<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

                  For the Quarterly Period Ended June 30, 1998

                                       OR

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

             For the Transition Period From __________ to _________

                         Commission File Number 0-22147


                               ILEX ONCOLOGY, INC.
             (Exact name of registrant as specified in its charter)

    Delaware                                                     74-2699185
(State or other                                               (I.R.S. Employer
jurisdiction of                                              Identification No.)
incorporation or             
organization)


                          11550 I.H. 10 West, Suite 300
                            San Antonio, Texas 78230
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (210) 949-8200
              (Registrant's telephone number, including area code)

                                   ----------

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

         Yes   X       No
             -----        -----

                                   ----------

         Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.

         On August 10, 1998, there were outstanding 12,641,146 shares of Common
Stock, $.01 par value, of the registrant.


<PAGE>   2
                               ILEX ONCOLOGY, INC.

                                    FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
PART I.    FINANCIAL INFORMATION                                           PAGE
                                                                           ----
<S>                                                                        <C>
Item 1:    Financial Statements

           Consolidated Balance Sheets - December 31, 1997 
           and June 30, 1998                                               3-4

           Consolidated Statements of Operations - For the 
           three and six month periods ended June 30, 1997
           and June 30, 1998                                               5

           Consolidated Statements of Cash Flows - For the 
           six month periods ended June 30, 1997 and
           June 30, 1998                                                   6

           Notes to the Consolidated Financial Statements                  7-9

Item 2:    Management's Discussion and Analysis of Financial Condition   
           and Results of Operations                                       10-16


PART II.   OTHER INFORMATION

Items 1-6: Other Information                                               17-18


SIGNATURES                                                                 19
</TABLE>



                                      -2-
<PAGE>   3

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                               ILEX ONCOLOGY, INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                        June 30, 
                                                       December 31,       1998   
                             ASSETS                        1997        (unaudited)
                                                       ------------    -----------
<S>                                                    <C>             <C>     
CURRENT ASSETS:
  Cash and cash equivalents                              $ 22,655       $ 15,929
  Investments in marketable securities                     10,111         11,925
  Accounts receivable, net of allowance
    for doubtful accounts of $123 at both
    December 31, 1997 and June 30, 1998:
      Billed                                                2,516          3,177
      Unbilled                                                889          1,188
  Prepaid expenses and other                                  720            765
                                                         --------       --------

          Total current assets                             36,891         32,984
                                                         --------       --------

NONCURRENT ASSETS:
  Investment in and advances to:
      Research and development partnerships                  (360)           920
      Contract research affiliate                           1,494          1,573
  Intangible asset, net of amortization                     4,847          4,308
  Investments in marketable securities                      9,880          4,175
                                                         --------       --------

          Total noncurrent assets                          15,861         10,976
                                                         --------       --------

PROPERTY AND EQUIPMENT, Net of accumulated
  depreciation and amortization of $562 and
  $909 at December 31, 1997 and June 30, 1998,
  respectively                                              2,559          3,641
                                                         --------       --------

          Total assets                                   $ 55,311       $ 47,601
                                                         ========       ========
</TABLE>


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


                                      -3-
<PAGE>   4

                               ILEX ONCOLOGY, INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                        June 30, 
                                                       December 31,       1998   
         LIABILITIES AND STOCKHOLDERS' EQUITY              1997        (unaudited)
                                                       ------------    -----------
<S>                                                    <C>             <C>     

CURRENT LIABILITIES:
  Accounts payable-
    Related parties                                      $    163      $    268
    Other                                                     345           617
  Accrued subcontractor costs-
    Related parties                                           982           625
    Other                                                     657         1,018
  Accrued liabilities                                         727           706
  Advance billings                                            928           979
                                                         --------      --------

          Total current liabilities                         3,802         4,213
                                                         --------      --------

OTHER LONG-TERM LIABILITIES                                   433           425
                                                         --------      --------

COMMITMENTS AND CONTINGENCIES (Note 4)

STOCKHOLDERS' EQUITY:
  Common stock, $0.01 par value; 40,000 shares
    authorized; 12,280 and 12,314 shares issued and
    outstanding at December 31, 1997 and June 30,
    1998, respectively                                        123           123
  Additional paid-in capital                               61,090        64,381
  Receivables on sale of common stock                         (82)          (82)
  Accumulated deficit                                     (10,055)      (21,459)
                                                         --------      --------

          Total stockholders' equity                       51,076        42,963
                                                         --------      --------

          Total liabilities and stockholders'
             equity                                      $ 55,311      $ 47,601
                                                         ========      ========
</TABLE>


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


                                      -4-
<PAGE>   5

                               ILEX ONCOLOGY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                    (In Thousands, Except Per Share Amounts)


<TABLE>
<CAPTION>
                                                                          Three Months                Six Months
                                                                             ended                       ended
                                                                            June 30,                    June 30,
                                                                     ----------------------      ----------------------
                                                                       1997          1998          1997          1998
                                                                     --------      --------      --------      --------
<S>                                                                  <C>           <C>           <C>           <C>     
REVENUE:
  Product development                                                $  1,463      $  1,279      $  2,834      $  2,090
  Contract research services, net                                       1,406         2,795         2,618         4,923
                                                                     --------      --------      --------      --------

           Total revenue                                                2,869         4,074         5,452         7,013
                                                                     --------      --------      --------      --------

OPERATING EXPENSES:
  Research and development costs                                        2,225         3,531         3,914         5,910
  Direct costs of research services                                     1,198         2,867         2,169         4,615
  General and administrative                                              968         1,654         1,667         3,185
  Licensing fees                                                           --            50            --         3,443
                                                                     --------      --------      --------      --------

           Total operating expenses                                     4,391         8,102         7,750        17,153
                                                                     --------      --------      --------      --------

OPERATING LOSS                                                         (1,522)       (4,028)       (2,298)      (10,140)
                                                                     --------      --------      --------      --------

OTHER INCOME (EXPENSE):
  Equity in income (losses) of:
   Research and development partnerships                                 (442)         (903)         (546)       (2,359)
   Contract research affiliate                                             --            24            --            79
  Interest income                                                         639           449         1,051         1,016
                                                                     --------      --------      --------      --------

NET LOSS                                                             $ (1,325)     $ (4,458)     $ (1,793)     $(11,404)
                                                                     ========      ========      ========      ========

BASIC AND DILUTED NET LOSS PER SHARE                                 $   (.11)     $   (.36)     $   (.15)     $   (.93)
                                                                     ========      ========      ========      ========

WEIGHTED AVERAGE SHARES USED IN 
   COMPUTING BASIC AND DILUTED LOSS PER 
   SHARE OF COMMON STOCK                                               12,559        12,306        11,744        12,293
                                                                     ========      ========      ========      ========
</TABLE>


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


                                      -5-
<PAGE>   6

                               ILEX ONCOLOGY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                        Six Months Ended
                                                                            June 30,
                                                                     ----------------------
                                                                       1997          1998
                                                                     --------      --------
<S>                                                                  <C>           <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                         $ (1,793)     $(11,404)
    Adjustments to reconcile net loss to net cash used in
      operating activities-
       Depreciation and amortization                                      146           886
       Net activity of research and development partnerships and
         contract research affiliate                                       37           293
     Valuation of warrants issued in payment as licensing fees             --         3,143
       Change in assets and liabilities-
         (Increase) decrease in assets-
           Accounts receivable, net                                    (1,651)         (960)
           Prepaid expenses and other                                     189           (45)
         Increase (decrease) in liabilities-
           Accounts payable                                              (474)         (334)
           Accrued liabilities                                            433           694
           Advance billings                                               817            51
           Other long-term liabilities                                    128            (8)
                                                                     --------      --------

     Net cash used in operating activities                             (2,168)       (7,684)
                                                                     --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of marketable securities                                   (6,111)       (2,769)
  Maturities of marketable securities                                   1,220         6,660
  Purchase of property and equipment                                   (1,612)       (1,429)
  Investments in research and development partnerships                     --        (1,652)
                                                                     --------      --------

     Net cash provided by (used in) investing activities               (6,503)          810
                                                                     --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of common stock for cash, net of issuance cost              29,261           148
  Payments of receivables on sale of common stock                          65            --
                                                                     --------      --------

      Net cash provided by financing activities                        29,326           148
                                                                     --------      --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   20,655        (6,726)

CASH AND CASH EQUIVALENTS, beginning of period                          5,037        22,655
                                                                     --------      --------
CASH AND CASH EQUIVALENTS, end of period                             $ 25,692      $ 15,929
                                                                     ========      ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the period for-
      Interest                                                       $     --            --
      Income taxes                                                         --            --
</TABLE>


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


                                      -6-
<PAGE>   7

                               ILEX ONCOLOGY, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  June 30, 1998

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



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 wholly-owned
subsidiaries("the Company"). 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, which 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 be 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, 1997. 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. EARNINGS 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.


3. INVESTMENTS IN JOINT VENTURES:

In May 1997, the Company entered into an agreement with LeukoSite, Inc.
("LeukoSite"), for an equally owned joint venture, L&I Partners, L.P. ("L&I"),
for research collaboration endeavors. During the six months ended June 30, 1998,
the Company provided funding of $1,626 in cash and $950 by contributing accounts
receivable from L&I. The following is summarized information for L&I as of and
for the three months and six months ended June 30, 1998 (unaudited):


                                      -7-
<PAGE>   8

                     Summarized Income Statement Information

<TABLE>
<CAPTION>
                                                Three Months      Six Months
                                                    Ended           Ended
                                                June 30, 1998    June 30,1998
                                                -------------    ------------
<S>                                             <C>              <C>    
     Revenue                                        $    --        $    --
     Research and development expenses                1,309          3,978
                                                    -------        -------
     Other income                                         4              8
                                                    -------        -------
     Net loss                                       $(1,305)       $(3,970)
                                                    =======        =======
</TABLE>

                      Summarized Balance Sheet Information

                                  June 30, 1998

<TABLE>
<S>                                                 <C>    
     Assets                                         $ 1,820
     Liabilities                                      4,632
                                                    -------
     Partners' equity (deficit)                     $(2,812)
                                                    =======
</TABLE>


4. COMMITMENTS & CONTINGENCIES:

In March 1998, the Company entered into an agreement with The Burnham Institute
to license a compound for development by the Company. The agreement called for
an initial payment of $250 and a warrant to purchase 590,113 shares of the
Company's common stock. Using a pricing model, the value of the warrant was
determined to be $3.1 million. The agreement also requires subsequent payments
to The Burnham Institute at the attainment of various milestones. The first of
these milestones is expected to be reached in the fourth quarter of 1998.

5. SUBSEQUENT EVENTS:

In July 1998, the Company guaranteed a line of credit for its contract research
affiliate, P.F.K. Pharma Forschung Kaufbeuren GmbH ("PFK") in the amount of U.S.
$614. This guarantee is secured by stock of PFK.

In July 1998, the Company guaranteed a $1,000 line of credit for Clinical
Research Group, Inc. ("CRG"). The guarantee is secured by the stock of CRG.

In accordance with the terms of the collaborative agreements between the Company
and Physician Reliance Network, Inc. ("PRN") the Company issued 314,600 shares
of Common Stock to PRN in July 1998. The Company will record the cost of the
shares at market value on the date issued as an intangible asset to be amortized
over the remaining term of the agreements (9 years).

6. SEGMENT INFORMATION:

The Company has two reportable segments: products and services. The products
segment is involved in the development of proprietary compounds for the
treatment and prevention of cancer. The services segment provides contract
research services for the development, manufacturing, and regulatory approval of
oncology compounds. The Company's reportable segments are strategic business
units which are managed separately because each business requires different
technology and marketing strategies.

The accounting policies of the segments are the same as those of the Company.



                                      -8-
<PAGE>   9

The Company evaluates performance based on the profit or loss from operations
before income taxes.

                          Selected Segment Information

<TABLE>
<CAPTION>
                                                 For the three months ended             For the three months ended
                                                        June 30, 1997                          June 30, 1998
                                              ---------------------------------      ---------------------------------
                                              Services     Products      Total       Services     Products      Total
                                              --------     --------     -------      --------     --------     -------
<S>                                           <C>          <C>          <C>          <C>          <C>          <C>    
Revenues                                      $  1,406     $  1,463     $ 2,869      $  2,795     $  1,279     $ 4,074
Direct costs                                     1,198        2,225       3,423         2,867        3,581       6,448
                                              --------     --------     -------      --------     --------     -------
Segment operating income (loss)                    208         (762)       (554)          (72)      (2,302)     (2,374)
Equity in income (losses) in research and
  development partnerships and clinical
  research affiliate                                --         (442)       (442)           24         (903)       (879)
                                              --------     --------     -------      --------     --------     -------
Segment income (loss)                         $    208     $ (1,204)    $  (996)     $    (48)    $ (3,205)    $(3,253)
                                              ========     ========     =======      ========     ========     =======
</TABLE>


<TABLE>
<CAPTION>
                                                  For the six months ended               For the six months ended
                                                        June 30, 1997                          June 30, 1998
                                              ----------------------------------     ----------------------------------
                                              Services     Products      Total       Services     Products      Total
                                              --------     --------     --------     --------     --------     --------
<S>                                           <C>          <C>          <C>          <C>          <C>          <C>    
Revenues                                      $  2,618     $  2,834     $  5,452     $  4,923     $  2,090     $  7,013
Direct costs                                     2,169        3,914        6,083        4,615        9,353       13,968
                                              --------     --------     --------     --------     --------     --------
Segment operating income (loss)                    449       (1,080)        (631)         308       (7,263)      (6,955)
Equity in income (losses) in research and
  development partnerships and clinical
  research affiliate                                --         (546)        (546)          79       (2,359)      (2,280)
                                              --------     --------     --------     --------     --------     --------
Segment income (loss)                         $    449     $ (1,626)    $ (1,177)    $    387     $ (9,622)    $ (9,235)
                                              ========     ========     ========     ========     ========     ========
</TABLE>


                      Reconciliation of Segment Information
                             To Consolidated Totals

<TABLE>
<CAPTION>
                                                     Three months ended          Six months ended
                                                          June 30                    June 30
                                                   ----------------------      ----------------------
                                                     1997          1998          1997          1998
                                                   --------      --------      --------      --------
<S>                                                <C>           <C>           <C>           <C>      
OPERATING LOSS:
  Reportable segment operating loss                $   (554)     $ (2,374)     $   (631)     $ (6,955)
  Corporate general and administrative expense         (968)       (1,654)       (1,667)       (3,185)
                                                   --------      --------      --------      --------
Consolidated operating loss                        $ (1,522)     $ (4,028)     $ (2,298)     $(10,140)
                                                   ========      ========      ========      ========

NET LOSS:
  Reportable segment net loss                      $   (996)     $ (3,253)     $ (1,177)     $ (9,235)
  Corporate general and administrative expense         (968)       (1,654)       (1,667)       (3,185)
  Interest income                                       639           449         1,051         1,016
                                                   --------      --------      --------      --------
Consolidated net loss                              $ (1,325)     $ (4,458)     $ (1,793)     $(11,404)
                                                   ========      ========      ========      ========
</TABLE>


                                      -9-
<PAGE>   10

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

FORWARD-LOOKING STATEMENTS - CAUTIONARY STATEMENTS

         Certain statements contained in this Quarterly Report on Form 10-Q,
including statements regarding the anticipated development and expansion of the
Company's business, expenditures, the intent, belief or current expectations of
the Company, its directors or its officers, primarily with respect to the future
operating performance of the Company and other statements contained herein
regarding matters that are not historical fact, are "forward-looking statements"
(as such term is defined in the Private Securities Litigation Reform Act of
1995). Because such statements include risks and uncertainties, actual results
may differ materially from those expressed or implied by such forward-looking
statements. 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, those discussed in other filings including those contained in
the Company's Registration Statement on Form S-1 (File No. 333-17769), the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, and
in other reports filed with the Securities and Exchange Commission. The Company
does not intend to update these forward-looking statements.

GENERAL

         The Company is engaged in the businesses of (i) acquiring rights to
(generally in exchange for the payment of licensing fees and future royalty
payments), and developing for commercialization, drugs for the treatment of
patients with cancer and for the prevention of cancer and (ii) providing
clinical research, development and manufacturing services on a contract basis to
pharmaceutical and biotechnology companies engaged in the development of
oncology products.

         In March 1998, the Company acquired a license for the compound THP-Dox
from The Burnham Institute.

         In July 1998, the Company entered into two agreements to guarantee
lines of credit secured by stock. The first such agreement is for P.F.K. Pharma
Forschung Kaufbeuren GmbH ("PFK"), a European clinical research organization, of
which the Company owns 30% of the ownership interests. The Company guaranteed a
$614,000 line of credit for PFK, to be used for expansion, which is secured by
stock of PFK.

         The second agreement is for Clinical Research Group, Inc. ("CRG"). The
Company guaranteed a $1,000,000 working capital line of credit for CRG. The
guarantee is secured by the stock of CRG.

         The Company has no products available for sale and does not expect to
have any products resulting from its drug development efforts, including its
collaborations with others, commercially available for several years, if at all.
The Company has incurred losses and expects to incur additional losses for the
foreseeable future as the Company continues to invest in research and
development. The Company's revenue for the foreseeable future will be limited to
development funding under its collaborative relationships, fee-for-service
revenues pursuant to contracts with its clients, interest income and other
miscellaneous income.


                                      -10-
<PAGE>   11

         The following is a discussion of the financial condition and results of
operations for the Company for the three-month and six-month periods ended June
30, 1997 and 1998. It should be read in conjunction with the Interim
Consolidated Financial Statements of the Company, the Notes thereto and other
financial information included elsewhere in this report and in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.

RESULTS OF OPERATIONS

         THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED 
JUNE 30, 1998


Operating Revenues

         Total revenue increased from approximately $2.9 million in the second
quarter of 1997 to $4.1 million in the second quarter of 1998. The increase of
approximately $1.2 million, or 41%, was due to an additional $1.4 million of
contract research revenues offset by a reduction of $0.2 million in product
development revenues. The reduction in product development revenues to
approximately $1.3 million compares to $1.5 million in the second quarter of
1997. The decrease reflects the elimination of revenue from the development of
two drugs, crisnatol and mitoguazone. The $1.4 million, or 100%, increase in
contract research services revenues to $2.8 million, compared to approximately
$1.4 million in second quarter 1997, reflects an increase in both the number of
contracts underway as well as in the size and duration of the contract research
projects.

Operating Expenses
         Research and Development Costs. Research and development costs
increased from approximately $2.2 million in the second quarter of 1997 to $3.5
million in the second quarter of 1998. This increase of $1.3 million, or 59%,
was primarily attributable to increased spending for the development of four
compounds, CAMPATH-1H, piritrexim, THP-Dox, and ILX23-7553 (Vitamin D3
analogue).

         General and Administrative Costs. General and administrative costs
increased from approximately $1.0 million in the second quarter of 1997 to $1.7
million in the second quarter 1998. This increase of $0.7 million, or 70%, is
primarily attributable to increases in rental expense and other facilities
costs, legal costs, and compensation related to additional administrative staff.

         Direct Costs of Research Services. Direct costs of research services
increased from $1.2 million in the second quarter of 1997 to $2.9 million in the
second quarter of 1998. This increase of $1.7 million, or 142%, is primarily
attributable to increases in expenditures required to support growth in the
number and size of contract research contracts, including staffing expenses and
facility and equipment expansion.

         Licensing Fees. In the second quarter of 1998 the Company paid a
$50,000 fee in connection with the acquisition of the licensing rights for
Oxypurinol. Additional payments will be due upon attainment of specific
milestones. No licensing fees were incurred in the second quarter of 1997.


                                      -11-
<PAGE>   12

Equity in Income (Losses) of Research and Development Partnerships and Contract
Research Affiliate

         Equity in losses of research and development partnerships increased
from $0.4 million in the second quarter of 1997 to $0.9 million in the second
quarter 1998. The increase of $0.5 million relates to increased development
costs for CAMPATH-1H and piritrexim, which are being developed by the Company's
joint ventures with LeukoSite Inc. and MPI Enterprises, L.L.C., respectively.

         The Company recorded $24,000 in income from its investment in its
affiliate, PFK, for the second quarter of 1998. The Company did not have an
investment in PFK during the second quarter of 1997.


Net Interest Income

         Net interest income decreased from approximately $0.6 million in the
second quarter of 1997 to $0.4 in the second quarter of 1998. This decrease of
$0.2, or 33%, is attributable to an decrease in average balances of cash, cash
equivalents and investments in marketable securities.

Net Loss Per Share

         The net loss per share increased $.25 from $.11 in the second quarter
of 1997 to $.36 in the second quarter of 1998 due to the above reasons.


         SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30,
1997

Operating Revenues

         Total revenue increased from approximately $5.5 million in the first
half of 1997 to $7.0 million in the first six months of 1998. The increase of
approximately $1.5 million, or 27%, was due to an additional $2.3 million of
contract research revenues offset by a reduction of $0.7 million in product
development revenues. The reduction in product development revenues to
approximately $2.1 million from $2.8 million in the first six months of 1997
reflects the elimination of revenue from the development of crisnatol and
mitoguazone, which was partially offset by the addition of development revenue
for CAMPATH-1H, and an increase in the development funding for piritrexim. The
$2.3 million, or 88%, increase in contract research services revenues to $4.9
million, from approximately $2.6 million in first six months of 1997, reflects
an increase in both the number of contracts underway as well as in the size and
complexity of the contract research projects.

Operating Expenses

         Total Operating Expenses. Total operating expenses increased from
approximately $7.8 million in the first half of 1997 to $17.2 million in the
first half of 1998. This increase of approximately $9.4 million includes a
one-time, non-cash expense for $3.1 million for the value of a warrant to
purchase shares of common stock of the Company issued to The Burnham Institute
in exchange for the licensing rights to THP-Dox. The remaining increase of $6.3
million or 81%, reflects increases in research and development costs, general,
and administrative costs, and direct costs of research services.


                                      -12-
<PAGE>   13

         Research and Development Costs. Research and development costs
increased from approximately $3.9 million in the first half of 1997 to $5.9
million in the first half of 1998. This increase of $2.0 million, or 51%, was
primarily attributable to increased spending for the development of CAMPATH-1H,
piritrexim, THP-Dox, and ILX23-7553 (Vitamin D3 analogue).

         General and Administrative Costs. General and administrative costs
increased from approximately $1.7 million in the first half of 1997 to $3.2
million in the first half 1998. This increase of $1.5 million, or 88%, is
primarily attributable to increases in rental expense and other facilities
costs, legal costs, and compensation related to additional administrative staff.

         Direct Costs of Research Services. Direct costs of research services
increased from $2.2 million in the first half of 1997 to $4.6 million in the
first half of 1998. This increase of $2.4 million, or 109%, is primarily
attributable to increases in expenditures required to support growth in the
number and size of contract research contracts, including staffing expenses and
facility expansion.

         Licensing Fees. Licensing fees for the first half of 1998 of $3.4
million relate to the acquisition of a license for THP-Dox from The Burnham
Institute. Payment of the fee was $250,000 in cash and issuance to The Burnham
Institute of a warrant to purchase 590,113 shares of the Company's common stock,
which was valued at $3.1 million using a pricing model. Also in the first half
of 1998, the Company pay a $50,000 fee in connection with the acquisition of the
licensing rights for Oxypurinol. Additional payments will be due upon attainment
of specific milestones. No licensing fees were incurred in the first half of
1997.


Operating Loss

         The loss from operations increased from $2.3 million in the first half
of 1997 to $10.1 million in the first half of 1998. This increase of $7.8
million includes a one-time, non-cash charge for the value of a warrant to
purchase shares of common stock of the Company issued to The Burnham Institute
for payment, in part, of a licensing fee for the compound THP-Dox, in the amount
of $3.1 million. Additionally, spending by the Company on its products
portfolio, which was not reimbursed by the Company's collaborative partners,
increased by $2.7 million.

Equity in Income (Losses) of Research and Development Partnerships and Contract
Research Affiliate

         Equity in losses of research and development partnerships increased
from $0.5 million in the first half of 1997 to $2.4 million in the first half of
1998. The increase of $1.9 million relates to increased development costs for
CAMPATH-1H and piritrexim, which are being developed by the Company's joint
ventures with LeukoSite Inc. and MPI Enterprises, L.L.C., respectively.
Significant expense was incurred by L & I Partners, LP., the Company's joint
venture with LeukoSite, Inc., for manufacturing of clinical supplies of
CAMPATH-1H. Additionally, the Company began development of THP-Dox during the
second quarter 1998.

         The Company recorded $79,000 in income from its investment in contract
research affiliate, PFK, for the first half of 1998. The Company did not have an
investment in PFK during first half of 1997.


                                      -13-
<PAGE>   14

Net Interest Income

         Net interest income decreased from approximately $1.1 million in the
first half of 1997 to $1.0 in the first half of 1998. This decrease of $0.1, or
9%, is attributable to a decrease in average balances of cash, cash equivalents
and investments in marketable securities.

Net Loss

         The net loss increased $9.6 million from $1.8 million in the first half
of 1997 to $11.4 million in the first half of 1998 for the reasons set forth
above.

Net Loss Per Share

         The net loss per share increased $.78 from $.15 in the first half of
1997 to $.93 in the first half of 1998 for the reasons set forth above.

SEASONALITY

         ILEX expects that results of operations in the future will fluctuate
significantly from period to period. Such fluctuations may result from numerous
factors, including the amount and timing of revenues earned under existing or
future collaborative relationships or joint ventures, if any, technological
advances and determinations as to the commercial potential of compounds, the
progress of the Company's drug development programs, the receipt of regulatory
approvals, acquisitions, the timing of start-up expenses for new facilities and
equipment, changes in the Company's mix of services, the cost of preparing,
filing, prosecuting, maintaining, defending and enforcing patent claims and
other intellectual property rights, the status of competing products and
technologies and the timing and availability of financing for the Company,
including existing or future strategic alliances and joint ventures with third
parties. In addition, with respect to the Company's contract research services
revenues, fluctuations may result due to a number of factors, including the
commencement, completion or cancellation of large contracts and progress of
ongoing contracts. ILEX believes that comparisons of its quarterly and annual
historical results may not be meaningful and should not be relied upon as an
indication of future performance.

INCOME TAXES

     The availability of net operating loss carryforwards to reduce U.S. federal
taxable income is subject to various limitations under the Internal Revenue Code
of 1986 (the "Code"), as amended, in the event of an ownership change as defined
in Section 382 of the Code. As of December 31, 1997, the Company had incurred at
least a 31 percent ownership change during the applicable three-year period. The
Company does not believe that this change in ownership significantly impacts the
Company's ability to utilize its net operating loss and tax credit carryforwards
as of December 31, 1997, because the amount of the annual limitation under the
Code of such carryforwards, during the remaining carryforward periods, is in
excess of the total amount of net operating loss and tax credit carryforwards.
There was no material ownership change during the six-month period ended June
30, 1998.


                                      -14-
<PAGE>   15

LIQUIDITY AND CAPITAL RESOURCES

         ILEX has financed its operations primarily through the sale of its
capital stock, through development and licensing fee revenues provided by its
partners under its collaborative agreements and through fee-for-service or
participatory revenues pursuant to contracts with its contract research services
customers. The Company receives payments under collaborative agreements
primarily in the form of development funding, milestone payments if milestones
are achieved, and royalties if products are commercialized.

         To date, the majority of the Company's expenditures have been for
research and development activities. The Company does not expect to receive
royalties or other revenues based upon net sales of compounds that may be
developed for several years, if at all. ILEX expects research and development
expenses to be significant for the next several years as its development
programs progress. As of June 30, 1998, the Company had cash, cash equivalents
and investments in marketable securities of approximately $32.0 million and
working capital of approximately $28.8 million. The Company believes that such
amounts will be used primarily to support continued research and development of
its compounds, expand its contract research services business, for general and
administrative expenses and for other general corporate purposes.

         As of June 30, 1998, the Company had no material commitments for
capital expenditures.

         ILEX's future expenditures and capital requirements will depend on
numerous factors, including without limitation, 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. The
Company's cash requirements are expected to increase each year as the Company
expands its activities and operations. There can be no assurance that the
Company will ever be able to generate product revenue or achieve or sustain
profitability.

YEAR 2000 COMPLIANCE

         The efficient operation of the Company's business is dependent on its
computer software programs and operating systems (collectively, "Programs and
Systems"). These Programs and Systems are used in several key areas of the
Company's business, including information management services and financial
reporting, as well as in various administrative functions. The Company has been
evaluating its Programs and Systems to identify potential year 2000 compliance
problems, as well as manual processes, external interfaces with customers, and
services supplied by vendors to coordinate year 2000 compliance and conversion.
The year 2000 problem refers to the limitations of the programming code in
certain existing software programs to recognize date sensitive information for
the year 2000 and beyond. Unless modified prior to the year 2000, such systems
may not properly recognize such information and could generate erroneous data or
cause a system to fail to operate properly.


                                      -15-
<PAGE>   16

         Based on current information, the Company expects to attain year 2000
compliance and institute appropriate testing of its modifications and
replacements in a timely fashion and in advance of the year 2000 date change. It
is anticipated that modification or replacement of the Company's Programs and
Systems will be performed in-house by company personnel. The Company believes
that, with modifications to existing software and conversions to new software,
the year 2000 problem will not pose a significant operational problem for the
Company. However, because most computer systems are, by their very nature,
interdependent, it is possible that non-compliant third party computers may not
interface properly with the Company's computer systems. The Company could be
adversely affected by the year 2000 problem if it or unrelated parties fail to
successfully address this issue. Management of the Company currently anticipates
that the expenses and capital expenditures associated with its year 2000
compliance project will not have a material effect on its financial position or
results of operations.


                                      -16-
<PAGE>   17

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings: Not Applicable

Item 2. Changes in Securities

     (a)  Not applicable.

     (b)  Not applicable.

     (c)  Pursuant to a Service Agreement (the "Agreement") dated effective June
          30, 1997 between the Company and PRN Research, Inc. ("PRN"), the
          Company issued 314,600 shares of common stock, $.01 par value ("Common
          Stock"), to PRN on July 20, 1998. Under the terms of the Agreement,
          the Company will receive as consideration the right to use PRN's sites
          for trials managed or sponsored by the Company, and PRN has agreed to
          promote the Company as PRN's preferred contract research organization
          for clinical trials; to provide scientific review services to the
          Company to evaluate proposed clinical trials; and to assist the
          Company in clinical trials design. The Company will also issue to PRN
          314,600 additional shares of Common Stock in each of 1999 and 2000. In
          addition, the Company will issue to PRN up to 1,255,988 shares should
          the Company meet certain contract research revenue thresholds. The
          Agreement terminates December 31, 2007. The Common Stock was not
          registered under the Securities Act of 1933, as amended (the
          "Securities Act"), pursuant to the exemptions of such registration
          provided under Section 4(2) of the Securities Act and Regulation D
          ("Regulation D") of the rules and regulations promulgated under the
          Securities Act by the Securities and Exchange Commission. The Company
          relied upon certain representations and warranties of PRN, including,
          among other things, as to its status as an accredited investor (as
          that term is defined in Rule 501(a) of Regulation D), and that the
          Common Stock was acquired solely for its own account for investment
          and not with a view to distribution.


Item 3. Defaults Upon Senior Securities: Not Applicable

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

     (a)  The Annual Meeting of Stockholders was held on May 20, 1998.

     (b)  Annual Meeting of Shareholders or until their successors have been
          elected and qualified:

                Gary V. Woods                Richard L. Love
                A. Dana Callow, Jr.          John L. Cassis
                Jason S. Fisherman, M.D      Ruskin C. Norman, M.D.
                Daniel D. Von Hoff, M.D.     Joseph S. Bailes, M.D.


                                      -17-
<PAGE>   18

     (c)  (1) The directors in (b) above were elected by the following votes:

<TABLE>
<CAPTION>
          Nominee                       Shares Voted For       Shares Withheld
          -------                       ----------------       ---------------
<S>                                     <C>                    <C>  
          Gary V. Woods                    8,796,344                7,750
          Richard L. Love                  8,796,244                7,850
          A. Dana Callow, Jr.              8,796,044                8,050
          John L. Cassis                   8,796,344                7,750
          Jason S. Fisherman, M.D          8,796,244                7,850
          Ruskin C. Norman, M.D.           8,796,344                7,750
          Daniel D. Von Hoff, M.D.         8,796,244                7,850
          Joseph S. Bailes, M.D.           8,796,044                8,050
</TABLE>

          (2) that with respect to the proposal to approve and amend the
     Company's 1995 Stock Option Plan to increase the number of shares
     authorized for issuance under the 1995 Stock Option Plan to 1,800,000,
     7,737,922 shares of Common Stock were voted "For", 88,635 shares were voted
     "Against" and 4,640 shares abstained from voting;

          (3) that with respect to the proposal to approve and amend the
     Company's 1996 Non-Employee Director Stock Option Plan to increase the
     number of shares authorized for issuance under the Non-Employee Director
     Stock Option Plan to 225,000, 7,597,079 shares of Common Stock were voted
     "For", 236,593 shares were voted "Against" and 4,700 shares abstained from
     voting;

          (4) that with respect to the proposal to ratify the appointment of
     Arthur Andersen LLP as the Company's independent public accountants for the
     fiscal year ending December 31, 1998, 8,787,336 shares of Common Stock were
     voted "For", 13,608 shares were voted "Against" and 3,150 shares abstained
     from voting.

Item 5. Other Information: Not Applicable

Item 6. Exhibits and Reports on Form 8-K

          (a) Exhibit 10.1*:    Office Building Lease Agreement dated April 8, 
                                1998 between ILEX Oncology, Inc. and N.W.A. 
                                Limited Partnership

              Exhibit 11.1:     Computation of Net Loss Per Share

              Exhibit 27.1:     Financial Data Schedule

          (b) Reports on Form 8-K: Not Applicable


     *Filed herewith


                                      -18-
<PAGE>   19

                                   SIGNATURES


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


                                       ILEX ONCOLOGY, INC.
                                       (Registrant)



Dated:  August 14, 1998                By:        /s/ Richard L. Love
        ---------------                    -------------------------------------
                                           Richard L. Love
                                           President and Chief Executive Officer
                                             (Principal Executive Officer)



Dated:  August 14, 1998                By:        /s/ Michael T. Dwyer
        ---------------                    -------------------------------------
                                           Michael T. Dwyer
                                           Vice President and Chief Financial
                                            Officer
                                             (Principal Financial and Accounting
                                               Officer)


                                      -19-
<PAGE>   20
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT 
NUMBER              DESCRIPTION
-------             -----------
<S>                 <C>
 10.1*              Office Building Lease Agreement dated April 8, 
                    1998 between ILEX Oncology, Inc. and N.W.A. 
                    Limited Partnership

 11.1               Computation of Net Loss Per Share

 27.1               Financial Data Schedule
</TABLE>