<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 [NO FEE REQUIRED]

                For the Quarterly Period Ended September 30, 1999

                                       OR

    ( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

              For the transition period from _________ to _________

                           Commission File No. 0-20111

                          ARONEX PHARMACEUTICALS, INC.
             (Exact name of Registrant as specified in its charter)

                Delaware                              76-0196535

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

     8707 Technology Forest Place, The Woodlands, Texas        77381-1191
        (Address of principal executive office)                (Zip Code)

       Registrant's telephone number, including area code: (281) 367-1666

         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.

                 CLASS                   OUTSTANDING AT SEPTEMBER 30, 1999
       -----------------------------     ---------------------------------
       Common Stock, $.001 par value              22,788,071 shares


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


<PAGE>   2


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                       QUARTERLY PERIOD SEPTEMBER 30, 1999

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                PAGE
                                                                                                ----
<S>      <C>                                                                                    <C>
Factors Affecting Forward-Looking Statements...................................................   3

PART I.           FINANCIAL INFORMATION

Item 1   Consolidated Financial Statements.....................................................   3

         Consolidated Balance Sheets - December 31, 1998 and September 30, 1999 (unaudited)....   4

         Consolidated Statements of Operations:
           Nine Months Ended September 30, 1998 and September 30, 1999
           (unaudited) and three months ended September 30, 1998 and September
           30, 1999 (unaudited) and for the Period from Inception
           (June 13, 1986) through September 30, 1999 (unaudited)..............................   5

         Consolidated Statements of Comprehensive Income:
           Nine Months Ended September 30, 1998 and September 30, 1999
           (unaudited) and three months ended September 30, 1998 and
           September 30, 1999 (unaudited)......................................................   5

         Consolidated Statements of Cash Flows:
           Nine Months Ended September 30, 1998 and September 30, 1999
           (unaudited) and for the Period from Inception (June 13, 1986)
           through September 30, 1999 (unaudited)..............................................   6

         Notes to Consolidated Financial Statements -September 30, 1999........................   7

Item 2   Management's Discussion and Analysis of Financial
           Condition and Results of Operations.................................................  10

Item 3   Quantitative and Qualitative Disclosures about Market Risk............................  15

PART II.           OTHER INFORMATION

Item 6   Exhibits and Reports on Form 8-K......................................................  16


SIGNATURES ....................................................................................  17
</TABLE>


                                       -2-

<PAGE>   3
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

         This Quarterly Report on Form 10-Q includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The words "anticipate," "believe," "expect," "estimate,"
"project" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, believed, expected, estimated or projected.
For additional discussion of such risks, uncertainties and assumptions, see
"Item 1. Business -- Manufacturing," "-- Sales and Marketing," "-- Patents and
Proprietary Rights," "-- Government Regulation," "-- Competition" and "--
Additional Business Risks" included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998, (the "1998 Form 10-K") and "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "-- Liquidity and Capital Resources" included elsewhere in this
report.

PART I.           FINANCIAL INFORMATION

ITEM 1.       CONSOLIDATED FINANCIAL STATEMENTS

         The following unaudited consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made herein are
adequate to make the information presented not misleading. These consolidated
financial statements should be read in conjunction with the audited financial
statements for the year ended December 31, 1998 included in the 1998 Form 10-K.

         The information presented in the accompanying financial statements is
unaudited, but in the opinion of management, reflects all adjustments (which
include only normal recurring adjustments) necessary to present fairly such
information.


                                       -3-

<PAGE>   4


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


                           CONSOLIDATED BALANCE SHEETS
                  (ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)


                                     ASSETS

<TABLE>
<CAPTION>
                                                                                                         SEPTEMBER 30,
                                                                                      DECEMBER 31,            1999
                                                                                         1998             (UNAUDITED)
                                                                                    ---------------      -------------
<S>                                                                                 <C>                  <C>
Current assets:
   Cash and cash equivalents.................................................       $        11,338      $      15,884
   Short-term investments....................................................                 7,757              7,515
   Accounts receivable.......................................................                   132                857
   Prepaid expenses and other assets.........................................                   260                567
                                                                                    ---------------      -------------
        Total current assets.................................................                19,487             24,823

Long-term investments........................................................                 1,295                927
Furniture, equipment and leasehold improvements, net of accumulated
   depreciation of $2,839 and  $3,319, respectively..........................                 2,263              2,126
                                                                                    ---------------      -------------
        Total assets.........................................................       $        23,045      $      27,876
                                                                                    ===============      =============

                                 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses.....................................       $         5,319      $       3,207
   Accrued payroll...........................................................                   885                830
   Advance from Genzyme......................................................                 2,000                 --
   Current portion of notes payable and obligations under capital leases.....                   219                317
                                                                                    ---------------      -------------
        Total current liabilities............................................                 8,423              4,354

Long-term liabilities:
   Notes payable.............................................................                 1,012              3,618
                                                                                    ---------------      -------------
        Total long-term liabilities..........................................                 1,012              7,972

Commitments and contingencies

Stockholders' equity:
   Preferred stock $.001 par value, 5,000,000 shares authorized,
        none issued and outstanding..........................................                    --                 --
   Common stock $.001 par value, 40,000,000 shares authorized,
        16,379,309 and 22,788,071 shares issued and outstanding,
        respectively.........................................................                    16                 23
   Additional paid-in capital................................................               100,654            112,983
   Common stock warrants.....................................................                    50                959
   Treasury stock............................................................                   (11)               (11)
   Deferred compensation.....................................................                  (380)              (127)
   Unrealized gain on investments............................................                   716                817
   Deficit accumulated during development stage..............................               (87,435)           (94,740)
                                                                                    ---------------      -------------
        Total stockholders' equity...........................................                13,610             19,904
                                                                                    ---------------      -------------
        Total liabilities and stockholders' equity...........................       $        23,045      $      27,876
                                                                                    ===============      =============
</TABLE>


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

                                       -4-

<PAGE>   5


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


                      CONSOLIDATED STATEMENTS OF OPERATIONS
             (ALL AMOUNTS IN THOUSANDS, EXCEPT LOSS PER SHARE DATA)
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                                                                                       PERIOD
                                                                                                                        FROM
                                                                                                                      INCEPTION
                                                             NINE MONTHS ENDED            THREE MONTHS ENDED          (JUNE 13,
                                                                SEPTEMBER 30,                 SEPTEMBER 30,             1986)
                                                          ------------------------      ------------------------       THROUGH
                                                                                                                      SEPT. 30,
                                                             1998           1999           1998           1999           1999
                                                          ---------      ---------      ---------      ---------      ---------
<S>                                                       <C>            <C>            <C>            <C>            <C>
Revenues:
     Interest income ...................................  $   1,013      $   1,030      $     265      $     339      $   7,876
     Research and development grants and contracts .....        329         10,727            136            854         22,514
                                                          ---------      ---------      ---------      ---------      ---------
              Total revenues ...........................      1,342         11,757            401          1,193         30,390

Expenses:
     Research and development ..........................     15,399         15,664          5,532          5,035         91,592
     Purchase of in-process research and development ...         --             --             --             --         11,625
     Selling, general and administrative ...............      2,448          3,141            901          1,414         20,299
     Interest expense and other ........................         41            257             27            143          1,614
                                                          ---------      ---------      ---------      ---------      ---------
              Total expenses ...........................     17,888         19,062          6,460          6,592        125,130
                                                          ---------      ---------      ---------      ---------      ---------

Net loss ...............................................  $ (16,546)     $  (7,305)     $  (6,059)     $  (5,399)     $ (94,740)
                                                          =========      =========      =========      =========      =========

Basic and diluted loss per share .......................  $   (1.07)     $   (0.34)     $   (0.39)     $   (0.24)
                                                          =========      =========      =========      =========

Weighted average shares used in computing basic and
diluted loss per share .................................     15,475         21,365         15,497         22,664
</TABLE>


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
             (ALL AMOUNTS IN THOUSANDS, EXCEPT LOSS PER SHARE DATA)
                                   (UNAUDITED)



<TABLE>
<S>                                                           <C>             <C>            <C>           <C>
Comprehensive income:
 Net loss................................................     $  (16,546)     $   (7,305)    $  (6,059)    $  (5,399)
     Unrealized gain on securities available for sale....             --             101            --            --
                                                              ----------      ----------     ---------     ---------
              Comprehensive income.......................     $  (16,546)     $   (7,204)    $  (6,059)    $  (5,399)
                                                              ==========      ==========     =========     =========
</TABLE>

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

                                       -5-

<PAGE>   6


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (ALL AMOUNTS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                              PERIOD FROM
                                                                                                               INCEPTION
                                                                                                               (JUNE 13,
                                                                                     NINE MONTHS ENDED           1986)
                                                                                       SEPTEMBER 30,            THROUGH
                                                                                 ------------------------    SEPTEMBER 30,
                                                                                   1998           1999           1999
                                                                                 ---------      ---------      ---------
<S>                                                                              <C>            <C>            <C>
Cash flows from operating activities:
   Net loss ................................................................     $ (16,546)     $  (7,305)     $ (94,740)
   Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities:
        Depreciation and amortization ......................................           521            480          5,327
        Loss (gain) disposal of assets .....................................            (2)            --            200
        Compensation expense related to stock, stock options and stock
          warrants .........................................................           432            861          4,644
        Charge for purchase of in-process research and development .........            --             --         11,547
        Acquisition costs, net of cash received ............................            --             --           (270)
        Accrued interest payable converted to stock ........................            --             --             97
        Loss in affiliate ..................................................            --             --            500
   Changes in assets and liabilities:
        Decrease (increase) in accounts receivable .........................           100           (725)          (857)
        Decrease (increase) in prepaid expenses and other assets ...........            90           (307)          (382)
        Increase (decrease) in accounts payable and accrued expenses .......         1,361         (2,167)         3,964
        Decrease in deferred revenue .......................................            --             --           (353)
                                                                                 ---------      ---------      ---------
                  Net cash used in operating activities ....................       (14,044)        (9,163)       (70,323)

Cash flows from investing activities:
   Purchases of investments ................................................       (37,518)       (11,353)      (260,887)
   Sales of investments ....................................................        53,240         12,064        258,997
   Purchase of furniture, equipment and leasehold improvements .............        (1,545)          (343)        (6,422)
   Proceeds from sale of assets ............................................             9             --             63
   Deposits ................................................................           490             --             --
   Investment in affiliate .................................................            --             --           (500)
                                                                                 ---------      ---------      ---------
                  Net cash provided by (used in) investing activities ......        14,676            368         (8,749)

Cash flows from financing activities:
   Proceeds from and increase in notes payable .............................         1,369            923          6,964
   Repayment of notes payable and principal payments under capital
     lease obligations .....................................................          (307)          (219)        (3,030)
   Purchase of treasury stock ..............................................            --             --            (11)
   Proceeds from issuance of stock .........................................            68         12,637         91,033
                                                                                 ---------      ---------      ---------
                  Net cash provided by financing activities ................         1,130         13,341         94,956
                                                                                 ---------      ---------      ---------

Net increase in cash and cash equivalents ..................................         1,762          4,546         15,884
Cash and cash equivalents at beginning of period ...........................         2,029         11,338             --
                                                                                 ---------      ---------      ---------

Cash and cash equivalents at end of period .................................     $   3,791      $  15,884      $  15,884
                                                                                 =========      =========      =========
Supplemental disclosures of cash flow information:
   Cash paid during the period for interest ................................     $      41      $     222      $   1,088
Supplemental schedule of noncash financing activities:
   Conversion of notes payable and accrued interest to common stock ........     $      --      $      --      $   3,043
</TABLE>

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


                                       -6-

<PAGE>   7


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (UNAUDITED)

1.       ORGANIZATION

         Aronex Pharmaceuticals, Inc. (the "Company" or "Aronex
Pharmaceuticals") is a development-stage company that has devoted substantially
all of its efforts to research and product development and has not yet generated
any significant revenues, nor is there any assurance of future revenues. In
addition, Aronex Pharmaceuticals expects to continue to incur losses for the
foreseeable future, and there can be no assurance that Aronex Pharmaceuticals
will successfully complete the transition from a development-stage company to
successful operations. The Company's research and development activities involve
a high degree of risk and uncertainty. The Company's ability to successfully
develop, manufacture and market its proprietary products is dependent upon many
factors. These factors include, but are not limited to, the need for additional
financing, attracting and retaining key personnel and consultants, and
successfully developing manufacturing, sales and marketing operations. The
Company's ability to develop these operations may be immensely impacted by
uncertainties related to patents and proprietary technologies, technological
change and obsolescence, product development, competition, government
regulations and approvals, health care reform, third-party reimbursement and
product liability exposure. Additionally, the Company is reliant upon
collaborative arrangements for research, contractual agreements with corporate
partners, and its exclusive license agreements with The University of Texas M.D.
Anderson Cancer Center. Further, during the period required to develop these
products, the Company will require additional funds which may not be available
to it. Accordingly, there can be no assurance of its future success. See
"Business -- Additional Business Risks" in the 1998 Form 10-K.

         The consolidated balance sheet at September 30, 1999 and the related
consolidated statements of operations and cash flows for the three and nine
month periods ending September 30, 1999 and 1998 and the period from inception
(June 13, 1986) through September 30, 1999 are unaudited. These interim
financial statements should be read in conjunction with the audited financial
statements and related notes included in the 1998 Form 10-K. The unaudited
interim consolidated financial statements reflect all adjustments which are, in
the opinion of management, necessary for a fair statement of results for the
interim periods presented and all such adjustments are of a normal recurring
nature. Interim results are not necessarily indicative of results for a full
year.

2.       ACCOUNTING POLICIES

         Principles of Consolidation

         The consolidated financial statements include the accounts of Aronex
Pharmaceuticals and its wholly owned subsidiary, Aronex Europe Limited. All
material intercompany transactions have been eliminated in consolidation.

         Cash, Cash Equivalents and Short- and Long-Term Investments

         Cash and cash equivalents include money market accounts and investments
with an original maturity of less than three months. At September 30, 1999,
short-term investments include held to maturity securities and available for
sale securities. The held to maturity securities consist of high-grade
commercial paper with a carrying value of $6,698,000 which approximates fair
market value. Available for sale securities consist of Targeted Genetics
Corporation Common Stock with an amortized cost of zero, a fair market value of
$817,000 and an unrealized gain of $817,000. Long-term investments at September
30, 1999 are available for sale securities which are United States
mortgage-backed securities with maturity dates over the next twenty-four years
that have an amortized cost of $927,000, which approximates fair market value.
Aronex Pharmaceuticals currently has no trading securities.


                                       -7-

<PAGE>   8


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


3.        STOCKHOLDERS' EQUITY

          In February 1999, Aronex Pharmaceuticals raised proceeds net of
offering costs of approximately $11.7 million in a public offering of 6,000,000
shares of Common Stock. In connection with this offering, the Company issued
warrants to purchase 600,000 shares of Common Stock at an exercise price of
$3.28 per share. These warrants are exercisable from February 16, 2000 through
February 16, 2004. The fair value of the warrants, $758,400, was recorded in the
accompanying financial statements when they were issued. This amount has been
estimated on the date of the grant using the Black Scholes options pricing model
with the following weighted-average assumptions: a risk-free interest rate of
5.2% with no expected dividends, an expected life of five years and expected
volatility of 113%.

4.        FEDERAL INCOME TAXES

          At December 31, 1998, the Company had net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $102.2 million.
The Tax Reform Act of 1986 provided a limitation on the use of NOL and tax
credit carryforwards following certain ownership changes that could limit the
Company's ability to utilize these NOLs and tax credits. Accordingly, the
Company's ability to utilize the above NOL and tax credit carryforwards to
reduce future taxable income and tax liabilities may be limited. As a result of
the merger with Triplex Pharmaceutical Corporation "Triplex" and API Acquisition
Company, Inc. "API", a change in control as defined by federal income tax law
occurred, causing the use of these carryforwards to be limited and possibly
eliminated. Additionally, because United States tax laws limit the time during
which NOLs and the tax credit carryforwards may be applied against future
taxable income and tax liabilities, the Company may not be able to take full
advantage of its NOLs and tax credit carryforwards for federal income tax
purposes. The carryforwards will begin to expire in 2001 if not otherwise used.
Due to the possibility of not reaching a level of profitability that will allow
for the utilization of the Company's deferred tax assets, a valuation allowance
has been established to offset these tax assets. The Company has not made any
federal income tax payments since inception.

5.        LICENSE, RESEARCH AND DEVELOPMENT AGREEMENT

          In March 1999, Genzyme Corporation ("Genzyme") notified the Company
that they did not intend to exercise their option to acquire the right to market
and sell ATRAGEN(R) worldwide. As a result of the election, the Company has
regained full marketing rights to ATRAGEN(R) on a worldwide basis and the
Company was obligated to repay Genzyme the $2.0 million advance by May 21, 1999
and pay product royalties, including $500,000 in minimum royalties by April 24,
2000. In May 1999, the $2.0 million advance from Genzyme and the $500,000 in
minimum royalties were converted into a $2.5 million convertible note payable to
Genzyme. This note bears interest at 10% per annum with interest payable
semi-annually, and the principal is due May 21, 2002. This note can be converted
into Common Stock of the Company at $4.35 per share at Genzyme's option. In
connection with this financing, the Company issued Genzyme warrants to purchase
50,000 shares of Common Stock at an exercise price of $4.00 per share. These
warrants are exercisable until May 21, 2004. The fair value of the warrants,
$150,000, was recorded in the accompanying financial statements when they were
issued. This amount has been estimated on the date of grant using the Black
Scholes option pricing model with the following weighted-average assumptions: a
risk free interest rate of 5.2% with an expected life of five years and expected
volatility of 114%.

6.        RECENT EVENTS

          In July 1999, an officer of the Company left under a severance
agreement and release. Under the agreement, the Company is obligated to pay this
officer a monthly salary of $13,333 plus certain benefits for a period of 12
months after termination and to accelerate the vesting of certain stock options.
In July 1999, the Company recorded a non-cash compensation expense of $177,600
relating to the stock options.

          On August 4, 1999, the FDA informed the Company that its invitation to
us to discuss the Company's ATRAGEN(R) NDA filing at the Oncologic Drugs
Advisory Committee, or ODAC, on September 17, 1999 had been

                                       -8-

<PAGE>   9


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


withdrawn. The FDA cited deficiencies in our ATRAGEN(R) filing but did not
specify at the time what those deficiencies are or how we might correct them. On
September 24, 1999, the FDA provided the Company with an action letter citing
the deficiencies in the Company's ATRAGEN(R) submission. While the FDA has cited
such deficiencies, the FDA has not notified us of any safety issues associated
with ATRAGEN(R). While no assurances can be given that the deficiencies can be
resolved, management believes that we can effectively address the FDA issues,
and we have already formally advised them of our intention to amend our filing.
Additionally, we will meet with the FDA to address the issues they have raised
and to ensure that these are effectively addressed in our amendment. Once we
have had this meeting, we believe that we will be able to more clearly assess
our revised timetable.

          On October 6, 1999, the Board of Directors of the Company adopted a
shareholder rights plan resulting in the declaration of a dividend distribution
of one preferred stock purchase right for each outstanding share of common stock
of the Company. The shareholder rights plan was designed to deter coercive
takeover tactics and to prevent a change of control from occurring without the
stockholders of the Company receiving fair value.


                                       -9-

<PAGE>   10


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)



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

RESULTS OF OPERATIONS

          OVERVIEW

          Since our inception in 1986, we have primarily devoted our resources
to fund research, drug identification and development. We have been unprofitable
to date and expect to incur operating losses for the next several years as we
expend resources for product research and development, preclinical and clinical
testing and regulatory compliance. We have sustained net losses of approximately
$94.7 million from inception through September 30, 1999. We have primarily
financed our research and development activities and operations through
offerings of securities and research and development collaborations. Our
operating results have fluctuated significantly during each quarter, and we
anticipate that such fluctuations, largely attributable to varying commitments
and expenditures for clinical trials and research and development, will continue
for the next several years.

          Three and Nine Month Periods Ended September 30, 1998 and 1999

          Revenues from research and development grants and contracts increased
528% to $854,000 for the three months ended September 30, 1999 from $136,000 for
the three months ended September 30, 1998. Revenues from research and
development grants and contracts increased 3,152% to $10.7 million for the nine
months ended September 30, 1999 from $329,000 for the nine months ended
September 30, 1998. These increases resulted from $843,000 and $10.7 million in
milestone and development revenue under our license agreement for NYOTRAN(R)
with Abbott Laboratories ("Abbott") for the quarter and nine month periods
ending September 30, 1999.

          Interest income increased by 28% to $339,000 for the three months
ended September 30, 1999 from $265,000 for the three months ended September 30,
1998. Interest income decreased by 2% to $1,030,000 for the nine months ended
September 30, 1999, from $1,013,000 for the nine months ended September 30,
1998. These changes resulted from an increase in the average amount of funds
available for investment for the three months ended September 30, 1999 and a
decrease in the average amount of funds available for the nine months ended
September 30, 1999.

          Research and development expenses decreased by 10% to $5.0 million for
the three months ended September 30, 1999 from $5.5 million for the three months
ended September 30, 1998. The decrease in research and development expenses for
the three months ended September 30, 1999 described above resulted primarily
from a decrease of $1.1 million in clinical trial costs for NYOTRAN(R) as the
trials for this product are in the process of being completed.

          The decrease listed above was offset by the following:

          o    an increase of $184,000 in consulting fees relating to regulatory
               matters concerning NYOTRAN(R) and ATRAGEN(R);
          o    an increase of $100,000 in salaries and payroll costs; and
          o    an increase of $242,000 in drug materials and manufacturing costs
               for ATRAGEN(R).


                                      -10-

<PAGE>   11


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)



          Research and development expenses increased by 2% to $15.7 million for
the nine-month period ending September 30, 1999 from $15.4 million for the
nine-month period ending September 30, 1998. The increase in research and
development expenses for the nine months ended September 30, 1999 described
above resulted primarily from:

          o    an increase of $1.1 million in salaries and payroll costs;
          o    an increase of $432,000 in consulting fees relating to regulatory
               matters concerning NYOTRAN(R) and ATRAGEN(R); and
          o    an increase of $187,000 in outside research consultants and
               contracts.

          The increases listed above were offset by a decrease of $972,000 in
drug materials and manufacturing costs for NYOTRAN(R) and Annamycin, and a
decrease of $231,000 in outside pharmacology and toxicology studies relating
mainly to NYOTRAN(R).

          Selling, general and administrative expenses increased 55% to $1.4
million for the three months ended September 30, 1999 from $901,000 for the
three months ended September 30, 1998. Selling, general and administrative
expenses increased 29% to $3.1 million for the nine months ended September 30,
1999 from $2.4 million for the nine months ended September 30, 1998. This
increase in selling, general and administrative expenses for the three and nine
months ended September 30, 1999 resulted primarily from:

          o   increases of $351,000 and $448,000, respectively, in marketing
              salaries and payroll costs, including deferred compensation. These
              increases were due mainly to expenses under a July 1999 severance
              and release agreement with an officer of the Company;
          o   increases of $302,000 and $353,000 respectively in business
              consultants; and
          o   an increase of $215,000 in marketing expenses relating mainly to
              ATRAGEN(R) for the nine months ended September 30, 1999.

          These increases were partially offset by decreases of $116,000 and
$366,000 in salaries and payroll costs, including deferred stock option
compensation, for general and administrative personnel. Salary and payroll costs
were less in 1999 due mainly to termination and severance payments to the
Company's former president recorded in the first quarter of 1998.

          Interest expense and other increased 430% to $143,000 for the three
months ended September 30, 1999 from $27,000 for the three months ended
September 30, 1998. Interest expense and other increased 527% to $257,000 for
the nine months ended September 30, 1999 from $41,000 for the nine months ended
September 30, 1998. The increase in interest expense was primarily due to the
following:

          o   an increase in the balance of notes payable obtained to finance
              furniture and equipment; and
          o   an increase of $2.5 million in notes payable relating to a
              promissory note issued to Genzyme in the second quarter of 1999.

          Net loss decreased by $660,000 resulting in a loss of $5.4 million for
the three months ended September 30, 1999. Net loss decreased by $9.2 million to
$7.3 million for the nine months ended September 30, 1999. These decreases were
due mainly to increased revenue of $792,000 and $10.4 million for the three- and
nine- month periods ending September 30, 1999, respectively.


                                      -11-

<PAGE>   12


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


LIQUIDITY AND CAPITAL RESOURCES

          Since inception, our primary source of cash has been from financing
activities, which have consisted primarily of sales of equity securities. We
have raised an aggregate of approximately $90 million from the sale of equity
securities from our inception through September 30, 1999. In July 1992, we
raised net proceeds of approximately $10.7 million in our initial public
offering of Common Stock. In September 1993, we entered into a collaborative
agreement with Genzyme relating to the development and commercialization of
ATRAGEN(R), in which we received net proceeds of approximately $4.5 million from
the sale of Common Stock to Genzyme. We received the following net proceeds in
public offerings of our Common Stock on the following dates:

          o    November 1993     $11.5 million
          o    May 1996          $32.1 million
          o    February 1999     $11.7 million

          From October 1995 through December 31, 1997, we received aggregate net
proceeds of approximately $6.5 million from the exercise of certain warrants
issued in a 1995 merger. In November 1998, we entered into a license agreement
with Abbott relating to NYOTRAN(R), in which Abbott purchased 837,989 shares of
Common Stock for $3.0 million. Through September 30, 1999, we received an
additional $14.7 million in up-front and milestone payments from Abbott, all of
which are non-refundable.

          In September 1996, Genzyme advanced us $2.0 million relating to a $5.0
million equity milestone. Early in 1997, we amended the agreement through which
(1) we released Genzyme from any further obligation to perform development work
for ATRAGEN(R) and (2) the license granted to Genzyme under the agreement was
converted to an option to acquire the right to market and sell ATRAGEN(R)
worldwide. We retained co-promotion rights in the United States. If Genzyme had
exercised its option, Genzyme would have been required to pay us $3.0 million
and product royalties, and we would have been entitled to retain the $2.0
million advance. In March 1999, Genzyme notified us that they did not intend to
exercise their option. As a result of the election, we regained full marketing
rights to ATRAGEN(R) on a worldwide basis and we were obligated to repay Genzyme
the $2.0 million advance by May 21, 1999 and to pay product royalties, including
$500,000 in minimum royalties by April 24, 2000. In May 1999, the $2.0 million
advance and $500,000 in minimum royalties were converted into a $2.5 million
convertible promissory note payable which bears interest at 10% per annum.

          The majority of our development activities are committed on a
short-term, as-needed basis through contracts and purchase orders. These
arrangements can be changed based on our needs and development activities. We
have contracted with certain clinical research organizations to conduct our
clinical trials outside of the United States for NYOTRAN(R) in the following
indications: cryptococcal meningitis, presumed fungal infections and Aspergillus
salvage. The remaining amount projected to be expended to complete the clinical
research organizations' activities with respect to those indications is less
than $500,000. The agreements provide that we can terminate them at any time,
should either our financial situation or the results of the studies require it.
Nonetheless, we intend to continue to engage clinical research organizations in
the future to monitor our various clinical trials outside of the United States.

          Our primary use of cash to date has been in operating activities to
fund research and development, including preclinical studies and clinical trials
and selling, general and administrative expenses. We used cash of $9.2 million
and $14.0 million in operating activities during the first nine months of 1999
and 1998, respectively. We had cash, cash-equivalents and short-term and
long-term investments of $24.3 million as of September 30, 1999, consisting
primarily of cash and money market accounts, and United States government
securities, common stock and investment grade commercial paper.

                                      -12-

<PAGE>   13


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)



          We have experienced negative cash flows from operations since our
inception and we have funded our activities to date primarily from equity
financing and corporate collaborations. We have expended, and will continue to
require, substantial funds to continue research and development, including
preclinical studies and clinical trials of our products, and to commence sales
and marketing efforts if the U.S. Food and Drug Administration and other
regulatory approvals are obtained.

          We expect that our existing financial resources should be sufficient
to fund our capital requirements into the year 2001. During this period, we
anticipate receiving further payments from Abbott under the license agreement
for NYOTRAN(R); however, these payments are dependent upon performance and are
not guaranteed. In the future, we may need to raise substantial additional
capital to fund our operations.

          We have experienced significant increases in accounts payable and
accrued payroll since 1996, primarily as a result of the increased development
activities relating to our two late-stage products, NYOTRAN(R) and ATRAGEN(R).
We anticipate that the amounts expended for these items in the future will
continue to correspond with our development activities. If the volume of
development activities decreases, there will be a decrease in outstanding
payables and a decrease in our liquidity position. We expect that our expenses
relating to development activities will fluctuate from quarter to quarter over
the next few years as we have not yet generated revenues from product sales. We
have typically obtained debt financing when necessary for equipment, furniture
and leasehold improvement requirements. We expect that we will continue to incur
additional debt to meet our capital requirements from time to time in the
future, based on our financial resources and needs.

          Our capital requirements will depend on many factors, including those
factors more completely described under "Business -- Additional Business Risks"
in our 1998 Form 10K. These factors include:

          o   problems, delays, expenses and complications frequently
              encountered by development-stage companies;
          o   the progress of our research, development and clinical trial
              programs;
          o   the extent and terms of any future collaborative research,
              manufacturing, marketing or other funding arrangements;
          o   the costs and timing of seeking regulatory approvals of our
              products;
          o   our ability to obtain regulatory approvals;
          o   the success of our sales and marketing programs;
          o   the costs of filing, prosecuting and defending and enforcing any
              patent claims and other intellectual property rights; and
          o   changes in economic, regulatory or competitive conditions of our
              planned business.

          Estimates about the adequacy of funding for our activities are based
on certain assumptions, including the assumption that testing and regulatory
procedures relating to our products can be conducted at projected costs. We
cannot assure that changes in our research and development plans, acquisitions,
or other events will not result in accelerated or unexpected expenditures.

          To satisfy our capital requirements, we may seek to raise additional
funds in the public or private capital markets. Our ability to raise additional
funds in the public or private markets on terms favorable to the Company and its
stockholders may have been adversely affected by recent developments regarding
ATRAGEN(R). On August 4, 1999, the FDA informed us that its invitation to us to
discuss our ATRAGEN(R) NDA filing at the Oncologic Drugs Advisory Committee, or
ODAC, on September 17, 1999 had been withdrawn. The FDA cited deficiencies in
our ATRAGEN(R) filing but did not specify at the time what those deficiencies
are or how we might correct them. On September 24, 1999, the FDA provided us
with an action letter citing the deficiencies in our ATRAGEN(R) submission.
While the FDA has cited such deficiencies, the FDA has not notified us of any
safety issues associated with ATRAGEN(R). While no assurances can be given that
the deficiencies can be resolved, management believes that we can effectively
address the FDA issues, and we have already formally advised them of our
intention to amend our filing. Additionally, we will meet with the FDA to
address the issues they have raised and to ensure that these are

                                      -13-

<PAGE>   14


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


effectively addressed in our amendment. Once we have had this meeting, we
believe that we will be able to more clearly assess our revised timetable.

          We may seek additional funding through corporate collaborations and
other financing vehicles. We cannot assure that any funding will be available to
us on favorable terms or at all. If adequate funds are not available, we may be
required to curtail significantly one or more of our programs, or we may be
required to obtain funds through arrangements with future collaborative partners
or other parties that may require us to relinquish rights to some or all of our
technologies or products. If we are successful in obtaining additional
financing, the terms of such financing may have the effect of diluting or
adversely affecting the holdings or the rights of the holders of our Common
Stock.

YEAR 2000

          Year 2000 issues result from the inability of certain computer
programs or computerized equipment to accurately calculate, store or use a date
subsequent to December 31, 1999, typically occurring because such programs or
equipment erroneously interpret the year 2000 as the year 1900. System failure
or miscalculations could result causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send invoices
or engage in similar normal business.

          We are in the process of assessing all of our financial and
operational systems and equipment to ensure year 2000 compliance. We have
completed our initial review of our financial and operational systems and
equipment, with the exception of certain personal computer and network hardware
which we are continuing to assess. Except for the personal computer and network
hardware that remains under assessment, we have either obtained certifications
as to year 2000 compliance from vendors or have tested the year 2000 compliance
of substantially all our systems and equipment, and have taken the steps we
believe will be necessary to remediate year 2000 problems associated with the
systems and equipment that we have determined not to be year 2000 compliant. We
have completed our assessment of our financial and operational systems and
equipment. We believe that the potential impact, if any, of our systems not
being year 2000 compliant could result in the loss of data, which is available
in hard-copy, that would have to be re-entered. We believe that any loss of
computer data will not materially affect our ability to continue our research
and development activities or have a material adverse effect on our business,
results of operations or financial condition. However, this potential loss of
data could result in a material delay in completing clinical studies of our
products which could have a material adverse effect on our business, results of
operations and financial condition.

          We are in the process of contacting our consultants and other
suppliers of goods and services, as well as our corporate partners, to assess
the possible impact of year 2000 compliance of their systems and equipment on
us. We plan to complete our assessment of these matters by November 30, 1999. We
believe that the potential impact, if any, of the systems of our consultants
(including clinical research organizations and hospitals), suppliers and
corporate partners not being year 2000 compliant could result in the loss of
data, which is available in hard-copy, that would have to be re-entered. Any
loss of computer data will not materially affect our ability to continue our
research and development activities. However, this potential loss of data could
result in a material delay in completing clinical studies of our products which
could have a material adverse effect on our business, results of operations and
financial condition.

          Based on our assessments and remediation efforts to date, we do not
anticipate incurring any significant costs relating to the assessment and
remediation of year 2000 issues. To date, we estimate that we have spent less
than $25,000 in reviewing and remediating year 2000 issues and that total
expenditures incurred in completing our review and remediation efforts will not
exceed $100,000. However, we cannot assure that planned expenditures for these
efforts will not exceed such amount should unforeseen complications arise during
such review and assessment or as a result of our remediation efforts or those of
our vendors, consultants or corporate partners. Such expenditures are budgeted
as part of our operating expenses. Also, there can be no assurance that we or
our consultants, suppliers and corporate partners will successfully be able to
identify and remedy all potential year 2000 problems or that a system failure
resulting from a failure to identify any problems would not have a material
adverse effect on us.


                                      -14-

<PAGE>   15


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


          We have developed and are implementing a contingency plan of
maintaining in hard copy form all data that is generated or collected by us or
our collaborators, including clinical research organizations, hospitals,
physicians, consultants and others. Any loss of data due to year 2000 problems
could be re-entered manually. We also maintain all of our accounting records in
hard copy so that we can continue to manually pay vendors, employees,
consultants and collaborators in the event that our accounting software or other
computer programs or systems malfunction due to the year 2000 issue. We also
have keys to the doors of our facilities to enable us to gain access to our
laboratory and offices in the event that the building's security systems
malfunction. We are continuing to review these and related operational
requirements in order to complete our contingency plan for our non-critical
business functions.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

           Not applicable.


                                      -15-

<PAGE>   16


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


PART II.        OTHER INFORMATION

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

    (a) Exhibits

    10.1      Severance Agreement and Release dated July 30, 1999 between the
              Company and Janet Walter.

    10.2      Consulting Agreement dated October 1, 1999 between the Company and
              James R. Butler.

    10.3      Consulting Agreement dated October 1, 1999 between the Company and
              David J. McLachlan.

    11.1      Statement Regarding Computation of Share Earnings.

    27.1      Financial Data Schedule.


    (b) Reports on Form 8-K

        None

                                      -16-

<PAGE>   17


                  ARONEX PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)


                                   SIGNATURES

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



                          ARONEX PHARMACEUTICALS, INC.




Dated:   November 5, 1999           By: /s/ GEOFFREY F. COX
                                       -----------------------------------
                                    Geoffrey F. Cox, Ph.D.
                                    Chief Executive Officer







Dated:   November 5, 1999           By: /s/ TERANCE A. MURNANE
                                       -----------------------------------
                                    Terance A. Murnane
                                    Controller
                                    (Principal Financial and Accounting Officer)


                                      -17-

<PAGE>   18


                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                   DESCRIPTION
-------                  -----------
<S>           <C>
    10.1      Severance Agreement and Release dated July 30, 1999 between the
              Company and Janet Walter.

    10.2      Consulting Agreement dated October 1, 1999 between the Company and
              James R. Butler.

    10.3      Consulting Agreement dated October 1, 1999 between the Company and
              David J. McLachlan.

    11.1      Statement Regarding Computation of Share Earnings.

    27.1      Financial Data Schedule.
</TABLE>