          Supply Agreement dated as of June 4, 1999 between Millennium &
                ILEX Partners, L.P. (formerly L&I Partners, L.P.) and Boehringer
                Ingelheim Pharma KG. (Incorporated herein by reference to
                Exhibit 10.25 to the Millennium Pharmaceuticals, Inc. 10-K for
                the fiscal year ending December 31, 1999)

10.24+          License Agreement, dated May 2, 1997, between Millennium & ILEX
                Partners, L.P. (formerly L&I Partners, L.P.) and Millennium
                Pharmaceuticals, Inc. (as successor to LeukoSite, Inc.).
                Incorporated by reference to Exhibit 10.17(b) to LeukoSite,
                Inc.'s Registration Statement on Form S-1 (No. 333-30213) filed
                June 27, 1997)

10.25+          First Amended and Restated Agreement of Limited Partnership of
                Millennium & ILEX Partners L.P. (formerly L&I Partners, L.P.)
                (Incorporated herein by reference to Exhibit 10.26 to the
                Millennium Pharmaceuticals, Inc. 10-K for the fiscal year ending
                December 31, 2000).

10.26           Investor Rights Agreement dated February 13, 2001 among ILEX
                Oncology, Inc., Valorous Trading PTE Ltd., Craig Bentzen,
                Jean-Charles Roguet, Mong Lan Nguyen and Eric Neissor.
                (Incorporated herein by reference to Exhibit 10.1 to the
                Company's current Report on Form 8-K filed February 28, 2001)

10.27*          2001 UK Employee Stock Compensation Plan

10.28*          Severance Agreement between ILEX Oncology, Inc. and Richard L.
                Love dated December 31, 2001
</Table>

<PAGE>


<Table>
<S>             <C>
11.1*           Computation of Earnings Per Share

21.1            Subsidiaries of the Company
</Table>

<Table>
<Caption>


                                                      State of               Names Under Which
                Name                                  Incorporation          Doing Business
                ----                                  -------------          --------------
<S>                                                   <C>                    <C>
                ILEX Oncology Services, Inc.          Delaware               ILEX Oncology Services, Inc.
                ILEX Products, Inc.                   Delaware               ILEX Products, Inc.
                Convergence Pharmaceuticals, Inc.     Delaware               ILEX Products Research Division
                ILEX Services Limited                 England and Wales      ILEX Services Limited
                ILEX Oncology Research, S.A.          Geneva, Switzerland    ILEX Oncology Research, S.A.
                ILEX Acquisitions, Inc.               Delaware               ILEX Acquisitions, Inc.
                ILEX Pharmaceuticals L.P.             Delaware               ILEX Pharmaceuticals L.P.
</Table>

<Table>
<S>             <C>

23*             Consent of Arthur Andersen LLP
</Table>

*        Filed herewith.

+        Confidential treatment has been requested with respect to certain
         portions of this exhibit. Omitted portions have been filed separately
         with the Securities and Exchange Commission.