10-K

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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
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                                   FORM 10-K
                            ------------------------

     [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

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

                          COMMISSION FILE NO. 0-16614

                               NEORX CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                              
                  WASHINGTON                                       91-1261311
        (STATE OR OTHER JURISDICTION OF                 (IRS EMPLOYER IDENTIFICATION NO.)
        INCORPORATION OR ORGANIZATION)



            410 WEST HARRISON STREET, SEATTLE, WASHINGTON 98119-4007
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (206) 281-7001

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                          COMMON STOCK, $.02 PAR VALUE
           $2.4375 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK, SERIES 1

     Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                               Yes  X      No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]

     The aggregate market value of voting stock held by nonaffiliates of the
Registrant as of February 28, 2001 was approximately $337 million (based on the
closing price for shares of the Registrant's Common Stock as reported by the
NASDAQ National Market for the last trading date prior to that date). Shares of
Common Stock held by each officer, director and holder of 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

     As of February 28, 2001, approximately 26.2 million shares of the
Registrant's Common Stock, $.02 par value per share, were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

     (1) Portions of the Registrant's 2001 Notice of Annual Meeting and Proxy
         Statement for the Registrant's Annual Meeting of Shareholders to be
         held on May 22, 2001 are incorporated by reference in Part III of this
         Form 10-K.

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                                     PART I

           IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

     This annual report on Form 10-K contains forward-looking statements. These
statements relate to future events or future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expect," "plan," "intend," "anticipate," "believe,"
"estimate," "predict," "potential," "propose" or "continue," the negative of
these terms or other terminology. These statements reflect our current views
with respect to future events and are based on assumptions and are subject to
risks and uncertainties. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. We discuss many of these risks in
greater detail under the heading "Risk Factors" below. Also, these
forward-looking statements represent our estimates and assumptions only as of
the date of this Form 10-K.

     You should read this Form 10-K and the documents that we incorporate by
reference completely and with the understanding that our actual results,
performance and achievements may be materially different from any future
results, performance or achievements expressed or implied by the forward-looking
statements.

                                  RISK FACTORS

     This section briefly discusses certain risks that should be considered by
shareholders and prospective investors in NeoRx. Many of these risks are
discussed in other contexts in other sections of this report.

WE HAVE A HISTORY OF OPERATING LOSSES, WE EXPECT TO CONTINUE TO INCUR LOSSES,
AND WE MAY NEVER BECOME PROFITABLE.

     We have not been profitable for any year since our formation in 1984. As of
December 31, 2000, we had an accumulated deficit of $159 million. These losses
have resulted principally from costs incurred in our research and development
programs and from our general and administrative costs. To date, we have been
engaged only in research and development activities and have not generated any
significant revenues from product sales. We do not anticipate that any of our
proposed products will be commercially available for several years. We expect to
incur additional operating losses in the future. These losses may increase
significantly as we expand development and clinical trial efforts. Our ability
to achieve long-term profitability is dependent upon obtaining regulatory
approvals for our proposed products and successfully commercializing our
products alone or with third parties. However, our operations may not be
profitable even if we succeed in commercializing any of our products under
development.

WE WILL NEED TO RAISE ADDITIONAL CAPITAL, AND OUR FUTURE ACCESS TO CAPITAL IS
UNCERTAIN.

     It is expensive to develop cancer therapy products and conduct clinical
trials for these products. We plan to continue to simultaneously conduct
clinical trials and preclinical research for a number of different cancer
therapy products, which is costly. Our future revenues may not be sufficient to
support the expense of our operations and the conduct of our clinical trials and
preclinical research. We will need to raise additional capital:

     - to fund operations;

     - to continue the research and development of our therapeutic products; and

     - to commercialize our proposed products.

     We believe that our existing funds will be sufficient to satisfy our
financing requirements through at least the second quarter of 2002. However, we
may need additional financing within this time frame depending on a number of
factors, including the following:

     - the rate of progress and costs of our research and development and
       clinical trial activities;

     - the costs of developing manufacturing operations;
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     - the costs of developing marketing operations, if we undertake those
       activities;

     - the amount of milestone payments we might receive from potential
       collaborators;

     - our degree of success in commercializing our cancer therapy products;

     - the emergence of competing technologies and other adverse market
       developments;

     - changes in or terminations of our existing collaborations and licensing
       arrangements; and

     - the costs of preparing, filing, prosecuting, maintaining and enforcing
       patent claims and other intellectual property rights.

     We may not be able to obtain additional financing on favorable terms or at
all. If we are unable to raise additional funds when we need them, we may be
required to delay, reduce or eliminate some or all of our development programs
and some or all of our clinical trials. We also may be forced to partner with
third parties to develop or commercialize products or technologies that we
otherwise would have sought to develop independently. If we raise additional
funds by issuing equity securities, further dilution to shareholders may result,
and new investors could have rights superior to current security holders.

OUR POTENTIAL PRODUCTS MUST UNDERGO RIGOROUS CLINICAL TESTING AND REGULATORY
APPROVALS, WHICH COULD BE COSTLY, TIME CONSUMING, SUBJECT US TO UNANTICIPATED
DELAYS OR PREVENT US FROM MARKETING ANY PRODUCTS.

     The manufacture and marketing of our proposed products and our research and
development activities are subject to regulation for safety, efficacy and
quality by the U.S. Food and Drug Administration in the United States and
comparable authorities in other countries.

     The process of obtaining FDA and other required regulatory approvals,
including foreign approvals, is expensive and often takes many years and can
vary substantially based upon the type, complexity and novelty of the products
involved. Our Skeletal Targeted Radiation, which we call STR, and PRETARGET(R)
products are novel; therefore, regulatory agencies lack experience with them.
This may lengthen the regulatory review process, increase our development costs
and delay or prevent commercialization of our STR and PRETARGET(R) products. Our
current STR studies were placed on clinical hold after some phase I/II patients
in our STR multiple myeloma trials developed a serious late toxicity. The FDA
has requested that we collect additional dosimetry data from patients to
demonstrate the accuracy of the method we propose to use to calculate dose in
our phase III trial. Our phase III STR trials may be delayed until the dosimetry
trial is completed. The FDA has also suggested that we analyze our patient data
to determine the relevant factors for selecting a radiation dose likely to
produce an appropriate safety profile. Our current STR phase III protocol could
be modified based on this analysis. Our trials cannot begin until we receive
authorization from the FDA.

     No cancer products using our STR or PRETARGET(R) technologies have been
approved for marketing. Consequently, there is no precedent for the successful
commercialization of products based on our technologies. In addition, we have
had only limited experience in filing and pursuing applications necessary to
gain regulatory approvals. This may impede our ability to obtain timely FDA
approvals, if at all. We will not be able to commercialize any of our potential
products until we obtain FDA approval, and consequently any delay in obtaining,
or inability to obtain, FDA approval could harm our business.

     If we violate regulatory requirements at any stage, whether before or after
marketing approval is obtained, we may be fined, forced to remove a product from
the market and experience other adverse consequences, including delay, which
could materially harm our financial results. Additionally, we may not be able to
obtain the labeling claims necessary or desirable for the promotion of our
proposed products. We may also be required to undertake post-marketing trials.
In addition, if others or we identify side effects after any of our products are
on the market, or if manufacturing problems occur, regulatory approval may be
withdrawn and reformulation of our products, additional clinical trials, changes
in labeling of our products, and additional marketing applications may be
required.

     The requirements governing the conduct of clinical trials, manufacturing
and marketing of our proposed products outside the United States vary widely
from country to country. Foreign approvals may take longer to

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obtain than FDA approvals and can involve additional testing. Foreign regulatory
approval processes include all of the risks associated with the FDA approval
processes. Also, approval of a product by the FDA does not ensure approval of
the same product by the health authorities of other countries.

WE MAY TAKE LONGER TO COMPLETE OUR CLINICAL TRIALS THAN WE PROJECT, OR WE MAY BE
UNABLE TO COMPLETE THEM AT ALL.

     Although for planning purposes we project the commencement, continuation
and completion of our clinical trials, a number of factors, including scheduling
conflicts with participating clinicians and clinical institutions and
difficulties in identifying and enrolling patients who meet trial eligibility
criteria, may cause significant delays. We may not commence or complete clinical
trials involving any of our products as projected or may not conduct them
successfully.

     We rely on academic institutions or clinical research organizations to
conduct, supervise or monitor some or all aspects of clinical trials involving
our proposed products. We will have less control over the timing and other
aspects of those clinical trials than if we conducted them entirely on our own.
If we fail to commence or complete, or experience delays in, any of our planned
clinical trials, our stock price and our ability to conduct our business as
currently planned could be harmed.

IF TESTING OF A PARTICULAR PRODUCT DOES NOT YIELD SUCCESSFUL RESULTS, WE WILL BE
UNABLE TO COMMERCIALIZE THAT PRODUCT.

     Our research and development programs are designed to test the safety and
efficacy of our proposed products in humans through extensive preclinical and
clinical testing. We may experience numerous unforeseen events during, or as a
result of, the testing process that could delay or prevent commercialization of
our proposed products, including the following:

     - safety and efficacy results attained in early human clinical trials may
       not be indicative of results that are obtained in later clinical trials;

     - the results of preclinical studies may be inconclusive, or they may not
       be indicative of results that will be obtained in human clinical trials;

     - after reviewing test results, we or any potential collaborators may
       abandon projects that we previously believed were promising;

     - our potential collaborators or regulators may suspend or terminate
       clinical trials if the participating subjects or patients are being
       exposed to unacceptable health risks; and

     - the effects our potential products have may not be the desired effects or
       may include undesirable side effects or other characteristics that
       preclude regulatory approval or limit their commercial use if approved.

     Clinical testing is very expensive, can take many years, and the outcome is
uncertain. We cannot at this time predict if, when or under what conditions we
will be permitted to restart our STR phase III trial or our other STR clinical
trials. The data collected from our clinical trials may not be sufficient to
support approval by the FDA of our proposed STR multiple myeloma product, or any
of our other proposed products. The clinical trials of our proposed STR multiple
myeloma product, and our other products under development, may not be completed
on schedule and the FDA may not ultimately approve any of our product candidates
for commercial sale. Our failure to adequately demonstrate the safety and
efficacy of a cancer therapy product under development would delay or prevent
regulatory approval of the product, which could prevent us from achieving
profitability.

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WE ARE DEPENDENT ON SUPPLIERS FOR THE TIMELY DELIVERY OF MATERIALS AND SERVICES
AND MAY EXPERIENCE IN THE FUTURE INTERRUPTIONS IN SUPPLY.

     To be successful, we need to develop and maintain reliable and affordable
third party suppliers of:

     - commercial quantities of holmium-166, the form of radiation used in our
       STR product, and yttrium-90, the form of radiation used in our
       PRETARGET(R) program;

     - the chemical agent used in our STR product to deliver holmium-166 to the
       bone; and

     - the antibodies and proteins used in our PRETARGET(R) program.

     Sources of some of these materials are limited, and we may be unable to
obtain these materials in amounts and at prices necessary to successfully
commercialize our proposed products. Timely delivery of materials is critical to
our success. For example, holmium-166, the form of radiation used in our STR
product, loses its effectiveness for treating patients within a short period of
time. As a result, our suppliers must ship the STR product to the patient within
24-hours after it is manufactured. Failures or delays in the manufacturing and
shipping processes could compromise the quality and effectiveness of our
products. We currently depend on a single source vendor for the holmium-166
component of our STR product. We plan to establish an additional supplier for
this material, but this may take several years. There are, in general,
relatively few alternative sources of holmium-166. While the current vendor
generally has provided us these materials with acceptable quality, quantity and
cost in the past, it may be unable or unwilling to meet out future demands. If
we have to switch to a replacement vendor, the manufacture and delivery of our
products could be interrupted for an extended period.

     We have entered into an arrangement with the University of Missouri
research reactor facility group, also known as MURR, to produce holmium-166.
MURR currently is responsible for the manufacture of holmium-166, including
process qualification, quality control, packaging and shipping, from its
Columbia, Missouri reactor facility. Our business and operations could be
materially adversely affected if MURR does not perform satisfactorily under this
arrangement. We plan to negotiate a long-term supply contract with MURR. If we
are unable to negotiate a long-term contract in a timely fashion upon favorable
terms, or if MURR is unable or unwilling to provide supplies of holmium-166
under such contract in a satisfactory manner, we may suffer delays in, or be
prevented from, initiating or completing clinical trials of our STR product.

IF WE FAIL TO NEGOTIATE AND MAINTAIN COLLABORATIVE ARRANGEMENTS WITH THIRD
PARTIES, OUR MANUFACTURING, CLINICAL TESTING, SALES AND MARKETING ACTIVITIES MAY
BE DELAYED OR REDUCED.

     We rely in part on collaborators and other third parties to perform for us
or assist us with a variety of important functions, including research and
development, manufacturing and clinical trials management. We also license
technology from others to enhance or supplement our technologies. We may not be
able to locate suppliers to manufacture our products at a cost or in quantities
necessary to make them commercially viable. We intend to rely on third party
contract manufacturers to produce large quantities of materials needed for
clinical trials and product commercialization. Third party manufacturers may not
be able to meet our needs with respect to timing, quantity or quality. If we are
unable to contract for a sufficient supply of needed materials on acceptable
terms, or if we should encounter delays or difficulties in our relationships
with manufacturers, our clinical testing may be delayed, thereby delaying the
submission of products for regulatory approval or the market introduction and
subsequent sales of our products. Any such delay may lower our revenues and
potential profitability.

     Moreover, any potential third-party manufacturers and we must continually
adhere to current Good Manufacturing Practices, or cGMP, regulations enforced by
the FDA through its facilities inspection program. If our facilities, or the
facilities of these manufacturers, cannot pass a pre-approval plant inspection,
the FDA will not grant pre-market approval of our cancer therapy products. In
complying with cGMP and foreign regulatory requirements, we and any of our
third-party manufacturers will be obligated to expend time, money and effort in
production, record-keeping and quality control to assure that our products meet
applicable

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specifications and other requirements. If any of our third-party manufacturers
or we fail to comply with these requirements, we may be subject to regulatory
action.

     ABC Laboratories, Inc., which we call ABC, currently is our sole
collaborator manufacturing STR for our pending multiple myeloma clinical trials.
As such, ABC Labs would be responsible for all aspects of the manufacture of
STR, including process qualification, quality control, packaging and shipping.
We believe that ABC's manufacturing facilities will be sufficient to meet our
initial needs for the planned STR multiple myeloma and other STR clinical
trials. In the past, we have experienced interruptions in ABC Labs' STR
manufacturing processes, which if they occur in the future, could result in
material delays in, or prevent us from completing, our clinical trials and
otherwise commercializing our STR product. To help protect against such future
interruptions or delays in supply, on March 20, 2001, we entered into an
agreement with International Isotopes Inc. to purchase International Isotopes'
radiopharmceutical manufacturing facility and certain other assets, located in
Denton, Texas. To acquire these assets, we have agreed to pay $6 million in
cash, assume $6 million of restructured debt of International Isotopes and issue
to International Isotopes a three-year warrant to purchase 800,000 shares of
NeoRx common stock. Completion of the purchase is subject to a number of
conditions of closing, including the sale by International Isotopes of certain
of its other assets to third parties, settlement by International Isotopes of
claims of certain creditors, receipt by International Isotopes of bank financing
for its proposed future operations and delivery by International Isotopes of the
assets free and clear of material liens. Many of the conditions of closing of
the proposed transaction with International Isotopes depend on actions of
parties over which we have no control. The asset purchase agreement can be
terminated by us or by International Isotopes if the closing does not occur by
April 30, 2001. If the purchase is completed by April 30, 2001, we currently
expect this manufacturing facility to be operational in the third quarter of
2001. In this case, the manufacture of STR for clinical trials would be shared
by ABC Labs and NeoRx.

     If we lose or are unable to secure collaborators, or if we are not
successful in acquiring the International Isotopes facility, or if our current
collaborators, including ABC Labs, do not apply adequate resources to their
collaboration with us, our product development and potential for profitability
may suffer. We intend to enter into collaborations for one or more of the
research, development, manufacturing, marketing and other commercialization
activities relating to some of our products under development. If any
collaborator breaches or terminates its agreement with us, or fails to conduct
its collaborative activities in a timely manner, the commercialization of our
products under development could be slowed down or blocked completely. Disputes
may arise between us and ABC Labs or other collaborators on a variety of
matters, including financial or other obligations under our agreements. These
disputes may be both expensive and time consuming and may result in delays in
the development and commercialization of our proposed products.

WE FACE SUBSTANTIAL COMPETITION IN THE DEVELOPMENT OF CANCER THERAPIES AND MAY
NOT BE ABLE TO SUCCESSFULLY COMPETE AND OUR POTENTIAL PRODUCTS MAY BE RENDERED
OBSOLETE BY RAPID TECHNOLOGICAL CHANGE.

     The competition for development of cancer therapies is intense. There are
numerous competitors developing products to treat the diseases for which we are
seeking to develop products. We are initially focusing our STR product on the
treatment of multiple myeloma. Celgene Corporation's thalidomide product is
being sold for multiple myeloma, and Cell Therapeutics, Inc.'s arsenic trioxide
also is being tested in that disease. Some competitors have adopted product
development strategies targeting cancer cells with antibodies. Many emerging
companies, including IDEC Pharmaceuticals, Cytogen Corp. and Coulter
Pharmaceuticals, have corporate partnership arrangements with large, established
companies to support the research, development and commercialization of products
that may be competitive with ours. In addition, a number of established
pharmaceutical companies, including SmithKline Beecham, Nycomed Amersham,
Mallinkrodt, Inc. and Bristol-Myers Squibb, are developing proprietary
technologies or have enhanced their capabilities by entering into arrangements
with, or acquiring, companies with proprietary antibody-based technology or
other technologies applicable to the treatment of cancer. Many of our existing
or potential competitors have, or have access to, substantially greater
financial, research and development, marketing and production resources than we
do and may be better equipped than us to develop, manufacture and market
competing products. Our

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competitors may have, or may develop and introduce, new products that would
render our technology and products under development less competitive,
uneconomical or obsolete.

     We also expect to face increasing competition from universities and other
non-profit research organizations. These institutions carry out a significant
amount of cancer research and development. These institutions are becoming
increasingly aware of the commercial value of their findings and more active in
seeking patent and other proprietary rights, as well as licensing revenues.

IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, WE MAY NOT BE ABLE TO
COMPETE EFFECTIVELY, OR OPERATE PROFITABLY.

     Our success is dependent in part on obtaining, maintaining and enforcing
our patents and other proprietary rights and our ability to avoid infringing the
proprietary rights of others. Patent law relating to the scope of claims in the
biotechnology field in which we operate is still evolving and, consequently,
patent positions in our industry may not be as strong as in other
better-established fields. Accordingly, the United States Patent and Trademark
Office may not issue patents from the patent applications owned by or licensed
to us. If issued, the patents may not give us an advantage over competitors with
similar technology.

     We own more than 100 issued United States patents and have licenses to
additional patents. However, the issuance of a patent is not conclusive as to
its validity or enforceability and it is uncertain how much protection, if any,
will be given to our patents if we attempt to enforce them and they are
challenged in court or in other proceedings, such as oppositions, which may be
brought in foreign jurisdictions to challenge the validity of a patent. A third
party may challenge the validity or enforceability of a patent after its
issuance by the Patent and Technology Office. It is possible that a competitor
may successfully challenge our patents or that a challenge will result in
limiting their coverage. Moreover, the cost of litigation to uphold the validity
of patents and to prevent infringement can be substantial. If the outcome of
litigation is adverse to us, third parties may be able to use our patented
invention without payment to us. Moreover, it is possible that competitors may
infringe our patents or successfully avoid them through design innovation. To
stop these activities we may need to file a lawsuit. These lawsuits are
expensive and would consume time and other resources, even if we were successful
in stopping the violation of our patent rights. In addition, there is a risk
that a court would decide that our patents are not valid and that we do not have
the right to stop the other party from using the inventions. There is also the
risk that, even if the validity of our patents was upheld, a court would refuse
to stop the other party on the ground that its activities do not infringe our
patents.

     In addition to the intellectual property rights described above, we also
rely on unpatented technology, trade secrets and confidential information.
Therefore, others may independently develop substantially equivalent information
and techniques or otherwise gain access to or disclose our technology. We may
not be able to effectively protect our rights in unpatented technology, trade
secrets and confidential information. We require each of our employees,
consultants and advisors to execute a confidentiality agreement at the
commencement of an employment or consulting relationship with us. However, these
agreements may not provide effective protection of our information or, in the
event of unauthorized use or disclosure, they may not provide adequate remedies.

THE USE OF OUR TECHNOLOGIES COULD POTENTIALLY CONFLICT WITH THE RIGHTS OF
OTHERS.

     Our competitors or others may have or acquire patent rights that they could
enforce against us. If they do so, we may be required to alter our products, pay
licensing fees or cease activities. If our products conflict with patent rights
of others, third parties could bring legal actions against us claiming damages
and seeking to enjoin manufacturing and marketing of the affected products. If
these legal actions are successful, in addition to any potential liability for
damages, we could be required to obtain a license in order to continue to
manufacture or market the affected products. We may not prevail in any legal
action and a required license under the patent may not be available on
acceptable terms or at all.

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WE MAY INCUR SUBSTANTIAL COSTS AS A RESULT OF LITIGATION OR OTHER PROCEEDINGS
RELATING TO PATENT AND OTHER INTELLECTUAL PROPERTY RIGHTS.

     The cost to us of any litigation or other proceedings relating to
intellectual property rights, even if resolved in our favor, could be
substantial. Some of our competitors may be better able to sustain the costs of
complex patent litigation because they have substantially greater resources. If
there is litigation against us, we may not be able to continue our operations.
If third parties file patent applications, or are issued patents claiming
technology also claimed by us in pending applications, we may be required to
participate in interference proceedings in the Patent and Trademark Office to
determine priority of invention. We may be required to participate in
interference proceedings involving our issued patents and pending applications.
We may be required to cease using the technology or to license rights from
prevailing third parties as a result of an unfavorable outcome in an
interference proceeding. A prevailing party in that case may not offer us a
license on commercially acceptable terms.

PRODUCT LIABILITY CLAIMS IN EXCESS OF THE AMOUNT OF OUR INSURANCE WOULD
ADVERSELY AFFECT OUR FINANCIAL CONDITION.

     The testing, manufacturing, marketing and sale of the cancer therapy
products that we have under development may subject us to product liability
claims. We are insured against such risks up to a $10 million annual aggregate
limit in connection with clinical trials of our products under development and
intend to obtain product liability coverage in the future. However, insurance
coverage may not be available to us at an acceptable cost, if at all. We may not
be able to obtain insurance coverage that will be adequate to satisfy any
liability that may arise. Regardless of merit or eventual outcome, product
liability claims may result in decreased demand for a product, injury to our
reputation, withdrawal of clinical trial volunteers and loss of revenues. As a
result, regardless of whether we are insured, a product liability claim or
product recall may result in losses that could be material.

OUR USE OF RADIOACTIVE AND OTHER HAZARDOUS MATERIALS EXPOSES US TO THE RISK OF
MATERIAL ENVIRONMENTAL LIABILITIES, AND WE MAY INCUR SIGNIFICANT ADDITIONAL
COSTS TO COMPLY WITH ENVIRONMENTAL LAWS IN THE FUTURE.

     Our research and development and clinical manufacturing processes, as well
as the manufacturing processes used by our collaborators, involve the controlled
use of hazardous and radioactive materials. As a result, we are subject to
foreign, federal, state and local laws, rules, regulations and policies
governing the use, generation, manufacture, storage, air emission, effluent
discharge, handling and disposal of certain materials and wastes in connection
with our use of these materials. Although we believe that our safety procedures
and the safety procedures utilized by our collaborative partners for handling
and disposing of such materials comply with the standards prescribed by such
laws and regulations, we may be required to incur significant costs to comply
with environmental and health and safety regulations in the future. In addition,
the risk of accidental contamination or injury from hazardous and radioactive
materials cannot be completely eliminated. In the event of such an accident, we
could be held liable for any resulting damages, and any such liability could
exceed our resources.

EVEN IF WE BRING PRODUCTS TO MARKET, CHANGES IN HEALTHCARE REIMBURSEMENT COULD
ADVERSELY AFFECT OUR ABILITY TO EFFECTIVELY PRICE OUR PRODUCTS OR OBTAIN
ADEQUATE REIMBURSEMENT FOR SALES OF OUR PRODUCTS.

     The levels of revenues and profitability of biotechnology companies may be
affected by the continuing efforts of government and third-party payors to
contain or reduce the costs of healthcare through various means. For example, in
certain foreign markets pricing or profitability of prescription pharmaceuticals
is subject to governmental control. In the United States, there have been, and
we expect that there will continue to be, a number of federal and state
proposals to implement similar governmental controls. It is uncertain what
legislative proposals will be adopted or what actions federal, state or private
payors for healthcare goods and services may take in response to any healthcare
reform proposals or legislation. Even in the absence of statutory change, market
forces are changing the healthcare sector. We cannot predict the effect
healthcare reforms may have on the development, testing, commercialization and
marketability of our cancer therapy products. Further, to the extent that such
proposals or reforms have a material adverse effect on the business,
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financial condition and profitability of other companies that are prospective
collaborators for certain of our potential products, our ability to
commercialize our products under development may be adversely affected. In
addition, both in the United States and elsewhere, sales of prescription
pharmaceuticals depend in part on the availability of reimbursement to the
consumer from third-party payors, such as governmental and private insurance
plans. Third-party payors are increasingly challenging the prices charged for
medical products and services. If we succeed in bringing one or more products to
market, we cannot be certain that these products will be considered
cost-effective and that reimbursement to the consumer will be available or will
be sufficient to allow us to sell our products on a competitive or profitable
basis.

THE LOSS OF KEY EMPLOYEES COULD ADVERSELY AFFECT OUR OPERATIONS.

     We are a small company with fewer than 70 employees. Our success depends,
to a significant extent, on the continued contributions of our principal
management and scientific personnel. The loss of the services of one or more of
our key personnel, including Paul G. Abrams, Chief Executive Officer of the
Company, and other principal members of our scientific and management staff,
could delay our product development programs and our research and development
efforts. We do not maintain key person life insurance on any of our officers,
employees or consultants.

     Competition for qualified employees among companies in the biotechnology
and biopharmaceutical industry is intense. Our future success depends upon our
ability to attract, retain and motivate highly skilled employees. In order to
commercialize our proposed products successfully, we may be required to expand
substantially our workforce, particularly in the areas of manufacturing,
clinical trials management, regulatory affairs, business development and sales
and marketing. These activities will require the addition of new personnel,
including management, and the development of additional expertise by existing
management personnel.

OUR STOCK PRICE IS VOLATILE AND, AS A RESULT, YOU COULD LOSE SOME OR ALL OF YOUR
INVESTMENT.

     There has been a history of significant volatility in the market prices of
securities of biotechnology companies, including our common stock, and it is
likely that the market price of our common stock will continue to be highly
volatile. Our business and the relative prices of our common stock may be
influenced by a large variety of industry factors, including:

     - announcements by us or our competitors concerning acquisitions, strategic
       alliances, technological innovations and new commercial products;

     - the availability of critical materials used in developing our products;

     - the results of clinical trials;

     - developments concerning patents, proprietary rights and potential
       infringement; and

     - the expense and time associated with and the extent of our ultimate
       success in securing government approvals.

     In addition, public concern about the safety of the products we develop,
comments by securities analysts, and general market conditions may have a
significant effect on the market price of our common stock. The realization of
any of the risks described in this report, as well as other factors, could have
a material adverse impact on the market price of our common stock and may result
in a loss of some or all of your investment.

     In the past, securities class action litigation has often been brought
against companies following periods of volatility in their stock prices. We may
in the future be the targets of similar litigation. Securities litigation could
result in substantial costs and divert our management's time and resources,
which could cause our business to suffer.

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CERTAIN PROVISIONS IN OUR ARTICLES OF INCORPORATION AND WASHINGTON STATE LAW
COULD DISCOURAGE A CHANGE OF CONTROL OF NEORX.

     Our articles of incorporation authorize our board of directors to issue up
to 3,000,000 shares of preferred stock and to determine the price, rights,
preference, privileges and restrictions, including voting rights, of those
shares without any further vote or action by our shareholders. The issuance of
preferred stock could have the effect or delaying, deferring or preventing a
change of control of NeoRx, even if this change would benefit our shareholders.
In addition, the issuance of preferred stock may adversely affect the market
price of our common stock and the voting and other rights of the holders of our
common stock.

     We have adopted a shareholders' rights plan, which is intended to protect
the rights of shareholders by deterring coercive or unfair takeover tactics. The
board of directors declared a dividend to holders of our common stock of one
preferred share purchase right for each outstanding share of the common stock.
The right is exercisable ten days following the offer to purchase or acquisition
of beneficial ownership of 20% of the outstanding common stock by a person or
group of affiliated persons. Each right entitles the registered holder, other
than the acquiring person or group, to purchase from NeoRx one-hundredth of one
share of Series A Junior Participating Preferred Stock at the price of $40,
subject to adjustment. The rights expire April 10, 2006. In lieu of exercising
the right by purchasing one one-hundredth of one share of Series A Preferred
Stock, the holder of the right, other than the acquiring person or group, may
purchase for $40 that number of shares of our common stock having a market value
of twice that price.

     Washington law imposes restrictions on some transactions between a
corporation and significant shareholders. Chapter 23B.19 of the Washington
Business Corporation Act prohibits a target corporation, with some exceptions,
from engaging in particular significant business transactions with an acquiring
person, which is defined as a person or group of persons that beneficially owns
10% or more of the voting securities of the target corporation, for a period of
five years after the acquisition, unless the transaction or acquisition of
shares is approved by a majority of the members of the target corporation's
board of directors prior to the acquisition. Prohibited transactions include,
among other things:

     - a merger or consolidation with, disposition of assets to, or issuance or
       redemption of stock to or from the acquiring person;

     - termination of 5% or more of the employees of the target corporation; or

     - receipt by the acquiring person of any disproportionate benefit as a
       shareholder.

     A corporation may not opt out of this statute. This provision may have the
effect of delaying, deterring or preventing a change in control of NeoRx.

ITEM 1. BUSINESS

THE COMPANY

     NeoRx is developing innovative products designed to provide improved,
cost-effective treatments for patients with cancer. Our lead product candidate
is named Skeletal Targeted Radiotherapy, which we call STR. We completed
enrollment of the phase I/II clinical trials of STR in multiple myeloma in 2000.
In September 2000, we initiated phase III clinical trials of our STR product
combined with chemotherapy for the treatment of multiple myeloma. In November
2000, we received a letter from the FDA suspending enrollment and treatment
under our phase III trials in multiple myeloma and other STR studies after a
serious delayed side effect appeared in a number of phase I/II patients who
received STR. We are in continuing communications with the FDA regarding the
removal of our proposed STR product from clinical hold. Communications with the
FDA to date have focused on:

     - the relevant factors for selecting a safe radiation dose, and

     - the accuracy of radiation dose calculations.

     The FDA has requested that we collect additional dosimetry data from
patients to demonstrate the accuracy of the method we propose to use to
calculate dose in our phase III STR trial. We expect to file a

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protocol for this study with the FDA shortly involving a limited number of
patients. Our STR trials may be delayed until this study is completed. The FDA
has suggested that we analyze our patient data to determine the relevant factors
for selecting a radiation dose that is likely to have the appropriate safety
profile. Our current STR phase III protocol may be modified based upon this
analysis. We currently cannot predict if, when or under what conditions we will
be permitted to start our phase III STR trials. Our STR trials cannot begin
until we receive authorization from the FDA.

     We also are developing a proprietary PRETARGET(R) program to deliver
radiation therapy, and potentially other anti-cancer agents, directly to tumor
sites. This program employs antibody fragments that target cancer cells.
Antibodies are proteins produced by certain white blood cells in the body's
immune system in response to foreign substances (antigens), such as viruses,
bacteria, toxins and specific types of cancer cells. An antibody will recognize
and bond specifically only to a single type of antigen. With PRETARGET(R)
technology, a fragment of an antibody that will bond with tumor cells is
administered to the patient prior to radiation therapy. A radioactive drug is
subsequently administered to the patient. The radioactive drug is formulated to
attach to the antibody fragment that has already bonded to the patient's tumor.
Any drug that does not attach to the antibody fragment is rapidly eliminated in
the patient's urine.

     We began phase I clinical trials of our PRETARGET(R) technology in patients
with cancers of the lymph cells (lymphomas) in December 2000. A competitive
award from the Small Business Innovative Research program of the National
Institutes of Health sponsors development of this lymphoma product, in part. We
also are developing PRETARGET(R) therapeutics that may be useful for the
treatment of cancers of the lung, breast, ovary, colon, rectum and pancreas.
Phase I PRETARGET(R) clinical trials in patients with pancreatic and other
cancers of the gastrointestinal tract are expected to begin in 2001.

PRODUCTS

  Cancer and Its Treatment

     Cancer is second only to cardiovascular disease as a cause of death in the
United States. The American Cancer Society estimates that approximately
1,220,000 new cases of cancer will be diagnosed in the United States in 2000, of
which more than 50% are expected to be tumors of the lung, colon, breast and
prostate. Cancer is a large group of diseases characterized by uncontrolled cell
proliferation. Cancer cells have the tendency to dislodge from the sites where
the tumors originate and spread to other parts of the body (a process called
metastasis), where they invade and destroy the organs in which they are growing.

     Current treatments of cancer include surgery, external-beam radiation,
chemotherapy, hormone therapy for some tumors and, more recently, certain
biological agents such as interferons and antibodies. With some exceptions,
chemotherapy is the primary therapy for tumors that have spread throughout the
body. However, chemotherapy provides only modest benefits to patients with the
most frequently occurring malignancies, such as lung, colon and breast cancers.
Generally, relatively low benefit and considerable toxicity characterizes
existing cancer therapy for these high-incidence tumors.

     Chemotherapy drugs are usually administered intravenously so that the drug
can circulate throughout the body to reach the metastases. As chemotherapy drugs
circulate, they kill cancer cells, but can also kill normal cells. Consequently,
cancer patients receiving chemotherapy often suffer severe, sometimes
life-threatening side effects, such as damage to bone marrow, lungs, heart,
kidneys and nerves. Therefore, the optimal drug dose for killing cancer cells
must often be reduced to avoid intolerable damage to normal cells and vital
organs.

     We believe that improved cancer therapies will arise from one of two
approaches:

     - inhibiting a process that is both unique and critical to the tumor; or

     - targeting more generally toxic agents preferentially to tumors.

     NeoRx's proposed STR and PRETARGET(R) product focus on the second approach.

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  Skeletal Targeted Radiotherapy (STR)

     Multiple myeloma is a cancer involving the malignancy of plasma cells,
which are found in the bone marrow. Current treatments for this disease have had
limited success. With conventional chemotherapy, disease disappears completely
(a complete response) in only about 15% of patients. The median survival of all
myeloma patients is approximately 2-3 years from treatment. Over the last
decade, high-dose chemotherapy with stem cell transplantation has been shown to
be superior to conventional chemotherapy for multiple myeloma.

     Our proposed STR product uses a targeting principle to deliver a specific
kind of radiation, holmium-166, to bone where it is designed to destroy both
tumor cells and normal cells in the marrow. The patient then receives an
infusion of cells harvested from the patient prior to exposure to treatment.
These cells are designed to repopulate the bone marrow so that the patient can
make normal red cells, white cells and platelets. We believe that STR may
represent an important advancement in cancer therapy to deliver high doses of
radiation to the bone and marrow cavity without simultaneously causing
significant damage to multiple organs outside the bone.

     In mid-1998 NeoRx began phase I studies of STR combined with standard
therapies in patients with multiple myeloma. In mid-2000 the Company completed
patient enrollment on the phase I/II studies combining the highest STR dose
tested with high dose melphalan, a chemotherapy drug. As of the end of 2000, 28
of 65 patients who had been evaluated achieved complete remission, defined as
the absence of cancer cells in the bone marrow and the elimination of all signs
of the characteristic mycelia protein as assessed by sensitive biochemical
techniques.

     Two methods were used to calculate the average dosage to marrow in the
phase I/II trials. Using the more conservative calculation, some patents in the
high-dose STR groups received 40Gy and others received 48Gy. Of the 32 patients
treated in these high-dose groups, 10 of 18 evaluated as of the end of 2000 had
complete remission: three of six at the 40Gy does and seven of 12 at the 48 Gy
dose. Our current phase III trial protocol uses the more conservative method
(40Gy) to calculate average dose to marrow.

     In September 2000, we initiated phase III clinical trials of our STR
product for multiple myeloma. In November 2000, we suspended enrollment and
treatment on our STR trials pending FDA review and receipt of FDA approval to
proceed with those trials. Our STR trials were suspended because a delayed side
effect, referred to as TTP/HUS (thrombotic thrombocytopenic purpura/hemolytic
uremic syndrome), appeared in a number of phase I/II patients who received STR.
TTP/HUS involves a combination of symptoms, including abnormal clotting of blood
in small blood vessels. This can lead to anemia, a low platelet count that can
result in bleeding, and potential damage to organs. Although relatively
uncommon, TTP/HUS has many potential triggering causes, including food
contamination, toxic shock syndrome, post-viral infection, bone marrow
transplantation and drug effects. Each of the affected patients had at least two
known potential triggers of TTP/HUS.

     We are in continuing communications with the FDA regarding the removal of
our proposed STR product from clinical hold. Communications with the FDA to date
have focused on:

     - the relevant factors for selecting a safe radiation dose, and

     - the accuracy of radiation dose calculations.

     The FDA has requested that we collect additional dosimetry data from
patients to demonstrate the accuracy of the method we propose to use to
calculate dose in our phase III STR trial. We expect to file a protocol for this
study with the FDA shortly involving a limited number of patients. Our phase III
STR trials may be delayed until this study is completed. The FDA has suggested
that we analyze our patient data to determine the relevant factors for selecting
a radiation dose that is likely to have the appropriate safety profile. Our
current STR phase III protocol may be modified based upon this analysis. We
currently cannot predict if, when or under what conditions we will be permitted
to start our phase III STR trials.

     The actual period of the delay of our phase III clinical trials will depend
on the additional time, if any, that the Company requires to conduct additional
studies and institute any protocol changes requested by the
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FDA. We cannot at this time predict the extent and potential costs of the delay
or its effect on the Company's financial condition and results of operations or
if, when and under what conditions the FDA will remove our STR product from
clinical hold. See the discussion above under in the heading "Risk Factors" for
additional discussion of this and other risks.

     As currently proposed, our pending STR phase III clinical trials are
designed to compare the effectiveness and safety of STR combined with
chemotherapy to chemotherapy alone. The proposed phase III study would be a
multi-center, randomized open-label trial. The studies are designed to explore
whether the addition of STR to high dose therapy will increase the number of
complete responses without adding significant toxicity. The goal is to improve
patient responses without increasing the side effects associated with high-dose
therapy.

     In January 2000, we entered into an agreement with Pharmaceutical Product
Development, Inc., which we call PPD, pursuant to which PPD will monitor our
proposed STR phase III clinical study. As part of the agreement, PPD will
provide NeoRx a $5 million credit line to help fund our phase III trial. We must
repay any principal and interest for any credit drawn, but we are not under an
obligation to use the credit line. If the credit line is used, principal and
interest is not due until the STR product is approved by the FDA or abandoned by
NeoRx. In return for the line of credit, we issued PPD a warrant to purchase
NeoRx common stock at a premium to the price on the date of issue. As of March
30, 2001, no funds have been drawn on this line of credit.

     In January 2001, the Company and ABC Laboratories (Columbia, MO) extended
their existing agreement for ABC Laboratories to manufacture NeoRx's STR product
for the proposed phase III clinical trials in multiple myeloma. ABC Laboratories
had supplied doses of STR for the phase I/II clinical trials and will continue
to supply the doses needed for phase III. We have also entered into an
arrangement with the University of Missouri research reactor facility group,
also known as MURR, to produce holmium-166, the radioactive component of the STR
product. MURR currently is responsible for the manufacture of holmium-166,
including process qualification, quality control, packaging and shipping, from
its Columbia, Missouri reactor facility.

     On March 20, 2001, we entered into an agreement to purchase certain
radiopharmaceutical manufacturing assets of International Isotopes Inc. in
Denton, Texas. Completion of the purchase is subject to a number of conditions
of closing, including the settlement by International Isotopes of claims of
certain creditors, receipt by International Isotopes of bank financing for its
proposed future operations and delivery by International Isotopes of the assets
free and clear of liens. To acquire the assets, we have agreed to pay $6 million
in cash and to assume $6 million of restructured debt of International Isotopes.
In addition, we have agreed to issue to International Isotopes a three-year
warrant to purchase, at an exercise price of $10 per share, up to 800,000 shares
of NeoRx common stock (the "warrant shares"). We have agreed to file a
registration statement to register the warrant shares for resale after closing.
In addition, we have committed to hire key employees of International Isotopes
to assist us with our proposed operations in Denton. Many of the conditions of
closing of the proposed transaction with International Isotopes depend upon
actions of parties over which NeoRx has no control. As a result, there can be no
assurance that such conditions will be satisfied on the date of closing, if at
all. The asset purchase agreement can be terminated by either NeoRx or
International Isotopes if the closing does not occur by April 30, 2001.

     The Denton facility is inspected and approved by the FDA, carries the
required radiation licenses and access to technical expertise. As a result, we
believe that acquiring the facility will address our manufacturing needs more
quickly and efficiently than building our own plant.

     Subject to the receipt of FDA approval to restart our STR studies, we
intend to explore additional uses for STR in cancer therapy. Most patients with
metastatic prostate cancer, for example, have most of their tumor in the bone.
For those patients in whom standard therapies with hormones no longer work,
tumor in the bone results in pain, declining performance status, and death. We
believe that administering STR, with or without additional chemotherapy, may
cause a regression of the prostate cancer in the bone. A pilot phase I study to
determine the feasibility of this approach is currently planned for 2002.

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  Market Opportunity for STR

     There are approximately 15,000 new cases of multiple myeloma annually in
North America, and an equal number in Europe. We estimate that about half these
patients will not be appropriate candidates for our therapy due to overall
health status. The Company believes that, at the Multiple Myeloma Workshop held
in Stockholm (Sweden) in 1999, the consensus of the experts was that high-dose
therapy requiring re-infusion of bone marrow stem cells is the preferred
treatment for those multiple myeloma patients who can tolerate it.

     We believe that, if approved by the FDA for commercial sale, STR will
principally be used in clinical centers conducting stem cell transplants. In
North America, the majority of the transplants are performed at approximately 80
transplant centers. We currently estimate that approximately 25% (or twenty) of
these centers will participate in the phase III clinical trials. Thus, multiple
myeloma represents a concentrated market, allowing a small sales force and
focused marketing effort to reach the eighty major transplant centers in the
United States.

  PRETARGET(R) proprietary drug delivery platform for cancer therapies

     NeoRx is also developing a proprietary PRETARGET(R) technology program to
deliver radiation therapy, and potentially other anti-cancer agents (such as
drugs and cytokines), to tumor sites. This program employs monoclonal antibodies
to target cancer cells. Antibodies are proteins produced by certain white blood
cells in the body's immune system in response to antigens (foreign substances)
such as viruses, bacteria, toxins and specific types of cancer cells. An
antibody will recognize and bind specifically only to a single type of antigen.
This quality makes antibodies potentially useful as "targeting vehicles" for the
delivery of products to image or treat sites of disease.

     Radiation is known to kill cancer cells that are exposed to sufficiently
large doses. In the conventional approach to radioimmunotherapy, the radiation
is linked to the antibody that is then administered to patients. Because the
antibody is a large molecule, the antibody and the linked radiation circulate
for a long time through the bloodstream before eventually reaching the tumor.
This prolonged circulation can cause "innocent bystander" toxicity to normal
organs such as the bone marrow. Our PRETARGET(R) technology is designed to more
efficiently locate the radiation on the tumor, reduce "innocent bystander"
toxicity, and allow higher radiation doses to be safely administered than in
conventional radioimmunetherapy.

     Our PRETARGET(R) technology takes advantage of the high binding affinity of
two molecules: biotin and streptavidin. Because biotin is a small molecule, it
travels rapidly through the bloodstream and penetrates the tumor site much
faster than a large molecule such as an antibody. As a small molecule, it also
exits the body rapidly. To endow biotin with selectivity for tumor tissue, we
have genetically engineered fusion proteins consisting of an antibody fragment
specific to the tumor of interest fused to streptavidin. The fusion protein is
administered to the patient and allowed to accumulate at the tumor over a period
of 24 - 48 hours. Since no radiation is attached to the fusion protein, there is
no "innocent bystander" toxicity during this period of circulation. Binding of
the fusion protein to tumor via the antibody portion results in the display of
streptavidin on the tumor surface. Subsequent injection of a radioisotope linked
to biotin results in rapid attachment to the pre-localized fusion protein and
selective radiation of the patient's tumor. Any unbound radiation is rapidly
eliminated through the kidneys. The selectivity of the PRETARGET(R) technology
is further improved by injecting a "clearing agent" into the patient between the
fusion protein and the radiobiotin. The clearing agent scavenges the fusion
protein that is still in the bloodstream and removes it to the liver where it is
metabolized and excreted. In January 2001, we received a US patent that covers
our clearing agent.

  Lymphoma

     Lymphomas are cancers of the white blood cells (lymphocytes) in the body,
and represent a variety of different disease entities. Non-Hodgkin's Lymphoma
(NHL) is one type of lymphoma. In 2000, there were about 57,000 new cases of NHL
in the United States. The frequency of this disease is increasing at a rate of
about 3% per year. NHL is a radiation-sensitive tumor, which is rarely curable
with conventional chemotherapy. Recently developed immunotherapy products for
the treatment of lymphoma have enjoyed considerable commercial success, despite
the fact that they have not changed the natural history of the disease. NeoRx
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believes its PRETARGET(R) technology may be able to deliver high doses of
radiation to NHL without requiring a bone marrow transplant. If so, this could
constitute a major improvement in both the efficacy and cost of treatment for
this disease.

     In 1998 and 1999, the Company conducted a clinical proof-of-concept in
which we used an antibody selective for B-lymphocytes (the cells most often
affected by NHL) in our PRETARGET(R) format to deliver a beta-emitting isotope,
yttrium-90, to patients with NHL. This study, which was reported in 2000 in the
journal Cancer Biotherapy and Radiopharmaceuticals, indicated that radiation
doses up to at least three times the maximum tolerated dose of other radio
labeled antibodies could be delivered safely using our PRETARGET(R) approach. We
were also encouraged that six of the seven patients treated in this study
demonstrated objective responses, including three complete responses.

     Based on these results, we proceeded to develop a proprietary fusion
protein for NHL, and in December 2000, we began phase I clinical studies with
this new agent. Preclinical data concerning this fusion molecule were published
in the December 1, 2000 edition of the journal Cancer Research. A total of
approximately 20 patients will be treated in the first group of patients, in
which the dosage and timing of the different components of the product will be
studied. Subsequently, groups of patients will receive escalating doses of the
radiation component to determine the maximum tolerated dose. Development of the
NHL fusion protein was partially funded by a competitive award from the Small
Business Innovation Research program of the National Cancer Institute. We also
expect to receive an additional $1.1 million over 2001 - 2002 from this program
to fund part of the clinical development of the product.

  Carcinomas

     Carcinomas are solid tumors that arise from the epithelial cells lining
such organs as lung, colon, breast, prostate and pancreas. Although these tumors
are generally less sensitive to radiation than blood cell cancers (such as NHL),
carcinomas are far more common. We began our application of PRETARGET(R)
technology to carcinomas with the AVICIDIN(R) product. AVICIDIN(R) completed the
phase I clinical trials in 1997. In these phase I trials tumor regression was
observed in some patients following a single AVICIDIN(R) dose, including
patients with advanced, bulky tumors. Phase II studies of AVICIDIN(R) were
terminated when it became clear that the antibody used in that product was not
sufficiently selective for tumor tissue relative to normal tissue, especially
gut epithelium. We were unable to make this determination earlier because of the
absence of an animal model expressing the antigen recognized by AVICIDIN(R).

     We believe, however, that the "PRETARGET(R) principle" was validated in
these earlier studies inasmuch as radiation was successfully targeted to those
tissues that expressed the antigen recognized by AVICIDIN(R), and not to tissues
that lacked the antigen and that higher radiation doses were tolerated by
patients than had been previously using the conventional approach described
above. To improve the performance of PRETARGET(R) for treatment of carcinomas,
we began acquiring a library of antibodies from which to construct fusion
proteins with better selectivity toward tumors. Although we believe that we have
identified several appropriate fusion proteins, the lack of antigen-expressing
animal models continues to make evaluation difficult outside of a clinical
setting.

     We currently expect to begin phase I clinical trials of one of these fusion
proteins in 2001 in patients with pancreatic and other cancers of the
gastrointestinal tract. We believe that PRETARGET(R) will be best applied to the
treatment of carcinomas, not as a single agent, but in combination with
radiation-sensitizing chemotherapy. Many of the chemotherapy agents commonly
used to treat pancreatic and gastrointestinal cancers are also
radiation-sensitizing agents, such as gemcitabine, 5-fluorouracil, irinotecan,
and paclitaxel. In 2000 there were almost 30,000 new cases of pancreatic cancer
and 130,000 new cases of colorectal cancer in the United States.

PATENTS AND PROPRIETARY RIGHTS

     The Company's policy is to protect its proprietary technology aggressively.
We have filed applications for U.S. and foreign patents issued in our portfolio,
covering numerous aspects of our technology. We currently have in excess of 100
issued U.S. patents.
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     NeoRx has been awarded over 20 U.S. patents related to its PRETARGET(R)
technology, and has additional U.S. and foreign applications pending. We also
are the exclusive licensee of Stanford University's U.S., European and Japanese
patents, which expand our PRETARGET(R) proprietary position.

     In addition, we are the exclusive worldwide licensee, except in Australia,
of The Dow Chemical Company for NeoRx's STR product. Our STR portfolio includes
the U.S. patents covering the STR product composition and its uses and
corresponding patent coverage in most jurisdictions in the world.

     Risks associated with the protection of our patents and other proprietary
technologies are described under the heading "Risk Factors" above. Pending or
future applications of the Company or its collaborators will not necessarily
result in issued patents. Moreover, the current patents owned by or licensed to
the Company may not provide substantial protection or commercial benefit. In
addition to patent protection, we rely upon trade secrets, un-patented
proprietary know-how and continuing technological innovation to develop and
maintain our competitive position. Third parties could acquire or independently
develop the same or similar technology, or our issued patents or those licensed
could be circumvented, invalidated or rendered obsolete by new technology. Third
parties also could gain access to or disclose our proprietary technology, and we
may be unable to meaningfully protect our rights in such unpatented proprietary
technology.

     The rapid rate of development and the intense research efforts throughout
the world in biotechnology, the significant lag time between the filing of a
patent application and its review by appropriate authorities and the lack of
significant legal precedent involving biotechnology inventions make it difficult
to predict accurately the breadth or degree of protection that patents will
afford the Company's or its licensees' biotechnology products or their
underlying technology. It is also difficult to predict whether valid patents
will be granted based on biotechnology patent applications or, if such patents
are granted, to predict the nature and scope of the claims of such patents or
the extent to which they may be enforceable.

     Under U.S. law, although a patent has a statutory presumption of validity,
the issuance of a patent is not conclusive as to validity or as to the
enforceable scope of its claims. Accordingly, the patents owned or licensed by
the Company could be infringed or designed around by third parties, and third
parties could obtain patents that the Company would need to license or design
around.

     It is the Company's policy to respect the valid patent rights of others. We
have obtained patent licenses from various parties covering technologies
relating to our proposed products. We expect to enter into additional license
agreements in the future with third parties for technologies that may be useful
or necessary for the development and or manufacture of the our products. We
anticipate that such licenses, if any, will be available on commercially
reasonable terms. If such licenses are not available, we may be unable to design
around necessary technology patented by others in a cost-effective manner, if at
all.

COMPETITION

     We face significant competition from emerging companies and established
biotechnology, pharmaceutical and chemical companies. Many emerging companies,
including IDEC Pharmaceuticals, Cytogen Corp. and Coulter Pharmaceuticals, have
corporate partnership arrangements with large, established companies to support
research, development and commercialization efforts of products that may be
competitive with those being developed by the Company. In addition, a number of
established pharmaceutical companies, including SmithKline Beecham, Nycomed
Amersham, Mallinkrodt, Inc. and Bristol-Myers Squibb, are developing proprietary
technologies or have enhanced their capabilities by entering into arrangements
with, or acquiring, companies with proprietary monoclonal antibody-based
technology or other technologies applicable to cancer therapy. Many of our
existing or potential competitors have or have access to substantially greater
financial, research and development, marketing and production resources than
those of the Company.

     We also expect to face increasing competition from universities and other
non-profit research organizations. These institutions carry out a significant
amount of research and development in the field of antibody-based technology.
These institutions are becoming increasingly aware of the commercial value of
their findings and more active in seeking patent and other proprietary rights,
as well as licensing revenues.

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     Our cancer therapy products under development are designed for the
treatment of metastatic cancer or where there is a very high statistical risk
that the cancer has spread. We anticipate that the principal competition in this
type of cancer treatment will come from existing chemotherapy, hormone therapy
and biological therapies that are designed to treat the same cancer stage. We
are initially focusing our STR product on the treatment of multiple myeloma.
Celgene Corporation's thalidomide product is being sold for multiple myeloma,
and Cell Therapeutics, Inc.'s arsenic trioxide also is being tested in that
disease.

     Other companies may develop and introduce products and processes
competitive with or superior to those of the Company. Further, the development
by others of new disease treatment or prevention products could render our
technology and products under development less competitive, uneconomical or
obsolete.

     Timing of market introduction and health care reform, both uncertainties,
will affect the competitive position of our potential products. We believe that
competition among products approved for sale will be based, among other things,
on product safety, efficacy, reliability, availability, third party
reimbursement, price, and patent protection.

GOVERNMENT REGULATION AND PRODUCT TESTING

     The manufacture and marketing of our proposed products and our research and
development activities are subject to extensive regulation for safety, efficacy
and quality by numerous government authorities in the United States and other
countries. In the United States, drugs and biologics are subject to rigorous
regulation by the FDA. The Federal Food, Drug and Cosmetic Act of 1976, as
amended, and the regulations promulgated there under, and other federal and
state statutes and regulations govern, among other things, the testing,
manufacture, safety, efficacy, labeling, storage, record keeping, approval,
advertising and promotion of our proposed products. Product development and
approval within this regulatory framework take a number of years to accomplish,
if at all, and involve the expenditure of substantial resources.

     The steps required before a pharmaceutical product may be marketed in the
United States include:

     - preclinical laboratory tests, in vivo preclinical studies and formulation
       studies;

     - The submission to the FDA of an Investigational New Drug Application,
       commonly referred to an IND, which must become effective before clinical
       trials can commence;

     - Adequate and well-controlled clinical trials to establish the safety and
       efficacy of the drug;

     - The submission of a Biologic License Application or New Drug Application
       to the FDA; and

     - FDA approval of the Biologic License Application or New Drug Application
       prior to any commercial sale or shipment of the drug.

     In addition to obtaining FDA approval for each product, each domestic
drug-manufacturing establishment must be registered with, and inspected by, the
FDA. Domestic manufacturing establishments are subject to biennial inspections
by the FDA and must comply with current Good Manufacturing Practice regulations,
also called cGMP, which are enforced by the FDA through its facilities
inspection program for biologics, drugs and devices. To supply products for use
in the United States, foreign manufacturing establishments must comply with cGMP
and are subject to periodic inspection by the FDA or by corresponding regulatory
agencies in such countries under reciprocal agreements with the FDA.

     Preclinical studies include laboratory evaluation of product chemistry and
formulation, as well as animal studies, to assess the potential safety and
efficacy of the proposed product. Laboratories that comply with the FDA
regulations regarding Good Laboratory Practice must conduct preclinical safety
tests. The results of the preclinical studies are submitted to the FDA as part
of an IND and are reviewed by the FDA prior to commencement of clinical trials.
Unless the FDA provides comments to an IND, the IND will become effective 30
days following its receipt by the FDA. Submission of an IND does not assure FDA
authorization to commence clinical trials.

     Clinical trials involve the administration of the investigational new drug
to healthy volunteers or to patients under the supervision of a qualified
principal investigator. Clinical trials are conducted in accordance
                                        16
   18

with the FDA's Protection of Human Subjects regulations and Good Clinical
Practices under protocols that detail the objectives of the study, the
parameters to be used to monitor safety and the efficacy criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the IND.
Further, each clinical study must be conducted under the auspices of an
independent Institutional Review Board at the institution where the study will
be conducted. The Institutional Review Board will consider, among other things,
ethical factors, the safety of human subjects and the possible liability of the
institution.

     Clinical trials are typically conducted in three sequential phases, but the
phases may overlap. In phase I, the drug is tested for:

     - safety (adverse effects);

     - dosage tolerance;

     - metabolism;

     - distribution;

     - excretion; and

     - pharmaco dynamics (clinical pharmacology).

     In phase II, a limited patient population is studied to:

     - determine the efficacy of the drug for specific, targeted indications;

     - determine dosage tolerance and optimal dosage; and

     - identify possible adverse effects and safety risks.

     If a compound is found to have potential efficacy and to have an acceptable
safety profile in phase II clinical trials, phase III clinical trials are
undertaken to further evaluate clinical efficacy and to further test for safety
within an expanded patient population at geographically dispersed clinical study
sites. With respect to any of our proposed products subject to clinical trials,
there can be no assurance that phase I, phase II or phase III studies will be
completed successfully within any specific time period, if at all. Furthermore,
the Company or the FDA may suspend clinical trials at any time if it determines
that the subjects or patients are being exposed to an unacceptable health risk.

     The results of the pharmaceutical development, preclinical studies and
clinical trials are submitted to the FDA in the form of a Biologic License
Application, also called a BLA, or a New Drug Application, also called an NDA,
for approval of the marketing and commercial shipment of the drug. The testing
and approval processes are likely to require substantial cost, time and effort,
and there can be no assurance that any approval will be granted on a timely
basis, if at all. The FDA may deny a BLA or an NDA if applicable regulatory
criteria are not satisfied, may require additional testing or information, or
may require post market testing and surveillance to monitor the safety of the
product. If regulatory approval is granted, such approval may entail limitations
on the indicated uses for which the product may be marketed. The FDA may
withdraw product approvals if compliance with regulatory standards is not
maintained or if problems occur following initial marketing.

     Among the conditions for BLA or NDA approval is the requirement that the
prospective manufacturers' quality control and manufacturing procedures conform
to cGMP. In complying with standards set forth in these regulations,
manufacturers must continue to expend time, money and effort in the areas of
production and quality control to ensure full technical compliance.

EMPLOYEES

     As of March 23, 2001, the Company had 68 full-time employees and four
part-time employees, 13 of whom hold Ph.D. degrees and one of whom holds an M.D.
degree. Of this number, 57 employees were engaged in research, development and
manufacturing activities and 15 were employed in general administration.

                                        17
   19

     We consider our relations with employees to be good. None of the Company's
employees are covered by a collective bargaining agreement.

ITEM 2. PROPERTIES

     The Company occupies approximately 36,000 square feet of office, laboratory
and manufacturing space at 410 West Harrison Street, Seattle, Washington, under
a lease that expires May 31, 2006. In July 2000, we entered into a facilities
sublease agreement with F-5 Networks for approximately 28,854 additional square
feet of office space located at 501 Elliot Avenue West Building 3, Floor 2,
under a lease agreement that expires November 30, 2003.

     We believe that our facilities are in good condition and are adequate for
all present uses. A portion of our facilities is used for pilot manufacturing to
produce certain of our products under development for clinical trials. We
believe that the production capacity of our pilot facility is adequate to
satisfy our phase I/II clinical trial requirements. The facility passed an FDA
inspection for these purposes in 1993 and a Washington State Board of Pharmacy
inspection in 1996.

ITEM 3. LEGAL PROCEEDINGS

     There are no legal proceedings pending against the Company.

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

     Not Applicable.

                                        18
   20

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock is traded on the NASDAQ National Market under
the symbol NERX. The following table sets forth, for the periods indicated, the
high and low sales price for Common Stock as reported by NASDAQ. These
quotations reflect inter-dealer prices without retail mark-up, markdown or
commission, and may not necessarily represent actual transactions.



                                                              HIGH      LOW
                                                             ------    ------
                                                                 
2000
First Quarter..............................................  $70.00    $ 3.50
Second Quarter.............................................   20.25      9.63
Third Quarter..............................................   26.25     14.63
Fourth Quarter.............................................   25.81      4.25
1999
First Quarter..............................................  $ 2.75    $ 1.34
Second Quarter.............................................    2.38      1.00
Third Quarter..............................................    2.19      1.50
Fourth Quarter.............................................    4.88      1.13


     There were approximately 861 shareholders of record as of February 28,
2001. This figure does not include the number of shareholders whose shares are
held on record by a broker or clearing agency, but includes such a brokerage
house or clearing agency as one holder of record.

     The Company has not paid any cash dividends on the Common Stock since its
inception and does not intend to pay cash dividends on the Common Stock in the
foreseeable future.

     Warrants. In connection with an agreement with a company for investor
relations services, the Company on February 1, 2000, issued four two-year
warrants to purchase an aggregate of 80,000 shares of common stock at exercise
prices ranging from $6.00 to $9.00. The warrants expire in 2002. In connection
with a line of credit agreement, the Company on February 2, 2000, issued one
four-year warrant to purchase 75,000 shares of common stock at an exercise price
of $6.7734. The warrant will expire in 2004. In connection with an agreement
with a company for investor relations services, the Company on October 14, 1999,
issued one five-year warrant to purchase 150,000 shares of common stock at an
exercise price of $1.6875. The warrant will expire in 2004. In each case above,
the warrant was issued in reliance on Section 4(2) of the Securities Act of
1933. The purchaser represented, in connection with the purchase of the warrant,
that it was an accredited investor as defined in Regulation D under the
Securities Act.

     Private Placements of Common Stock. On April 14, 2000, NeoRx issued a total
of 1,727,045 shares of its common stock to a total of 11 purchasers and received
net proceeds of $17,978,967. On August 25, 2000, NeoRx issued a total of
2,450,000 shares of its common stock to a total of 8 purchasers and received net
proceeds of $35,627,500. The shares in both of these transactions were issued in
reliance on Section 4(2) of the Securities Act. All purchasers in each
transaction represented, in connection with the purchase of its shares, that it
was an accredited investor as defined in Regulation D under the Securities Act.
The Company has filed Registration Statements on Form S-3 to register the shares
issued for resale by the purchaser. Adams Harkness & Hill acted as the placement
agent in both of these offerings and received aggregate commissions of
$1,814,406. In addition, Roth Capital acted as a placement agent in the April
14, 2000 private placement and received commissions of $237,469.

     The Company intends to use the net proceeds from the transactions described
above to advance its research and development programs, including its STR and
PRETARGET(R) product candidates, as well as for other general corporate
purposes.

                                        19
   21

ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                             YEARS ENDED DECEMBER 31,
                                                --------------------------------------------------
                                                  2000       1999      1998      1997       1996
                                                --------   --------   -------   -------   --------
                                                                           
STATEMENT OF OPERATIONS DATA:
Revenues......................................  $  3,549   $    591   $ 9,087   $10,352   $  4,784
Operating expenses............................    21,594     15,354    15,378    14,647     14,763
Loss from operations..........................   (18,045)   (14,763)   (6,291)   (4,295)    (9,979)
Net loss......................................   (11,402)   (11,951)   (4,449)   (2,550)    (9,001)
Net loss applicable to common shareholders....   (11,905)   (12,459)   (4,975)   (5,619)   (10,685)
Net loss per common share -- basic and
  diluted.....................................  $  (0.50)  $  (0.59)  $ (0.24)  $ (0.31)  $  (0.68)
Weighted average common shares outstanding --
  basic and diluted...........................    23,853     21,009    20,907    18,065     15,604
BALANCE SHEET DATA:
Cash and cash equivalents.....................  $  8,389   $  3,752   $ 1,910   $ 1,949   $  2,945
Investment securities.........................    49,189     15,289    28,242    31,760     15,322
Working capital...............................    59,315     16,664    28,807    33,775     17,523
Total assets..................................    64,458     20,765    32,441    36,321     20,510
Long-term debt................................        --         --     1,195     1,199      1,242
Shareholders' equity..........................  $ 62,245   $ 17,822   $29,044   $33,368   $ 17,079


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

INTRODUCTION

     The following discussion of results of operations, liquidity and capital
resources, contains forward-looking statements that involve risks and
uncertainties. As described in the "Cautionary Statement Regarding Forward
Looking Statements" at the beginning of this report, NeoRx's actual results may
differ materially from the results discussed in the forward-looking statements.
Factors that might cause or contribute to such differences include those
discussed herein and in the section entitled "Risk Factors."

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000 COMPARED WITH DECEMBER 31, 1999

     The Company's revenues for 2000 totaled $3.5 million, which included $3.1
million from licensing agreements and $0.4 million from government grants. The
majority of the revenue in 2000 is from Theseus Corporation and Angiotech
Pharmaceuticals, Inc. for non-strategic patent licensing agreements entered into
in 1998. The Company's revenues for 1999 totaled $0.6 million, which consisted
primarily of license fees. The Company does not have any significant revenue
sources that will continue into 2001.

     The Company's total operating expenses were $21.6 million for 2000 and
$15.4 million for 1999. Research and development expenses increased 39% from
$11.5 million in 1999 to $16.0 million in 2000. The increase in research and
development expenses was primarily due to increased costs for patient therapy,
clinical trial expenses and manufacturing development relating to the Company's
Skeletal Targeted Radiotherapy project, which we call STR. Research and
development expenses for the Company's PRETARGET(R) project also increased in
2000, primarily due to costs associated with our PRETARGET(R) Lymphoma phase
I/II study. Research and development expenses are shown net of reimbursements
received under collaborative agreements for payments made by NeoRx to third
parties. During 2000, the Company received $0.4 million in reimbursements. In
1999, reimbursements from collaborative agreements totaled $0.3 million. General
and administrative expenses increased 44% to $5.6 million in 2000 compared to
$3.9 million in 1999. The increase in general and administrative expenses is
principally due to increased expenses for personnel, outside consulting
services, recruiting and legal services.

     Other income in 2000 included a $2.9 million gain on the sale of the
Company's shares of Angiotech Pharmaceuticals, Inc. during the first quarter of
2000 and a $0.5 million gain recorded from the receipt of

                                        20
   22

stock of North American Scientific, Inc. from their acquisition of Theseus LTD.
Other income for 1999 included $1.9 million from final payments under a prior
agreement. Other income also included interest income for 2000 of $3.0 million
compared to $1.0 million in 1999. The increase in interest income was primarily
due to higher cash and investment balances due to the private sales of 4.2
million shares of newly issued common shares of the Company that generated $54
million in net proceeds.

     Preferred dividends were $0.5 million in 2000 and 1999. Preferred dividends
in 2000 and 1999 are related to payment of dividends on Series 1 preferred
stock.

YEAR ENDED DECEMBER 31, 1999 COMPARED WITH DECEMBER 31, 1998

     The Company's revenues for 1999 totaled $0.6 million, and primarily
consisted of license fees of $0.6 million from Theseus LTD. The Company's
revenues for 1998 totaled $9.1 million, and consisted primarily of a milestone
payment of $7.0 million from Janssen Pharmaceutica NV, also known as Janssen, a
wholly owned subsidiary of Johnson & Johnson Inc., reflecting Janssen's decision
to begin phase II trials of AVICIDIN(R), and license fees paid in the form of
$1.4 million in cash and $0.7 million in stock from Nycomed Imaging AS, Theseus
LTD, and Angiotech Pharmaceuticals, Inc. for the license of parts of NeoRx's
non-strategic technology.

     The Company's total operating expenses for 1999 and 1998 were $15.4
million. In 1999, research and development expenses increased 11% from $10.3
million in 1998 to $11.5 million. The increase in research and development
expenses was primarily due to increased costs for clinical trials for STR.
Research and development expenses are shown net of reimbursements received under
collaborative agreements for payments made by NeoRx to third parties. During
1999 the Company received $0.3 million in reimbursements. In 1998,
reimbursements from collaborative agreements totaled $2.2 million. The decrease
in reimbursements from collaborative agreements was caused by the termination of
the Janssen agreement in the fourth quarter of 1998. General and administrative
expenses decreased 11% to $3.9 million in 1999 compared to 1998. The decrease in
general and administrative expenses is principally due to lower costs for
recruiting and administrative personnel as a result of the Company's
restructuring effort during the fourth quarter of 1998.

     Other income for 1999 included $1.9 million from final payments under a
prior agreement. Other income also included interest income for 1999 of $1.0
million compared to $2.0 million in 1998. The decrease in interest income was
primarily due to lower average cash and investment balances.

     Preferred dividends were $0.5 million in 1999 and 1998. Preferred dividends
in 1999 and 1998 are related to payment of dividends primarily on Series 1
preferred stock.

LIQUIDITY AND CAPITAL RESOURCES

     Cash, cash equivalents and investment securities totaled $57.6 million at
December 31, 2000. Cash increased during the second and third quarters of 2000
from the private sales of 4.2 million newly issued NeoRx common shares that
generated approximately $53.6 million in net proceeds. Cash used in operating
activities for 2000 totaled $17.0 million. Revenues and other income sources
were not sufficient in 2000 to cover operating expenses.

     Cash used in investing activities for 2000 totaled $32.4 million. The
Company invests excess cash in investment securities that will be used to fund
future operating costs. During 2000, the Company also invested $2.0 million in
equipment, furniture and leasehold improvements, primarily to support its
research activities. As of December 31, 2000, the Company was committed to
spending approximately $5.6 million pursuant to operating lease obligations
through 2005.

     In February 2000, the Company sold the majority of its investment in
Angiotech Pharmaceuticals, Inc. for $4.0 million. The carrying value of the
investment was $1.1 million at December 31, 1999. In the first quarter of 2000,
the Company established a line of credit with PPD, Inc., of up to $5.0 million
to assist in funding its phase III trial of its STR product in development. The
Company has not drawn funds on this line of credit to date.

                                        21
   23

     The Company expects that its capital resources and interest income will be
sufficient to finance its currently anticipated working capital and capital
requirements through at least the second quarter of 2002. The Company's actual
capital requirements will depend on numerous factors, including results of
research and development activities, clinical trials, the levels of resources
that the Company devotes to establishing and expanding marketing and
manufacturing capabilities (including whether our proposed acquisition of the
International Isotopes facility is successful), competitive and technological
developments and the timing of revenues and expense reimbursements resulting
from relationships with third parties or collaborative agreements. The Company
intends to seek additional funding through arrangements with corporate partners,
public or private equity financing, or other sources. There can be no assurance
that the Company will be able to obtain such additional capital or enter into
relationships with corporate partners on a timely basis, on favorable terms, or
at all. If adequate funds are not available, the Company may be required to
delay, reduce or eliminate expenditures for certain of its programs or products
or enter into relationships with corporate partners to develop or commercialize
products or technologies that the Company would otherwise seek to develop or
commercialize itself.

RECENT DEVELOPMENTS

     On March 20, 2001, we entered into an agreement to purchase certain
radiopharmaceutical manufacturing assets of International Isotopes Inc. in
Denton, Texas. Completion of the purchase is subject to a number of conditions
of closing, including the settlement by International Isotopes of claims of
certain creditors, receipt by International Isotopes of bank financing for its
proposed future operations and delivery by International Isotopes of the assets
free and clear of liens. To acquire the assets, we have agreed to pay $6 million
in cash and to assume $6 million of restructured debt of International Isotopes.
In addition, we have agreed to issue to International Isotopes a warrant to
purchase, at an exercise price of $10 per share, up to 800,000 shares of NeoRx
common stock (the "warrant shares"). The warrants will expire in three years. We
have agreed to file a registration statement to register the warrant shares for
resale after closing. In addition, we have committed to hire key employees of
International Isotopes to assist us with our proposed operations in Denton. Many
of the conditions of closing of the proposed transaction with International
Isotopes depend upon actions of parties over which NeoRx has no control. As a
result, there can be no assurance that such conditions will be satisfied on the
date of closing, if at all. The asset purchase agreement can be terminated by
either NeoRx or International Isotopes if the closing does not occur by April
30, 2001.

     On March 21, 2001, we announced that we are in continuing discussions with
the FDA regarding our proposed STR product. Our phase III multiple myeloma and
other STR studies were placed on clinical hold in November 2000 by the FDA after
some patients developed a serious delayed toxicity. Communications with the FDA
have focused on the relevant factors for selecting a safe radiation dose and the
accuracy of radiation calculations. The FDA has requested that we collect
additional dosimetry data from patients to demonstrate the accuracy of the
method we propose to use to calculate dose in our phase III STR trial. We expect
to file a protocol for this study with the FDA shortly involving a limited
number of patients. Our phase III STR trials may be delayed pending the
completion of this study. The FDA suggested that we analyze the relevant factors
to select a radiation dose with the appropriate safety profile. Our current STR
phase III protocol may be modified by this analysis. We intend to continue to
work diligently with the FDA to move development of the STR product forward.

     We also announced on March 21, 2001, that Douglas Given, MD, PhD, formerly
the Chief Technology Officer of Mallinckrodt, Oye Olukoton, MD, formerly the
Chief Medical Officer of Mallinckrodt, and Ray Schmelter, PhD, formerly Senior
Director of Medical Affairs and Operations of Mallinckrodt, are consulting with
the Company to support our operations, medical and regulatory functions. On that
same date, we announced that Richard Anderson announced his intention to retire
in twelve months. Mr. Anderson has stepped down from his positions as President
and Chief Operating Officer of NeoRx and will focus on the proposed acquisition,
transition and integration of the International Isotopes radiopharmaceutical
facility.

     In addition, Carl Goldfischer, MD, formerly Chief Financial Officer of
ImClone, Inc. and currently a director of NeoRx, has agreed to serve as a
strategic and financial consultant to NeoRx.

                                        22
   24

NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, also known as SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS 133 establishes a new model
for accounting for derivatives and hedging activities and supersedes and amends
existing accounting standards and is required to be adopted on January 1, 2001.
SFAS 133 requires that all derivatives be recognized in the balance sheet at
their fair market value, and the corresponding derivative gains or losses be
either reported in the statement of operations or as a component of other
comprehensive income depending on the type of hedge relationship that exists
with respect to such derivative. The adoption of SFAS 133 on January 1, 2001
will not have a material impact on our financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to the impact of interest rate changes and changes
in the market values of its investments.

INTEREST RATE RISK

     The Company's exposure to market rate risk for changes in interest rates
relates primarily to the Company's debt securities included in its investment
portfolio. The Company does not have any derivative financial instruments. The
Company invests in debt instruments of the U.S. Government and its agencies and
high-quality corporate issuers. Investments in both fixed rate and floating rate
interest earning instruments carry a degree of interest rate risk. Fixed rate
securities may have their fair market value adversely impacted due to a rise in
interest rates, while floating rate securities may produce less income than
expected if interest rates fall. Due in part to these factors, the Company's
future investment income may fall short of expectations due to changes in
interest rates or the Company may suffer losses in principal if forced to sell
securities which have declined in market value due to changes in interest rates.
At December 31, 2000, the Company owns government debt instruments in the amount
of $15.3 million and corporate debt securities in the amount of $40.5 million.
The Company's exposure to losses as a result of interest rate changes is managed
through investing primarily in securities with relatively short maturities of up
to three years. The Company has approximately $19,400,000 of corporate debt
securities and $6,000,000 of federal government and agency securities that had
maturity dates greater than one year at December 31, 2000. Of the investments
with maturity dates greater than one year at December 31, 2000, $24,400,000
mature in 2002 and $1,000,000 mature in 2003.

INVESTMENT RISK

     The Company has received equity instruments under licensing agreements.
These instruments are included in investment securities and are accounted for at
fair value with unrealized gains and losses reported as a component of
comprehensive loss and classified as accumulated other comprehensive income --
unrealized gain on investment securities in shareholders' equity. Such
investments are subject to significant fluctuations in fair market value due to
the volatility of the stock market. At December 31, 2000, the Company owned such
corporate equity securities in the amount of $0.3 million.

                                        23
   25

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



                                                               PAGE
                                                              NUMBER
                                                              ------
                                                           
Report of Independent Public Accountants....................    25
Balance Sheets -- December 31, 2000 and 1999................    26
Statements of Operations -- For the Years Ended December 31,
  2000, 1999 and 1998.......................................    27
Statements of Shareholders' Equity -- For the Years Ended
  December 31, 2000, 1999 and 1998..........................    28
Statements of Cash Flows -- For the Years Ended December 31,
  2000, 1999 and 1998.......................................    29
Notes to Financial Statements...............................    30


     All financial schedules are omitted since the required information is not
applicable or has been presented in the financial statements and the notes
thereto.

                                        24
   26

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors and Shareholders
NeoRx Corporation

     We have audited the accompanying balance sheets of NeoRx Corporation as of
December 31, 2000 and 1999, and the related statements of operations,
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NeoRx Corporation as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for each of the years in the three year period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.

KPMG LLP

Seattle, Washington
January 26, 2001,
except as to note 18, which is as of March 20, 2001

                                        25
   27

                               NEORX CORPORATION

                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                     ASSETS



                                                                   DECEMBER 31,
                                                              ----------------------
                                                                2000         1999
                                                              ---------    ---------
                                                                     
Current assets:
Cash and cash equivalents...................................  $   8,389    $   3,752
Investment securities.......................................     49,189       15,289
Notes receivable............................................      2,617          134
Prepaid expenses and other current assets...................      1,333          432
                                                              ---------    ---------
          Total current assets..............................     61,528       19,607
                                                              ---------    ---------
Facilities and equipment, at cost:
Leasehold improvements......................................      3,283        3,283
Equipment and furniture.....................................      6,152        5,040
                                                              ---------    ---------
                                                                  9,435        8,323
Less: accumulated depreciation and amortization.............     (7,791)      (7,405)
                                                              ---------    ---------
  Facilities and equipment, net.............................      1,644          918
                                                              ---------    ---------
Other assets, net...........................................      1,286          240
                                                              ---------    ---------
          Total assets......................................  $  64,458    $  20,765
                                                              =========    =========

                        LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................  $   1,702    $     819
Accrued liabilities.........................................        511          929
Current portion of convertible subordinated debentures......         --        1,195
                                                              ---------    ---------
          Total current liabilities.........................      2,213        2,943
                                                              ---------    ---------
Commitments, contingencies and subsequent event
Shareholders' equity:
Preferred stock, $.02 par value, 3,000,000 shares
  authorized:
  Convertible preferred stock, Series 1, 205,340 and 208,240
     shares issued and outstanding at December 31, 2000 and
     1999, respectively (entitled in liquidation to $5,176
     and $5,248 at December 31, 2000 and 1999,
     respectively)..........................................          4            4
Common stock, $.02 par value, 60,000,000 shares authorized,
  26,197,699 and 21,073,235 shares issued and outstanding,
  at December 31, 2000 and 1999, respectively...............        524          421
Additional paid-in capital..................................    220,702      164,151
Accumulated deficit.........................................   (159,001)    (147,096)
Accumulated other comprehensive income -- unrealized gain on
  investment securities.....................................         16          342
                                                              ---------    ---------
          Total shareholders' equity........................     62,245       17,822
                                                              ---------    ---------
          Total liabilities and shareholders' equity........  $  64,458    $  20,765
                                                              =========    =========


              See accompanying notes to the financial statements.
                                        26
   28

                               NEORX CORPORATION

                            STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2000        1999       1998
                                                              --------    --------    -------
                                                                             
Revenues....................................................  $  3,549    $    591    $ 9,087
                                                              --------    --------    -------
Operating expenses:
Research and development....................................    15,989      11,462     10,325
General and administrative..................................     5,605       3,892      4,394
Restructuring expense.......................................        --          --        659
                                                              --------    --------    -------
          Total operating expenses..........................    21,594      15,354     15,378
                                                              --------    --------    -------
Loss from operations........................................   (18,045)    (14,763)    (6,291)
                                                              --------    --------    -------
Other income (expense):
  Other income..............................................       471       1,900         --
  Realized gain on sale of securities.......................     3,353          --         --
  Interest income...........................................     2,986       1,029      1,972
  Interest expense..........................................      (167)       (117)      (130)
                                                              --------    --------    -------
Net loss....................................................   (11,402)    (11,951)    (4,449)
Preferred stock dividends...................................      (503)       (508)      (526)
                                                              --------    --------    -------
Net loss applicable to common shares........................  $(11,905)   $(12,459)   $(4,975)
                                                              ========    ========    =======
Net loss per common share -- basic and diluted..............  $   (.50)   $   (.59)   $  (.24)
                                                              ========    ========    =======
Weighted average common shares outstanding -- basic and
  diluted...................................................    23,853      21,009     20,907
                                                              ========    ========    =======


              See accompanying notes to the financial statements.
                                        27
   29

                               NEORX CORPORATION

                       STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)



                                          PREFERRED STOCK     COMMON STOCK
                                          ----------------   --------------                               ACCUMULATED
                                          NUMBER             NUMBER           ADDITIONAL                     OTHER        SHARE-
                                            OF       PAR       OF      PAR     PAID-IN     ACCUMULATED   COMPREHENSIVE   HOLDERS'
                                          SHARES    VALUE    SHARES   VALUE    CAPITAL       DEFICIT        INCOME        EQUITY
                                          -------   ------   ------   -----   ----------   -----------   -------------   --------
                                                                                                 
BALANCE, DECEMBER 31, 1997..............    214        4     20,707    414      162,612      (129,662)          --         33,368
Exercise of stock options and
  warrants..............................     --       --        141      3          479            --           --            482
Exchange of preferred stock for common
  stock.................................     (6)      --        138      3           (3)           --           --             --
Comprehensive loss:
  Net loss..............................     --       --         --     --           --        (4,449)          --         (4,449)
  Unrealized gain on investment
    securities..........................     --       --         --     --           --            --           68             68
                                                                                                                         --------
Total comprehensive loss................     --       --         --     --           --            --           --         (4,381)
                                                                                                                         --------
Preferred stock dividends...............     --       --         21     --          101          (526)          --           (425)
                                            ---       --     ------   ----     --------     ---------        -----       --------
BALANCE, DECEMBER 31, 1998..............    208        4     21,007    420      163,189      (134,637)          68         29,044
Exercise of stock options...............     --       --         66      1          105            --           --            106
Stock warrants issued for services......     --       --         --     --          450            --           --            450
Compensation expense on stock options...     --       --         --     --          407            --           --            407
Comprehensive loss:
  Net loss..............................     --       --         --     --           --       (11,951)          --        (11,951)
  Unrealized gain on investment
    securities..........................     --       --         --     --           --            --          274            274
                                                                                                                         --------
Total comprehensive loss................     --       --         --     --           --            --           --        (11,677)
                                                                                                                         --------
Preferred stock dividends...............     --       --         --     --           --          (508)          --           (508)
                                            ---       --     ------   ----     --------     ---------        -----       --------
BALANCE, DECEMBER 31, 1999..............    208        4     21,073    421      164,151      (147,096)         342         17,822
Common stock issued, net of offering
  costs of $2,141.......................     --       --      4,177     84       53,523            --           --         53,607
Common stock issued for services........     --       --          4     --           81            --           --             81
Exercise of stock options...............     --       --        940     19        2,138            --           --          2,157
Stock options and warrants issued for
  services and credit arrangement.......     --       --         --     --          786            --           --            786
Conversion of preferred stock...........     (3)      --          3     --           --            --           --             --
Conversion of subordinated debentures...     --       --          1     --           23            --           --             23
Comprehensive loss:
  Net loss..............................     --       --         --     --           --       (11,402)          --        (11,402)
  Unrealized gain on investment
    securities..........................     --       --         --     --           --            --           60             60
  Less: reclassification adjustment for
    gains included in income............     --       --         --     --           --            --         (386)          (386)
                                                                                                                         --------
Total comprehensive loss................     --       --         --     --           --            --           --        (11,728)
                                                                                                                         --------
Preferred stock dividends...............     --       --         --     --           --          (503)          --           (503)
                                            ---       --     ------   ----     --------     ---------        -----       --------
BALANCE, DECEMBER 31, 2000..............    205       $4     26,198   $524     $220,702     $(159,001)       $  16       $ 62,245
                                            ===       ==     ======   ====     ========     =========        =====       ========


              See accompanying notes to the financial statements.
                                        28
   30

                               NEORX CORPORATION

                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)



                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2000        1999       1998
                                                              --------    --------    -------
                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..................................................  $(11,402)   $(11,951)   $(4,449)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
  Depreciation and amortization.............................       514         356        427
  Gain on sale of securities................................    (3,353)         --         --
  Stock and warrants received for license fees..............      (471)         --       (690)
  Common stock issued for services..........................        81          --         --
  Stock options and warrants issued for services............       486         450         --
  Compensation expense on employee stock options............        --         407         --
  (Increase) decrease in notes receivable...................    (2,483)        (42)        20
  (Increase) decrease in prepaid expenses and other
     assets.................................................      (875)        405        742
  Increase (decrease) in accounts payable...................       883          63        (44)
  Increase (decrease) in accrued liabilities................      (418)       (263)       281
  Increase (decrease) in deferred revenue...................        --        (250)       250
                                                              --------    --------    -------
  Net cash used in operating activities.....................   (17,038)    (10,825)    (3,463)
                                                              --------    --------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales and maturities of investment
     securities.............................................    54,431      27,662     70,820
  Purchases of investment securities........................   (84,833)    (14,435)   (66,544)
  Facilities and equipment purchases........................    (2,012)       (154)      (866)
                                                              --------    --------    -------
  Net cash provided by (used in) investing activities.......   (32,414)     13,073      3,410
                                                              --------    --------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of capital lease obligations....................        --          (4)       (43)
  Repayment of subordinated debentures......................    (1,172)         --         --
  Proceeds from stock options exercised.....................     2,157         106        482
  Preferred stock dividends.................................      (503)       (508)      (425)
  Proceeds from issuance of common stock....................    53,607          --         --
                                                              --------    --------    -------
  Net cash provided by (used in) financing activities.......    54,089        (406)        14
                                                              --------    --------    -------
Net increase (decrease) in cash and cash equivalents........     4,637       1,842        (39)
CASH AND CASH EQUIVALENTS:
  Beginning of year.........................................     3,752       1,910      1,949
                                                              --------    --------    -------
  End of year...............................................  $  8,389    $  3,752    $ 1,910
                                                              ========    ========    =======


            See the accompanying notes to the financial statements.
                                        29
   31

                               NEORX CORPORATION

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1. THE COMPANY

     NeoRx Corporation develops innovative biopharmaceutical products designed
to improve treatments for patients with cancer.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Cash and Cash Equivalents. All highly liquid investments with a remaining
maturity of three months or less when purchased, are considered to be cash
equivalents. At December 31, 2000 and 1999, cash equivalents consisted primarily
of federal government and agency securities and corporate debt securities
totaling $6,906,000 and $1,736,000, respectively.

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

     Research and Development Revenues and Expenses. Revenues from collaborative
agreements are recognized as earned as the Company performs research activities
under the terms of each agreement. Billings in excess of amounts earned are
classified as deferred revenue. Pursuant to the Securities and Exchange
Commission Staff Accounting Bulletin No. 101, also known as SAB 101, "Revenue
Recognition in Financial Statements," non-refundable upfront technology license
fees, where the company is providing continuing services related to product
development, are deferred. Such fees are recognized as revenue over the product
development periods based on estimated total development costs.

     Milestone payments are recognized as revenue at the time such payments are
due, based on the ratio of cumulative costs incurred to date, to total estimated
development costs. Any remaining balance is deferred and recognized as revenue
over the remaining development period. The Company adopted SAB 101 on October 1,
2000. The adoption of SAB 101 did not have a material impact on the Company's
financial statements. Prior to the adoption of SAB 101, revenue was recognized
for milestone payments upon the attainment of a specified event. Other payments
for technology or licensing fees were recognized as revenue when payment was
received, unless subject to a contingency, which resulted in the deferral of
revenue. Research and development costs are expensed as incurred. It is the
Company's practice to offset third party collaborative reimbursements received
as a reduction of research and development expenses. Third party reimbursements
for 2000, 1999 and 1998 were $367,640, $276,127, and $2,186,616, respectively.

     Income Taxes. The Company computes income taxes using the asset and
liability method, under which deferred income taxes are provided for the
temporary differences between the financial reporting basis and the tax basis of
the Company's assets and liabilities and for operating loss and tax credit carry
forwards. A valuation allowance is established when necessary to reduce deferred
tax assets to the amount, if any, which is more likely than not expected to be
realized.

     Fair Value of Financial Instruments. The Company has financial instruments
consisting of cash, cash equivalents, investment securities, notes receivable,
note from officer and accounts payable. All of the Company's financial
instruments, based on current market indicators or quotes from brokers,
approximate their carrying amount.

     Investment Securities. The Company considers all investment securities as
available-for-sale. All securities are carried at fair value. The Company does
not invest in derivative financial instruments. Unrealized gains and losses on
investment securities are reported as a component of comprehensive income or
loss and classified as accumulated other comprehensive income or
loss -- unrealized gain on investment securities in shareholders' equity.

                                        30
   32
                               NEORX CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     Segment Reporting. The Company has one operating business segment. Revenues
consist almost entirely of fees received under license agreements. Expenses
incurred are reported according to their nature. No further segment segregation
is considered meaningful.

     Comprehensive Loss. The Company's comprehensive loss for 2000, 1999, and
1998 consisted of net loss and unrealized gain on investment securities.

     Facilities and Equipment. Facilities and equipment are stated at cost.
Depreciation is provided using the straight-line method over an estimated useful
life of five to seven years for equipment and furniture and three years for
computer equipment and software. Leasehold improvements are amortized using the
straight-line method over the shorter of the assets' estimated useful lives or
the terms of the leases.

     Net Loss Per Common Share. Basic and diluted loss per share are based on
net loss applicable to common shares, which is comprised of net loss and
preferred stock dividends in all periods presented. Shares used to calculate
basic loss per share are based on the weighted average number of common shares
outstanding during the period. Shares used to calculate diluted loss per share
are based on the potential dilution that would occur upon the exercise or
conversion of securities into common stock using the treasury stock method.
Calculations of basic and diluted loss per share for 2000, 1999 and 1998 were
the same, because including the effect of potential common shares would be
antidilutive. The computation of diluted net loss per share excludes the
following options and warrants to acquire shares of common stock for the years
indicated because their effect would be antidilutive.



                                            2000          1999          1998
                                         ----------    ----------    ----------
                                                            
Common stock options...................   3,156,050     3,629,133     3,334,916
Weighted average exercise price per
  share................................  $     5.16    $     2.56    $     2.81
Common stock warrants..................     305,000       150,000            --
Weighted average exercise price per
  share................................  $     4.46    $     1.69            --


     In addition, 234,088 aggregate shares issuable upon conversion of the
Company's preferred stock are not included in the calculation of diluted loss
per share for 2000, and 283,712 aggregate shares issuable upon conversion of the
Company's convertible subordinated debentures and its preferred stock are not
included in the calculation of diluted loss per share for 1999 and 1998 because
the effect of including such shares would have been antidilutive.

     Stock Issued to Employees. The Company accounts for its stock option plans
for employees in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. Compensation expense related to employee stock options is
recorded if, on the date of grant, the fair value of the underlying stock
exceeds the exercise price. The Company amortizes compensation expense on fixed
awards with pro rata vesting based on the straight-line method. The Company
applies the disclosure-only requirements of SFAS No. 123, "Accounting for
Stock-Based Compensation", which allows entities to continue to apply the
provisions of APB Opinion No. 25 for transactions with employees and provide pro
forma net income and pro forma earnings per share disclosures as if the
fair-value based method of accounting in SFAS No. 123 had been applied to
employee stock option grants.

     Reclassifications. Certain reclassifications were made to the 1999
financial statements to make them comparable with the 2000 presentation.

                                        31
   33
                               NEORX CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     Concentration in the Available Sources of Supply of Materials. The Company
is dependent on suppliers for the timely delivery of materials and services and
may experience interruptions in supply. The Company has limited suppliers of the
following materials at December 31, 2000:

     - commercial quantities of holmium-166, the form of radiation used in the
       Company's STR product, and yttrium-90, the form of radiation used in the
       Company's PRETARGET(R) program;

     - the chemical agent used in the Company's STR product to deliver
       holmium-166 to the bone; and

     - the antibodies and proteins used in the Company's PRETARGET(R) program.

     Sources of some of these materials are limited, and the Company may be
unable to obtain these materials in amounts and at prices necessary to
successfully commercialize our proposed products.

     New Accounting Pronouncement. In March 2000, the Financial Accounting
Standards Board issued Interpretation No. 44, "Accounting for Certain
Transactions involving Stock Compensation". Interpretation No. 44 clarifies the
application of APB 25, "Accounting for Stock Issued to Employees" effective July
1, 2000. The adoption of Interpretation No. 44 did not have a material impact on
the Company's financial statements.

NOTE 3. INVESTMENT SECURITIES

     Investment securities consisted of the following (in thousands):



                                                              DECEMBER 31,
                                                           ------------------
                                                            2000       1999
                                                           -------    -------
                                                                
Federal government and agency securities.................  $15,340    $ 7,985
Corporate debt securities................................   33,595      6,227
Corporate equity securities..............................      254      1,077
                                                           -------    -------
                                                           $49,189    $15,289
                                                           =======    =======


     Unrealized gains and losses at December 31, 2000 are as follows (in
thousands):



                                                          FAIR
                                           AMORTIZED     MARKET     UNREALIZED    UNREALIZED
                                           COST BASIS     VALUE       GAINS         LOSSES
                                           ----------    -------    ----------    ----------
                                                                      
Federal government and agency
  securities.............................   $15,287      $15,340       $ 53         $  --
Corporate debt securities................    33,415       33,595        183            (3)
Corporate equity securities..............       471          254         --          (217)
                                            -------      -------       ----         -----
                                            $49,173      $49,189       $236         $(220)
                                            =======      =======       ====         =====
Net unrealized gains.....................                              $ 16
                                                                       ====


                                        32
   34
                               NEORX CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     Unrealized gains and losses at December 31, 1999 are as follows (in
thousands):



                                                          FAIR
                                           AMORTIZED     MARKET     UNREALIZED    UNREALIZED
                                           COST BASIS     VALUE       GAINS         LOSSES
                                           ----------    -------    ----------    ----------
                                                                      
Federal government and agency
  securities.............................   $ 8,012      $ 7,985       $ --          $(27)
Corporate debt securities................     6,244        6,227         --           (17)
Corporate equity securities..............       691        1,077        386            --
                                            -------      -------       ----          ----
                                            $14,947      $15,289       $386          $(44)
                                            =======      =======       ====          ====
Net unrealized gains.....................                              $342
                                                                       ====


     Approximately $19,400,000 of corporate debt securities and $6,000,000 of
federal government and agency securities had maturity dates greater than one
year at December 31, 2000. Of the investments with maturity dates greater than
one year at December 31, 2000, $24,400,000 mature in 2002 and $1,000,000 mature
in 2003. All corporate debt securities and federal government and agency
securities at December 31, 1999 matured within one year.

NOTE 4. NOTES RECEIVABLE

     The Company has various unsecured notes receivable resulting from licensing
agreements, which includes a note for $2,500,000 bearing interest at 10% due in
August 2001.

NOTE 5. ACCRUED LIABILITIES

     Accrued liabilities consist of the following (in thousands):



                                                              DECEMBER 31,
                                                              ------------
                                                              2000    1999
                                                              ----    ----
                                                                
Compensation................................................  $437    $529
Severance...................................................     7     312
Other.......................................................    67      88
                                                              ----    ----
                                                              $511    $929
                                                              ====    ====


NOTE 6. LINE OF CREDIT

     In 2000, the Company established a line of credit with Pharmaceutical
Product Development, Inc., also known as PPD, of up to $5,000,000 to assist in
funding the Company's phase III trials of its STR product. Funds may be drawn at
any time for clinical trial services and interest is payable on any unpaid
balances at 16%. Principal and interest are payable in full in twenty-four equal
monthly installments beginning thirty days after funds are drawn. The Company
has not drawn funds on this line of credit to date. The line of credit
terminates on the earlier of the second anniversary of the first draw date or on
various other dates related to commitments completed or change in control of the
Company. In connection with this line of credit agreement the Company issued a
warrant to purchase 75,000 shares of Common Stock at an exercise price of
$6.7734. The Company recorded the fair value of the warrants as a deferred cost
within other assets, which will be amortized over the expected term of the line
of credit. Based upon the Black-Scholes option-pricing model, the grant-date
fair value of the warrant was $5.32 per share using assumptions of expected
volatility of 112%, contractual warrant term of four years, expected dividend
rate of zero and a risk-free rate of interest of 6.1%. The warrant expires in
2004.

                                        33
   35
                               NEORX CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7. LEASES

     The lease agreements for the Company's principal locations expire in 2003
and 2006. Total rent expense under operating leases was approximately $613,000,
$591,000, and $555,000, for 2000, 1999 and 1998, respectively.

     Minimum lease payments as of December 31, 2000, are as follows (in
thousands):



                                                             OPERATING
                           YEAR                               LEASES
                           ----                              ---------
                                                          
2001.......................................................   $1,611
2002.......................................................    1,601
2003.......................................................    1,420
2004.......................................................      401
2005.......................................................      382
Thereafter.................................................      153
                                                              ------
          Total minimum lease payments.....................   $5,568
                                                              ======


NOTE 8. CONVERTIBLE SUBORDINATED DEBENTURES

     At December 31, 1999, the Company had $1,195,000 in principal of
convertible subordinated debentures outstanding. The debentures were convertible
at the option of the holder into the Company's common stock at a conversion
price of $25.80 per share (par), subject to adjustment under certain conditions.
Interest at 9 3/4% was payable semi-annually on June 1 and December 1. The
debentures were redeemable, in whole or in part, at any time, at the option of
the Company at par, together with accrued interest. The debentures were
subordinated in right of payment to any outstanding senior indebtedness of the
Company, as defined in the indenture. At the option of the holders of the
debentures, $23,000 of debentures were converted into 890 common shares in 2000.
In June 2000, the Company retired the remaining balance of $1,172,000 of the
outstanding convertible subordinated debentures.

NOTE 9. SHAREHOLDERS' EQUITY

     Common Stock Transactions. During 2000, the Company generated approximately
$53,607,000 in net proceeds from the private sales of 4,177,045 newly issued
common shares of the Company. Also during 2000, the Company generated $2,157,278
in net proceeds from the issuance of 939,485 common shares related to the
exercises of employee stock options. The Company issued 3,294 shares of common
stock in exchange for 2,900 shares of Series 1 Convertible Preferred Stock, also
known as Series 1 Preferred Stock, and issued 890 shares of common stock upon
conversion of $23,000 of the Company's convertible subordinated debentures. The
Company also issued 3,750 common shares for consulting services.

     During 1998, the Company issued 138,422 shares of common stock in exchange
for 5,167 shares of Series 2 Convertible Preferred Stock, also known as Series 2
Preferred Stock, and 1,000 shares of Series 3 Convertible Preferred Stock, also
known as Series 3 Preferred Stock. Dividends of $101,240 were also paid on the
Series 2 Preferred Stock by issuing 21,038 shares of common stock.

     Preferred Stock Transactions. Holders of Series 1 Preferred Stock are
entitled to receive an annual cash dividend of $2.4375 per share if declared by
the Board of Directors, also known as the Board, payable semi-annually on June 1
and December 1. Dividends are cumulative. Each share of Series 1 Preferred Stock
is convertible into approximately 1.14 shares of common stock, subject to
adjustment in certain events. The Series 1 Preferred Stock is redeemable at the
option of the Company at $25.00 per share. Holders of Series 1 Preferred Stock
have no voting rights, except in limited circumstances.

                                        34
   36
                               NEORX CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     During 1998, 5,167 shares of Series 2 Preferred Stock were converted into
115,747 shares of Common Stock. As of December 31, 2000 and 1999, no Series 2
Preferred Stock remained outstanding.

     During 1998, 1,000 shares of Series 3 Preferred Stock were converted into
22,675 shares of common stock. As of December 31, 2000 and 1999, no Series 3
Preferred Stock remained outstanding.

     Shareholders' Rights Plan. The Company has adopted a Shareholders' Rights
Plan intended to protect the rights of shareholders by deterring coercive or
unfair takeover tactics. The Board declared a dividend to holders of the
Company's common stock, payable on April 19, 1996, to shareholders of record on
that date, of one preferred share purchase right, also known as the Right, for
each outstanding share of the common stock. The Right is exercisable 10 days
following the offer to purchase or the acquisition of a beneficial ownership of
20% of the outstanding common stock by a person or group of affiliated persons.
Each Right entitles the registered holder, other than the acquiring person or
group, to purchase from the Company one-hundredth of one share of Series A
Junior Participating Preferred Stock, also known as Series A Preferred Stock, at
a price of $40, subject to adjustment. The Rights expire in 2006. The Series A
Preferred Stock will be entitled to a minimum preferential quarterly dividend of
$1 per share and has liquidation provisions. Each share of Series A Preferred
Stock has 100 votes, and will vote with the common stock. Prior to the
acquisition by a person or group of 20% of the outstanding common stock, the
Board may redeem each Right at a price of $.001.

     In lieu of exercising the Right by purchasing one one-hundredth of one
share of Series A Preferred Stock, the holder of the Right, other than the
acquiring person or group, may purchase for $40, that number of the Company's
common stock having a market value of twice that price.

     The Board may, without further action by the shareholders of the Company,
issue preferred stock in one or more series and fix the rights and preferences
thereof, including dividend rights, dividend rates, conversion rates, voting
rights, terms of redemption, redemption price or prices, liquidation preferences
and the number of shares constituting any series or the designations of such
series.

     Stock Options. The Company has two stock option plans with options
available for grant: the 1994 Stock Option Plan (the "1994 Plan") and the 1991
Stock Option Plan for Non-Employee Directors (the "Directors Plan").

     The 1994 Plan, as amended in 2000, authorizes the Board or an Option
Committee appointed by the Board to grant options to purchase a maximum of
4,500,000 shares of common stock. The 1994 Plan allows for the issuance of
incentive stock options and nonqualified stock options to employees, officers,
Directors, agents, consultants, advisors and independent contractors of the
Company, subject to certain restrictions. All option grants expire ten years
from the date of grant. Beginning in May 2000, option grants for employees with
at least one year of service become exercisable in monthly increments over a
four-year period from the grant date. Option grants for employees with less than
one year of service and employees receiving promotions beginning in May 2000
become exercisable at a rate of 25% after one year from the grant date and then
in monthly increments at a rate of 1/48 per month over the following three
years. As of December 31, 2000, there were 529,788 shares of common stock
available for grant under the 1994 Plan.

     In connection with an agreement with a consultant in 2000 for clinical
consulting services, the Company granted stock options to purchase 100,000
shares of Common Stock at an exercise price of $9.1875. The options vest 25%
immediately, and 25% every six months thereafter. The fair value of the grant is
being recorded as compensation expense over the period the services are provided
by the consultant. Based upon the Black Scholes option-pricing model, the
grant-date fair value of the options ranged from $7.81 to $7.93 per share using
assumptions of expected volatility of 144%, expected option life of two years,
expected dividend rate of zero and risk-free rates of interest of 6.5% to 6.6%.
The fair value of the options with future vesting dates will not be known until
the earlier of the vesting of the options or the completion of the services
being provided.

                                        35
   37
                               NEORX CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     In May 2000, the Company amended its stock option plan to provide that an
employee will have two years to exercise the vested portion of an option upon
retirement from the Company, whereas the employee previously had three months to
exercise such option. Compensation expense equal to the intrinsic value of an
employee's option at the modification date will be recorded for employees that
receive an extension of their options upon retirement.

     On December 14, 1998, the Company canceled and reissued 1,904,927 employee
stock options at a price of $1.60 per share, which was greater than the fair
market value of $1.25 per share of the common stock on the reissue date. Except
for the exercise price, the options had terms identical to the cancelled
options. Employees agreed to a one-year moratorium on exercise of these options
to qualify for the exchange. During this "black-out period" any employee
resigning from the Company was not able to exercise these options. The exercise
price of the cancelled options ranged from $2.94 - $12.25.

     In December 1999, the Company extended the term of 211,000 vested stock
options for certain employees. At the time of the extension of the term, the
fair value of the Company's common stock was greater than the exercise price of
the stock options. The Company recorded $407,000 in compensation expense for the
difference between the fair value of the Company's common stock on the date the
exercise period was extended and the exercise price of the stock options.

     The Directors Plan authorizes the grant of stock options to non-employee
Directors to purchase a maximum of 250,000 shares of Common Stock. Under the
terms of the amended plan, each eligible Director receives annually, concurrent
with the annual election of Directors, an option to purchase 10,000 shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock on the date of grant. The options become exercisable in two equal annual
installments beginning with the first annual meeting of shareholders after the
date of grant. In addition, each newly appointed non-employee Director receives
a one-time initial option to purchase 20,000 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock on the date of
grant. Options expire on the earlier of ten years from the date of grant or five
years after the Director's termination of service as a Director. As of December
31, 2000, there were no shares of Common Stock available for grant under the
Directors Plan. Information relating to activity under the Company's stock
option plans is as follows (in thousands, except per share data):



                                            2000                         1999                         1998
                                 --------------------------   --------------------------   --------------------------
                                                WEIGHTED                     WEIGHTED                     WEIGHTED
                                  NUMBER        AVERAGE        NUMBER        AVERAGE        NUMBER        AVERAGE
                                 OF SHARES   EXERCISE PRICE   OF SHARES   EXERCISE PRICE   OF SHARES   EXERCISE PRICE
                                 ---------   --------------   ---------   --------------   ---------   --------------
                                                                                     
Outstanding at beginning of
  year.........................    3,629         $ 2.56         3,335         $2.81          3,148         $5.14
Granted........................      810          13.57           598          1.49          2,589          1.97
Exercised......................     (939)          2.30           (66)         1.60           (127)         3.25
Cancelled......................     (344)          5.38          (238)         3.70         (2,275)         5.06
                                   -----         ------         -----         -----         ------         -----
Outstanding at end of year.....    3,156         $ 5.16         3,629         $2.56          3,335         $2.81
                                   =====         ======         =====         =====         ======         =====
Exercisable at end of year.....    1,705         $ 3.51         2,118         $3.22            887         $5.31
                                   =====         ======         =====         =====         ======         =====


                                        36
   38
                               NEORX CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     Information relating to stock options outstanding and exercisable at
December 31, 2000 is as follows (in thousands, except per share data):



                                                     OPTIONS OUTSTANDING
                                          ------------------------------------------      OPTIONS EXERCISABLE
                                                        WEIGHTED                       --------------------------
                                                         AVERAGE         WEIGHTED                     WEIGHTED
                                           NUMBER       REMAINING        AVERAGE        NUMBER        AVERAGE
        RANGE OF EXERCISE PRICES          OF SHARES   LIFE IN YEARS   EXERCISE PRICE   OF SHARES   EXERCISE PRICE
        ------------------------          ---------   -------------   --------------   ---------   --------------
                                                                                    
$1.25 - $ 1.44..........................      474         8.11            $ 1.36           245         $ 1.36
        $ 1.60..........................    1,176         5.06              1.60           802           1.60
$1.63 - $ 9.19..........................      869         6.29              5.02           565           5.37
$9.25 - $21.75..........................      637         9.03             14.73            93          14.30
                                            -----         ----            ------         -----         ------
                                            3,156         6.66            $ 5.16         1,705         $ 3.51
                                            =====         ====            ======         =====         ======


     The fair value of each stock option granted is valued on the date of grant
using the Black Scholes option-pricing model. During 2000, the weighted average
grant-date fair value of stock options granted was $11.50 per share using
assumptions of expected volatility of 144%, expected option lives of three
years, expected dividend rate of zero and a risk-free rate of interest of 5.1%.
During 1999, the weighted average grant-date fair value of stock options granted
was $1.16 per share using assumptions of expected volatility of 112%, expected
option lives of four years, expected dividend rate of zero and a risk-free rate
of interest of 6.6%. During 1998, the weighted average grant-date fair value of
stock options granted with an exercise price equal to the fair market value of
the common stock was $2.01 per share using assumptions of expected volatility of
105%, expected option lives of four to six years, expected dividend rate of zero
and a risk-free rate of interest of 4.7%. The weighted average grant-date fair
value of repriced stock options in 1998 was $.89 per share using assumptions of
expected volatility of 105%, expected option lives of four to five years,
expected dividend rate of zero and a risk-free rate of interest of 4.7%.

     Had compensation cost for these stock option plans been determined in
accordance with SFAS 123, the Company's "Net Loss", "Net Loss Applicable to
Common Shares" and "Net Loss Per Common Share" would have increased to the
following pro forma amounts for 2000, 1999 and 1998 (in thousands, except per
share data):



                                                        2000        1999       1998
                                                      --------    --------    -------
                                                                     
Net loss
  As reported.......................................  $(11,402)   $(11,951)   $(4,449)
  Pro forma.........................................   (13,799)    (13,967)    (5,819)
Net loss applicable to common shares
  As reported.......................................  $(11,905)   $(12,459)   $(4,975)
  Pro forma.........................................   (14,302)    (14,475)    (6,345)
Net loss per common share, basic and diluted
  As reported.......................................  $   (.50)   $   (.59)   $  (.24)
  Pro forma.........................................      (.60)       (.69)      (.30)


     Because the SFAS 123 method of accounting has not been applied to stock
options granted before January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.

     Restricted Stock. The Company also has a Restricted Stock Plan (the
"Restricted Stock Plan") under which restricted stock may be granted or sold to
selected employees, officers, agents, consultants, advisors and independent
contractors of the Company. Under the Restricted Stock Plan, adopted in 1991,
250,000 shares are authorized for grant, of which 190,250 remain available for
grant at December 31, 2000. There were 3,750

                                        37
   39
                               NEORX CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

shares granted without restrictions during 2000 for services. No restricted
shares were granted in 1999 and 1998.

     Warrants. In connection with an agreement with a company in 2000 for
investor relations services, the Company issued warrants to purchase 80,000
shares of Common Stock at exercise prices ranging from $6.00 to $9.00. The
Company recorded an expense in the amount of $205,000 for the fair value of the
warrants on the date the services were completed. Based upon the Black Scholes
option pricing model, the grant-date fair values of the warrants ranged from
$5.32 to $7.97 per share using assumptions of expected volatility of 112%,
expected warrant lives of two years, expected dividend rate of zero and a
risk-free rate of interest of 6.1%. The warrants expire in 2002.

     In connection with an agreement with a company in 1999 for investor
relations services, the Company issued a warrant to purchase 150,000 shares of
Common Stock at an exercise price of $1.6875. The Company recorded an expense in
the amount of $450,000 for the fair value of the warrant on the date the
services were completed. Based upon the Black Scholes option pricing model, the
grant-date fair value of the warrant was $1.22 per share using assumptions of
expected volatility of 112%, expected warrant life of five years, expected
dividend rate of zero and a risk-free rate of interest of 6.6%. The warrant
expires in 2004.

NOTE 10. REVENUES

     The Company recorded $1,975,000 of revenue in 2000 from a licensing
agreement entered in 1998 with Theseus LTD concurrent with Theseus LTD's
acquisition by North American Scientific, Inc. and management's determination
that collectibility of contractual amounts due was reasonably assured.

     The Company entered into an agreement in August 1997 with Janssen
Pharmaceutica NV, also known as Janssen, a wholly owned subsidiary of Johnson &
Johnson Inc., for the worldwide development, manufacture and distribution of
NeoRx's AVICIDIN(R) cancer therapy product. The Company received a $5,000,000
license fee in 1997, which was recorded as revenue in 1997, and rights to
potential future milestone payments and royalties on product sales. In January
1998, the Company received a $7,000,000 milestone payment from Janssen,
reflecting Janssen's decision to begin phase II trials of AVICIDIN(R) cancer
therapy as part of the agreement entered into with Janssen in 1997. Janssen
terminated this agreement on December 29, 1998.

     The Company received $1,900,000 in 1999 from final payments under a
previous licensing agreement, which was recorded as other income.

NOTE 11. CASH FLOWS

     Interest paid by the Company was $49,000, $117,000, and $130,000, for 2000,
1999 and 1998, respectively. During 2000, $23,000 of subordinated debentures
were converted into 890 shares of common stock. During 2000, the Company issued
warrants valued at $300,000 in connection with the line of credit, which have
been recorded as deferred costs within other assets.

                                        38
   40
                               NEORX CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 12. FEDERAL INCOME TAXES

     Temporary differences and carryforwards giving rise to deferred tax assets
were as follows (in thousands):



                                                             DECEMBER 31,
                                                         --------------------
                                                           2000        1999
                                                         --------    --------
                                                               
Net operating loss carryforwards.......................  $ 26,865    $ 23,318
Research and experimentation credit carryforwards......     6,220       5,814
Capitalized research and development...................     5,732       1,725
Depreciation and amortization..........................       425         503
Other..................................................       748         727
                                                         --------    --------
  Deferred tax assets..................................    39,990      32,087
                                                         --------    --------
Deferred tax asset valuation allowance.................   (39,990)    (32,087)
                                                         --------    --------
  Net deferred taxes...................................  $     --    $     --
                                                         ========    ========


     The Company has established a valuation allowance equal to the amount of
deferred tax assets because the Company has not had taxable income since its
inception and significant uncertainty exists regarding the ultimate realization
of the deferred tax assets. Accordingly, no tax benefits have been recorded in
the accompanying statements of operations. The valuation allowance increased by
$7,903,000, $4,000,000, and $5,617,000 in 2000, 1999 and 1998, respectively.

     The Company has net operating loss carryforwards of approximately
$79,000,000 which expire from 2001 through 2020. Research and experimentation
credits expire from 2001 to 2020. As a result of changes in ownership, the
utilization of the Company's net operating loss carry forwards may be limited.

NOTE 13. RELATED PARTY TRANSACTIONS

     The Company's Chairman of the Board of Directors, Dr. Fred Craves, has a
consulting agreement with the Company that provides that he shall be retained as
a general advisor and consultant to the Company's management on all matters
pertaining to the Company's business. In exchange for such services, he is
compensated $30,000 for each calendar quarter of services, plus reasonable
travel and other expenses. Compensation payments under this agreement totaled
$120,000 for each of the years 2000, 1999 and 1998. In addition, payments for
travel and other expenses totaled approximately $29,900, $22,500 and $21,175 for
2000, 1999 and 1998, respectively.

     Dr. Craves is a founder of Bay City Capital BD, LLC, also known as BCC, a
merchant bank focused on the life sciences industry. Another NeoRx director is
on the business advisory board of BCC. The Company and BCC entered into an
agreement whereby BCC will act as the Company's advisor for the purpose of
identifying opportunities to enter into strategic alliances. The Company pays a
retainer fee of $50,000 in cash for each calendar quarter. The agreement also
includes a percentage of consideration, ranging from one to five percent,
depending on the ultimate amount of consideration raised. Payments under this
agreement totaled $50,000 for 2000. The balance payable at December 31, 2000 was
$100,000.

     In connection with financial consulting services to be performed in 2001, a
board director received stock option grants of 10,000 shares in December 2000
and 150,000 shares in January 2001. The 10,000 options granted in December 2000
vest in three monthly increments beginning in January 2001. The 150,000 options
granted in January 2001 vest in eighteen monthly increments beginning in
February 2001. Fair value of the option grants will be recorded as an expense
over the period the services are to be performed.

     The Company has a demand note receivable from an officer with a balance of
$60,875, and $82,338 at December 31, 2000 and 1999, respectively.

                                        39
   41
                               NEORX CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 14. RESTRUCTURING EXPENSE

     In December 1998, the Company restructured its operations and reduced its
workforce in all departments by 20 employees. The Company incurred a severance
charge of $659,000 as a result of the restructuring. The accrued severance
payable at December 31, 1998 was $504,000, which was paid in 1999.

NOTE 15. 401(k) PLAN

     The Company sponsors a 401(k) plan that covers substantially all employees.
At its own discretion, the Company may make contributions to the plan on a
percentage of participants' contributions. The Company made contributions of
$18,112, $19,367 and $24,386 for the years ended December 31, 2000, 1999 and
1998, respectively. The Company has no other post employment or postretirement
benefit plans.

NOTE 16. UNAUDITED QUARTERLY DATA

     The following table presents summarized unaudited quarterly financial data
(in thousands, except per share data):



                                               FIRST     SECOND      THIRD     FOURTH
                                              QUARTER    QUARTER    QUARTER    QUARTER
                                              -------    -------    -------    -------
                                                                   
2000
Revenues....................................  $   149    $   727    $   684    $ 1,989
Operating expenses..........................    6,063      5,062      4,852      5,617
Net loss....................................   (2,366)    (3,855)    (3,450)    (1,731)
Net loss applicable to common shares........   (2,493)    (3,982)    (3,575)    (1,855)
Net loss per common share -- basic and
  diluted...................................     (.12)      (.17)      (.15)      (.06)
1999
Revenues....................................  $   413    $    47    $     3    $   128
Operating expenses..........................    3,346      3,721      3,779      4,508
Net loss....................................   (2,708)    (3,457)    (3,508)    (2,278)
Net loss applicable to common shares........   (2,835)    (3,584)    (3,635)    (2,405)
Net loss per common share -- basic and
  diluted...................................     (.13)      (.17)      (.17)      (.12)


NOTE 17. CONTINGENCY

     The Company is in continuing discussions with the FDA regarding their
proposed STR product. The Company's phase III multiple myeloma and other STR
studies were placed on clinical hold in November 2000 by the FDA after some
patients developed a serious delayed toxicity. Communications with the FDA have
focused on (1) the relevant factors for selecting a safe radiation dose and (2)
the accuracy of radiation calculations. The FDA has requested that the Company
collect additional dosimetry data from patients to demonstrate the accuracy of
the method the Company proposed to use to calculate dose in the phase III STR
trial.

NOTE 18. SUBSEQUENT EVENT

     On March 20, 2001, the Company entered into an agreement to purchase
certain radiopharmaceutical manufacturing assets of International Isotopes Inc.
in Denton, Texas. Completion of the purchase is subject to a number of
conditions of closing, including the sale by International Isotopes of certain
of its other assets to third parties, settlement by International Isotopes of
claims of certain creditors, receipt by International Isotopes of bank financing
for its proposed future operations and delivery by International Isotopes of the
assets free and clear of liens. To acquire the assets, we have agreed to pay $6
million in cash and to assume

                                        40
   42
                               NEORX CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

$6 million of restructured debt of International Isotopes. In addition, the
Company has agreed to issue to International Isotopes a warrant to purchase, at
an exercise price of $10 per share, up to 800,000 shares of NeoRx common stock
(the "warrant shares"). The warrant will expire in 3 years. The Company has
agreed to file a registration statement to register the warrant shares for
resale after closing. The asset purchase agreement can be terminated by either
NeoRx or International Isotopes if the closing does not occur by April 30, 2001.

                                        41
   43

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

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     (a) Directors. The information required by this item is incorporated herein
by reference to the section captioned "Election of Directors" in the Company's
Proxy Statement for the Annual Meeting of Shareholders to be held on May 22,
2001, filed with the Securities and Exchange Commission (the "Commission")
pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").

     (b) Executive Officers. Information with respect to the Company's executive
officers is set forth below.



                   NAME                     AGE            POSITION WITH THE COMPANY
                   ----                     ---            -------------------------
                                            
Paul G. Abrams, M.D., J.D. ...............  53    President, Chief Executive Officer and
                                                  Director
Karen Auditore-Hargreaves, Ph.D. .........  48    Vice-President, Research and Development
Becky J. Bottino..........................  52    Vice President, Operations
Melinda G. Kile...........................  44    Controller, Secretary and Chief Accounting
                                                  Officer


BUSINESS EXPERIENCE

     Dr. Paul G. Abrams is a co-founder of the Company, has been a Director
since January 1985 and has been Chief Executive Officer since May 1990 and has
been President since March 2001. Dr. Abrams holds M.D., J.D. and B.A. degrees
from Yale University. He is a board-certified internist and medical oncologist
and is an Affiliate Associate Professor in the Department of Radiology at the
University of Washington.

     Karen Auditore-Hargreaves has been Vice President of Research and
Development since May 1999. Prior to joining the Company, she was Vice President
of Research, at CellPro, Inc and responsible for the development of products for
the selection, activation and expansion of human hematopoietic cells. Prior to
joining CellPro, Dr. Hargreaves held research management positions with Oculon
Corporation, PATH and Genetic Systems Corporation. Dr. Hargreaves holds a Ph.D.
in Genetics from the University of California, Davis and received her
postdoctoral training at the Massachusetts Institute of Technology Center for
Cancer Research. Her twenty years experience in the biotechnology industry
includes drug and device development as well as in vitro diagnostics.

     Becky J. Bottino has been Vice President of Operations since September
1997. She was the Company's Director of Manufacturing and Product Development
from October 1996 through September 1997, Director of Product Development from
1992 to 1994 and Manager of Product Development from 1989 to 1992. Ms. Bottino
joined NeoRx in 1985 as a Research Technologist. She holds a M.S. degree in
Chemistry from the University of Washington and a B.S. degree from the
University of Utah.

     Melinda G. Kile has been the Controller since January 1998, has been Chief
Accounting Officer since February 2001, and has been Secretary since March 2001.
She joined NeoRx from Perstorp Xytec, Inc., where she was Vice President and
Chief Financial Officer from March 1996 to January 1998. Prior to joining
Perstorp Xytec, Ms. Kile was Controller at Tree Top, Inc., and held a number of
positions in finance and marketing from April 1983 through March 1996. Ms. Kile
is a CPA and received a B.S. in Accounting from Central Washington University.

     (c) Compliance with Section 16(a) of the Exchange Act. The information
required by this item is incorporated herein by reference to the section
captioned "Compliance With Section 16(a) of the Securities Exchange Act of 1934"
in the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held on May 22, 2001 filed with the Commission pursuant to Section 14(a) of the
Exchange Act.

                                        42
   44

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this item is incorporated herein by reference
to the sections captioned "Executive Compensation" in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on May 22, 2001,
filed with the Commission pursuant to Section 14(a) of the Exchange Act.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is incorporated herein by reference
to the section captioned "Security Ownership of Certain Beneficial Owners and
Management" in the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 22, 2001, filed with the Commission pursuant to
Section 14(a) of the Exchange Act.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is detailed in the Notes to Financial
Statements contained herein in the section captioned "Related Party
Transactions".

                                    PART IV

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

     (a)(1) Financial Statements -- See Index to Financial Statements.

     (a)(2) Financial Statement Schedules -- Not applicable.

     (a)(3) Exhibits -- See Exhibit Index filed herewith.

     (b) Reports on Form 8-K --

        Form 8-K dated October 2, 2000, announcing initiation of STR phase III
        clinical trials in multiple myeloma

        Form 8-K dated November 8, 2000, relating to suspension of STR trials

        Form 8-K dated December 5, 2000, updating efficacy data on phase I/II
        STR trials.

     (c) Exhibits -- See Exhibit Index filed herewith.

                                        43
   45

                                   SIGNATURES

     Pursuant to the requirements of Section 13 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.

                                          NEORX CORPORATION
                                          (Registrant)

                                                  /s/ MELINDA G. KILE
                                          --------------------------------------
                                                     Melinda G. Kile
                                                        Controller
                                                 (Principal Financial and
                                              Accounting Officer, Secretary)

Date: March 30, 2001

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.

                                                                                  

                 /s/ PAUL G. ABRAMS                      President, Chief Executive     March 30, 2001
- -----------------------------------------------------       Officer and Director
                   Paul G. Abrams                       (Principal Executive Officer)

                 /s/ FRED B. CRAVES                       Chairman of the Board of      March 30, 2001
- -----------------------------------------------------             Directors
                   Fred B. Craves

                 /s/ JACK L. BOWMAN                               Director              March 30, 2001
- -----------------------------------------------------
                   Jack L. Bowman

               /s/ E. ROLLAND DICKSON                             Director              March 30, 2001
- -----------------------------------------------------
                 E. Rolland Dickson

               /s/ CARL S. GOLDFISCHER                            Director              March 30, 2001
- -----------------------------------------------------
                 Carl S. Goldfischer

                /s/ ALAN A. STEIGROD                              Director              March 30, 2001
- -----------------------------------------------------
                  Alan A. Steigrod



                                        44
   46

                                 EXHIBIT INDEX



                                                                           INCORPORATION
EXHIBIT                           DESCRIPTION                             BY REFERENCE TO
- -------                           -----------                             ---------------
                                                                    
 3.1(a)   Restated Articles of Incorporation, dated April 29, 1996....        *
 3.1(b)   Articles of Amendment, dated March 31, 1997, to Restated
          Articles of Incorporation...................................        **
 3.1(c)   Articles of Amendment, dated August 8, 1997, to Restated
          Articles of Incorporation...................................      XXXXX
 3.2      Bylaws, as amended, of the registrant.......................      XXXXX
 4.1      Form of Indenture, dated as of June 1, 1989, between NeoRx
          Corporation and First Interstate Bank of Washington, N.A.,
          as Trustee..................................................       ***
10.1      Restated 1994 Stock Option Plan(++).........................        @
10.2      Lease Agreement for 410 West Harrison facility, dated
          February 15, 1996, between NeoRx Corporation and Diamond
          Parking, Inc................................................        #
10.3      Amendment No. 1, dated August 14, 2000, to Lease Agreement
          between NeoRx Corporation and Dina Corporation..............        X
10.4      1991 Stock Option Plan for Non-Employee Directors, as
          amended(++).................................................        =
10.5      1991 Restricted Stock Option Plan(++).......................      ******
10.6      Agreement, dated as of December 15, 1995....................    = = = = =
10.7      Consulting Agreement, dated as of July 7, 1993, between
          NeoRx Corporation and Dr. Fred Craves(++)...................        =
10.8      Amendment No. 4 to consulting agreement, dated July 1, 2000
          between NeoRx Corporation and Dr. Fred Craves(++)...........        X
10.9      Agreement, dated as of June 1, 1987, between NeoRx
          Corporation and the Board of Trustees of the Leland Stanford
          Junior University, as amended...............................       = =
10.10     Amendment No. 4, dated July 11, 1997, to Contract between
          NeoRx Corporation and the Board of Trustees of the Leland
          Stanford Junior University..................................        X
10.11     Indemnification Agreement(++)...............................        #
10.12     Form of Key Executive Severance Agreement(++)...............        ##
10.13     Officer Change in Control Agreement(++).....................      XXXXX
10.14     Key Executive Severance Agreement(++).......................      XXXXX
10.15     License Agreement, dated June 30, 1999, between NeoRx and
          The Dow Chemical Company....................................        ~
10.16     Credit Facility Agreement, dated February 3, 2000, between
          NeoRx Corporation and PPD...................................        ~~
10.17     Clinical Manufacture and Supply Agreement, dated February
          21, 2000, between NeoRx Corporation and International
          Isotopes, Inc. .............................................        ~~
10.18     Clinical Manufacture and Supply Agreement, dated September
          1, 2000, between NeoRx Corporation and ABC Labs.............       ~~~
10.19     Facilities Lease, dated July 24, 2000, between NeoRx
          Corporation and F5 Networks.................................       ~~~
10.20     Stock Option Agreement, dated December 19, 2000, between
          NeoRx Corporation and Carl S. Goldfischer(++)...............        X
10.21     Asset Purchase Agreement, dated March 20, 2001, between
          International Isotopes Inc. and NeoRx Corporation...........        X
10.22     Stock Option Agreement, dated January 17, 2001, between
          NeoRx Corporation and Carl S. Goldfischer(++)...............        X
10.23     Consulting Agreement, dated December 19, 2000, between NeoRx
          Corporation and Carl S. Goldfischer(++).....................        X
10.24     Consulting Agreement, dated November 6, 2000, between NeoRx
          Corporation and Douglass Given(++)..........................        X

   47



                                                                           INCORPORATION
EXHIBIT                           DESCRIPTION                             BY REFERENCE TO
- -------                           -----------                             ---------------
                                                                    
10.25     Stock Option Agreement, dated November 16, 2000, between
          NeoRx Corporation and Douglass Given(++)....................        X
23.1      Consent of KPMG LLP.........................................        X


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

          
*            Filed as an exhibit to the Company's Form 10-K for the
             fiscal year ended December 31, 1996 and incorporated herein
             by reference.

**           Filed as an exhibit to the Company's Registration Statement
             on Form S-3 (Registration No. 333-25161), filed April 14,
             1997 and incorporated herein by reference.

***          Filed as an exhibit to the Company's Registration Statement
             on Form S-1 (Registration No. 33-28545), effective May 31,
             1989 and incorporated herein by reference.

******       Filed as an exhibit to the Company's Annual Report on Form
             10-K for the fiscal year ended September 30, 1991 and
             incorporated herein by reference.

=            Filed as an exhibit to the Company's Registration Statement
             on Form S-2 (Registration No. 33-71164) effective December
             13, 1993 and incorporated herein by reference.

==           Filed as an exhibit to the Company's Form 10-K for the
             fiscal year ended December 31, 1994 and incorporated herein
             by reference.

=====        Filed as an exhibit to the Company's Form 10-K for the
             fiscal year ended December 31, 1995 and incorporated herein
             by reference.

@            Filed as an exhibit to the Company's Registration Statement
             on Form S-8, filed July 31, 1997 and incorporated herein by
             reference.

#            Filed as an exhibit to the Company's Form 10-Q for the
             quarterly period ended March 31, 1996 and incorporated
             herein by reference.

##           Filed as an exhibit to the Company's Form 10-Q for the
             quarterly period ended June 30, 1996 and incorporated herein
             by reference.

X            Filed as an exhibit to the Company's Form 10-K for the
             fiscal year ended December 31, 2000.

XXXXX        Filed as an exhibit to the Company's Form 10-K for the
             fiscal year ended December 31, 1998.

~            Filed as an exhibit to the Company's Form 10-Q for the
             quarterly period ended September 30, 1999 and incorporated
             herein by reference. Certain portions of the agreement have
             been omitted pursuant to a grant of confidential treatment.

~~           Filed as an exhibit to the Company's Form 10-Q for the
             quarterly period ended March 31, 2000 and incorporated
             herein by reference. Certain portions of the agreement have
             been omitted pursuant to a grant of confidential treatment.

~~~          Filed as an exhibit to the Company's Form 10-Q for the
             quarterly period ended September 30, 2000 and incorporated
             herein by reference. Certain portions of the agreement have
             been omitted pursuant to a grant of confidential treatment.

++           Management contract or compensatory plan.

EX-10.3

   1
                                                                    EXHIBIT 10.3

                            FIRST AMENDMENT TO LEASE

This first Amendment to Lease dated this 14th day of August, 2000 by and between
Dina Corporation, successor in interest to Diamond Parking, Inc., as Lessor and
NeoRx Corporation, a Washington Corporation, as Tenant.

                                    RECITALS

        WHEREAS Landlord and Tenant did enter into a Lease dated February 15,
1996, and,

        WHEREAS Landlord and Tenant desire to amend said Lease with an effective
date of June 1, 2001, and

        NOW THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, Landlord and Tenant do agree as follows:

                             BASIC LEASE INFORMATION

SECTION 3 - TERM. The extended lease term shall commence on the June 1, 2001 and
shall terminate on May 31, 2006.

SECTION 4 - RENT. Rent for the extended lease term shall be as spelled out in
SECTION 38 (D) AND 38 (E) OF THE ORIGINAL LEASE DATED FEBRUARY 15, 1996.

SECTION 38 - RENEWAL OPTION. Tenant has exercised its final five (5) year
option.

All other terms and conditions of the original Lease dated February 15, 1996
shall remain in full force and effect.

   2
Re:  First Amendment to Lease between
     Dina Corporation, Lessor and NeoRx Corporation, Tenant
     August 11, 2000
     Page Two

IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to
Lease as of the date first written above.

                                            Lessor:

                                            DINA CORPORATION


                                            By /s/ DIANE FOREMAN
                                               ---------------------------------
                                               Name:
                                                    ----------------------------
                                               Title: President
                                                     ---------------------------

                                            Tenant:

                                            NEORX CORPORATION,
                                            A Washington Corporation

                                            By /s/ RICHARD L. ANDERSON
                                               ---------------------------------
                                               Name:  Richard L. Anderson
                                                     ---------------------------
                                               Title:    President & COO
                                                     ---------------------------

EX-10.8

   1
                                                                    EXHIBIT 10.8

                     Amendment Four to Consulting Agreement

        WHEREAS, this Amendment Four to Consulting Agreement is effective July
1, 2000, and is made between NEORX CORPORATION, 410 West Harrison Street,
Seattle, Washington 98119, and DR. FRED CRAVES, 215 Laurel Grove, Kentfield,
California 94904; and

        WHEREAS, the parties are desirous of extending the term of said
Consulting Agreement.

        NOW, THEREFORE, the term of the Agreement shall be extended to December
31, 2000.

        All other terms and conditions of the original Consulting Agreement as
amended shall remain in full force and effect, as stated.

                                              NeoRx Corporation

                                              By: /s/ PAUL G. ABRAMS
                                                  ------------------------------
                                                      Paul G. Abrams, M.D., J.D.
                                                      Chief Executive Officer


                                              /s/ FRED B. CRAVES
                                              ----------------------------------
                                              Fred B. Craves, Ph.D.

EX-10.10

   1
                                                                   Exhibit 10.10

                                 AMENDMENT NO. 4

                                     to the

                                License Agreement

                             Effective June 1, 1987

                                     Between

                               STANFORD UNIVERSITY

                                       and

                                NEORX CORPORATION

        Effective as of July 11, 1997, THE BOARD OF TRUSTEES OF THE LELAND
STANFORD JUNIOR UNIVERITY, a body having corporate powers under the laws of the
State of California ("STANFORD") and NEORX CORPORATION, a Washington
Corporation, having a principal place of business at 410 W. Harrison, Seattle,
Washington 98119 ("NEORX"), agree as follows:

                                    AMENDMENT

        2.3 - Paragraph 12.3(a) of the License is hereby amended to read in its
entirety, as follows:

        12.3 (a) - Sublicense terms and conditions shall reflect that any
        sublicensee shall not further sublicense; provided, however, that
        NEORX's proposed sublicensee, JANSSEN PHARMACEUTICA, may further
        sublicense provided that notification is sent to STANFORD upon signing
        of the sublicense and that any sub-sublicensee may not further
        sublicense; and

        IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.
4 in duplicate originals by their duly authorized officers or representatives.

THE BOARD OF TRUSTEES                         NEORX CORPORATION
OF THE LELAND STANFORD
JUNIOR UNIVERSITY

By      /s/ [SIGNATURE ILLEGIBLE]             By     /s/ PAUL G. ABRAMS
        --------------------------------             ---------------------------

Title   Director Technology Licensing         Title  President & CEO
        --------------------------------             ---------------------------

Date    July 15, 1997                         Date   7/11/97
        --------------------------------             ---------------------------

EX-10.20

   1
                                                                   EXHIBIT 10.20
                               NEORX CORPORATION
                   NONQUALIFIED STOCK OPTION LETTER AGREEMENT
                                DECEMBER 19, 2000

TO:  CARL S. GOLDFISCHER

We are pleased to inform you that you have been granted a nonqualified stock
option under the NeoRx Corporation Restated 1994 Stock Option Plan (the "Plan")
for the purchase of 10,000 shares of NeoRx Corporation's (the "Company") common
stock at an exercise price of $6.25 per share, pursuant to the terms and
conditions set forth below and in the Company Plan. A copy of the Plan is
attached and incorporated into this Agreement by reference.

The terms of the option are as set forth in the Plan and in this Agreement. The
most important of the terms set forth in the Plan are summarized as follows:

        DATE OF GRANT: The date of grant of the option is December 19, 2000.

        VESTING: The option shall vest and become exercisable, subject to
shareholder approval of the Plan, in accordance with the following schedule:

               Date On and After Which             Portion of Total Option
                Option is Exercisable               Which is Exercisable
               -----------------------             -----------------------

                  January 19, 2001                        One-Third
                  February 19, 2001                       One-Third
                  March 19, 2001                          One-Third

        TERM: The option to have a term of ten years, to vest in equal monthly
amounts over the next three months during which time he is providing financial
advice to the Company and shall terminate in accordance with Section 5.8 of the
Plan after the passage of a certain amount of time after Dr. Goldfischer ceases
his relationship with the Company (whether as a consultant, Director or
otherwise).

        EXERCISE: During your lifetime only you can exercise the option. The
Plan also provides for exercise of the option by the personal representative of
your estate or the beneficiary thereof following your death.

        PAYMENT FOR SHARES: The option may be exercised by the delivery of:

        (1) Cash, personal check (unless, at the time of exercise, the Plan
Administrator determines otherwise), bank certified or cashiers check;

        (2) Unless the Plan Administrator in its sole discretion determines
otherwise, shares of the capital stock of the Company held by you for a period
of at least six months having a fair


   2
market value at the time of exercise, as determined in good faith by the Plan
Administrator, equal to the exercise price; or

        (3) A properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price.

        TERMINATION: If you cease to be a Consultant to the Company for any
reason other than death or termination for cause, and unless by its terms this
option sooner terminates or expires, then you may exercise, for a two-year
period, that portion of your option which is exercisable at the time of such
cessation, but the option shall terminate at the end of such period following
such cessation as to all shares for which it has not theretofore been exercised.

        DEATH OF OPTIONEE: If you die while serving as a Consultant to the
Company or within the two-year period following cessation of such service, this
option may, to the extent that you would have been entitled to exercise this
option, be exercised within one year after your death by the personal
representative of your estate or by the person or persons to whom your rights
under this option shall pass by will or by the applicable laws of descent and
distribution, unless sooner terminated.

        STATUS OF SHAREHOLDER: Neither you nor any person or persons to whom
your rights and privileges under this option may pass shall be, or have any of
the rights or privileges of, a shareholder of the Company with respect to any of
the shares issuable upon the exercise of this option unless and until this
option has been exercised.

        CONTINUATION OF STATUS AS CONSULTANT: Nothing in this Agreement shall
confer upon you any right to continue as a Consultant to the Company, or to
interfere in any way with the right of the Company to terminate your service as
a Consultant to the Company at any time.

        TRANSFER OF OPTION: This option and the rights and privileges conferred
hereby may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will, by the applicable
laws of descent and distribution, and shall not be subject to execution,
attachment or similar process. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of any right or privilege
conferred hereby, contrary to law or to the provisions of this Agreement, or the
sale or levy or any attachment or similar process upon the rights and privileges
conferred hereby shall be null and void.

        HOLDING PERIOD: Shares of common stock obtained upon the exercise of
this option may not be sold until six months after the date the option was
granted.

        Your particular attention is directed to the section(s) of the Plan
which describe(s) certain important conditions relating to federal and state
securities laws that must be satisfied before the option can be exercised and
before the company can issue any shares to you. The Company intends to maintain
an effective registration statement with respect to the shares that will be
issued upon exercise of this option but has no obligation to do so. If there is
no effective registration statement, you will not be able to exercise the option
or sell the option shares unless

   3
exemptions from registration under federal and state securities laws are
available. Such exemptions are very limited and might be unavailable.
Consequently, you might have no opportunity to exercise the option and to
receive shares upon such exercise.

        Please execute the Acceptance and Acknowledgment set forth below and
return it to the undersigned.

NEORX CORPORATION


- ------------------------------------
PAUL G. ABRAMS
CHIEF EXECUTIVE OFFICER

                          ACCEPTANCE AND ACKNOWLEDGMENT

I, Carl S. Goldfischer, a resident of the State of Wyoming, accept the
nonqualified stock option described above and in NeoRx Corporation's 1994 Stock
Option Plan, and acknowledge receipt of a copy of this Agreement, including a
copy of the Plan. I have read and understand the Plan, including the
provision(s) relating to federal and securities law.

        Dated:
              --------------             ---------------------------------------


- --------------------
Taxpayer I.D. Number

By signing below, the spouse of the Optionee, if such Optionee is legally
married as of the date of execution of this Agreement, acknowledges that (s)he
has read this Agreement and the Plan and is familiar with the terms and
provisions thereof, and agrees to be bound by all the terms and conditions of
this Agreement and the Plan.


        Dated:
              --------------             ---------------------------------------


By signing below, the Optionee represents that (s)he is not legally married as
of the date of execution of this Agreement.

        Dated:
              --------------------------------

EX-10.21

   1
                                                                   EXHIBIT 10.21
                                ----------------
                                REDACTED VERSION
                                ----------------

                            ASSET PURCHASE AGREEMENT



                                     BETWEEN



                           INTERNATIONAL ISOTOPES INC.



                                       AND



                                NEORX CORPORATION







                              DATED: MARCH 20, 2001



                                      -7-
   2


                                    CONTENTS

                                                                               
1.      Definitions................................................................  1
2.      Purchase and Sale of Assets................................................  5
        2.1       Purchase and Sale................................................  5
                  2.1.1      Equipment.............................................  5
                  2.1.2      Equipment and Other Personal Property Leases..........  6
                  2.1.3      Inventory.............................................  6
                  2.1.4      Intellectual Property, Books and Manuals..............  6
                  2.1.5      Permits...............................................  7
                  2.1.6      Contract Rights.......................................  7
                  2.1.7      Purchased Real Property...............................  7
                  2.1.8      Insurance Proceeds....................................  7
        2.2       Excluded Assets..................................................  7
                  2.2.1      Tax Refunds...........................................  7
                  2.2.2      Cash and Equivalents..................................  7
                  2.2.3      Accounts Receivable...................................  7
                  2.2.4      Excluded Real Property................................  7
                  2.2.5      Excluded Contracts....................................  8
                  2.2.6      Other Excluded Assets.................................  8
        2.3       Assumption of Liabilities........................................  8
        2.4       Excluded Liabilities.............................................  8
                  2.4.1      Excluded Real Property................................  8
                  2.4.2      Taxes.................................................  8
                  2.4.3      Litigation............................................  8
                  2.4.4      Claims................................................  9
                  2.4.5      Warranties............................................  9
                  2.4.6      Environmental Liability...............................  9
                  2.4.7      Severance Costs.......................................  9
                  2.4.8      Employee Expenses.....................................  9
                  2.4.9      Accrued Liabilities and Payables......................  9
                  2.4.10     Other.................................................  10
        2.5       Instruments of Sale and Transfer.................................  10
        2.6       Further Assurances...............................................  10
3.      Purchase Price.............................................................  10
        3.1       Purchase Price...................................................  10
        3.2       Allocation of Purchase Price.....................................  11
4.      Closing....................................................................  11
        4.1       Closing Date.....................................................  11
        4.2       Closing Payments.................................................  11
5.      Representations and Warranties of Seller...................................  12
        5.1       Organization, Good Standing, etc.................................  12
        5.2       Corporate Authority..............................................  12
        5.3       No Conflict......................................................  12
        5.4       Consents and Approvals...........................................  13
        5.5       Financial Statements.............................................  13



                                      -i-

   3

                                                                               
        5.6       Absence of Certain Changes or Events.............................  13
        5.7       Taxes............................................................  13
        5.8       Purchased Real Property..........................................  14
        5.9       Equipment........................................................  15
        5.10      Environmental and Safety Matters.................................  15
        5.11      Contracts........................................................  17
        5.12      Claims and Legal Proceedings.....................................  17
        5.13      Labor Matters....................................................  18
        5.14      Patents, Trademarks and Intellectual Property....................  18
        5.15      Licenses, Permits, Authorizations, etc...........................  20
        5.16      Compliance With Law..............................................  20
        5.17      Permits and Qualifications.......................................  20
        5.18      Insurance........................................................  20
        5.19      Employee Plans...................................................  20
        5.20      Excluded Assets..................................................  21
        5.21      Brokerage........................................................  21
        5.22      Accredited Investor..............................................  21
        5.23      Ongoing Business.................................................  22
        5.24      Full Disclosure..................................................  22
6.      Representations and Warranties of Buyer....................................  22
        6.1       Organization, Good Standing, Power, etc..........................  22
        6.2       Transaction Documents............................................  22
        6.3       No Conflict......................................................  22
        6.4       Claims and Local Proceedings.....................................  23
        6.5       Brokerage........................................................  23
        6.6       Warrant..........................................................  23
        6.7       Consents and Approvals...........................................  23
7.      Certain Covenants..........................................................  23
        7.1       Access...........................................................  23
        7.2       Assignment of Contracts..........................................  24
        7.3       Conduct of Business Prior to Closing.............................  25
                  7.3.1 ...........................................................  25
                  7.3.2 ...........................................................  25
        7.4       Covenants to Satisfy Conditions..................................  26
8.      Conditions Precedent to Obligations of Buyer...............................  26
        8.1       No Injunction or Litigation; Compliance with Laws................  26
        8.2       Representations, Warranties and Covenants........................  27
        8.3       No Adverse Changes...............................................  27
        8.4       Consents and Approvals...........................................  27
        8.5       Taxes............................................................  28
        8.6       Delivery of Documents............................................  28
        8.7       Legal Opinion....................................................  29
        8.8       Satisfaction of Conditions.......................................  29
        8.9       Employment and Noncompetition Arrangements.......................  29
        8.10      Agreement with Texas State Bank; Assumption of Bank Debt.........  29
        8.11      Opinion as to Environmental Matters..............................  29



                                      -ii-

   4

                                                                               
        8.12      Imagyn Lease Agreement...........................................  29
        8.13      University of North Texas Lease Agreement........................  30
        8.14      License to Background Intellectual Property......................  30
9.      Conditions Precedent to Obligations of Seller..............................  30
        9.1       No Injunction or Litigation......................................  30
        9.2       Representations, Warranties and Covenants........................  31
        9.3       Delivery of Documents............................................  31
        9.4       Legal Opinion....................................................  31
        9.5       Agreement with Texas State Bank; Assumption of Bank Debt.........  31
        9.5       Obligations to Unsecured Creditors...............................  31
        9.6       Imagyn Closing...................................................  31
        9.7       LINAC and Bracco Agreement.......................................  31
        9.9       University of North Texas Lease Agreement........................  32
        9.10      Satisfaction of Conditions.......................................  32
10.     Certain Post-Closing Covenants.............................................  32
        10.1      Further Assurances...............................................  32
        10.2      Books and Records................................................  32
        10.3      Post-Closing Cooperation.........................................  33
11.     Taxes and Costs; Apportionment.............................................  33
        11.1      Transfer Taxes...................................................  33
        11.2      Transaction Costs................................................  33
        11.3      Apportionment....................................................  33
12.     Bulk Sales.................................................................  33
13.     Covenants Not to Compete...................................................  33
        13.1      Covenants........................................................  33
        13.2      Minor Investments................................................  34
        13.3      Remedies.........................................................  34
14.     Survival and Indemnification...............................................  34
        14.1      Survival.........................................................  34
        14.2      Indemnification by Seller........................................  35
        14.3      Indemnification by Buyer.........................................  36
        14.4      Threshold and Time Limitations...................................  36
        14.5      Procedure........................................................  37
        14.6      Proportional Liability for Losses................................  38
        14.7      Election of Remedies.............................................  38
        14.8      Specific Performance.............................................  38
        14.9      Exclusive Remedies...............................................  39
15.     Termination................................................................  39
        15.1      Termination......................................................  39
        15.2      Effect of Termination............................................  39
16.     Miscellaneous..............................................................  40
        16.1      Confidentiality Obligations of Seller Following the Closing......  40
        16.2      Public Announcements.............................................  40
        16.3      Severability.....................................................  40
        16.4      Modification and Waiver..........................................  40
        16.5      Notices..........................................................  41



                                     -iii-

   5

                                                                               
        16.6      Assignment.......................................................  41
        16.7      Captions.........................................................  42
        16.8      Entire Agreement.................................................  42
        16.9      No Third-Party Rights............................................  42
        16.10     Counterparts.....................................................  42
        16.11     Governing Law....................................................  42





Exhibit 2.5(a)    Bill of Sale and Assignment
Exhibit 2.5(b)    Assignment and Assumption Agreement
Exhibit 3.1       Form of Warrant
Exhibit 8.7       Opinion of Seller's Counsel
Exhibit 9.4       Opinion of Buyer's Counsel


                                      -iv-

   6

                            ASSET PURCHASE AGREEMENT

        This Asset Purchase Agreement (this "Agreement") is made as of the 20th
day of March, 2001, by and between International Isotopes Inc., a Texas
corporation ("Seller"), and NeoRx Corporation, a Washington corporation
("Buyer").

                                    RECITALS

        A. Seller desires and intends to sell certain of its assets and other
rights relating to its operations, products, services and activities at or on
the Jim Christal Property, at the price and on the terms and conditions herein
set forth.

        B. Buyer desires and intends to purchase certain of Seller's assets and
other rights relating to Seller's operations, products, services and activities
at or on the Jim Christal Property and to assume certain of the liabilities
relating to such assets, at the price and on the terms and conditions herein set
forth.

                                    AGREEMENT

        NOW, THEREFORE, in consideration of the covenants and agreements set
forth herein, the parties hereby agree as follows:

1.    DEFINITIONS

        As used in this Agreement, the following capitalized terms shall have
the meanings set forth below:

        1.1 "Affiliate": of any person (the "Subject") means any other person
which, directly or indirectly, controls or is controlled by or is under common
control with the Subject and, without limiting the generality of the foregoing,
includes, in any event, (a) any person which beneficially owns or holds 25% or
more of any class of voting securities of the Subject or 25% or more of the
legal or beneficial interest in the Subject and (b) any person of which the
Subject beneficially owns or holds 25% or more of any class of voting securities
or 25% or more of the legal or beneficial interest; provided, however, that the
Preferred Shareholders of Seller and persons and entities not controlled by
Seller shall not be deemed "Affiliates" of the Seller for purposes of Section 13
of this Agreement. "Control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities, by contract or otherwise.

        1.2 "Agreement": This Agreement and all Schedules and Exhibits hereto.

        1.3 "Assets": As defined in Section 2.1.

        1.4 "Assignment and Assumption Agreement": As defined in Section 2.5.

        1.5 "Assumed Liabilities": As defined in Section 2.3.


                                      -1-
   7


        1.6 "Balance Sheet Date": As defined in Section 5.5.

        1.7 "Bill of Sale". As defined in Section 2.6.

        1.8 "Business". All operations, products, services and activities of
Seller at or on the Jim Christal Property. "Business" shall include the
operation of the Assets and the Facilities. Notwithstanding the foregoing,
"Business" does not include Seller's brachytherapy seed business, the business
of International Isotopes of Idaho, Inc., the linear accelerator operations of
Seller or the related operations conducted at Seller's Shady Oaks property in
Denton, Texas, or any operations of Seller conducted at Seller's property in
Waxahachie, Texas.

        1.9 "Claim": Any claim, demand, cause of action, suit, proceeding,
arbitration, hearing or investigation.

        1.10 "Closing": The consummation of the purchase and sale of the Assets
under this Agreement.

        1.11 "Closing Date": The date upon which the Closing becomes effective.

        1.12 "Code": The Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to time.

        1.13 "Contract": As defined in Section 2.1.6.

        1.14 "Creditor Amount": As defined in Section 3.1.

        1.15 "Disclosure Memorandum": That certain Disclosure Memorandum dated
as of the date hereof and delivered by Seller to Buyer on the date hereof in
connection with this Agreement.

        1.16 "Employee Benefit Plans": All employee pension benefit plans, as
defined in Section 3(2) of ERISA, employee welfare benefit plans, as defined in
Section (3)(1) of ERISA, and any deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, severance, insurance, retirement, excess
benefit, fringe benefit or other plan, trust or arrangement, whether or not
covered by ERISA, whether written or oral, for the benefit of the Business
employees.

        1.17 "ERISA": The Employee Retirement Income Security Act of 1974, as
amended.

        1.18 "Encumbrance": Any security interest, mortgage, lien, charge,
option, easement, license, adverse claim or restriction of any kind, including,
but not limited to, any restriction on the use, transfer, voting, receipt of
income or other exercise of any attributes of ownership.

        1.19 "Environment": The air, ground (surface and subsurface) or water
(surface and groundwater).

        1.20 "Environmental and Safety Law": Any federal, state, local or other
law, statute, rule, ordinance or regulation or any common law (now or hereafter
in effect) pertaining to public or worker health, welfare or safety or the
Environment, including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, 42 U.S.C. Section 9601 et
seq., as amended by the Superfund Amendments and Reauthorization Act of 1986;
the


                                      -2-
   8

Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section
6901 et seq.; the Federal Clean Air Act, 42 U.S.C. Section 7401-7626; the
Federal Water Pollution Control Act and Federal Clean Water Act of 1977, as
amended, 33 U.S.C. Section 1251 et seq.; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. Section 135 et seq.; the Federal Environmental
Pesticide Control Act, the Federal Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; the Federal Safe Drinking Water Act, 42 U.S.C. Section
300(f) et seq.; the Emergency Planning and Community Right-To-Know Act of 1986,
42 U.S.C. Section 11001 et seq.; the Occupational Safety and Health Act of 1970,
29 U.S.C. Section 651 et seq.; the Energy Reorganization Act of 1974, P.L.
93-438, 42 U.S.C. Sections 5801, et seq.; the Texas Department of Health, Bureau
of Radiation Control regulations, 25 TAC Section 289, et seq., under the
authority of Tex. Rev. Civ. Stat. Ann. Art. 4590f, et seq.; Federal Drug
Administration regulations, 21 C.F.R. Part 310, et seq., under the authority of
21 U.S.C. Sections 321 et seq. and 42 U.S.C. 216 et seq.; Texas Department of
Health, Drugs and Medical Devices Division regulations, 25 TAC Section 229 et
seq., under the authority of Tex. Health & Safety Code Chapter 431: Texas Food,
Drug, and Cosmetic Act; and the rules and regulations of the Texas Natural
Resources Conservation Commission.

        1.21 "Excluded Assets": As defined in Section 2.2.

        1.22 "Excluded Liabilities": As defined in Section 2.4.

        1.23 "Excluded Real Property": As defined in Section 2.2.4.

        1.24 "Facilities": The Jim Christal Property, and all plants, buildings,
structures and improvements located thereon, including the cyclotron building.

        1.25 "Financial Statements": As defined in Section 5.5.

        1.26 "Governmental Body": Any federal, state or other court or
governmental body, any subdivision, agency, commission or authority thereof, or
any quasi-governmental or private body exercising any regulatory or taxing
authority thereunder, domestic or foreign.

        1.27 "Hazardous Materials": Any hazardous or toxic substances, materials
and wastes, including, but not limited to, those substances included in the
definitions of "Hazardous Substances," "Hazardous Materials," "Toxic
Substances," "Hazardous Waste," "Solid Waste," "Pollutant," or "Contaminant" in
any Environmental and Safety Law and the Hazardous Material Transportation Act,
49 U.S.C. Section 1801 et seq., and in the regulations promulgated pursuant to
those laws; those substances listed in the United States Department of
Transportation Table (49 C.F.R. Section 172.101 and any amendments thereto);
such other substances, materials and wastes which now or hereafter are regulated
or are classified as hazardous or toxic by any Governmental Body; asbestos,
polychlorinated biphenyls and oil and petroleum products or by-products; and
radioactive waste, radioactive substances, radioactive products, pollutants,
wastes or contaminants.

        1.28 "Imagyn": Imagyn Medical Technologies, Inc.

        1.29 "Imagyn Lease Agreement": As defined in Section 8.13.

        1.30 "indemnified party": As defined in Section 14.5.

        1.31 "indemnifying party": As defined in Section 14.5.


                                      -3-
   9


        1.32 "Intellectual Property": As defined in Section 2.1.4.

        1.33 "Inventory": The inventories of Seller described in Section 2.1.3.

        1.33.1 "Jim Christal Property": The real property situated at 3100 Jim
Christal Road, Denton, Texas, which real property is more particularly described
on Schedule 2.1.7.

        1.34 "Judgment": Any judgment, order, award, writ, injunction or decree
of any Governmental Body or arbitrator.

        1.35 "Loss": Any loss, damage, Judgment, debt, liability, obligation,
fine, penalty, cost or expense (including, but not limited to, any legal and
accounting fee or expense), whether or not relating to personal injury, property
damage, public or worker health, welfare or safety or the Environment and
whether or not relating to violations of or liability under Environmental and
Safety Law.

        1.36 "Material Adverse Effect"; "Material Adverse Change": Matters
concerning Seller, the Assets or the Business will be deemed to have a "Material
Adverse Effect" or to have resulted in a "Material Adverse Change" only if,
individually or in the aggregate, they would, or reasonably could be expected
to, materially decrease the value of the Assets in the hands of Buyer,
materially interfere with Buyer's ability to operate the Business following the
Closing, or result in material liability to Buyer that Buyer has not expressly
agreed to assume pursuant to this Agreement.

        1.37 "Note": As defined in Section 3.1.

        1.38 "1999 Balance Sheet": As defined in Section 5.5.

        1.39 "Operating Amount": As defined in Section 3.1.

        1.40 "Permit": Any permit, license, approval, certification, endorsement
or qualification of any Governmental Body or any other person or entity.

        1.40.1 "Permitted Encumbrance": An Encumbrance specifically agreed to by
Buyer and listed on Schedule 2.1.

        1.41 "Personal Property": As defined in Section 5.8.

        1.42 "Preferred Shareholders ": Holders of shares of Seller's Series A
Convertible Redeemable Preferred Stock and Series B 7% Convertibles Redeemable
Preferred Stock.

        1.43 "Purchase Price": As defined in Section 3.1.

        1.44 "Purchased Real Property": The real property described in Section
2.1.7.

        1.45 "Relevant Employees": As defined in Section 5.13.

        1.46 "Remedial Action": Any investigation, site assessment, monitoring
or other evaluation of conditions relating to the Environment at a site, or any
clean-up, treatment,


                                      -4-
   10


containment, removal, restoration, corrective action or remedial work involving
any Hazardous Materials.

        1.47 "Restricted Activities": As defined in Section 13.1.

        1.48 "Tax" or "Taxes": All taxes, charges, fees, levies or other
assessments, including, without limitation, income, excise, gross receipts,
personal property, real property, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, severance, stamp,
occupation, windfall profits, social security and unemployment or other taxes
imposed by the United States or any agency or instrumentality thereof, any
state, county, local or foreign government, or any agency or instrumentality
thereof, and any interest or fines, and any and all penalties or additions
relating to such taxes, charges, fees, levies or other assessments.

        1.49 "Third-Party Claim": As defined in Section 14.5.

        1.50 "Threshold": As defined in Section 14.4.

        1.51 "Transaction Documents": Any and all of the agreements and
documents referenced in Sections 8 and 9, including, without limitation, the
Warrants.

        1.52 "Transfer": As defined in Section 2.1.

        1.53 "Transmitted Copies": As defined in Section 16.10.

        1.54 "TSB": Texas State Bank.

        1.55 "TSB Agreements": As defined in Section 8.10.

        1.56 "Warrants": As defined in Section 3.1.

2.    PURCHASE AND SALE OF ASSETS

        2.1 PURCHASE AND SALE

        Subject to the terms and conditions of this Agreement, at the Closing,
Seller shall sell, transfer, convey, assign and deliver (collectively,
"transfer"), or cause to be transferred, to Buyer, free and clear of all
Encumbrances, except Permitted Encumbrances specifically listed on Schedule 2.1,
and Buyer shall purchase and acquire, all of Seller's right, title and interest
in and to all of the assets and rights (collectively, the "Assets") of every
type and description, used in or relating to the Business, whether tangible or
intangible, real, personal or mixed, wherever located and whether or not
reflected on the books and records of Seller, including, but not limited to, the
following assets and rights (but excluding the Excluded Assets):

            2.1.1 EQUIPMENT

        All machinery, equipment, furniture, computer hardware, fixtures, motor
vehicles, tooling, leasehold improvements and other tangible personal property
owned by Seller and used in or relating to the Business as of the close of
business on the Closing Date, including, without limitation, the personal
property described in Schedule 2.1.1 to the Disclosure Memorandum and such
personal


                                      -5-
   11


property and fixtures used in or relating to the Business even if located on the
Excluded Real Property.

            2.1.2 EQUIPMENT AND OTHER PERSONAL PROPERTY LEASES

        All of Seller's right, title and interest in, to and under the leases
and rental agreements in respect of equipment or other tangible personal
property used in or relating to the Business as of the close of business on the
Closing Date, including, without limitation, those leases and agreements
described in Schedule 2.1.2 to the Disclosure Memorandum.

            2.1.3 INVENTORY

        All inventory, wherever located (including inventory located on the
Excluded Real Property), including raw materials, works-in-process, packaging,
finished goods, spare parts and shop and production supplies, used in or
relating to the Business as of the close of business on the Closing Date
("Inventory"), including, without limitation, the types of Inventory described
in Schedule 2.1.3 to the Disclosure Memorandum (which Schedule sets forth raw
materials, finished goods, packaging and other Inventory by location as of the
date indicated in such Schedule) and all rights of Seller to the warranties
received from suppliers and distributors and any related claims, credits, rights
of recovery and setoffs with respect to such Inventory.

            2.1.4 INTELLECTUAL PROPERTY, BOOKS AND MANUALS

        (a) All information (whether or not protectible by patent, copyright or
trade secret rights) and intellectual property rights possessed or owned by
Seller and used in or relating to the Business as now conducted or planned to be
conducted, and all right, title and interest of Seller in, to and under
licenses, sublicenses or like agreements providing Seller any right or
concession to use any information or intellectual property, and, in each case,
used in or relating to the Business as now conducted or planned to be conducted,
including all trade names, trademarks (including common-law trademarks), service
marks, art work, packaging, plates, emblems, logos, insignia and copyrights, and
their registrations and applications, and all goodwill associated therewith, all
domestic and foreign patents and patent applications, all technology, know-how,
show-how, trade secrets, manufacturing processes, formulae, drawings, designs,
systems, forms, technical manuals, data, computer programs, product information
and development work-in-progress and all documentary evidence of any of the
foregoing, including, without limitation, the trademarks, patents, patent
applications, other assets and related agreements; and (b) all books and records
(including all discs, tapes and other media storage data and information),
equipment maintenance records, warranty information, records of plant operations
and the source and disposition of materials used and produced in such plants,
standard forms of documents, manuals of operations or business procedures and
other similar procedures, including but not limited to written operating
procedures and good manufacturing practices, and all other information of Seller
used in or relating to the Business as now conducted or planned to be conducted
and, with respect to the Purchased Real Property, all soil test reports,
building inspection reports, building plans, blueprints, renderings and surveys,
including in the case of both (a) and (b) above those items described in
Schedule 2.1.4 to the Disclosure Memorandum (collectively, the "Intellectual
Property"); provided, however, that as to those standard operating procedures
that are specifically identified on Schedule 2.1.4 attached hereto as also
relating to other parts of Seller's business that are not being sold to Buyer
hereunder, Seller


                                      -6-
   12


shall retain equal and co-extensive ownership rights and may convey the same to
the purchasers of other parts of Seller's business to which such standard
operating procedures also relate.

            2.1.5 PERMITS

        All Permits used in or relating to the Business as of the close of
business on the Closing Date, to the extent actually assignable or transferable,
including, without limitation, those described in Schedule 2.1.5 to the
Disclosure Memorandum.

            2.1.6 CONTRACT RIGHTS

        All of Seller's right, title and interest in, to and under the contracts
and agreements described in Schedule 2.1.6 to the Disclosure Memorandum (the
"Contracts").

            2.1.7 PURCHASED REAL PROPERTY

        All real property, and rights thereto, owned by Seller and used in or
relating to the operation of the Business as of the close of business on the
Closing Date as described in Schedule 2.1.7 to the Disclosure Memorandum (the
"Purchased Real Property").

            2.1.8 INSURANCE PROCEEDS

        All insurance proceeds paid or payable to Seller in respect of any
damage to or destruction or loss of any assets or rights of Seller reflected on
the Schedules referred to in this Section 2.1, including any assets of Seller
that, as far as could reasonably be foreseen, would have been included in the
Assets but for such damage, destruction or loss.

            2.2 EXCLUDED ASSETS

        Seller and Buyer expressly understand and agree that Seller is not
transferring to Buyer pursuant to this Agreement any of the following assets or
rights of Seller (the "Excluded Assets"):

            2.2.1 TAX REFUNDS

        Seller's rights to refunds of Taxes paid with respect to the Business
for the periods on or prior to the Closing Date.

            2.2.2 CASH AND EQUIVALENTS

        Seller's cash, bank deposits or similar cash and cash equivalent items
existing as of the close of business on the Closing Date.

            2.2.3 ACCOUNTS RECEIVABLE

        Seller's accounts receivable existing as of the close of business on the
Closing Date.

            2.2.4 EXCLUDED REAL PROPERTY

        None of Seller's real property other than the Purchased Real Property,
or any of the rights and liabilities relating to such other real property (the
"Excluded Real Property").


                                      -7-
   13

            2.2.5 EXCLUDED CONTRACTS

        None of Seller's right, title or interest in, to or under any contracts
or agreements other than the Contracts described in Schedule 2.1.6 to the
Disclosure Memorandum.

            2.2.6 OTHER EXCLUDED ASSETS

        All other assets of Seller described in Schedule 2.2.6 to the Disclosure
Memorandum.

            2.3 ASSUMPTION OF LIABILITIES

        Upon the terms and subject to the conditions of this Agreement and
except for Excluded Liabilities, Buyer agrees, effective at the time of Closing,
to assume all obligations, contracts, and liabilities of Seller (the "Assumed
Liabilities") of any kind, character or description, relating to or arising out
of the Business from and after the Closing Date, including, without limitation,
the following:

        (a) All liabilities and obligations of Seller arising under the
Contracts and the leases and rental agreements covered by Section 2.1.2 from and
after the Closing Date;

        (b) Any liabilities and obligations relating to or arising out of any
products sold, or services rendered, by the Business from and after the Closing
Date; and

        (c) Any liabilities arising in connection with the Business or the
Assets under federal, state, local or foreign environmental or health laws from
and after the Closing Date.

        2.4 EXCLUDED LIABILITIES

        Buyer shall not assume any liabilities other than the Assumed
Liabilities, nor shall it assume any of the following obligations or
liabilities, which shall remain obligations and liabilities of Seller (all
obligations or liabilities not assumed by Buyer herein are called the "Excluded
Liabilities"):

            2.4.1 EXCLUDED REAL PROPERTY

        Any payables, claims, liabilities, fines, rents and contractual and
other obligations, contingent or otherwise, accruing or relating to the periods
on or prior to the Closing Date, in any way relating to the Excluded Real
Property.

            2.4.2 TAXES

        Except as otherwise provided in this Agreement, any liabilities for
Taxes either accruing or relating to the periods on or prior to the Closing
Date.

            2.4.3 LITIGATION

        Any claim, Judgment, penalty, settlement agreement or other obligation
to pay in respect of any Claim that is pending or threatened on or prior to the
Closing Date, including, but not limited to, those listed in Schedule 5.12 to
the Disclosure Memorandum.


                                      -8-
   14


            2.4.4 CLAIMS

        All claims, liabilities or other obligations that relate to injuries,
actions, omissions, conditions or events that occurred or existed on or prior to
the Closing Date, whether based on any act or omission of Seller, in connection
with the operation of the Business, including, without limitation, claims based
on workers' compensation, product liability, negligence, strict liability,
failure to warn or defective design.

            2.4.5 WARRANTIES

        Seller's liabilities and obligations pursuant to warranties (express or
implied) to customers for any products manufactured on or prior to the Closing
Date.

            2.4.6 ENVIRONMENTAL LIABILITY

        All claims and liabilities arising out of or relating to (a) the
treatment, storage or disposal on or prior to the Closing Date of Hazardous
Materials by Seller or any other person (including, without limitation, any
previous owner, lessor or sublessor) on or at the Purchased Real Property or any
other real property previously owned, leased, subleased or used by Seller in the
operation of the Business; (b) releases of Hazardous Materials on, at or from
any assets or properties, including, without limitation, the Purchased Real
Property, owned, leased, subleased or used by Seller in the operation of the
Business at any time such assets or properties were owned, leased, subleased or
used by Seller in the operation of the Business; (c) use, generation,
manufacture, shipment or transportation of Hazardous Materials by Seller in the
operation of the Business; and (d) releases of Hazardous Materials by any person
(including, without limitation, any previous owner, lessee or sublessee) on or
from the Purchased Real Property prior to Seller's ownership or use thereof.

            2.4.7 SEVERANCE COSTS

        All severance obligations and other costs of terminating employees
wherever located resulting from any termination or cessation of employment
occurring on or prior to the Closing Date, from whatever source such obligations
and costs arise, including, without limitation, contractual obligations, notices
to employees, employment manuals, course of dealings, past practices,
obligations relating to Section 2806 or 4999 of the Code, or otherwise.

            2.4.8 EMPLOYEE EXPENSES

        All liabilities and obligations with respect to either the continuation
or the termination by Seller of any Employee Benefit Plan for the benefit of the
Business's employees, except as otherwise provided by law, and all liabilities
with respect to accrued payroll, bonuses, hourly and salary vacation pay,
workers compensation liability, year-end profit sharing, state disability tax,
hourly and salary profit sharing, fringe benefits and other employee benefits
with respect to or that relate to periods of employment on or prior to the
Closing Date.

            2.4.9 ACCRUED LIABILITIES AND PAYABLES

        All liabilities accrued on or before the Closing Date, including,
without limitation, property taxes, sales and use taxes, utilities, freight
expense, inventory gain/loss and all other accrued liabilities, and any trade
payable or account payable (whether or not the same has become due and


                                      -9-
   15

payable), accrued expense, loan, note, advance, credit, intercompany borrowing,
liability or account allocation or other form of indebtedness of any kind or
nature incurred in connection with the Business on or prior to the Closing Date.

            2.4.10 OTHER

        All liabilities and obligations in respect of any Excluded Asset.

        2.5 INSTRUMENTS OF SALE AND TRANSFER

        On or prior to the Closing Date, Seller shall deliver to Buyer and Buyer
shall deliver to Seller, as the case may be, such instruments of sale and
assignment as shall, in the reasonable judgment of Buyer and Seller, be
effective to vest in Buyer on the Closing Date all of Seller's right, title and
interest in and to the Assets and to evidence the assumption of the Assumed
Liabilities by Buyer, including, without limitation, a Bill of Sale and
Assignment substantially in the form of Exhibit 2.5(a) (the "Bill of Sale") and
an Assignment and Assumption Agreement substantially in the form of Exhibit
2.5(b) (the "Assignment and Assumption Agreement"). Title to the Purchased Real
Property shall be conveyed by special warranty deed. Seller shall take all
reasonable additional steps as may be necessary to put Buyer in possession and
operating control of the Assets at the Closing, and Buyer shall take all
reasonable additional steps as may be necessary for it to assume the Assumed
Liabilities at the Closing.

        2.6 FURTHER ASSURANCES

        From time to time following the Closing, Buyer and Seller shall execute
and deliver, or cause to be executed and delivered, to the other such additional
instruments of conveyance and transfer and evidences of assumption as such party
may reasonably request or as may be otherwise necessary or desirable to carry
out the purposes of this Agreement.

3.    PURCHASE PRICE

        3.1 PURCHASE PRICE

        The aggregate purchase price for the Assets (the "Purchase Price") shall
be the following:

        (a) A $6 million note payable to TSB (the "Note), which Note shall
satisfy in full existing indebtedness of Seller to TSB with respect to the
Assets and the Business. The Note shall be on terms agreeable to Buyer and TSB;

        (b) Cash up to the amount of $3 million (the "Creditor Amount"), which
shall be used by Seller to pay unsecured creditors of Seller, including payment
to certain employees of Seller for accrued vacation and expense accounts as
described in Section 4.2(d);

        (c) Cash up to the amount of $3 million (the "Operating Amount"), which
shall be used by Seller to pay operating expenses of Seller, including payment
in full of all amounts owed by Seller to Buyer and TSB for operating funds
advanced to Seller as described in Section 4.2(c) below; and


                                      -10-
   16

        (d) Warrants to purchase 800,000 shares of Buyer's common stock (the
"Warrants"), on the terms and conditions set forth in the form of warrant
attached to this Agreement as Exhibit 3.1.

        The parties agree that for purposes of allocating the Purchase Price for
federal, state, local and other tax purposes, the fair market values of the
Assets are as set forth in Schedule 3.1 to the Disclosure Memorandum.

        3.2 ALLOCATION OF PURCHASE PRICE

        The parties agree to utilize the fair market values of the Assets on the
date of Closing, as set forth in Schedule 3.1 to the Disclosure Memorandum,
which Schedule shall be delivered at Closing, for the purpose of allocating the
Purchase Price paid hereunder for the Assets for federal, state, local and other
Tax purposes, which allocation is in accordance with Section 1060 of the Code.
Buyer and Seller shall each pay one-half of any sales and use taxes arising out
of the transfer of the Assets. Each party agrees to report the federal, state,
local and other Tax consequences of the transactions contemplated by this
Agreement and the Transaction Documents in a manner consistent with such
allocation and shall not take any position inconsistent therewith upon
examination of any Tax return, in any refund claim, or in any litigation,
investigation or otherwise. Each party shall cooperate with the other party in
the filing of Form 8594 with the U.S. Internal Revenue Service.

4.    CLOSING

        4.1 CLOSING DATE

        Subject to the terms and conditions of this Agreement, the Closing shall
take place on the earliest practicable business day (the "Closing Date") after
the satisfaction or waiver of the conditions set forth in Sections 8 and 9 at 10
a.m. local time at the offices of Locke Liddell & Sapp, LLP, 2200 Ross Avenue,
Suite 2200, Dallas, Texas, or such other date, time or location as Buyer and
Seller shall agree and shall be effective as of midnight of the Closing Date.

        4.2 CLOSING PAYMENTS

        (a) Subject to subparagraphs (b), (c) and (d) below, Buyer at Closing
shall pay to Seller the Creditor Amount and the Operating Amount set forth in
Section 3.1 by wire transfer of immediately available funds to such bank account
of Seller as it may designate in writing prior to the Closing. Buyer will
execute and deliver the Note to TSB and the Warrants to Seller at Closing.

        (b) If, prior to Closing, (i) Buyer and TSB enter into an intercreditor
agreement in a form acceptable to Buyer and (ii) Buyer is reasonably satisfied
that Imagyn is current in the payment of Imagyn's expenses in connection with
Seller's brachytherapy seed business, Buyer shall advance cash funds to Seller
on a weekly basis. The amounts of such weekly cash advances shall be determined
by Buyer in good faith after consultation with Seller.

        (c) Buyer agrees to satisfy the following obligations of Seller out of
the Operating Amount payable at Closing: (i) first, all amounts, including
interest thereon, owed to Buyer for operating funds advanced by Buyer to Seller
on and after December 4, 2000; and after satisfaction thereof (ii) then all
amounts, including interest thereon, owed by Seller to TSB for operating funds
advanced by TSB to Seller on and after January 10, 2001..


                                      -11-
   17

        (d) Buyer agrees to satisfy the following obligation of Seller out of
the Creditor Amount at Closing: $103,000 to be paid to certain employees of
Seller for vacation and expense accounts accrued as of February 28, 2001, as
adjusted for accruals thereafter to the date of Closing. The remainder of the
Creditor Amount shall be used to reduce accounts payable to unsecured creditors
as contemplated by Section 9.5 below.

        (e) Seller hereby authorizes Buyer, on Seller's behalf, to pay the
amounts set forth in clauses (c) and (d) directly to the affected parties at
Closing.

5.    REPRESENTATIONS AND WARRANTIES OF SELLER

        To induce Buyer to enter into and perform this Agreement, Seller
represents and warrants to Buyer (which representations and warranties shall
survive the Closing as provided in Section 14) all as follows in this Section 5:

        5.1 ORGANIZATION, GOOD STANDING, ETC.

        Seller is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Seller has all
requisite corporate power and authority to own, operate and lease the Assets and
its properties related to the operation of the Business and to carry on the
Business's business as now being conducted. Seller is duly qualified and
licensed as a foreign corporation to do business, and is in good standing in the
states required due to (a) the ownership or lease of real or personal property
for use in the operation of the Business's business or (b) the nature of the
Business conducted by the Business, except where the failure to be so qualified
or in good standing would not have a Material Adverse Effect.

        5.2 CORPORATE AUTHORITY

        Seller has full corporate power and authority to execute, deliver and
perform this Agreement and the Transaction Documents to which it is a party and
perform its obligations hereunder and thereunder. The execution and delivery by
Seller of this Agreement and the Transaction Documents to which it is a party,
the performance by Seller of its obligations hereunder and thereunder and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action of the Seller and its
officers, directors and shareholders. This Agreement constitutes a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, and the Transaction Documents to which Seller is a party, when executed
and delivered by Seller, will constitute valid and binding obligations of
Seller, enforceable against Seller in accordance with their respective terms.

        5.3 NO CONFLICT

        The execution, delivery and performance of this Agreement and the
Transaction Documents by Seller and the consummation of the transactions
contemplated hereby and thereby will not (a) violate, conflict with, or result
in any breach of, any provision of Seller's articles of incorporation or bylaws
(or equivalent documents); or (b) except as set forth in Schedule 5.3 (b),
violate, conflict with, result in any breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would constitute a default)
under any Contract or Judgment to which Seller is a party or by which it is
bound or which relates to the Assets or the Business; or (c) result in the
creation of any Encumbrance on any of the Assets; or (d) violate any applicable
law, statute, rule, ordinance or

                                      -12-
   18


regulation of any Governmental Body; or (e) except as set forth in Schedule
5.3(e), violate or result in the suspension, revocation, modification,
invalidity or limitation of any Permits relating to the Assets or the Business;
or (f) except as set forth in Schedule 5.3(f), give any party with rights under
any Contract, Judgment or other restriction to which Seller is a party or by
which it is bound or which relates to the Assets or the Business, the right to
terminate, modify or accelerate any rights, obligations or performance under
such Contract, Judgment or restriction.

        5.4 CONSENTS AND APPROVALS

        Except as set forth in Schedule 5.4 to the Disclosure Memorandum, (a) no
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Body is required for the execution, delivery and
performance by Seller of this Agreement and the Transaction Documents to which
it is a party and for the consummation by Seller of the transactions
contemplated hereby and thereby and (b) no consent, approval or authorization of
any third party is required for the execution, delivery and performance by
Seller of this Agreement and the Transaction Documents to which it is a party
and the consummation by Seller of the transactions contemplated hereby and
thereby.

        5.5 FINANCIAL STATEMENTS

        Seller has delivered to Buyer the following financial statements of
Seller, (collectively, the "Financial Statements"): an audited balance sheet for
Seller (the "1999 Balance Sheet") as of December 31, 1999, (the "Balance Sheet
Date"), audited balance sheets for Seller and its subsidiaries as of December
31, 1998 and December 31, 1997, the related audited statements of income for
each of the years then ended, and the unaudited balance sheets for the quarters
ended March 31, June 30 and September 30, 2000. The Financial Statements were
prepared from the books and records kept by Seller and its subsidiaries and
fairly present the financial position of Seller and it subsidiaries as of their
respective dates and the results of operations of Seller and its subsidiaries
for the respective years or periods then ended, in accordance with generally
accepted accounting principles consistently applied. Each accrual reflected on
the Financial Statements is, to Seller's knowledge, adequate to meet the
liability underlying such accrual. The foregoing balance sheets reflect, as of
their respective dates, all properties and assets, real, personal or mixed, that
were used by Seller in the Business and were required to be reflected on such
balance sheets pursuant to generally accepted accounting principles consistently
applied.

        5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS

        Except as set forth in Schedule 5.6 to the Disclosure Memorandum, since
December 31, 2000, and through the Closing Date, Seller has not, with respect to
the Assets or the Business:

        (a) paid any intercompany dividends or made any intercompany
distributions; or

        (b) changed the compensation and terms of employment provided to
Seller's officers and principal employees, except for changes made with the
prior knowledge and consent of Buyer.

        5.7 TAXES

        Except as set forth in Schedule 5.7, all Tax obligations of Seller with
respect to the Assets and the Business have been timely paid or are being
contested in good faith, and, except as reflected



                                      -13-
   19

in the balance sheets included in the Financial Statements and in any balance
sheet hereafter delivered to Buyer, Seller has no liability for any Tax
obligations with respect to the Assets and the Business and no interest or
penalties have accrued or are accruing with respect thereto, whether state,
county, local or otherwise with respect to any periods prior to the Closing Date
except, in each case, any Tax obligations that, if not timely paid by Seller,
could not result in (a) an Encumbrance on any of the Assets or (b) the
commencement of a Claim against Buyer.

        5.8 PURCHASED REAL PROPERTY

        (a) Attached as Schedule 2.1.7 to the Disclosure Memorandum is a
complete and accurate list of all Purchased Real Property, and Seller has
provided to Buyer a complete and accurate list of all personal property (the
"Personal Property") owned, leased, rented or used in the Business. Seller has
delivered to Buyer true and complete copies of all leases, subleases, rental
agreements, contracts of sale, tenancies or licenses of any portion of the
Purchased Real Property and the Personal Property.

        (b) Except as specifically described in Schedule 5.8(b), Seller has good
and marketable title to all Purchased Real Property in fee simple, free and
clear of all Encumbrances, except Permitted Encumbrances specifically listed in
Schedule 2.1, and Seller has good and marketable title to all Personal Property,
or in the case of the equipment leases described in Schedule 2.1.2 to the
Disclosure Memorandum, has the rights with respect to the leased equipment
specified therein. The Encumbrances described in Schedule 5.8(b) and the
Permitted Encumbrances specifically listed in Schedule 2.1, do not impair or
reduce the value or utility of the Purchased Real Property or the Assets in any
respect that would have a Material Adverse Effect. Seller does not lease any
Real Property used in or related to the Business.

        (c) There are no applicable adverse zoning, building or land use codes
or rules, ordinances, regulations or other restrictions relating to zoning or
land use that currently or, to Seller's knowledge after due inquiry with
applicable authorities, may prospectively prevent, or cause the imposition of
material fines or penalties as the result of the use of all or any portion of
the Purchased Real Property. Seller has received all necessary approvals with
regard to occupancy and maintenance of the Purchased Real Property.

        (d) There are no existing leases, subleases, service contracts,
tenancies or licenses of any portion of the Purchased Real Property except for
those identified in Schedule 5.8(d) to the Disclosure Memorandum, true and
complete copies of which have been delivered to Buyer by Seller and the terms of
which have been approved by Buyer.

        (e) Except as set forth on Schedule 5.8(e) to the Disclosure Memorandum,
each lease of any portion of the Purchased Real Property, and each lease,
license, rental agreement, contract of sale or other agreement to which Personal
Property is subject, is valid and in good standing, Seller has performed all
material obligations imposed on it thereunder, and neither Seller nor, to the
knowledge of Seller, any other party thereto is in material default thereunder
in any material respect, nor is there any event that with notice or lapse of
time, or both, would constitute a default thereunder by Seller or, to the
knowledge of Seller, any other party thereto. Except as set forth on Schedule
5.8(e) to the Disclosure Memorandum, Seller has not received notice, and Seller
is not otherwise aware, that any party to any such lease, license, rental
agreement, contract of sale or other agreement intends to cancel, terminate or
refuse to renew the same or to exercise or decline to


                                      -14-
   20

exercise any option or other right thereunder. No Purchased Real Property or
Personal Property is subject to any lease, license, contract of sale or other
agreement that could reasonably be expected to have a Material Adverse Effect.

        (f) Except (i) for assessments for Taxes not yet due and payable, (ii)
for mechanics', materialmen's, carriers' and other similar liens securing
indebtedness that is in the aggregate less than $10,000, is not yet due and
payable, and was incurred in the ordinary course of business, and (iii) as set
forth in Schedule 5.8(f), the Personal Property is free and clear of all liens,
mortgages, pledges, deeds of trust, security interest, conditional sales
agreements, charges, encumbrances and other adverse claims or interests of any
kind, and, other than personal property leased by Seller for use in the
operation of the Business and so noted on the list supplied pursuant to Section
5.8(a), Seller has good and marketable title thereto.

        (g) Except as specifically set forth in Schedule 5.8(g) to the
Disclosure Memorandum, Seller has no knowledge of any physical defect in the
Purchased Real Property that would have a Material Adverse Effect. Seller is not
in default under any covenant, condition, restriction, easement, right-of-way or
governmental approval relating to the Purchased Real Property that would have a
Material Adverse Effect.

        5.9 EQUIPMENT

        Except as set forth in Schedule 5.9, the machinery, equipment, furniture
and other physical assets included in the Assets do not have any structural
defects known to Seller, are in good operating condition and repair and are
adequate for the conduct of the Business as heretofore conducted by Seller, and
they conform to and are free of any building, fire or other violations under all
applicable zoning, pollution, health and safety and other laws, statutes, rules,
ordinances and regulations that would have a Material Adverse Effect. During the
past three years there has not been any significant interruption in the
operation of the Facilities, due to the malfunctioning of any such Assets.

        5.10 ENVIRONMENTAL AND SAFETY MATTERS

        (a) Seller has given Buyer access to all of the following:

               (i)    all communications in Seller's possession or control with
                      the U.S. Environmental Protection Agency, the U.S.
                      Department of Labor, all applicable state and local
                      authorities, including but not limited to the Texas
                      Department of Health, Bureau of Radiation Control, and all
                      other Governmental Bodies having jurisdiction over or the
                      authorization to enforce any Environmental and Safety Law,
                      relating to the operation of the Business or the ownership
                      or operation of the Assets or the Facilities;

               (ii)   all written materials in Seller's possession or control
                      relating to waste handling, storage, disposal and
                      transport practices, groundwater monitoring, effluent
                      discharges and air emissions on, at, around, under, or
                      from the Assets or the Facilities or otherwise relating to
                      the operation of the Business; and

               (iii)  all manifests of all shipments of waste relating to the
                      operation of the Business or the ownership or operation of
                      the Assets or the Facilities.


                                      -15-
   21

        (b) Seller has delivered to Buyer, or given Buyer access to, all of the
following:

               (i)    copies of all written documentation in Seller's possession
                      or control indicating the presence of any Hazardous
                      Materials or the release or the threat of a release of any
                      Hazardous Materials into the Environment on, at, around or
                      under the Assets or the Facilities or other properties
                      used in or related to the Business, or properties
                      currently or previously owned or leased by Seller or by
                      any third party acting on Seller's behalf and used in or
                      related to the Business, or any other locations where
                      Hazardous Materials from the Assets or the Facilities or
                      any such properties were treated, handled, stored,
                      disposed of, transported or abandoned, or any other
                      locations to which Hazardous Materials from the Assets or
                      the Facilities or any such properties were emitted,
                      discharged, spilled, migrated, released, disposed of or
                      placed;

               (ii)   copies of all Permits, whether expired, suspended, revoked
                      or presently in force, issued by the U.S. Environmental
                      Protection Agency or any state or local authorities,
                      including the Texas Department of Health, Bureau of
                      Radiation Control, that authorize or relate to the
                      generation, treatment, storage, disposal, emission,
                      discharge or release of Hazardous Materials on, at,
                      around, under or from the Assets or the Facilities, and
                      copies of all applications for such permits;

               (iii)  copies of any notices of violation or alleged violation of
                      any Environmental and Safety Law relating to activities
                      conducted by Seller at the Assets or the Facilities; and

               (iv)   copies of any environmental, health or safety audits
                      performed by or at the request of Seller relating to
                      activities conducted at the Assets or the Facilities.

        (c) Schedule 5.10 to the Disclosure Memorandum describes any and all
Judgments, Contracts, Permit conditions and pending or, to Seller's knowledge,
threatened Claims (i) that require, provide for or seek damages, injunctive
relief or any other remedy, or could cause the incurrence of costs or expenses
or result in any liability under any Environmental and Safety Law, or (ii) that
require, provide for or seek any Remedial Action, or (iii) that require, provide
for or seek any change in the present condition of or any work, repairs,
construction or capital expenditures, in each case with respect to the Assets or
the Facilities or other properties used in or related to the conduct of the
Business, or properties currently or previously owned or leased by Seller or by
any third party acting on Seller's behalf and used in or related to the
Business, or any other locations where Hazardous Materials from the Assets or
the Facilities or any such properties were treated, handled, stored, disposed,
transported or abandoned, or any other locations to which Hazardous Materials
from the Assets or the Facilities or any such properties were emitted,
discharged, spilled, migrated, released, disposed or placed. To Seller's
knowledge, except as set forth in the environmental report contemplated by
Section 8.12, there are no conditions, circumstances, activities, practices,
events, plans or actions that could interfere with, or prevent the compliance or
continued compliance with, or result in any liability under, any Environmental
and Safety Laws, any notices or demands issued thereunder or any Judgments,
Contracts or Permit conditions, or otherwise form the basis under any
Environmental and Safety Laws of any past, present or future Claims (including,
but not limited to, any Claims of the nature described in the foregoing
sentence), based on or related to the


                                      -16-
   22

manufacture, generation, processing, distribution, use, treatment, handling,
storage, disposal, transport or abandoning of Hazardous Materials on, at, around
or under the Assets or the Facilities or any such properties or locations, or
the emission, discharge, spill, migration, release, disposal or placing of
Hazardous Materials, or the threat of the same, into the Environment on, at,
around or under the Assets or the Facilities or any such properties or
locations.

        (d) Except as set forth in Schedule 5.10 to the Disclosure Memorandum
and except as set forth in the environmental report contemplated by Section
8.12, (i) the Assets and the Facilities and properties currently or previously
owned or leased by Seller or by any third party acting on Seller's behalf and
related to the Business are not and were not used for the manufacture,
generation, processing, treatment, storage, distribution, handling, disposal or
removal of Hazardous Materials, and (ii) the manufacture, generation,
processing, treatment, storage, distribution, handling, disposal and removal of
all Hazardous Materials from the Assets and the Facilities and such properties
have been conducted in compliance with Environmental and Safety Laws, and have
not given rise to Claims of which Seller has notice, nor to Seller's knowledge
is there any basis for any such Claims. Schedule 5.10 to the Disclosure
Memorandum contains a correct and complete list of all Hazardous Materials
currently located on the Facilities. .

        (e) Except as set forth in this Section 5.10 or in Schedule 5.10 to the
Disclosure Memorandum or the documents referenced therein and, except as set
forth in the environmental report contemplated by Section 8.12, there are no
facts known to Seller that would be material to an evaluation by Buyer of the
status of the Business or the Assets or the Facilities with respect to
compliance with Environmental and Safety Laws, or conditions that now or in the
future may require Remedial Action to achieve such compliance.

        (f) Except as set forth in the environmental report contemplated by
Section 8.12, the conduct of the Business and the ownership or operation of the
Assets and the Facilities have not given rise to any material violation of any
Environmental and Safety Law, and no material expenditures are or would be
required in order to comply with any such Environmental and Safety Law.

        5.11 CONTRACTS

        Except as set forth in Schedule 5.11 to the Disclosure Memorandum, all
of the Contracts described in Schedule 2.1.6 to the Disclosure Memorandum are
valid and in full force and effect, Seller has performed all material
obligations imposed on it thereunder, and there are not, under any of such
Contracts, any defaults or events of default on the part of Seller or, to
Seller's knowledge, any other party thereto, that would materially adversely
affect the Business or the Assets or that could reasonably be expected to
materially adversely affect the Business or the Assets. Except as set forth in
Schedule 5.11 to the Disclosure Memorandum, Seller has not received notice, nor
is Seller otherwise aware, that any party to any such Contract intends to
cancel, terminate or refuse to renew such Contract or to exercise or decline to
exercise any option or right thereunder.

        5.12 CLAIMS AND LEGAL PROCEEDINGS

        Except as specifically set forth in Schedule 5.12 to the Disclosure
Memorandum, there are no Claims pending or, to Seller's knowledge, threatened
against Seller with respect to the Business or the Assets, before or by any
Governmental Body or nongovernmental department, commission,


                                      -17-
   23

board, bureau, agency or instrumentality or any other person. To Seller's
knowledge, there is no valid basis for any Claim, other than as specifically set
forth in Schedule 5.12 to the Disclosure Memorandum, adverse to the Business or
the Assets by or before any Governmental Body or nongovernmental department,
commission, board, bureau, agency or instrumentality, or any other person.
Except as set forth in Schedule 5.12 to the Disclosure Memorandum, there are no
outstanding or unsatisfied judgments, orders, decrees or stipulations to which
Seller with respect to the Business or the Assets is a party, that involve the
transactions contemplated herein or that would have a Material Adverse Effect.

        5.13 LABOR MATTERS

        There are no disputes, material employee grievances or material
disciplinary actions pending or, to Seller's knowledge, threatened between
Seller and any employees of Seller who either are employed at the Business or
have been offered employment by Buyer immediately following the Closing
(collectively, the "Relevant Employees"). Seller, with respect to the Relevant
Employees, has complied in all respects with all provisions of all laws relating
to the employment of labor, except where the failure to comply would not have a
Material Adverse Effect, and has no liability for any arrears of wages or Taxes
or penalties for failure to comply with any such laws. Seller has no knowledge
of any organizational efforts presently being made or threatened by or on behalf
of any labor union with respect to any Relevant Employees.

        Except as specifically set forth in Schedule 5.13 to the Disclosure
Memorandum, Seller, with respect to the Relevant Employees, is not a party to
any:

        (a) management, employment or other contract providing for the
employment or rendition of executive services;

        (b) employment contract that is not terminable without penalty by Seller
on 30 days' notice;

        (c) bonus, incentive, deferred compensation, severance pay, pension,
profit-sharing, retirement, stock purchase, stock option, employee benefit or
similar plan, agreement or arrangement;

        (d) collective bargaining agreement or other agreement with any labor
union or other employee organization (and no such agreement is currently being
requested by, or is under discussion by management with, any group of employees
or others); or

        (e) other employment contract or other compensation agreement or
arrangement, oral and written, affecting or relating to current or former
employees of the Business.

        Except as set forth in Schedule 5.13 to the Disclosure Memorandum, all
such contracts and other agreements and arrangements set forth in Schedule 5.13
to the Disclosure Memorandum are valid, in full force and effect, Seller has
performed all material obligations imposed on it thereunder, and there are,
under any of such contracts, agreements or arrangements, no defaults or events
of default by Seller or, to its knowledge, any other party thereto that would
have a Material Adverse Affect, or that would or reasonably could be expected to
materially adversely affect the relationship of Seller or Buyer with the
Business employees.


                                      -18-
   24

        Seller has not made, and will not through the date of Closing make, any
loans to any officer or employee of Seller employed in the business of the
Business.

        5.14 PATENTS, TRADEMARKS AND INTELLECTUAL PROPERTY

        (a) Seller is the sole and exclusive owner of the entire right, title
and interest in and to, and has the sole and exclusive right to use, free and
clear of any payment obligation or other Encumbrance, all the patents, trade
names, trademarks, service marks, copyrights and applications for any of the
foregoing, whether registered or not, that are used in or relate to the Business
or has valid and subsisting license to use, as they are currently used, any of
the same that are not owned by Seller. Schedule 2.1.4 to the Disclosure
Memorandum is an accurate and complete list of all such patents, trade names,
trademarks, service marks, copyrights, and applications for any of the
foregoing, reflecting dates of filing or dates of issuance, if applicable or
licenses therefor. No patents, trade names, trademarks, service marks,
copyrights or applications for any of the foregoing, other than those set forth
in Schedule 2.1.4 to the Disclosure Memorandum, are or have been used in, are
necessary in connection with, or are owned by Seller and relate to the Business.
All registrations listed in Schedule 2.1.4 to the Disclosure Memorandum owned by
Seller, or to Seller's knowledge, licensed to Seller, are in good standing,
valid, subsisting and in full force and effect in accordance with their terms.
The technical information and data and other intellectual property rights to be
transferred to Buyer hereunder include all of Seller's technical information and
data and other intellectual property rights (including, but not limited to,
those of the types referenced in Section 2.1.4) relating to or used in the
Business.

        (b) To the knowledge of Seller, none of the Intellectual Property or
Seller's rights thereto are being infringed or otherwise violated by any person
or entity.

        (c) The operation of the Business and use of the Intellectual Property
by Seller does not infringe or otherwise violate any rights of any person or
entity, and there has been and is no pending or, to the knowledge of Seller,
threatened Claim alleging any such infringement or violation. In addition, there
has been and is no pending or, to the knowledge of Seller, threatened Claim
alleging any defect in or invalidity, misuse or unenforceability of, or
challenging the operation of the Business or the ownership or use of or Seller's
rights with respect to, any of the Intellectual Property, and there is no basis
for any such Claim. Furthermore, there is no other Claim made by any person or
entity pertaining to the Intellectual Property. None of the Intellectual
Property is subject to any Judgment.

        (d) The consummation of the transactions contemplated by this Agreement
and the Transaction Documents will not alter or impair any of the Intellectual
Property, and the Intellectual Property may be transferred to Buyer hereunder
without the consent or approval of any other party or Governmental Body.

        (e) The Business does not involve the employment of any person in a
manner that violates any noncompetition or nondisclosure agreement known to
Seller that such person entered into in connection with his or her employment or
activities at any time prior to employment by Seller.

        (f) Seller is operating and has operated the Business in compliance with
all export control laws, statutes, rules, ordinances and regulations promulgated
by the U.S. Food and Drug


                                      -19-
   25

Administration (the "FDA"); the U.S. Department of Transportation; the U.S.
Environmental Protection Agency; the Texas Department of Health, Bureau of
Radiation Control; the Texas Natural Resources Conservation Commission; and the
Texas Department of Health, Bureau of Food, Drug and Medical Devices
(collectively, the "Designated Regulators") and, to Seller's knowledge, of any
other Governmental Body. Seller has not received any notice alleging that its
conduct of the Business violates any such laws, statutes, rules, ordinances or
regulations, nor is Seller aware of any basis for any Claim alleging the same.

        (g) The Business and the Facilities are in full technical compliance
with the current Good Manufacturing Practices regulations established by the
FDA.

        5.15 LICENSES, PERMITS, AUTHORIZATIONS, ETC.

        Seller has received all currently required governmental approvals,
authorizations, consents, licenses, orders, registrations and permits of all
agencies, whether federal, state, local or foreign, related to the operation of
the Business, except such approvals, authorizations, consents, licenses, orders,
registrations and permits the failure to obtain which will not have a Material
Adverse Effect.

        5.16 COMPLIANCE WITH LAW

        Seller is and has been in compliance with all laws, statutes, rules,
ordinances, regulations and judgments promulgated by the Designated Regulators,
and, except where the failure to comply with which would not have a Material
Adverse Effect, any other Governmental Body, applicable to the ownership or
operation of the Assets, the Facilities or the Business. Except as disclosed to
Buyer pursuant to Section 5.10(b)(iii), Seller has not received any notice of
any alleged violation (whether past or present and whether remedied or not), nor
is Seller aware of any basis for any claim of any such violation, of any such
law, statute, rule, ordinance, regulation or Judgment. To Seller's knowledge,
there is no law, statute, rule, ordinance or regulation promulgated by any
Governmental Body or any Judgment that would have a Material Adverse Affect.

        5.17 PERMITS AND QUALIFICATIONS

        All Permits issued by the Designated Regulators, and, to Seller's
knowledge, by any other Governmental Body, that are required for the ownership
or operation of the Assets or the Facilities or the operation of the Business
have been obtained by Seller, are in full force and effect. All material Permits
issued by the Designated Regulators are listed in Schedule 2.1.5 to the
Disclosure Memorandum, with their expiration dates, if any. Seller is and has
been in compliance with all such Permits, except as would not have a Material
Adverse Effect, and Seller has not received any notice of any alleged violation
(whether past or present and whether remedied or not) of, nor any threat of the
suspension, revocation, modification, invalidity or limitation of, any such
Permit, nor is Seller aware of any basis for any claim of any such violation or
any such threat. All such Permits that are transferable will be effectively
assigned to Buyer without additional liability to Buyer upon the Closing, or
upon compliance after the Closing with applicable recording, registration or
filing procedures set forth in Schedule 5.4 to the Disclosure Memorandum.


                                      -20-
   26

        5.18 INSURANCE

        Seller has, with respect to the Business and the Assets, maintained
adequate insurance protection against all liabilities, Claims and risks against
which it is customary for corporations engaged in the same or a similar business
similarly situated to insure.

        5.19 EMPLOYEE PLANS

        Seller maintains for the benefit of current or former employees of the
Business only those Employee Benefit Plans listed on Schedule 5.19 to the
Disclosure Memorandum. Seller is not now a contributing employer to any
"multi-employer plan" as described in Section 4001(a)(3) of ERISA with respect
to any employees of the Business. Seller has not been a contributing employer to
any "multi-employer" plan with respect to employees of the Business in the past
five years. Each and every pension plan (as defined in Section 3(1) of ERISA)
maintained by Seller for the benefit of the employees of the Business has been
issued a favorable determination letter with respect to its qualified status
under Section 401(a) of the Code by the U.S. Internal Revenue Service, or an
application for such a determination letter has been filed with the U.S.
Internal Revenue Service within the requisite time period to allow Seller to
make remedial amendments for such qualification purposes. With respect to
employees of the Business, Seller is in compliance with the healthcare
continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, Section 4980B of the Code, and proposed regulations
issued by the U.S. Internal Revenue Service.

        5.20 EXCLUDED ASSETS

        None of the Excluded Assets is related to or used in the Business for
any purpose. All assets associated with the Business are included in the Assets.

        5.21 BROKERAGE

        Seller has not retained any broker or finder in connection with the
transactions contemplated by this Agreement. Any brokerage or finder's fee due
to any broker or finder in violation of the foregoing representation shall be
paid by Seller.

        5.22 ACCREDITED INVESTOR

        (a) Seller has received all the information it considers necessary or
appropriate for deciding whether to acquire the Warrants. Seller further
represents that it has had an opportunity to ask questions of and receive
answers from Buyer regarding the terms and conditions of the offering of the
Warrants and the shares of common stock of Buyer to be received upon exercise of
the Warrants (the "Buyer Common Stock," the Warrants and the Buyer Common Stock
together being referred to herein as the "Securities") and the business,
properties, prospects and financial condition of Buyer.

        (b) Seller is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act").

        (c) Seller understands that the Securities have not been registered
under the Securities Act, by reason of a specific exemption from the
registration provisions of the Securities Act which


                                      -21-
   27


depends upon, among other things, the bona fide nature of the investment or
non-distributive intent and the accuracy of Seller's representations as
expressed herein. Seller understands that the Securities are characterized as
"restricted securities" under applicable U.S. federal and state securities laws
and that, pursuant to these laws, Seller must hold the Securities indefinitely
unless subsequently registered with the Securities and Exchange Commission and
qualified by state authorities, or an exemption from such registration and
qualification requirements is available. Other than as contained in the
applicable Transaction Documents, Seller acknowledges that Buyer has no
obligation to register or qualify the Securities for resale.

        5.23 ONGOING BUSINESS

        Seller will continue to engage in one or more lines of business after
Closing and will apply a portion of the Purchase Price into its continuing
business.

        5.24 FULL DISCLOSURE

        Seller has disclosed to Buyer in writing all material facts and
information relating to the Assets and the Business. No information furnished by
Seller to Buyer in connection with this Agreement (including, but not limited
to, the Financial Statements and all information in the Schedules to the
Disclosure Memorandum) is false or misleading in any material respect. In
connection with such information and with this Agreement and the transactions
contemplated hereby, Seller has not made any untrue statement of a material fact
or omitted to state a material fact necessary in order to make the statements
made or information delivered, in the light of the circumstances under which
they were made, not misleading.

6.    REPRESENTATIONS AND WARRANTIES OF BUYER

        To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller (which representations and warranties shall survive the
Closing as provided in Section 14) all as follows in this Section 6:

        6.1 ORGANIZATION, GOOD STANDING, POWER, ETC.

        Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington. Buyer has all requisite
power and authority to own or lease and operate its assets and to carry on its
business as it is now conducted.

        6.2 TRANSACTION DOCUMENTS

        Buyer has full corporate power and authority to execute, deliver and
perform this Agreement and the Transaction Documents to which it is a party and
perform its obligations hereunder and thereunder. The execution and delivery by
Buyer of this Agreement and the Transaction Documents to which it is a party,
the performance by Buyer of its obligations hereunder and thereunder and the
consummation by Buyer of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action of Buyer and its
officers, directors and shareholders. This Agreement constitutes a valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, and the Transaction Documents to which Buyer is a party, when executed
and delivered by Buyer, will constitute valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their terms.


                                      -22-
   28


        6.3 NO CONFLICT

        Neither the execution and delivery by Buyer of this Agreement or the
Transaction Documents to which Buyer is a party, the performance by Buyer of its
obligations hereunder or thereunder, nor the consummation of the transactions
contemplated hereby or thereby will (a) violate, conflict with or result in any
breach of any provision of Buyer's articles of incorporation or bylaws; or (b)
violate, conflict with, result in any breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would constitute a default)
under any Contract or Judgment to which Buyer is party or by which it is bound;
or (c) violate any applicable law, statute, rule, ordinance or regulation of any
Governmental Body.

        6.4 CLAIMS AND LOCAL PROCEEDINGS

        There are no Claims pending or, to the knowledge of Buyer, threatened
against Buyer, before or by any Governmental Body or nongovernmental department,
commission, board, bureau, agency or instrumentality, or any other person, and
there are no outstanding or unsatisfied Judgments or stipulations to which Buyer
is a party that involve the transactions contemplated herein or that would alone
or in the aggregate have a material adverse effect on the business, business
prospects, assets or financial condition of Buyer.

        6.5 BROKERAGE

        Except for Bay City Capital, Buyer has not retained any broker or finder
in connection with the transactions contemplated by this Agreement. Any
brokerage or finder's fee due to [Bay City Capital and] any broker or finder in
violation of the foregoing representation shall be paid by Buyer.

        6.6 WARRANT

        (a) The Warrants, when issued, sold and delivered in accordance with the
terms of this Agreement and the Transaction Documents will be duly and validly
issued, fully paid, and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under the Transaction Documents and
under applicable state and federal securities laws.

        (b) The Buyer Common Stock issuable upon exercise of the Warrants
purchased under this Agreement have been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Warrants and for the
consideration stated therein, will be duly and validly issued, fully paid and
non-assessable and will be free of restrictions on transfer other than
restrictions on transfer arising (i) under the terms of the Warrant, this
Agreement and the other Transaction Documents and (ii) under federal and state
securities laws.

        6.7 CONSENTS AND APPROVALS

        Except as contemplated in Section 8 below, (a) no consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Body is required for the execution, delivery and performance by Buyer of this
Agreement and the Transaction Documents to which it is a party and for the
consummation by Buyer of the transactions contemplated hereby and thereby and
(b) no consent, approval or authorization of any third party is required for the
execution, delivery and performance by Buyer of this Agreement and the
Transaction Documents to which it is a party and the consummation by Buyer of
the transactions contemplated hereby and thereby.


                                      -23-
   29

7.    CERTAIN COVENANTS

        7.1 ACCESS

        (a) Prior to the Closing Date, Seller shall (i) give Buyer and its
accounting, legal, business, environmental, engineering, intellectual property
and other authorized representatives and advisors full access, during normal
business hours, to all plants, offices, warehouses and other facilities and
properties of Seller relating to the Assets and the Business, (ii) furnish Buyer
and its authorized representatives and advisors with all documents and
information relating to the Assets and the Business as may be reasonably
requested by Buyer and its authorized representatives and advisors, (iii) permit
Buyer and its authorized representatives and advisors to review all books,
records and Contracts relating to the Assets and the Business as may be
reasonably requested by Buyer and its authorized representatives and advisors,
and make copies thereof, (iv) make available Seller's employees and advisors,
including those responsible for the management of the Business, and cause
Seller's employees and advisors to furnish Buyer and its authorized
representatives and advisors with data and other information with respect to the
Assets and the Business as may be reasonably requested by Buyer and its
authorized representatives and advisors, and discuss with Buyer and its
authorized representatives and advisors the affairs of the Business, and (v)
fully cooperate with Buyer and its authorized representatives and advisors in
their investigation and examination of the Assets and the affairs of the
Business. Except as provided in Sections 14.2 and 14.9, no investigation, or
receipt of information provided by or on behalf of Seller or review thereof by
Buyer or its representatives or advisors shall diminish or obviate, or relieve
Seller from, or affect Buyer's ability or right to rely on, any of the
representations, warranties, covenants and agreements of Seller contained in
this Agreement and the Transaction Documents.

        (b) In the event that the Closing under this Agreement shall not occur,
in addition to the obligations of the parties set out in Section 15.2, Buyer
shall keep confidential and not use or disclose to any party any confidential
information acquired by Buyer from Seller pursuant to this Section 7.1 or
otherwise disclosed in connection with the negotiation of this Agreement, unless
Seller shall give its written consent to the contrary; provided, however, that
the foregoing obligations of confidentiality and non-use shall not apply to any
information which (i) at the time of disclosure is, or thereafter becomes,
available to the public through no breach of this Agreement by Buyer; or (ii)
was known to, or otherwise in the possession of, Buyer or its Affiliates prior
to the receipt of such information from Seller; or (iii) is obtained by Buyer
from a source other than Seller and other than one who would be breaching a
commitment of confidentiality to Seller by disclosing the information to Buyer;
or (iv) is developed by Buyer or its Affiliates independently of Seller's
confidential information; or (v) is required to be disclosed by Buyer in
connection with a pending Claim; and provided further that in the event Buyer
becomes required in connection with a pending Claim to disclose any of the
information acquired from Seller in connection with this Agreement, then Buyer
shall provide Seller with reasonable notice so that Seller may seek a court
order protecting against or limiting such disclosure or any other appropriate
remedy; and in the event such protective order or other remedy is not sought, or
is sought but not obtained, Buyer shall furnish only that portion of the
information which is required and shall endeavor, at Seller's expense, to obtain
a protective order or other assurance that the portion of the information
furnished by Buyer will be accorded confidential treatment. The obligations of
Buyer set forth in this Section 7.1(b) shall be in effect for a period of five
years from the date of this Agreement.


                                      -24-
   30

        7.2 ASSIGNMENT OF CONTRACTS

        (a) Subject to the terms and conditions of this Agreement, as of the
Closing Date, Seller shall assign to Buyer all of the right, title and interest
of Seller in and under all Contracts that constitute any of the Assets, and
Buyer shall assume the liabilities and obligations of Seller arising under such
Contracts after the Closing Date; provided, however, that Buyer shall not
succeed to or assume, and Seller shall be responsible for, any liability or
obligation arising out of any or all of the following: (i) any breach by Seller
of any such Contract or any failure by Seller to discharge or perform any
liability or obligation arising on or prior to the Closing Date under any such
Contract; (ii) any Claim based on claims relating to products manufactured,
shipped or sold by Seller on or prior to the Closing Date; (iii) any Claim
resulting from any act or omission of Seller on or prior to the Closing Date;
and (iv) any Claim relating to any Excluded Contract.

        (b) If any Contract constituting any of the Assets is not assignable by
Seller to Buyer without the consent of a third party, or will not continue in
effect after the Closing and such assignment without the consent of a third
party, then Seller shall use its best efforts to provide Buyer with such
third-party consent prior to the Closing Date to the satisfaction of Buyer (but
if Seller's assignment or attempted assignment of any such Contract prior to
obtaining the third-party consent would constitute a breach of such Contract,
then such assignment or attempted assignment shall not be or be deemed effective
unless and until the third-party consent is obtained). Buyer shall render such
cooperation as is reasonably required to assist Seller in obtaining such
third-party consent.

        7.3 CONDUCT OF BUSINESS PRIOR TO CLOSING

            7.3.1

        Except for actions taken with the prior written consent of Buyer, from
the date of this Agreement until the Closing Date, and except to the extent
Seller acting in good faith is precluded from doing so by lack of funding and in
writing so advises Buyer with reasonable specificity, and Seller shall:

        (a) maintain the Business and the Assets intact;

        (b) maintain the Transferred Real Property, plants, buildings,
structures and other improvements and machinery and equipment constituting any
of the Assets in good operating condition and repair;

        (c) make payments and filings required to continue the Intellectual
Property and continue to prosecute and maintain all pending applications
therefor in all jurisdictions in which such applications are pending; and

        (d) comply with all Judgments, all laws, statutes, rules, ordinances and
regulations promulgated by any Governmental Body and all Permits applicable to
the operation the Business or the ownership or operation of the Assets or the
Facilities, and maintain, and prosecute applications for, such Permits and pay
all Taxes, assessments and other charges applicable thereto.


                                      -25-
   31

            7.3.2

        Except for actions taken with the prior consent of Buyer, from the date
of this Agreement until the Closing Date, Seller shall not take or permit to
exist any action or condition specified in Section 5.6, and Seller shall:

        (a) promptly advise Buyer in writing of any Material Adverse Change,
including prompt notification in writing of any outstanding or threatened
claims, legal, administrative or other proceedings involving Seller or its
personnel that could have a Material Adverse Effect;

        (b) use its best efforts not take any action, or omit to take any
action, that would result in any of Seller's representations and warranties made
herein being inaccurate at the time of such action or omission as if made at and
as of such time;

        (c) give written notice to Buyer promptly upon becoming aware of any
inaccuracy in any material respect of any of Seller's representations or
warranties made herein or in the Disclosure Memorandum or of any event or state
of facts that would result in any such representation or warranty being
inaccurate in any material respect at the time of such event or state of facts
as if made at and as of such time (any such notice to describe such inaccuracy,
event or state of facts in reasonable detail); and

        (d) not solicit, approach or furnish information to any prospective
buyer, or negotiate with any third party concerning the sale or transfer of the
Assets, the Business or any part thereof, whether any of such actions are taken
directly or indirectly, through a representative or otherwise.

        7.4 COVENANTS TO SATISFY CONDITIONS

        Each party shall proceed with all reasonable diligence and use its best
efforts to satisfy or cause to be satisfied all of the conditions precedent to
the other party's obligation to purchase or sell the Assets that are set forth
in Section 8 or 9, as the case may be, insofar as such matters are within the
control of such party; provided, however, that this provision shall not impose
upon Buyer or Seller any obligation to incur unreasonable expenses under the
circumstances in order to fulfill any condition contained in such Sections, and,
in the case of Seller acting in good faith and with prior written notice to
Buyer, is subject to the availability of funds therefor.

8.    CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

        The obligation of Buyer to purchase the Assets at the Closing shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions, any one or more of which may be waived by Buyer:

        8.1 NO INJUNCTION OR LITIGATION; COMPLIANCE WITH LAWS

        (a) As of the Closing Date, there shall not be any Claim or Judgment of
any nature or type threatened, pending or made by or before any Governmental
Body that questions or challenges the lawfulness of the transactions
contemplated by this Agreement or the Transaction Documents under any law or
regulation or seeks to delay, restrain or prevent such transactions.


                                      -26-
   32

        (b) The consummation of the transactions contemplated by this Agreement
and the Transaction Documents and the performance by Buyer of its obligations
pursuant to this Agreement and the Transaction Documents shall be legally
permitted by all laws and regulations to which Buyer is subject.

        8.2 REPRESENTATIONS, WARRANTIES AND COVENANTS

        (a) The representations and warranties of Seller made in this Agreement,
the Transaction Documents and any certificate furnished pursuant hereto or
thereto shall be true, complete and correct on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date;

        (b) Seller shall have performed and complied with the covenants and
agreements required by this Agreement to be performed and complied with by it on
or prior to the Closing Date; and

        (c) Seller shall have delivered to Buyer a certificate dated the Closing
Date to the foregoing effects, signed by a duly authorized executive officer of
Seller.

        Provided that Seller has at all times acted in good faith and with
reasonable diligence, the conditions of this Section 8.2 shall be deem satisfied
unless any failures of such representations and warranties of Seller to be true,
complete and correct on and as of the Closing Date (ignoring for such purpose
any materiality or knowledge qualifications contained in any particular
representation or warranty), and any failures to perform and comply with such
covenants and agreements, would, taken in the aggregate, have a Material Adverse
Effect.

        8.3 NO ADVERSE CHANGES

        From the date of this Agreement to the Closing Date, there shall not
have been any Material Adverse Change, and Seller shall have no knowledge of any
Material Adverse Change which is threatened (other than threatened solely as a
result of Seller's lack of funding for future operations); and Seller shall have
delivered to Buyer a certificate dated the Closing Date to the foregoing effects
signed by a duly authorized executive officer of Seller.

        8.4 CONSENTS AND APPROVALS

        (a) The principal terms of this Agreement and the Transaction Documents,
and all transactions contemplated hereby and thereby shall have been approved by
Seller's shareholders to the extent required by Seller's Articles of
Incorporation and applicable law.

        (b) All consents, approvals or authorizations of, or declarations,
filings or registrations with, all Governmental Bodies required for the
consummation of the transactions contemplated by this Agreement and the
Transaction Documents shall have been obtained or made on terms satisfactory to
Buyer and shall be in full force and effect. Without limiting the generality of
the foregoing, all consents, approvals and authorizations necessary for the
transfer to Buyer of all Permits of all Governmental Bodies held by Seller with
respect to the Business, as listed in Schedule 2.1.5 to the Disclosure
Memorandum, shall have been obtained and such consents, approvals and
authorizations shall be in full force and effect or shall, in Buyer's reasonable
judgment, be obtainable after the Closing Date upon compliance with applicable
recording, registration or


                                      -27-
   33

filing procedures and without additional liability to Buyer. Buyer shall have
been granted all Permits of all Governmental Bodies substantially equivalent to
those held by Seller with respect to the Business, as listed in Schedule 2.1.5
to the Disclosure Memorandum, without having to accept any significantly more
burdensome conditions than are now imposed on Seller under such Permits or such
Permits shall, in Buyer's reasonable judgment, be obtainable after the Closing
Date upon such terms. Furthermore all consents, approvals or authorizations of
any other third parties required for the consummation of the transactions
contemplated by this Agreement and the Transaction Documents, including, but not
limited to, all consents of any third parties required for the assignment to
Buyer of any Contracts that constitute any of the Assets and the continuation in
effect of such Contracts following the Closing and such assignment, and all
Permits of any Governmental Bodies (including but not limited to all
certifications, endorsements and qualifications required by the state and
federal radiation regulatory authorities and the FDA) required in connection
with the conduct by Buyer of the Business following the Closing in the manner
heretofore conducted by Seller, shall have been obtained to the satisfaction of
Buyer and shall be in full force and effect or shall, in Buyer's reasonable
judgment, be obtainable after the Closing Date upon compliance with applicable
recording, registration or filing procedures and without additional liability to
Buyer. In addition, the originals of all the consents, approvals, authorizations
and Permits referenced in this Section 8.4 shall have been delivered to Buyer.

        8.5 TAXES

        All Taxes and other assessments applicable to the Assets that are due
and owing as of the Closing Date shall have been paid, except for Taxes and
assessments to be apportioned between the parties as of the Closing pursuant to
Section 11.3 or paid pursuant to Section 11.1.

        8.6 DELIVERY OF DOCUMENTS

        Seller shall deliver the following documents, agreements and supporting
papers to Buyer at the Closing, and the delivery of each shall be a condition to
Buyer's performance of its obligations to be performed at the Closing:

        (a) an executed Bill of Sale;

        (b) a counterpart of the Assignment and Assumption Agreement executed by
Seller;

        (c) an executed and acknowledged special warranty deed conveying title
to the Purchased Real Property in due form for recordation with the appropriate
Governmental Body, and all other instruments necessary to record such deed,
together with a certified check for all applicable recording fees and Seller's
share of any transfer taxes;

        (d) policies of title insurance from a title insurance company selected
by Buyer, dated as of the Closing Date, insuring that Buyer has fee simple title
to each parcel of the Purchased Real Property, with face values equal to the
values allocated to the Purchased Real Property under Section 3.1, together
with, an endorsement as to no Encumbrances (other than Permitted Encumbrances
specifically listed in Schedule 2.1) and such other endorsements as are
reasonably required by Buyer and are available in the State of Texas, as the
case may be;


                                      -28-
   34

        (e) executed certificates, affidavits or other documents relating to
transfer taxes, or excise taxes, documentary stamp taxes or gains taxes imposed
by a Governmental Body due to transfer of the Purchased Real Property;

        (f) an executed nonforeign certificate in accordance with Section 1445
of the Code and the regulations issued thereunder;

        (g) any and all certificates of title relating to Personal Property
included within the Assets;

        (h) written consent to assignment (in form and substance reasonably
satisfactory to Buyer) of all agreements listed on Schedule 5.3(b) to the
Disclosure Memorandum; and

        (i) UCC-3 lien releases and other required certificates, documents and
filing terminating all security interests on the Assets.

        8.7 LEGAL OPINION

        Seller shall have delivered to Buyer the opinion of Seller's counsel,
Locke Liddell & Sapp, LLP, dated the Closing Date, substantially in the form of
Exhibit 8.7 hereto.

        8.8 SATISFACTION OF CONDITIONS

        All agreements and other documents required to be delivered by Seller
hereunder on or prior to the Closing Date shall be satisfactory in the
reasonable judgment of Buyer and its counsel. Buyer shall have received such
other agreements, documents and information as it may reasonably request in
order to establish satisfaction of the conditions set forth in this Section 8.

        8.9 EMPLOYMENT AND NONCOMPETITION ARRANGEMENTS

        Each of the employees listed on Schedule 8.9 shall have executed a
letter agreement, in form satisfactory to Buyer and shall have executed Buyer's
standard form of Confidentiality, Noncompetition and Invention Assignment
Agreement and each such letter and agreement shall remain in full force and
effect on the Closing Date.

        8.10 AGREEMENT WITH TEXAS STATE BANK; ASSUMPTION OF BANK DEBT

        TSB, Seller and Buyer shall have executed, prior to the Closing, a
written agreement or agreements (the "TSB Agreements"), providing for, among
other things, restructuring of $6,000,000 of Seller's existing debt to TSB on
terms and conditions acceptable to Buyer and delivery of the Note to TSB. TSB
and Seller shall have fulfilled their respective obligations under the TSB
Agreements to be performed at or prior to Closing.

        8.11 OPINION AS TO ENVIRONMENTAL MATTERS

        Buyer shall have received a report of an outside engineering firm
assessing environmental compliance, potential risks, hazards and liabilities in
connection with the Real Property, and the contents and findings of such report
shall be satisfactory to Buyer in its sole discretion.


                                      -29-
   35


        8.12 IMAGYN LEASE AGREEMENT

        Prior to the Closing, Buyer and Imagyn shall have executed a lease
agreement on terms acceptable to Buyer in its sole discretion (the "Imagyn Lease
Agreement").

        8.13 UNIVERSITY OF NORTH TEXAS LEASE AGREEMENT

        Prior to the Closing, Buyer and the University of North Texas shall have
executed a lease agreement on terms acceptable to Buyer in its sole discretion,
for the 42 MeV cyclotron and all appurtenances related thereto (the "Cyclotron
Lease Agreement").

        8.14 LICENSE TO BACKGROUND INTELLECTUAL PROPERTY

        (a) Immediately prior to the Closing, Seller shall have granted to Buyer
and its subsidiaries and affiliates (now or hereafter existing) a royalty-free,
fully paid-up, perpetual, worldwide, nonexclusive license (with right to
sublicense) to all Background Intellectual Property (as hereafter defined) for
use in the fields of nuclear medicine, nuclear research, radioisotopes,
pharmaceuticals, diagnostics and medical devices. For purposes hereof,
"Background Intellectual Property" shall mean all information and intellectual
property rights owned or controlled by Seller as of the date of this Agreement
or acquired after the date of this Agreement and prior to Closing that are not
included in the definition of Intellectual Property that is to be transferred to
Buyer pursuant to Section 2 and that are not Excluded Assets listed in Schedule
2.2.6(c).

        (b) Immediately prior to the Closing, Seller shall have granted to Buyer
and its subsidiaries and affiliates (now or hereafter existing) a royalty-free,
fully paid-up, perpetual, worldwide, nonexclusive license (with right to
sublicense) under U.S. Patent application [*] and including all (i)
continuation, continuation in-part, divisional or substitute applications
thereof, (ii) patents that issue thereon and any reissues, and (iii) foreign
counterparts of such applications and patents for use in the fields of nuclear
medicine, nuclear research, radioisotopes, pharmaceuticals, diagnostics and
medical devices.

        (c) Immediately prior to the Closing, Seller shall have granted to Buyer
and its subsidiaries and affiliates (now or hereafter existing) a royalty-free,
fully paid-up, perpetual, worldwide, nonexclusive license (with right to
sublicense) under U.S. Patent application [*] and including all (i)
continuation, continuation in-part, divisional or substitute applications
thereof, (ii) patents that issue thereon and any reissues, and (iii) foreign
counterparts of such applications and patents for use in the fields of nuclear
medicine, nuclear research, radioisotopes, pharmaceuticals, diagnostics and
medical devices.

     [*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO
         A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE
         COMMISSION.

9.    CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

        The obligation of Seller to sell the Assets to Buyer at the Closing
shall be subject to the satisfaction at or prior to the Closing of each of the
following conditions, any one or more of which may be waived by Seller:


                                      -30-
   36


        9.1 NO INJUNCTION OR LITIGATION

        As of the Closing Date, there shall not be any Claim or Judgment of any
nature or type threatened, pending or made by or before any Governmental Body
that questions or challenges the lawfulness of the transactions contemplated by
this Agreement or the Transaction Documents under any law or regulation or seeks
to delay, restrain or prevent such transactions.

        9.2 REPRESENTATIONS, WARRANTIES AND COVENANTS

        (a) The representations and warranties of Buyer made in this Agreement
or in the Transaction Documents or any certificate furnished pursuant hereto or
thereto shall be true, complete and correct on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date;

        (b) Buyer shall have performed and complied with the covenants and
agreements required by this Agreement to be performed and complied with by it on
or prior to the Closing Date; and

        (c) Buyer shall have delivered to Seller a certificate dated the Closing
Date to the foregoing effects signed by a duly authorized executive officer of
Buyer.

        9.3 DELIVERY OF DOCUMENTS

        Buyer shall have executed and delivered to Seller the Assignment and
Assumption Agreement relating to Contracts, substantially in the form of Exhibit
2.5(b) hereto, and the Warrant.

        9.4 LEGAL OPINION

        Buyer shall have delivered to Seller the opinion of Buyer's counsel,
Perkins Coie LLP, dated the Closing Date, substantially in the form of Exhibit
9.4 hereto.

        9.5 AGREEMENT WITH TEXAS STATE BANK; ASSUMPTION OF BANK DEBT

        TSB, Seller and Buyer shall have executed, prior to the Closing, the TSB
Agreements, providing for, among other things, restructuring of $6,000,000 of
Seller's existing debt to TSB on terms and conditions acceptable to Buyer and
delivery of the Note to TSB. TSB and Buyer shall have fulfilled their respective
obligations under the TSB Agreements concurrent with the Closing.

        9.5 OBLIGATIONS TO UNSECURED CREDITORS

        Accounts payable to unsecured creditors of Seller, including, without
limitation, William Nicholson, Lon Morgan and Carl Seidel, shall have been
reduced to not more than $500,000 in the aggregate.

        9.6 IMAGYN CLOSING

        The sale of certain assets of Seller's brachytherapy seed business to
Imagyn contemplated by the Asset Purchase Agreement dated March 20, 2001 between
Seller and Imagyn shall have been


                                      -31-
   37

consummated, and Seller shall have received cash in an amount not less than
$5,000,000, plus or minus the adjustments provided for in section 2.04 of such
agreement, as a result thereof.

        9.7 LINAC AND BRACCO AGREEMENT

        Seller shall not have reasonable cause to believe (i) that the Shady
Oaks property and the linear accelerator ("LINAC") will not be able to be
purchased by Antich Medical Imaging Inc. ("AMII") for at least $8,000,000 or
(ii) that Seller will not be relieved of its obligations under the Manufacturing
and Distribution Agreement dated May 14, 1998 between Seller and Bracco in
connection with such purchase by AMII.

        9.8 TSB AGREEMENT

        TSB shall have entered into an agreement with Seller, upon terms and
conditions reasonably satisfactory to Seller, (i) to provide a line of credit
agreement to Seller from and after the Closing; (ii) to provide Seller a
$500,000 draw loan, for a period of not less than nine months after Closing, to
be used solely to keep the LINAC facility and equipment operationally viable and
to pay reasonable and necessary salary and expenses of a third party retained by
Seller to sell the LINAC facility and equipment; (iii) to renew and extend, for
a period of not less than nine months after Closing, up to $7,225,000 of
Seller's pre-January 10, 2001 debt, all upon the terms and conditions
contemplated by the letter dated February 21, 2001 from counsel for TSB to
counsel for Seller.

        9.9 UNIVERSITY OF NORTH TEXAS LEASE AGREEMENT

        Prior to the Closing, Buyer and the University of North Texas shall have
executed the "Cyclotron Lease Agreement."

        9.10 SATISFACTION OF CONDITIONS

        All agreements and other documents required to be delivered by Buyer
hereunder on or prior to the Closing Date shall be satisfactory in the
reasonable judgment of Seller and its counsel. Seller shall have received such
other agreements, documents and information as it may reasonably request in
order to establish satisfaction of the conditions set forth in this Section 9.

10.   CERTAIN POST-CLOSING COVENANTS

        10.1 FURTHER ASSURANCES

        After the Closing Date, Seller shall from time to time at Buyer's
request execute and deliver, or cause to be executed and delivered, such further
instruments of conveyance, assignment and transfer or other documents, and
perform such further acts and obtain such further consents, approvals and
authorizations, as Buyer may reasonably require in order to fully effect the
conveyance and transfer to Buyer of, or perfect Buyer's right, title and
interest in, any of the Assets, to assist Buyer in obtaining possession of any
of the Assets, or to otherwise comply with the provisions of this Agreement and
consummate the transactions contemplated by this Agreement and the Transaction
Documents.

        After the Closing Date, Buyer shall from time to time at Seller's
request execute and deliver, or cause to be executed and delivered, such further
instruments of assumption or other documents,


                                      -32-
   38


and perform such further acts and obtain such further consents, approvals and
authorizations, as Seller may reasonably require in order to fully effect the
assumption by Buyer of the Assumed Liabilities, or to otherwise comply with the
provisions of this Agreement and consummate the transactions contemplated by
this Agreement and the Transaction Documents.

        10.2 BOOKS AND RECORDS

        Not later than 15 days after the Closing Date, Seller shall deliver to
Buyer (a) all of the technical information and data and other intellectual
property rights to be transferred hereunder (including all of the Assets
referenced in Section 2.1.4) which have been reduced to writing, (b) all of the
original Contracts referenced in Section 2.1.6, and (c) all of the books,
records, information and materials referenced in Section 2.1.4(b).

        10.3 POST-CLOSING COOPERATION

        After the Closing Date, each party shall provide the other party with
such reasonable assistance (without charge) as may be requested by the other
party in connection with any Claim or audit of any kind or nature whatsoever or
the preparation of any response, demand, inquiry, filing, disclosure or the like
(including, but not limited to, any tax return or form) relating to the Assets
or the Business.

11.   TAXES AND COSTS; APPORTIONMENT

        11.1 TRANSFER TAXES

        Seller shall be responsible for the payment of all transfer, sales and
use and documentary taxes, filing and recordation fees (including fees for the
recordation of the deeds to the Purchased Real Property included in the Assets)
and similar charges relating to the sale or transfer of the Assets hereunder.
Buyer shall furnish Seller with any necessary certificates of Tax exemption.

        11.2 TRANSACTION COSTS

        Each party shall be responsible for its own costs and expenses incurred
in connection with the preparation, negotiation and delivery of this Agreement
and the Transaction Documents, including but not limited to attorneys' and
accountants' fees and expenses. The title insurance policy referenced in Section
8.6(d) shall be obtained at Buyer's expense.

        11.3 APPORTIONMENT

        Any and all real property taxes, personal property taxes, assessments,
lease rentals, fuel, and other charges applicable to the Assets will be
pro-rated to the Closing Date, and such taxes and other charges shall be
allocated between the parties by adjustment at the Closing, or as soon
thereafter as the parties may agree. All such taxes shall be allocated on the
basis of the fiscal year of the tax jurisdiction in question.

12.   BULK SALES

        Buyer waives compliance with bulk sales laws, if any, applicable to the
transactions contemplated by this Agreement and the Transaction Documents.


                                      -33-
   39


13.   COVENANTS NOT TO COMPETE

        13.1 COVENANTS

        In consideration of the payment of $50,000 allocated from the Purchase
Price by Buyer to Seller at the Closing, Seller covenants and agrees as follows:

        (a) During the three-year period commencing on the Closing Date, neither
Seller nor any of Seller's Affiliates shall engage in any Restricted Activities
(as such term is defined below), whether directly or indirectly, for its account
or otherwise, or as a shareholder, owner, partner, principal, agent, joint
venturer, consultant, advisor, franchiser or franchisee, independent contractor
or otherwise, in, with or of any person or entity that engages directly or
indirectly in any Restricted Activities. As used herein, "Restricted Activities"
shall mean the development, manufacture or sale of any radioactive or
nonradioactive pharmaceuticals or medical devices, either therapeutic or
diagnostic, anywhere in North America, excluding brachytherapy seeds.
"Restricted Activities" shall not include the development, manufacture or sale
of radioactive materials not subject to approval by the FDA.

        (b) During the two-year period commencing on the Closing Date, neither
Seller nor any of its Affiliates shall, directly or indirectly, hire, or solicit
or encourage to leave the employment of Buyer or any of its Affiliates, any
former employee of the Business hired by Buyer or its Affiliates or any employee
of Buyer or its Affiliates engaged in any Restricted Activities or have any
arrangement (financial, consulting or otherwise) with any such individual.

        13.2 MINOR INVESTMENTS

        Notwithstanding the provisions of Section 13.1(a) above, Seller and its
Affiliates may at any time own in the aggregate, directly or indirectly, for
investment purposes only, 1% or less of any class of securities of any entity
traded on any national securities exchange or quoted on the Nasdaq National
Market.

        13.3 REMEDIES

        Seller acknowledges that compliance with the provisions of this Section
13 is necessary and proper to preserve and protect the Assets acquired by Buyer
under this Agreement and to assure that the parties receive the benefits
intended to be conveyed pursuant to this Section 13. Seller agrees that any
failure by Seller or any of its Affiliates to comply with the provisions of this
Section 13 shall entitle Buyer and its Affiliates, in addition to such other
relief and remedies as may be available, to equitable relief, including, but not
limited to, the remedy of injunction. Resort to any remedy shall not prevent the
concurrent or subsequent employment of any other remedy, or preclude the
recovery by Buyer and its Affiliates of monetary damages and compensation.

14.   SURVIVAL AND INDEMNIFICATION

        14.1 SURVIVAL

        All representations and warranties of Seller and Buyer contained in this
Agreement or in the Transaction Documents or in any certificate delivered
pursuant hereto or thereto and Claims for indemnification shall survive the
Closing for a period of one year after the Closing, except that (a)


                                      -34-
   40

Claims with respect to the matters covered by the representations and warranties
in Section 5.10 (Environmental and Safety Matters) and (b) Claims by Buyer
arising under Section 14.2(e), each shall survive for a period of two years
after the Closing. The covenants and agreements of Seller and Buyer contained in
this Agreement or in the Transaction Documents shall survive the Closing and
shall continue until all obligations with respect thereto shall have been
performed or satisfied or shall have been terminated in accordance with their
terms.

        14.2 INDEMNIFICATION BY SELLER

        From and after the Closing Date, Seller shall indemnify and hold Buyer
and its Affiliates harmless from and against, and shall reimburse Buyer and its
Affiliates for, any and all Losses arising out of or in connection with:

        (a) any inaccuracy in any representation or warranty made by Seller in
this Agreement or in the Transaction Documents or in any certificate delivered
pursuant hereto or thereto;

        (b) any failure by Seller to perform or comply with any covenant or
agreement in this Agreement or in the Transaction Documents;

        (c) any claim by any person or entity for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such person or entity directly or indirectly with
Seller or any of its officers, directors or employees in connection with any of
the transactions contemplated by this Agreement or the Transaction Documents;

        (d) the conduct of the Business, the ownership or operation of the
Assets or the Facilities on or prior to the Closing Date, including, but not
limited to, any Losses arising out of or in connection with any Claims and
Judgments relating to the Business, the Assets or the Facilities which are
pending or entered on or prior to the Closing Date or as to which Seller has
received notice on or prior to the Closing Date;

        (e) (i) the manufacture, generation, processing, distribution, use,
treatment, handling, storage, disposal, transport or abandoning of any material
(including but not limited to any Hazardous Materials) on, at, around or under
the Assets or the Facilities, or properties currently or previously owned or
leased by Seller or by any third party acting on Seller's behalf and related to
the Business, or the emission, discharge, spill, migration, release, disposal or
placing of any material (including but not limited to any Hazardous Materials),
or the threat of the same, into the Environment on, at, around or under the
Assets or the Facilities or such properties, (ii) the treatment, handling,
storage, disposal, transport or abandoning of any material (including, but not
limited to, any Hazardous Materials) from the Assets or the Facilities or such
properties to, on, at, around or under any other locations, (iii) the emission,
discharge, spill, migration, release, disposal or placing of any material
(including, but not limited to, any Hazardous Materials) from the Assets or the
Facilities or such properties, or the threat of the same, into the Environment
on, at, around or under any other locations, or (iv) the conduct of the
Business, the ownership or operation of the Assets or the Facilities, and which
Losses are related to public or worker health, welfare or safety or the
Environment and based on conditions existing on the Closing Date or which arise
after the Closing Date on account of events, acts or omissions occurring on or
prior to the Closing Date; any Losses referenced in this Section 14.2(e) may
include any Losses (including, but not limited to, any costs,


                                      -35-
   41

liabilities or obligations relating to contractors or consultants' fees, or
negotiations, administration, oversight, operation, maintenance or capital
expenditures) associated with any Remedial Action which is performed in
connection with any Claim brought by any Governmental Body or any other person
or entity (including, but not limited to, any threatened enforcement action or
any action under any Environmental and Safety Law), or any Remedial Action which
is performed by or on behalf of Buyer or its Affiliates in the absence of a
Claim brought by any Governmental Body or any other person or entity; or

        (f) any failure to comply with any applicable bulk sales laws in
connection with the transactions contemplated by this Agreement or the
Transaction Documents; or

        (g) any Claim relating to any business or assets of Seller or its
Affiliates not acquired by Buyer hereunder, or any obligations or liabilities of
Seller or its Affiliates not assumed by Buyer hereunder.

        Notwithstanding any other provision in this Agreement, Seller shall have
no liability for, and no obligation to indemnify Buyer with respect to, any
inaccuracy in or breach of any representation or warranty contained in this
Agreement or any Transaction Document or any failure (other than a willful
failure) by Seller to perform or comply with any covenant or agreement in this
Agreement or the Transaction Documents, if Seller provided Buyer written notice
describing with reasonable specificity such inaccuracy, breach or failure prior
to the Closing and Buyer elected to consummate the transactions contemplated
hereby after receipt of such written notice.

        14.3 INDEMNIFICATION BY BUYER

        From and after the Closing Date, Buyer shall indemnify and hold harmless
Seller and its Affiliates from and against, and shall reimburse Seller and its
Affiliates for, any and all Losses arising out of or in connection with:

        (a) any inaccuracy in any representation or warranty made by Buyer in
this Agreement or in the Transaction Documents or in any certificate delivered
pursuant hereto or thereto;

        (b) any failure by Buyer to perform or comply with any covenant or
agreement in this Agreement or the Transaction Documents;

        (c) the conduct of the Business, the ownership or operation of the
Assets or the Facilities after the Closing Date, except as to those matters as
to which Seller is obligated to indemnify Buyer pursuant to Section 14.2 hereof;
and

        (d) any Claim by any person or entity for brokerage or finders' fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such person or entity directly or indirectly with
Buyer or any of its officers, directors or employees in connection with any of
the transactions contemplated by the Agreement or the Transaction Documents.

        14.4 THRESHOLD AND TIME LIMITATIONS

        Neither party or its Affiliates shall be entitled to receive any
indemnification payment with respect to Claims for indemnification made under
Section 14.2 or 14.3, as the case may be, until the


                                      -36-
   42


aggregate Losses that such party and its Affiliates would be otherwise entitled
to receive as indemnification with respect to the Claims exceed one hundred
thousand dollars ($100,000) (the "Threshold"), in which case such party and its
Affiliates shall be entitled to receive indemnification payment only for the
amount of aggregate Losses in excess of the Threshold. Furthermore, neither
party or its Affiliates shall be entitled to assert any right of indemnification
with respect to any Claim of which neither such party or its Affiliates have
given written notice to the other party on or prior to the end of the applicable
survival period set forth in Section 14.1 above, except that if such party or
its Affiliates have given written notice setting out such Claim with reasonable
specificity to the other party on or prior to the end of such survival period,
then they shall continue to have the right to be indemnified with respect to
such pending Claim, notwithstanding the expiration of such survival period.

        14.5 PROCEDURE

        (a) Any party hereto or any of its Affiliates seeking indemnification
hereunder (in this context, the "indemnified party") shall notify the other
party (in this context, the "indemnifying party") in writing reasonably promptly
after the assertion against the indemnified party of any Claim by a third party
(a "Third-Party Claim") in respect of which the indemnified party intends to
base a Claim for indemnification hereunder, but the failure or delay so to
notify the indemnifying party shall not relieve it of any obligation or
liability that it may have to the indemnified party except to the extent that
the indemnifying party demonstrates that its ability to defend or resolve such
Third Party Claim is adversely affected thereby.

        (b) (i) Subject to the provisions of Sections 14.5(f) below, the
indemnifying party shall have the right, upon written notice given to the
indemnified party within 30 days after receipt of the notice from the
indemnified party of any Third Party Claim, to assume the defense or handling of
such Third Party Claim, at the indemnifying party's sole expense, in which case
the provisions of Section 14.5(b)(ii) below shall govern. (ii) The indemnifying
party shall select counsel reasonably acceptable to the indemnified party in
connection with conducting the defense or handling of such Third Party Claim,
and the indemnifying party shall defend or handle the same in consultation with
the indemnified party, and shall keep the indemnified party timely apprised of
the status of such Third Party Claim. The indemnifying party shall not, without
the prior written consent of the indemnified party, which consent shall not be
unreasonably withheld, agree to a settlement of any Third Party Claim The
indemnified party shall cooperate with the indemnifying party and shall be
entitled to participate in the defense or handling of such Third Party Claim
with its own counsel and at its own expense.

        (c) (i) If the indemnifying party does not give written notice to the
indemnified party, within 30 days after receipt of the notice from the
indemnified party of any Third Party Claim, of the indemnifying party's election
to assume the defense or handling of such Third Party Claim, the provisions of
Section 14(c)(ii) below shall govern. (ii) The indemnified party may, at the
indemnifying party's expense, select counsel in connection with conducting the
defense or handling of such Third Party Claim and defend or handle such Third
Party Claim in such manner as it may deem appropriate, provided, however, that
the indemnified party shall keep the indemnifying party timely apprised of the
status of such Third Party Claim and shall not settle such Third Party Claim
without the prior written consent of the indemnifying party, which consent shall
not be unreasonably withheld. If the indemnified party defends or handles such
Third Party Claim, the indemnifying



                                      -37-
   43

party shall cooperate with the indemnified party and shall be entitled to
participate in the defense or handling of such Third Party Claim with its own
counsel and at its own expense.

        (d) If the indemnified party intends to seek indemnification hereunder,
other than for a Third Party Claim, then it shall notify the indemnifying party
in writing within sixty (60) days after its discovery of facts upon which it
intends to base its Claim for indemnification hereunder, but the failure or
delay so to notify the indemnifying party shall not relieve the indemnifying
party of any obligation or liability that the indemnifying party may have to the
indemnified party except to the extent that the indemnifying party demonstrates
that the indemnifying party's ability to defend or resolve such Claim is
adversely affected thereby.

        (e) The indemnified party may notify the indemnifying party with respect
to a Claim even though the amount thereof plus the amount of other Claims
previously notified by the indemnified party aggregate less than the Threshold.

        (f) Notwithstanding anything in this Agreement to the contrary, in
connection with any Remedial Action, the Losses with respect to which are
covered in Section 14.2(e), Buyer and its Affiliates shall have the right, at
their election, and regardless of whether a Third Party Claim is involved or
not, to manage, administer, direct and regulate all activities relating to the
Remedial Action, including, but not limited to, the right to select and direct
the activities of contractors, consultants and counsel, to communicate directly,
lead discussions and make final agreements with any Governmental Body or any
other person or entity, to design and implement the Remedial Action and to
defend or handle any Claims relating to the Remedial Action in such manner as
they may deem appropriate, in each case with such advice and consultation as
Seller may provide, and Buyer and its Affiliates shall give good faith
consideration to such advice and consultation. If Buyer or its Affiliates elect
to manage the activities relating to the Remedial Action, they shall keep Seller
timely apprised of any material event relating to the Remedial Action to allow
Seller the opportunity for informed and meaningful participation in the Remedial
Action process, and Seller shall be entitled to participate in the activities
arising out of the Remedial Action with its own counsel and at its own expense.
Each party and its Affiliates shall cooperate with the other party and its
Affiliates in good faith in connection with the Remedial Action. Any costs and
expenses incurred by Buyer or its Affiliates in connection with the Remedial
Action shall be promptly reimbursed by Seller upon demand, or promptly paid by
Seller directly, at the option of Buyer or its Affiliates.

        14.6 PROPORTIONAL LIABILITY FOR LOSSES

        In the event any Losses referred to in this Section 14 are attributable
to or arise out of or in connection with the conduct of the Business in part
both before and after the Closing Date, each party shall indemnify the other
party and its Affiliates against such Losses in proportion to the extent to
which the Losses resulted from such pre-Closing or post-Closing activities.

        14.7 ELECTION OF REMEDIES

        In the event that any party or any of its Affiliates alleges that it is
entitled to indemnification hereunder, and that its Claim is covered under more
than one provision of this Section 14, such party or Affiliate shall be entitled
to elect the provision or provisions under which it may bring a claim for
indemnification.



                                      -38-
   44

        14.8 SPECIFIC PERFORMANCE

        The parties to this Agreement acknowledge that it may be impossible to
measure in money the damages that a party would incur if any covenant or
agreement contained in this Agreement were not performed in accordance with its
terms and agree that each of the parties hereto shall be entitled to obtain an
injunction to require specific performance of, and prevent any violation of the
terms of, this Agreement, in addition to any other remedy available hereunder.
In any such action specifically to enforce any provision of this Agreement, each
party hereby waives any claim or defense therein that an adequate remedy at law
or in damages exists.

        14.9 EXCLUSIVE REMEDIES

        Except with respect to claims based on knowing and willful acts of
either party, , the indemnification and specific performance remedies set forth
under this Section 14 shall constitute the sole and exclusive remedies of the
parties with respect to any matters arising under or relating to this Agreement.

15.   TERMINATION

        15.1 TERMINATION

        This Agreement may be terminated at any time before the Closing:

        (a) by Seller, by giving written notice to Buyer at any time, if any of
the conditions set forth in Section 9 is not satisfied at the time at which the
Closing (as it may be deferred pursuant to Section 4) would otherwise occur, or
if the satisfaction of any such condition is or becomes impossible;

        (b) by Buyer, by giving written notice to Seller at any time, if any of
the conditions set forth in Section 8 is not satisfied at the time at which the
Closing (as it may be deferred pursuant to Section 4) would otherwise occur, or
if the satisfaction of any such condition is or becomes impossible;

        (c) by Seller, by giving written notice to Buyer at any time, if Buyer
materially has breached any representation, warranty, covenant or agreement
contained in this Agreement and such breach is not cured within 5 calendar days
of the date of such written notice;

        (d) by Buyer, by giving written notice to Seller at any time, if Seller
materially has breached any representation, warranty, covenant or agreement
contained in this Agreement and such breach is not cured within 5 calendar days
of the date of such written notice;

        (e) by mutual written agreement of Seller and Buyer; and

        (f) by either party, by giving written notice to the other party, at any
time after April 30, 2001.



                                      -39-
   45

        15.2 EFFECT OF TERMINATION

        In the event of the termination of this Agreement pursuant to Section
15.1 above, (a) each party shall return or destroy all documents containing
confidential information of the other party (and, upon request, certify as to
the destruction thereof), and (b) no party hereto shall have any liability or
further obligation to the other party hereunder, except for obligations of
confidentiality and non-use with respect to the other party's confidential
information, which shall survive the termination of this Agreement, and except
for liabilities or obligations relating to any willful and material breach of
any party of any representation, warranty, covenant or agreement set forth
herein.

16.   MISCELLANEOUS

        16.1 CONFIDENTIALITY OBLIGATIONS OF SELLER FOLLOWING THE CLOSING

        From and after the Closing, Seller shall keep confidential and not use
or disclose to any party any confidential information relating to the assets,
business or affairs of Buyer or the Assets or the Business. The confidentiality
and non-use obligations set forth in this Section 16.1 shall not apply to any
information which is available to the public through no breach of this Agreement
by Seller, or is disclosed to Seller by third parties who are not under any duty
of confidentiality with respect thereto, or is required to be disclosed by
Seller in connection with pending litigation or investigation; provided,
however, that in the event Seller becomes required in connection with pending
litigation or investigation to disclose any of the confidential information
relating to the assets, business or affairs of Buyer or the Assets or the
Business, then Seller shall provide Buyer with reasonable notice so that Buyer
may seek a court order protecting against or limiting such disclosure or any
other appropriate remedy; and in the event such protective order or other remedy
is not sought, or is sought but not obtained, Seller shall furnish only that
portion of the information that is required and shall endeavor, at Buyer's
expense, to obtain a protective order or other assurance that the portion of the
information furnished by Seller will be accorded confidential treatment.

        16.2 PUBLIC ANNOUNCEMENTS

        Each party agrees not to make any public announcement in regard to the
transactions contemplated by this Agreement and the Transaction Documents
without the other party's prior consent, except as may be required be law, in
which case the parties shall use reasonable efforts to coordinate with each
other with respect to the timing, form and content of such required disclosures.

        16.3 SEVERABILITY

        If any court determines that any part or provision of this Agreement is
invalid or unenforceable, the remainder of this Agreement shall not be affected
thereby and shall be given full force and effect and remain binding upon the
parties. Furthermore the court shall have the power to replace the invalid or
unenforceable part or provision with a provision that accomplishes, to the
extent possible, the original business purpose of such part or provision in a
valid and enforceable manner. Such replacement shall apply only with respect to
the particular jurisdiction in which the adjudication is made. Without in any
way limiting the generality of the foregoing, it is understood and agreed that
this Section 16.3 shall apply to the provisions of Section 13 and that the
provisions of Section 13, as they relate to each jurisdiction within their
geographical scope, constitute separate and distinct covenants.


                                      -40-
   46


        16.4 MODIFICATION AND WAIVER

        This Agreement may not be amended or modified in any manner, except by
an instrument in writing signed by each of the parties hereto. The failure of
any party to enforce at any time any of the provisions of this Agreement shall
in no way be construed to be a waiver of any such provision, or in any way
affect the right of such party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be deemed to be a
waiver of any other or subsequent breach.

        16.5 NOTICES

        All notices and other communications required or permitted to be given
under this Agreement shall be in writing and shall be sent by facsimile
transmission, or mailed postage prepaid by first-class certified or registered
mail, or mailed by a nationally recognized express courier service, or
hand-delivered

        TO BUYER:          NeoRx Corporation
                           410 West Harrison Street
                           Seattle, Washington 98119-4007
                           Fax: (206) 284-7112
                           Attention:  Paul G. Abrams, Chief Executive Officer
        with a copy to:    Perkins Coie LLP
                           1201 Third Avenue, 48th Floor
                           Seattle, Washington 98101-3099
                           Fax: (206) 583-8500
                           Attention:     Faith M. Wilson
        TO SELLER:         International Isotopes Inc.
                           1500 Spencer Road
                           Denton, Texas   76205
                           Fax: (940) 323-2613
                           Attention:  David Camp, Chief Executive Officer
        with a copy to:    Locke Liddell & Sapp, LLC
                           100 Congress Avenue, Suite 300
                           Austin, Texas   78701-4800
                           Fax: (512) 305-4800
                           Attention:  Curtis R. Ashmos

        Either party may change the persons or addresses to which any notices or
other communications to it should be addressed by notifying the other party as
provided above. Any notice or other communication, if addressed and sent, mailed
or delivered as provided above, shall be deemed given or received three days
after the date of mailing as indicated on the certified or registered mail
receipt, or on the next business day if mailed by express courier service, or on
the date of delivery or transmission if hand-delivered or sent by facsimile
transmission, provided that confirmation of delivery is given by such express
courier or confirmation of transmission of such facsimile transmission is
received by the sending party.


                                      -41-
   47


        16.6 ASSIGNMENT

        Neither Seller nor Buyer may assign any of its rights or obligations
hereunder without the prior written consent of the other party. Notwithstanding
the foregoing, Buyer may assign its rights and obligations under this Agreement
to any Affiliate of Buyer, and furthermore Buyer may assign its rights and
obligations hereunder to any successor of Buyer in the conduct of the Business
after the Closing and Seller may allow the grant of a security interest herein
pursuant to its agreements with TSB; provided, however, that any such assignment
by Buyer or Seller shall not relieve Buyer or Seller from its obligations
hereunder. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns.

        16.7 CAPTIONS

        The captions and headings used in this Agreement have been inserted for
convenience of reference only and shall not be considered part of this Agreement
or be used in the interpretation thereof.

        16.8 ENTIRE AGREEMENT

        This Agreement (together with the Transaction Documents) constitutes the
entire agreement and understanding between the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations, representations and statements, whether oral, written, implied or
expressed, relating to such subject matter.

        16.9 NO THIRD-PARTY RIGHTS

        Nothing in this Agreement is intended, nor shall be construed, to confer
upon any person or entity other than Buyer and Seller (and only to the extent
expressly provided herein, their respective Affiliates) any right or remedy
under or by reason of this Agreement.

        16.10 COUNTERPARTS

        This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement. To expedite the process of entering into this Agreement,
the parties acknowledge that Transmitted Copies of this Agreement will be
equivalent to original documents until such time as original documents are
completely executed and delivered. "Transmitted Copies" will mean copies that
are reproduced or transmitted via photocopy, facsimile or other process of
complete and accurate reproduction and transmission.

        16.11 GOVERNING LAW

        This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Washington.

        [Signatures follow on next page]


                                      -42-
   48


        IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective representatives hereunto authorized as of the day
and year first above written.

                                      INTERNATIONAL ISOTOPES INC.


                                      By________________________________________
                                      Title_____________________________________

                                      NEORX CORPORATION


                                      By________________________________________
                                      Title_____________________________________


                                      -43-
   49


                                                                  Exhibit 2.5(a)
                                                     to Asset Purchase Agreement


                           BILL OF SALE AND ASSIGNMENT


        KNOW ALL MEN BY THESE PRESENTS, that International Isotopes Inc., a
Texas corporation ("Seller"), for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged by it, does hereby sell, transfer,
convey, assign and deliver to NeoRx Corporation, a Washington corporation
("Buyer"), all of Seller's right, title and interest in and to the Assets, as
defined in the Asset Purchase Agreement (the "Agreement") between Seller and
Buyer dated March ___, 2001, which is incorporated herein by reference.

        Seller warrants that it has good, valid and marketable title to the
Assets, free and clear of any lien or encumbrance, except as otherwise provided
in the Agreement.

        This Bill of Sale and Assignment is being delivered in connection with
the Agreement and is subject to, and is entitled to the benefits in respect of,
the Agreement.

        This Bill of Sale and Assignment shall be binding upon and inure to the
benefit of Buyer and Seller and their respective successors and assigns.

        IN WITNESS WHEREOF, Seller has caused its duly authorized representative
to execute this Bill of Sale and Assignment as of this ____ day of March, 2001.



                                      International Isotopes Inc.

                                      By________________________________________

                                      Title_____________________________________


                                      -44-
   50

                                                                  Exhibit 2.5(b)
                                                     to Asset Purchase Agreement



                       ASSIGNMENT AND ASSUMPTION AGREEMENT

        Assignment and Assumption Agreement dated as of this ____ day of March,
2001, by and between International Isotopes Inc., a Texas corporation
("Seller"), and NeoRx Corporation, a Washington corporation ("Buyer").

        WHEREAS, Seller and Buyer have entered into an Asset Purchase Agreement
dated as of March __, 2001 (the "Agreement");

        NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by the parties, the parties hereby
agree as follows:

        All capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the Agreement.

        Subject to the terms and conditions of the Agreement, Seller hereby
assigns to Buyer as of the Closing Date all of the right, title and interest of
Seller in and under the Contracts listed in SCHEDULE 2.1.6 to the Disclosure
Memorandum and all Personal Property leases and agreements relating to the
Assets and the Business, including but not limited to the Personal Property
leases and agreements described in SECTION 2.1.7 to the Disclosure Memorandum.
Subject to the terms and conditions of the Agreement, Buyer hereby assumes as of
the Closing Date the liabilities and obligations of Seller arising under the
Contracts and such Personal Property leases and agreements after the Closing
Date; provided, however, that Buyer shall not succeed to or assume, and Seller
shall be responsible for, any liability or obligation arising out of any or all
of the following: (i) any breach by Seller of any such Contract or Personal
Property lease or agreement or any failure by Seller to discharge or perform any
liability or obligation arising on or prior to the Closing Date under any such
Contract or Personal Property lease or agreement, (ii) any Claim based on
products sold or services rendered by the Business on or prior to the Closing
Date, (iii) any Claim resulting from any act or omission of Seller on or prior
to the Closing Date, and (iv) the Excluded Assets, including but not limited to,
the Excluded Contracts.

        This Assignment and Assumption Agreement is being delivered in
connection with the Agreement and is subject to, and is entitled to the benefits
in respect of, the Agreement.

        This Assignment and Assumption Agreement shall be binding upon and inure
to the benefit of Buyer and Seller and their respective successors and assigns.

        This Assignment and Assumption Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one agreement.

        IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Assignment and Assumption Agreement as of the
date first written above.


                                      -45-
   51


                                      INTERNATIONAL ISOTOPES INC.


                                      By________________________________________

                                      Title_____________________________________



                                      NEORX CORPORATION



                                      By________________________________________

                                      Title_____________________________________


                                      -46-
   52


                                                                     Exhibit 3.1
                                                     to Asset Purchase Agreement



THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE OR FOREIGN SECURITIES
LAWS, AND NO INTEREST MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE OR FOREIGN SECURITIES LAWS COVERING ANY SUCH
TRANSACTION INVOLVING SAID SECURITIES, (B) THE COMPANY RECEIVES AN OPINION OF
LEGAL COUNSEL FOR THE HOLDER OF THE SECURITIES SATISFACTORY TO THE COMPANY
STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, (C) SUCH TRANSACTION
IS IN COMPLIANCE WITH RULE 144 OF THE ACT, OR (D) THE COMPANY OTHERWISE
SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.

No. W-1
Issued:  March  ___, 2001                       Warrant to Purchase Common Stock
Void After March ___, 2004


                                NEORX CORPORATION

                                     WARRANT

        THIS IS TO CERTIFY that, for value received and subject to the terms and
conditions hereinafter set forth, International Isotopes Inc., a Texas
corporation, or such person to whom this Warrant is transferred (the "HOLDER"),
is entitled to exercise this Warrant to purchase from NeoRx Corporation, a
Washington corporation (the "COMPANY"), 800,000 fully paid and nonassessable
shares of common stock of the Company, par value $.02 per share (the "WARRANT
SHARES"), at a price per share of $10.00 (the "EXERCISE PRICE") (such number of
shares, type of security and the Exercise Price being subject to adjustment as
provided below).

1.      CASH EXERCISE

        1.1 OPTIONAL EXERCISE

        This Warrant may be exercised by the Holder, at any time until March
___, 2004 (the "EXERCISE PERIOD"), in whole or in part, by delivering to the
Company at 410 West Harrison Street, Seattle, WA 98119 (or such other office or
agency of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company) (a) this
Warrant certificate, (b) a certified or cashier's check payable to the Company
or a wire transfer in the amount of the Exercise Price multiplied by the number
of shares for which this Warrant is being


                                      -47-
   53

exercised (the "PURCHASE PRICE"), and (c) the Notice of Cash Exercise attached
as EXHIBIT A duly completed and executed by the Holder.

        1.2 COMPANY CALL

        (a) Notwithstanding the provisions of Section 1.1, if at any time during
the Exercise Period the Closing Price, as defined below, equals or exceeds
$20.00 per share, the Company at any time thereafter shall have the right to
acquire all or any portion of the Warrant Shares issuable upon exercise of this
Warrant at a purchase price equal to $.01 per share (the "CALL PURCHASE PRICE")
(such right to acquire the Warrant Shares referred to as the "COMPANY CALL").
The Company will notify the Holder of its election to exercise the Company Call
(the "CALL NOTICE"), which Call Notice will contain the Company's notice of
election to purchase the Warrant Shares subject to the Company Call and the date
on or after which the Company may consummate the purchase and sale (the
"CANCELLATION DATE"). The Call Notice, if issued, shall be issued not less than
fifteen (15) days before the Cancellation Date. Delivery of the Call Notice
shall not obligate the Company to consummate a purchase and sale of the Warrant
Shares on any specific date, if at all.

        "CLOSING PRICE" shall mean, with respect to the Common Stock, the
following: (a) if the Common Stock is traded on an exchange or is quoted on the
Nasdaq National Market (the "NASDAQ NATIONAL MARKET"), the average of the
closing or last sale prices reported for the twenty (20) business days
immediately preceding the date of calculation of such Closing Price, or (b) if
the Common Stock is not traded on an exchange or quoted on the Nasdaq National
Market, but is traded in the over-the-counter market, the average of the closing
bid and asked prices reported for the twenty (20) business days immediately
preceding the date of calculation of such Closing Price.

        (b) Upon the consummation of a purchase and sale pursuant to Section
1.2(a) hereof:

               (i)    the Company will cancel the Warrant and will duly reflect
                      such cancellation on the books and in the records of the
                      Company; and

               (ii)   the Company will deliver to the Holder an amount in cash
                      equal to the Call Purchase Price times the number of
                      Warrant Shares purchased in the Company Call.

2.      DELIVERY OF STOCK CERTIFICATES; NO FRACTIONAL SHARES

        2.1 Within ten (10) business days after the payment of the Purchase
Price following the exercise of this Warrant (in whole or in part), the Company
at its expense shall issue in the name of and deliver to the Holder (a) a
certificate or certificates for the number of fully paid and nonassessable
Warrant Shares to which the Holder shall be entitled upon such exercise, and (b)
a new Warrant of like tenor to purchase up to that number of Warrant Shares, if
any, as to which this Warrant has not been exercised if this Warrant has not
expired. The Holder shall for all purposes be deemed to have become the holder
of record of such Warrant Shares on the date this Warrant was exercised (the
date the Holder has fully complied with the requirements of Section 1.1 or 1.2),
irrespective of the date of delivery of the certificate or certificates
representing the Warrant Shares; provided that, if the date such exercise is
made is a date when the stock transfer books of the Company are closed, such
person shall be deemed to have become the holder of record of such


                                      -48-
   54

Warrant Shares at the close of business on the next succeeding date on which the
stock transfer books are open.

        2.2 No fractional shares shall be issued upon the exercise of this
Warrant. In lieu of fractional shares, the Company shall pay the Holder a sum in
cash equal to the Daily Price (as defined below) of the fractional share on the
date of exercise.

        "DAILY PRICE" of a Warrant Share shall mean:

        (a) If the Company's Common Stock is listed and traded on an exchange or
is quoted on the Nasdaq National Market, the closing or last sale price on such
day;

        (b) If the Company's Common Stock is not traded on and exchange or
quoted on the Nasdaq National Market, but is traded in the over-the-counter
market, the average of the closing bid and asked prices reported on such day;
and

        (c) If none of the above is applicable, the Daily Price shall be the
fair market value of the Common Stock as determined in good faith by the
Company's Board of Directors.

3.      ADJUSTMENTS UPON CERTAIN EVENTS

        3.1 EFFECT OF REORGANIZATION

            (a) REORGANIZATION--NO CHANGE OF CONTROL

        Upon a merger, consolidation, acquisition of all or substantially all of
the property or securities, liquidation or other reorganization of the Company
(collectively, a "REORGANIZATION") during the Exercise Period, as a result of
which the shareholders of the Company receive cash, securities or other property
in exchange for their shares of Common Stock and the holders of the Company's
voting equity securities immediately prior to such Reorganization together own a
majority interest of the voting equity securities of the successor corporation
following such Reorganization, lawful provision shall be made so that the Holder
shall thereafter be entitled to receive, upon exercise of this Warrant, the
number and type of securities of the successor corporation resulting from such
Reorganization (and cash and other property), to which a holder of the Warrant
Shares issuable upon exercise of this Warrant would have been entitled in such
Reorganization if this Warrant had been exercised immediately prior to such
Reorganization. In any such case, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interest of the
Holder after the Reorganization to the end that the provisions of this Warrant
(including adjustments of the Exercise Price and the number and type of
securities purchasable and cash and other property deliverable pursuant to the
terms of this Warrant) shall be applicable after that event, as near as
reasonably may be, in relation to any securities, cash or other property
deliverable after that event upon the exercise of this Warrant.

            (b) REORGANIZATION--CHANGE OF CONTROL; TERMINATION OF WARRANT

        Upon a Reorganization prior to or during the Exercise Period, as a
result of which the shareholders of the Company receive cash, securities or
other property in exchange for their shares of Common Stock and the holders of
the Company's voting equity securities immediately prior to such


                                      -49-
   55

Reorganization together own less than a majority interest of the voting equity
securities of any successor corporation following such Reorganization, the
Holder shall be given notice at least ten (10) days prior to the effectiveness
thereof. Notwithstanding any other provision hereof, this Warrant shall become
immediately exercisable in full upon such notice to the Holder, subject to the
effectiveness of the Reorganization, provided, however, that such acceleration
of exercisability will not occur if, in the opinion of the Company's outside
accountants, such acceleration would render unavailable "pooling of interests"
accounting treatment for any Reorganization for which pooling of interests
accounting treatment is sought by the Company (in which event, lawful provision
shall be made so that the Holder shall thereafter be entitled to receive, upon
exercise of this Warrant during the remainder of the Exercise Period, the number
and type of securities of the successor corporation resulting from such
Reorganization (and cash and other property) to which a holder of the Warrant
Stock issuable upon exercise of this Warrant would have been entitled in such
Reorganization if this Warrant had been exercised immediately prior to such
Reorganization). The Holder shall have five (5) days from the receipt of such
notice to give notice to the Company whether it intends to conditionally
exercise this Warrant, in whole or in part. Notwithstanding any other provision
hereof, this Warrant shall become forever null and void to the extent not
conditionally exercised on or before 5:00 p.m., Pacific time, on the fifth day
following the receipt by the Holder of notice of the proposed Reorganization
(unless the acceleration of exercisability is denied by the Company in order to
preserve "pooling of interests" accounting treatment as set forth above).

        3.2 ADJUSTMENTS FOR STOCK SPLITS, DIVIDENDS

        If the Company shall issue any shares of the same class as the Warrant
Stock as a stock dividend or subdivide the number of outstanding shares of the
same class as the Warrant Shares into a greater number of shares, then, in
either such case, the Exercise Price in effect before such dividend or
subdivision shall be proportionately reduced and the number of Warrant Shares at
that time issuable pursuant to the exercise of this Warrant shall be
proportionately increased; and, conversely, if the Company shall contract the
number of outstanding shares of the same class as the Warrant Shares by
combining such shares into a smaller number of shares, then the Exercise Price
in effect before such combination shall be proportionately increased and the
number of Warrant Shares at that time issuable pursuant to the exercise or
conversion of this Warrant shall be proportionately decreased. Each adjustment
in the number of Warrant Shares issuable shall be to the nearest whole share.

        3.3 CERTIFICATE AS TO ADJUSTMENTS

        In the case of any adjustment in the Exercise Price or number and type
of securities issuable and cash or other property deliverable upon exercise of
this Warrant, the Company will promptly give written notice to the Holder in the
form of a certificate, certified and confirmed by an officer of the Company,
setting forth the adjustment in reasonable detail.

4.      SECURITIES LAWS RESTRICTIONS; LEGEND ON WARRANT SHARES

        4.1 This Warrant and, subject to satisfaction of Section 7.2, the
securities issuable upon exercise of this Warrant, have not been registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT") or
applicable state securities laws, and no interest may be sold, distributed,
assigned, offered, pledged or otherwise transferred to any entity other than a
subsidiary of the Holder unless (a) there is an effective registration statement
under the Securities Act and applicable state


                                      -50-
   56


securities laws covering any such transaction involving said securities, (b) the
Company receives an opinion of legal counsel for the Holder satisfactory to the
Company stating that such transaction is exempt from registration, (c) such
transaction is in compliance with Rule 144A or Rule 144 of the Securities Act,
or (d) the Company otherwise satisfies itself that such transaction is exempt
from registration.

        4.2 A legend setting forth or referring to the above restrictions shall
be placed on this Warrant, any replacement and any certificate representing the
Warrant Shares, and a stop transfer order shall be placed on the books of the
Company and with any transfer agent until such securities may be legally sold or
otherwise transferred.

5.      EXCHANGE OF WARRANT; LOST OR DAMAGED WARRANT CERTIFICATE

        This Warrant is exchangeable upon its surrender by the Holder at the
office of the Company. Upon receipt by the Company of satisfactory evidence of
the loss, theft, destruction or damage of this Warrant and either (in the case
of loss, theft or destruction) reasonable indemnification or (in the case of
damage) the surrender of this Warrant for cancellation, the Company will execute
and deliver to the Holder, without charge, a new Warrant of like denomination.

6.      REPRESENTATIONS AND WARRANTIES OF THE HOLDER AND THE COMPANY

        The Holder hereby represents and warrants to the Company as follows:

        (a) The Holder is an accredited investor as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.

        (b) The Holder is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire this Warrant and the Warrant
Shares. The Holder is acquiring this Warrant and the Warrant Shares issuable
upon exercise hereof for its own account and not with a view to or for sale in
connection with any distribution thereof in violation of the Securities Act and
the General Rules and Regulations promulgated thereunder. The Holder shall not
make any sale, transfer or other disposition of this Warrant or any Warrant
Shares issuable upon exercise thereof in violation of the Securities Act by the
U.S. Securities and Exchange Commission (the "COMMISSION") or in violation of
any applicable state or foreign securities law.

        (c) The Holder has been advised that this Warrant, and the Warrant
Shares issuable upon exercise hereof, have not been registered under the
Securities Act or state or foreign securities laws in reliance upon an exemption
from registration, and that reliance by the Company on such exemptions is
predicated in part on Holder's representations set forth herein.

        (d) The Holder has been informed that under the Securities Act, this
Warrant and the Warrant Shares issuable upon conversion hereof must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from such registration (such as Rule 144) is available with respect
to any proposed transfer or disposition by the Holder. The Holder further agrees
that the Company may refuse to permit the Holder to sell, transfer or dispose of
this Warrant, and the Warrant Shares issuable upon conversion hereof (except as
permitted under Rule 144), unless there is in effect a registration statement
under the Securities Act and any applicable state or


                                      -51-
   57

foreign securities laws covering such transfer, or unless the Holder furnishes
an opinion of counsel reasonably satisfactory to counsel for the Company, to the
effect that such registration is not required.

        The Company hereby represents and warrants to the Holder that this
Warrant, when issued, sold and delivered in accordance with the terms of the
Agreement and the Transaction Documents (as those terms are defined in the Asset
Purchase Agreement between NeoRx Corporation and International Isotopes Inc.
dated as of March 20, 2001) will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer, other than
restrictions on transfer arising (a) under federal and state securities law, (b)
not by or through the Company, or (c) by agreement between the Company and the
Holder or its successors..

7.      COVENANTS AS TO WARRANT SHARES

        7.1 RESERVATION OF SHARES

        The Company covenants that at all times during the Exercise Period there
shall be reserved for issuance and delivery upon exercise of this Warrant such
number of Warrant Shares as is necessary for exercise in full of this Warrant
and, from time to time, it will take all steps necessary to provide sufficient
reserves of Warrant Shares. All shares of Warrant Stock issued pursuant to the
exercise of this Warrant will, upon their issuance, be validly issued, fully
paid and nonassessable, free and clear of all liens and other encumbrances or
restrictions on sale and free and clear of all preemptive rights, except
restriction arising (a) under federal and state securities law, (b) not by or
through the Company, or (c) by agreement between the Company and the Holder or
its successors.

        7.2 REGISTRATION OF WARRANT SHARES

        The Company agrees:

               (a)    to use its best efforts to as soon as practicable, but not
                      more than ten (10) business days after the later of (i)
                      receipt and acceptance by the Company of EXHIBIT C,
                      properly completed and executed, reflecting the assignment
                      of the Warrant, or portions thereof, to the preferred
                      shareholders of International Isotopes Inc. (the"I3
                      PREFERRED SHAREHOLDERS") or (ii) receipt and acceptance by
                      the Company of EXHIBITS B AND D, properly completed and
                      executed, from individual I3 Preferred Shareholders in the
                      aggregate constituting at least 85% of the total number of
                      I3 Preferred Shareholders, to prepare and file with the
                      Commission a registration statement (the "REGISTRATION
                      STATEMENT") relating to the sale of the Warrant Shares by
                      the Holder from time to time on the Nasdaq National Market
                      (or the facilities of any national securities exchange on
                      which the Company's Common Stock is then traded) or in
                      privately negotiated transactions;

               (b)    to use its best efforts, subject to receipt of necessary
                      information from the Holder, to cause the Commission to
                      notify the Company of the Commission's willingness to
                      declare the Registration Statement effective within ninety
                      (90) days after the Registration Statement is filed with
                      the Commission;


                                      -52-
   58


               (c)    to use its best efforts to prepare and file with the
                      Commission such amendments and supplements to the
                      Registration Statement and the Prospectus filed as part
                      thereof and take such other action, if any, as may be
                      necessary to keep the Registration Statement effective
                      until the earlier of (i) two years after the effective
                      date of the Registration Statement, (ii) the date on which
                      the Warrant Shares may be resold by the Holder without
                      registration or without regard to any volume limitations
                      by reason of Rule 144 under the Securities Act or any
                      other rule of similar effect, or (iii) all of the Warrant
                      Shares have been sold pursuant to the Registration
                      Statement or Rule 144 under the Securities Act or any
                      other rule of similar effect;

               (d)    to furnish to the Holder with respect to the Warrant
                      Shares registered under the Registration Statement such
                      reasonable number of copies of the Prospectus, including
                      any supplements to or amendments of the Prospectus, in
                      order to facilitate the public sale or other disposition
                      of all or any of the Warrant Shares by the Holder;
                      provided however, that the obligation of the Company to
                      deliver copies of the Prospectus to the Purchaser shall be
                      subject to the receipt by the Company of reasonable
                      assurances from the Holder that the Holder will comply
                      with the applicable provisions of the Securities Act and
                      of such other securities or blue sky laws as may be
                      applicable in connection with any use of the Prospectus;

               (e)    during the period when copies of the Prospectus are
                      required to be delivered under the Securities Act or the
                      Securities Exchange Act of 1934, as amended (the "EXCHANGE
                      ACT"), to file all documents required to be filed with the
                      Commission pursuant to Section 13, 14 or 15 of the
                      Exchange Act within the time periods required by the
                      Exchange Act and the rules and regulations promulgated
                      thereunder;

               (f)    to use its best efforts to file documents required of the
                      Company for customary Blue Sky clearance in states
                      specified in writing by the Holder; provided, however,
                      that the Company shall not be required to qualify to do
                      business or consent to service of process in any
                      jurisdiction in which it is not now so qualified or has
                      not so consented, and to file the documents necessary to
                      list the Warrant Shares on the Nasdaq Stock Market;

               (g)    to bear all expenses in connection with the procedures in
                      paragraphs (a) through (f) of this Section 7.2 and the
                      registration of the Warrant Shares pursuant to the
                      Registration Statement, other than any fees and expenses
                      of counsel or other advisers to the Holder, brokerage fees
                      and commissions incurred by the Holder;

               (h)    to comply with the provisions of the Securities Act with
                      respect to the disposition of all Warrant Shares covered
                      by the Registration Statement in accordance with the
                      intended methods of distribution by the Holder as set
                      forth in the Registration Statement;


                                      -53-
   59

               (i)    to notify the Holder, if the Holder has registered Warrant
                      Shares in the Registration Statement which remain unsold,
                      (i) when a prospectus or any prospectus supplement or
                      post-effective amendment has been filed, and, with respect
                      to the Registration Statement or any post-effective
                      amendment, when the same has become effective, (ii) of any
                      request by the Commission or any other federal or state
                      governmental authority during the period of effectiveness
                      of the Registration Statement for amendments or
                      supplements to the Registration Statement or related
                      prospectus or for additional information relating to the
                      Registration Statement, (iii) of the issuance by the
                      Commission or any other federal or state governmental
                      authority of any stop order suspending the effectiveness
                      of the Registration Statement or the initiation of any
                      proceedings for that purpose, (iv) of the receipt by the
                      Company of any notification with respect to the suspension
                      of the qualification or exemption from qualification of
                      any of the Warrant Shares for sale in any jurisdiction or
                      the initiation of any proceeding for such purpose, (v) of
                      the happening of any event which makes any statement made
                      in the Registration Statement or related prospectus or any
                      document incorporated or deemed to be incorporated therein
                      by reference untrue in any material respect or which
                      requires the making of any changes in the Registration
                      Statement or prospectus so that, in the case of the
                      Registration Statement, it will not contain any untrue
                      statement of a material fact or omit to state any material
                      fact required to be stated therein or under which such
                      statement was made, not misleading, and (vi) of the
                      Company's reasonable determination that a post-effective
                      amendment to the Registration Statement would be
                      appropriate;

               (j)    to use commercially reasonable efforts to obtain the
                      withdrawal of any order suspending the effectiveness of
                      the Registration Statement, or the lifting of any
                      suspension of the qualification (or exemption from
                      qualification) of any of the Warrant Shares for sale in
                      any jurisdiction; and

               (k)    upon the occurrence of any event contemplated by Section
                      7.2(i)(v) or 7.2(i)(vi) above, to prepare a supplement or
                      post-effective amendment to the Registration Statement or
                      a supplement to the related prospectus or any document
                      incorporated therein by reference or file any other
                      required document so that, as thereafter delivered to the
                      purchasers of the Warrant Shares being sold thereunder,
                      such prospectus will not contain an untrue statement of
                      material fact or omit to state a material fact required to
                      be stated therein or necessary to make the statements
                      therein, in light of the circumstances under which they
                      were made, not misleading.

        7.3 RESALE OF WARRANT SHARES

        (a) The Holder hereby covenants with the Company not to make any sale of
the Warrant Shares without satisfying the requirements of the Securities Act and
the Rules and Regulations promulgated thereunder, including, in the event of any
resale under the Registration Statement, the prospectus delivery requirements
under the Securities Act, and the Holder acknowledges and agrees that such
Warrant Shares are not transferable on the books of the Company pursuant to a
resale under


                                      -54-
   60

the Registration Statement unless the certificate submitted to the transfer
agent evidencing the Warrant Shares is accompanied by a separate certificate in
the form acceptable to the Company to the effect that (i) the Warrant Shares
have been sold in accordance with the Registration Statement and (ii) the
requirement of delivering a current prospectus has been satisfied.

        (b) The Holder acknowledges that there may occasionally be times when
the Company determines the use of the Prospectus forming a part of the
Registration Statement should be suspended until such time as an amendment or
supplement to the Registration Statement or the Prospectus has been filed by the
Company and any such amendment to the Registration Statement is declared
effective by the Commission, or until such time as the Company has filed an
appropriate report with the Commission pursuant to the Exchange Act. The Holder
hereby covenants that it will not sell any Warrant Shares pursuant to the
Prospectus during the period commencing at the time at which the Company gives
the Holder written notice of the suspension of the use of the Prospectus and
ending at the time the Company gives the Holder written notice that the Holder
may thereafter effect sales pursuant to the Prospectus. The Company may, upon
written notice to the Holder, suspend the use of the Prospectus for two 60-day
periods in any 365-day period based on the reasonable determination of the
Company's Board of Directors that there is a significant business purpose for
such determination, such as pending corporate developments, public filings with
the Commission or similar events. The Company shall in no event be required to
disclose the business purpose for which it has suspended the use of the
Prospectus if the Company determines in its good faith judgment that the
business purpose should remain confidential.

        (c) The Holder further covenants to notify the Company promptly of the
sale of any of its Warrant Shares.

8.      INDEMNIFICATION

        (a) The Company agrees to indemnify and hold harmless the Holder and
each person, if any, who controls the Holder within the meaning of the
Securities Act, against any losses, claims, damages, liabilities or expenses,
joint or several, to which the Holder or such controlling person may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company, which consent shall not be unreasonably withheld),
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof as contemplated below) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, including the Prospectus, financial statements and
schedules, and all other documents filed as a part thereof, as amended at the
time of effectiveness of the Registration Statement, including any information
deemed to be a part thereof as of the time of effectiveness pursuant to
paragraph (b) of Rule 430A or pursuant to Rule 434 under the Securities Act, or
the Prospectus, in the form first filed with the Commission pursuant to Rule
424(b) of the under the Securities Act, or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) filing is required (the
"PROSPECTUS"), or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the statements in any of
them, in light of the circumstances under which they were made, not misleading,
or arise out of or are based in whole or in part on any inaccuracy in the
representations and warranties of the Company contained in this Warrant, or any
failure of the Company to perform its obligations under this Warrant or under
law, and will reimburse the Holder


                                      -55-
   61

and each such controlling person for any legal and other expenses as such
expenses are reasonably incurred by the Holder or such controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon (i) an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, the Prospectus or any amendment or
supplement of the Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Holder by or on behalf of
the Holder expressly for use in the Registration Statement or the Prospectus, or
(ii) the failure of the Holder to comply with the covenants and agreements
contained in Sections 6 and 7 of this Warrant respecting resale of the Shares,
or (iii) the inaccuracy of any representations made by the Holder in this
Warrant or (iv) any untrue statement or omission of a material fact required to
make such statement not misleading in any Prospectus that is corrected in any
subsequent Prospectus that was delivered to the Holder before the pertinent sale
or sales by the Holder.

        (b) The Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of the Securities
Act, against any losses, claims, damages, liabilities or expenses to which the
Company, each of its directors, each of its officers who signed the Registration
Statement or controlling person may become subject, under the Securities Act,
the Exchange Act, or any other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Holder, which consent
shall not be unreasonably withheld) insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon (i) any failure to comply with the covenants and
agreements contained in Sections 7.2 of this Warrant respecting the sale of the
Warrant Shares or (ii) the inaccuracy of any representation made by the Holder
in this Warrant or (iii) any untrue or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus, or any amendment
or supplement to the Registration Statement or Prospectus, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, the Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Holder expressly for use therein, and the
Holder will reimburse the Company, each of its directors, each of its officers
who signed the Registration Statement or controlling person for any legal and
other expense reasonably incurred by the Company, each of its directors, each of
its officers who signed the Registration Statement or controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action.

        (c) Promptly after receipt by an indemnified party under this Section 8
of notice of the threat or commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 8, promptly notify the indemnifying party in writing of the
claim; but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party for contribution
or otherwise than under the indemnity agreement contained in this Section 8 or
to the extent it is not prejudiced as a result of such failure.


                                      -56-
   62

        (d) In case any such action is brought against any indemnified party and
such indemnified party seeks or intends to seek indemnity from an indemnifying
party, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be a conflict
between the positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal defenses
available to it or other indemnified parties that are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless:

               (i)    the indemnified party shall have employed such counsel in
                      connection with the assumption of legal defenses in
                      accordance with the proviso to the preceding sentence (it
                      being understood, however, that the indemnifying party
                      shall not be liable for the expenses of more than one
                      separate counsel, approved by such indemnifying party in
                      the case of Section 8(c), representing all of the
                      indemnified parties who are parties to such action), or

               (ii)   the indemnifying party shall not have employed counsel
                      reasonably satisfactory to the indemnified party to
                      represent the indemnified party within a reasonable time
                      after notice of commencement of action, in each of which
                      cases the reasonable fees and expenses of counsel shall be
                      at the expense of the indemnifying party.

        (e) If the indemnification provided for in this Section 8 is required by
its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under this Section 8 in
respect to any losses, claims, damages, liabilities or expenses referred to in
this Agreement, then each applicable indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to in this Agreement

               (i)    in such proportion as is appropriate to reflect the
                      relative benefits received by the Company and the Holder
                      from the placement of the Warrant Shares or

               (ii)   if the allocation provided by clause (e)(i) above is not
                      permitted by applicable law, in such proportion as is
                      appropriate to reflect not only the relative benefits
                      referred to in clause (e)(i) above but the relative fault
                      of the Company and the Holder in connection with the
                      statements or omissions or inaccuracies in the
                      representations and warranties in this Warrant resulted in
                      such losses, claims, damages, liabilities or expenses, as
                      well as any other relevant equitable considerations.


                                      -57-
   63

        The respective relative benefits received by the Company on the one hand
and the Holder on the other shall be deemed to be in the same proportion as the
amount paid by the Holder to the Company pursuant to this Warrant for the
Warrant Shares purchased by the Holder that were sold pursuant to the
Registration Statement bears to the difference (the "DIFFERENCE") between the
amount the Holder paid for the Shares that were sold pursuant to the
Registration Statement and the amount received by the Holder from such sale. The
relative fault of the Company and the Holder shall be determined by reference
to, among other things, whether the untrue or alleged statement of a material
fact or the omission or alleged omission to state a material fact or the
inaccurate or the alleged inaccurate representation or warranty relates to
information supplied by the Company or by the Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Sections 8(c) and
(d), any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim. The provisions
set forth in Sections 8(c) and (d) with respect to the notice of the threat or
commencement of any threat or action shall apply if a claim for contribution is
to be made under this Section 8(e); provided, however, that no additional notice
shall be required with respect to any threat or action for which notice has been
given under Section 8 for purposes of indemnification. The Company and the
Holder agree that it would not be just and equitable if contribution pursuant to
this Section 8 were determined solely by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in this paragraph. Notwithstanding the provisions of this Section 8,
the Holder shall not be required to contribute any amount in excess of the
amount by which the Difference exceeds the amount of any damages that the Holder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

        (f) For the purpose of this Section 8, the term "Registration Statement"
shall include any preliminary or final prospectus, exhibit, supplement or
amendment included in or relating to the Registration Statement referred to in
Section 8(a) above.

9.      MISCELLANEOUS

        9.1 HOLDER AS OWNER

        The Company may deem and treat the holder of record of this Warrant as
the absolute owner for all purposes regardless of any notice to the contrary.

        9.2 NO SHAREHOLDER RIGHTS

        This Warrant shall not entitle the Holder to any voting rights or any
other rights as a shareholder of the Company or to any other rights except the
rights stated herein; and no dividend or interest shall be payable or shall
accrue in respect of this Warrant or the Warrant Shares, until this Warrant is
exercised.

        9.3 NOTICES


                                      -58-
   64

        Unless otherwise provided, any notice under this Warrant shall be given
in writing and shall be deemed effectively given (a) upon personal delivery to
the party to be notified, (b) upon confirmation of receipt by fax by the party
to be notified, (c) two business days after deposit with a reputable overnight
courier, prepaid for overnight delivery and addressed as set forth in (d), or
(d) five days after deposit with the United States Post Office or any foreign
postal service, postage prepaid, registered or certified with return receipt
requested and addressed to the party to be notified at the address indicated
below, or at such other address as such party may designate by ten (10) days'
advance written notice to the other party given in the foregoing manner.


       If to the Holder:           To the address last furnished
                                   in writing to the Company by
                                   the Holder

       If to the Company:          NeoRx Corporation
                                   410 West Harrison Street
                                   Seattle, WA  98119
                                   Attn:  Chief  Financial Officer
                                   Telephone: (206) 281-7001
                                   Facsimile:  (206) 298-9442

        9.4 AMENDMENTS AND WAIVERS

        Any term of this Warrant may be amended and the observance of any term
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company and
the Holder. Any amendment or waiver effected in accordance with this Section 9.4
shall be binding on each future Holder and the Company.

        9.5 GOVERNING LAW

        This Warrant shall be governed by and construed under the laws of the
state of Washington without regard to principles of conflict of laws. The
parties irrevocably consent to the jurisdiction and venue of the state and
federal courts located in King County, Washington in connection with any action
relating to this Warrant.

        9.6 SUCCESSORS AND ASSIGNS; TRANSFER

        The terms and conditions of this Warrant shall inure to the benefit of
and be binding on the respective successors and assigns of the parties. This
Warrant may not be transferred or assigned without the consent of the Company.
Notwithstanding Sections 4.1 and 6(d), upon delivery by I3 to the Company of (a)
an assignment for each I3 Preferred Shareholder in the form attached hereto as
EXHIBIT C, (b) a letter of each I3 Preferred Shareholder in the form attached
hereto as EXHIBIT D, (c) an EXHIBIT B properly completed by each I3 Preferred
Shareholder, (d) written certification by I3, in form satisfactory to the
Company, that I3 has complied, in both the offer and sale of the Warrants, with
all notice, filing and registration requirements of federal and state securities
laws as set forth in a Memorandum of Law satisfactory in form and substance to
the Company prepared by counsel


                                      -59-
   65


satisfactory to the Company, and (e) such other information as the Company shall
reasonably request, the Company shall consent to the transfer or assignment of
this Warrant to the I3 Preferred Shareholders.

10.     MODIFICATION; AMENDMENT

        This Warrant may not be modified or amended except pursuant to an
instrument in writing signed by the Company and the Holder.

11.     SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

        Notwithstanding any investigation made by the Holder or the Company, all
covenants, agreements, representations and warranties made by the Company and
the Holder in this Agreement and in the certificates for the Warrant Shares
delivered pursuant to this Warrant shall survive the execution of this Warrant,
the delivery to the Holder of the Warrant and the Warrant Shares and the payment
therefor.

12.     HEADINGS

        The headings of the various sections of this Warrant have been inserted
for convenience of reference only and shall not be deemed to be part of this
Warrant.

13.     ENTIRE AGREEMENT; COUNTERPARTS

        This Warrant constitutes the entire agreement between the parties about
its subject and supersedes all prior agreements.

        [Signature page follows.]


                                      -60-
   66

        IN WITNESS WHEREOF, the parties have executed this Warrant as of the
date first written above.

                                     NeoRx Corporation



                                     By:________________________________________
                                        Paul G. Abrams, Chief Executive Officer



ACCEPTED AND AGREED:

International Isotopes Inc.



By____________________________________
Its___________________________________


                                      -61-

EX-10.22

   1
                                                                   EXHIBIT 10.22

                                NEORX CORPORATION
                   NONQUALIFIED STOCK OPTION LETTER AGREEMENT
                                JANUARY 17, 2001


TO:  CARL S. GOLDFISCHER

We are pleased to inform you that you have been granted a nonqualified stock
option under the NeoRx Corporation Restated 1994 Stock Option Plan (the "Plan")
for the purchase of 150,000 shares of NeoRx Corporation's (the "Company") common
stock at an exercise price of $8.0625 per share, pursuant to the terms and
conditions set forth below and in the Company Plan. A copy of the Plan is
attached and incorporated into this Agreement by reference.

The terms of the option are as set forth in the Plan and in this Agreement. The
most important of the terms set forth in the Plan are summarized as follows:

        DATE OF GRANT: The date of grant of the option is January 17, 2001.

        VESTING: The option shall vest and become exercisable, subject to
shareholder approval of the Plan, in accordance with the following schedule:

        Monthly in equal fractions over 18 months, with the first fraction
vesting on February 17, 2001.

        TERM: The option will expire upon the earlier of ten years from the date
of grant or two years after your termination of service as a Consultant to the
Company, unless sooner terminated.

        EXERCISE: During your lifetime only you can exercise the option. The
Plan also provides for exercise of the option by the personal representative of
your estate or the beneficiary thereof following your death.

        PAYMENT FOR SHARES: The option may be exercised by the delivery of:

        (1) Cash, personal check (unless, at the time of exercise, the Plan
Administrator determines otherwise), bank certified or cashiers check;

        (2) Unless the Plan Administrator in its sole discretion determines
otherwise, shares of the capital stock of the Company held by you for a period
of at least six months having a fair market value at the time of exercise, as
determined in good faith by the Plan Administrator, equal to the exercise price;
or (3) A properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price.

        TERMINATION: If you cease to be a Consultant to the Company for any
reason other than death or termination for cause, and unless by its terms this
option sooner terminates or expires, then you may exercise, for a two-year
period, that portion of your option which is exercisable at the time of such
cessation, but the option shall terminate at the end of such period following
such cessation as to all shares for which it has not theretofore been exercised.

   2

        DEATH OF OPTIONEE: If you die while serving as a Consultant to the
Company or within the two-year period following cessation of such service, this
option may, to the extent that you would have been entitled to exercise this
option, be exercised within one year after your death by the personal
representative of your estate or by the person or persons to whom your rights
under this option shall pass by will or by the applicable laws of descent and
distribution, unless sooner terminated.

        STATUS OF SHAREHOLDER: Neither you nor any person or persons to whom
your rights and privileges under this option may pass shall be, or have any of
the rights or privileges of, a shareholder of the Company with respect to any of
the shares issuable upon the exercise of this option unless and until this
option has been exercised.

        CONTINUATION OF STATUS AS CONSULTANT: Nothing in this Agreement shall
confer upon you any right to continue as a Consultant to the Company, or to
interfere in any way with the right of the Company to terminate your service as
a Consultant to the Company at any time.

        TRANSFER OF OPTION: This option and the rights and privileges conferred
hereby may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will, by the applicable
laws of descent and distribution, and shall not be subject to execution,
attachment or similar process. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of any right or privilege
conferred hereby, contrary to law or to the provisions of this Agreement, or the
sale or levy or any attachment or similar process upon the rights and privileges
conferred hereby shall be null and void.

        HOLDING PERIOD: Shares of common stock obtained upon the exercise of
this option may not be sold until six months after the date the option was
granted.

        Your particular attention is directed to the section(s) of the Plan
which describe(s) certain important conditions relating to federal and state
securities laws that must be satisfied before the option can be exercised and
before the company can issue any shares to you. The Company intends to maintain
an effective registration statement with respect to the shares that will be
issued upon exercise of this option but has no obligation to do so. If there is
no effective registration statement, you will not be able to exercise the option
or sell the option shares unless exemptions from registration under federal and
state securities laws are available. Such exemptions are very limited and might
be unavailable. Consequently, you might have no opportunity to exercise the
option and to receive shares upon such exercise. Please execute the Acceptance
and Acknowledgment set forth below and return it to the undersigned.

NEORX CORPORATION


- --------------------------------
PAUL G. ABRAMS
CHIEF EXECUTIVE OFFICER


   3


                          ACCEPTANCE AND ACKNOWLEDGMENT

I, Carl S. Goldfischer, a resident of the State of California, accept the
nonqualified stock option described above and in NeoRx Corporation's 1994 Stock
Option Plan, and acknowledge receipt of a copy of this Agreement, including a
copy of the Plan. I have read and understand the Plan, including the
provision(s) relating to federal and securities law.


        Dated:__________________                   _____________________________


Taxpayer I.D. Number

By signing below, the spouse of the Optionee, if such Optionee is legally
married as of the date of execution of this Agreement, acknowledges that (s)he
has read this Agreement and the Plan and is familiar with the terms and
provisions thereof, and agrees to be bound by all the terms and conditions of
this Agreement and the Plan.


        Dated:__________________                   _____________________________


By signing below, the Optionee represents that (s)he is not legally married as
of the date of execution of this Agreement.


        Dated:__________________                   _____________________________

EX-10.23

   1
                                                                   EXHIBIT 10.23

                              CONSULTING AGREEMENT

        THIS CONSULTING AGREEMENT, having an effective date of December 19,
2000, is made between NEORX CORPORATION (hereinafter referred to as "NeoRx"),
410 West Harrison, Seattle, Washington 98119, and CARL S. GOLDFISCHER, M.D.
(hereinafter referred to as "Consultant"),                                     .
                                          -------------------------------------

        The parties agree as follows:

        1. Term. The term of this Agreement shall be from December 19, 2000
through June 19, 2001 and is renewable for two additional six month periods.
Either party may terminate this Agreement immediately with cause, or upon 30
days prior written notice without cause.

        2. Services to be Provided. Consultant shall provide consulting services
primarily related to STRATEGIC AND FINANCIAL ISSUES. Such services will be
provided 2-3 days per week.

        3. Independent Contractor. The parties understand and hereby acknowledge
that nothing in this Agreement shall be construed to create any relationship
other than that of an independent contractor relationship for purposes of and
services rendered under this Agreement. The parties also acknowledge that
Consultant is currently a member of NeoRx's Board of Directors. Under this
Agreement, NeoRx will, however, retain no control over the methods by which
Consultant performs his services, provided, however, that the days on which
Consultant's services are required may be determined by NeoRx according to its
needs. These services may be provided to NeoRx by telephone or at meetings
convened at a mutually agreeable time and place, or may be provided to others at
NeoRx's request.

        4. Compensation. During the term of this Agreement, NeoRx shall pay
Consultant the sum of $10,000 once monthly, beginning in January 2001, upon
receipt of an invoice for the services directed to "Attention: Kenneth Chow."
Consultant understands that he is an independent contractor and will be
responsible for his own withholding taxes and social security deductions.

        As further compensation, NeoRx shall also grant Consultant certain stock
options.

        The invoice submitted by Consultant shall provide the date and a brief
description of services rendered per day, and NeoRx shall provide payment for
approved services within thirty (30) days of receipt of such invoice. In
addition, NeoRx shall reimburse Consultant for actual and necessary
out-of-pocket expenses incurred, where such expenses are related to services
rendered under this Agreement. Consultant shall submit a monthly itemized
expense statement to NeoRx and NeoRx shall provide reimbursement of approved
expenses within thirty (30) days of receipt of such statement; this expense
statement shall also be directed to the attention of Kenneth Chow.


   2
        5. Confidential Information and Property. Consultant agrees that he will
not disclose or use any Confidential Information relating to NeoRx, or any
property of NeoRx, except as NeoRx shall direct. "Confidential Information"
includes all plans, research, test procedures and results, products, formulas,
processes, protocols, computer data, customer lists, marketing plans, financial
information, business strategies, relationships with third parties of NeoRx, and
all information related to NeoRx and not generally available to the public.
"Property" means chemical, biochemical, biological, synthetic and other
materials used in NeoRx's business. Consultant agrees that no patent rights or
licenses are granted to Consultant by this paragraph, and further agrees that
NeoRx has no obligation to grant Consultant any rights in patents, Confidential
Information or property of NeoRx. Consultant consents that NeoRx may disclose to
others that he is acting as a consultant relative to the services described in
paragraph 2. The restrictions contained in this paragraph 5 concerning
confidentiality shall be effective during the term of this Agreement and at all
times thereafter.

        6. Exceptions. Consultant shall not be subject to the restrictive
obligations set forth in Section 5 as to the disclosure or use of any
information which : (1) is or later becomes publicly known under circumstances
involving no breach of this Agreement by Consultant; (2) is already known to
Consultant at the time of receipt of the information; (3) is lawfully made
available to Consultant by a third party; or (4) is required by law or
regulation.

        Specific Confidential Information shall not be considered to fall within
the above exceptions merely because it is within the scope of more general
information within an exception. Furthermore, a combination of features shall
not be considered to fall within the above exceptions unless the combination
itself, including its principles of operation, are within the exceptions.

        7. Assignment. All Inventions which Consultant conceives, develops or
actually reduces to practice, either alone or with others, relating to the
actual services provided by Consultant shall be the exclusive property of NeoRx.
Consultant hereby assigns to NeoRx or its designee all of Consultant's right,
title and interest in and to any Invention, any patent applications relating
thereto, and any patents granted thereon, and will execute any such formal
Assignment documents upon request of NeoRx. Consultant shall disclose such
Inventions to NeoRx promptly and in writing. When requested and at NeoRx's
expense, Consultant will assist NeoRx or its designee in efforts to protect
NeoRx's proprietary and patent rights to such Inventions.

        For the purposes of this Agreement, "Invention" shall mean all
inventions, discoveries, concepts and ideas, whether patentable or not,
including but not limited to articles, processes, methods, formulas, systems and
techniques, as well as improvements and derivations and know-how related
thereto.

        8. Adherence to Terms. Consultant agrees that he shall require his
officers, employees, affiliates, associates, agents, contractors and other
personnel to adhere to the terms of this Agreement.

   3
        9. Entire Agreement. This Agreement expresses the entire understanding
between the parties on the subject matter hereof. The provisions of this
Agreement may not be waived or modified except by a writing signed by the party
against whom enforcement is sought. No waiver of breach shall constitute a
subsequent waiver of any subsequent breach, and if any provisions of this
Agreement are held to be invalid or unenforceable, the remaining provisions
shall remain valid and enforceable.

                                     NeoRx Corporation

                                     By:
                                         ---------------------------------------
                                            Paul G. Abrams, M.D., J.D.
                                            Chief Executive Officer


                                     By:
                                         ---------------------------------------
                                            Carl S. Goldfischer, M.D.

                                     Soc. Sec. or Tax ID:
                                                          ----------------------

EX-10.24

   1
                                                                   EXHIBIT 10.24



                              CONSULTING AGREEMENT

               THIS CONSULTING AGREEMENT, having an effective date of November
6, 2000, is made between NEORX CORPORATION (hereinafter referred to as "NeoRx"),
410 West Harrison, Seattle, Washington 98119, and DOUGLASS GIVEN, M.D., PH.D.
(hereinafter referred to as "Consultant"), 130 Gloria Circle, Menlo Park,
California 94025.

               The parties agree as follows:

               1. Term. The term of this Agreement shall be from November 6,
2000 through April 6, 2001. Either party may terminate this Agreement
immediately with cause, or upon 30 days prior written notice without cause.

               2. Services to be Provided. Consultant shall provide consulting
services primarily related to NEORX'S SKELETAL TARGETED RADIOTHERAPY (STR)
PROJECT, INCLUDING BUT NOT LIMITED TO, STR MEDICAL AND MANUFACTURING MATTERS,
AND ALSO GENERAL NEORX MEDICAL AND TECHNICAL MATTERS. Such services will be
provided at a minimum of 2 days per week at NeoRx and off-site as needed.

               3. Independent Contractor. The parties understand and hereby
acknowledge that nothing in this Agreement shall be construed to create any
relationship other than that of an independent contractor relationship.
Consultant is not an agent, employee, officer or trustee of NeoRx, and is not
entitled to the benefits provided by NeoRx to its agents, employees, officers or
trustees, except as may be expressly provided herein. NeoRx may, during the term
of this Agreement, engage other independent contractors to perform consultant
services. To that end, NeoRx will retain no control over the methods by which
Consultant performs his services, provided, however, that the days on which
Consultant's services are required may be determined by NeoRx according to its
needs. These services may be provided to NeoRx by telephone or at meetings
convened at a mutually agreeable time and place, or may be provided to others at
NeoRx's request.

               4. Compensation. During the term of this Agreement, NeoRx shall
pay Consultant the sum of $25,000 once monthly upon receipt of an invoice for
the services directed to "Attention: Kenneth Chow." Consultant understands that
he is an independent contractor and will be responsible for his own withholding
taxes and social security deductions.

               As further compensation, NeoRx shall also grant Consultant
certain stock options as set forth in the Stock Option Letter Agreement dated
November 16, 2000.

               The invoice submitted by Consultant shall provide the date and a
brief description of services rendered per day, and NeoRx shall provide payment
for approved services within thirty (30) days of receipt of such invoice. In
addition, NeoRx shall reimburse Consultant for actual and necessary
out-of-pocket expenses incurred, where such expenses are related to services
rendered under this Agreement. Consultant shall submit a monthly itemized
expense statement to NeoRx and NeoRx shall provide reimbursement of approved
expenses within thirty (30) days

   2
of receipt of such statement; this expense statement shall also be directed to
the attention of Kenneth Chow.

               5. Confidential Information and Property. Consultant agrees that
he will not disclose or use any Confidential Information relating to NeoRx, or
any property of NeoRx, except as NeoRx shall direct. "Confidential Information"
includes all plans, research, test procedures and results, products, formulas,
processes, protocols, computer data, customer lists, marketing plans, financial
information, business strategies, relationships with third parties of NeoRx, and
all information related to NeoRx and not generally available to the public.
"Property" means chemical, biochemical, biological, synthetic and other
materials used in NeoRx's business. Consultant agrees that no patent rights or
licenses are granted to Consultant by this paragraph, and further agrees that
NeoRx has no obligation to grant Consultant any rights in patents, Confidential
Information or property of NeoRx. Consultant consents that NeoRx may disclose to
others that he is acting as a consultant relative to the services described in
paragraph 2. The restrictions contained in this paragraph 5 concerning
confidentiality shall be effective during the term of this Agreement and at all
times thereafter.

               6. Exceptions. Consultant shall not be subject to the restrictive
obligations set forth in Section 5 as to the disclosure or use of any
information which : (1) is or later becomes publicly known under circumstances
involving no breach of this Agreement by Consultant; (2) is already known to
Consultant at the time of receipt of the information; (3) is lawfully made
available to Consultant by a third party; or (4) is required by law or
regulation.

               Specific Confidential Information shall not be considered to fall
within the above exceptions merely because it is within the scope of more
general information within an exception. Furthermore, a combination of features
shall not be considered to fall within the above exceptions unless the
combination itself, including its principles of operation, are within the
exceptions.

               7. Assignment. All Inventions which Consultant conceives,
develops or actually reduces to practice, either alone or with others, relating
to the actual services provided by Consultant shall be the exclusive property of
NeoRx. Consultant hereby assigns to NeoRx or its designee all of Consultant's
right, title and interest in and to any Invention, any patent applications
relating thereto, and any patents granted thereon, and will execute any such
formal Assignment documents upon request of NeoRx. Consultant shall disclose
such Inventions to NeoRx promptly and in writing. When requested and at NeoRx's
expense, Consultant will assist NeoRx or its designee in efforts to protect
NeoRx's proprietary and patent rights to such Inventions.

               For the purposes of this Agreement, "Invention" shall mean all
inventions, discoveries, concepts and ideas, whether patentable or not,
including but not limited to articles, processes, methods, formulas, systems and
techniques, as well as improvements and derivations and know-how related
thereto.

   3
               8. Adherence to Terms. Consultant agrees that he shall require
his officers, employees, affiliates, associates, agents, contractors and other
personnel to adhere to the terms of this Agreement.

               9. Entire Agreement. This Agreement expresses the entire
understanding between the parties on the subject matter hereof. The provisions
of this Agreement may not be waived or modified except by a writing signed by
the party against whom enforcement is sought. No waiver of breach shall
constitute a subsequent waiver of any subsequent breach, and if any provisions
of this Agreement are held to be invalid or unenforceable, the remaining
provisions shall remain valid and enforceable.



                                       NeoRx Corporation



Date:                                  By:
      ----------------------------        --------------------------------------
                                            Paul G. Abrams, M.D., J.D.
                                            Chief Executive Officer



Date:
     -----------------------------
                                       Douglass Given, M.D., Ph.D.
                                       Soc. Sec. or Tax ID

EX-10.25

   1
                                                                   EXHIBIT 10.25



                                NEORX CORPORATION
                   NONQUALIFIED STOCK OPTION LETTER AGREEMENT
                                NOVEMBER 16, 2000


TO:  DOUGLASS GIVEN

We are pleased to inform you that you have been granted a nonqualified stock
option under the NeoRx Corporation Restated 1994 Stock Option Plan (the "Plan")
for the purchase of 100,000 shares of NeoRx Corporation's (the "Company") common
stock at an exercise price of $9.1875 per share, pursuant to the terms and
conditions set forth below and in the Company Plan. A copy of the Plan is
attached and incorporated into this Agreement by reference.

The terms of the option are as set forth in the Plan and in this Agreement. The
most important of the terms set forth in the Plan are summarized as follows:

               DATE OF GRANT: The date of grant of the option is November 15,
2000.

               VESTING: The option shall vest and become exercisable, subject to
shareholder approval of the Plan, in accordance with the following schedule:




                 Date On and After Which                    Portion of Total Option
                  Option is Exercisable                       Which is Exercisable
                  ---------------------                     -----------------------
                                                          
                    November 15, 2000                                 25%
                      May 15, 2001                                    50%
                    November 15, 2001                                 75%
                      May 15, 2002                                   100%


               TERM: The option will expire upon the earlier of ten years from
the date of grant or two years after your termination of service as a Consultant
to the Company, unless sooner terminated.

               EXERCISE: During your lifetime only you can exercise the option.
The Plan also provides for exercise of the option by the personal representative
of your estate or the beneficiary thereof following your death.

               PAYMENT FOR SHARES: The option may be exercised by the delivery
of:

               (1) Cash, personal check (unless, at the time of exercise, the
Plan Administrator determines otherwise), bank certified or cashiers check;

               (2) Unless the Plan Administrator in its sole discretion
determines otherwise, shares of the capital stock of the Company held by you for
a period of at least six months having a fair market value at the time of
exercise, as determined in good faith by the Plan Administrator, equal to the
exercise price; or


   2
               (3) A properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price.

               TERMINATION: If you cease to be a Consultant to the Company for
any reason other than death or termination for cause, and unless by its terms
this option sooner terminates or expires, then you may exercise, for a two-year
period, that portion of your option which is exercisable at the time of such
cessation, but the option shall terminate at the end of such period following
such cessation as to all shares for which it has not theretofore been exercised.

               DEATH OF OPTIONEE: If you die while serving as a Consultant to
the Company or within the two-year period following cessation of such service,
this option may, to the extent that you would have been entitled to exercise
this option, be exercised within one year after your death by the personal
representative of your estate or by the person or persons to whom your rights
under this option shall pass by will or by the applicable laws of descent and
distribution, unless sooner terminated.

               STATUS OF SHAREHOLDER: Neither you nor any person or persons to
whom your rights and privileges under this option may pass shall be, or have any
of the rights or privileges of, a shareholder of the Company with respect to any
of the shares issuable upon the exercise of this option unless and until this
option has been exercised.

               CONTINUATION OF STATUS AS CONSULTANT: Nothing in this Agreement
shall confer upon you any right to continue as a Consultant to the Company, or
to interfere in any way with the right of the Company to terminate your service
as a Consultant to the Company at any time.

               TRANSFER OF OPTION: This option and the rights and privileges
conferred hereby may not be transferred, assigned, pledged or hypothecated in
any manner (whether by operation of law or otherwise) other than by will, by the
applicable laws of descent and distribution, and shall not be subject to
execution, attachment or similar process. Any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of this option or of any right or
privilege conferred hereby, contrary to law or to the provisions of this
Agreement, or the sale or levy or any attachment or similar process upon the
rights and privileges conferred hereby shall be null and void.

               HOLDING PERIOD: Shares of common stock obtained upon the exercise
of this option may not be sold until six months after the date the option was
granted.

               Your particular attention is directed to the section(s) of the
Plan which describe(s) certain important conditions relating to federal and
state securities laws that must be satisfied before the option can be exercised
and before the company can issue any shares to you. The Company intends to
maintain an effective registration statement with respect to the shares that
will be issued upon exercise of this option but has no obligation to do so. If
there is no effective registration statement, you will not be able to exercise
the option or sell the option shares unless exemptions from registration under
federal and state securities laws are available. Such exemptions are very
limited and might be unavailable. Consequently, you might have no opportunity to
exercise the option and to receive shares upon such exercise.
   3
               Please execute the Acceptance and Acknowledgment set forth below
and return it to the undersigned.



NEORX CORPORATION



- ---------------------------------
PAUL G. ABRAMS
CHIEF EXECUTIVE OFFICER


                          ACCEPTANCE AND ACKNOWLEDGMENT

I, Douglass Given, a resident of the State of California, accept the
nonqualified stock option described above and in NeoRx Corporation's 1994 Stock
Option Plan, and acknowledge receipt of a copy of this Agreement, including a
copy of the Plan. I have read and understand the Plan, including the
provision(s) relating to federal and securities law.


               Dated:
                     -----------------------            ------------------------

- ---------------------
Taxpayer I.D. Number

By signing below, the spouse of the Optionee, if such Optionee is legally
married as of the date of execution of this Agreement, acknowledges that (s)he
has read this Agreement and the Plan and is familiar with the terms and
provisions thereof, and agrees to be bound by all the terms and conditions of
this Agreement and the Plan.


               Dated:
                     -----------------------            ------------------------


By signing below, the Optionee represents that (s)he is not legally married as
of the date of execution of this Agreement.


               Dated:
                     -----------------------            ------------------------

EX-23.1

   1
                                                                    EXHIBIT 23.1

                             CONSENT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
NeoRx Corporation:

We consent to incorporation by reference in the registration statements (Nos.
33-60029, 33-63169, 333-05661, 333-00785, 333-25161, 333-35442, 333-43712, and
333-45398) on Form S-3 and in the registration statements (Nos. 33-43860,
33-46317, 33-87108, 333-32583 and 333-41764) on Form S-8 of NeoRx Corporation,
of our report dated January 26, 2001, except as to note 18, which is as of
March 20, 2001, relating to the balance sheets of NeoRx Corporation as of
December 31, 2000 and 1999, and the related statements of operations,
shareholders' equity and cash flows for each of the years in the three year
period ended December 31, 2000, which report appears in the December 31, 2000
annual report on Form 10-K of NeoRx Corporation.

KPMG LLP
Seattle, Washington
March 28, 2001