<PAGE>   1

================================================================================

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

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


                                    FORM 10-Q


 (MARK ONE)
    [  ]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 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


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


         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 [  ].


         THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK AS OF
AUGUST 7, 2001, IS 26,467,655.

================================================================================

<PAGE>   2


ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


                                      INDEX


<TABLE>
<S>      <C>                                                                                                 <C>
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

         Consolidated Balance Sheets - June 30, 2001, and December 31, 2000                                    3

         Consolidated Statements of Operations - Three and Six Month Periods Ended June 30, 2001 and 2000      5

         Consolidated  Statements of Cash Flows - Six Month Periods Ended June 30, 2001 and 2000               6

         Notes to Consolidated Financial Statements                                                            7

ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations                16

ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk                                           23


PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS                                                                                    23

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                  23

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                                                     24


SIGNATURES                                                                                                    25
</TABLE>



                                       2
<PAGE>   3


ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                           CONSOLIDATED BALANCE SHEETS
               (In Thousands, Except Shares and Per Share Amounts)


<TABLE>
<CAPTION>
                                                                                              June 30,      December 31,
                                         ASSETS                                                2001             2000
                                         ------                                            ------------     ------------
                                                                                           (Unaudited)

<S>                                                                                        <C>               <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                                $    14,457       $   18,099
  Investments in marketable securities                                                         125,183          136,913
  Restricted investments                                                                         6,635            1,635
  Accounts receivable, net of allowance for doubtful accounts of $344
    in 2001 and 2000, respectively -
      Billed                                                                                     6,242            6,155
      Unbilled                                                                                     873            2,186
      Employee                                                                                     148              154
      Other                                                                                        123              126
  Interest receivable                                                                            3,290            4,368
  Prepaid expenses and other                                                                     2,064              975
                                                                                           -----------       ----------
                   Total current assets                                                        159,015          170,611
                                                                                           -----------       ----------
NONCURRENT ASSETS:
  Investments in marketable securities                                                          27,364           42,960
  Restricted investments                                                                         3,165            3,165
  Investments in and advances to joint venture                                                  (3,227)          (7,104)
  Intangible asset, net of accumulated amortization of $38 in 2001                                 262              -
  Other assets                                                                                     275              248
                                                                                           -----------       ----------
                   Total noncurrent assets                                                      27,839           39,269
                                                                                           -----------       ----------
PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation of $4,669
  and $3,763 in 2001 and 2000, respectively                                                      6,633            6,476
                                                                                           -----------       ----------
                   Total assets                                                            $   193,487       $  216,356
                                                                                           ===========       ==========

</TABLE>




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



                                       3

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ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------



                           CONSOLIDATED BALANCE SHEETS
               (In Thousands, Except Shares and Per Share Amounts)


<TABLE>
<CAPTION>
                                                                                             June 30,     December 31,
                          LIABILITIES AND STOCKHOLDERS' EQUITY                                 2001           2000
                          ------------------------------------                            -------------   ------------
                                                                                           (Unaudited)

<S>                                                                                        <C>             <C>
CURRENT LIABILITIES:
   Accounts payable -
      Related parties                                                                      $        61     $      30
      Other                                                                                     11,877         6,706
   Accrued subcontractor costs -
      Related parties                                                                              457           678
      Other                                                                                      1,830         2,181
   Accrued liabilities                                                                           3,203         3,671
   Deferred revenue                                                                              3,856         4,423
                                                                                            ----------    ----------
                   Total current liabilities                                                    21,284        17,689
                                                                                            ----------    ----------
DEFERRED INCOME TAXES                                                                               73           -

LONG-TERM LIABILITIES                                                                            2,707         2,662
                                                                                            ----------    ----------
                   Total liabilities                                                            24,064        20,351
                                                                                            ----------    ----------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   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; 26,482,396 and
     25,815,243 shares issued; 26,443,396 and 25,776,243 shares outstanding in 2001
     and 2000, respectively                                                                        265           258
   Additional paid-in capital                                                                  328,029       312,687
   Accumulated deficit                                                                        (158,051)     (116,320)
   Accumulated other comprehensive loss                                                           (303)         (103)
   Less - Treasury stock at cost; 39,000 shares in 2001 and 2000                                  (517)         (517)
                                                                                            ----------    ----------
                   Total stockholders' equity                                                  169,423       196,005
                                                                                            ----------    ----------
                   Total liabilities and stockholders' equity                               $  193,487    $  216,356
                                                                                            ==========    ==========
</TABLE>





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



                                       4

<PAGE>   5


ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In Thousands, Except Per Share Amounts)

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                              Three Months Ended         Six Months Ended
                                                                   June 30                   June 30
                                                           ----------------------    -----------------------
                                                               2001         2000         2001         2000
                                                           ----------   ---------    ----------   ----------
<S>                                                        <C>         <C>          <C>          <C>
REVENUE:
   Product development                                     $      846   $     621    $    1,526   $    1,659
   Contract research services                                   6,165       6,908        11,793       12,484
                                                           ----------   ---------    ----------   ----------
                   Total revenue                                7,011       7,529        13,319       14,143
                                                           ----------   ---------    ----------   ----------
OPERATING EXPENSES:
   Research and development costs                               8,962       5,790        16,384       11,104
   Licensing cost                                               6,897       1,025         8,184        1,050
   Direct cost of research services                             3,811       5,636         8,479       10,741
   General and administrative                                   3,414       1,365         5,742        2,304
   In-process research and development                            -           -          21,112          -
                                                           ----------   ---------    ----------   ----------
                   Total operating expenses                    23,084      13,816        59,901       25,199
                                                           ----------   ---------    ----------   ----------
OPERATING LOSS                                                (16,073)     (6,287)      (46,582)     (11,056)

OTHER INCOME (EXPENSE):
   Equity in income (losses) of joint venture                     660      (1,450)         (501)      (1,411)
   Interest income and other, net                               2,161       3,316         5,381        4,832
   Minority interest in consolidated subsidiary                   -           (75)          -           (150)
                                                           ----------   ---------    ----------   ----------
LOSS BEFORE INCOME TAXES                                      (13,252)     (4,496)      (41,702)      (7,785)

PROVISION FOR FOREIGN INCOME TAXES                                 29          48            29          143
                                                           ----------   ---------    ----------   ----------
NET LOSS                                                   $  (13,281)  $  (4,544)   $  (41,731)  $   (7,928)
                                                           ==========   =========    ==========   ==========
BASIC AND DILUTED NET LOSS PER SHARE                          $(.50)      $(.18)       $(1.59)       $(.34)
                                                              =====       =====        ======        =====
WEIGHTED-AVERAGE NUMBER OF SHARES OF
   COMMON STOCK OUTSTANDING                                    26,375      24,825        26,230       23,432
                                                           ==========   =========    ==========   ==========
</TABLE>




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



                                       5


<PAGE>   6

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                             Six Months Ended
                                                                                                 June 30
                                                                                        --------------------------
                                                                                            2001          2000
                                                                                        -----------    -----------
<S>                                                                                     <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                             $  (41,731)     $  (7,928)
   Adjustments to reconcile net loss to net cash used in operating activities -
      Depreciation and amortization                                                          1,289          1,068
      In-process research and development                                                   21,112            -
      Net activity of joint venture                                                           (508)         2,207
      Minority interest                                                                        -              150
      Deferred compensation expense for consultants' options                                   -            1,222
      Loss on disposal of equipment                                                            148            -
      Changes in operating assets and liabilities -
        Decrease (increase) in receivables, net                                              2,313         (4,432)
        Increase in prepaid expenses and other                                                (816)          (476)
        Increase in other noncurrent assets                                                    (27)           -
        Increase (decrease) in accounts payable and accrued liabilities                      4,598           (100)
        (Decrease) increase in accrued subcontractor costs                                    (572)           397
        (Decrease) increase in deferred revenue                                               (567)         3,578
        (Decrease) increase in long-term liabilities                                            68            (15)
                                                                                        ----------    -----------
                   Net cash used in operating activities                                   (14,693)        (4,329)
                                                                                        ----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Net activity of marketable securities' transactions                                      27,326       (107,645)
   Net activity in restricted investments                                                   (5,000)           425
   Purchase of property and equipment                                                       (1,398)        (1,263)
   Proceeds from sale of property and equipment                                                 57            -
   Advances to joint venture                                                                (3,369)           -
   Acquisitions, net of cash acquired                                                       (7,529)          (136)
                                                                                        ----------    -----------
                   Net cash provided by (used in) investing activities                      10,087       (108,619)
                                                                                        ----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of common stock for cash, net of issuance costs                                    -          127,186
   Exercise of stock options and warrants                                                    1,183          1,431
   Principal payments for capital lease obligations                                            (19)          (131)
                                                                                        ----------    -----------
                   Net cash provided by financing activities                                 1,164        128,486
                                                                                        ----------    -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                  (200)           (83)
                                                                                        ----------    -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                        (3,642)        15,455

CASH AND CASH EQUIVALENTS, beginning of period                                              18,099         43,477
                                                                                        ----------    -----------
CASH AND CASH EQUIVALENTS, end of period                                                $   14,457    $    58,932
                                                                                        ==========    ===========
</TABLE>




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



                                       6
<PAGE>   7

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in Thousands, Except Share Information, Per Share Information or As
Otherwise Indicated) (Unaudited)

1.   PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying interim consolidated financial statements presented herein
include the accounts of ILEX Oncology, Inc., and its subsidiaries (the Company
or ILEX). All significant intercompany transactions and accounts have been
eliminated in consolidation. These interim consolidated financial statements
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In management's opinion, all
adjustments that are necessary for a fair presentation of financial position and
results of operations have been made.

It is recommended that these interim consolidated financial statements are read
in conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000. The
results of operations for any interim period are not necessarily indicative of
the results of operations for the entire year. Certain prior period amounts have
been reclassified to conform to the current period presentation.

2.   IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

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 Principals Board Opinion No. 16,
"Business Combinations" (APB No. 16) and FASB Statement No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises," requires that all
business combinations be accounted for by the purchase method. Statement 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 and to all business
combinations accounted for using the purchase method for which the date of
acquisition is July 1, 2001 or later.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142). 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 asset 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 financial affect on the
Company's consolidated financial statements.

3.   MERGERS AND ACQUISITIONS

On February 13, 2001, the Company acquired Symphar S.A., now ILEX
Research-Europe, S.A., a drug discovery firm located in Geneva, Switzerland that
combines a targeted medicinal chemistry platform with expertise in the biology
of nuclear receptors important in controlling such cellular functions as
apoptosis, cholesterol synthesis and calcium metabolism. The acquisition has
been accounted for using the purchase method of accounting. Under the terms of
the agreement, ILEX acquired Symphar for approximately $29 million, including
$15 million in cash, of which $5.0 million is escrowed and contingently payable,
and 521,121 shares of the Company's common stock. The issued shares are
restricted and will be made available for trading as follows: 30 percent 90 days
after closing, 40 percent 180 days after closing, and 30 percent 270 days after
closing. 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 terms
were agreed to and announced.


                                       7
<PAGE>   8

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


The 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                                                     215
          Intangible asset                                             300
          Current liabilities                                         (464)
          In-process research and development                       21,112
                                                                 ---------
                          Total purchase price                   $  23,907
                                                                 =========
</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 operates under the name ILEX Research-Europe, S.A., and is
comprised of former employees of Symphar. The Company has granted certain
registration rights for the shares issued in connection with the acquisition.
Concurrent with the acquisition, ILEX Research-Europe entered into a three-year
employment agreement with one of the founders of Symphar. The agreement
specifies a compensation level. 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.

Additionally, of the $15 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. In addition, $5.0
million of the purchase price is in escrow to be released in the event a legally
binding commitment is executed on or before February 14, 2002 with a third party
acceptable to ILEX to provide funding of at least $5.0 million for a period of
at least one year for certain nononcology 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 held in escrow. The $5.0
million escrow balance is included in restricted investments as a current asset.

The Company acquired certain intangible assets including intellectual property
in the area of targeted medicinal phosphonate chemistry. Additionally, the
Company has recorded an intangible asset in the amount of $300 related to
assembled work force that will be amortized over three years. In accordance with
purchase accounting, the Company has included the results of operations for
Symphar from the date of acquisition.

In connection with the purchase price allocation, $21.1 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 in-depth
assessment of the research and development projects. The value assigned to these
assets 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 Symphar'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 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


                                       8

<PAGE>   9

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------

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 developed 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, its partners and its 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 percent 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
Symphar's lead drug candidates, APOMINE and Lp(a) were considered. It was
determined that forecasting cash flows for Symphar'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 million to $15 million had been spent on APOMINE and Lp(a) to date, and an
additional $17 million to $20 million is expected to be incurred to complete
clinical testing and gain marketing approval.

APOMINE, targeted at several cancer indications, as well as bone repair and
osteoporosis, represented approximately 45 percent 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 US in 2007 for its
first cancer indication, with an estimated cost to complete of approximately $12
million to $14 million. Management believes that the Company may be able to
license its product to a major pharmaceutical company or marketing partner and
begin receiving upfront 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 percent starting with product launch. As of June 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 percent 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 US in 2007, with an estimated cost
to complete of approximately $5 million to $6 million. Management believes that
the Company may be able to license its product to a major pharmaceutical company
or marketing partner and begin receiving upfront 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 percent starting with
product launch. As of June 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 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.


                                       9
<PAGE>   10

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------

The following table reflects unaudited pro forma combined results of operations
of ILEX and Symphar as if the acquisition had occurred on January 1, 2001 and
2000. Included in pro forma results are amortization of the intangible asset of
$13 for the three and six month periods ended June 30, 2001 and $25 and $50 for
the three and six months ended June 30, 2000. Also included in the pro forma
results is $21.1 million recorded as in-process research and development for the
three and six month period ended June 30, 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, 2001 and 2000.

<TABLE>
<CAPTION>
                                                      Three Months Ended         Six Months Ended
                                                           June 30                   June 30
                                                   -----------------------   ---------------------
                                                      2001         2000          2001       2000
                                                   -----------  ----------   ----------   --------
<S>                                                  <C>         <C>          <C>         <C>
Total Revenue                                        $ 7,011     $ 8,276      $13,702     $15,659
Net Loss                                             (13,281)     (4,572)     (41,744)     (7,933)
Basic and diluted net loss per share                   (.50)       (.18)       (1.58)       (.33)
</TABLE>

4.   STOCKHOLDERS' EQUITY

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 the Record Date and the earlier of the Distribution Date (as
hereinafter defined) or the final expiration date of the Rights. The dividend
was payable on April 20, 2001 (the Record Date), 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 accumulates beneficial ownership of 20 percent 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 percent
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 percent 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.

The description and terms of the Rights are set forth in a Rights Agreement (the
Rights Agreement) between the Company and American Stock Transfer & Trust Co.,
as Rights Agent (the 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.

5.   LOSS PER SHARE

Diluted net loss per share is equal to basic net loss per share, as the effect
of all common stock equivalents is antidilutive.



                                       10
<PAGE>   11

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------

6.   STATEMENTS OF CASH FLOWS

Noncash financing and investing activities for the six months ended June 30,
2001 and 2000, include the following:

<TABLE>
<CAPTION>
                                                             2001          2000
                                                          ----------     -------
<S>                                                       <C>            <C>
Issuance of common stock for acquisition                  $ 13,907       $  -
Assets acquired in acquisition                                 788          -
Liabilities acquired in acquisition                            464          -
Cashless exercise of warrants                                   -           2
Issuance of common stock for Employee Stock
   Purchase Plan                                               259          -
Purchases of equipment under capital lease                      -          466
</TABLE>


Supplemental disclosures of cash flow information for the six months ended
June 30, 2001 and 2000 include the following:

<TABLE>
<CAPTION>
                                                             2001          2000
                                                          ----------     -------
                   <S>                                      <C>          <C>
                   Cash paid  for:
                   Interest                                 $  6         $  5

                   Foreign income taxes                     $  5         $  -
</TABLE>

7.   COMPREHENSIVE INCOME

Comprehensive income is defined as the change in equity during a period from
transactions and other events and circumstances from nonowner sources. The
following table presents the components of the Company's comprehensive loss:

<TABLE>
<CAPTION>
                                                      Three Months Ended         Six Months Ended
                                                           June 30                   June 30
                                                   ------------------------  ----------------------
                                                      2001         2000          2001        2000
                                                   -----------  ----------   ----------   ---------
<S>                                                <C>          <C>         <C>          <C>
Net loss                                           $  (13,281)  $  (4,544)   $  (41,731)  $  (7,928)
Other comprehensive loss -
   Currency translation adjustments                      (156)        (58)         (200)        (83)
                                                   ----------   ---------    ----------   ---------
            Comprehensive loss                     $  (13,437)  $  (4,602)   $  (41,931)  $  (8,011)
                                                   ==========   =========    ==========   =========
</TABLE>


8.   LICENSING AGREEMENTS

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 June 30, 2001, the Company had paid $4.0 million in license
fees. During second quarter of 2001, the Company recorded additional license fee
expense of $6.0 million, in accordance with the license agreement, that is
payable in either cash or unrestricted stock by December 31, 2001. The Company
may be required to make 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.

9.   INVESTMENTS IN AND ADVANCES TO JOINT VENTURE

In May 1997, the Company entered into an agreement with LeukoSite, Inc., now
Millennium Pharmaceuticals, Inc. (Millennium), for an equally owned joint
venture, Millennium & ILEX Partners, L.P. (M&I Partners), to develop Campath.
The Company accounts for its investment in M&I Partners using the equity method
of accounting.

In August 1999, M&I Partners 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 and
Millennium have retained rights. The agreement provides that Schering will
advance up to $30 million to M&I Partners for the rights to Campath and for the
achievement of certain regulatory milestones. Schering shares 33 percent of the
development expenses for certain indications. Profits from the sale of Campath
in the U.S. are shared equally among


                                       11
<PAGE>   12


ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------

ILEX, Millennium and Schering's U.S. affiliate, Berlex Laboratories, Inc. For
sales made outside the U.S., Schering will make royalty payments to M&I Partners
approximately equivalent to the rate of profit sharing in the U.S.

The agreement provides for interest bearing (prime rate plus 1 percent) advances
to the partnership of up to $30 million in up-front and milestone payments. As
of July 31, 2001, M&I Partners received payments totaling $30 million, $25
million of which had been received as of June 30, 2001. The revenues recorded by
M&I Partners are based upon the research and development expenses incurred by
Millenium and ILEX which, pursuant to the distribution agreement, offset the
advance balances due Schering in an amount equal to 110 percent for CLL
indications and 77 percent for non-CLL indications. The Company has recorded
product development revenue related to the research and development fees in the
amount of $.8 million and $.6 million for the three month periods and $1.4
million and $1.6 million for the six month periods ended June 30, 2001 and 2000,
respectively. In February 2001, ILEX made a capital contribution to M&I Partners
of $3.4 million in cash and development expenses of which $1.6 million was
settled as additional capital contributions.

In May 2001, the Company received U.S. regulatory approval for marketing of
Campath. Net U.S. sales for the five weeks ended June 30, 2001 were
approximately $5.3 million. M&I Partners' share of these net sales, less
applicable expenses, is included in M&I Partners' revenue as royalty income.

The following is summarized financial information for M&I Partners:

                     Summarized Income Statement Information

<TABLE>
<CAPTION>
                                                 Three Months Ended         Six Months Ended
                                                      June 30                   June 30
                                              ------------------------   --------------------
                                                 2001         2000          2001       2000
                                              ----------   ----------    ---------   --------
<S>                                           <C>          <C>           <C>         <C>
Revenue                                       $  4,060     $  2,223      $  3,751    $  4,408
Operating expenses                               2,652        4,984         4,553       6,951
Operating income (loss)                          1,408       (2,761)         (802)     (2,543)
Net income (loss)                                1,319       (2,901)       (1,003)     (2,822)
</TABLE>


                      Summarized Balance Sheet Information

<TABLE>
<CAPTION>
                                               June 30,        December 31,
                                                 2001              2000
                                              ----------       ------------
<S>                                           <C>               <C>
Assets                                        $    7,137        $    4,755
Liabilities                                       15,240            21,855
                                              ----------        ----------
Partners' equity                              $   (8,103)       $  (17,100)
                                              ==========        ==========
</TABLE>

10.  INTEREST INCOME AND OTHER, NET

Included in interest income and other, net, for the three and six months ended
June 30, 2001, is $435 related to the accrual of a non-cash loss on the
impairment of a held to maturity marketable security.

11.  COMMITMENTS AND CONTINGENCIES

On August 16, 2000, Cytokine Pharmasciences Inc. ("CPI"), successor-in-interest
to Cytokine Networks, Inc. ("CNI"), filed a lawsuit against Convergence
Pharmaceuticals, Inc. ("Convergence"), a Delaware corporation and wholly owned
indirect subsidiary of ILEX, and Glenn Rice, Ph.D. ("Glenn Rice") in the
Superior Court Department of Trial Court of the Commonwealth of Massachusetts.
The suit alleged that Convergence's predecessor which was merged into
Convergence, through Glenn Rice, used intellectual property of CNI and requested
unspecified damages and a permanent injunction against Glenn Rice and
Convergence from using or disclosing any intellectual property developed in
whole or in part by Glenn Rice while he was employed by CNI. The lawsuit claims
were settled effective July 2, 2001 and the lawsuit has been dismissed with
prejudice. The settlement had an immaterial financial affect 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.



                                       12
<PAGE>   13

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------

In June 2001, the Company extended an existing guarantee of an obligation of an
unaffiliated site management organization. This guarantee expires on June 30,
2002. In June 1999, management determined that they would be required to fund
the $750 obligation and accrued this expense accordingly.

12.  SEGMENT REPORTING

The Company has two reportable segments: ILEX Products, Inc. (ILEX Products),
and ILEX Oncology Services, Inc. (ILEX Services). ILEX Products develops
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 are managed separately, as each business requires
different technology and marketing strategies. The Company evaluates performance
based on the profit or loss from operations before income taxes.

                          Selected Segment Information
<TABLE>
<CAPTION>
                                                       Three Months Ended                       Six Months Ended
                                                         June 30, 2001                           June 30, 2001
                                              ----------------------------------     ------------------------------------
                                              Services     Products       Total      Services    Products        Total
                                              --------     --------    ---------     --------    --------     -----------
<S>                                           <C>         <C>          <C>           <C>         <C>          <C>
Revenue from external customers               $  6,165    $     846    $   7,011     $ 11,793    $   1,526    $    13,319
Intersegment revenue                               444          -            444          850          -              850
                                              --------    ---------    ---------     --------   ----------   ------------
               Total revenue                     6,609          846        7,455       12,643        1,526         14,169

Direct costs                                     3,952        9,265       13,217        8,923       16,790         25,713
Licensing costs                                    -          6,897        6,897          -          8,184          8,184
In-process research and development                -            -            -            -         21,112         21,112
                                              --------    ---------    ---------     --------   ----------   ------------
Segment operating income (loss)                  2,657      (15,316)     (12,659)       3,720      (44,560)       (40,840)

Equity in income (losses) of joint venture         -            660          660          -           (501)          (501)
                                              --------    ---------    ---------     --------   ----------   ------------
Segment net income (loss)                     $  2,657    $ (14,656)   $ (11,999)    $  3,720    $ (45,061)   $   (41,341)
                                              ========    =========    =========     ========    =========    ===========
Segment assets                                                                       $ 11,138    $   5,945    $    17,083
                                                                                     ========    =========
   Corporate assets                                                                                               315,458
   Elimination of intersegment balances                                                                          (139,054)
                                                                                                              -----------
Consolidated total assets                                                                                     $   193,487
                                                                                                              ===========
</TABLE>


                                       13
<PAGE>   14


ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                       Three Months Ended                       Six Months Ended
                                                         June 30, 2000                           June 30, 2000
                                             ------------------------------------    ------------------------------------
                                              Services     Products       Total      Services    Products        Total
                                              --------    ---------    ---------    ---------    ---------    -----------
<S>                                           <C>         <C>          <C>           <C>         <C>          <C>
Revenue from external customers               $  6,908    $     621    $   7,529     $ 12,484    $   1,659    $    14,143
Intersegment revenue                             2,835          -          2,835        5,248          -            5,248
                                              --------    ---------    ---------     --------    ---------    -----------
               Total revenue                     9,743          621       10,364       17,732        1,659         19,391

Direct costs                                     6,998        7,263       14,261       13,273       13,820         27,093
Licensing costs                                    -          1,025        1,025          -          1,050          1,050
In-process research and development                -            -            -            -            -              -
                                              --------    ---------    ---------     --------    ---------    -----------
Segment operating income (loss)                  2,745       (7,667)      (4,922)       4,459      (13,211)        (8,752)

Equity in income (losses) of joint venture         -         (1,450)      (1,450)         -         (1,411)        (1,411)
                                              --------    ---------    ---------     --------    ---------    -----------
Segment net income (loss)                     $  2,745    $  (9,117)   $  (6,372)    $  4,459    $ (14,622)   $   (10,163)
                                              ========    =========    =========     ========    =========    ===========
Segment assets                                                                       $ 17,681    $  (2,319)   $    15,362
                                                                                     ========    ==========
   Corporate assets                                                                                               276,327
   Elimination of intersegment balances                                                                           (66,322)
                                                                                                              -----------
Consolidated total assets                                                                                     $   225,367
                                                                                                              ===========
</TABLE>

          Reconciliation of Segment Information to Consolidated Totals

<TABLE>
<CAPTION>
                                                                         Three Months               Six Months
                                                                       Ended June 30              Ended June 30
                                                                    ----------------------    ----------------------
                                                                       2001         2000         2001         2000
                                                                    ---------     --------    ---------    ---------
<S>                                                                 <C>           <C>         <C>         <C>
Research and development costs -
   Reportable products segment direct costs                         $   9,265     $  7,263    $  16,790    $  13,820
   Elimination of intersegment gross profit                              (303)      (1,473)        (406)      (2,716)
                                                                    ---------     --------    ---------    ---------
      Consolidated research and development costs                   $   8,962     $  5,790    $  16,384    $  11,104
                                                                    =========     ========    =========    =========
Direct costs of research services -
   Reportable services segment direct costs                         $   3,952     $  6,998    $   8,923    $  13,273
   Elimination of intersegment expenses                                  (141)      (1,362)        (444)      (2,532)
                                                                    ---------     --------    ---------    ---------
      Consolidated direct costs of research services                $   3,811     $  5,636    $   8,479    $  10,741
                                                                    =========     ========    =========    =========
Operating net loss -
   Reportable segment operating loss                                $ (12,659)    $ (4,922)   $ (40,840)   $  (8,752)
   Corporate general and administrative                                (3,414)      (1,365)      (5,742)      (2,304)
                                                                    ---------     --------    ---------    ---------
      Consolidated operating loss                                   $ (16,073)    $ (6,287)   $ (46,582)   $ (11,056)
                                                                    =========     ========    =========    =========
Net loss -
   Reportable segment net loss                                      $ (11,999)    $ (6,372)   $ (41,341)   $ (10,163)
   Corporate general and administrative                                (3,414)      (1,365)      (5,742)      (2,304)
   Interest income and other, net                                       2,161        3,316        5,381        4,832
   Minority interest in consolidated subsidiary                           -            (75)         -           (150)
   Provision for foreign income taxes                                     (29)         (48)         (29)        (143)
                                                                    ---------     --------    ---------    ---------
      Consolidated net loss                                         $ (13,281)    $ (4,544)   $ (41,731)   $  (7,928)
                                                                    =========     ========    =========    =========
</TABLE>



                                       14
<PAGE>   15


ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


13.  SUBSEQUENT EVENT

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, a cytokine-like
receptor that is highly overexpressed by most human cancers. The agreement
requires the Company to pay approximately $200 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 July 31, 2001, the Company
expensed approximately $350 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.



                                       15
<PAGE>   16


ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

(Amounts in Thousands, Except Share Information, Per Share Information or As
Otherwise Indicated) (Unaudited)

The following discussion is included to describe the Company's financial
position and results of operations for the three and six month periods ended
June 30, 2001. The consolidated financial statements and notes thereto contain
detailed information that should be referred to in conjunction with this
discussion.

GENERAL

ILEX is building a leading oncology-focused pharmaceutical company by assembling
and developing a portfolio of novel treatments both for advanced stage cancers
and for early stage cancers and pre-malignant conditions. We have a portfolio of
eight anticancer product candidates in clinical development and several
preclinical stage product candidates. We built this portfolio primarily through
in-licensing and acquisition. In addition to our clinical development programs,
we have established the groundwork for bringing proprietary product candidates
into our pipeline by conducting drug discovery research.

We are primarily engaged in the development of novel therapeutics to treat and
prevent human cancers. We have historically operated through two subsidiaries:
ILEX Products, Inc., through which we develop our own portfolio of anticancer
compounds, and ILEX Oncology Services, Inc., or ILEX Services, which is our full
service contract research organization, or CRO. Through ILEX Services we have
built our drug development capabilities and developed expertise in managing
preclinical research and clinical trials. In February 2001, we announced our
intent to focus this expertise on our own proprietary products, including those
being jointly developed with strategic partners. As we progress into an
oncology-focused pharmaceutical company, we will use the ILEX Services
development organization solely for our own product candidates. ILEX will
continue to recognize CRO revenue from current client projects, but we do not
intend to take on any new significant fee-for-service CRO business, except where
we can obtain an ownership interest in the client compounds being developed.

We have incurred losses since inception and had an accumulated deficit through
June 30, 2001, of $158.1 million. Our losses have resulted primarily from
product development activities, including in-licensing of products for which we
incur in-process research and development fees, and related administrative
expenses. We expect to continue to incur operating losses for at least the next
year. With the exception of Campath, none of our other drug candidates has
generated sales revenue. Our revenue for the foreseeable future will be limited
to our product development for a joint venture, contract research services
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 joint venture.

We have one marketed product, Campath, which we developed in a partnership with
Millennium Pharmaceuticals, Inc. called Millennium & ILEX Partners, L.P., or M&I
Partners. In August 1999, M&I Partners granted Schering AG 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 MabCampathTM, the
trade name for Campath in Europe, in July 2001. Under this authorization, M&I
Partners 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.



                                       16
<PAGE>   17

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
-------------------------------------------------------------------------------


Profits from the sale of Campath in the U.S. will be shared equally among ILEX,
Millennium and Berlex Laboratories, Inc. (Berlex), the U.S. affiliate of
Schering. For sales made outside the U.S., Schering will make royalty payments
approximately equivalent to the rate of profit sharing in the U.S. Drug product
sales, net of related expenses, for Campath will be recorded as revenue by M&I
Partners. ILEX has historically accounted for Campath development activities as
follows:

     o    ILEX operating revenue includes product development revenue we receive
          from M&I Partners;

     o    ILEX research and development expenses include all of our development
          costs for Campath, which are largely offset by M&I Partners' revenue
          we receive, and;

     o    M&I Partners income (losses) is reported on the Company's Consolidated
          Statements of Operations as equity in income (losses) of joint
          venture.

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, a cytokine-like
receptor that is highly overexpressed by most human cancers. The agreement
requires the Company to pay approximately $200 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 July 31, 2001, the Company
expensed approximately $350 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 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 June 30, 2001, the Company had paid $4.0 million in license
fees. During second quarter of 2001, the Company recorded additional license fee
expense of $6.0 million, in accordance with the license agreement, that is
payable in either cash or unrestricted stock by December 31, 2001. The Company
may be required to make 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 March 2001, ILEX entered into a definitive agreement to co-develop
clofarabine, a purine 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, 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 U.S. and Canada and 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, and will have exclusive
manufacturing and marketing rights, and ILEX will have rights to royalties.

In February 2001, the Company acquired Symphar S.A., whose research platform in
targeted medicinal chemistry and nuclear receptor biology has led to drug
candidates in several therapeutic fields, including bone disease, an important
complement to our oncology pipeline. The Symphar acquisition, combined with our
preclinical angiogenesis inhibition program in Boston, gives the Company the
strong capability to translate early-stage research leads into clinical drug
development programs. Under the terms of the agreement, we acquired Symphar for
approximately $29 million, including $15 million in cash and 521,121 shares of
our common stock. Symphar owns certain intangible assets including intellectual
property in the area of targeted medicinal phosphonate chemistry. In connection
with the purchase price allocation, $21.1 million was expensed as a charge for
the purchase of in-process research and development. Of the $15 million paid in
cash, the Company has placed in escrow $4.5 million to provide indemnification
against future claims. This amount will be released in equal installments of
$1.5 million every six months following closing for a period of 18 months net of
any claims that have arisen. In addition, $5.0 million of the purchase price is
in escrow to be released in the event a legally binding commitment is executed
on or before February 14, 2002 with a third party acceptable to ILEX to provide
funding of at least $5.0 million for a period of at least one year for certain
nononcology indications. Upon the execution of the agreement with a third party,
the Company would recognize in-process research and development expense. The
$5.0 million escrow balance is included in restricted investments as a current
asset. Additionally, the Company has recorded an intangible asset in the amount
of $300,000 related to assembled workforce that is currently being amortized
over three years. Upon adoption of the Financial Accounting Standards Board
issued Statements of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" beginning January 1, 2002, the cost of the Company's
assembled workforce will no longer be subject to amortization but will be
reviewed at least annually for impairment. The Company anticipates that the
adoption of SFAS No. 142 will have an immaterial financial affect on the
Company's consolidated financial statements.



                                       17
<PAGE>   18


ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
-------------------------------------------------------------------------------


Our 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 five 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. 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.

RECENT DEVELOPMENTS IN PRODUCT PIPELINE

MARKETED PRODUCT

     CAMPATH:

     o    Received U.S. regulatory approval for Campath in May 2001 and launched
              sales through our marketing partner in late May

     o    Received European regulatory approval for marketing MabCampath in July
              2001 and expect to launch sales through our marketing partner in
              August 2001 in certain EU countries

     o    Organized the Phase III post-marketing study required as part of the
              accelerated approval process in the U.S. and Europe


PHASE III DEVELOPMENT PROGRAMS

         EFLORNITHINE:

     o    Accrued 85% of patients as of second quarter 2001, with plans to
              complete enrollment by year end, for a Phase III randomized,
              placebo controlled trial for the prevention of recurrence of
              superficial bladder cancer

     o    Recommendation from independent Data Safety Monitoring Board that the
              trial in superficial bladder be continued as the first interim
              analysis of data indicated no significant difference in safety
              between the eflornithine arm and the placebo arm

     o    Organized a Phase III trial of eflornithine in combination with
              celecoxib in patients with familial adenomatous polyposis,
              expected to begin enrollment in September.


PHASE II DEVELOPMENT PROGRAMS

         CLOFARABINE:

     o    Ongoing Phase II trials in patients with acute leukemias and CLL

     o    Striving to have pivotal trials underway by year end for highly
              refractory patients with acute leukemias

         APOMINE:

     o    In Phase I studies, shown to be well tolerated at the recommended
              Phase II dosing schedule, and antitumor activity was noted in
              several patients with advanced cancer

     o    Ongoing Phase II trial in patients with bone metastasis

     o    Finalizing the design of a placebo-controlled Phase II trial in
              patients with prostate cancer who are receiving hormonal therapy

     o    Initiating a Phase II trial in patients with metastatic melanoma in
              the U.S. and Australia


PHASE I DEVELOPMENT PROGRAMS

     NM-3: Began patient enrollment during second quarter to Phase I trials in
     the U.S.

     ILX-651: Began patient enrollment during second quarter to Phase I trials
     in the U.S.



                                       18
<PAGE>   19

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------

PRECLINICAL PROGRAMS

     ANGIOGENESIS INHIBITORS: Identified for the first time linear short peptide
     sequences derived from one of the Company's extracellular domain proteins,
     tumstatin. These peptides account for all of the anti-angiogenesis activity
     of the full length protein, can be made by conventional peptide synthesis
     and can be delivered by a wide range of drug delivery systems including
     oral administration.

     MUC 1: 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, a cytokine-like
     receptor that is highly overexpressed by most human cancers.


RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2001 AND 2000

OPERATING REVENUES

Total revenue decreased to $13.3 million in the first six months of 2001, from
$14.1 million in the first six months of 2000. The decrease of $.8 million, or
6%, was primarily due to a $.7 million reduction in CRO revenue. The decrease of
6% in CRO revenues is consistent with our plan to internalize the CRO
fee-for-service business.

OPERATING EXPENSES

     Total Operating Expenses. Total operating expenses increased to $38.8
million in the first six months of 2001, excluding in-process research and
development expenses totaling $21.1 million, from $25.2 million in 2000. This
increase of $13.6 million, or 54%, is primarily due to an increase in licensing
costs, largely due to a license fee expense accrual of $6 million for ILX-651
and a payment of $1.1 million to Bioenvision for the U.S. rights to clofarabine.
Additionally, research and development costs have risen as more resources are
being directed toward the development of our proprietary product candidates.

     Research and Development Costs. Research and development costs increased to
$16.4 million in the first six months of 2001, from $11.1 million in 2000. This
increase of $5.3 million, or 48%, was due to increased development spending on
the Company's product pipeline, particularly for Eflornithine, Elinafide and
ILX-651. Additionally, research and development expense increased due to the
acquisition of Symphar and the addition of our drug discovery research
laboratory in Geneva, Switzerland.

     Licensing Costs. Licensing costs increased to $8.2 million in the first six
months of 2001, from $1.1 million in 2000. The primary reason for the increase
is a license fee expense accrual of $6.0 million for ILX-651 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 execution of an agreement to U.S. rights to
clofarabine, a nucleoside analog. The Company may be required to make future
payments in accordance with these agreements if certain drug development and
time-based milestones are met.

     Direct Cost of Research Services. Direct cost of research services expense
decreased to $8.5 million during the first six months of 2001, from $10.7
million in 2000. This decrease of $2.2 million, or 21%, is attributable to the
Company's transition out of the fee-for service CRO business. Our CRO operating
margin has increased to 28% for the first six months of 2001, as compared to 14%
for the same period a year ago. The margin improved due to the successful
renegotiation of an existing contract, and because ILEX is no longer incurring
business development expenses related to the CRO business.

     General and Administrative Costs. General and administrative costs
increased to $5.7 million for the first six months of 2001, compared to $2.3
million for the same period in 2000. This increase of $3.4 million, or 148% is
due in part to the transition out of the CRO business, and the corresponding
transition of existing internal resources to focus on new business
opportunities, build strategic relationships and develop our proprietary
products. 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 expense.

     In-Process Research and Development. In connection with the purchase price
allocation for the February 2001 acquisition of Symphar, the Company expensed
$21.1 million for the purchase of in-process research and development.



                                       19
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ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


OPERATING LOSS

Excluding in-process research and development expense of $21.1 million incurred
in the first quarter of 2001, loss from operations increased to $25.5 million in
the first six months of 2001, from $11.1 million in 2000. This increase of $14.4
million, or 130%, is due to an increase in research and development costs and
licensing costs, as well as an increase in general and administrative expense,
partially offset by the improved profitability of the Company's CRO business.


EQUITY IN INCOME (LOSSES) OF JOINT VENTURE

Equity in income (losses) of Campath joint venture was ($.5) million for the
first six months of 2001, compared to ($1.4) million in 2000, a decrease of $.9
million, or 64%. The loss for the first half of 2001 includes
pre-commercialization marketing and selling expenses incurred by the Campath
joint venture, which are offset by approximately five weeks of Campath sales.

INTEREST INCOME AND OTHER, NET

Interest income and other, net, increased to $5.4 million for the six months
ended June 30, 2001, from $4.8 million for the same period a year ago. This
increase of $.6 million, or 13%, is attributable to an increase in average cash
and investment balances during the first six months of 2001, compared to the
same period a year ago.

NET LOSS

Net loss increased $33.8 million in the first six months of 2001, or 428%, to
$41.7 million, from $7.9 million in 2000. Net loss per share increased $1.25 per
share to $1.59 per share in 2001, from $0.34 per share in 2000. Excluding
in-process research and development expense, net loss increased $12.7 million,
or 161%, to $20.6 million in the first six months of 2001, from $7.9 million for
the same period in 2000, and net loss per share increased $0.45 per share to
$0.79 per share, from $.34 per share in 2000.

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2001 AND 2000

OPERATING REVENUES

Total revenue decreased to $7 million in the second quarter of 2001, from $7.5
million in the second quarter of 2000. The decrease of $.5 million, or 7%, was
due to a decrease of $.7 million in CRO revenues and partially offset by an
increase of $.2 million in product development revenues. The decrease of $.7
million, or 10%, in CRO revenues to $6.2 million for the quarter in 2001,
compared to $6.9 million in the same quarter in 2000, reflects a decrease in the
number of active contracts in process with existing clients.

OPERATING EXPENSES

     Total Operating Expenses. Total operating expenses increased to $23.1
million in the second quarter of 2001 from $13.8 million in 2000. This increase
of $9.3 million, or 67%, is largely due to a license fee expense accrual of $6
million for ILX-651 and to increased research and development costs. ILEX
believes that research and development costs will continue to increase in future
periods as the Company evaluates in-licensing opportunities, and expands its
preclinical research and clinical trials associated with developing its existing
proprietary compounds.

     Research and Development Costs. Research and development costs increased to
$9.0 million in the second quarter of 2001, from $5.8 million in 2000. This
increase of $3.2 million, or 55%, was due to increased development spending on
the Company's product pipeline, particularly for Campath, Eflornithine,
Clofarabine and ILX-651.. Additionally, research and development expense
increased due to the addition of our drug discovery research laboratory in
Geneva, Switzerland.

     Licensing Costs. Licensing costs increased to $6.9 million in the second
quarter of 2001, from $1.0 million in 2000. The primary reason for the increase
is a license fee expense accrual of $6 million related to an exclusive,
worldwide license from Knoll AG (BASF Pharma) for ILX-651, a synthetic
pentapeptide analog of dolastatin. The Company may be required to make future
payments in accordance with the agreements if certain drug development and
time-based milestones are met.



                                       20
<PAGE>   21


ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


     Direct Cost of Research Services. Direct cost of research services expense
decreased to $3.8 million during the second quarter of 2001, from $5.6 million
in 2000. This decrease of $1.8 million, or 32%, is attributable to the Company's
transition out of the fee-for service CRO business. Our CRO operating margin has
increased to 38% for the second quarter of 2001, as compared to 18% for the same
period a year ago. The margin improved due to the successful renegotiation of an
existing contract and because ILEX is no longer incurring business development
expenses related to the CRO business.

     General and Administrative Costs. General and administrative costs
increased to $3.4 million for the second quarter of 2001, compared to $1.4
million for the same quarter in 2000. This increase of $2.0 million, or 143% is
due in part to the transition out of the CRO business, and the corresponding
transition of existing internal resources to focus on new business
opportunities, build strategic relationships and develop our proprietary
products. 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 expense.

OPERATING LOSS

Operating loss for the second quarter was $16.1 million, an increase of 156%
compared to $6.3 million in the same period a year ago. This increase of $9.8
million is due to an increase in research and development costs and licensing
costs, as well as an increase in general and administrative expense, partially
offset by the improved profitability of the Company's CRO business.

EQUITY IN INCOME (LOSSES) OF JOINT VENTURE

Equity in income (losses) of Campath joint venture was $.7 million for the
second quarter of 2001, compared to ($1.5) million in 2000, a change of $2.2
million, or 147%. The income for the second quarter of 2001 is the result of
approximately five weeks of Campath U.S. net sales offset by
pre-commercialization marketing and selling expenses incurred by the Campath
joint venture.

INTEREST INCOME AND OTHER, NET

Interest income and other income, net, decreased to $2.2 million in 2001, from
$3.3 million in 2000. This decrease of $1.1 million, or 33%, is attributable to
a decrease in average cash and investment balances during the second quarter of
2001 as compared to the same period a year ago and to the accrual of impairment
on a marketable security.

NET LOSS

Net loss increased $8.8 million in the second quarter in 2001, or 196%, to $13.3
million, from $4.5 million in 2000. Net loss per share increased $.32 per share
to $.50 per share in 2001, from $.18 per share in 2000.

LIQUIDITY AND CAPITAL RESOURCES

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

At June 30, 2001, we had cash, cash equivalents, restricted investments and
investments in marketable securities of $176.8 million and working capital of
$137.7 million. Cash, cash equivalents, restricted investments and investments
in marketable securities decreased $26 million from $202.8 million at December
31, 2000, primarily due to acquisition costs, drug licensing costs and a capital
contribution to the Campath joint venture, as well as general operating
requirements, including capital purchases. Our cash requirements are expected to
continue to increase each year as we expand our activities and operations.



                                       21
<PAGE>   22

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


In February 2001, we acquired Symphar for approximately $29 million, including
$15 million in cash and 521,121 shares of our common stock. The acquisition
agreement specifies that, subject to the viability of performance, we agree to
fund a minimum operating and capital budget between $4 million to $5 million
annually for each of the next three years. Of the $15 million paid in cash, the
Company has placed in escrow $4.5 million to provide indemnification against
future claims. This amount will be released in equal installments of $1.5
million every six months following closing for a period of 18 months provided no
claims have arisen. In addition, $5.0 million of the purchase price is in escrow
to be released in the event a legally binding commitment is executed on or
before February 14, 2002 with a third party acceptable to ILEX to provide
funding of at least $5.0 million for a period of at least one year for certain
nononcology indications. Upon the execution of the agreement with a third party,
the Company would recognize in-process research and development expense. The
$5.0 million escrow balance is included in restricted investments as a current
asset.

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
product development from our joint venture, contract research services revenue,
interest income, other miscellaneous income and proceeds from the sale of equity
securities.

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 that the Company make
payments in either cash or stock if certain drug development or time-based
milestones are met. Total future commitments under these agreements are
approximately $22.1 million through the year 2005.

We plan to continue our policy of investing available funds in government
securities and investment-grade, interest-bearing securities, primarily with
maturities of one year or less. We do not invest in derivative financial
instruments, as defined by SFAS No. 119.

ILEX's future expenditures and capital requirements will depend on numerous
factors, including but not limited to, the progress of its research and
development programs, the progress of its preclinical 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 of the Company to establish, maintain
and avoid termination of collaborative arrangements and the purchase of capital
equipment and acquisitions of compounds, technologies or businesses. As of June
30, 2001, the Company did not have any material commitments for capital
expenditures. The Company may never be able to generate product revenue or
achieve or sustain profitability. The Company expects its cash, cash equivalents
and marketable securities will be adequate to cover all of its obligations for
the next year.

FORWARD-LOOKING STATEMENTS - CAUTIONARY STATEMENTS

This Quarterly Report on Form 10-Q contains certain "forward-looking" statements
(as such term is defined in the Private Securities Litigation Reform Act of
1995). Because these statements include risks and uncertainties, actual results
may differ materially from those expressed or implied by such forward-looking
statements. Specifically, factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements
include, but are not limited to: risks associated with preclinical and clinical
developments in the biopharmaceutical industry in general and in ILEX's
compounds under development in particular; market acceptance of Campath; 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 marketing clearance from regulatory
agencies for our compounds under development; acquisitions, divestitures,
mergers, licenses or strategic initiatives that change the Company's business,
structure or projections; the ability of the Company to predict its future
expenses and capital needs; the development of competing products; uncertainties
related to the Company's dependence on third parties and partners; and those
risks described in the Company's Form S-3 filed May 1, 2001, as amended
(Commission file #333-59954) and the Company's Annual Report on Form 10-K for
the year ended December 31, 2000, and in other filings made by the Company with
the SEC. The Company disclaims any obligation to update these forward-looking
statements.



                                       22
<PAGE>   23


ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
-------------------------------------------------------------------------------


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact the financial position,
results of operations or cash flows of the Company 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 our
investment of cash, cash equivalents, restricted investments and investments in
marketable securities of $176.8 million at June 30, 2001. These funds are
generally invested in highly liquid treasury bills, money market accounts with
short-term maturities 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-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.

PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

On August 16, 2000, Cytokine Pharmasciences Inc. ("CPI"), successor-in-interest
to Cytokine Networks, Inc. ("CNI"), filed a lawsuit against Convergence
Pharmaceuticals, Inc. ("Convergence"), a Delaware corporation and wholly owned
indirect subsidiary of ILEX, and Glenn Rice, Ph.D. ("Glenn Rice") in the
Superior Court Department of Trial Court of the Commonwealth of Massachusetts.
The suit alleged that Convergence's predecessor which was merged into
Convergence, through Glenn Rice, used intellectual property of CNI and requests
unspecified damages and a permanent injunction against Glenn Rice and
Convergence from using or disclosing any intellectual property developed in
whole or in part by Glenn Rice while he was employed by CNI. The lawsuit claims
were settled effective July 2, 2001 and the lawsuit has been dismissed with
prejudice. There is no future impact related to the lawsuit or settlement on the
consolidated financial statements of ILEX.

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

The following matters were voted upon at the Annual Meeting of Stockholders held
on May 24, 2001, and received the votes set forth below:

     1.   All of the following persons nominated were elected to serve as
          directors and received the number of votes set forth opposite their
          respective names:


<TABLE>
<CAPTION>
             Name                           For               Withheld
             ----                           ---              ----------
<S>                                     <C>                  <C>
Richard L. Love                         19,924,406           1,809,054
Gary V. Woods                           21,583,002             150,458
Jeffrey H. Buchalter                    21,586,602             146,858
Joseph S. Bailes, M.D.                  21,586,702             146,758
Jason S. Fisherman, M.D.                21,586,502             146,958
Ruskin C. Norman, M.D.                  21,586,602             146,858
Daniel D. Von Hoff, M.D.                21,586,402             147,058
</TABLE>


     2.   A proposal to ratify the appointment of Arthur Andersen, LLP as
          Independent Public Accountants received 21,203,641 votes FOR and
          519,242 votes AGAINST, with 10,577 abstentions.




                                       23
<PAGE>   24

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)  Exhibits

<TABLE>
<CAPTION>
             Exhibit
             Number
             -------
              <S>        <C>
              10.1*      Amended and Restated ILEX Oncology, Inc. 1995 Stock Option Plan

              11.1*      Computation of Net Loss Per Share
</TABLE>


        (b)  Reports on Form 8-K: None

    *   Filed herewith




                                       24
<PAGE>   25

ILEX ONCOLOGY, INC.
JUNE 30, 2001-QUARTERLY REPORT ON FORM 10-Q
--------------------------------------------------------------------------------


                                   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 August 14, 2001.


                                      ILEX ONCOLOGY, INC.


                                  By:  /s/ RICHARD L. LOVE
                                      ------------------------------------------
                                      Richard L. Love
                                      President and Chief Executive Officer
                                      (Principal Executive Officer)


                                  By:   /s/ GREGORY L. WEAVER
                                      ------------------------------------------
                                      Gregory L. Weaver
                                      Vice President and Chief Financial Officer
                                      (Chief Financial and Accounting Officer)




                                       25
<PAGE>   26


                                 EXHIBIT INDEX


        (a)  Exhibits

<TABLE>
<CAPTION>
             Exhibit
             Number
             -------
              <S>        <C>
              10.1*      Amended and Restated ILEX Oncology, Inc. 1995 Stock Option Plan

              11.1*      Computation of Net Loss Per Share
</TABLE>

    *   Filed herewith