<PAGE>   1
                       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, 1997

                                       OR

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

            For the Transition Period From __________ to __________

                         Commission File Number 0-22147


                              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 July 31, 1997, there were outstanding 12,212,998 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

           Balance Sheets - December 31, 1996 and June 30, 1997            3-4

           Statements of Operations - For the three and six month
           periods ended June 30, 1996 and June 30, 1997                     5

           Statements of Cash Flows - For the six month periods
           ended June 30, 1996 and June 30, 1997                             6

           Notes to Financial Statements                                   7-8

Item 2:    Management's Discussion and Analysis of Financial Condition    9-14
           and Results of Operations


PART II.   OTHER INFORMATION

Items 1-6: Other Information                                                15


SIGNATURES                                                                  16
</TABLE>


                                      -2-
<PAGE>   3

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                  ILEX ONCOLOGY, INC. CONDENSED BALANCE SHEETS

              (In Thousands, Except Shares and Per Share Amounts)



<TABLE>
<CAPTION>
                                                                      June 30,
                                                     December 31,      1997
                         ASSETS                         1996        (unaudited)
                         ------                      ------------   -----------
<S>                                                   <C>            <C>     
CURRENT ASSETS:
   Cash and cash equivalents                          $  5,037       $ 25,692
   Investments in marketable securities                  5,768          7,728
   Accounts receivable, net                              2,152          4,270
   Prepaid expenses and other                            1,047            858
                                                      --------       --------

               Total current assets                     14,004         38,548
                                                      --------       --------

NONCURRENT ASSETS:
   Investment in joint venture                             250           (296)
   Investments in marketable securities                 12,179         15,110
                                                      --------       --------

               Total noncurrent assets                  12,429         14,814
                                                      --------       --------

PROPERTY AND EQUIPMENT, NET:
                                                           941          2,407
                                                      --------       --------

                         Total assets                 $ 27,374       $ 55,769
                                                      ========       ========
</TABLE>


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


                                      -3-
<PAGE>   4

                  ILEX ONCOLOGY, INC. CONDENSED BALANCE SHEETS

              (In Thousands, Except Shares and Per Share Amounts)


<TABLE>
<CAPTION>
                                                                           June 30,
                                                            December 31,     1997
                 LIABILITIES AND STOCKHOLDERS' EQUITY          1996      (unaudited)
                 ------------------------------------       -----------  -----------
<S>                                                          <C>         <C>     
CURRENT LIABILITIES:
   Accounts payable-
     Related parties                                         $    250    $     64
     Other                                                        378          90
   Accrued subcontractor costs-
     Related parties                                              345         282
     Other                                                        251         885
   Accrued liabilities                                            568         430
   Deferred revenue                                               530       1,347

               Total current liabilities                        2,322       3,098
                                                             --------    --------
OTHER LONG-TERM LIABILITIES                                       226         354
                                                             --------    --------
COMMITMENTS AND CONTINGENCIES (Note 5)

STOCKHOLDERS' EQUITY:
   Convertible Preferred Stock, $0.01 par value;
     20,000,000 shares authorized-
       Series A; 2,991,477 and none issued and
         outstanding in 1996 and 1997, respectively                30           -
       Series B; 3,101,448 and none issued and
         outstanding in 1996 and 1997, respectively                31           -
       Series C; 1,309,424 and none issued and
         outstanding in 1996 and 1997, respectively                13           -
       Series D; 113,953 and none  issued and
         outstanding in 1996 and 1997, respectively                 1           -
       Series E; 475,753 and none issued and
         outstanding in 1996 and 1997, respectively                 5           -
   Common stock, $0.01 par value; 40,000,000 shares
     authorized; 1,187,539 and 11,893,942 shares
     issued and outstanding in 1996 and 1997, respectively         12         119
   Additional paid-in capital                                  26,218      55,452
   Receivables on sale of common stock                           (111)        (88)
   Accumulated deficit                                         (1,373)     (3,166)
                                                             --------    --------

               Total stockholders' equity                      24,826      52,317
                                                             --------    --------

               Total liabilities and stockholders' equity    $ 27,374    $ 55,769
                                                             ========    ========
</TABLE>


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


                                      -4-
<PAGE>   5

                              ILEX ONCOLOGY, INC.
                            STATEMENTS OF OPERATIONS
                                  (Unaudited)

                    (In Thousands, Except Per Share Amounts)


<TABLE>
<CAPTION>
                                                Three Months             Six Months
                                                   ended                   ended
                                                  June 30,                June 30,
                                            --------------------    --------------------
                                              1996        1997        1996        1997
                                            --------    --------    --------    --------
<S>                                         <C>         <C>         <C>         <C>     
REVENUE:
   Product development                      $    823    $  1,463    $  1,718    $  2,834
   Contract research services                    339       1,583         457       2,827
                                            --------    --------    --------    --------

           Total revenue                       1,162       3,046       2,175       5,661

OPERATING EXPENSES:
   Research and development costs                849       1,810       1,597       3,199
   General and administrative                    557       1,383       1,065       2,382
   Costs of contract research services           263         438         487         990
   Subcontractor costs                           178         937         255       1,388

           Total operating expenses            1,847       4,568       3,404       7,959

OPERATING LOSS                              $   (685)   $ (1,522)   $ (1,229)   $ (2,298)
                                            --------    --------    --------    --------

OTHER INCOME (EXPENSE):
   Equity in loss in joint venture                 -        (442)          -        (546)
   Interest income                               111         639         243       1,051
   Interest expense                                -           -          (4)          -
                                            --------    --------    --------    --------

NET LOSS                                    $   (574)   $ (1,325)   $   (990)   $ (1,793)
                                            ========    ========    ========    ========

NET LOSS PER SHARE                          $   (.07)   $   (.11)   $   (.12)   $   (.15)
                                            ========    ========    ========    ========

WEIGHTED AVERAGE NUMBER OF COMMON           
   STOCK AND COMMON STOCK EQUIVALENTS 
   OUTSTANDING                                 8,206      12,559       8,213      11,744
                                            ========    ========    ========    ========
</TABLE>


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


                                      -5-
<PAGE>   6

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

                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                         Six Months
                                                                           Ended
                                                                          June 30,
                                                                    --------------------
                                                                      1996        1997
                                                                    --------    --------
<S>                                                                 <C>         <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                        $   (990)   $ (1,793)
    Adjustments to reconcile net loss to net cash used in
      operating activities-
       Depreciation and amortization                                      41         146
       Equity in loss in joint venture in excess of distributions          -         546
       Change in assets and liabilities-
         (Increase) decrease in assets-
           Accounts receivable                                          (224)     (2,118)
           Prepaid expenses and other                                    222         189
         Increase (decrease) in liabilities-
           Accounts payable                                             (169)       (474)
           Accrued liabilities                                           (50)        433
           Deferred revenue                                              258         817
           Other long-term liabilities                                     -         128
                                                                    --------    --------

        Net cash used in operating activities                           (912)     (2,126)
                                                                    --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of marketable securities                                 (6,232)     (6,111)
   Maturities of marketable securities                                     -       1,220
   Purchase of property and equipment                                   (210)     (1,612)
                                                                    --------    --------

  Net cash used in investing activities                               (6,442)     (6,503)
                                                                    --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of common stock for cash                                       -      32,032
   Repayments of receivables on sale of common stock                      21          23
   Stock issuance costs paid                                               -      (2,771)
   Repayment of advances from related party                             (305)          -

      Net cash provided by financing activities                         (284)     29,284
                                                                    --------    --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                  (7,638)   $ 20,655

CASH AND CASH EQUIVALENTS, beginning of period                         9,636       5,037
                                                                    --------    --------

CASH AND CASH EQUIVALENTS, end of period                            $  1,998    $ 25,692
                                                                    ========    ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the period for-
       Interest                                                     $      4           -
       Income taxes                                                        -           -
</TABLE>


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


                                      -6-
<PAGE>   7

                              ILEX ONCOLOGY, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                  (Unaudited)
                                 JUNE 30, 1997

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

1.   BASIS OF PRESENTATION:

The accompanying unaudited financial statements of ILEX Oncology, Inc. ("the
Company") have been prepared 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, consisting of normal recurring adjustments, which are necessary
for a fair presentation of financial position and results of operations have
been made. It is recommended that these financial statements be read in
conjunction with the financial statements and notes related thereto included in
the Company's Registration Statement on Form S-1 (File No. 333-17769). Certain
prior period amounts have been reclassified to conform to the current period
presentation.


2.   RECENT ACCOUNTING PRONOUNCEMENTS:

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
establishes standards for computing and presenting earnings per share ("EPS")
for entities with publicly held common stock or potential common stock. SFAS
No. 128 simplifies the standards for computing EPS previously found in
Accounting Principles Board Opinion No. 15, "Earnings Per Share", and makes
them comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS, which excludes dilution. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures. SFAS No. 128 is
effective for fiscal years ending after December 15, 1997, and early adoption
is not permitted. Had SFAS No. 128 been adopted, proforma basic EPS would have
been $(0.16) for the six months ended June 30, 1997, and $(0.83) for the six
months ended June 30, 1996. Proforma June 30, 1996 basic EPS shown excludes
convertible preferred stock which converted to common in the initial public
offering. If this had been included the proforma EPS would have been $(0.14)
per share. Proforma diluted EPS would have been $(0.15) for the six months
ended June 30, 1997 and $(0.12) for the six months ended June 30, 1996.
Management of the Company does not anticipate the adoption of SFAS No. 128 will
have a material impact on the Company's financial position or results of
operation.

In June 1997, the FASB issued SFAS no. 130, "Reporting Comprehensive Income",
which establishes standards for reporting and displaying comprehensive income
and its components in a full set of financial statements. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997, and requires
reclassification of comparative financial statements for earlier periods.
Management of the Company does not anticipate the adoption of SFAS No. 130 will
have a material impact on the Company's financial position or results of
operations.

                                      -7-
<PAGE>   8

In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which establishes standards for reporting
information about operating segments in annual and interim financial
statements. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131
supersedes FASB No. 14, "Financial Reporting for Segments of a Business
Enterprise". Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and
deciding how to allocate resources to segments. SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997. In the
initial year of application, comparative information for earlier periods is to
be restated. Management of the Company does not anticipate the adoption of SFAS
No. 131 will have a material impact on the Company's financial position or
results of operations.

3.   STOCKHOLDERS' EQUITY:

In February 1997, the company completed the initial public offering of its
common stock. 2,500,000 shares of stock were sold at a price of $12 per share.
Coincident with the public offering, all classes of convertible preferred stock
converted into common stock.

In March 1997, the underwriters of the initial public offering, exercised their
option to purchase 200,000 additional shares of common stock to meet certain
over allotments.

4.   INCOME TAXES:

The availability of the Net Operating Loss carryforward 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. The Company experienced a change in
ownership interest in excess of 50 percent as defined under the Code upon the
consummation of its offering of Series B convertible preferred stock. 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, 1996, because the amount of the annual
limitation under the Code of such carryforwards is in excess of the total
amount of net operating loss and tax credit carryforwards. The Company did not
experience a change in ownership as defined in Section 382 of the Code as the
result of its initial public offering.

5.   COMMITMENTS & CONTINGENCIES:

In May 1997, the Company and Leukosite, Inc. formed a joint venture to license
and develop Campath 1-H. The joint venture agreement contemplates that ILEX will
provide up to $5.0 million in funding over the next 2 years, with the initial
funding to occur in the quarter ending September 30, 1997.

6.   SUBSEQUENT EVENT:

In July 1997, the Company entered into a series of collaborative agreements
with Physician Reliance Network, Inc. (PRN) under which ILEX and PRN agree to
jointly market their clinical trial service capabilities. As part of one of
these agreements, ILEX transferred 312,188 shares of ILEX Common Stock to PRN.
ILEX also agreed to issue up to an additional 943,800 shares to PRN over a
three year period and up to an additional 1,255,988 shares over a four year
period based on achievement of certain milestones. Additional shares resulting
from this transaction have not been reflected in results.


                                      -8-
<PAGE>   9

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 facts, 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 Registration Statement on Form S-1 (File No. 333-17769)
made by the Company with the Securities and Exchange Commission.

GENERAL

         ILEX 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.

         During the second quarter of 1997, the Company announced several major
events. In April, ILEX entered into a contract with Eli Lilly and Company
("Lilly") and Physician Reliance Network, Inc. to manage the development of two
drugs for Lilly. In May, the Company announced the creation of a joint venture
with LeukoSite, Inc. to acquire the rights to an additional development
compound, Campath 1-H. In June, the Company presented its work on mitoguazone
("MGBG") to the Oncology Drug Advisory Committee at the Food and Drug
Administration. The committee chose not to recommend mitoguazone for approval.

         ILEX 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 increasing losses for
the foreseeable future as the Company's research and development expenditures
increase. 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 Contract Research Organization ("CRO")
clients, interest income and other miscellaneous income.

         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 1996. It should be read in conjunction with the Interim
Financial Statements of the Company, the Notes thereto and other financial
information included elsewhere in this report.


                                      -9-
<PAGE>   10

RESULTS OF OPERATIONS

         THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED 
JUNE 30, 1996


Operating Revenues

         Total revenue increased from approximately $1.2 million in the second
quarter of 1996 to $3.0 million in the second quarter of 1997. The increase of
approximately $1.8 million, or 162%, was due to an additional $640,000 of
product development revenues and $1.2 million of contract research revenues.
The $640,000 increase in product development revenues, to $1.5 million,
compares to $823,000 in the second quarter of 1996. The increase reflects
additional revenue from license and development agreements entered into in the
fourth quarter of 1996 relating to Piritrexim and Crisnatol. This increase was
partially offset by a decrease in revenues with respect to the development of
mitoguazone. The $1.2 million increase in contract research services revenues,
to $1.6 million, compared to approximately $339,000 in 1996, 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 $1.8 million in the second quarter of 1996 to $4.6 million in the
second quarter of 1997. This increase of approximately $2.8 million, or 147%,
was due to an increase in research and development costs, general and
administrative costs and subcontractor costs.

         Research and Developments Costs. Research and development costs
increased from approximately $849,000 in the second quarter of 1996 to $1.8
million in the second quarter of 1997. This increase of $1.0 million, or 113%,
was primarily attributable to spending approximately $500,000 in connection
with the development of difluoromethylornithine and $200,000 on Campath 1-H.

         General and Administrative Costs. General and administrative costs
increased from approximately $557,000 in the second quarter of 1996 to $1.4
million in the second quarter 1997. This increase of $826,000, or 148%, is
primarily attributable to increases in rental expense, business development
activities, legal costs and compensation related to additional administrative
staff.

         Costs of Contract Research Services. Contract research services costs
increased from $263,000 in the second quarter of 1996 to $438,000 in the second
quarter of 1997. This increase of $175,000, or 67%, is primarily attributable
to increases in expenditures required to support growth in the number and size
of contract research contracts.

         Subcontractor Costs. Subcontractor costs increased from $178,000 in
the second quarter of 1996 to $937,000 in the second quarter of 1997. This
increase of $759,000 is primarily due to increases in expenditures required to
support growth in the Company's contract research services operations.


                                     -10-
<PAGE>   11

Operating Loss

         The loss from operations increased from ($685,000) in the second
quarter of 1996 to ($1.5 million) in the second quarter of 1997. This increase
of ($837,000), or 122%, is primarily attributable to increased spending on
ILEX's portfolio products which have not yet been partnered for development,
including increased spending associated with the development of
difluoromethylornithine.

Equity in Loss in Joint Venture

         Equity in loss in joint venture was ($442,000) in the second quarter
of 1997. Since this joint venture was not formed until December 1996, there
were no expenses for the comparable three month period in 1996.

Net Interest Income

         Net interest income increased from approximately $111,000 in the
second quarter of 1996 to $639,000 in the second quarter of 1997. This increase
of $528,000, or 476%, is attributable to an increase in interest income
resulting from higher average balances of cash, cash equivalents and
investments in marketable securities from proceeds received from ILEX's initial
public offering completed in February 1997, and private placements of the
Company's securities completed in 1996.

Net Income

         The net loss increased ($751,000) during the second quarter of 1997,
or 131%, from ($574,000) in the second quarter of 1996 to ($1.3 million) in the
second quarter of 1997.

Earnings Per Share

         The net loss increased from ($.07) in the second quarter of 1996 to
($.11) in the second quarter of 1997, a change of ($.04) per share.


                                     -11-
<PAGE>   12

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996


Operating Revenues

         Total revenue increased from approximately $2.2 million in the first
half of 1996 to $5.7 million in the first half of 1997. The increase of
approximately $3.5 million, or 160%, was due to an additional $1.1 million of
product development revenues and $2.4 million of contract research revenues.
The $1.1 million increase in product development revenues, to $2.8 million,
compares to $1.7 million in the first half of 1996. The increase reflects
additional revenue from license and development agreements signed in the fourth
quarter of 1996 relating to Piritrexim and Crisnatol. This increase was
partially offset by a decrease in revenues with respect to the development of
mitoguazone. The $2.4 million increase in contract research services revenues,
to $2.8 million, compared to approximately $457,000 in 1996, 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 $3.4 million in the first half of 1996 to $8.0 million in the
first half of 1997. This increase of approximately $4.6 million, or 134%, was
due to an increase in research and development costs, general and
administrative costs and subcontractor costs.

         Research and Developments Costs. Research and development costs
increased from approximately $1.6 million in the first half of 1996 to $3.2
million in the first half of 1997. This increase of $1.6 million, or 100%, was
primarily attributable to spending approximately $1.1 million in connection
with the development of difluoromethylornithine and $200,000 on Campath 1-H.

         General and Administrative Costs. General and administrative costs
increased from approximately $1.1 million in the first half of 1996 to $2.4
million in the first half 1997. This increase of $1.3 million, or 124%, is
primarily attributable to increases in rental expense, legal costs, business
development activities and compensation related to additional administrative
staff.

         Costs of Contract Research Services. Contract research services costs
increased from $487,000 in the first half of 1996 to $990,000 in the first half
of 1997. This increase of $503,000, or 103%, is primarily attributable to
increases in expenditures required to support growth in the number and size of
contract research contracts.

         Subcontractor Costs. Subcontractor costs increased from $255,000 in
the first half of 1996 to $1.4 million in the first half of 1997. This increase
of $1.1 million is primarily due to increases in expenditures required to
support growth in the Company's contract research services operations.


                                     -12-
<PAGE>   13

Operating Loss

         The loss from operations increased from ($1.2 million) in the first
half of 1996 to ($2.3 million) in the first half of 1997. This increase of
($1.1 million), or 87%, is primarily attributable to increased spending on
ILEX's portfolio products which have not yet been partnered for development,
including increased spending associated with the development of
difluoromethylornithine.

Equity in Loss in Joint Venture

         Equity in loss in joint venture was ($546,000) in the first half of
1997. Since this joint venture was not formed until December 1996, there were
no expenses for the comparable six month period in 1996.

Net Interest Income

         Net interest income increased from approximately $239,000 in the first
half of 1996 to $1.1 million in the first half of 1997. This increase of
$812,000, or 340%, is attributable to an increase in interest income resulting
from higher average balances of cash, cash equivalents and investments in
marketable securities from proceeds received from ILEX's initial public
offering completed in February 1997 and private placements of the Company's
securities completed in the second half of 1996.

Net Income

         The net loss increased ($803,000) during the first half of 1997, or
81%, from ($990,000) in the first half of 1996 to ($1.8 million) in the first
half of 1997.

Earnings Per Share

         The net loss increased from ($.12) in the first half of 1996 to ($.15)
in the first half of 1997, a change of ($.03) per share. This improvement was
primarily attributable to additional dilution from stock sales.

         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,
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.


                                     -13-
<PAGE>   14

INCOME TAXES

     The availability of the NOL carryforward 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. The Company experienced a change in ownership
interest in excess of 50 percent as defined under the Code upon the
consummation of its offering of Series B convertible preferred stock. 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, 1996, because the amount of the annual
limitation under the Code of such carryforwards is in excess of the total
amount of net operating loss and tax credit carryforwards. The Company did not
experience a change in control under the Code as the result of its initial
public offering.

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
collaborative partners under its collaborative agreements and through
fee-for-service or participatory revenues pursuant to contracts with its CRO
clients. 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 drugs that may be developed
for a significant number of years, if at all. ILEX expects research development
expenses to increase significantly for the next several years as its
development programs progress. In addition, general administrative expenses
necessary to support such expanded programs are also expected to increase over
the next several years. As of June 30, 1997, the Company had cash, cash
equivalents and investments in marketable securities of approximately $49.1
million and working capital of approximately $35.5 million. The Company
believes that such amounts will be used primarily to support continued research
and development of its compounds, expand its CRO services business, for general
and administrative expenses and for other general corporate purposes.

         As of June 30, 1997, the Company did not have any 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 continue to increase significantly
each year as it 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.


                                     -14-
<PAGE>   15

                          PART II - OTHER INFORMATION

Item 1.  Legal Proceedings: Not Applicable

Item 2.  Changes in Securities:  Not Applicable

Item 3.  Defaults Upon Senior Securities: Not Applicable

Item 4.  Submission of Matters to a Vote of Security Holders: Not
         Applicable

Item 5.  Other Information: Not Applicable

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibit 10.1*:   Lease Agreement between the Company and N.W.A.
                               Limited Partnership, dated October 16, 1996

              Exhibit 10.2*:   First Amendment to Lease Agreement between the
                               Company and N.W.A. Limited Partnership, dated 
                               March 26, 1997

              Exhibit 10.3*:   Registration Rights Agreement dated July 9, 
                               1997, between the Company and PRN Research, Inc.

              Exhibit 10.4*+:  Service Agreement dated June 30, 1997, between
                               the Company and PRN Research, Inc.

              Exhibit 11.1*:   Computation of Net Loss Per Share

              Exhibit 27.1*:   Financial Data Schedule

                   *Filed herewith

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

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


                                     -15-
<PAGE>   16

                                   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, 1997                By: /s/ RICHARD L. LOVE
                                          -------------------------------------
                                          Richard L. Love
                                          President and Chief Executive Officer
                                            (Principal Executive Officer)



Dated: August 14, 1997                By: /s/ JAMES R. KOCH
                                          -------------------------------------
                                          James R. Koch
                                          Vice President and Chief Financial
                                            Officer
                                                (Principal Financial and
                                                  Accounting Officer)


                                     -16-
<PAGE>   17
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
      EXHIBIT NO.      DESCRIPTION
      -----------      -----------
      <S>              <C>
      Exhibit 10.1*:   Lease Agreement between the Company and N.W.A.
                       Limited Partnership, dated October 16, 1996

      Exhibit 10.2*:   First Amendment to Lease Agreement between the
                       Company and N.W.A. Limited Partnership, dated 
                       March 26, 1997

      Exhibit 10.3*:   Registration Rights Agreement dated July 9, 
                       1997, between the Company and PRN Research, Inc.

      Exhibit 10.4*+:  Service Agreement dated June 30, 1997, between
                       the Company and PRN Research, Inc.

      Exhibit 11.1*:   Computation of Net Loss Per Share

      Exhibit 27.1*:   Financial Data Schedule
</TABLE>

           *Filed herewith

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

                                     -17-