8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT

(DATE OF EARLIEST EVENT REPORTED):

June 4, 2009

US Oncology Holdings, Inc.

US Oncology, Inc.

(Exact name of registrant as specified in its charter)

Delaware Delaware	333-126922 0-26190	90-0222104 84-1213501
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(IRS employer identification number)

10101 Woodloch Forest

The Woodlands, Texas 77380

(Address of Principal Executive Offices) (Zip Code)

(281) 863-1000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01 Regulation FD Disclosure.

On June 4, 2009, US Oncology, Inc. (“US Oncology”), a subsidiary of US Oncology Holdings, Inc. (collectively with US Oncology, the “Company”), announced that it had adopted plans to refinance its existing senior secured credit facility with the proceeds from an offering of new senior secured notes and to amend its existing senior secured revolving credit facility. US Oncology commenced a private offering of such new senior secured notes on the same day. The new notes have been offered solely to qualified institutional buyers, as defined under Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non–U.S. persons, as defined under Regulation S under the Securities Act.

In connection with the offering of such notes, the Company has received commitments from affiliates of the initial purchasers of the notes for a new senior secured revolving credit facility which would replace the Company’s existing senior secured revolving credit facility. The Company currently anticipates that such facility will provide for aggregate borrowings of up to $100.0 million (which could increase to $140.0 million if additional commitments are obtained) and is proposed to have a maturity date of August 2012 (or, if our existing senior notes are not repaid, July 2012). The execution of the new senior secured revolving credit facility is contingent upon certain conditions, including the consummation of the notes offering described above. There is no assurance the Company will satisfy these conditions.

The Company is disclosing under Item 7.01 in this Current Report the information attached as Exhibits 99.1, 99.2, 99.3, 99.4, 99.5, 99.6, 99.7 and 99.8, each of which is incorporated by reference herein. Such information, which has not been previously disclosed, was included in the confidential offering memorandum utilized in connection with the offering of the new notes.

In addition, the Company is disclosing under Item 7.01 in this Current Report the information attached as Exhibit 99.8, all of which is incorporated by reference herein. Such information, which has not been previously disclosed, represents revised versions of US Oncology’s audited financial statements for the fiscal years ended December 31, 2006, 2007 and 2008, which retrospectively adjust US Oncology’s original audited financial statements for such years previously filed with the Securities and Exchange Commission to reflect the Company’s adoption, effective January 1, 2009, of FASB Statement No. 160 “Noncontrolling Interests in Consolidated Financial Statements — an Amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 establishes new standards governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially-owned subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, rather than a liability; that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses; and that losses of a partially-owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also requires changes to certain presentation and disclosure requirements. SFAS No. 160 was effective for annual reporting periods beginning after December 15, 2008 and required retrospective application of its presentation and disclosure requirements, including in connection with securities offerings such as US Oncology’s offering of the new notes described above. These revised audited financial statements do not reflect any subsequent information or events other than the adoption of SFAS No. 160. More current information is contained in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, filed on May 7, 2009, and subsequent filings with the Securities and Exchange Commission, and these revised financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed on March 12, 2009, as well as such Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009 and such subsequent filings as they contain important information regarding events, developments and updates to certain expectations of the Company that have occurred since the filing of the Annual Report on Form 10-K. The Company notes that the “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Exhibits 99.5 and 99.6 to this Current Report also reflect the retrospective application of SFAS No. 160.

This report is neither an offer to sell nor a solicitation of an offer to buy any securities of the Company. The information in this Current Report on Form 8-K and Exhibits 99.1, 99.2, 99.3, 99.4, 99.5, 99.6, 99.7 and 99.8 hereto is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. In addition, this information shall not be incorporated by reference into any of the Company’s filings with the Securities and Exchange Commission or any other document, except as shall be expressly set forth by specific reference in such filing.

Forward-Looking Statements

The information included in this Current Report and in Exhibits 99.1, 99.2, 99.3, 99.4, 99.5, 99.6, 99.7 and 99.8 hereto contains forward-looking statements, including statements that include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “projects,” or similar expressions and statements regarding our prospects. Although the Company believes that the expectations reflected in such statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Such expectations are subject to risks and uncertainties, including the impact of a recession in the U.S. or global economy, the possibility of healthcare reform in the United States and its impact on cancer care specifically, the Company’s reliance on pharmaceuticals for the majority of its revenues, the Company’s ability to maintain favorable pharmaceutical pricing and favorable relationships with pharmaceutical manufacturers and other vendors, concentration of pharmaceutical purchasing and favorable pricing with a limited number of vendors, prescription drug reimbursement, such as reimbursement for Erythropoiesis-Stimulating Agents (“ESAs”), and other reimbursement under Medicare (including reimbursement for radiation and diagnostic services), reimbursement for medical services by non-governmental payers and cost-containment efforts by such payers, including whether such payers adopt coverage guidelines regarding ESAs or pharmaceutical reimbursement methodologies that are similar to Medicare coverage, other changes in the manner patient care is reimbursed or administered, the impact of increasing unemployment (which may result in a larger population of uninsured and under insured patients), the decisions of employers to increase the financial responsibility of individuals under health insurance programs afforded to their employees, the Company’s ability to service its substantial indebtedness and comply with related covenants in debt agreements, the Company’s ability to fund its operations through operating cash flow or utilization of its revolving credit facility or its ability to obtain additional financing on acceptable terms, the instability of capital and credit markets, including the potential that certain financial institutions may be unable to honor existing financing commitments, the Company’s ability to implement strategic initiatives, the Company’s ability to maintain good relationships with existing practices and expand into new markets and development of existing markets, modifications to, and renegotiation of, existing economic arrangements, the Company’s ability to complete cancer centers and PET facilities currently in development and its ability to recover investments in cancer centers, government regulation and enforcement, increases in the cost of providing cancer treatment services, the operations of the Company’s affiliated physician practices, and potential impairments that could result from declining market valuations. Also, please refer to the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2008, for a discussion of factors that could cause actual results to differ materially from the Company’s expectations reflected in such forward-looking statements.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit 99.1	Summary of Historical Condensed Consolidated Financial Information (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.2	Risk Factors (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.3	Use of Proceeds (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.4	Capitalization (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)

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Exhibit 99.5	Selected Financial Data (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.6	Management’s Discussion and Analysis of Financial Condition and Results Of Operations (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.7	Description of Certain Other Indebtedness (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.8	Financial Statements and Supplementary Data

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SIGNATURE

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

Date: June 4, 2009	By:	/s/ Phillip H. Watts
	Name:	Phillip H. Watts
	Title:	Vice President and General Counsel

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EXHIBIT INDEX

Exhibit 99.1	Summary of Historical Condensed Consolidated Financial Information (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.2	Risk Factors (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.3	Use of Proceeds (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.4	Capitalization (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.5	Selected Financial Data (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.6	Management’s Discussion and Analysis of Financial Condition and Results Of Operations (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.7	Description of Certain Other Indebtedness (excerpted from US Oncology’s Preliminary Offering Memorandum, dated June 4, 2009)
Exhibit 99.8	Financial Statements and Supplementary Data

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EX-99.1

Exhibit 99.1

Summary of Historical Condensed Consolidated Financial Information

The summary historical consolidated financial and other data presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto contained in our Current Report on Form 8-K filed on June 4, 2009 (which retrospectively adjusted the audited Financial Statements and Supplemental Data in our Annual Report on Form 10-K for the year ended December 31, 2008) and the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, which are incorporated by reference herein. The summary historical consolidated financial data and other data set forth below for, and as of the end of the fiscal years ended December 31, 2006, 2007 and 2008 have been derived from our audited consolidated financial statements. The summary historical consolidated financial data and other data set forth below for, and as of the end of the three month periods ended March 31, 2008 and 2009 have been derived from our unaudited consolidated financial statements and have been prepared on the same basis as the audited consolidated financial statements included elsewhere herein. In the opinion of management, the interim data reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of results for these periods. Operating results for the three month period ended March 31, 2009 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2009.

	Year Ended December 31,									Three Months Ended March 31,						Twelve Months Ended March 31, 2009
	2006			2007			2008			2008			2009
	(dollars in thousands)
Statement of Operations Data:
Product revenues	$	1,822,141		$	1,970,106		$	2,224,704		$	543,261		$	563,080		$	2,244,523
Service revenues		989,242			1,030,672			1,079,473			267,346			279,481			1,091,608
Total revenues		2,811,383			3,000,778			3,304,177			810,607			842,561			3,336,131
Cost of products		1,753,638			1,925,547			2,163,943			532,027			551,585			2,183,501
Cost of services:
Operating compensation and benefits		458,006			479,177			523,939			130,188			137,640			531,391
Other operating costs		274,665			293,677			321,947			76,796			80,696			325,847
Depreciation and amortization		69,351			73,159			72,790			18,601			17,565			71,754
Total cost of services		802,022			846,013			918,676			225,585			235,901			928,992
Total cost of products and services		2,555,660			2,771,560			3,082,619			757,612			787,486			3,112,493
General and administrative expense		76,948			84,326			76,883			19,988			18,131			75,026
Impairment, restructuring and other charges, net		—			15,126			384,929			381,306			1,409			5,032
Depreciation and amortization		13,983			16,172			30,017			7,153			7,533			30,397
Total costs and expenses		2,646,591			2,887,184			3,574,448			1,166,059			814,559			3,222,948
Income (loss) from operations		164,792			113,594			(270,271	)		(355,452	)		28,002			113,183
Other income (expense):
Interest expense, net		(92,870	)		(95,342	)		(92,757	)		(24,200	)		(22,622	)		(91,179	)
Other income (expense), net		—			—			2,213			1,371			—			842
Income (loss) before income taxes		71,922			18,252			(360,815	)		(378,281	)		5,380			22,846
Income tax (provision) benefit		(27,509	)		(7,447	)		(6,351	)		922			(3,604	)		(10,877	)
Net income (loss)		44,413			10,805			(367,166	)		(377,359	)		1,776			11,969
Less: Net income attributable to non-controlling interests		(2,388	)		(3,619	)		(3,324	)		(715	)		(759	)		(3,368	)
Net income (loss) attributable to the Company	$	42,025		$	7,186		$	(370,490	)	$	(378,074	)	$	1,017		$	8,601
Other Financial Data:
EBITDA(1)	$	250,275		$	203,678		$	(165,361	)	$	(329,143	)	$	53,669		$	217,451
Adjusted EBITDA(2)		250,275			218,804			219,568			52,163			55,078			222,483
Capital Expenditures		82,571			90,850			88,743			23,624			16,047			81,166

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	Fiscal Year Ended December 31,									Three Months Ended March 31,						Twelve Months Ended March 31, 2009
	2006			2007			2008			2008			2009
	(dollars in thousands)
Statement of Cash Flows Data:
Net cash provided by (used in)
Operating activities	$	43,639		$	198,030		$	141,487		$	50,864		$	31,027		$	121,650
Investing activities		(110,768	)		(93,170	)		(137,004	)		(57,416	)		(15,342	)		(94,930	)
Financing activities		223,058			(237,370	)		(49,263	)		(2,316	)		(11,318	)		(58,265	)
Balance Sheet Data:
Working capital	$	254,022		$	202,232		$	198,616		$	165,279		$	205,005
Total assets		2,359,982			2,208,650			1,842,853			1,887,973			1,809,697
Long term debt, excluding current maturities		1,069,664			1,031,569			1,061,133			1,056,498			1,053,867
Total liabilities		1,765,093			1,641,110			1,633,866			1,697,850			1,603,235
Total Company Stockholder’s equity		580,741			554,323			195,415			176,829			192,937
Key Operating Data:
Services Volume
Cancer centers (at end of period)		80			77			80			79			80
Medical oncology visits		9,793			10,028			10,816			10,572			11,274
Radiation treatments		2,698			2,719			2,732			2,731			2,678
PET systems (at end of period)		33			34			37			34			38
PET scans		163			180			207			193			219
New patients enrolled in research studies		2,723			3,050			3,447
Affiliated physicians (at end of period)		1,067			1,199			1,211			1,247			1,227
Physician practice affiliations		112			132			112			66			50
Recruited physicians		61			58			52			5			10

	Twelve Months Ended March 31, 2009
	(dollars in thousands)
Adjusted Credit Statistics(3)
Cash and cash equivalents (at end of period)	$	111,751
Secured Debt(4)		789,150
Total Debt(5)		1,095,745
Total Net Debt(6)		983,994
Interest Expense(7)
EBITDA		217,451
Adjusted EBITDA		222,483
Ratio of Secured Debt to Adjusted EBITDA		3.5x
Ratio of Total Debt to Adjusted EBITDA		4.9x
Ratio of Total Net Debt to Adjusted EBITDA		4.4x
Ratio of Adjusted EBITDA to interest expense

(1) EBITDA is net income before interest, taxes, depreciation, amortization (including amortization of stock-based compensation), and other (income) expense. We believe EBITDA is a commonly applied measurement of financial performance. Adjusted EBITDA represents EBITDA adjusted for the various items described below. EBITDA and Adjusted EBITDA do not represent income or cash flows from operations, as these terms are defined under generally accepted accounting principles, and should not be considered as an alternative to net income as an indicator of our operating performance or to cash flows as a measure of liquidity. We believe that EBITDA and Adjusted EBITDA are useful to investors, since it can provide investors with additional information that is not directly available in a GAAP presentation. Each gives investors an indication of our liquidity and financial condition and each is used in evaluating the value of companies in general and in evaluating the liquidity of companies, their debt service obligations and their ability to service their indebtedness. EBITDA and Adjusted

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EBITDA are a key tool used by management in assessing business performance and financial condition both with respect to our business as a whole and with respect to individual sites or product lines. EBITDA and Adjusted EBITDA as presented herein are not necessarily comparable to similarly titled measures reported by other companies. See our Current Report on Form 8-K filed on June 4, 2009 and the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, both of which been incorporated by reference herein. The following sets forth a reconciliation of EBITDA to net income (loss) and Adjusted EBITDA to EBITDA.

	Year Ended December 31,							Three Months Ended March 31,					Twelve Months Ended March 31, 2009
	2006		2007		2008			2008			2009
	(dollars in thousands)
Net income (loss)	$	44,413	$	10,805	$	(367,166	)	$	(377,359	)	$	1,776	$	11,969
Interest expense, net		92,870		95,342		92,757			24,200			22,622		91,179
Income tax provision (benefit)		27,509		7,447		6,351			(922	)		3,604		10,877
Depreciation and amortization		83,334		89,331		102,807			25,754			25,098		102,151
Amortization of stock compensation		2,149		753		2,103			555			569		2,117
Other (income) expense, net		—		—		(2,213	)		(1,371	)		—		(842	)
EBITDA	$	250,275	$	203,678	$	(165,361	)	$	(329,143	)	$	53,669	$	217,451
Impairment, restructuring and other charges		—		15,126		384,929			381,306			1,409		5,032
Adjusted EBITDA	$	250,275	$	218,804	$	219,568		$	52,163		$	55,078	$	222,483

(2) Adjusted EBITDA reflects EBITDA, less impairment, restructuring and other charges, net.

(3) These as adjusted statistics are calculated using historical financial data as adjusted to give effect to the offering of the notes and use of proceeds therefrom, as if each occurred on March 31, 2009, other than interest expense, EBITDA and the ratio of interest expense to EBITDA, which are calculated as if such transactions occurred on March 31, 2008.

(4) Secured debt consists of the notes offered hereby and our existing senior notes. There are no amounts outstanding under our existing senior secured revolving credit facility, which is also secured debt.

(5) Represents actual total debt of $1,067.4 million plus the notes offered hereby of $465.0 million less the amounts outstanding under our existing term loan of $436.7 million (which term loan is to be retired in connection with this offering).

(6) Represents total debt less cash and cash equivalents.

(7) Interest expense reflects the interest rate on the notes offered hereby and the revised interest rate on our existing senior secured revolving credit facility following the amendment to such facility entered into in connection with this offering. See “Description of Certain Other Indebtedness—Our Existing Senior Secured Revolving Credit Facility.” Each quarter point change in the assumed interest rate would result in a $1.2 million change in annual interest expense on the notes offered hereby.

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EX-99.2

Exhibit 99.2

RISK FACTORS

You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition or results of operations. In such case, you may lose all or part of your investment in the notes offered hereby. In general, because our revenues depend upon the revenues of our affiliated practices, any risks that harm the economic performance of the practices will, in turn, harm us.

Risks Relating to the Offering and the Notes

Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes.

We have a significant amount of indebtedness. As of March 31, 2009, after giving effect to the issuance of the notes and use of proceeds therefrom, our total debt would have been approximately $1,095.7 million, excluding $138.1 million of unused commitments under our existing senior secured revolving credit facility, which would have represented approximately 80.6% of our total anticipated as adjusted capitalization. In connection with the issuance of the notes offered hereby we have received commitments for our new senior secured revolving credit facility, which we currently anticipate will provide for aggregate borrowings of up to $100.0 million (which could increase to $140.0 million if additional commitments are obtained).

Our substantial indebtedness could have important consequences for you by adversely affecting our financial condition and thus making it more difficult for us to satisfy our obligations with respect to the notes, including our repurchase obligations. Our substantial indebtedness could:

• increase our vulnerability to adverse general economic and industry conditions;

• require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

• place us at a competitive disadvantage compared to our competitors that have less debt; and

• limit our ability to borrow additional funds.

Despite our current level of indebtedness, we may be able to incur substantially more debt. This could further exacerbate the risks to our financial condition described above.

We may be able to incur significant additional indebtedness in the future. Although the indenture governing the notes issued hereby, the indenture governing our existing senior notes, the indenture governing our existing 10.75% senior subordinated notes, the indenture governing Holdings’ existing senior unsecured floating rate toggle notes and the credit agreement governing our existing senior secured revolving credit facility contains and the credit agreement governing our new senior secured credit facility is proposed to contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. In addition, our existing senior secured revolving credit facility provided for unused commitments of $138.1 million as of March 31, 2009, and we note that our new senior secured revolving credit facility, if entered into, will provide for commitments of $100.0 million (which could increase to $140.0 million if additional commitments are obtained) in place of the existing commitments under our existing senior secured revolving credit facility. To the extent new debt is added to our currently anticipated debt levels, the substantial leverage risks described above would increase. See “Description of Certain Other Indebtedness” and “Description of Notes.”

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We must refinance existing indebtedness prior to the maturity of the notes. Failure to do so could have a material adverse effect upon us.

The maturities of our existing senior notes, our existing 10.75% senior subordinated notes and our existing 9.625% senior subordinated notes are August 15, 2012, August 15, 2014 and February 1, 2012, all of which are before the maturity of the notes offered hereby, and all outstanding loans under our existing senior secured revolving credit facility will be due and payable on August 20, 2010, which is before the maturity of the notes being offered hereby. In addition, the maturity of the existing senior unsecured floating rate toggle notes of Holdings is March 15, 2012 and the proposed maturity of our new senior secured revolving credit facility is August 2012 (or, if our existing senior notes are not repaid, July 2012), each of which is before the maturity of the notes being offered hereby. Based on our financial projections, we will not be able to satisfy all of our and Holdings’ scheduled maturities through cash on hand and cash generated through operations. While the indenture governing the notes offered hereby will permit us, and we expect, to refinance our indebtedness, we cannot assure you that we will be able to refinance this indebtedness, or whether any refinancing will be on commercially reasonable terms. The indenture governing the notes offered hereby will also permit us, subject to the terms of the indenture, to refinance Holdings’ existing notes with our indebtedness. There can be no assurance that the financial terms and covenants (including restrictions on availability) of any new credit facility and/or other indebtedness will be the same or as favorable as those under our existing senior secured revolving credit facility or the indentures governing the notes or any of our existing notes or Holdings’ existing notes. Our ability to refinance other debt (including the debt of Holdings) using availability under our existing senior secured revolving credit facility and, if consummated, our new senior secured credit facility may be limited. In addition, although we have obtained commitments for a new senior secured revolving credit facility, the execution thereof is subject to, among other conditions, the successful completion of this offering. There can be no assurance that the new facility will be consummated.

Our ability and Holdings’ ability to complete a refinancing of any of such indebtedness is subject to a number of conditions beyond our control. If we or Holdings are unable to refinance this indebtedness, our alternatives would consist of negotiating an extension of our existing senior secured revolving credit facility with the lenders and seeking or raising new capital. If we or Holdings are unsuccessful, the lenders under our senior secured revolving credit facility, the holders of any of our existing notes and the holders of Holdings’ existing notes could demand repayment of the indebtedness owed to them on the relevant maturity date. As a result, our ability to pay the principal of and interest on the notes would be adversely affected.

The terms of our existing senior secured revolving credit facility, the indenture governing the notes issued hereby, and the indentures governing our existing senior notes, our existing 10.75% senior subordinated notes and Holdings’ existing senior unsecured floating rate toggle notes may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

Our existing senior secured revolving credit facility contains a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests. In particular, this facility includes covenants restricting, among other things, our ability to:

• incur, assume or guarantee additional debt;

• pay dividends and make other restricted payments;

• create liens;

• use the proceeds from sales of assets and subsidiary stock;

• enter into sale and leaseback transactions;

• make capital expenditures;

• change our business;

• enter into agreements that restrict dividends from subsidiaries;

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• enter into certain transactions with affiliates; and

• transfer all or substantially all of our assets or enter into merger or consolidation transactions.

We expect the new senior secured revolving credit facility to contain restrictive covenants that may restrict our ability to take certain actions.

The indenture governing the notes issued hereby will contain, the indentures governing our existing senior notes and our existing 10.75% senior subordinated notes and Holdings’ existing senior unsecured floating rates note contain, numerous operating and financial covenants, including, among other things, restrictions on our ability to:

• incur, assume or guarantee additional debt;

• pay dividends and make other restricted payments;

• create liens;

• use the proceeds from sales of assets and subsidiary stock;

• enter into sale and leaseback transactions;

• enter into agreements that restrict dividends form subsidiaries;

• make investments or acquisitions;

• change our business;

• enter into transactions with affiliates; and

• transfer all or substantially all of our assets or enter into merger or consolidation transactions.

Our existing senior secured revolving credit facility also includes a requirement that we maintain a maximum leverage ratio and minimum interest coverage ratio and a limitation on capital expenditures.

A failure by us to comply with the covenants contained in our existing senior secured revolving credit facility, the indenture governing the notes issued hereby, the indentures governing our existing notes or Holdings’ existing notes or the new senior secured revolving credit facility, if entered into, could result in an event of default. In the event of any default under our existing senior secured revolving credit facility, the lenders under our existing senior secured revolving credit facility or, if consummated, the lenders under our new senior secured revolving credit facility, could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable, enforce their security interest, require us to apply all of our available cash to repay these borrowings (even if the lenders have not declared a default) or prevent us from making debt service payments on the notes, any of which would result in an event of default under the notes. In addition, future indebtedness could contain financial and other covenants more restrictive than those applicable to our existing senior secured revolving credit facility and the notes. See “Description of Certain Other Indebtedness” and “Description of Notes.”

We may not be able to generate sufficient cash flow to meet our debt service obligations, including payments on the notes.

As of March 31, after giving effect to the issuance of the notes and the applications of proceeds therefrom, our cash on hand and unused commitments under our existing senior secured revolving credit facility would have been approximately $111.8 million and $138.1 million, respectively. Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations will depend on our future financial performance, which will be affected by a range of economic, competitive, regulatory, legislative and business factors, many of which are outside of our control. In addition, the payment and reimbursement practices in our industry require significant amounts of working capital because of delays that often occur between the time that a claim is submitted for payment and the date payment is actually received. If we do not generate sufficient cash

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flow from operations to satisfy our debt obligations, including payments on the notes, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot assure you that any refinancing would be possible or that any assets could be sold on acceptable terms or otherwise. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms, would have an adverse effect on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations under the notes. Additionally, any downgrades to our credit rating may increase the cost and reduce the availability of any refinancing.

Fluctuations in interest rates could adversely affect our liquidity and ability to meet our debt service obligations.

Holdings’ senior unsecured floating rate toggle notes bear interest at variable interest rates. As of March 31, 2009, $475.6 million aggregate principal amount of such indebtedness was outstanding. Holdings has entered into an interest rate swap agreement with respect to such indebtedness, fixing the LIBOR base rate at 4.97% through maturity. Holdings’ consolidated balance sheet as of March 31, 2009 and December 31, 2008 includes a liability of $27.2 million and $30.5 million, respectively, to reflect the fair market value of the interest rate swap as of that date. Holdings relies on distributions from us and our subsidiaries to make any payments on the interest rate swap and the cost to terminate this agreement may differ from the fair market value recorded on the balance sheet of Holdings. Furthermore, the interest rate swap is secured ratably with our existing senior secured revolving credit facility and, if consummated, our new senior secured revolving credit facility. To the extent market interest rates continue to increase, Holdings may experience difficulty making scheduled payments on such obligations and funding its other fixed costs. Further, Holdings’ available cash flow for general corporate requirements may be adversely affected. The semiannual payment obligations on the interest rate swap increase by $2.1 million for each 1.00% that the fixed interest rate of 4.97% paid to the counterparty exceeds the variable interest rate received from the counterparty. Similarly, the semiannual payment obligations on the interest rate swap decrease by $2.1 million when the difference between the fixed interest rate paid to the counterparty and the variable interest rate received from the counterparty reduces by 1.00%.

Not all of our subsidiaries will guarantee the notes, and the assets of our non-guarantor subsidiaries may not be available to make payments on the notes.

The guarantors of the notes will not include all of our subsidiaries. The historical consolidated financial information included in this offering memorandum, however, is presented on a combined basis, including both our guarantor and non-guarantor subsidiaries. At March 31, 2009, after giving effect to the issuance of the notes and the use of proceeds therefrom, the total debt of our non-guarantor subsidiaries would have been less than $20.2 million, including trade payables. In the event that any non-guarantor subsidiary becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, holders of its indebtedness and its trade creditors generally will be entitled to payment on their claims from the assets of that subsidiary before any of those assets are made available to us. Consequently, your claims in respect of the notes will be effectively subordinated to all of the liabilities of our non-guarantor subsidiaries, including trade payables, and the claims (if any) of any third party holders of preferred equity interests in our non-guarantor subsidiaries.

A substantial portion of our assets are held by, and a substantial portion of our income is derived from, our subsidiaries, and the debt of our subsidiary guarantors may restrict payment on the notes.

We hold a substantial portion of assets through our subsidiaries and derive a substantial portion of our operating income from our subsidiaries. We are dependent on the earnings and cash flow of our subsidiaries to meet our obligations with respect to the notes. We cannot assure you that our subsidiaries will be able to, or be permitted to, pay to us amounts necessary to service the notes. In certain circumstances, the indenture governing the notes will permit our subsidiary guarantors to enter into agreements that can limit our ability to receive distributions from our subsidiaries. In the event we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the notes.

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There may be no active trading market for the notes.

The notes will constitute a new issue of securities for which there is no established trading market. We do not intend to list the notes (or any exchange notes that may be issued pursuant to the exchange offer we have agreed to make) on any national securities exchange. Although the initial purchasers have advised us that they currently intend to make a market in the notes (and the exchange notes, if issued), they are not obligated to do so and may discontinue such market making activity at any time without notice. In addition, market making activity will be subject to the limits imposed by the Securities Act and the Securities Exchange Act of 1934, as amended, or the Exchange Act, and may be limited during the exchange offer and the pendency of any shelf registration statement. The notes are being sold pursuant to an exemption from registration under the Securities Act and they may not be publicly offered, sold or otherwise transferred unless they are registered or are sold in a transaction exempt from registration. Although the notes (and the exchange notes, if issued) are expected to be eligible for trading in The Portal^SM Market, there can be no assurance as to the development or liquidity of any market for the notes (or any exchange notes, if issued), the ability of the holders of the notes (and the exchange notes, if issued) to sell their notes (or any exchange notes, if issued) or the price at which the holders would be able to sell their notes (or any exchange notes, if issued).

The market price for the notes may be volatile.

Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the notes offered hereby. The market for the notes, if any, may be subject to similar disruptions. Any such disruptions may adversely affect the value of your notes.

There are restrictions on your ability to resell your notes.

The notes have not been registered under the Securities Act or any state securities laws. Absent registration, the notes may be offered or sold only in transactions that are not subject to or that are exempt from the registration requirements of the Securities Act and applicable state securities laws. Although we have agreed to file and to use our commercially reasonable efforts to have declared effective a registration statement relating to an exchange offer for the notes, we cannot assure you that a registration statement will become or remain effective.

We may not be able to fulfill our repurchase obligations in the event of a change of control.

Upon the occurrence of any change of control, we will be required to make a change of control offer to repurchase the notes. There are similar obligations with respect to our existing senior notes and existing 10.75% senior subordinated notes. In addition, any change of control also would constitute a default under our existing senior secured revolving credit facility. Therefore, upon the occurrence of a change of control, the lenders under our existing senior secured revolving credit facility would have the right to accelerate their loans, and we would be required to prepay all of our outstanding obligations under such facility.

If a change of control occurs, there can be no assurance that we will have available funds sufficient to satisfy our obligations under our existing senior secured revolving credit facility, the indenture governing the notes, the indentures governing our existing notes and, if consummated, our new senior secured revolving credit facility, and to pay the change of control purchase price for any or all of the notes that might be delivered by holders of the notes seeking to accept the change of control offer and, accordingly, none of the holders of the notes may receive the change of control purchase price for their notes. Our failure to make the change of control offer or pay the change of control purchase price when due would result in a default under the indenture governing the notes. See “Description of Notes—Events of Default.”

Fraudulent conveyance laws could void our obligations under the notes.

Our incurrence of debt under the notes may be subject to review under federal and state fraudulent conveyance laws if a bankruptcy, reorganization or rehabilitation case or a lawsuit, including circumstances in

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which bankruptcy is not involved, were commenced by, or on behalf of, our unpaid creditors or unpaid creditors of our guarantors at some future date. Federal and state statutes allow courts, under specific circumstances, to void notes and guarantees and require noteholders to return payments received from debtors or their guarantors. As a result, an unpaid creditor or representative of creditors could file a lawsuit claiming that the issuance of the notes constituted a “fraudulent conveyance.” To make such a determination, a court would have to find that we did not receive fair consideration or reasonably equivalent value for the notes and that, at the time the notes were issued, we:

• were insolvent;

• were rendered insolvent by the issuance of the notes;

• were engaged in a business or transaction for which our remaining assets constituted unreasonably small capital; or

• intended to incur, or believed that we would incur, debts beyond our ability to repay those debts as they matured.

If a court were to make such a finding, it could void all or a portion of our obligations under the notes, subordinate the claim in respect of the notes to our other existing and future indebtedness or take other actions detrimental to you as a holder of the notes, including in certain circumstances, invalidating the notes or the guarantees.

The measure of insolvency for these purposes will vary depending upon the law of the jurisdiction being applied. Generally, a company will be considered insolvent for these purposes if the sum of that company’s debts is greater than the fair value of all of that company’s property, or if the present fair salable value of that company’s assets is less than the amount that will be required to pay its probable liability on its existing debts as they mature. Moreover, regardless of solvency, a court could void an incurrence of indebtedness, including the notes, if it determined that the transaction was made with intent to hinder, delay or defraud creditors, or a court could subordinate the indebtedness, including the notes, to the claims of all existing and future creditors on similar grounds. We cannot determine in advance what standard a court would apply to determine whether we were “insolvent” in connection with the sale of the notes.

The making of the guarantees might also be subject to similar review under relevant fraudulent conveyance laws. A court could impose legal and equitable remedies, including subordinating the obligations under the guarantees to our other existing and future indebtedness or taking other actions detrimental to you as a holder of the notes.

The security interest and liens for the benefit of holders of the notes may be released without such holders’ consent.

The security documents governing the notes generally provide for an automatic release of all liens on any asset securing our existing senior secured revolving credit facility and, if consummated, the new senior secured revolving credit facility, on a first-priority basis that is disposed of in compliance with the provisions of such facility. In addition, the guarantee of a guarantor will be automatically released in connection with a sale of such guarantor in a transaction not prohibited by the indenture. As a result, we cannot assure holders of the notes that the notes will continue to be secured by any such assets. In addition, the capital stock of our subsidiaries will be excluded from the collateral to the extent liens thereon would trigger reporting obligations under Rule 3-16 of Regulation S-X, which requires financial statements from any company whose securities are collateral if its book value or market value would exceed 20% of the principal amount of the notes secured thereby. However, the liens on such securities will continue to secure obligations under our existing senior secured revolving credit facility. Accordingly, as of the date hereof, the collateral will not include the securities of Physicians Reliance LLC and AOR Management Company of Virginia, LLC.

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The collateral may not be valuable enough to satisfy all the obligations secured by such collateral.

We will secure our obligations under the notes by the pledge of certain of our assets. This pledge is also junior in priority to and for the benefit of the lenders under our existing senior secured revolving credit facility and, if consummated, the new senior secured revolving credit facility, and equal in priority to and for holders of our existing senior notes. The notes and the related guarantees will be secured on a second-priority lien basis (subject to certain exceptions and permitted liens) by substantially all of the assets and properties of US Oncology and the guarantors that secure our existing senior secured revolving credit facility on a first-priority lien basis.

Although the holders of obligations secured by a first-priority lien on the collateral and the holders of obligations secured by a second-priority lien on the collateral, including the notes, will share in the proceeds of the collateral, the holders of obligations secured by a first-priority lien in the collateral will be entitled to receive proceeds from any realization of the collateral to repay the obligations held by them in full before the holders of the notes, and the holders of other obligations secured by a second-priority lien in the collateral receive any such proceeds.

The notes will share equally and ratably in all collateral with our existing senior notes, which will be amended to include such security in connection with the offering of the notes. The actual value of such collateral at any time will depend upon market and other economic conditions.

After giving effect to the issuance of the notes and the use of proceeds therefrom, we would have had approximately $138.1 million of availability under our existing senior secured revolving credit facility as of March 31, 2009. As noted above, all indebtedness under our existing senior secured revolving credit facility is and, if consummated, our new senior secured revolving credit facility, which we expect to provide for aggregate borrowings of up to $100.0 million (which could increase to $140.0 million if additional commitments are obtained), will be secured by a first-priority lien on the collateral (subject to certain exceptions). In addition, under the terms of the indenture governing the notes, we may grant an additional lien on any property or asset that constitutes collateral in order to secure any obligation permitted to be incurred pursuant to the indenture. Any such additional lien may be a lien that is senior to the lien securing the notes or may be a second-priority lien that ranks pari passu with the lien securing the notes. In either case, any grant of additional liens on the collateral would further dilute the value of the second-priority lien on the collateral securing the notes. Further, as discussed above, we will be permitted under the terms of the indenture governing the notes to sell all assets that constitute collateral and not apply the proceeds to invest in additional assets that will secure the notes or repay outstanding indebtedness.

The value of the collateral in the event of a liquidation will depend upon market and economic conditions, the availability of buyers and similar factors. No independent appraisals of any of the pledged property have been prepared by or on behalf of us in connection with this offering of the notes. Accordingly, we cannot assure holders of the notes that the proceeds of any sale of the collateral following an acceleration to maturity with respect to the notes would be sufficient to satisfy, or would not be substantially less than, amounts due on the notes and the other debt secured thereby.

If the proceeds of any sale of the collateral were not sufficient to repay all amounts due on the notes, the holder of the notes (to the extent their notes were not repaid from the proceeds of the sale of the collateral) would have only an unsecured claim against our remaining assets. By their nature, some or all of the collateral may be illiquid and may have no readily ascertainable market value. Likewise, we cannot assure holders of the notes that the collateral will be saleable or, if saleable, that there will not be substantial delays in their liquidation. To the extent that liens, rights and easements granted to third parties encumber assets located on property owned by us or constitute subordinate liens on the collateral, those third parties may have or may exercise rights and remedies with respect to the property subject to such encumbrances (including rights to require marshalling of assets) that could adversely affect the value of the collateral located at that site and the ability of the collateral agent to realize or foreclose on the collateral at that site.

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In addition, the asset sale covenant and the definition of asset sale in the indenture governing the notes have a number of significant exceptions pursuant to which we will be able to sell collateral without being required to reinvest the proceeds of such sale into assets that will comprise collateral or to make an offer to the holders of the notes to repurchase the notes. The indenture governing the notes also permits us, subject to compliance with certain financial tests, to issue additional secured debt, including debt secured equally and ratably by the same assets pledged for the benefit of the holders of the notes. This would reduce amounts payable to holders of the notes from the proceeds of any sale of the collateral.

The rights of holders of the notes with respect to the collateral will be substantially limited by the terms of the intercreditor agreement.

Under the terms of the intercreditor agreement that will be entered into in connection with our issuance of the notes, at any time that obligations that have the benefit of the first-priority liens on the collateral are outstanding, any actions that may be taken in respect of the collateral, including the ability to cause the commencement of enforcement proceedings against the collateral and to control the conduct of such proceedings, and the approval of amendments to, releases of collateral from the lien of, and waivers of past defaults under, the security documents governing the collateral, will be at the direction of the holders of the obligations secured by the first-priority liens, including the existing senior secured revolving credit facility and, if consummated, our new senior secured revolving credit facility, and the trustee, on behalf of the holders of the notes, will not have the ability to control or direct such actions, even if the rights of the holders of the notes are adversely affected, subject to certain exceptions. See “Description of Notes—Security for the Notes” and “Description of Notes—Amendment, Supplement and Waiver.” Under the terms of the intercreditor agreement, at any time that obligations that have the benefit of the first-priority liens on the collateral are outstanding, if the holders of such indebtedness release the collateral for any reason whatsoever, including, without limitation, in connection with any sale of assets, the second-priority security interest in such collateral securing the notes will be automatically and simultaneously released without any consent or action by the holders of the notes, subject to certain exceptions. The collateral so released will no longer secure our and the guarantors’ obligations under the notes. In addition, because the holders of the indebtedness secured by first-priority liens in the collateral control the disposition of the collateral, such holders could decide not to proceed against the collateral, regardless of whether there is a default under the documents governing such indebtedness or under the indenture governing the notes. In such event, the only remedy available to the holders of the notes would be to sue for payment on the notes and the related guarantees. In addition, the intercreditor agreement will give the holders of first-priority liens on the collateral the right to access and use the collateral securing the notes on a first lien basis to allow those holders to protect the collateral and to process, store and dispose of the collateral.

The value of the collateral may not be sufficient to secure post-petition interest.

In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding against us, holders of the notes will only be entitled to post-petition interest under the bankruptcy code to the extent that the value of their security interest in the collateral is greater than their pre-bankruptcy claim. If the collateral has a value equal or less than their pre-bankruptcy claim, the holders of the notes will not be entitled to post-petition interest under the bankruptcy code. No appraisal of the fair market value of the collateral has been prepared in connection with this offering and we therefore cannot assure you that the value of the noteholders’ interest in the collateral equals or exceeds the principal amount of the notes. See “—The collateral may not be valuable enough to satisfy all the obligations secured by such collateral.”

The waiver in the intercreditor agreement of rights of marshaling may adversely affect the recovery rates of holders of the notes in a bankruptcy or foreclosure scenario.

The notes and the guarantees are secured on a second-priority lien basis by the collateral. The intercreditor agreement provides that, at any time that obligations that have the benefit of the first-priority liens, including the existing senior secured credit facility and, if consummated, our new senior secured revolving credit facility, on the collateral are outstanding the holders of the notes, the trustee under

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the indenture governing the notes and the notes collateral agent may not assert or enforce any right of marshaling accorded to a junior lienholder, as against the holders of such indebtedness secured by first-priority liens in the collateral. Without this waiver of the right of marshaling, holders of such indebtedness secured by first-priority liens in the collateral would likely be required to liquidate collateral on which the notes did not have a lien, if any, prior to liquidating the collateral, thereby maximizing the proceeds of the collateral that would be available to repay our obligations under the notes. As a result of this waiver, the proceeds of sales of the collateral could be applied to repay any indebtedness secured by first-priority liens in the collateral before applying proceeds of other collateral securing indebtedness, and the holders of notes may recover less than they would have if such proceeds were applied in the order most favorable to the holders of the notes.

In the event of a bankruptcy of us or any of the guarantors, holders of the notes may be deemed to have an unsecured claim to the extent that our obligations in respect of the notes exceed the fair market value of the collateral securing the notes.

In any bankruptcy proceeding with respect to us or any of the guarantors, it is possible that the bankruptcy trustee, the debtor-in-possession or competing creditors will assert that the fair market value of the collateral with respect to the notes on the date of the bankruptcy filing was less than the then-current principal amount of the notes. Upon a finding by the bankruptcy court that the notes are under-collateralized, the claims in the bankruptcy proceeding with respect to the notes would be bifurcated between a secured claim and an unsecured claim, and the unsecured claim would not be entitled to the benefits of security in the collateral. Other consequences of a finding of under-collateralization would be, among other things, a lack of entitlement on the part of the notes to receive post-petition interest and a lack of entitlement on the part of the unsecured portion of the notes to receive other “adequate protection” under federal bankruptcy laws. In addition, if any payments of post-petition interest had been made at the time of such a finding of under-collateralization, those payments could be recharacterized by the bankruptcy court as a reduction of the principal amount of the secured claim with respect to the notes.

Because each guarantor’s liability under its guarantees may be reduced to zero, avoided or released under certain circumstances, you may not receive any payments from some or all of the guarantors.

The notes have the benefit of the guarantees of the guarantors. However, the guarantees by the guarantors are limited to the maximum amount that the guarantors are permitted to guarantee under applicable law. As a result, a guarantor’s liability under its guarantee could be reduced to zero, depending upon the amount of other obligations of such guarantor. Further, under the circumstances discussed more fully above, a court under federal and state fraudulent conveyance and transfer statutes could void the obligations under a guarantee or further subordinate it to all other obligations of the guarantor. See “—Fraudulent conveyance laws could void our obligations under the notes.” In addition, you will lose the benefit of a particular guarantee if it is released under certain circumstances described under “Description of the Notes—Note Guarantees.”

Bankruptcy laws may limit the ability of holders of the notes to realize value from the collateral.

The right of the trustee to repossess and dispose of the collateral upon the occurrence of an event of default under the indenture governing the notes is likely to be significantly impaired by applicable bankruptcy law if a bankruptcy case were to be commenced by or against us before the trustee repossessed and disposed of the collateral. For example, under Title 11 of the United States Code, or the United States Bankruptcy Code, pursuant to the automatic stay imposed upon the bankruptcy filing, a secured creditor is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security repossessed from such debtor, or taking other actions to levy against a debtor, without bankruptcy court approval. Moreover, the United States Bankruptcy Code permits the debtor to continue to retain and to use collateral even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given “adequate protection.” The meaning of the term “adequate protection” may vary according to circumstances (and is within the discretion of the bankruptcy court), but it is intended in general to protect the value of the secured creditor’s interest in the collateral and may

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include cash payments or the granting of additional security, if and at such times as the court in its discretion determines, for any diminution in the value of the collateral as a result of the automatic stay of repossession or disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. Generally, adequate protection payments, in the form of interest or otherwise, are not required to be paid by a debtor to a secured creditor unless the bankruptcy court determines that the value of the secured creditor’s interest in the collateral is declining during the pendency of the bankruptcy case. Due to the imposition of the automatic stay, the lack of a precise definition of the term “adequate protection” and the broad discretionary powers of a bankruptcy court, it is impossible to predict (1) how long payments under the notes could be delayed following commencement of a bankruptcy case, (2) whether or when the trustee could repossess or dispose of the collateral or (3) whether or to what extent holders of the notes would be compensated for any delay in payment or loss of value of the collateral through the requirement of “adequate protection.”

The collateral is subject to casualty risks.

We are obligated under our existing senior secured revolving credit facility and we will be obligated under the indenture governing the notes, and, if consummated, under the new senior secured revolving credit facility to at all times cause all the collateral to be properly insured and kept insured against loss or damage by fire or other hazards. There are, however, some losses, including losses resulting from terrorist acts, that may be either uninsurable or not economically insurable, in whole or in part. As a result, we cannot assure holders of notes that the insurance proceeds will compensate us fully for our losses. If there is a total or partial loss of any of the collateral, we cannot assure holders of the notes that the proceeds received by us in respect thereof will be sufficient to satisfy all the secured obligations, including the notes.

In the event of a total or partial loss to any of the mortgaged facilities, certain items of equipment and inventory may not be easily replaced. Accordingly, even though there may be insurance coverage, the extended period needed to manufacture replacement units or inventory could cause significant delays.

Rights of holders of the notes in the collateral may be adversely affected by the failure to perfect security interests in collateral.

Applicable law requires that a security interest in certain tangible and intangible assets can only be properly perfected and its priority retained through certain actions undertaken by the secured party. The liens in the collateral securing the notes may not be perfected with respect to the claims of the notes if the collateral agent is not able to take the actions necessary to perfect any of these liens on or prior to the date of the indenture governing the notes. Specifically, we do not expect the collateral agent to have completed all the actions necessary to perfect the liens in any real property by the time of completion of this offering. In addition, applicable law requires that certain property and rights acquired after the grant of a general security interest, such as real property, equipment subject to a certificate of title and certain proceeds, can only be perfected at the time such property and rights are acquired and identified. There can be no assurance that we will inform the trustee of the future acquisition of property and rights that constitute collateral, and that the necessary action will be taken to properly perfect the security interest in such after-acquired collateral. Neither the trustee nor the notes collateral agent has an obligation to monitor the acquisition of additional property or rights that constitute collateral or the perfection of any security interest. Such failure may result in the loss of the security interest in the collateral or the priority of the security interest in favor of the notes against third parties.

In addition, a portion of the accounts receivable collateral consists of loans made by us to affiliated practices, which loans are secured by the practices’ receivables from governmental entities. Although collections from these accounts receivable are deposited into our accounts on a nightly basis to repay such loans under the terms of our service agreements, in the event such deposits were not made, there can be no assurance that we will be successful in securing repayment of such loans or realizing the value of the receivables that serve as collateral therefor, which, in turn would adversely impact the value of the collateral securing the notes.

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Any future pledge of collateral in favor of the holders of the notes might be voidable in bankruptcy.

Any future pledge of collateral in favor of the holders of the notes, including pursuant to security documents delivered after the date of the indenture governing the notes, might be voidable by the pledgor (as debtor in possession) or by its trustee in bankruptcy if certain events or circumstances exist or occur, including, under the United States Bankruptcy Code, if the pledgor is insolvent at the time of the pledge, the pledge permits the holders of the notes to receive a greater recovery than if the pledge had not been given and a bankruptcy proceeding in respect of the pledgor is commenced with 90 days following the pledge, or, in certain circumstances, a longer period.

We will in most cases have control over the collateral.

The security documents generally allow us and the guarantors to remain in possession of, retain exclusive control over, to freely operate, and to collect, invest and dispose of any income from, the collateral. These rights may adversely affect the value of the collateral at any time.

The collateral securing the notes may be substantially different from the collateral securing our existing senior secured revolving credit facility.

The collateral securing the notes may be substantially different from the collateral securing our existing senior secured revolving credit facility and, if consummated, our new senior secured revolving credit facility. Indebtedness under our existing senior secured revolving credit facility is guaranteed by, and we expect our new senior secured revolving credit facility, if consummated to be guaranteed by all of our current restricted subsidiaries, all of our future restricted subsidiaries and by Holdings, and is or in the case of the new senior secured revolving credit facility will be secured by a first priority security interest in substantially all of our existing and future real and personal property, including accounts receivable, inventory, equipment, general intangibles, intellectual property, investment property, cash and a first priority pledge of our capital stock and the capital stock of the guarantor subsidiaries. The collateral securing the notes will not include the capital stock of our subsidiaries if the book value (or market value, if greater) of such subsidiary’s capital stock exceeds 20% of the principal amount of the notes, all of which will continue to secure our existing senior secured revolving credit facility on a first-priority lien basis. See “Description of Notes—Security for the Notes”, and “Description of Certain Other Indebtedness—Our Existing Senior Secured Revolving Credit Facility.”

We are a wholly owned subsidiary of Holdings. Holdings is a holding company and therefore depends on our ability and the ability of our subsidiaries to make distributions to service its obligations under its existing senior unsecured floating rate toggle notes and other indebtedness.

As of March 31, 2009, the aggregate principal amount of Holdings’ senior unsecured floating rate toggle notes outstanding was $475.6 million. In connection with issuing the Holdings notes, Holdings entered into an interest rate swap agreement, with a notional amount of $425.0 million, fixing the LIBOR base rate at 4.97% through maturity in 2012. Holdings depends on us and our subsidiaries, who conduct the operations of the business, for dividends and other payments to generate the funds necessary to meet its financial obligations, including payments of principal and interest on its existing senior unsecured floating rate toggle notes and obligations on its interest rate swap agreement. However, we are not obligated to make funds available to Holdings for payment on the Holdings’ notes and interest rate swap. The terms of the indenture governing the notes will restrict (subject to the ability to make payment to Holdings to service its interest rate swap), and the terms of our existing senior secured revolving credit facility and, if consummated, our new senior secured revolving credit facility, and the terms of the indentures governing our existing senior notes and our existing 10.75% senior subordinated notes restrict, us and certain of our subsidiaries from, in each case, paying dividends or otherwise transferring assets to Holdings. Such restrictions include, among others, financial covenants, prohibition of dividends in the event of default and limitations on the total amount of dividends and other restricted payments. In addition, legal and contractual restrictions in agreements governing other current and future indebtedness, as well as financial condition and operating requirements of Holdings’ subsidiaries,

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currently limit and may, in the future, limit Holdings’ ability to obtain cash from us. The earnings from, or other available assets of us, may not be sufficient to pay dividends or make distributions or loans to enable Holdings to make cash payments of interest in respect of its obligations when such payments are due.

As of March 31, 2009, we had the ability to make approximately $26.4 million in restricted payments (including payments to Holdings to service its obligations), which amount increases based on capital contributions to us and by 50 percent of our net income and is reduced by i) the amount of any restricted payments made and ii) our net losses, excluding certain non-cash charges such as the $380.0 million goodwill impairment during the three months ended March 31, 2008. Delaware law also requires that we be solvent both at the time, and immediately following, a restricted payment to Holdings. Because Holdings relies on dividends from us to fund cash interest payments on its existing senior unsecured floating rate toggle notes, in the event that such restrictions prevent us from paying such a dividend, Holdings would be unable to pay interest on such notes in cash and would instead be required to pay PIK interest. Unlike interest on Holdings’ existing notes, which may be settled in cash or through the issuance of additional notes, payments due to the swap counterparty must be made in cash. As a result of the current and projected low interest rate environment, and the related expectation that Holdings will continue to be a net payer on the interest rate swap, we believe that cash payments for the interest rate swap obligations, although permitted under the notes offered hereby, will reduce the availability under the restricted payments provisions in our indebtedness to a level that additional payments for cash interest for Holdings’ existing notes may not be prudent and therefore, no longer remain probable.

Our principal stockholder’s interest may conflict with yours.

An investor group led by Welsh, Carson, Anderson & Stowe IX, L.P., or Welsh Carson IX, an investment fund owned by Welsh Carson, owns approximately 61.0 percent of our parent’s outstanding common stock and approximately 81.3% of its outstanding participating preferred stock and controls a substantial portion of the voting power of such outstanding equity securities. Welsh Carson IX’s interests in exercising control over our business may conflict with the interests you as a holder of the notes.

A portion of the net proceeds of this offering will be received by the initial purchasers and certain of their affiliates. In addition, we have received commitments from affiliates of the initial purchasers and certain of their affiliates for our new senior secured revolving credit facility. These relationships may present a conflict of interest.

We intend to use the net proceeds from this offering to repay outstanding indebtedness under our existing term loan credit facility. Affiliates of several of the initial purchasers are lenders under our existing term loan facility and will receive a portion of such net proceeds. In addition, we have received commitments from affiliates of the initial purchasers for our new senior secured revolving credit facility. These relationships may present a conflict of interest. See “Description of Certain Other Indebtedness” and “Plan of Distribution.”

The notes may be issued with original issue discount for U.S. federal income tax purposes.

The notes may be issued with original issue discount for U.S. federal income tax purposes. In such an event, United States Holders will be required to include original issue discount in income as it accrues for U.S. federal income tax purposes in advance of receiving cash that corresponds to that income. See “Certain Material U.S. Federal Income Tax Considerations.”

Risks Relating to Our Industry

Continued efforts by commercial payers to reduce reimbursement levels, change reimbursement methodologies or control the way in which services are provided could adversely affect us.

Commercial payers continue to seek to negotiate lower levels of reimbursement for cancer care services, with a particular focus on reimbursement for pharmaceuticals. A disproportionate majority of affiliated practices’ profitability is attributable to reimbursement from commercial payers. There is a risk that commercial payers will

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seek reductions in pharmaceutical reimbursement similar to those included in the recent decisions by Medicare and Medicaid, formally the Centers for Medicare and Medicaid Services or CMS, and in federal legislation discussed below. Any reductions in reimbursement levels could harm us and our affiliated physicians. In addition, several payers are trying to implement Mandatory Vendor Imposition programs under which cancer patients or their oncologists would be required to obtain pharmaceuticals from a third-party. That third-party, rather than the oncologist, would then be reimbursed. Private payers have the ability to implement such programs through benefit designs that offer patients significant incentives to receive drugs in this fashion as well as through negotiations with practices. As described below, the United States Department of Health and Human Services, or HHS, was required to implement a program under which oncologists may elect to receive drugs from a Medicare contractor, rather than purchase drugs and seek reimbursement. If such a program is successfully implemented for Medicare, private payers may follow. Commercial payers are also attempting to reduce reimbursement for other services, such as diagnostic imaging tests, by requiring that such tests be performed by specific providers within a given market or otherwise limiting the circumstances under which they will provide reimbursement for those services. In the event that payers succeed with these initiatives, our practices’ and our results of operations could be adversely affected.

Changes in Medicare reimbursement may continue to adversely affect our results of operations.

Government organizations, such as CMS are the largest payers for our collective group of affiliated practices. For the three months ended March 31, 2009, the affiliated practices derived approximately 39.4% of their net patient revenue from services provided under the Medicare program (of which 6.4% relates to Medicare managed care programs). As such, changes in Medicare reimbursement practices have been initiated over the past several years, and which are continuing into 2009, may adversely affect our results of operations. Several changes which have and may continue to adversely affect us include:

• Change in Medicare reimbursement methodology based on average wholesale price, or AWP, to average sales price, or ASP, for oncology pharmaceuticals administered in physicians’ offices effective January 1, 2005 and its impact on differential pricing offered on pharmaceuticals;

• Elimination of payments for data submission under the Medicare Demonstration Project under which physicians were reimbursed during 2005 and 2006 for providing certain data relating to quality of care for cancer patients;

• Implementation of the Competitive Acquisition Program, or CAP, which began August 1, 2006, should any affiliated practices elect to participate in this program;

• CMS changes to the Practice Expense, or PE, Methodology for non-drug services reimbursement which is being phased in from 2007 to 2010;

• Change in Medicare fee schedule conversion factors for 2010, which if adopted, may result in a decrease of 21.5%;

• Capping of Medicare imaging reimbursement at the lower or Hospital Outpatient Prospective Payment System, or HOPPS, rates or Physician Fee Schedule, or PFS, National Payment Amounts under the Deficit Reduction Act, or DRA; and

• A National Coverage Determination, or NCD, issued by the CMS on July 30, 2007, eliminating coverage of erythropoiesis-stimulating agents, or ESAs, for patients with certain types of cancer or receiving certain types of drug therapy, and limiting coverage of ESAs in certain other circumstances, and subsequent label change by the Food and Drug Administration, or FDA, including similar restrictions, which are discussed in greater detail below.

The Obama administration has identified healthcare as a policy priority and has released an outline of its healthcare policy initiatives as they relate to the 2010 federal budget. The outline identifies guiding principles for healthcare reform and spending, which include increasing access to and affordability of healthcare, primarily by ensuring access to health insurance, increasing effectiveness of care, through effective use of technology and an

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emphasis on evidence-based medicine, maintaining patient choice, emphasizing preventive care and enhancing the fiscal sustainability of the U.S. healthcare system. Specific initiatives described in the outline include reducing drug costs for federal programs by increasing availability of generics and increasing the Medicaid rebates payable by manufacturers to states, increasing incentives to reduce unnecessary variability in treatment and to practice evidence-based medicine, incentivizing the use of electronic medical records and other technology, and reducing unnecessary or wasteful spending. Similarly, some states in which we operate have undertaken, or are considering, healthcare reform initiatives that also address these issues. While many of the stated goals of the initiatives are consistent with our own mission to increase access to care that is effective, efficient and based upon the latest available scientific evidence, additional regulation and continued fiscal pressure may adversely affect our business.

The reductions in Medicare reimbursement may also cause some oncologists to cease providing care in the physician office setting either by retiring from the practice of medicine or by moving to a hospital setting or they may cease charging for drugs administered in the office by choosing to obtain drugs through CAP. Any such reductions in our affiliated practices would adversely affect our results of operations. In addition, any reduction in the overall size of the outpatient oncology market could adversely affect our prospects for growth and business development. Recently, CMS has implemented a pilot program in which third party contractors are retained to seek recovery of allegedly erroneous payments by governmental programs and are paid based upon successful recoveries. We believe that the increasing national budget deficit, aging population and the prescription drug benefit will mean that pressure to reduce healthcare costs, and drug costs in particular, will continue to intensify. For a more complete description of the Medicare reimbursement changes and their impact on us, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reimbursement Matters.”

Restrictions on reimbursement by government programs for ESAs have resulted in a material and continuing reduction in revenues and profits of our affiliated practices and us.

ESAs are widely-used drugs for the treatment of anemia, which is a condition that occurs when the level of healthy red blood cells in the body becomes too low, thus inhibiting the blood’s ability to carry oxygen. Many cancer patients suffer from anemia either as a result of their disease or as a result of the treatments they receive to treat their cancer. ESAs have historically been used by oncologists to treat anemia caused by chemotherapy, as well as anemia in cancer patients who are not currently receiving chemotherapy. ESAs are administered to increase levels of healthy red blood cells and are an alternative to blood transfusions.

In March 2007, the FDA issued a public health advisory outlining new safety information, including revised product labeling, about ESAs which it later revised on November 8, 2007. In particular, the FDA highlighted studies that concluded that an increased risk of death may occur in cancer patients who are not receiving chemotherapy and who are treated with ESAs. The FDA advisory and subsequent actions led the CMS to open a NCA, on March 14, 2007, on the use of ESAs for conditions other than advanced kidney disease, which was the first step toward issuing a proposed national coverage determination. The NCD was released on July 30, 2007, and was effective as of that date.

The NCD went significantly beyond limiting coverage for ESAs in patients who are not currently receiving chemotherapy that was referenced in the initial FDA advisory referred to above. The NCD included determinations that eliminate coverage for anemia not related to cancer treatment. Coverage was also eliminated for patients with certain other risk factors. In circumstances where ESA treatment is reimbursed, the NCD established conditions for Medicare coverage that (i) require that in order to commence ESA treatment, patients be significantly more anemic than was common practice prior to the NCD; (ii) impose limitations on the duration of ESA therapy and the circumstances in which it should be continued and (iii) limit dosing and dose increases in nonresponsive patients.

Subsequent to the issuance of the NCD, the Oncologic Drug Advisory Committee of the FDA, or ODAC, met on March 13, 2008, to further consider the use of ESAs in oncology. Based upon the ODAC findings on

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July 30, 2008, FDA published final new labeling for the ESA drugs Aranesp and Procrit. Unlike the NCD from CMS, which governs reimbursement, rather than prescribing, for Medicare beneficiaries only, the FDA approved labeling indicates the conditions under which the FDA believes that use of a product is safe and effective. The revised labeling was effective as of August 14, 2008, and primarily changed the labeled use of ESAs in the following areas:

• ESAs are “not indicated” for patients receiving chemotherapy when the anticipated outcome is cure;

• ESA therapy should not be initiated when hemoglobin levels are ³ 10 grams per deciliter, or g/dL; and

• References in the labeling to an upper limit of 12 g/dL have been removed.

The FDA did not adopt an ODAC recommendation to limit ESA in head/neck and breast cancers, or any other tumor type. FDA’s action on this point significantly reduced the impact of a possible decrease in utilization.

FDA also mandated that a Risk Evaluation and Mitigation Strategy, or REMS, with respect to ESAs be adopted. A REMS proposal by manufacturers was submitted to the FDA in late August, 2008. The REMS may require additional patient consent/education requirements, medical guides and physician registration procedures. The length of time required for the FDA to approve a REMS and for the manufacturers to implement the new program is uncertain, however we believe it may be released during the first quarter of 2009. Once implemented, the REMS will outline additional, if any, procedural steps that will be required for qualified physicians to order and prescribe ESAs for their patients.

Operating income attributable to ESAs administered by our network of affiliated physicians was $32.1 million in 2008 compared to $58.0 million in 2007 and $5.6 million and $10.2 million during the three months ended March 31, 2009 and 2008, respectively. The operating income reflects results from our Medical Oncology Services segment which relate primarily to the administration of ESAs by practices receiving comprehensive management services and from our Pharmaceutical Services segment which includes purchases by physicians affiliated under the OPS model, as well as distribution and group purchasing fees received from manufacturers. As the NCD was effective July 30, 2007, the impact of reduced ESA utilization was not fully reflected in the results for the last half of 2007. In addition, there was a net increase in ESA pricing, the impacts of which are included in the 2008 financial results.

It is not possible to estimate the impact of the REMS on our financial results as it relates to prescribing patterns, until the REMS is in effect (expected to be sometime in 2009). We believe a possible impact of the REMS could be further reductions in ESA utilization. The significant decline in ESA usage has had a significant adverse affect on our results of operations, and, particularly, our Medical Oncology Services and Pharmaceutical Services segments, and we cannot assure you that a further decline will not occur. Decreased financial performance of affiliated practices as a result of declining ESA usage could also have an effect on their relationship with us and lead to increased pressure to amend the terms of their management services agreements. In addition, reduced utilization of ESAs may adversely impact our ability to continue to receive favorable pricing from ESA manufacturers. Decreased financial performance may also adversely impact our ability to obtain acceptable credit terms from pharmaceutical manufacturers, including manufacturers of products other than ESAs.

Continued review of pharmaceutical companies and their pricing and marketing practices could result in lowered reimbursement for pharmaceuticals and adversely affect us.

Continued review of pharmaceutical companies by government payers could result in lowered reimbursement for pharmaceuticals, which could harm us. Because Medicare reimbursement is no longer based on AWP, governmental scrutiny of AWP, which has been a focus of several investigations by government agencies may be expected to decline. However, many state Medicaid programs continue to reimburse for drugs on an AWP-based model. Moreover, existing and prior lawsuits and investigations regarding AWP have resulted and could continue to result in

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significant settlements that include corporate integrity agreements affecting pharmaceutical manufacturer behavior. Corporate integrity agreements subject healthcare providers, including pharmaceutical manufacturers, to burdensome and costly monitoring and reporting requirements to the Office of Inspector General of the HHS. Additionally, many of the concerns of government agencies will continue to apply under any reimbursement model. Because our network is a significant purchaser of pharmaceuticals, the other services we provide to, and relationships we have with pharmaceutical manufacturers, could be subject to scrutiny to the extent they are not viewed as bona fide arms length relationships or are inappropriately linked to pharmaceutical purchasing. Furthermore, possibly in response to such scrutiny as well as significant adverse coverage by the media, some pharmaceutical manufacturers could alter pricing or marketing strategies that increase the cost of pharmaceuticals to oncologists, which in turn could adversely affect us. Finally, because our network of affiliated practices participates in a group purchasing organization that is a significant purchaser of pharmaceuticals paid for by government programs, we or our network of affiliated practices have become involved in these investigations or lawsuits, and are the target of such pharmaceutical-related scrutiny. Any of these events could have a material adverse effect on us.

ASP-based reimbursement could make it more difficult for us to obtain favorable pricing from pharmaceutical companies.

Historically, one of our key business strengths has been our ability to obtain pricing for pharmaceuticals that we believe is better than prices widely available in the marketplace. Starting January 1, 2005, Medicare began reimbursing for oncology pharmaceuticals based on 106% of the average price at which pharmaceutical companies sell those drugs to oncologists and other users, so that any discount to any purchaser would have the effect of reducing reimbursement for drugs administered in all physician offices. We believe that this change has made pharmaceutical companies more reluctant to offer market-differentiated pricing to us and has reduced the degree of such differentiation. Any decrease in our ability to obtain pricing for pharmaceuticals that is more favorable than the market as a whole could adversely affect our ability to attract new customers and retain existing customers, particularly under our OPS model, and could adversely affect our business and results of operations.

We conduct business in a heavily regulated industry, and changes in regulations or violations of regulations may directly or indirectly, reduce our revenues and harm our business.

The healthcare industry is highly regulated, and there can be no assurance that the regulatory environment in which we operate will not change significantly and adversely in the future. Several areas of regulatory compliance that may affect our ability to conduct business include:

• federal and state anti-kickback laws;

• federal and state self-referral and financial inducement laws, including the federal Ethics in Patient Referrals Act of 1989, also known as the Stark Law;

• federal and state false claims laws;

• state laws regarding prohibitions on the corporate practice of medicine;

• state laws regarding prohibitions on fee splitting;

• federal and state laws regarding pharmacy regulations;

• federal and state laws regarding pharmaceutical distribution; and

• federal and state laws and regulations applicable to the privacy and security of health information and other personal information.

These federal and state laws and regulations are extremely complex. In many instances, the industry does not have the benefit of significant regulatory or judicial interpretation of these laws and regulations. It also is possible that the courts could ultimately interpret these laws in a manner that is different from our interpretations.

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In addition, federal and state agencies responsible for enforcement and interpretation of these laws, as well as courts, continue to issue new interpretations and change prior interpretations of these laws, including some changes that may have an adverse impact on our operations or require us to alter certain of our business arrangements. While we believe that we are currently in compliance in all material respects with applicable laws and regulations, a determination that we have violated these laws, or the public announcement or perception that we are being investigated for possible violations of these laws, would have an adverse effect on our business, financial condition and results of operations. In addition to our affiliated practices, hospitals and other healthcare providers with which we, or our affiliated practices, have entered into various arrangements are also heavily regulated. To the extent that our arrangements with these parties or their independent activities fail to comply with applicable laws and regulations, our business and financial condition could be adversely affected. For a more complete description of these regulations, see “Government Regulation.”

We face the risk of governmental investigation and qui tam litigation relating to regulations governing billing for medical services.

The federal government is aggressive in examining billing practices and seeking repayments and penalties allegedly resulting from improper billing and reimbursement practices. In addition, federal and some state laws authorize private whistleblowers to bring false claim, or qui tam suits, on behalf of the government and reward the whistleblower with a portion of any final recovery. We have previously been named in qui tam suits. In each of the qui tam suits naming us of which we are aware, the United States Department of Justice, or DOJ, has not intervened and such suits have been dismissed. However, because qui tam lawsuits are filed under seal, we could be named in other such suits of which we are not aware. For the past several years, the number of qui tam suits filed against healthcare companies and the aggregate amount of recoveries under such suits have increased significantly. This trend increases the risk that we may become subject to additional qui tam lawsuits.

Although we believe that our operations comply with applicable laws and we intend to vigorously defend ourselves against allegations of wrongdoing, the costs of addressing such suits, as well as the amount of any recovery in the event of a finding of wrongdoing on our part, could be significant. The existence of qui tam litigation involving us may also strain our relationships with our affiliated physicians, particularly those physicians or practices named in such suits, or with our pharmaceutical suppliers.

In previous qui tam suits of which we have been made aware, the DOJ has declined to intervene in such suits and the suits have been dismissed. Qui tam suits are brought by private individuals, and there is no minimum evidentiary or legal threshold for bringing such a suit. The DOJ is legally required to investigate the allegations in these suits. The subject matter of many such claims may relate both to our alleged actions and alleged actions of an affiliated practice. Because the affiliated practices are separate legal entities not controlled by us, such claims necessarily involve a more complicated, higher cost of defense, and may adversely impact the relationship between the practices and us. If the individuals who file complaints and/or the United States were to prevail in these claims against us, and the magnitude of the alleged wrongdoing were determined to be significant, the resulting judgment could have a material adverse financial and operational effect on us, including potential limitations in future participation in governmental reimbursement programs. In addition, addressing complaints and government investigations requires us to devote significant financial and other resources to the process, regardless of the ultimate outcome of the claims.

We operate in a highly competitive industry.

We have existing competitors, as well as a number of potential new competitors, some of whom have greater name recognition and significantly greater financial, technical, marketing and managerial resources than we do. This may permit our competitors to devote greater resources than we can to the development and promotion of their services. These competitors may also undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to existing and potential employees.

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We also expect our competitors to develop additional strategic relationships with providers, pharmaceutical companies and payers, which could result in increased competition. The introduction of new and enhanced services, acquisitions, industry consolidation and the development of additional strategic relationships by our competitors could cause price competition, a decline in revenue or a loss of market acceptance of our services, or make our services less attractive. Additionally, in developing cancer centers, we compete with a number of non-profit organizations that can finance acquisitions and capital expenditures on a tax-exempt basis or receive charitable contributions unavailable to us. Such organizations may be willing to provide services at rates lower than we would require to operate profitably.

With respect to research activities, the competitive landscape is fragmented, with competitors ranging from small limited-service providers to large full-service contract research organizations with global operations. Some of these large contract research organizations have access to more financial resources than we do.

Industry forces are affecting us and our competitors. In recent years, the healthcare industry has undergone significant changes driven by various efforts to reduce costs, including national healthcare reform, trends toward managed care, limits in Medicare coverage and reimbursement levels, consolidation of healthcare service companies and collective purchasing arrangements by office-based healthcare practitioners. The changes in our industry have caused greater competition among industry participants. Our inability to predict accurately, or react competitively to, changes in the healthcare industry could adversely affect our operating results. We cannot assure you that we will be able to compete successfully against current or future competitors or that competitive pressures will not have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to Our Business

Most of our revenues come from pharmaceuticals, and an adverse impact on the way in which pharmaceuticals are reimbursed or purchased by us would have an adverse impact on our business.

During 2008, approximately 71% of the patient revenue generated by our affiliated practices under comprehensive service agreements was attributable to pharmaceuticals. Under the comprehensive services model, our medical oncology revenues are dependent on the earnings of our affiliated practices related to pharmaceuticals. Under the OPS model, our revenues are dependent on use of pharmaceuticals by affiliated practices. Because revenues attributable to pharmaceuticals and our ability to procure pharmaceuticals at competitive prices are such a significant part of the affiliated practices’ earnings and, consequently, our revenues, factors that adversely affect those revenues, such as changes in reimbursement or usage, or the cost structure underlying those revenues are likely to adversely affect our business.

In addition, there is a risk that a change in treatment patterns or reduction in use of a particular drug could result from new scientific findings or regulatory or reimbursement actions, as has occurred with ESAs. Any such change that impacts a significant amount of pharmaceutical utilization would adversely affect our results of operations.

We derive a substantial portion of our revenue and profitability from the utilization of pharmaceuticals manufactured and sold by a very limited number of suppliers and any termination or modification of relations with those suppliers could have a material adverse impact on our business.

We derive a substantial portion of our revenue and profitability from the utilization of a limited number of pharmaceutical products manufactured and sold by a very limited number of, or in several cases, a single manufacturer. During 2008, approximately 43% of patient revenue generated by our affiliated practices resulted from pharmaceuticals sold exclusively by five manufacturers. Included among these are ESAs, which accounted for 5.3% of our 2008 revenue and a larger proportion of our earnings before interest, taxes, depreciation and amortization, or EBITDA, and net income. In addition, a limited number of manufacturers are responsible for a disproportionately large amount of market-differentiated pricing we offer to practices. Our agreements with these manufacturers are typically for one to three years and are cancelable by either party without cause with 30 days

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prior notice. Further, several of the agreements provide favorable pricing that can be adjusted periodically based on specified volume levels, growth levels, or a specified level of use of a specific drug as a percentage of the overall use of drugs within a given therapeutic class.

In some cases, compliance with the contract is measured on a quarterly basis and pricing concessions are given in the form of rebates payable at the end of the measurement period. Unanticipated changes in usage patterns, including changes in reimbursement policies such as those which may affect ESAs or the introduction of standardized treatment regimens or clinical pathways that disfavor a given drug, could result in lower-than-anticipated utilization of a given pharmaceutical product, and cause us to fail to attain the performance levels required to earn rebates. A departure of a significant number of physicians from our network could also cause us to fail to reach contract targets. Failure to attain performance levels could result in our not earning rebates, including cost-reductions that may already have been reflected in our financial statements. Furthermore, certain manufacturers pay rebates under multi-product agreements. Under these types of agreements, our pricing on several products could be adversely impacted based upon our failure to meet predetermined targets with respect to any single product. Any termination or adverse adjustment to these relationships could have a material adverse effect on our business, financial condition and results of operations.

Our ability to negotiate the purchase of pharmaceuticals on behalf of our network of affiliated physicians, or to expand the scope of pharmaceuticals purchased, from a particular supplier at prices below those generally offered to all oncologists is largely dependent upon such supplier’s assessment of the value of our network. Many pharmaceuticals used by our affiliated physicians are single-sourced drugs and available from only one manufacturer and, accordingly, the lack of competitive products makes differentiated pricing difficult to achieve. To the extent that our pharmaceutical services structure or other factors cause pharmaceutical suppliers to perceive our network as less valuable, our relationships and any pricing advantages with such suppliers could be harmed. Our inability to negotiate prices of pharmaceuticals with any of our significant suppliers at prices below those generally available to all oncologists could have a material adverse effect on our business, results of operations and financial condition.

Our centralized business operations, particularly our distribution operation, may be adversely affected by business interruptions resulting from events that are beyond our control.

Our centralized business operations, particularly our distribution operation, may be adversely affected by business interruptions resulting from events that are beyond our control. We have only one pharmaceutical distribution facility, which is located in Fort Worth, Texas. In addition, certain of our other business functions are centralized at our headquarters in The Woodlands, Texas. A significant interruption in the operation of any of these facilities, whether as a result of natural disaster or other unexpected damage from fire, floods, power loss, telecommunications failures, break-in, terrorist attacks, acts of war and other events, could significantly impair our ability to operate our business and adversely impact our and our affiliated practices’ operations. If we seek to replicate our centralized operations at other locations, we will face a number of technical as well as financial challenges, which we may not be able to address successfully. In particular, with respect to distribution, although we and our affiliated practices would be able to obtain pharmaceuticals from other sources, we cannot assure you that we will be able to do so at a price that is comparable or in as efficient a manner as through our own distribution operation. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur.

A significant portion of our revenues are represented by our affiliate practice, Texas Oncology. A deterioration of our relationship with this practice or any adverse effects on this practice could significantly harm our business.

One affiliated practice, Texas Oncology, represented approximately 25% of our revenue for the years ended December 31, 2008, 2007 and 2006. We perceive our relationship with this practice to be positive, however if the relationship were to deteriorate, or the practice were to disaffiliate, we would experience a material, adverse impact on our results of operations and financial condition.

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If our affiliated practices terminate their agreements with us, we could be seriously harmed.

Our affiliated practices under certain circumstances are allowed, and may attempt, to terminate their agreements with us. If any of our larger practices were to succeed in such a termination, our business could be seriously harmed. From time to time, we have disputes with physicians and practices that could result in harmful changes to our relationship with them or a termination of a service agreement if adversely determined. We are also aware that some practices that are not part of our network but which are affiliated with other companies, have attempted to end or restructure their affiliations with such companies, although they may not have a contractual right to do so, by arguing that their affiliations violate some aspect of healthcare law and have been successful in doing so.

Specifically, we are involved in litigation with a practice in Oklahoma that was affiliated with us under the net revenue model (a subset of what is now the comprehensive services model) until April, 2006. While we were still affiliated with the practice, we initiated arbitration proceedings pursuant to a provision in the service agreement providing for contract reformation in certain events. The practice countered with a lawsuit that alleges, among other things, that we have breached the service agreement and that our service agreement is unenforceable as a matter of public policy due to alleged violations of healthcare laws. The practice sought unspecified damages and a termination of the contract. We believe that our service agreement is lawful and enforceable and that we are operating in accordance with applicable law. As a result of alleged breaches of the service agreement by the practice, we terminated the service agreement in April, 2006. In March 2007, the Oklahoma Supreme Court overturned a lower court’s ruling that would have compelled arbitration in this matter and remanded the case back to the lower court to hold hearings to determine whether and to what extent the arbitration provisions of the service agreement will be applicable to the dispute. We expect these hearings to occur in late 2009 or 2010. Because of the need for further proceedings, we believe that the Oklahoma Supreme Court ruling will extend the amount of time it will take to resolve this dispute and increase the risk of the litigation to us. In any event, as with any complex litigation, we anticipate that this dispute may take several years to resolve.

During the first quarter of 2006, the practice represented 4.6% of our consolidated revenue. In October, 2006, we sold, for cash, the property, plant and equipment to the practice for an amount that approximated its net book value at the time of sale.

As a result of the ongoing litigation, we have been unable to collect on a timely basis a receivable owed to us relating to accounts receivable purchased by us under the service agreement and amounts for reimbursement of expenses paid by us on the practice’s behalf. At December 31, 2008, the total receivable owed to us of $22.4 million is reflected on our balance sheet as other assets. Currently, a deposit of approximately $11.4 million is held in an escrowed bank account into which the practice has been making, and is required to continue to make, monthly deposits. These amounts will be released upon resolution of the litigation. In addition, approximately $7.6 million is being held in a bank account that has been frozen pending the outcome of related litigation regarding that account. In addition, we have filed a security lien on the receivables of the practice. We believe that the amounts held in the bank accounts combined with the receivables of the practice in which we have filed a security lien represent adequate collateral to recover the $22.4 million receivable recorded as other noncurrent assets at December 31, 2008. Accordingly, we expect to realize the amount that we believe to be owed by the practice. However, realization is subject to a successful conclusion to the litigation with the practice, and we cannot assure you as to when the litigation will be finally concluded or as to what the ultimate outcome of the litigation will be. We expect to continue to incur expenses in connection with our litigation with the practice.

In addition to loss (if any) of revenue from a particular practice, a departure of a large number of physicians from our network could adversely affect our ability to obtain favorable pricing for goods and services and other economies of scale that are based upon the size of our network. If some of our affiliated physicians or affiliated practices terminate their affiliation with us, this could result in a material adverse effect on our business.

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If a significant number of physicians leave our affiliated practices, we could be seriously harmed.

Our affiliated practices usually enter into employment or non-competition agreements with their physicians that provide some assurance to both the practice and to us with respect to continuing affiliation. We and our affiliated practices seek to maintain and renew such contracts once they expire. We cannot predict whether a court will enforce the non-competition covenants in these agreements. If practices are unable to enforce these non-competition provisions or otherwise enforce these employment agreements, physicians may leave our network and compete with our affiliated practices. In addition, physicians leave our network from time to time as a result of retirement, disability or death. In addition to loss of revenue from departing physicians, a departure of a large number of physicians from our network could adversely affect our ability to obtain favorable pricing for goods and services and other economies of scale that are based upon the size of our network. If a significant number of physicians terminated relationships with our affiliated practices, our business could be seriously harmed.

We are subject to numerous legal proceedings, many of which could be material.

Professional Liability Claims

The provision of medical services by our affiliated practices entails an inherent risk of professional liability claims. We do not control the practice of medicine by the clinical staff or their compliance with regulatory and other requirements directly applicable to practices. In addition, because the practices purchase and prescribe pharmaceutical products, they face the risk of product liability claims. In addition, because of licensing requirements and affiliated practices’ participation in governmental healthcare programs, we and affiliated practices are, from time to time, subject to governmental audits and investigations, as well as internally initiated audits, some of which may result in refunds to governmental programs. Although we and our practices maintain insurance coverage, successful malpractice, regulatory or product liability claims asserted against us or one of the practices in excess of insurance coverage could have a material adverse effect on us.

U.S. Department of Justice Subpoena

During the fourth quarter of 2005, we received a subpoena from the DOJ’s Civil Litigation Division requesting a broad range of information about us and our business, generally in relation to our contracts and relationships with pharmaceutical manufacturers. We have cooperated fully with the DOJ in responding to the subpoena. All outstanding document requests from the DOJ were addressed in early 2008, and we continue to await further direction and feedback from the DOJ. At the present time, the DOJ has not made any allegation of wrongdoing on the part of the Company. However, we cannot provide assurance that such an allegation or litigation will not result from this investigation. While we believe that we are operating and have operated our business in compliance with law, including with respect to the matters covered by the subpoena, we cannot provide assurance that the DOJ will not make a determination that wrongdoing has occurred. In addition, we have devoted significant resources to responding to the DOJ subpoena and anticipate that such resources will be required on an ongoing basis to fully respond to the subpoena.

We have also received requests for information relating to class action litigation against pharmaceutical manufacturers relating to alleged manipulation of AWP and alleged inappropriate marketing practices with respect to AWP.

Qui Tam Suits

From time to time, we have become aware that we and certain of our subsidiaries and affiliated practices have been the subject of qui tam lawsuits (commonly referred to as “whistle-blower” suits). Because qui tam actions are filed under seal, it is possible that we are the subject of other qui tam actions of which we are unaware.

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In previous qui tam suits of which we have been made aware, the DOJ has declined to intervene in such suits and the suits have been dismissed. Qui tam suits are brought by private individuals, and there is no minimum evidentiary or legal threshold for bringing such a suit. The DOJ is legally required to investigate the allegations in these suits. The subject matter of many such claims may relate both to our alleged actions and alleged actions of an affiliated practice. Because the affiliated practices are separate legal entities not controlled by us, such claims necessarily involve a more complicated, higher cost defense, and may adversely impact the relationship between the practices and us. If the individuals who file complaints and/or the United States were to prevail in these claims against us, and the magnitude of the alleged wrongdoing were determined to be significant, the resulting judgment could have a material adverse financial and operational effect on us, including potential limitations in future participation in governmental reimbursement programs. In addition, addressing complaints and government investigations requires us to devote significant financial and other resources to the process, regardless of the ultimate outcome of the claims.

Breach of Contract Claims

We and our network physicians are defendants in a number of lawsuits involving employment and other disputes and breach of contract claims. In addition, we are involved from time to time in disputes with, and claims by, our affiliated practices against us.

We are also involved in litigation with a practice in Oklahoma that was affiliated with us under the net revenue model (a subset of what is now the comprehensive services model) until April, 2006. While we were still affiliated with the practice, we initiated arbitration proceedings pursuant to a provision in the service agreement providing for contract reformation in certain events. The practice countered with a lawsuit that alleges, among other things, that we have breached the service agreement and that our service agreement is unenforceable as a matter of public policy due to alleged violations of healthcare laws. The practice sought unspecified damages and a termination of the contract. We believe that our service agreement is lawful and enforceable and that we are operating in accordance with applicable law. As a result of alleged breaches of the service agreement by the practice, we terminated the service agreement in April, 2006. In March 2007, the Oklahoma Supreme Court overturned a lower court’s ruling that would have compelled arbitration in this matter and remanded the case back to the lower court to hold hearings to determine whether and to what extent the arbitration provisions of the service agreement will be applicable to the dispute. We expect these hearings to occur in late 2009 or 2010. Because of the need for further proceedings, we believe that the Oklahoma Supreme Court ruling will extend the amount of time it will take to resolve this dispute and increase the risk of the litigation to us. In any event, as with any complex litigation, we anticipate that this dispute may take several years to resolve.

During the three months ended March 31, 2006, the Oklahoma practice represented 4.6% of our consolidated revenue. In October 2006, we sold, for cash, the property, plant and equipment to the practice for an amount that approximated its net book value at the time of sale.

As a result of the ongoing litigation, we have been unable to collect on a timely basis a receivable owed to us relating to accounts receivable purchased by us under the service agreement and amounts for reimbursement of expenses paid by us on the practice’s behalf. At December 31, 2008, the total receivable owed to us of $22.4 million is reflected on our balance sheet as other assets. Currently, approximately $11.4 million are held in an escrowed bank account into which the practice has been making, and is required to continue to make, monthly deposits. These amounts will be released upon resolution of the litigation. In addition, approximately $7.6 million are being held in a bank account that has been frozen pending the outcome of related litigation regarding that account. In addition, we have filed a security lien on the receivables of the practice. We believe that the amounts held in the bank accounts combined with the receivables of the practice in which we have filed a security lien represent adequate collateral to recover the $22.4 million receivable recorded in other assets at December 31, 2008. Accordingly, we expect to realize the amount that we believe to be owed by the practice. However, realization is subject to a successful conclusion to the litigation with the practice, and we cannot assure you as to when the litigation will be finally concluded or as to what the ultimate outcome of the litigation will be. We expect to continue to incur expenses in connection with our litigation with the practice.

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We intend to vigorously pursue our claims, including claims for any costs and expenses that we incur as a result of the termination of the service agreement and to defend against the practice’s allegations that we breached the agreement and that the agreement is unenforceable. However, we cannot provide assurance as to what the outcome of the litigation will be, or, even if we prevail in the litigation, whether we will be successful in recovering the full amount, or any, of our costs associated with the litigation and termination of the service agreement.

Assessing our financial and operational exposure on litigation matters requires the application of substantial subjective judgments and estimates based upon facts and circumstances, resulting in estimates that could change as more information becomes available.

Certificate of Need Regulatory Action

During the third quarter of 2006, one of our affiliated practices in North Carolina lost (through state regulatory action) the ability to provide radiation services at its cancer center in Asheville. The practice continued to provide medical oncology services, but was not permitted to use the radiation services area of the center (approximately 18% of the square footage of the cancer center). The practice appealed the regulatory action and the North Carolina Court of Appeals ruled in favor of the practice on procedural grounds and ordered the state agency to hold a new hearing on its regulatory action. During the three months ended March 31, 2008, the practice received a ruling in its appeal, which mandated a rehearing by the state agency. The state agency conducted a rehearing and issued a new ruling upholding the practice’s right to provide radiation services. That decision was appealed, and the appellants also sought a stay of the state’s decision. The request for a stay was denied in July 2008, while the appeal is still pending. As a result, the practice resumed diagnostic services in September 2008 and radiation services in February 2009.

Delays during the three months ended March 31, 2007 in pursuing strategic alternatives led to uncertainty regarding the form and timing associated with alternatives to a successful appeal. Consequently, we performed impairment testing as of March 31, 2007 and we recorded an impairment charge of $1.6 million relating to a management services agreement asset and equipment in the three months ended March 31, 2007. (These charges are a component of the impairment losses disclosed in “Results of Operations—Impairment and Restructuring Charges” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.) No additional impairment charges relating to this regulatory action have been recorded through December 31, 2008.

At December 31, 2008, our consolidated balance sheet included net assets in the amount of $0.9 million related to this practice, which includes primarily working capital in the amount of $0.6 million. The construction of the cancer center in which the practice operates was financed as an operating lease and, as such, is not recorded on our balance sheet. At December 31, 2008, the lease had a remaining term of 17 years and the net present value of minimum future lease payments is approximately $7.0 million.

Antitrust Inquiry

The United States Federal Trade Commission, or FTC, and a state Attorney General have informed one of our affiliated physician practices that they have opened an investigation to determine whether a recent transaction in which another group of physicians became employees of that affiliated group violated relevant state or federal antitrust laws. In addition, the FTC has informed us that it intends to request information from us regarding our role in that transaction. The affiliated practice is in the process of responding to a request for information on this matter. At present, we believe that the scope of the investigation is limited to a single transaction, but we cannot assure you that the scope will remain limited. We believe that we and our affiliated physician practices comply with relevant antitrust laws. However, if this investigation were to result in a claim against us or our affiliated physician practice in which the FTC or attorney general prevails, the resulting judgment could have a material adverse financial and operational effect on us or that practice, including the possibility of monetary damages or fines, a requirement that we unwind the transaction at issue or the imposition of restrictions on our future

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operations and development. In addition, addressing government investigations requires us to devote significant financial and other resources to the process, regardless of the ultimate outcome of the claims. Furthermore, because of the size and scope of our network, there is a risk that we could be subjected to greater scrutiny by government regulators with regard to antitrust issues.

We rely on the ability of our affiliated practices to grow and expand.

We rely on the ability of our affiliated practices to grow and expand. Qualified oncologists are in short supply nationwide, and we expect this shortage, relative to patient demand, to continue or worsen. There can be no assurance that our affiliated groups will be successful in recruiting or retaining physicians. Our affiliated practices may also encounter other difficulties attracting additional physicians and expanding their operations or may choose not to do so. The failure of practices to expand their patient base and increase revenues could harm us.

Our affiliated practices may be unsuccessful in obtaining favorable contracts with third-party payers, which could result in lower operating margins.

We facilitate negotiation of commercial payer contracts and advise our affiliated physicians accordingly under our comprehensive services model. Commercial payers, such as managed care organizations, often request fee structures or alternative reimbursement methodologies that could have a material adverse effect on our affiliated physicians and therefore, on our operating results. Reductions in reimbursement rates for services offered by our affiliated physicians and other commercial payer cost containment measures could affect our liquidity and results of operations with respect to our comprehensive service agreements.

We may encounter difficulties in managing our network of affiliated practices.

We do not control the practice of medicine by the physicians or their compliance with regulatory and other requirements directly applicable to the practices. At the same time, an affiliated practice may have difficulty in effectively governing the practices of its individual physicians. In addition, we have only limited control over the business decisions of the practices even under the comprehensive services model. As a result, it is difficult to implement standardized practices across the network, and this could have an adverse effect on cost controls, regulatory compliance, business strategy, our profitability and the strength of our network.

Loss of revenues or a decrease in income of our affiliated practices, including as a result of cost containment efforts by third-party payers, could adversely affect our results of operations.

Our revenue currently depends on revenue generated by affiliated practices. Loss of revenue by the practices could seriously harm us. It is possible that our affiliated practices will not be able to maintain successful medical practices. In addition, our fees under comprehensive service agreements and our ability to collect fees under our OPS model depend upon the profitability of the practices. Any failure by the practices to contain costs effectively will adversely impact our results of operations. Because we do not control the manner in which our practices conduct their medical practice (including drug utilization), our ability to control costs related to the provision of medical care is limited. Furthermore, the affiliated practices face competition from several sources, including sole practitioners, single and multi-specialty practices, hospitals and managed care organizations. We have limited ability to discontinue or alter our service arrangements with practices, even where continuing to manage such practices under existing arrangements is economically detrimental to us.

Physician practices typically bill third-party payers for the healthcare services provided to their patients. Third-party payers such as private insurance plans and commercial managed care plans negotiate the prices charged for medical services and supplies in order to lower the cost of the healthcare services and products they pay for and to shift the financial risk of providing care to healthcare providers. Third-party payers can also deny reimbursement for medical services and supplies by concluding that they believe a treatment was not appropriate,

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and these reimbursement denials are difficult to appeal or reverse. Third-party payers are also seeking to contain costs by moving certain services, particularly pharmaceutical services, outside of the physician’s office. We believe that self-injectable supportive care drugs used by oncologists, which account for approximately 12% of the pharmaceutical revenue generated by our affiliated practices in 2008, are particularly susceptible to this trend. Also, any adverse impact on the financial condition of a third party payer could subject receivables from that payer to greater collection risk. Our affiliated practices also derive a significant portion of their revenues from governmental programs. Governmental programs, such as Medicare and Medicaid, are collectively the affiliated practices’ largest payers. For the three months ended March 31, 2009, the affiliated practices under comprehensive service agreements derived 39.4% of their net patient revenue from services provided under the Medicare program (of which 6.4%, relates to Medicare managed care). Reimbursement by governmental programs generally is not subject to negotiation and is established by governmental regulation. There is a risk that other payers could reduce rates of reimbursement to match any reduction by governmental payers. Our management fees under the comprehensive services model are dependent on the financial performance of the practices and would be adversely affected by a reduction in reimbursement. From time to time, due to market conditions and other factors, we may also renegotiate our management fee arrangements, reducing our management fee income. In addition, to the extent physician practices affiliated with us under the OPS model are impacted adversely by reduced reimbursement levels, our business could be harmed generally and receivables owed to us by those practices could be subject to greater credit risk.

The development or operation of cancer centers could cause us to incur unexpected costs, and our existing or future centers may not be profitable.

The development and operation of integrated cancer centers is subject to a number of risks, including not obtaining regulatory permits or approval, delays that often accompany construction of facilities and environmental liabilities related to the disposal of radioactive, chemical and medical waste. Our strategy includes the development of additional integrated cancer centers. As of March 31, 2009, we have three cancer centers under construction, and several others in various planning stages. Any failure or delay in successfully building new integrated cancer centers, as well as liabilities from ongoing operations, could seriously harm us. New cancer centers may incur significant operating losses during their initial operations, which could materially and adversely affect our operating results, cash flows and financial condition. In addition, in some cases our cancer centers may not be profitable enough for us to recover our investment. We may decide to close or sell cancer centers, either because of underperformance or other market developments.

Our success depends on our ability to attract and retain highly qualified technical staff and other key personnel, and we may not be able to hire enough qualified personnel to meet our hiring needs.

Our ability to offer and maintain high quality service is dependent upon our ability to attract and maintain arrangements with qualified professional and technical staff and with executives on our management team. Clinical staffs at affiliated practices are practice employees, but we assist in recruiting them. There is a high level of competition for such skilled personnel among healthcare providers, research and academic institutions, government entities and other organizations, and there is a nationwide shortage in many specialties, including oncology nursing and technical radiation staff. We cannot assure that we or our affiliated practices will be able to hire sufficient numbers of qualified personnel or that employment arrangements with such staff can be maintained on terms advantageous to our affiliated practices or us. In addition, if one or more members of our management team become unable or unwilling to continue in their present positions, we could be harmed.

Our failure to remain technologically competitive in a declining payment environment for imaging and radiation services could adversely affect our business.

Rapid technological advancements have been made in the radiation oncology and diagnostic imaging industry. Although we believe that our equipment and software can generally be upgraded as necessary, the development of new technologies or refinements of existing technologies might make existing equipment

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technologically obsolete. If such obsolescence were to occur, we may be compelled to incur significant costs to replace or modify the equipment, which could have a material adverse effect on our business, financial condition and results of operations. In addition, some of our cancer centers compete against local centers, which may own more advanced imaging or radiation therapy equipment or provide additional technologies. Our performance is dependent upon physician and patient confidence in the quality of our technology and equipment as compared to that of our competitors.

Advances in other cancer treatment methods, such as chemotherapy, surgery and immunotherapy, or in cancer prevention techniques could reduce demand for the radiation therapy services provided at the cancer centers we operate. The development and commercialization of new radiation therapy technologies could have a material adverse effect on our affiliated practices and on our business, financial condition and results of operations.

Our working capital could be impacted by delays in reimbursement for services.

The healthcare industry is characterized by delays that can be as much as three to six months between when services are provided and when the reimbursement or payment for these services is received. Under our comprehensive service agreements, our working capital is dependent on such collections. Although we believe our collection experience is generally consistent with that of the industry, industry reimbursement practices make working capital management, including prompt and diligent billing and collection, an important factor in our results of operations and liquidity. At practices affiliated under the OPS model we do not control the billing and collection function and reduced liquidity could adversely affect their ability to pay amounts owed to us. We cannot provide assurance that trends in the industry or in the economy generally will not further extend the collection period and negatively impact our or their working capital.

Our services could give rise to liability to clinical trial participants and the parties with whom we contract.

In connection with clinical research programs, we provide several services focused on bringing new drugs to market, which is time consuming and expensive. Such clinical research involves the testing of new drugs on human volunteers. Clinical research involves the inherent risk of liability for personal injury or death to patients resulting from, among other things, unforeseen adverse side effects or improper administration of the new drugs by physicians. In certain cases, these patients are already seriously ill and are at risk of further illness or death. In addition, under the privacy regulations promulgated pursuant to the Health Insurance Portability and Accountability Act, or HIPAA, there are specific privacy standards associated with clinical trial agreements. Violations of such standards could subject us to an enforcement action by HHS. If we do not perform our services in accordance with contractual or regulatory standards, the clinical trial process and the participants in such trials could be adversely affected. These events would create a risk of liability to us from either the pharmaceutical companies with which we contract or the study participants.

We also contract with physicians to serve as investigators in conducting clinical trials. Third parties could claim that we should be held liable for losses arising from any professional malpractice of the investigators with whom we contract or in the event of personal injury to or death of patients for the medical care rendered by third-party investigators. Although we would vigorously defend any such claims, it is possible that we could be held liable for such types of losses.

We could be subject to malpractice claims and other harmful lawsuits not covered by insurance.

In the past, we have been named in suits related to medical services provided by our affiliated physicians. We cannot provide assurance that claims relating to services delivered by a network physician will not be brought against us in the future. In addition, because affiliated physicians prescribe and dispense pharmaceuticals and we operate pharmacies and participate in the drug procurement and distribution process, we and our affiliated physicians could be subject to product liability claims.

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Although we maintain malpractice insurance, there can be no assurance that it will be adequate in the event of a judgment against us. There can be no assurance that any claim asserted against us for professional liability will not be successful. The availability and cost of professional liability insurance varies widely from state to state and is affected by various factors, many of which are beyond our control. We may be unable to obtain insurance in the amounts we seek or at prices we are prepared to pay.

Under OPS relationships, our agreements with affiliated practices have shorter terms than our comprehensive services agreements, and we have less input with respect to the business operations of the practices.

Currently, most of our revenues are derived from providing comprehensive management services to practices under long-term agreements that generally have 10 to 40 year initial terms and that are not terminable except under specified circumstances. Agreements under our comprehensive services model allow us to be the exclusive provider of management services, including all services contemplated under the OPS structure, to each of the affiliated practices. In addition, under those agreements, the affiliated practices are required to bind their physicians to specified employment terms or restrictive covenants. Under the OPS structure, our agreements with affiliated practices have 1 to 3 year terms, and are more easily terminable. A number of the other input mechanisms that we currently have with respect to affiliated comprehensive services practices do not exist under our oncology pharmaceutical services model. This may increase the ability of affiliated practices to change their internal composition to our detriment and may result in arrangements that are easier for individual physicians and practices to exit, exposing us to increased credit risk and competition from other companies, especially in the pharmacy services sector. Departure of a significant number of physicians or practices from participation in our OPS structure could harm us. These risks will increase as we grow our business under the OPS structure.

Changes in estimates related to our recoverability of long-lived assets, including goodwill, could result in an impairment of those assets.

The carrying values of our fixed assets, service agreement intangibles and goodwill are tested for impairment on an annual basis and more frequently if events or changes in circumstances indicate their recorded value may not be recoverable. The impairment review of goodwill must be based on estimated fair values. With the assistance of a third party valuation firm, we estimate the fair value of the operating segments to which goodwill has been allocated based upon widely-accepted valuation techniques, including the use of peer market multiples (on a trailing and forward basis) and discounted cash flow analysis, in the absence of market capitalization data. Our goodwill is impaired if the carrying value of goodwill exceeds the estimated fair value. Future adverse changes in actual or anticipated operating results, as well as unfavorable changes in economic factors and market multiples used to estimate our fair value, could result in future non-cash impairment charges.

For fixed assets and service agreements, the carrying value is compared to our projected cash flows associated with the affiliated practice that is utilizing the fixed assets or that is party to the management services agreement. We may be required to recognize an impairment charge in the event these analyses indicate that our fixed assets or management service agreement intangible assets are not recoverable.

We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our cost of financing or ability to obtain financing.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, beginning with the filing of the Annual Report on Form 10-K for the fiscal year ended December 31, 2007, we are required to furnish, an annual report by our management on our internal control over financial reporting. Such a report contains an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment would include disclosure of any material weaknesses in our internal control over financial reporting if any were identified by management. Effective with the year ending December 31, 2009, such report must also contain a statement that our independent registered public accounting firm has issued an attestation report on the effectiveness of our internal control over financial reporting.

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We began preparing the system and process documentation and evaluation needed to comply with Section 404 during 2004. Our assessment as of December 31, 2008 indicated that our internal control over financial reporting is effective. However, in the future, if our management identifies one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control is effective. If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion that our internal controls are effective for the year ending December 31, 2009, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our cost of financing or our ability to obtain financing.

Our business may be significantly impacted by a downturn in the economy.

While we believe the patient demand for cancer care will not generally be impacted by a downturn in the economy, unfavorable economic conditions may result in some patients electing to defer treatment, as well as increased pricing pressure from payers and vendors. In addition, vendors that have historically extended credit to the Company may restrict, or eliminate, the terms on which credit is extended or require additional collateral related to these business arrangements. In addition, many of our customers and suppliers may rely on the availability of short-term financing to support their operations. An adverse change in the ability of our customers or suppliers to obtain necessary financing could disrupt their operations and, consequently, limit their ability to pay obligations owed to us or provide goods and services necessary to our operations. These events could negatively impact our operating results and cash flows.

Any downturn in the economy could result in a reduction in the ability of our affiliated practices’ patients to pay co-insurance amounts or deductibles. In addition, increased unemployment will likely result in an increase in the number of patients not covered by adequate insurance. Even for patients who are insured, in the event a significant third party payer, such as insurance company or self-funded benefit plan of another organization encounters significant deterioration in its financial condition, receivables from such payer or other organization could be subject to delay or greater risk of uncollectibility. While we provide services to physician practices throughout the United States, individual physician practices typically have a local customer and, to a lesser extent, payer base. Therefore, we would expect that practices located in regions or localities disproportionally affected by an economic downturn, would be particularly adversely affected by such trends. We believe that our affiliated practices are already experiencing a rise in uncollectibility as a result of the foregoing trends.

The current economic environment may increase our exposure to bad debt or decrease demand for cancer care.

We continue to experience downward trends in reimbursement, which has been exacerbated as a result of the current economic environment. As more patients become uninsured as a result of job losses or receive reduced coverage as a result of cost-control measures by employers, patients are becoming increasingly responsible for the cost of treatment, which is increasing our exposure to bad debt. The shifting responsibility to pay for care has, in some instances, resulted in patients electing not to receive treatment. Third party payers are also becoming more aggressive in their efforts to deny or reduce reimbursement. In response to this environment, we have accelerated cost reduction efforts and our ongoing lean six sigma process to improve the efficiency of care delivery, increased the rigor of its patient financial counseling and claim submission processes, raised its capital investment requirements and tightened our management of working capital.

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EX-99.3

Exhibit 99.3

USE OF PROCEEDS

We estimate that the net proceeds we will receive from this offering will be approximately $439.6 million, after deducting the estimated transaction fees and expenses payable by us. The following table sets forth our estimated sources and uses of funds related to the offering. The actual amounts of such sources and uses are expected to differ upon the actual issuance of the notes.

	(in millions)
Sources
Notes offered hereby	$	465.0
Total sources	$	465.0
Uses
Repayment of existing term loan credit facility(1)	$	436.7
Transaction fees and expenses		25.4
Cash on hand		2.9
Total uses	$	465.0

(1) Our existing senior secured credit facility includes a term loan credit facility and a revolving loan credit facility. Currently there are no amounts outstanding pursuant to our senior secured revolving credit facility, but there are outstanding letters of credit amounting to approximately $21.9 million and availability of $138.1 million as of March 31, 2009. Our existing senior secured term loan credit facility will be terminated in connection with this offering and our existing senior secured revolving credit facility will be amended to permit the issuance of the notes offered and the security interests in the notes and our existing senior notes referred to in this offering memorandum. See “Description of Certain Other Indebtedness—Our Existing Senior Secured Revolving Credit Facility.” In connection with the issuance of the notes offered hereby, we have received commitments from affiliates of the initial purchasers for a new senior secured revolving credit facility. We intend to replace our existing senior secured revolving credit facility with the new senior secured revolving credit facility, which we currently anticipate will provide for aggregate borrowings of up to $100.0 million (which could increase to $140.0 million if additional commitments are obtained) and is proposed to have a maturity date of August 2012 (or, if our existing senior notes are not repaid, July 2012). The execution of the new senior secured revolving credit facility is contingent upon certain conditions, including the consummation of the issuance of the notes offered hereby. There is no assurance that we will satisfy these conditions. See “Description of Certain Other Indebtedness—Commitment for New Senior Secured Revolving Credit Facility.”

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EX-99.4

Exhibit 99.4

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2009, on a historical and on an as adjusted basis giving effect to the issuance of the notes and the application of the proceeds therefrom as if they had occurred on that date. This table should be read in conjunction with the information contained in “Use of Proceeds” and “Description of Certain Other Indebtedness” included elsewhere in this offering memorandum and our consolidated financial statements and the notes contained in the Current Report on Form 8-K filed on June 4, 2009 (which retrospectively adjusted portions of our Annual Report on Form 10-K for the year ended December 31, 2008) and the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, which are incorporated by reference herein.

	As of March 31, 2009
	Actual		As Adjusted
	(in thousands)
Cash and cash equivalents	$	108,843	$	111,751
Debt:
Existing senior secured credit facility(1)
Revolving credit facility		—		—
Term loans		436,666		—
Senior secured notes offered hereby		—		465,000
9% Senior notes(2)		300,000		300,000
10 3/4% Senior subordinated notes		275,000		275,000
9 5/8% Senior subordinated notes		3,000		3,000
Subordinated notes		28,595		28,595
Mortgage, capital lease obligations and other		24,150		24,150
Total debt		1,067,411		1,095,745
Total Company Stockholder’s equity(3)		192,937		192,937
Total capitalization	$	1,260,348	$	1,288,682

(1) Our existing senior secured credit facility includes a term loan credit facility and a revolving loan credit facility. Currently there are no amounts outstanding pursuant to our senior secured revolving credit facility, but there are outstanding letters of credit amounting to approximately $21.9 million and availability of $138.1 million as of March 31, 2009. Our existing senior secured term loan credit facility will be terminated in connection with this offering. In connection with the issuance of the notes offered hereby, we have received commitments from affiliates of the initial purchasers for a new senior secured revolving credit facility. We intend to replace our existing senior secured revolving credit facility with the new senior secured revolving credit facility, which we currently anticipate will provide for aggregate borrowings of up to $100.0 million (which could increase to $140.0 million if additional commitments are obtained) and is proposed to have a maturity date of August 2012 (or, if our existing senior notes are not repaid, July 2012). The execution of the new senior secured revolving credit facility is contingent upon certain conditions, including the consummation of the issuance of the notes offered hereby. There is no assurance that we will satisfy these conditions. See “Description of Certain Other Indebtedness—Commitments For New Senior Secured Revolving Credit Facility.”

(2) In connection with this offering, our existing senior notes will be amended to add the same security that will secure our obligations under the notes offered hereby. Our existing senior notes will share ratably in all collateral that secures the notes offered hereby. See “Description of Certain Other Indebtedness—Our Existing Senior Secured Revolving Credit Facility.”

(3) The as adjusted amount does not reflect the loss recognition on previously deferred financing costs or loss on extinguishment of debt associated with the existing term loan credit facility.

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EX-99.5

Exhibit 99.5

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

The following selected consolidated financial information set forth below is qualified by reference to, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included in our Current Report on Form 8-K filed on June 4, 2009 and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, both of which are incorporated by reference herein. The selected historical consolidated financial and other data presented below for, and as of the end of, the fiscal years ended December 31, 2004, 2005, 2006, 2007 and 2008 have been derived from our audited consolidated financial statements. The selected historical consolidated financial and other data presented below for, and as of the end of, the three month periods ended March 31, 2008 and March 31, 2009 have been derived from our unaudited condensed consolidated financial statements and have been prepared on the same basis as the audited consolidated financial statements. Operating results for the three month period ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

The selected historical consolidated financial and other data provided below for the period from January 1, 2004 through August 20, 2004, or predecessor, and the period from August 21, 2004 through December 31, 2004, or successor, have been derived from our audited consolidated financial statements.

	(Predecessor) Period from January 1, 2004 through August 20, 2004			(Successor) Period from August 21, 2004 through December 31, 2004			Year Ended December 31,												Three Months Ended March 31,
							2005			2006			2007			2008			2008			2009
	(dollars in thousands)
Statement of Operations Data
Product revenues	$	901,616		$	490,222		$	1,615,943		$	1,822,141		$	1,970,106		$	2,224,704		$	543,261		$	563,080
Services revenues		524,238			343,771			902,617			989,242			1,030,672			1,079,473			267,346			279,481
Total revenues		1,425,854			833,993			2,518,560			2,811,383			3,000,778			3,304,177			810,607			842,561
Cost of products		839,774			460,946			1,545,588			1,753,638			1,925,547			2,163,943			532,027			551,585
Cost of services:
Operating compensation and benefits		244,168			143,142			418,102			458,006			479,177			523,939			130,188			137,640
Other operating costs		144,220			100,987			245,630			274,665			293,677			321,947			76,796			80,696
Depreciation and amortization		37,375			21,096			67,414			69,351			73,159			72,790			18,601			17,565
Total cost of services		425,763			265,225			731,146			802,022			846,013			918,676			225,585			235,901
Total cost of products and services		1,265,537			726,171			2,276,734			2,555,660			2,771,560			3,082,619			757,612			787,486
General and administrative expense		40,676			30,159			72,008			76,948			84,326			76,883			19,988			18,131
Impairment and restructuring charges, net		—			—			—			—			15,126			384,929			381,306			1,409
Merger-related charges		9,625			8,330			—			—			—			—			—			—
Compensation under long-term incentive plan		—			—			14,507			—			—			—			—			—
Depreciation and amortization		13,198			6,254			17,504			13,983			16,172			30,017			7,153			7,533
		1,329,036			770,914			2,380,753			2,646,591			2,887,184			3,574,448			1,166,059			814,559
Income (loss) from operations		96,818			63,079			137,807			164,792			113,594			(270,271	)		(355,452	)		28,002
Other income (expense):
Interest expense, net		(10,931	)		(27,842	)		(84,174	)		(92,870	)		(95,342	)		(92,757	)		(24,200	)		(22,622	)
Loss on early extinguishment of debt		(38,272	)		—			—			—			—			—			—			—
Other income (expense), net		622			1,976			—			—			—			2,213			1,371			—
Income (loss) before income taxes		48,237			37,213			53,633			71,922			18,252			(360,815	)		(378,281	)		5,380
Income tax (provision) benefit		(21,939	)		(15,355	)		(20,652	)		(27,509	)		(7,447	)		(6,351	)		922			(3,604	)
Net income (loss)		26,298			21,858			32,981			44,413			10,805			(367,166	)		(377,359	)		1,776
Less: Net income attributable to noncontrolling interests		20			(106	)		(2,003	)		(2,388	)		(3,619	)		(3,324	)		(715	)		(759	)
Net income (loss) attributable to the Company	$	26,318		$	21,752		$	30,978		$	42,025		$	7,186		$	(370,490	)	$	(378,074	)	$	1,017
Other Financial Data
EBITDA(1)	$	109,139		$	94,379		$	224,605		$	250,275		$	203,678		$	(165,361	)	$	(329,143	)	$	53,669
Ratio of earnings to fixed charges(2)		2.6x			2.0x			1.5x			1.6x			1.1x			N/A			N/A			1.1x
Statement of Cash Flows Data:
Net cash provided by (used in) Operating activities	$	131,649		$	91,744		$	124,555		$	43,639		$	198,030		$	141,487		$	50,864		$	31,027
Investing activities		(50,339	)		(22,884	)		(90,234	)		(110,768	)		(93,170	)		(137,004	)		(57,416	)		(15,342	)
Financing activities		4,143			(158,428	)		(28,883	)		223,058			(237,370	)		(49,263	)		(2,316	)		(11,318	)

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	As of December 31,										As of March 31,
	2004		2005		2006		2007		2008		2008		2009
	(dollars in thousands)
Balance Sheet Data (at end of period):
Working capital	$	186,577	$	215,421	$	254,022	$	202,232	$	198,616	$	165,279	$	205,005
Total assets		2,031,798		2,111,047		2,359,982		2,208,650		1,842,853		1,887,973		1,809,697
Long term debt, excluding current maturities		978,937		980,871		1,069,664		1,031,569		1,061,133		1,056,498		1,053,867
Total Company Stockholder’s equity		582,323		600,249		580,741		554,323		195,415		176,829		192,937

(1) EBITDA is net income before interest, taxes, depreciation, amortization (including amortization of stock-based compensation), and other (income) expense. We believe EBITDA is a commonly applied measurement of financial performance. EBITDA does not represent income or cash flows from operations, as these terms are defined under generally accepted accounting principles, and should not be considered as an alternative to net income as an indicator of our operating performance or to cash flows as a measure of liquidity. We believe that EBITDA is useful to investors, since it can provide investors with additional information that is not directly available in a GAAP presentation. Each gives investors an indication of our liquidity and financial condition and each is used in evaluating the value of companies in general and in evaluating the liquidity of companies, their debt service obligations and their ability to service their indebtedness. EBITDA is a key tool used by management in assessing business performance and financial condition both with respect to our business as a whole and with respect to individual sites or product lines. EBITDA as presented herein is not necessarily comparable to similarly titled measures reported by other companies. See our Current Report on Form 8-K filed on June 4, 2009 (which retrospectively adjusted portions of our Annual Report on Form 10-K for the year ended December 31, 2008) and the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, both of which have been incorporated by reference herein. The following sets forth a reconciliation of EBITDA to net income.

	Period from January 1, 2004 through August 20, 2004		Period from August 21, 2004 through December 31, 2004			Year Ended December 31,										Three Months Ended March 31,
						2005			2006		2007		2008			2008			2009
						(dollars in thousands)
Net Income (loss)	$	26,298	$	21,858		$	32,981		$	44,413	$	10,805	$	(367,166	)	$	(377,359	)	$	1,776
Interest expense, net and other income		10,309		25,866			84,174			92,870		95,342		92,757			24,200			22,622
Income tax provision (benefit)		21,939		15,355			20,625			27,509		7,447		6,351			(922	)		3,604
Depreciation and amortization		50,573		27,350			84,918			83,334		89,331		102,807			25,754			25,098
Amortization of stock expense		—		4,056			3,883			2,149		753		2,103			555			569
Noncontrolling interest		20		(106	)		(2,003	)		—		—		—			—			—
Other (income) expense		—		—			—			—		—		(2,213	)		(1,371	)		—
EBITDA	$	109,139	$	94,379		$	224,605		$	250,275	$	203,678	$	(165,361	)	$	(329,143	)	$	53,669

(2) The ratio of earnings to fixed charges was calculated by dividing (i) net income (loss) before income taxes and fixed charges attributable to us by (ii) fixed charges which consist of interest expense incurred, including amortization of debt expense and discount, and one-third of rental expense, which approximates the interest portion of our rental expense. For the year ended December 31, 2008 and the three months ended March 31, 2008, earnings before fixed charges were insufficient to cover fixed charges by $365.2 million and $379.3 million, respectively.

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EX-99.6

Exhibit 99.6

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements and notes thereto included elsewhere in this offering memorandum. References to “fiscal year” refer to the period from January 1 to December 31 of the indicated year. Unless otherwise noted, references to EBITDA and the combined period have the meaning set forth under “Discussion of Non-GAAP Information.”

Business Overview

Our mission is to enable physicians to provide the right treatment, at the right time, for the right patient. We strive to expand and improve patient access to high quality, integrated and advanced cancer care by working closely with physicians, manufacturers and payers to improve the safety, efficiency and effectiveness of the cancer care delivery system. To realize our mission of enhancing patient access to advanced care, we must maintain a dual emphasis on cost containment and quality improvement. Pursuit of this mission involves strategic initiatives at both the local level, where cancer care is delivered to patients, and at the national level to address the needs of commercial and governmental payers, pharmaceutical manufacturers and other industry customers. Our headquarters are located in The Woodlands, Texas. As of March 31, 2009, our network included:

• 1,227 affiliated physicians;

• 468 sites of service;

• 80 comprehensive cancer centers and 15 facilities providing radiation therapy only;

• A research network currently managing 71 active clinical trials; and

• A pharmaceutical distribution business currently distributing $2.2 billion annually in oncology pharmaceuticals.

We provide our services through four operating segments; medical oncology services, cancer center services, pharmaceutical services and research/other services. Each of our operating segments is described in greater detail below.

We provide practice management services to practices under comprehensive services agreements in both our medical oncology and cancer center services segments. Our management services are intended to support affiliated physicians in providing high quality, integrated and advanced cancer care. Both medical oncology and cancer center services may be provided under the same arrangement to provide comprehensive practice management services with the differentiation between these segments relating to the nature of cancer care being supported. Medical oncology services typically relate to the support of physicians who provide chemotherapy and drug administration, while cancer center services typically relate to physicians performing radiation treatments and diagnostic radiology.

Our practice management services are designed to encompass all non-clinical aspects of managing an oncology practice and assist affiliated practices develop and execute long-term strategies for their success. We believe our fee arrangements, which are typically based on a percentage of the affiliated practice’s earnings, effectively align our interests and long-term objectives with those our comprehensively managed practices.

We work with affiliated groups to improve practice performance through optimizing reimbursement, implementing Lean Six-Sigma operating processes, providing customized electronic medical records and information systems, and obtaining nationally-negotiated supply arrangements. We also assist in recruiting additional physicians into our groups, including physicians from established practices and newly qualified oncologists. In 2008, approximately 50 oncologists were recruited to join one of our affiliated groups. We believe that a substantial portion of newly qualified oncologists that enter private practice join groups that are

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affiliated with us. We also assist affiliated groups in strengthening their market position in an increasingly competitive environment through the development of relationship-building programs targeted to referring physicians, and through local and national branding campaigns that communicate the benefits of being a member of the our network.

We work with practices to establish budgets, determine goals, set strategic direction and assess the viability of capital projects or other initiatives to position them for long-term growth. Our network technology infrastructure provides a common platform that facilitates collaboration among physicians, including virtual tumor boards where challenging cases and treatments can be discussed among peers. In addition, this infrastructure allows for the accumulation of financial information that can be used to establish key performance metrics, benchmark practice results, identify opportunities to enhance performance and develop best operating practices. We also provide a voice in Washington, D.C. for our affiliated practices and advocate on their behalf, and on behalf of their patients, with state agencies and lawmakers.

In addition, our management services are designed to encompass all non-clinical aspects of managing an oncology practice, allowing affiliated physicians to spend more time providing care to patients. These services include accounting, billing and collection, personnel management, payroll, benefits administration, risk management and compliance.

Operating Challenges and Strategic Responses

The economics of healthcare and the aging American population mean that pressures to increase the effectiveness of care while reducing the cost of delivery will continue. We work with physicians, manufacturers and payers to address these issues. In 2008, we launched Innovent Oncology, a service specifically designed to bring physicians and payers together to provide the highest clinical quality while better managing the total cost of care through evidence-based treatment protocols and patient support services. In 2009, we will continue to expand this offering designed to address the fundamental pressures on the cancer care delivery system in America.

We expect that the demand for professional management of physician groups will continue. We recently began packaging five key services (OPS, ORS, Innovent, iKnowMed and Research) into a new targeted physician services offering. This offering is intended to complement the CSA model and address the needs of mid-size practices (five to fifteen physicians). It is available as a suite of services customized to each practice’s priorities.

We will also continue to work with our network of comprehensively affiliated practices to improve practice performance by optimizing reimbursement, implementing Lean Six Sigma operating processes, recruiting physicians, providing customized electronic medical records and information systems and obtaining nationally-negotiated supply arrangements. We will continue to assist affiliated groups strengthen their market position, in an increasingly competitive environment, through liaison programs that market affiliated practices to referring physicians and through both local and national branding campaigns that communicate the benefits of being a member of our network.

Our Strategy

Our mission is to enable physicians to provide the right treatment, at the right time, for the right patient. We strive to expand and improve patient access to high quality, integrated and advanced cancer care by working closely with physicians, manufacturers and payers to improve the safety, efficiency and effectiveness of the cancer care delivery system. We know that to realize our mission of enhancing patient access to advanced care, we must maintain a dual emphasis on cost containment and quality improvement. Pursuit of this mission involves strategic initiatives at both the local level, where cancer care is delivered to patients, and at the national level to address the needs of commercial and governmental payers, pharmaceutical manufacturers and other industry customers.

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We believe declining reimbursement and increasing operating costs have resulted in a trend toward professional management of physician groups. Since our inception, we have worked with local physician groups to enable affiliated practices to offer state of the art care to cancer patients in outpatient settings, including professional medical services, chemotherapy infusion, radiation oncology services, access to clinical trials, laboratory services, diagnostic radiology, pharmacy services and patient education. In addition, we work with affiliated groups to improve practice performance through optimizing reimbursement, implementing Lean Six-Sigma operating processes, recruiting physicians, providing customized electronic medical records and information systems, and obtaining favorable pharmaceutical pricing. We also assist affiliated groups in strengthening their market position in an increasingly competitive environment through the development of relationship-building programs targeted to referring physicians, and through local and national branding campaigns that communicate the benefits of being a member of our network.

As of March 31, 2009, we were affiliated with 1,227 physicians operating in 468 locations, including 95 radiation oncology facilities, in 39 states. Our affiliated physicians in the twelve months ended March 31, 2009, cared for approximately 680,000 patients, which we believe is the largest for-profit cancer care network in the United States. We will continue to work with existing affiliated physicians, and seek to enter into new affiliations, to increase the financial strength of network practice and support their clinical initiatives.

It is that sizable physician and patient population that allows us to realize volume efficiencies for the network and a variety of additional industry customers. We provide oncologists with a broad range of innovative products and services through two economic models: a comprehensive services model, under which we provide all of our practice management products and services under a single contract with one fee typically based on the practice’s financial performance, and our targeted physician services model, under which physicians purchase a narrower suite of services based on the types of services required by the practice. We expect our services will increasingly be offered through targeted arrangements where a subset of our comprehensive services, including supplying oncology pharmaceuticals, reimbursement services, disease management, electronic medical records and research can be obtained separately on a fee for service basis. These targeted arrangements are designed to meet the needs of oncology practices that may not be well-suited for a comprehensive management arrangement but still value a narrower scope of our services.

In addition to assisting physicians in addressing the challenges in their local markets, we will continue to use the insight gained from working with these practices to assist payers and pharmaceutical manufacturers improve patient access to high quality cancer care and the effectiveness of the care delivery system

Our reimbursement expertise helps providers, payers and manufacturers realize cost efficiency and predictability in a largely unpredictable field of medicine. Innovent Oncology addresses the payer’s need to avoid the unnecessary costs of care while ensuring the highest level of clinical quality. Innovent Oncology offers a comprehensive solution to the key cost drivers in cancer care: variable treatments, debilitating side effects that lead to emergency room visits and hospitalizations between treatments, and futile treatment at the end of life.

We also work with pharmaceutical manufacturers in the development and commercialization of oncology pharmaceuticals. The US Oncology Research Network provides pharmaceutical manufacturers with a centrally managed and efficient system for the clinical development of new therapies from Phase I through IV. This research network is led by industry-leading cancer experts in all major tumor types and offers access to an unparalleled national sampling of patients. In addition, AccessMed^® provides patient financial assistance and product support services to assist pharmaceutical manufacturers commercialize their products while our Healthcare Informatics business collects and analyzes data to provide significant insight into drug performance and patient outcomes for ongoing product development and evaluation.

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Physician Relationship Models

Comprehensive Service Agreements

Under our comprehensive services model, we own or lease all of the real and personal property used by our affiliated practices. In addition, we generally manage the non-medical business operations of our affiliated practices and facilitate communication with our affiliated physicians. Each management agreement contemplates a policy board consisting of representatives from the affiliated physician practice and us. Each board’s responsibilities include strategic planning, decision-making and preparation of an annual budget for that practice. While both we and the affiliated practice have an equal vote in matters before the policy board, the practice physicians are solely responsible for all medical decisions, including the hiring and termination of physicians. We are responsible for all non-medical decisions, including facilities management and information systems management.

Under most of our comprehensive service agreements, or CSAs, we are compensated under the earnings model. Under the earnings model, we account for all expenses that we incur in connection with managing a practice, including rent, pharmaceutical expenses and salaries and benefits of non-physician employees of the practices, and are paid a management fee based on a percentage of the practice’s earnings before income taxes, subject to certain adjustments. During the year ended December 31, 2008, 80.9% of our revenue was derived from CSAs related to practices managed under the earnings model. During the three months ended March 31, 2009, 81.2% of our revenue was derived from CSAs. Our other CSAs are on a fixed management fee basis, as required by some states.

Targeted Physician Services

Our services are increasingly being offered through targeted arrangements where a subset of the services offered through our comprehensive management agreements are provided separately to oncologists on a fee-for-service basis. Targeted physician services represented 15.8% of our revenue during the year ended December 31, 2008, which was primarily fees for payment for pharmaceuticals and supplies used by the practice and reimbursement for certain pharmacy-related expenses. Targeted physician services represented 14.8% of our revenue during the three months ended March 31, 2009. A smaller portion of our revenue from targeted arrangements was payment for billing, collection and reimbursement support service and payment for the other services we provide. Rates for our services typically are based on the level of services desired by the practice.

Concentrations of Risk

One affiliated practice, Texas Oncology, P.A., or Texas Oncology, represented approximately 25% of our revenue for the quarter ended March 31, 2009 and the years ended December 31, 2008, 2007 and 2006. We perceive our relationship with this practice to be positive, however if the relationship were to deteriorate, or the practice were to disaffiliate, we would experience a material, adverse impact on our results of operations and financial condition.

We derive a substantial portion of our revenue and profitability from the utilization of a limited number of pharmaceuticals that are manufactured and sold by a very limited number of manufacturers. During 2008, approximately 43% of patient revenue generated by our affiliated practices resulted from pharmaceuticals sold exclusively by five manufacturers. In addition, a limited number of manufacturers are responsible for a disproportionately large amount of market-differentiated pricing we offer to practices. Our agreements with these manufacturers are typically for one to three years and certain agreements are cancelable by either party without cause with 30 days prior notice. Further, several of the agreements provide favorable pricing that is adjusted quarterly based on specified volume levels or a specified level of use of a specific drug as a percentage of overall use of drugs within a given therapeutic class. In some cases, compliance with the contract is measured on an annualized basis and pricing concessions are given in the form of rebates payable at the end of the measurement period. Unanticipated changes in usage patterns, including as a result of reimbursement changes such as those

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affecting ESAs and the introduction of standardized treatment regimens or clinical pathways, by our affiliated practices, that disfavor a given drug, could result in lower-than-anticipated utilization of a given pharmaceutical product, and cause us to fail to attain the performance levels required to earn rebates. A departure of a significant number of physicians from our network could also cause us to fail to reach contract targets. Failure to attain performance levels could result in our not earning rebates, including cost-reductions that may already have been reflected in our financial statements based on our prior assessment as to the likelihood of attaining such reductions. Furthermore, certain manufacturers pay rebates under agreements based on multi-product performance. Under these types of agreements, our pricing on several products could be adversely impacted based upon our failure to meet predetermined targets with respect to any single product. Any termination or adverse adjustment to these relationships could have a material adverse effect on our business, financial condition and results of operations.

Governmental programs, such as Medicare and Medicaid, are collectively the affiliated practices’ largest payers. For the years ended December 31, 2008, 2007 and 2006, the practices affiliated with us under comprehensive services agreements derived approximately 38.2%, 37.8% and 37.8%, respectively, of their net patient revenue from services provided under the Medicare program (of which 5.5%, 3.8%, and 3.0%, respectively, relates to Medicare managed care programs) and approximately 3.3%, 3.0% and 3.1%, respectively of their net patient revenue from services provided under state Medicaid programs. Under managed care programs, Medicare contracts with third-party payers to administer health plans for Medicare beneficiaries. Under such programs, physicians are reimbursed at negotiated rates (rather than the Medicare fee schedule) and the payer is a third-party, rather than the Medicare program itself. Practices affiliated under comprehensive services agreements collectively have agreements with one additional payer that represents more than 10% of net revenues. That payer represented 11% of net revenues in 2006, and less than 10% in 2007 and 2008. No other single payer accounted for more than 10% of our revenue during the years ended December 31, 2008, 2007 and 2006. Certain of our individual affiliated practices, however, have contracts with payers accounting for more than 10% of their revenue.

Reimbursement Matters

Pharmaceutical Reimbursement under Medicare

Erythropoiesis-stimulating agents, or ESAs, are widely-used drugs for the treatment of anemia, which is a condition that occurs when the level of healthy red blood cells in the body becomes too low, thus inhibiting the blood’s ability to carry oxygen. Many cancer patients suffer from anemia either as a result of their disease or as a result of the treatments they receive to treat their cancer. ESAs have historically been used by oncologists to treat anemia caused by chemotherapy, as well as anemia in cancer patients who are not currently receiving chemotherapy. ESAs are administered to increase levels of healthy red blood cells and are an alternative to blood transfusions.

In March 2007, the U.S. Food and Drug Administration, or the FDA, issued a public health advisory outlining new safety information, including revised product labeling, about ESAs which was later revised on November 8, 2007. In particular, the FDA highlighted studies that concluded that an increased risk of death may occur in cancer patients who are not receiving chemotherapy and who are treated with ESAs. The FDA advisory and subsequent actions led the Centers for Medicare and Medicaid Services, or CMS, to open a national coverage analysis, or NCA, on March 14, 2007, on the use of ESAs for conditions other than advanced kidney disease, which was the first step toward issuing a proposed national coverage determination. The national coverage determination, or NCD, was released on July 30, 2007, and was effective as of that date.

The NCD went significantly beyond limiting coverage for ESAs in patients who are not currently receiving chemotherapy as referred to above. The NCD included determinations that eliminate coverage for anemia in cancer patients not related to cancer treatment. Coverage was also eliminated for patients with certain other risk factors. In circumstances where ESA treatment is reimbursed, the NCD established conditions for Medicare

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coverage that (i) require that in order to commence ESA treatment, patients be significantly more anemic than was common practice prior to the NCD; (ii) impose limitations on the duration of ESA therapy and the circumstances in which it should be continued and (iii) limit dosing and dose increases in nonresponsive patients.

Subsequent to the issuance of the NCD, the Oncologic Drugs Advisory Committee of the FDA, or ODAC, met on March 13, 2008, to further consider the use of ESAs in oncology. Based upon the ODAC findings, on July 30, 2008, FDA published final new labeling for the ESA drugs Aranesp and Procrit. Unlike the NCD from CMS, which governs reimbursement, rather than prescribing, for Medicare beneficiaries only, the FDA-approved labeling indicates the conditions under which FDA believes that use of a product is safe and effective. The revised labeling was effective as of August 14, 2008, and primarily changed the labeled use of ESAs in the following areas:

• ESAs are “not indicated” for patients receiving chemotherapy when the anticipated outcome is cure.

• ESA therapy should not be initiated when hemoglobin levels are ³ 10 grams per deciliter, or g/dL

• References in the labeling to an upper limit of 12 g/dL have been removed.

The FDA did not adopt an ODAC recommendation to limit ESA in head/neck and breast cancers, or any other tumor type. FDA’s action on this point significantly reduced the impact of a possible decrease in utilization.

The FDA also mandated that a Risk Evaluation and Mitigation Strategy, or REMS, with respect to ESAs be adopted. A REMS proposal by manufacturers was submitted to the FDA in late August 2008. The REMS may require additional patient consent/education requirements, medication guides and physician registration procedures. The length of time required for the FDA to approve a REMS and for the manufacturers to implement the new program is uncertain and the specifications of the REMS presently remain under FDA review. Once implemented, the REMS will outline additional, if any, procedural steps that will be required for qualified physicians to order and prescribe ESAs for their patients.

Operating income attributable to ESAs administered by our network of affiliated physicians was $32.1 million in 2008 compared to $58.0 million in 2007 and $5.6 million during the three months ended March 31, 2009. This operating income includes results from our Medical Oncology Services segment which relate primarily to the administration of ESAs by practices receiving comprehensive management services and also from our Pharmaceutical Services segment which includes purchases by physicians affiliated under the OPS model, as well as distribution and group purchasing fees received from manufacturers. As the NCD was effective July 30, 2007, the impact of reduced ESA utilization was not fully reflected in the results for the last half of 2007. In addition, during 2008 there was a net increase in ESA pricing, the impacts of which are not fully reflected in the 2008 financial results since the increases took place during the year.

It is not possible to estimate the impact of the REMS on our financial results as it relates to prescribing patterns, until the REMS is in effect (expected to be sometime in 2009). We believe a possible impact of the REMS could be further reductions in ESA utilization. The significant decline in ESA usage has had a significant adverse affect on our results of operations, and, particularly, its Medical Oncology Services and Pharmaceutical Services segments. We cannot assure you that a further decline will not occur. Decreased financial performance of affiliated practices as a result of declining ESA usage could also have an effect on their relationship with us and lead to increased pressure to amend the terms of their management services agreements. In addition, reduced utilization of ESAs may adversely impact our ability to continue to receive favorable pricing from ESA manufacturers. Decreased financial performance may also adversely impact our ability to obtain acceptable credit terms from pharmaceutical manufacturers, including manufacturers of products other than ESAs.

We expect continued payer scrutiny of the side effects of supportive care products and other drugs that represent significant costs to payers. Such scrutiny by payers or additional scientific data could lead to future restrictions on usage or reimbursement for other pharmaceuticals as a result of payer or FDA action or reductions

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in usage as a result of the independent determination of oncologists practicing in our network. Any such reduction could have an adverse effect on our business. In our evidence-based medicine initiative, affiliated physicians continually review emerging scientific information to develop clinical pathways for use in oncology and remain engaged with payers in determining optimal usage for all pharmaceuticals.

Also, Medicare reimburses providers for oncology pharmaceuticals administered in physicians’ offices, including those in our network, at the manufacturer’s average sales price, or ASP, for the drugs plus 6%. Medicare’s payment amount for drugs, combined with the importance of pharmaceuticals to our business and concentration of our purchases with a limited number of manufacturers, represents a significant risk for us. Nearly all of our pharmaceutical pricing advantage relative to other suppliers is derived from a small number of drugs. Implementation of ASP-based reimbursement has reduced the amount of differential pricing that is available to us from pharmaceutical manufacturers, which is one of our key competitive strengths.

Medicare Demonstration Project

Until 2007, the decline in oncology pharmaceutical reimbursement was partially offset by payments for certain data relating to symptom management for cancer patients, under the Medicare Demonstration Project. For 2005, the Medicare Demonstration Project was projected by CMS to add an aggregate of $260 million in Medicare payments to oncologists across the United States. The project continued for 2006; however it included substantial revisions to gather more specific information relevant to the quality of care for cancer patients. Reporting for 2006 was not specific to chemotherapy, but instead was focused on physician evaluation and management. The reduced reimbursement under the Medicare Demonstration Project negatively impacted pre-tax income in 2006 by approximately $6.8 million as compared to 2005. The Oncology Medicare Demonstration Project expired as of December 31, 2006, and the reduced reimbursement negatively impacted 2007 pre-tax income by an estimated $2.6 million.

Reimbursement for Physician Services

Medicare reimbursement for physician services is based on a fee schedule, which establishes payment for a given service, in relation to actual resources used in providing the service, through the application of relative value units. The resources used are converted into a dollar amount of reimbursement through a conversion factor, which is updated annually by CMS, based on a formula, or by Congress enacting legislation that overrides the formula.

On November 1, 2007, CMS issued a physician fee schedule update for 2008 to be set under the statutory formula which was to be effective as of January 1, 2008. Under the CMS release, the 2008 conversion factor would have been 10.1% lower than the 2007 rates. However, as a result of the Medicare, Medicaid, and SCHIP Extension Act of 2007, effective for claims with dates of service from January 1, 2008 through June 30, 2008, the update to the conversion factor was an increase of 0.5% over the 2007 rates; and as a result of the Medicare Improvements for Patients and Providers Act of 2008 passed by Congress on July 15, 2008, the conversion factor for claims with dates of service from July 1, 2008 through December 31, 2008, remained at the threshold of 0.5% over 2007 rates that were in effect.

Under the statutory formula, the conversion factor for 2010 is estimated to decrease by about 21.5% unless Congress again enacts superseding legislation. Congress and the Administration are considering possible actions to prevent that decrease.

On October 30, 2008, CMS issued a final rule for the Medicare Physician Fee Schedule for calendar year 2009. The final rule establishes Medicare payment rates and policy changes that went into effect for services furnished by physicians and non-physician practitioners as of January 1, 2009. The Medicare Physician Fee Schedule released in October includes a 5% decrease in the conversion factor from the 2008 rates, reflecting the discontinuation of a budget neutrality adjustor that had been applied to a portion of the fee schedule calculation

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for the past two years, but increased the relative values of certain services. This change negatively impacted highly technical services and increased reimbursement for services with greater physician work components such as Evaluation and Management services. The final rule is estimated to result in a decrease in pre-tax income of $1.8 million in 2009 based on 2008 utilization patterns.

On November 1, 2006, CMS released its Final Rule of the Five-Year Review of Work Relative Value Units, or RVU or Work RVU, under the Physician Fee Schedule and Proposed Changes to the Practice Expense, or PE, Methodology, or the Final Rule. The Work RVU changes were implemented in full beginning January 1, 2007, while the PE Methodology changes are being phased in over a four-year period (2007 to 2010). Significant Final Rule changes included (i) increases to evaluation and management reimbursement, (ii) adoption of a “bottom-up” payment methodology for calculating direct practice costs, (iii) modifications to the methodology used to calculate indirect practice costs, and (iv) elimination of the “non-physician work pool” (which is currently used to calculate practice expense RVUs for services without physician involvement, such as certain radiation oncology services), with reimbursement using the standard methodology.

For 2008 and 2007, the Final Rule resulted in an increase in pre-tax income of $2.9 million and $2.3 million, respectively, over the comparable prior year periods for Medicare non-drug reimbursement. When fully implemented in 2010, we would expect a 4.1% increase in Medicare reimbursement for all non-drug services, compared to 2006, composed of a 13% increase in radiation oncology reimbursement and a 0.1% decrease in non-drug medical oncology reimbursement. Some managed care contracts linked to Medicare reimbursement would also increase ratably. During the three months ended March 31, 2009, the Final Rule changes in PE values resulted in an increase in pretax income of $1.0 million over the comparable prior year periods for Medicare non-drug reimbursement excluding the 2009 conversion factor change.

The Final Rule for the Medicare Physician Fee Schedule, or MPFS, for 2009 included a 2% incentive bonus for participation in both electronic prescribing , or e-prescribing, and Physician Quality Reporting Initiative, or PQRI. The combined 4% bonus could increase pre-tax income by a maximum of $3 million in 2009; however, participation in the PQRI program by affiliated physicians has been minimal since initiated in 2007 and had nominal impact on 2008 pre-tax income.

Imaging Reimbursement

The Deficit Reduction Act, or DRA, passed in February, 2006, contained a provision affecting imaging reimbursement. The technical component of the physician fee schedule for physician-office imaging services was capped at the Hospital Outpatient Prospective Payment System, or HOPPS, rates. As a result, effective January 1, 2007, Medicare reimbursement was limited to no more than the HOPPS rates. The impact on our affiliated practices primarily relates to reduced reimbursement for Positron Emission Tomography, or PET, Positron Emission Tomography/Computerized Tomography, or PET/CT, and Computerized Tomography, or CT services. During the year ended December 31, 2007, the reduced reimbursement for these imaging services reduced pre-tax income by approximately $9.6 million compared to the year ended December 31, 2006. During 2008, the HOPPS rates increased, compared to 2007, resulting in an increase in pre-tax income in imaging reimbursement of approximately $1.7 million over 2007.

On April 6, 2009, CMS issued a final national coverage determination, or NCD, to expand coverage for initial testing with PET as a cancer diagnostic tool for Medicare beneficiaries who are diagnosed with and treated for most solid tumor cancers. This NCD also extends coverage to patients to allow PET usage beyond initial diagnosis to include subsequent treatment strategies and is expected to expand usage of PET scans, including at our affiliated practices, beginning in the second quarter of 2009.

The President’s proposed budget for FY 2010 includes a proposed change to the Medicare law that would require prior authorization by a radiology benefit manager for advanced imaging services, such as CT and PET.

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General Reimbursement Matters

Other reimbursement matters that could impact our future results include the risk factors described above, as well as:

• the extent to which non-governmental payers change their reimbursement rates or implement other initiatives, such as pay for performance, or change benefit structures;

• changes in practice performance or behavior, including the extent to which physicians continue to administer drugs to Medicare patients, or changes in our contracts with physicians;

• changes in our cost structure or the cost structure of affiliated practices, including any change in the prices our affiliated practices pay for drugs;

• changes in our business, including new cancer centers, PET system installations or otherwise expanding operations of affiliated physician groups;

• changes in patient responsibility to pay for cancer treatment as a result of employer benefit plan design, rising unemployment or other related factors; and

• any other changes in reimbursement or practice activity that are unrelated to the prescription drug legislation.

Summary of Medicare and Other Reimbursement Changes

Many factors impact the reimbursement for treatment provided by our affiliated practices, including new rules and rate changes which are enacted frequently. The legislative changes which had the most impact on reimbursement in 2008 include the PE Methodology changes for physician services and the HOPPS rate limitation for imaging reimbursement, which together increased pre-tax income by $4.6 million in 2008.

Also, as experienced during the past two years (with ESAs), new information often emerges regarding the possible effects of drugs brought about changes from the FDA, CMS, physicians and patients in determining the most appropriate and effective use of those drugs. Pre-tax income attributable to ESAs administered by our network of affiliated physicians decreased by approximately $26 million in 2008 (Medicare and all other patients).

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate these estimates, including those related to accounts receivable, intangible assets, goodwill, income taxes, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates under different assumptions or conditions. In addition, as circumstances change, we may revise the basis of our estimates accordingly.

We believe the following accounting policies represent management’s most significant, complex or subjective judgments and are most critical to reporting our financial condition and results of operations.

Our critical accounting policies and estimates include:

• Revenue from affiliated practices

• Valuation of accounts receivable

• Impairment of long-lived assets

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• Volume-based pharmaceutical rebates

• Accounting for income taxes

Revenue from Affiliated Practices

A majority of our revenues, 81.1% for the year ended December 31, 2008, are derived through CSAs with affiliated practices. Under these agreements, our management fee is calculated as a portion of the earnings of affiliated practices, net of any amounts retained by the practices for payment of compensation to the practices’ physicians and certain other direct costs, or in limited circumstances, a fixed fee.

Therefore, although we are not directly involved in providing healthcare services to cancer patients, under our CSAs, our results are highly correlated to the results of our affiliated practices which provide such care. Our affiliated practices recognize revenue based on gross billings, net of allowances for contractual adjustments and uncollectible accounts. Contractual adjustments are necessary to reduce gross billings to amounts that will be paid by individual payers under terms of individual arrangements with affiliated practices. These payers include Medicare, Medicaid, managed care, other health plans and patients. Payments from these payers are subject to regulatory change, in the case of Medicare and Medicaid, or periodic renegotiation and the financial health of the payer, in the case of managed care, other health plans and patients. Additionally, charges to third party payers are often subject to review, and possibly audit, by the payer, which may result in a reduction of fees recognized for billed services. While we believe affiliated practices under the CSA model appropriately record contractual allowances and provisions for doubtful accounts in the determination of revenue, the process includes an inherent level of subjectivity. Typically, adjustments to revenue for these matters, and ultimately our management fees, have not been material and are recorded in the period such adjustments become known.

Our revenue is net of amounts retained by practices for payment of compensation to affiliated physicians. Many of our affiliated practices under comprehensive services agreements participate in a bonus program that is intended to create a mutually-aligned incentive to appropriately utilize resources and deploy capital by providing a reduction in, or rebate of, management fees payable to us. Practices participate in this program only when specified earnings and returns on invested capital targets are met. These payments are generally based upon annual practice results and are computed in accordance with our service agreement with the practice. Additionally, effective July 1, 2006, to promote continued support of initiatives in the pharmaceutical services segment, we initiated a program to reduce management fees paid by affiliated practices under comprehensive services agreements based upon compliance with distribution efficiency guidelines established by us and the profitability of the segment.

Physician practices that enter into CSA arrangements receive pharmaceutical products as well as a broad range of practice management services. These products and services represent multiple deliverables provided under a single contract for a single fee. We have analyzed the components of the contract attributable to the provision of products and the provision of services and attributed fair value to each component. For revenue recognition purposes, product revenue and service revenue have each been accounted for separately.

Product revenue consists of sales of pharmaceuticals to affiliated practices under CSA arrangements or under the OPS model. Under each of these arrangements, we agree to furnish the affiliated practices with pharmaceuticals and supplies. Because we act as principal, product revenue is recognized as (i) the cost of the pharmaceutical (which is reimbursed to us pursuant to all of our contractual arrangements with physician practices) plus (ii) an additional amount. Under the OPS model, this additional amount is the actual amount charged to practices because all of the services provided under this model are directly related to and not separable from the delivery of pharmaceutical products. CSA arrangements do not provide for a separate fee for supplying pharmaceuticals other than reimbursement of the cost of pharmaceuticals. Accordingly, the additional amount included in product revenue reflects our estimate of the portion of our service fee that represents fair value relative to product sales and is based upon the terms upon which we offer pharmaceuticals under our OPS model. Service revenue consists of our revenue, other than product revenue, under our service agreements with affiliated practices and for our services provided to customers other than affiliated physicians.

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Valuation of Accounts Receivable

Reimbursement relating to healthcare accounts receivable, particularly governmental receivables, is complex and changes frequently, and could, in the future, adversely impact our ability to collect accounts receivable and the accuracy of our estimates.

To the extent we are legally permitted to do so, we purchase accounts receivable generated by treating patients from our CSA practices. We purchase these receivables at their estimated net realizable value, which in management’s judgment is the amount that we expect to collect, taking into account contractual agreements that reduce gross fees billed and allowances for accounts that may otherwise be uncollectible. If we determine that accounts are uncollectible after purchasing them from a practice, our contracts require the practice to reimburse us for the additional uncollectible amount. Such reimbursement however, reduces the practice’s earnings for the applicable period. Because our management fees are partly based upon practice earnings, this adjustment would also reduce our future service fees. Typically, the impact of the adjustment on our fees has not been significant.

We maintain decentralized billing systems, which vary by individual practice. We continue to upgrade and modify those systems. We take this into account as we evaluate the realizability of receivables and record appropriate reserves, based upon the risks of collection inherent in such a structure. In the event subsequent collections are higher or lower than our estimates, results of operations in subsequent periods could be either positively or negatively impacted as a result of prior estimates. This risk is particularly relevant for periods in which there is a significant shift in reimbursement from large payers, such as recent changes in Medicare reimbursement.

Unlike our practices affiliated through comprehensive agreements, we do not maintain billing and collection systems for practices affiliated under the OPS model and our collection of receivables from OPS customers is subject to their willingness and ability to pay for products and services delivered by us. Typically, payment is due from OPS customers within 30 days from the date products and services are delivered. Where appropriate, we seek to obtain personal guarantees from affiliated physicians to support the collectibility of receivables. We maintain an allowance for uncollectible accounts based upon both an estimate for specifically-identified doubtful accounts and an estimate based on an evaluation of the aging of receivable balances.

Impairment of Long-Lived Assets

As of March 31, 2009 and December 31, 2008, our consolidated balance sheet includes goodwill in the amount of $377.3 million, of which $28.9 million, $191.4 million and $157.0 million was associated with the Medical Oncology Services, Cancer Center Services and Pharmaceutical Services segments, respectively.

In accordance with SFAS 142 “Goodwill and Other Intangible Assets”, or SFAS 142, we test goodwill for impairment on an annual basis or more frequently if events or circumstances arise that indicate the recorded value may not be recoverable. In accordance with SFAS 142, goodwill is tested for impairment through a two-step approach. Under the first step, the carrying value of an operating segment is compared to its estimated fair market value. If the fair value is less than the carrying value, goodwill is considered impaired and the impairment is measured through a second step that uses a hypothetical purchase price allocation to estimate the current fair market value of goodwill. An impairment charge is then recorded to reduce the carrying value of goodwill to its implied fair value.

This assessment of goodwill is performed at the operating segment level. We consider our operating segments to which goodwill has been allocated, Medical Oncology Services, Cancer Center Services and Pharmaceutical Services, to be the reporting units subject to impairment review. Our goodwill impairment analysis requires an estimate of fair value for each of our reporting units. We are privately-held and, therefore, our estimation of fair value includes obtaining assistance from a third party valuation firm in performing our evaluation. The valuation is based upon widely-accepted valuation techniques, including the use of peer market multiples (on a trailing and forward basis) and discounted cash flow analysis, in the absence of market

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capitalization data. The use of peer market multiples is based on an index of peers for which market information is available and that, collectively, exhibit characteristics similar to the reporting unit. The peer index includes outpatient healthcare providers, radiation therapy providers, physician practice management companies and pharmaceutical distributors. The discounted cash flow analysis is based on internal projections of future operating performance and capital requirements to support the projected levels of operating performance. The results of the trailing peer multiple analysis, forward peer multiple analysis and discounted cash flow analysis are equally weighted to arrive at a range of potential values for each reporting unit being tested for impairment. The midpoint of that range is then compared to the carrying value of the reporting unit to assess whether or not the carrying value of goodwill has been impaired.

At December 31, 2008, we estimated that the fair values of our Medical Oncology Services, Cancer Center Services and Pharmaceutical Services segments exceeded their carrying values by approximately $290.0 million, $44.0 million and $125.0 million, respectively. A future decline in the operating performance or increase in the capital requirements of the Cancer Center Services segment could result in an impairment of goodwill related to this segment. Factors that could contribute to a decline in operating performance would include, but are not limited to, a reduction in reimbursement for radiation therapy and diagnostic services by third party payers (including governmental and commercial payers), an increase in operating costs such as compensation or utilities, or a reduction in our management fees under comprehensive management agreements. Additionally, increasing capital requirements as a result of escalating equipment or financing costs or investments in new technology could negatively impact the segment’s estimated fair value such that an impairment of its goodwill may be deemed to have occurred. In evaluating the fair value of the Cancer Center Services segment, we assumed revenue increases at a compound annual growth rate of 9.6% between the years ending December 31, 2009 and December 31, 2012. The projected revenue increases are consistent with the compound annual rate of 9.8% by which revenue increased between the years ended December 31, 2004 and December 31, 2008, the historical period of equal duration to the projection period. In the discounted cash flow analysis, we assumed a discount rate of 9.5% and a terminal growth rate of 3.5%. Peer market multiples applied to EBITDA to estimate fair value ranged from 7.5x to 8.0x in the trailing multiple analysis and from 7.0x to 7.5x in the forward multiple analysis. We may need to perform an impairment test of goodwill before October 1, 2009 (the next annual assessment date) related to the Cancer Center Services segment if the discount rate were to increase above 10.0%, if market multiples decline by 0.5x or in the event of other negative changes to assumptions used in our fair value calculations, particularly changes that reduce future projections of financial performance. Such future adverse changes in actual or anticipated operating results, economic factors and/or market multiples used to estimate our fair value, could result in future non-cash impairment charges. Because measuring an impairment charge requires the identification and valuation of intangible assets that have either increased in value or have been created since the goodwill was initially recognized, it is not possible to estimate the impact of the impairment charge that would be recorded if the estimated fair value of the Cancer Center Services segment were to decline below its carrying value. We do not believe that it is reasonably possible that a change in the key assumptions related to the calculation of fair value for the Medical Oncology Services or Pharmaceutical Services segments would result in the need to perform an impairment test prior to our next annual assessment on October 1, 2009.

During the three months ended March 31, 2009, we implemented certain cost reduction efforts and increased our emphasis on capital management, including working capital and investments in new projects. On April 6, 2009, CMS issued a final NCD to expand coverage for initial testing with PET as a cancer diagnostic tool for Medicare beneficiaries who are diagnosed with and treated for most solid tumor cancers. This NCD also extends coverage to patients to allow PET usage beyond initial diagnosis to include subsequent treatment strategies and is expected to expand usage of PET scans, and favorably impact the results of the Cancer Center Services segment, beginning in the second quarter of 2009.

As a result of the foregoing, an impairment charge of $380.0 million was recorded during the year ended December 31, 2008 related to goodwill in the Medical Oncology Services segment. The impairment charge reflected the declining actual and projected profitability in that segment due to reductions in pharmaceutical

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reimbursement and continued uncertainty associated with utilization of ESAs. When an impairment of goodwill is identified, an impairment charge is necessary to adjust the carrying value to its implied fair value, based upon a hypothetical purchase price allocation assuming the reporting unit was acquired for its estimated fair value. Determining the implied fair value of goodwill also requires the identification and valuation of intangible assets that have either increased in value or have been created since the goodwill was initially recognized. In connection with assessing this impairment charge, we identified previously unrecognized intangible assets, as well as increases to the fair value of the recognized management service agreement intangible assets, which amounted to approximately $160 million in the aggregate. Value assigned to these intangible assets reduced the amount attributable to goodwill in the hypothetical purchase price allocation and, consequently, increased the impairment charge necessary to state goodwill at its implied fair value by a like amount. In accordance with GAAP, these increases in the fair value of other intangible assets have not been recorded in our consolidated balance sheet.

The carrying values of our fixed assets and service agreement intangibles are also tested for impairment when events or changes in circumstances indicate their recorded value may not be recoverable. In addition, on an annual basis, the carrying value of these assets is compared to our cash flow associated with the affiliated practice that is utilizing the fixed assets or that is party to the management services agreement. In the event this comparison indicates that the period necessary to recover the assets’ carrying value is approximately equal to (or greater than) the remaining useful life of the related assets, we conducted further analysis to assess whether an impairment charge may be required. No impairment was required to be recorded as of December 31, 2008.

Volume-based Pharmaceutical Rebates

Several of our agreements with pharmaceutical manufacturers provide for discounts in the form of volume-based rebates, which are payable at the end of a stipulated measurement period. Certain agreements also provide rebates based upon market share data. At December 31, 2008 and 2007, we had recorded a rebate receivable of $32.9 million and $105.2 million, respectively. Effective October 1, 2008, an agreement with one manufacturer that previously provided pricing adjustments through rebates was converted, for the most part, to provide those adjustments as discounts to the invoiced cost of pharmaceuticals. As a result of this change, the discounts are now a reduction of the amount payable to the manufacturer rather than a rebate receivable at December 31, 2008. Rebates earned from manufacturers are subject to review and final determination based upon the manufacturer’s analysis of usage data and contractual terms. Certain manufacturers pay rebates under multi-product agreements. Under these types of agreements, our rebates on several products could be impacted based upon our failure to meet predetermined targets with respect to any single product. Additionally, contractual measurement periods may not necessarily coincide with our fiscal periods.

We accrue rebates, and record a reduction to cost of products, based upon our internally monitored usage data and our expectations of usage during the measurement period for which rebates are accrued. Rebate estimates accrued prior to invoicing manufacturers (which generally occurs 10-30 days after the end of the measurement period) are revised to reflect actual usage data for the measurement period being invoiced. For certain agreements, we record market share rebates at the time we invoice the manufacturer, as information necessary to reliably assess whether such amounts will be earned is not available until that time. Our billings are subject to review, and possible adjustment, by the manufacturer. Adjustments to estimates of rebates earned, based on manufacturers’ review of such billings, have not been material to our financial position or results of operations.

Accounting for Income Taxes

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes,” or SFAS No. 109, which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. As part of the process of preparing our consolidated financial

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statements, we estimate our income taxes based on our current tax provision together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. We also recognize as deferred tax assets the future tax benefits from net operating loss carryforwards. We evaluate the realizability of deferred tax assets by assessing the future reversals of existing temporary differences, and the impact of tax planning strategies that could be implemented to avoid the potential loss of future tax benefits. Changes in tax codes, statutory tax rates or future taxable income levels could materially impact our valuation of tax accruals and assets and could cause our provision for income taxes to vary from estimated amounts and from period to period. At December 31, 2008, we had deferred tax liabilities in excess of deferred tax assets of approximately $30.8 million.

Effective January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, or FIN 48, “Accounting for Uncertainty in Income Taxes.” In connection with the adoption of FIN 48, we recognized increases to our tax reserves for uncertain tax positions and interest and penalties.

Recent Accounting Pronouncements

From time to time, the FASB, the SEC and other regulatory bodies seek to change accounting rules, including rules applicable to our business and financial statements. We cannot provide assurance that future changes in accounting rules would not require us to make restatements.

Discussion of Non-GAAP Information

In this offering memorandum, we use the term “EBITDA” which represents net income before interest, taxes, depreciation, amortization (including amortization of stock-based compensation) and other income (expense). EBITDA is not calculated in accordance with generally accepted accounting principles in the United States; rather it is derived from relevant items in our GAAP-based financial statements. A reconciliation of EBITDA to the consolidated statement of operations and comprehensive income and the consolidated statement of cash flows is included in this offering memorandum.

We believe EBITDA is useful to investors in evaluating the value of companies in general, and in evaluating the liquidity of companies with debt service obligations and their ability to service their indebtedness. Management uses EBITDA as a key indicator to evaluate liquidity and financial condition, both with respect to the business as a whole and with respect to individual sites in our network. Our existing senior secured revolving credit facility also requires that we comply on a quarterly basis with certain financial covenants that include EBITDA as a financial measure. Management believes that EBITDA is useful to investors, since it provides investors with additional information that is not directly available in a GAAP presentation.

As a non-GAAP measure, EBITDA should not be viewed as an alternative to our income from operations, as an indicator of operating performance, or our cash flow from operations as a measure of liquidity. For example, EBITDA does not reflect:

• our significant interest expense, or the cash requirements necessary to service interest and principal payments on our indebtedness;

• cash requirements for the replacement of capital assets being depreciated and amortized, which typically must be replaced in the future, even though depreciation and amortization are non-cash charges;

• changes in, or cash equivalents available for, our working capital needs;

• our cash expenditures, or future requirements, for other capital expenditure or contractual commitments; and

• the fact that other companies may calculate EBITDA differently than we do, which may limit its usefulness as a comparative measure.

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Despite these limitations, management believes that EBITDA provides investors and analysts with a useful measure of liquidity and financial condition unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. Management compensates for these limitations by relying primarily on our GAAP results and using EBITDA as supplemental information for comparative purposes and for analyzing compliance with our loan covenants.

In all events, EBITDA is not intended to be a substitute for GAAP measures. Investors are advised to review such non-GAAP measures in conjunction with GAAP information provided by us.

Results of Operations

The following table sets forth our consolidated statement of operations and the percentages of revenue represented by certain items reflected herein for the years ended December 31, 2008, 2007 and 2006 and the three months ended March 31, 2009 and 2008 (in thousands).

	Year Ended December 31,															Three Months Ended March 31,
	2008					2007					2006					2009					2008
Product revenues	$	2,224,704		67.3	%	$	1,970,106		65.7	%	$	1,822,141		64.8	%	$	563,080		66.8	%	$	543,261		67.0	%
Service revenues		1,079,473		32.7			1,030,672		34.3			989,242		35.2			279,481		33.2			267,346		33.0
Total revenues		3,304,177		100.0			3,000,778		100.0			2,811,383		100.0			842,561		100.0			810,607		100.0
Cost of products		2,163,943		65.5			1,925,547		64.2			1,753,638		62.4			551,585		65.5			532,027		65.6
Cost of services:
Operating compensation and benefits		523,939		15.9			479,177		16.0			458,006		16.3			137,640		16.3			130,188		16.1
Other operating costs		321,947		9.7			293,677		9.8			274,665		9.8			80,696		9.6			76,796		9.5
Depreciation and amortization		72,790		2.2			73,159		2.3			69,351		2.4			17,565		2.1			18,601		2.3
Total cost of services		918,676		27.8			846,013		28.1			802,022		28.5			235,901		28.0			225,585		27.9
Total cost of products and services		3,082,619		93.3			2,771,560		92.3			2,555,660		90.9			787,486		93.5			757,612		93.5
General and administrative expense		76,883		2.3			84,326		2.8			76,948		2.7			18,131		2.2			19,988		2.5
Impairment and restructuring charges		384,929		11.6			15,126		0.5			—		—			1,409		0.2			381,306		47.0
Depreciation and amortization		30,017		0.9			16,172		0.5			13,983		0.5			7,533		0.8			7,153		0.9
Total costs and expenses		3,574,448		108.1			2,887,184		96.1			2,646,591		94.1			814,559		96.7			1,166,059		143.9
Income (loss) from operations		(270,271	)	(8.1	)		113,594		3.9			164,792		5.9			28,002		3.3			(355,452	)	(43.9	)
Other income (expense):
Interest expense, net		(92,757	)	(2.8	)		(95,342	)	(3.2	)		(92,870	)	(3.3	)		(22,622	)	(2.7	)		(24,200	)	(3.0	)
Other income (expense), net		2,213		0.1			—		—			—		—			—		—			1,371		0.2
Income (loss) before income taxes		(360,815	)	(10.8	)		18,252		0.7			71,922		2.6			5,380		0.6			(378,281	)	(46.7	)
Income tax benefit (provision)		(6,351	)	(0.2	)		(7,447	)	(0.2	)		(27,509	)	(1.0	)		(3,604	)	(0.4	)		922		0.1
Net income (loss)	$	(367,166	)	(11.0	)%	$	10,805		0.5	%	$	44,413		1.6	%	$	1,776		0.2	%	$	(377,359	)	(46.6	)%
Less: Net income attributable to noncontrolling interests		(3,324	)	(0.1	)		(3,619	)	(0.1	)		(2,388	)	(0.1	)		(759	)	(0.1	)		(715	)	(0.1	)
Net income (loss) attributable to the Company	$	(370,490	)	(11.1	)%	$	7,186		0.4	%	$	42,025		1.5	%	$	1,017		0.1	%	$	(378,074	)	(46.7	)%

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We derive revenue primarily in four areas:

• GPO, data and other pharmaceutical service fees. We receive fees from pharmaceutical companies for acting as a distributor, as a GPO for our affiliated practices, and for providing informational and other services to pharmaceutical companies. GPO fees are typically based upon the volume of drugs purchased by the practices. Fees for other services include amounts paid for data we collect, compile and analyze, as well as fees for other services we provide to pharmaceutical companies, including reimbursement support.

• Clinical research fees. We receive fees for clinical research services from pharmaceutical and biotechnology companies. These fees are separately negotiated for each study and typically include a management fee, per patient accrual fees and fees for achieving various study milestones.

• Oncology pharmaceutical services fees. Under our OPS agreements, we bill practices for services rendered. These revenues include payment for all of the pharmaceutical agents used by the practice for which we pay the pharmaceutical manufacturers and a service fee for the pharmacy-related services we provide.

• Comprehensive service fee revenues. Under our CSAs, we recognize revenues equal to the reimbursement we receive for all expenses we incur in connection with managing a practice plus an additional management fee that is generally based upon a percentage of the practice’s earnings before income taxes, subject to certain adjustments.

A portion of our revenue under our CSAs and our OPS arrangements with affiliated practices is derived from sales of pharmaceutical products and is reported as product revenues. Our remaining revenues are reported as service revenues. Physician practices that enter into CSAs with us receive a broad range of services and receive pharmaceutical products. These products and services represent multiple deliverables rendered under a single contract, with a single fee. We have analyzed the component of the contract attributable to the provision of products (pharmaceuticals) and the component of the contract attributable to the provision of services and attributed fair value to each component.

We retain all amounts we collect in respect of practice receivables that we collect on behalf of affiliated practices under CSAs. On a monthly basis, we calculate what portion of their revenues those affiliated practices are entitled to retain by subtracting accrued practice expenses and our accrued fees from accrued revenues. We pay practices this remainder in cash, which they use primarily for physician compensation. The amounts retained by physician groups are excluded from our revenue, because they are not part of our fees. By paying on a cash basis for accrued amounts, we assist in financing their working capital.

Three Months Ended March 31, 2009 and March 31, 2008

As of March 31, 2009 and 2008, respectively, we have affiliated with the following number of physicians (including those under OPS agreements), by specialty:

	March 31,
	2009	2008
Medical oncologists/hematologists	987	1,039
Radiation oncologists	158	154
Other oncologists	82	54
Total physicians	1,227	1,247

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The following tables set forth changes in the number of physicians affiliated with us under both comprehensive and OPS agreements:

Comprehensive Service Agreements(1)	Three Months Ended March 31,
	2009		2008
Affiliated physicians, beginning of period	979		903
Physician practice affiliations	30		54
Recruited physicians	10		5
Retiring/Other	(25	)	(11	)
Net conversions to/(from) OPS agreements	(4	)	—
Affiliated physicians, end of period	990		951
Oncology Pharmaceutical Services Agreements(2)	Three Months Ended March 31,
	2009		2008
Affiliated physicians, beginning of period	232		296
Physician practice affiliations	20		12
Physician practice separations	(19	)	(5	)
Retiring/Other	—		(7	)
Net conversions to/(from) CSAs	4		—
Affiliated physicians, end of period	237		296
Total affiliated physicians, end of period	1,227		1,247

(1) Operations related to CSAs are included in the Medical Oncology and Cancer Center services segments.

(2) Operations related to OPS agreements are included in the Pharmaceutical Services segment.

The following table sets forth the number of radiation oncology facilities and PET systems managed by us:

	Three Months Ended March 31,
	2009		2008
Cancer Centers, beginning of period	80		77
Cancer Centers opened	1		2
Cancer Centers closed	(1	)	—
Cancer Centers, end of period	80		79
Radiation oncology-only facilities, end of period	15		12
Total Radiation Oncology Facilities(1)	95		91
Linear Accelerators	120		117
PET Systems(2)	38		34
CT Scanners(3)	63		64

(1) Includes 92 and 82 sites utilizing IMRT and/or IGRT technology at March 31, 2009 and 2008, respectively.

(2) Includes 27 and 22 PET/CT systems at March 31, 2009 and 2008, respectively.

(3) Excludes PET/CT systems which are classified as PET systems above.

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The following table sets forth key operating statistics as a measure of the volume of services provided by our practices affiliated under CSAs:

	Three Months Ended March 31,
	2009	2008
Average Per Operating Day Statistics:
Medical oncology visits	11,274	10,572
Radiation treatments	2,678	2,731
Targeted treatments (included in radiation treatments)(1)	730	653
PET scans	219	193
CT scans	818	761

(1) Includes IMRT, IGRT, brachytherapy and stereotactic radiosurgery treatments.

Revenue

The following tables reflect our revenue by segment for the three months ended March 31, 2009 and 2008 (in thousands):

	Three Months Ended March 31,						Change
	2009			2008
Medical oncology services	$	581,930		$	552,755		5.3	%
Cancer center services		92,317			90,091		2.5
Pharmaceutical services		577,603			610,622		(5.4	)
Research and other services		19,223			13,062		47.2
Eliminations(1)		(428,512	)		(455,923	)	6.0
Total revenue	$	842,561		$	810,607		3.9	%
As a percentage of total revenue:
Medical oncology services		69.1	%		68.2	%
Cancer center services		11.0			11.1
Pharmaceutical services		68.6			75.3
Research and other services		2.3			1.6
Eliminations(1)		(51.0	)		(56.2	)
Total revenue		100.0	%		100.0	%

(1) Eliminations represent the sale of pharmaceuticals from our distribution center (Pharmaceutical Services segment) to our affiliated practices (Medical Oncology segment).

Medical Oncology Services. For the three months ended March 31, 2009, Medical Oncology Services revenue increased $29.2 million, or 5.3 percent, from the three months ended March 31, 2008. The revenue increase reflects higher Medical Oncology visits, due to both physician additions and increased daily productivity partially offset by one less operating day and lower utilization of supportive care drugs by affiliated physicians.

Cancer Center Services. Cancer Center Services revenue for the three months ended March 31, 2009 was $92.3 million, an increase of $2.2 million, or 2.5 percent. Despite one less operating day, revenue increased due to higher radiation treatment and diagnostic scan volumes reflecting additional radiation oncologists affiliated under CSAs. We continue to experience a shift toward advanced targeted radiation therapies such as IMRT, IGRT, mammosite and brachytherapy.

Pharmaceutical Services. Pharmaceutical Services revenue during the three months ended March 31, 2009 was $577.6 million, a decrease of $33.0 million, or 5.4 percent, from the three months ended March 31, 2008. The revenue decrease is primarily due to lower utilization of ESAs by physicians affiliated under both

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comprehensive and OPS agreements as well as working capital management programs implemented during the quarter that encouraged affiliated practices to minimize on-hand inventory and resulted in a reduction in purchases from our distribution center.

Research and Other. During the three months ended March 31, 2009, revenue from research and other services was $19.2 million, an increase of $6.2 million from the three months ended March 31, 2008. The increase as compared to the three months ended March 31, 2008, reflects our strategy to expand the existing research network, launch a contract research organization, and create aligned incentives with participating physicians that encourage long-term value creation.

Operating Costs

Operating costs, including depreciation and amortization related to our operating assets, and are presented in the tables below (in thousands):

	Three Months Ended March 31,						Change
	2009			2008
Cost of products	$	551,585		$	532,027		3.7	%
Cost of services:
Operating compensation and benefits		137,640			130,188		5.7
Other operating costs		80,696			76,796		5.1
Depreciation and amortization		17,565			18,601		(5.6	)
Total cost of services		235,901			225,585		4.6
Total cost of products and services	$	787,486		$	757,612		3.9
As a percentage of revenue:
Cost of products		65.5	%		65.6	%
Cost of services:
Operating compensation and benefits		16.3			16.1
Other operating costs		9.6			9.5
Depreciation and amortization		2.1			2.3
Total cost of services		28.0			27.9
Total cost of products and services		93.5	%		93.5	%

Cost of Products. Cost of products consists primarily of oncology pharmaceuticals and supplies used by affiliated practices in our Medical Oncology Services segment and sold to practices affiliated under the OPS model in our Pharmaceutical Services segment. Product costs increased 3.7% over the three month period ended March 31, 2008, which is consistent with the revenue growth associated with pharmaceutical use from the corresponding period. As a percentage of revenue, cost of products was 65.5% and 65.6% in the three months ended March 31, 2009 and 2008, respectively.

Cost of Services. Cost of services includes compensation and benefits related to our operations, including non-physician employees of our affiliated practices. Cost of services also includes other operating costs such as rent, utilities, repairs and maintenance, insurance and other direct operating costs. As a percentage of revenue, cost of services was 28.0% and 27.9% in the three months ended March 31, 2009 and 2008, respectively.

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Corporate Costs and Net Income

Corporate costs include general and administrative expenses, depreciation and amortization related to corporate assets and interest expense. Corporate costs are presented in the table below.

	Three Months Ended March 31,						Change
(in thousands)	2009			2008
General and administrative expense	$	18,131		$	19,988		(9.3	)%
Impairment and restructuring charges		1,409			381,306		nm	(1)
Depreciation and amortization		7,533			7,153		5.3
Interest expense, net		22,622			24,200		(6.5	)
Other (income) expense, net		—			(1,371	)	nm	(1)
As a percentage of revenue
General and administrative expense		2.2	%		2.5	%
Impairment and restructuring charges		0.2			47.0
Depreciation and amortization		0.8			0.9
Interest expense, net		2.7			3.0
Other (income) expense, net		—			(0.2	)

(1) Not meaningful

General and Administrative. General and administrative expense was $18.1 million for the three months ended March 31, 2009 and $20.0 million for the same period in 2008. General and administrative expense during the three months ended March 31, 2009 was $1.9 million lower than the comparable prior year period due to the continued management of controllable costs, primarily in areas such as personnel expenses, professional fees and travel. General and administrative expense represented 2.2% and 2.5% of revenue, respectively, for the three months ended March 31, 2009 and 2008.

Impairment and Restructuring Charges

Impairment and restructuring charges recognized during the three months ended March 31, 2009 and 2008 consisted of the following amounts (in thousands):

	Three Months Ended March 31,
	2009		2008
Goodwill	$	—	$	380,000
Severance costs		1,242		1,306
Service agreements, net		150		—
Other, net		17		—
Total	$	1,409	$	381,306

During the three months ended March 31, 2009, we recorded $1.2 million of severance charges related to certain corporate personnel in connection with efforts to further reduce costs. These charges will be paid through the second quarter of 2010. In addition, an unamortized service agreement intangible was impaired for $0.2 million related to a practice that converted from a comprehensive services model to a targeted physician services relationship.

During the three months ended March 31, 2008, we recorded an impairment of goodwill related to the Medical Oncology segment of $380.0 million. Also during the period, charges of $1.3 million were recognized primarily related to employee severance for which payment was made in the second quarter of 2008.

Depreciation and Amortization. Depreciation and amortization expense increased $0.4 million for the three months ended March 31, 2009 over the three months ended March 31, 2008, which reflects incremental amortization of comprehensive service agreement intangibles for newly affiliated practices and investments made in our corporate infrastructure.

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Interest. Interest expense, net, decreased to $22.6 million during the three months ended March 31, 2009 from $24.2 million in the comparable period of the prior year due to lower market interest rates on our variable rate senior secured credit facility as well as a reduction of indebtedness due to a $29.4 million repayment as a result of the excess cash flow sweep provision of that facility paid in April, 2008.

Income Taxes. Our effective tax rate was a tax provision of 78.0% and a tax benefit 0.2% for the three months ended March 31, 2009 and 2008, respectively. The increase in the effective tax rate is attributable to the impairment of goodwill in the Medical Oncology Services segment during the three months ended March 31, 2008. Of the $380.0 million impairment charge, $376.0 million was not deductible for tax purposes, so there was no corresponding tax benefit associated with a significant portion of the goodwill impairment.

Net Income (Loss) Attributable to the Company. Net income for the three months ended March 31, 2009 was $1.0 million, compared to net loss of $378.1 million for the three months ended March 31, 2008.

Net Income Attributable to Noncontrolling Interests. Net income attributable to noncontrolling interests was $0.8 million and $0.7 million for the three months ended March 31, 2009 and 2008, respectively.

Years Ended December 31, 2008, 2007 and 2006

As of December 31, 2008, 2007 and 2006, we have affiliated with the following number of physicians (including those under OPS arrangements), by specialty:

	As of December 31,
	2008	2007	2006
Medical oncologists/hematologists	989	1,001	874
Radiation oncologists	160	146	146
Other oncologists	62	52	47
Total physicians	1,211	1,199	1,067

The following tables set forth changes in the number of affiliated physicians under both comprehensive and OPS agreements:

	As of December 31,
Comprehensive Service Agreements(1)	2008		2007		2006
Affiliated physicians, beginning of period	903		879		856
Physician affiliations	67		21		27
Recruited physicians	52		58		61
Physician separations	—		—		(35	)
Retiring/Other	(56	)	(40	)	(40	)
Net conversions to/(from) OPS agreements	13		(15	)	10
Affiliated physicians, end of period	979		903		879
	As of December 31,
Oncology Pharmaceutical Services Agreements(2)	2008		2007		2006
Affiliated physicians, beginning of period	296		188		138
Physician affiliations	45		111		85
Physician separations	(67	)	(13	)	(18	)
Retiring/Other	(29	)	(5	)	(7	)
Net conversions to/(from) CSAs	(13	)	15		(10	)
Affiliated physicians, end of period	232		296		188
Affiliated physicians, end of period	1,211		1,199		1,067

(1) Operations related to CSAs are included in the medical oncology and cancer center services segments.

(2) Operations related to OPS agreements are included in the pharmaceutical services segment.

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The following table sets forth the number of radiation oncology facilities and PET systems managed by us:

	December 31,
	2008		2007		2006
Cancer Centers, beginning of period	77		80		83
Cancer Centers opened(1)	4		2		2
Cancer Centers closed(2)	(1	)	(4	)	(5	)
Cancer Center recategorized(3)	—		(1	)	—
Cancer Centers, end of period	80		77		80
Radiation oncology-only facilities, end of period	14		11		11
Total Radiation Oncology Facilities(4)	94		88		91
Linear Accelerators	119		114		116
PET Systems(5)	37		34		33

(1) Cancer centers opened during 2008 in the Tampa, FL area (two locations), San Antonio, TX and Amarillo, TX.

(2) In 2008, one cancer center closed. In 2007, three cancer centers closed and one cancer center was purchased by an affiliated practice that converted to an OPS agreement (one integrated cancer center and one radiation only facility). In 2006, four cancer centers closed when purchased by a separating practice and one cancer center became part of a non-consolidating joint venture.

(3) In 2007, a cancer center was recategorized as a radiation-only facility.

(4) Includes 88, 77 and 73 sites utilizing IMRT and/or IGRT technology at December 31, 2008, 2007 and 2006, respectively.

(5) Includes 26, 21 and 12 PET/CT systems at December 31, 2008, 2007 and 2006, respectively.

The following table sets forth the key operating statistics as a measure of the volume of services provided by our practices affiliated under comprehensive service arrangements (per operating day, except research patient enrollments):

	Year Ended December 31,
	2008	2007	2006
Average Per Operating Day Statistics:
Medical oncology visits	10,816	10,028	9,793
Radiation treatments	2,732	2,719	2,698
IMRT treatments (included in radiation treatments)	659	596	489
PET scans	207	180	163
CT scans	792	743	669
New patients enrolled in research studies	3,447	3,050	2,723

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The following discussion compares our results of operations for the years ended December 31, 2008, 2007 and 2006.

Revenue

Revenue by segment is presented in the following table (in thousands):

	Year Ended December 31,						Change		Year Ended December 31, 2006			Change
	2008			2007
Medical oncology services	$	2,251,374		$	2,088,186		7.8	%	$	2,080,434		0.4	%
Cancer center services		367,062			349,900		4.9			323,917		8.0
Pharmaceutical services		2,486,685			2,282,761		8.9			1,995,664		14.4
Research and other services		58,991			51,189		15.2			53,220		(3.8	)
Eliminations(1)		(1,859,935	)		(1,771,258	)	nm	(2)		(1,641,852	)	nm	(2)
Total revenue	$	3,304,177		$	3,000,778		10.1		$	2,811,383		6.7
As a percentage of revenue:
Medical oncology services		68.1	%		69.6	%				74.0	%
Cancer center services		11.1			11.6					11.5
Pharmaceutical services		75.3			76.1					71.0
Research and other services		1.8			1.7					1.9
Eliminations(1)		(56.3	)		(59.0	)				(58.4	)
Total revenue		100.0	%		100.0	%				100.0	%

(1) Eliminations represent the sale of pharmaceuticals from our distribution center (pharmaceutical services segment) to our affiliated practices (medical oncology segment). The distribution center began operations, on a limited basis, in September 2005.

(2) Not meaningful.

One of our key initiatives has been to reduce our financial exposure, and that of our affiliated practices, to changes in pharmaceutical economics through expansion of service offerings. For the periods discussed, revenue generated from medical oncology services has decreased from 74.0% of consolidated revenue in 2006 to 68.1% of revenue in 2008, while revenue contributed from cancer center services remained consistent and pharmaceutical services increased as a percentage of revenue.

Medical Oncology Services Revenue

Medical oncology services revenue increased $163.2 million, or 7.8 percent, to $2,251.4 million for the year ended December 31, 2008 from $2,088.2 million for the year ended December 31, 2007. The revenue increase reflects higher average daily visits from the growth in our network of affiliated medical oncologists. Partially offsetting the revenue growth were reduced utilization of ESAs and the impact of contractual amendments in 2007.

Medical oncology services revenue increased $7.8 million, or 0.4 percent, to $2,088.2 million for the year ended December 31, 2007 from $2,080.4 million for the year ended December 31, 2006. The revenue increase reflects an increase in the average number of daily visits due to the growth in affiliated medical oncologists during 2007. Partially offsetting the revenue growth were reduced utilization of supportive care drugs, reductions to management fees paid by affiliated practices to encourage the efficient use of capital and pharmaceutical management practices (as discussed below), financial support provided to two affiliated practices experiencing operational challenges, and the elimination of payments by Medicare to oncologists for providing certain patient care information, or the Medicare Demonstration Project, effective January 1, 2007.

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Under CSAs, our management fees are comprised of reimbursement for expenses we incur in connection with managing a practice, plus a fee that is typically a percentage of the affiliated practice’s earnings before income taxes. Our agreements also provide for performance-based reductions in our percentage-based fee that are intended to encourage disciplined use of capital. Certain management agreements have been amended in 2007 and 2008, to provide a platform for long-term financial improvement of the practices’ results, to encourage practice growth and efficiency, and to streamline several complex service agreements.

Additionally, in connection with our launch of our pharmaceutical distribution business, effective July 1, 2006, to promote continued support of initiatives in this area, we initiated a program to reduce management fees paid by practices affiliated under CSAs based upon compliance with distribution efficiency guidelines established by us and the profitability of the pharmaceutical services segment. Management fees were reduced by $23.9 million, $24.6 million and $8.9 million for the years ended December 31, 2008, 2007 and 2006, respectively.

The financial results and other data relating to affiliated practices included in our discussion of Medical Oncology Services results reflects only physicians affiliated under comprehensive services agreements.

Cancer Center Services Revenue

In 2008, cancer center services revenue increased $17.2 million, or 4.9 percent, to $367.1 million for the year ended December 31, 2008 from $349.9 million for the year ended December 31, 2007. The revenue increase reflects higher volumes, an increase in physicians affiliated under CSAs, and continued migration toward advanced targeted radiation therapies. Partially offsetting the revenue growth were reduced management fees due to contractual amendments in 2007 and 2008.

In 2007, cancer center services revenue increased $26.0 million, or 8.0 percent, to $349.9 million for the year ended December 31, 2007 from $323.9 million for the year ended December 31, 2006. These increases reflect a 4.5 percent increase in radiation treatments and diagnostic radiology procedures over the same period in the prior year. Revenue increased at a rate greater than treatment volumes as a result of expanding services in advanced targeted radiation therapies, such as IGRT and brachytherapy administered by network physicians, which are reimbursed at higher rates than conventional radiation therapy. The expansion of advanced targeted radiation therapies continues the growth in these services that was experienced in 2006.

Pharmaceutical Services Revenue

Pharmaceutical services revenue was $2,486.7 million for the year ended December 31, 2008 from $2,282.8 million for the year ended December 31, 2007, an increase of $203.9 million, or 8.9 percent. The revenue increase is primarily due to the higher number of physicians affiliated through comprehensive service and OPS agreements during the year as well as increased revenue from our oral oncology specialty pharmacy. The impact from the addition of physicians was partially offset by lower utilization of ESAs.

Pharmaceutical services revenue was $2,282.8 million for the year ended December 31, 2007 from $1,995.7 million for the year ended December 31, 2006, an increase of $287.1 million, or 14.4 percent. The revenue increase is primarily due to the net addition of 132 physicians affiliated through comprehensive service and OPS agreements since the close of the fourth quarter of 2006. Excluding the impact of distribution sales, pharmaceutical services revenue increased $157.7 million over the prior year due to increased revenue from physicians affiliated under OPS agreements as well as revenue from the specialty pharmacy which was launched at the end of 2006.

Research and Other Services Revenue

Research and other services revenue consists primarily of revenue related to our cancer research program. Our cancer research program is designed to give community-based oncologists that are affiliated with us access to a broad range of the latest clinical trials. We view the research program as part of the comprehensive range of

24

services we offer to physicians to enhance the quality of care they offer to their patients, rather than as a profit- making venture in its own right. To this end, amounts generated in excess of operating costs, including our corporate overhead and centralized costs, are returned to the participating physicians and affiliated practices. As such, revenue increases and decreases will not typically impact our results of operations.

For the year ended December 31, 2008, research and other service revenue was $59.0 million compared to $51.2 million for the year ended December 31, 2007. Enrollment of new patients in 2008 increased 13 percent from 2007.

For the year ended December 31, 2007, research and other service revenue was $51.2 million compared to $53.2 million for the year ended December 31, 2006. The decrease is primarily due to deferred revenue recognized in 2006 upon completion of a contract amendment. Enrollment of new patients in 2007 increased 12 percent from 2006.

Operating Costs

Operating costs include cost of products and services, as well as depreciation and amortization related to our operating assets, and are presented in the table below (in thousands):

	Year Ended December 31,						Change		Year Ended December 31, 2006			Change
	2008			2007
Cost of products	$	2,163,943		$	1,925,547		12.4	%	$	1,753,638		9.8	%
Cost of services:
Operating compensation and benefits		523,939			479,177		9.3			458,006		4.6
Other operating costs		321,947			293,677		9.6			274,665		6.9
Depreciation and amortization		72,790			73,159		(0.5	)		69,351		5.5
Total cost of services		918,676			846,013		8.6			802,022		5.5
Total cost of products and services	$	3,082,619		$	2,771,560		11.2		$	2,555,660		8.4
As a percentage of revenue:
Cost of products		65.5	%		64.2	%				62.4	%
Cost of services:
Operating compensation and benefits		15.9			16.0					16.3
Other operating costs		9.7			9.8					9.8
Depreciation and amortization		2.2			2.3					2.4
Total cost of services		27.8			28.1					28.5
Total cost of products and services		93.3	%		92.3	%				90.9	%

Cost of Products. Cost of products consists primarily of oncology pharmaceuticals, and to a lesser extent supplies, used in our medical oncology and pharmaceutical services segments. Cost of products increased 12.4% in 2008 and 9.8% in 2007 which corresponds with product revenue increases of 12.9% and 8.1%, respectively, for corresponding periods.

As a percentage of revenue, cost of products was 65.5% in 2008, 64.2 % in 2007, and 62.4% in 2006. The increase of 9.8% in 2007 over 2006 was mainly due to product revenue increasing as a percentage of total revenue which reflects net growth in the number of physicians affiliated under our OPS model. In addition, drug costs have increased as a percentage of product revenue due to higher drug costs in 2008 and reduced ESA utilization in both 2008 and 2007 as supportive care drugs had higher margins, on average, than other drugs used by oncologists. We recognize product revenue from both comprehensive and OPS agreements based upon the terms on which we offer pharmaceutical services under the OPS model.

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Cost of Services. Cost of services includes operating compensation and benefits of our operating-level employees and the employees, other than physicians, of practices affiliated under comprehensive services agreements. Cost of services also includes other operating costs such as rent, utilities, repairs and maintenance, insurance and other direct operating costs. As a percentage of revenue, cost of services was 27.8% in 2008, 28.1% in 2007, and 28.5% in 2006, reflecting the economies of scale being obtained by our operating segments.

Corporate Costs and Net Income (Loss)

Recurring corporate costs include general and administrative expenses, depreciation and amortization related to corporate assets and interest expense. Corporate costs also include certain items that are not attributable to routine operations (in thousands).

	Year Ended December 31,								Year Ended December 31,
	2008			2007			Change		2006			Change
General and administrative expense	$	76,883		$	84,326		(8.8	)%	$	76,948		9.6	%
Impairment and restructuring charges		384,929			15,126		nm	(1)		—		—
Depreciation and amortization		30,017			16,172		85.6			13,983		15.7
Interest expense, net		92,757			95,342		(2.7	)		92,870		2.7
Other (income) expense		(2,213	)		—		nm	(1)		—		nm	(1)
As a percentage of revenue:
General and administrative expense		2.3	%		2.8	%				2.7	%
Impairment and restructuring charges		11.6			0.5					—
Depreciation and amortization		0.9			0.5					0.5
Interest expense, net		2.8			3.2					3.3
Other (income) expense		(0.1	)		—					—

(1) Not meaningful

General and Administrative. General and administrative expense was $76.9 million in 2008, $84.3 million in 2007, and $76.9 million in 2006. The decrease in 2008 from 2007 is due to the management of controllable costs, particularly in areas such as personnel expenses, meeting expenses, and professional fees. The increase in 2007 over the prior year is due to higher personnel costs, which reflect annual merit increases and personnel investments made to support our expanded regional infrastructure, as well as higher marketing costs to support our branding campaign and consulting expenses associated with an upgrade to our information system. Included in general and administrative expense for 2008, 2007 and 2006, is non-cash compensation expense of $2.1 million, $0.8 million, and $2.1 million, respectively, associated with restricted stock and stock option awards issued under our equity incentive plans.

Impairment and restructuring charges. During the years ended December 31, 2008 and 2007, we recorded impairment and restructuring charges of $384.9 million and $15.1 million, respectively. No impairment and restructuring charges were recorded during the year ended December 31, 2006.

The components of the charges are as follows (in thousands):

	Year Ended December 31,
	2008		2007
Goodwill	$	380,000	$	—
Severance costs		3,891		—
Services agreement, net		—		9,339
Property and equipment, net		—		4,974
Future lease obligations		950		792
Other		88		21
Total	$	384,929	$	15,126

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During 2008, we recorded restructuring charges of $4.8 million related to employee severance and lease termination fees. Also during 2008, we recognized a $380.0 million impairment charge to goodwill in our Medical Oncology Services segment. In connection with the preparation of the financial statements for the three months ended March 31, 2008, and as a result of the decline in the financial performance of the medical oncology services segment, we assessed the recoverability of goodwill related to that segment. During the year ended December 31, 2007, the financial performance of the medical oncology segment was negatively impacted by reduced coverage for ESAs as a result of revised product labeling issued by the FDA and coverage restrictions imposed by CMS. Goodwill was tested for impairment during both the three months ended September 30, 2007 and December 31, 2007 and no impairment was identified. During the three months ended March 31, 2008, additional price increases from manufacturers of ESAs and additional safety concerns related to the use of ESAs continued to reduce their utilization by our affiliated physicians and adversely impacted both current and projected operating results for our Medical Oncology Services segment. On March 13, 2008, the Oncology Drug Advisory Committee, or ODAC met to consider safety concerns related to the use of these drugs in oncology and recommended further restrictions. These factors, along with a lower market valuation at March 31, 2008 resulting from unstable credit markets, led us to recognize a non-cash goodwill impairment charge in the amount of $380.0 million related to our medical oncology services segment during the three months ended March 31, 2008. The charge is a non-cash item that does not impact the financial covenants of our existing senior secured credit facility.

When an impairment is identified, as was the case for the three months ended March 31, 2008, an impairment charge is necessary to state the carrying value of goodwill at its implied fair value, based upon a hypothetical purchase price allocation assuming the segment was acquired for its estimated fair value. The fair value of the medical oncology services segment was estimated with the assistance of an independent appraisal that considered the segment’s recent and expected financial performance as well as a market analysis of transactions involving comparable entities for which public information is available. Determining the implied fair value of goodwill also requires the identification and valuation of intangible assets that have either increased in value or have been created through our initiatives and investments since the goodwill was initially recognized. In connection with assessing the impairment charge, we identified previously unrecognized intangible assets, as well as increases to the fair value of the recognized management service agreement intangible assets, which amounted to approximately $160.0 million in the aggregate. Value assigned to these intangible assets reduced the amount attributable to goodwill in a hypothetical purchase price allocation and, consequently, increased the impairment charge necessary to state goodwill at its implied fair value by a like amount. In accordance with U.S. GAAP, these increases in the fair value of intangible assets have not been recorded in our consolidated balance sheet.

During the three months ended March 31, 2007, we recognized impairment and restructuring charges amounting to $7.4 million. In the majority of our markets, we believe our strategies of practice consolidation, expansion of services and process improvement continue to be effective. In a minority of our geographic markets, however, specific local factors have prevented effective implementation of our strategies, and practice performance has declined. Specifically, in two markets in which we have affiliated practices, these market-specific conditions resulted in recognizing impairment and restructuring charges.

In the first of these two markets (during the three months ended September 30, 2006), state regulators reversed a prior determination and ruled that, under the state’s certificate of need law, the affiliated practice was required to cease providing radiation therapy services to patients at a newly constructed cancer center. We appealed this determination, however, during the three months ended March 31, 2007, efforts had not advanced sufficiently, and, therefore, the resumption of radiation services or other means to recover the investment were not considered likely. Consequently, an impairment charge of $1.6 million was recorded during the three months ended March 31, 2007. During the three months ended March 31, 2008, we received a ruling in our appeal, which mandated a rehearing by the state agency. The state agency conducted a rehearing and issued a new ruling upholding the practice’s right to provide radiation services. That decision was appealed, and the appellants also sought a stay of the state’s decision. The request for a stay was denied in July 2008, while the appeal is still pending. As a result, the practice resumed diagnostic services in September 2008 and radiation services in February 2009.

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In the second market, financial performance deteriorated as a result of an excessive cost structure relative to practice revenue. During the three months ended March 31, 2007, we recorded impairment and restructuring charges of $5.8 million because, based on anticipated operating results, it did not expect that practice performance would be sufficient to recover the value of certain assets and the intangible asset associated with the management service agreement. Along with the affiliated practice, we have restructured the market to establish a base for future growth and to otherwise improve financial performance.

During the year ended December 31, 2007, we agreed to terminate CSAs with two practices previously affiliated with us and to instead contract with them under our OPS model. We recognized impairment and restructuring charges of $7.7 million related to these practices, which relate primarily to a $5.0 million write-off of our service agreement intangible assets, where the comprehensive service agreement was terminated in connection with the conversions. Also included in the impairment charge is $2.5 million related to assets operated by the practices, which represents the excess of our carrying value over the acquisition price paid by the practices.

Depreciation and Amortization. Depreciation and amortization expense of $30.0 million during the twelve months ended December 31, 2008, increased $13.8 million compared to $16.2 million for the twelve months ended December 31, 2007. The increase reflects amortization of affiliation consideration for newly affiliated practices and the amortization of our capital cost incurred to upgrade our company-wide financial system that occurred in 2007.

Interest expense, net. Interest expense, net, decreased to $92.8 million during the twelve months ended December 31, 2008 from $95.3 million during the twelve months ended December 31, 2007. The decrease in 2008 from prior year is due to decreasing LIBOR rates as well as the repayment of $29.4 million of indebtedness under our secured credit facility during the three months ended June 30, 2008, as required under the “excess cash flow sweep” provision of that facility. The increase in 2007 over the previous year reflects the $100.0 million borrowing under the term loan facility in July 2006, which was partially offset by decreasing interest rates at the end of 2007 related to our variable rate debt instruments that are based on margin paid over LIBOR.

Income taxes. Our effective tax rate was a provision of 1.7% on the 2008 net loss and provisions of 50.9% and 39.6% for net income in 2007 and 2006, respectively. The 2008 provision is attributable to the impairment of goodwill in the Medical Oncology Services segment, the majority of which is not deductible for tax purposes. Of the $380.0 million impairment charge $4.0 million is deductible through annual amortization for tax purposes. Consequently, there is no tax benefit associated with a significant portion of the goodwill impairment. As a result of the goodwill impairment, the 2008 effective tax rate is not indicative of future effective income tax rates. Excluding the impact of the goodwill impairment, the effective tax rate was 49.4% for the year ended December 31, 2008.

The increase in the effective tax rate in 2007 compared with 2006 is due primarily to the Texas margin tax (which became effective January 1, 2007). Under the Texas margin tax, a company’s tax obligation is computed based on its receipts less, in the case of us, the cost of pharmaceuticals. As such, significant costs incurred that would be deducted under an income tax of an entity may not be considered in assessing an obligation for margin tax. The difference between our effective and statutory tax rates is attributable primarily to the Texas margin tax (in 2007), and to non-deductible entertainment and public policy costs.

We are a subsidiary of the Holdings’ consolidated group for income tax reporting purposes. However, for financial reporting purposes, our tax provision has been computed on the basis that it filed a separate federal income tax return together with its subsidiaries. Our taxable income computed under the separate return method is greater than the taxable income of the Holdings’ consolidated group because we do not include the incremental expenses of the parent company which principally relate to interest on the indebtedness of Holdings. Under the terms of our indebtedness, we are precluded from making tax payments to our parent, or directly to the Internal Revenue Service, in excess of the consolidated group’s income tax liability, and Holdings has contributed to us

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tax benefits associated with the incremental expenses of Holdings based on tax returns filed for the period from August 21, 2004 through December 31, 2007. As such, and in accordance with generally accepted accounting principles, the amount by which our tax liability as stated under the separate return method exceeds the amount of tax liability ultimately settled with, or on behalf of, our parent company is considered a capital contribution from our parent to us. During the year ended December 31, 2008, we recognized a capital contribution in the amount of $22.5 million based on tax returns filed for the period from August 20, 2004 through December 31, 2007.

Net Income (Loss) Attributable to the Company. Net loss for 2008 was $370.5 million compared to net income of $7.2 million and $42.0 million for 2007 and 2006, respectively. Income from operations in 2008, includes $384.9 million in impairment and restructuring charges.

Net Income Attributable to Noncontrolling Interests. Net income attributable to noncontrolling interests was $3.3 million, $3.6 million and $2.4 million for 2008, 2007 and 2006, respectively.

Liquidity and Capital Resources

Three Months Ended March 31, 2009 and 2008

The following table summarizes our working capital and long-term indebtedness as of March 31, 2009 (in thousands).

Current assets	$	694,492
Current liabilities		489,487
Net working capital	$	205,005
Long-term indebtedness	$	1,053,867

The following table summarizes our statement of cash flows of for the three months ended March 31, 2009 (in thousands).

Net cash provided by operating activities	$	31,027
Net cash used in investing activities		(15,342	)
Net cash used in financing activities		(11,318	)
Net decrease in cash and equivalents		4,367
Cash and equivalents:
December 31, 2008		104,476
March 31, 2009	$	108,843

Cash Flows from Operating Activities

During the three months ended March 31, 2009, we generated $27.0 million in cash flow from operations compared to $50.9 million during the three months ended March 31, 2008. The decrease in operating cash flow in 2009 was primarily due to lower rebate collections, and the timing of their distribution to affiliated physicians, associated with the conversion of rebates to discounts by certain pharmaceutical manufacturers.

Cash Flows from Investing Activities

During the three months ended March 31, 2009, we used $15.3 million for investing activities. Cash flow for investing activities relate primarily to $16.0 million in capital expenditures, including $9.7 million relating to the development and construction of cancer centers and $6.3 million for maintenance capital expenditures.

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During the three months ended March 31, 2008, we used $57.4 million for investing activities. The investments consisted primarily of $23.6 million in capital expenditures, including $11.8 million relating to the development and construction of cancer centers and $11.7 million for maintenance capital expenditures. Also during the three months ended March 31, 2008, we funded $36.0 million of cash consideration (as well as $32.7 million of notes issued) to affiliating physicians.

Cash Flows from Financing Activities

During the three months ended March 31, 2009, $11.3 million was used in financing activities which relates primarily to the repayments of physician notes issued in connection with practice affiliations from the previous year. Cash flow used by us for financing activities also includes a distribution of $4.1 million to our parent company to finance the payment of interest on the Holdings notes and to settle amounts due under its interest rate swap agreement.

During the three months ended March 31, 2008, $2.3 million was used in financing activities which relates primarily to repayments made on the existing senior secured credit facility.

Earnings before Interest, Taxes, Depreciation and Amortization

“EBITDA” represents net income before interest and other expense, net, taxes, depreciation, and amortization (including amortization of stock-based compensation), and other income (expense). EBITDA is not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”); rather it is derived from relevant items in our GAAP-based financial statements. A reconciliation of EBITDA to the condensed consolidated statement of operations and comprehensive income (loss) and the condensed consolidated statement of cash flows is included in this document.

We believe EBITDA is useful to investors in evaluating the value of companies in general, and in evaluating the liquidity of companies with debt service obligations and their ability to service their indebtedness. Management uses EBITDA as a key indicator to evaluate liquidity and financial condition, both with respect to the business as a whole and with respect to individual sites in our network. Our senior secured credit facility also requires that we comply on a quarterly basis with certain financial covenants that include EBITDA as a financial measure. As of March 31, 2009, our existing senior secured credit facility required that we maintain an interest coverage ratio (interest expense divided by EBITDA, as defined by the indenture) of at least 2.00:1 and a leverage ratio (indebtedness divided by EBITDA, as defined by the indenture) of no more than 5.60:1. Both of these covenants become more restrictive over time and, at maturity in 2011, the minimum interest coverage ratio required will be at least 2.50:1 and the maximum leverage ratio may not be more than 4.75:1. For more information regarding our use of EBITDA and its limitations, see “Discussion of Non-GAAP Information.”

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The following table reconciles net income (loss) as shown in our condensed consolidated statement of operations and comprehensive income (loss) to EBITDA, and reconciles EBITDA to net cash provided by operating activities as shown in our condensed consolidated statement of cash flows (in thousands):

	Three Months Ended March 31,
	2009			2008
Net income (loss)	$	1,776		$	(377,359	)
Interest expense, net		22,622			24,200
Income tax (benefit) provision		3,604			(922	)
Depreciation and amortization		25,098			25,754
Amortization of stock compensation		569			555
Other income (expense)		—			(1,371	)
EBITDA		53,669			(329,143	)
Impairment and restructuring charges		1,409			381,306
Changes in assets and liabilities		(3,205	)		24,039
Deferred income taxes		5,380			(2,060	)
Interest expense, net		(22,622	)		(24,200	)
Income tax benefit (provision)		(3,604	)		922
Net cash provided by operating activities	$	31,027		$	50,864

Segment Information

Following is the EBITDA for our operating segments for the three months ended March 31, 2009 and 2008 (in thousands):

	Three Months Ended March 31, 2009
	Medical Oncology Services			Cancer Center Services			Pharmaceutical Services			Research/ Other			Corporate Costs			Eliminations(1)			Total
Product revenues	$	429,162		$	—		$	562,430		$	—		$	—		$	(428,512	)	$	563,080
Service revenues		152,768			92,317			15,173			19,223			—			—			279,481
Total revenues		581,930			92,317			577,603			19,223			—			(428,512	)		842,561
Operating expenses		(565,371	)		(70,435	)		(555,944	)		(16,846	)		(33,066	)		428,512			(813,150	)
Impairment and restructuring charges		(167	)		—			—			—			(1,242	)		—			(1,409	)
Income (loss) from operations		16,392			21,882			21,659			2,377			(34,308	)		—			28,002
Add back:
Depreciation and amortization		—			9,376			707			80			14,935			—			25,098
Amortization of stock-based compensation		—			—			—			—			569			—			569
EBITDA	$	16,392		$	31,258		$	22,366		$	2,457		$	(18,804	)	$	—		$	53,669

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	Three Months Ended March 31, 2008
	Medical Oncology Services			Cancer Center Services			Pharmaceutical Services			Research/ Other			Corporate Costs			Eliminations(1)			Total
Product revenues	$	403,314		$	—		$	595,870		$	—		$	—		$	(455,923	)	$	543,261
Service revenues		149,441			90,091			14,752			13,062			—			—			267,346
Total revenues		552,755			90,091			610,622			13,062			—			(455,923	)		810,607
Operating expenses		(534,146	)		(68,313	)		(589,196	)		(14,029	)		(34,992	)		455,923			(784,753	)
Impairment and restructuring charges		(380,080	)		—			—			—			(1,226	)		—			(381,306	)
Income (loss) from operations		(361,471	)		21,778			21,426			(967	)		(36,218	)		—			(355,452	)
Add back:
Depreciation and amortization		—			9,337			1,313			100			15,004			—			25,754
Amortization of stock-based compensation		—			—			—			—			555			—			555
EBITDA	$	(361,471	)	$	31,115		$	22,739		$	(867	)	$	(20,659	)	$	—		$	(329,143	)

(1) Eliminations represent the sale of pharmaceuticals from our distribution center (Pharmaceutical Services segment) to our practices affiliated under CSAs (Medical Oncology segment).

Below is a discussion of EBITDA generated by our three primary operating segments. Please refer to “—Results of Operations” for a discussion of our consolidated results presented in accordance with generally accepted accounting principles.

Medical Oncology Services. Medical Oncology Services EBITDA for the three months ended March 31, 2009 increased $377.9 million compared to the three months ended March 31, 2008 due to a $380.0 million non-cash impairment charge to goodwill (see “—Results of Operations—Impairment and Restructuring Charges”). The remaining $2.1 million decrease was due to reduced ESA utilization and declining reimbursement, particularly due to increasing patient responsibility for treatment costs, which more than offset earnings associated with revenue growth.

Cancer Center Services. Cancer Center Services EBITDA for the three months ended March 31, 2009 of $31.3 million was comparable to EBITDA of $31.1 million for the three months ended March 31, 2008. Radiation volumes continue to shift toward advanced targeted radiation therapies. Targeted therapies (such as IMRT, IGRT, mammosite and brachytherapy) enhance patient care by providing more intense radiation treatment to the tumor site while reducing damage to the surrounding healthy tissue. These treatment modalities generally have fewer sessions throughout the course of treatment than conventional radiation but are reimbursed at higher rates. For example, due to improved screening and awareness, breast cancer is increasingly diagnosed in the early stages and may be treated through mammosite radiation therapy, which uses an internal radiation source rather than an external beam. Mammosite radiation therapy typically requires about one third of treatment sessions necessary under conventional radiation therapy but has approximately the same total reimbursement.

Pharmaceutical Services. Pharmaceutical Services EBITDA was $22.4 million for the three months ended March 31, 2009, a decrease of $0.3 million from the three months ended March 31, 2008, as lower pharmaceutical volumes were partially offset by EBITDA increases from our informatics, specialty pharmacy and reimbursement support services.

Research and Other. During the three months ended March 31, 2009, EBITDA from research and other services was $2.5 million, an increase of $3.3 million from the three months ended March 31, 2008. The increase as compared to the three months ended March 31, 2008, reflects our strategy to expand the existing research

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network, launch a contract research organization, and create aligned incentives with participating physicians that encourage long-term value creation. As a result, a portion of the incentives expensed in 2008 will not be paid in 2009 but, rather, may become available through a new, long-term incentive program. In addition, because the new incentive programs focus on long-term growth, the related expense in the three months ended March 31, 2009 is lower than in prior periods.

Years ended December 31, 2008, 2007 and 2006

The following table summarizes our working capital and long-term indebtedness as of December 31, 2008 and 2007 (in thousands).

	2008		2007
Current assets	$	716,969	$	758,695
Current liabilities		518,353		556,463
Net working capital	$	198,616	$	202,232
Long-term indebtedness	$	1,061,133	$	1,031,569

The following table summarizes our cash flows (in thousands):

	Year Ended December 31,
	2008			2007			2006
Net cash provided by operating activities	$	141,487		$	198,030		$	43,639
Net cash used in investing activities		(137,004	)		(93,170	)		(110,768	)
Net cash provided by (used in) financing activities		(49,263	)		(237,370	)		223,058
Net increase (decrease) in cash and equivalents		(44,780	)		(132,510	)		155,929
Cash and equivalents, beginning of period		149,256			281,766			125,837
Cash and equivalents, end of period	$	104,476		$	149,256		$	281,766

Cash Flows from Operating Activities

We generated cash flow from operations of $141.5 million during 2008 compared to $198.0 million during 2007. The decrease in operating cash flow is primarily due to purchases made under new generic drug inventory management programs as well as higher working capital requirements associated with revenue growth and increasing network volumes. At December 31, 2007, other receivables include amounts due from one manufacturer that represent nearly 90%, or $86.5 million, of our other receivables. Effective October 7, 2008, this manufacturer converted a substantial portion of rebates to discounts which impact cash flow upon invoicing from the manufacturer. At December 31, 2008, this manufacturer balance decreased by $74.6 million, from December 31, 2007, as a result. These decreases were offset by related increases in amounts paid to physicians.

The increase in operating cash flow in 2007 compared to $43.6 million in 2006 was primarily due to increased receivable collections during 2007 and working capital investments during 2006, principally for inventory and accounts payable at our distribution center.

Cash Flows from Investing Activities

During the year ended December 31, 2008, cash used for investing activities was $137.0 million compared to $93.2 million for investing activities in 2007. The increase was due to $52.5 million in cash consideration paid for practice affiliations in 2008. During the year ended December 31, 2008, capital expenditures were $88.7 million, including $57.8 million relating to the development and construction of cancer centers. Capital expenditures for maintenance were $28.8 million.

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During the year ended December 31, 2007, cash used for investing activities was $93.2 million compared to $110.8 million in 2006. The decrease was primarily due to the purchase of AccessMed for $31.4 million in 2006 partially offset by increased capital expenditures in 2007. During the year ended December 31, 2007, capital expenditures were $90.9 million, including $40.9 million relating to the development and construction of cancer centers. Capital expenditures for maintenance were $47.1 million. Also during 2007, we funded a $4.7 million investment in a joint venture in which an affiliated practice and a hospital system provide radiation therapy services.

Cash Flows from Financing Activities

During the year ended December 31, 2008, $49.3 million was used in financing activities which relates primarily to repayments made on the existing senior secured credit facility, including a payment of $29.4 million due under the “excess cash flow” provision of our senior secured facility which was paid in April, 2008. Cash flow used for financing activities also includes a distribution of $13.0 million to our parent company to finance the payment of interest on the Holdings notes and to settle amounts due under its interest rate swap agreement.

During the year ended December 31, 2007, $237.4 million was used in financing activities. In January 2007, we used $150.0 million proceeds from a private placement of preferred and common stock of Holdings, along with $40.0 million in cash, to pay a $190.0 million dividend to shareholders of record immediately prior to the offering. Cash used in financing activities also includes $10.1 million for scheduled repayments of indebtedness. Cash flow used for financing activities also includes distributions of $34.9 million to our parent company to finance the payment of interest obligations on the Holdings notes.

Earnings Before Interest, Taxes, Depreciation and Amortization

The following table reconciles net income as shown in our consolidated statement of operations and comprehensive income to EBITDA, and reconciles EBITDA to net cash provided by operating activities as shown in our consolidated statement of cash flows (in thousands):

	Year Ended December 31,
	2008			2007			2006
Net income (loss)	$	(367,166	)	$	10,805		$	44,413
Interest expense, net		92,757			95,342			92,870
Income taxes		6,351			7,447			27,509
Depreciation and amortization		102,807			89,331			83,334
Amortization of stock compensation		2,103			753			2,149
Other (income) expense		(2,213	)		—			—
EBITDA		(165,361	)		203,678			250,275
Loss on early extinguishment of debt		—			—			—
Impairment, restructuring and other charges, net		384,929			15,126			—
Changes in assets and liabilities		19,533			81,023			(90,679	)
Deferred income taxes		1,494			992			4,422
Interest expense, net		(92,757	)		(95,342	)		(92,870	)
Income taxes		(6,351	)		(7,447	)		(27,509	)
Net cash provided by operating activities	$	141,487		$	198,030		$	43,639

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Segment Information. The table below presents information about reported segments for the years ended December 31, 2008, 2007 and 2006 (in thousands):

	Year Ended December 31, 2008
	Medical Oncology Services			Cancer Center Services			Pharmaceutical Services			Research/ Other			Corporate Costs			Eliminations(1)			Total
Product revenues	$	1,658,484		$	—		$	2,426,155		$	—		$	—		$	(1,859,935	)	$	2,224,704
Service revenues		592,890			367,062			60,530			58,991			—			—			1,079,473
Total revenues		2,251,374			367,062			2,486,685			58,991			—			(1,859,935	)		3,304,177
Operating expenses		(2,178,154	)		(279,063	)		(2,391,050	)		(64,118	)		(137,069	)		1,859,935			(3,189,519	)
Impairment and restructuring charges		(380,018	)		(150	)		—			—			(4,761	)		—			(384,929	)
Income (loss) from operations		(306,798	)		87,849			95,635			(5,127	)		(141,830	)		—			(270,271	)
Add back:
Depreciation and amortization		—			37,916			4,332			374			60,185			—			102,807
Amortization of stock-based compensation		—			—			—			—			2,103			—			2,103
EBITDA	$	(306,798	)	$	125,765		$	99,967		$	(4,753	)	$	(79,542	)	$	—		$	(165,361	)
	Year Ended December 31, 2007
	Medical Oncology Services			Cancer Center Services			Pharmaceutical Services			Research/ Other			Corporate Costs			Eliminations(1)			Total
Product revenues	$	1,541,186		$	—		$	2,200,178		$	—		$	—		$	(1,771,258	)	$	1,970,106
Service revenues		547,000			349,900			82,583			51,189			—			—			1,030,672
Total revenues		2,088,186			349,900			2,282,761			51,189			—			(1,771,258	)		3,000,778
Operating expenses		(2,008,528	)		(262,190	)		(2,191,828	)		(51,982	)		(128,788	)		1,771,258			(2,872,058	)
Impairment and restructuring charges		(1,552	)		(4,235	)		—			—			(9,339	)		—			(15,126	)
Income (loss) from operations		78,106			83,475			90,933			(793	)		(138,127	)		—			113,594
Add back:
Depreciation and amortization		—			39,131			5,196			542			44,462			—			89,331
Amortization of stock-based compensation		—			—			—			—			753			—			753
EBITDA	$	78,106		$	122,606		$	96,129		$	(251	)	$	(92,912	)	$	—		$	203,678

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	Year Ended December 31, 2006
	Medical Oncology Services			Cancer Center Services			Pharmaceutical Services			Research/ Other			Corporate Costs			Eliminations(1)			Total
Product revenues	$	1,518,975		$	—		$	1,945,018		$	—		$	—		$	(1,641,852	)	$	1,822,141
Service revenues		561,459			323,917			50,646			53,220			—			—			989,242
Total revenues		2,080,434			323,917			1,995,664			53,220			—			(1,641,852	)		2,811,383
Operating expenses		(1,955,969	)		(246,363	)		(1,915,906	)		(53,177	)		(117,028	)		1,641,852			(2,646,591	)
Income (loss) from operations		124,465			77,554			79,758			43			(117,028	)		—			164,792
Add back:
Depreciation and amortization		—			38,423			3,960			871			40,080			—			83,334
Amortization of stock-based compensation		—			—			—			—			2,149			—			2,149
EBITDA	$	124,465		$	115,977		$	83,718		$	914		$	(74,799	)	$	—		$	250,275

(1) Eliminations represent the sale of pharmaceuticals from our distribution center (pharmaceutical services segment) to our affiliated practices (medical oncology segment).

Below is a discussion of EBITDA generated by our three primary operating segments. Please refer to “—Results of Operations” for a discussion of our consolidated results presented in accordance with generally accepted accounting principles.

Medical Oncology Services. Medical Oncology Services EBITDA for the year ended December 31, 2008 decreased $384.9 million compared to the year ended December 31, 2007, primarily due to a $380.0 million non-cash impairment charge to goodwill in 2008 compared to a $1.6 million impairment charge in the prior year (see “—Results of Operations—Impairment and Restructuring Charges”). The remaining $6.0 million decrease was due to reduced utilization of ESAs, increased drug costs and the impact of contractual amendments in 2007 partially offset by revenue growth due to the increase in physicians affiliated under comprehensive services agreements.

Medical Oncology Services EBITDA for the year ended December 31, 2007 decreased $46.4 million, or 37.2 percent, compared to the year ended December 31, 2006. The EBITDA decrease is primarily due to reduced utilization of ESAs and the management fee revisions discussed previously (see “—Results of Operations—Revenue—Medical Oncology Services”), the elimination of payments by Medicare to oncologists for providing certain patient care information effective January 1, 2007 and financial support provided to two affiliated practices experiencing operational challenges. The impact on drug margin of reduced utilization of supportive care drugs was partially offset by lower drug costs resulting from the renegotiation of certain manufacturer discounts and rebates. In addition, the year ended December 31, 2007 included a $1.6 million impairment charge recorded in the medical oncology services segment.

Cancer Center Services. Cancer Center Services EBITDA for the year ended December 31, 2008 was $125.8 million, representing an increase of 2.6 percent over the year ended December 31, 2007. As discussed previously (see “—Results of Operations—Revenue—Cancer Center Services”), the revenue increase reflects higher volumes, an increase in physicians affiliated under CSAs, and continued migration toward advanced targeted radiation therapies. Partially offsetting the revenue growth and the impact of $4.2 million in impairment and restructuring charges in the prior year, were reduced management fees due to contractual amendments in 2007.

Cancer Center Services EBITDA for the year ended December 31, 2007 was $122.6 million, representing an increase of 5.7 percent over the year ended December 31, 2006. This increase reflects a 3.2 percent increase in

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radiation treatments and diagnostic radiology procedures over the same period in the prior year which were partially offset by reduced Medicare reimbursement for diagnostic radiology services effective January 1, 2007. EBITDA increased at a rate greater than treatment volumes as a result of expanding services in advanced targeted radiation therapies, such as image guided radiation therapy IGRT and brachytherapy administered by network physicians, which are reimbursed at higher rates than conventional radiation therapy. Partially offsetting the increase was $4.2 million in impairment and restructuring charges recorded during the year ended December 31, 2007 (see “—Results of Operations—Impairment and Restructuring Charges”).

Pharmaceutical Services. Pharmaceutical services EBITDA was $100.0 million for the year ended December 31, 2008, an increase of $3.8 million, or 4.0 percent, over the year ended December 31, 2007. Pharmaceutical services EBITDA was $96.1 million for the year ended December 31, 2007, an increase of $12.4 million, or 14.8 percent, over the year ended December 31, 2006. The increase in both periods is consistent with the revenue increase driven by the increase in physicians affiliated through comprehensive service and oncology pharmaceutical services agreements which more than offset the impact of reduced ESA utilization.

Anticipated Capital Requirements

We currently expect our principal uses of funds in the near future to be the following:

• Payments for acquisition of assets and additional consideration in connection with new practice affiliations under CSAs;

• Purchase of real estate and medical equipment for the development of new cancer centers, as well as installation of upgraded and replacement medical equipment at existing centers;

• Funding of working capital;

• Investments in information systems, including systems related to our electronic medical record product, iKnowMed;

• Debt service requirements on our outstanding indebtedness; and

• Payments made for possible acquisitions to support strategic initiatives or capital investments in new businesses, such as Innovent.

For all of 2009, we anticipate spending $75 to $90 million for the development of cancer centers, purchases of clinical equipment, investments in information systems and other capital expenditures. While we have traditionally focused on disciplined use of its capital, we expect to reduce our historic levels of capital investment as a mechanism to preserve cash given the current instability in the credit and financial markets.

As of May 6, 2009, we had cash and cash equivalents of $92.3 million and $136.1 million available under our $160.0 million existing senior secured revolving credit facility (which had been reduced by outstanding letters of credit, totaling $23.9 million).

We expect to fund our current capital needs with (i) cash flow generated from operations, (ii) borrowings under our existing senior secured revolving credit facility, (iii) lease or purchase money financing for certain equipment purchases and (iv) indebtedness to physicians in connection with new affiliations. Our success in implementing our capital plans could be adversely impacted by poor operating performance which would result in reduced cash flow from operations. In addition, to the extent that poor performance or other factors impact our compliance with financial and other covenants under our existing senior secured revolving credit facility, our ability to borrow under that facility or to find other financing sources could be limited. Furthermore, capital at financing terms satisfactory to management may be limited, due to market conditions or operating performance.

We and our subsidiaries, affiliates (subject to certain limitations imposed by existing indebtedness) or significant shareholders, in their sole discretion, may from time to time, purchase, redeem, exchange or retire any

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of our outstanding debt in open market purchases (privately negotiated or open market transactions) or otherwise. Such transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Indebtedness

We have a significant amount of indebtedness. On March 31, 2009, we had indebtedness of approximately $1,067.4 million (including current maturities of $13.5 million).

As of March 31, 2009 and December 31, 2008, our long-term indebtedness consisted of the following (in thousands):

	March 31, 2009			December 31, 2008
Senior Secured Credit Facility(1)	$	436,666		$	436,666
9.0% Senior Notes, due 2012(2)		300,000			300,000
10.75% Senior Subordinated Notes, due 2014		275,000			275,000
9.625% Senior Subordinated Notes, due 2012		3,000			3,000
Subordinated notes		28,595			34,956
Mortgage, capital lease obligations and other		24,150			22,188
		1,067,411			1,071,810
Less current maturities		(13,544	)		(10,677	)
	$	1,053,867		$	1,061,133

(1) The existing term loan credit facility will be retired with the proceeds of this offering. Currently there are no amounts outstanding pursuant to our existing senior secured revolving credit facility.

(2) The existing senior notes will be amended to add the same security that will secure our obligations under the notes offered hereby. The existing senior notes will share ratably in all collateral that secures the notes offered hereby.

At inception, our existing senior secured credit facility provided for financing of up to $560.0 million and was later increased to $660.0 million. The facility currently consists of a $160.0 million revolving credit facility and a $500.0 million term loan facility. The existing senior secured revolving credit facility includes a letter of credit sub-facility and a swingline loan sub-facility that will terminate on August 20, 2010. Borrowings under the existing senior secured revolving credit facility and the term loans bear interest, at our option, equal to either an alternate base rate or an adjusted London Interbank Offered Rate, or LIBOR, for a one, two, three or six month interest period chosen by us (or a nine or 12 month period if all lenders agree to make an interest period of such duration available) in each case, plus an applicable margin percentage. Swingline loans bear interest at the interest rate applicable to alternate base rate revolving loans. As of March 31, 2009, the alternate base rate is the greater of (i) the prime rate or (ii) one-half of 1% over the weighted average of the rates on overnight Federal funds transactions as published by the Federal Reserve Bank of New York. The adjusted LIBOR is based upon offered rates in the London interbank market. Currently, the applicable margin percentage is a percentage per annum equal to (i) 1.75% for alternate base rate term loans, (ii) 2.75% for adjusted LIBOR term loans, (iii) 1.75% for alternate base rate revolving loans and (iv) 2.75% for adjusted LIBOR revolving loans. The applicable margin percentage under the existing senior secured revolving credit facility and term loan facility are subject to adjustment based upon the ratio of our total indebtedness to our consolidated EBITDA (as defined in the credit agreement). At March 31, 2009, no amounts had been borrowed under our existing senior secured revolving credit facility. At March 31, 2009, $138.1 million was available for borrowing as the availability had been reduced by outstanding letters of credit amounting to $21.9 million. This entire amount is available to be drawn without violating leverage ratio requirements under financial covenants as of March 31, 2009. The term loan facility matures on August 20, 2011, with four quarterly installments of approximately $110 million each beginning on September 30, 2010. The amount outstanding under the term loan was $436.7 million as of March 31, 2009. No additional amounts may be borrowed under the term loan facility.

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Our existing senior secured credit facility and indentures governing our existing notes contain affirmative and negative covenants, including the maintenance of certain financial ratios, restrictions on sales, leases or other dispositions of property, restrictions on other indebtedness, prohibitions on the payment of dividends and other customary restrictions. Events of default under our senior secured credit facility and indentures generally include cross-defaults to all material indebtedness, including each of those financings. Substantially all of our assets, including certain real property, are pledged as security under the senior secured credit facility.

Our existing senior secured credit facility contains the most restrictive covenants related to our indebtedness and requires us to comply, on a quarterly basis, with certain financial covenants, including a minimum interest coverage ratio test and a maximum leverage ratio test, which become more restrictive over time. At March 31, 2009, the terms of the senior secured credit facility required that we maintain a minimum interest coverage ratio of 2.00:1 and maximum leverage ratio of 5.60:1. As of March 31, 2009, the minimum interest coverage ratio and maximum leverage ratio, as calculated under the terms of the senior secured credit facility, were 2.55:1 and 4.97:1, respectively. The ratios become more restrictive (generally on a quarterly basis) and, at maturity in 2011, the minimum interest coverage ratio required must be at least 2.50:1 and the maximum leverage ratio may not be more than 4.75:1. Based on our current capital structure and the adjustments to covenant levels in the senior secured credit facility, we believe that we must maintain a minimum EBITDA of approximately $205 million to remain in compliance with these covenants through March 31, 2010. Borrowings under our senior secured credit facility bear interest at a variable market interest rate. A sustained increase in market interest rates may negatively impact our ability to maintain compliance with the interest coverage covenant.

In addition, our existing senior secured credit facility includes various negative covenants, including with respect to indebtedness, liens, investments, permitted businesses and transactions and other matters, as well as certain customary representations and warranties, affirmative covenants and events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, actual or asserted failure of any guaranty or security document supporting the senior secured credit facility to be in full force and effect and change of control. If such an event of default occurs, the lenders under our senior secured credit facility are entitled to take various actions, including the acceleration of amounts due under our senior secured credit facility and all actions permitted to be taken by a secured creditor. We are currently in compliance with covenants under our senior secured credit facility and indentures and expect to remain in compliance through at least March 31, 2010.

In August 2004, we issued $575.0 million in unsecured notes. The unsecured notes consist of $300.0 million in our existing 9% senior notes due 2012 and $275.0 million in our existing 10.75% senior subordinated notes due 2014. The sale of the unsecured notes was exempt from registration under the Securities Act. The unsecured notes contain affirmative and negative covenants, including restrictions on sales, leases or other dispositions of property, restrictions on other indebtedness, prohibitions on the payment of dividends and other customary restrictions. Events of default under the unsecured notes include cross-defaults to all material indebtedness.

Scheduled Maturities

The maturities of our existing senior notes, our existing 10.75% senior subordinated notes and our existing 9.625% senior subordinated notes are August 15, 2012, August 15, 2014 and February 1, 2012, and all outstanding loans under our existing senior secured revolving credit facility will be due and payable on August 20, 2010 and all outstanding term loans under our existing senior secured credit facility will be due in four quarterly installments of approximately $110 million each beginning September 30, 2010 and concluding on August 20, 2011. In addition, the maturity of the existing senior unsecured floating rate toggle notes of Holdings is March 15, 2012. Based on our financial projections, we will not be able to satisfy all of our and Holdings’ scheduled maturities through cash on hand and cash generated through operations. Maturities during the year ending December 31, 2012 include $300.0 million of our existing senior notes, $3.0 million of our existing 9.625% senior subordinated notes and $475.6 million of Holdings’ existing senior unsecured floating rate toggle

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notes. Based on LIBOR rates as of March 31, 2009, if Holdings were to settle all future interest payments in kind, the principal balance of Holdings’ existing notes would be approximately $600 million upon maturity in 2012.

We will be dependent upon our ability to obtain external capital to satisfy our existing notes and Holdings notes maturing in 2012. We intend to seek additional financing to satisfy our capital needs by accessing the public or private equity markets, refinancing these obligations through issuance of new indebtedness, modifying the terms of existing indebtedness or through a combination of these alternatives. There can be no assurance that additional financing, if available, will be made on terms acceptable to us. Our ability and Holdings’ ability to complete a refinancing of any of such indebtedness is subject to a number of conditions beyond our control. If we or Holdings are unable to refinance this indebtedness, our alternatives would consist of negotiating an extension of our existing senior secured revolving credit facility with the lenders and seeking or raising new capital. If we or Holdings are unsuccessful, the lenders under our existing senior secured revolving credit facility, the holders of any of our existing notes and the holders of Holdings’ existing notes could demand repayment of the indebtedness owed to them on the relevant maturity date.

Following the Issuance of the Notes

Following the issuance of the notes, we intend to fund our ongoing capital and working capital requirements through a combination of cash flows from operations and borrowings under our existing senior secured revolving credit facility. We intend to use the proceeds from the offering of the notes to retire our existing term loan credit facility.

In connection with issuance of the notes offered hereby, our existing senior secured credit facility will be terminated and our existing senior secured revolving credit facility will be amended to permit the issuance of the notes and the security interests in the notes and our existing senior notes. See “Description of Other Indebtedness—Our Existing Senior Secured Revolving Credit Facility.” We have also received a commitment letter pursuant to which Deutsche Bank Trust Company Americas, JPMorgan Chase Bank N.A., Morgan Stanley Senior Funding and Wells Fargo Bank, N.A. are to provide U.S. Oncology with a $100.0 million revolving credit facility which will replace our existing senior secured revolving credit facility and provide us with funds for working capital and general corporate purposes.

The new senior secured revolving credit facility as proposed will (1) mature in August 2012 (or, if our existing senior notes are not repaid, July 2012), (2) provide for financial covenants to be determined by mutual agreement (which covenants may restrict our ability to access the full amount available under the facility), and (3) will be guaranteed by all existing and future wholly-owned domestic subsidiaries.

The execution of the new senior secured revolving credit facility is contingent upon certain conditions, including the consummation of the issuance of the notes offered hereby. There is no assurance that we will satisfy these conditions.

In connection with the issuance of the notes offered hereby, our existing senior notes will be amended to add the same security that will secure our obligations under the notes offered hereby. The existing senior notes will share ratably in all collateral that secures the notes offered hereby.

Holdings Indebtedness

We are a wholly owned subsidiary of Holdings. Currently, Holdings’ principal asset is 100% of the shares of our common stock and Holdings conducts all of its business through us and our subsidiaries.

On March 13, 2007, Holdings issued $425.0 million of its existing senior unsecured floating rate toggle notes, due 2012, or the Holdings notes. Holdings’ existing notes are senior unsecured obligations of Holdings. Holdings may elect to pay interest on its existing notes entirely in cash, by increasing the principal amount of the notes, or PIK interest, or by paying 50% in cash and 50% by increasing the principal amount of the notes. We do

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not expect to service Holdings’ existing notes in cash and, accordingly, the outstanding balance that will mature on March 15, 2012 will likely be increased due to the issuance of additional notes to settle interest obligations. Assuming that we elect to settle all future interest payments in kind, and that LIBOR interest rates do not change significantly from current levels, the principal amount of Holdings’ existing notes could increase to approximately $600 million at maturity.

Also, in connection with issuing Holdings’ existing notes, Holdings entered into an interest rate swap agreement, with a notional amount of $425.0 million, fixing the LIBOR base rate at 4.97% through the term of the notes. Unlike interest on Holdings’ existing notes, which may be settled in cash or through the issuance of additional notes, payments due to the swap counterparty must be made in cash.

Holdings depends on us and our subsidiaries, who conduct the operations of the business, for dividends and other payments to generate the funds necessary to meet its financial obligations, including payments of principal and interest on its existing notes and obligations on its interest rate swap agreement. However, we are not obligated to make funds available to Holdings for payment on the Holdings’ notes and interest rate swap. The terms of the indenture governing the notes will restrict (subject to the ability to make payments to Holdings to service its interest rate swap), and the terms of our existing senior secured revolving credit facility and the terms of the indentures governing our existing senior notes and our existing 10.75% senior subordinated notes restrict, us and certain of our subsidiaries from, in each case, paying dividends or otherwise transferring assets to Holdings. Such restrictions include, among others, financial covenants, prohibition of dividends in the event of default and limitations on the total amount of dividends and other restricted payments. In addition, legal and contractual restrictions in agreements governing other current and future indebtedness, as well as financial condition and operating requirements of Holdings’ subsidiaries, currently limit and may, in the future, limit Holdings’ ability to obtain cash from us. The earnings from, or other available assets of us, may not be sufficient to pay dividends or make distributions or loans to enable Holdings to make cash payments of interest in respect of its obligations when such payments are due.

As of March 31, 2009, we had the ability to make approximately $26.4 million in restricted payments (including payments to Holdings to service its obligations), which amount increases based on capital contributions to us and by 50 percent of our net income and is reduced by i) the amount of any restricted payments made and ii) our net losses, excluding certain non-cash charges such as the $380.0 million goodwill impairment during the three months ended March 31, 2008. Delaware law also requires that we be solvent both at the time, and immediately following, a restricted payment to Holdings. Because Holdings relies on dividends from us to fund cash interest payments on its existing senior unsecured floating rate toggle notes, in the event that such restrictions prevent us from paying such a dividend, Holdings would be unable to pay interest on such notes in cash and would instead be required to pay PIK interest. Unlike interest on Holdings’ existing notes, which may be settled in cash or through the issuance of additional notes, payments due to the swap counterparty must be made in cash. As a result of the current and projected low interest rate environment, and the related expectation that Holdings will continue to be net payer on the interest rate swap, we believe that cash payments for the interest rate swap obligations will reduce the availability under the restricted payments provisions in our indebtedness to a level that additional payments for cash interest for Holdings’ existing notes may not be prudent and therefore, no longer remain probable.

In the event amounts available under the restricted payments provision are insufficient for us to service Holdings’ obligations, including any obligation related to the interest rate swap, we may be required to arrange a capital infusion and use such proceeds to satisfy these obligations. There can be no assurance that additional financing, if available, will be made on terms that are acceptable to us. We expect Holdings to issue $18.4 million in new senior unsecured floating rate toggle notes to settle the interest due in September 2009 on its existing notes. In addition, it is required to pay $6.6 million to settle the obligation under the interest rate swap agreement for the interest period ending September 15, 2009. During the three months ended March 31, 2009, we paid dividends in the amount of $4.1 million to Holdings to finance obligations related to its existing notes and interest rate swap.

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Based on our financial projections, we will not be able to satisfy all scheduled maturities through cash on hand and cash generated through operations. Maturities during the year ending December 31, 2012 include $475.6 million of Holdings’ existing notes currently outstanding. As noted above, based on LIBOR rates as of March 31, 2009, if we were to settle all future interest payments in kind, the principal balance of the Holdings notes would be approximately $600 million upon maturity in 2012.

Contractual Obligations

The following summarizes our contractual obligations relating to our indebtedness, capital leases, noncancelable leases and outstanding purchase obligations at December 31, 2008. Our contractual obligations related to our indebtedness include both scheduled principal repayments and interest that will accrue on the outstanding principal balance. We have estimated interest obligations on variable rate indebtedness using the base rate in effect as of December 31, 2008, plus the spread paid over that base rate on the related indebtedness. In most circumstances, our variable rate indebtedness bears interest based upon a spread over the six month LIBOR which was 1.75% as of December 31, 2008.

Obligations	2009		2010		2011		2012		2013		Thereafter
	(dollars in thousands)
US Oncology debt and interest payments due	$	88,171	$	301,828	$	287,404	$	366,661	$	39,176	$	309,226
Capital lease payments due		399		566		322		330		339		2,587
Noncancelable operating leases		81,011		71,910		60,308		52,737		45,181		218,209
Reserve for uncertain tax positions		2,173		—		—		—		—		—

Purchase obligations consist of outstanding amounts on purchase orders issued for capital improvements and fixed asset purchases. We do not aggregate purchase orders for purchases other than capital improvements and fixed assets, because the period of time between the date of the commitment and the receipt of the supplier invoice is deemed immaterial. We impose preauthorized limits of authority for all expenditures.

We are obligated to pay $4.5 million under pending construction contracts, which we would expect to pay during 2009, based on the progress of the construction projects.

Off-Balance Sheet Arrangements and Leases

We have no off-balance sheet arrangements, other than noncancelable operating lease commitments entered into in the normal course of business. We lease office space, integrated cancer centers and certain equipment under noncancelable operating lease agreements. As of December 31, 2008, total future minimum lease payments, including escalation provisions and leases with parties affiliated with practices are reflected in the preceding table as noncancelable operating leases. We are a 50% partner in a joint venture which owns real property on which a new headquarters facility has been constructed, which has been leased to us. Our investment in the joint venture through December 31, 2008 was $6.4 million. Our obligations under the lease agreement are included in the amounts shown in the preceding table.

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EX-99.7

Exhibit 99.7

DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS

We summarize below the principal terms of the agreements that govern our existing senior secured revolving credit facility, and that govern our existing 9% senior notes due 2012, our existing 10.75% senior subordinated notes due 2014, our existing 9.625% senior subordinated notes due 2012 and our other existing subordinated notes, mortgage and capital lease obligations. This summary is not a complete description of all the terms of such agreements.

Our existing senior secured revolving credit facility will be amended to permit the issuance of the notes and the security interests in the notes and our existing senior notes. In connection with the issuance of the notes offered hereby, our existing senior notes will be amended to add the same security that will secure our obligations under the notes offered hereby. Our existing senior notes will share ratably in all collateral that secures the notes offered hereby.

In addition, in connection with the issuance of the notes offered hereby, we have received commitments from affiliates of the initial purchasers for a new senior secured revolving credit facility. The new senior secured revolving credit facility will replace our existing senior secured revolving credit facility, provide for aggregate borrowings of up to $100.0 million (which could increase if additional commitments are obtained) and is proposed to have a maturity date of August 2012 (or, if our existing senior notes are not repaid, July 2012).

Our Existing Senior Secured Revolving Credit Facility

In connection with and after giving effect to this offering, the repayment in full of the term loan facility under our existing senior secured credit agreement and the amendment to our existing senior secured revolving credit facility, our existing senior secured revolving credit facility will provide a $160.0 million revolving credit facility with a termination date of August 20, 2010, and include a letter of credit sub-facility and a swingline loan sub-facility. Borrowings under our existing senior secured revolving credit facility are expected to bear interest at a rate per annum equal to, at our option, either (a) the alternate base rate determined by reference to the higher of (i) the prime rate of JPMorgan Chase Bank or (ii) one-half of 1% over the weighted average of the rates on overnight Federal funds transactions as published by the Federal Reserve Bank of New York or (b) a LIBOR rate determined by reference to offered rates in the London interbank market. The applicable margin percentage will be a percentage per annum equal to (i) 3.50% for alternate base rate revolving loans and (ii) 4.50% for adjusted LIBOR revolving loans. The interest rates applicable to loans, other than swingline loans, under our existing senior secured revolving credit facility will be, at our option, equal to either an alternate base rate or an adjusted LIBOR for a one, two, three or six month interest period chosen by us (or a nine or 12 month period if all lenders agree to make an interest period of such duration available) in each case, plus an applicable margin percentage. Swingline loans bear interest at the interest rate applicable to alternate base rate revolving loans.

On the last business day of each calendar quarter, we will be required to pay each lender a commitment fee in respect of any unused commitment under our existing senior secured revolving credit facility. The commitment fee will be 0.75% annually.

Voluntary reductions of revolving credit commitments are permitted, in whole or in part, in minimum amounts without premium or penalty, other than customary breakage costs with respect to adjusted LIBOR loans.

Our senior secured revolving credit facility will require us to comply, on a quarterly basis, with certain financial covenants, including a minimum interest coverage ratio test and a maximum leverage ratio test, which become more restrictive over time. In addition, our senior secured revolving credit facility will include various negative covenants, including with respect to indebtedness, liens, investments, permitted businesses and transactions and other matters, as well as certain customary representations and warranties, affirmative covenants and events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, actual or asserted failure of any guaranty or security document supporting our senior secured credit facility to be in full force and effect and change of control. If such an event of default occurs, the lenders under

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our existing senior secured revolving credit facility will be entitled to take various actions, including the acceleration of amounts due under our existing senior secured revolving credit facility and all actions permitted to be taken by a secured creditor.

Indebtedness under our existing senior secured revolving credit facility will be guaranteed by all of our current subsidiaries (other than certain joint ventures), all of our future restricted subsidiaries (other than certain joint ventures), and by Holdings and will be secured by a first priority security interest in substantially all of our existing and future real and personal property, including accounts receivable, inventory, equipment, general intangibles, intellectual property, investment property, cash and a first priority pledge of US Oncology’s capital stock and the capital stock of the guarantor subsidiaries.

Commitment for New Senior Secured Revolving Credit Facility

We have also received a commitment letter pursuant to which Deutsche Bank Trust Company Americas, JPMorgan Chase Bank N.A., Morgan Stanley Senior Funding and Wells Fargo Bank, N.A. are to provide U.S. Oncology with a $100.0 million revolving credit facility which will replace our existing senior secured revolving credit facility and provide us with funds for working capital and general corporate purposes.

The new senior secured revolving credit facility as proposed will (1) mature in August 2012 (or, if our existing senior notes are not repaid, July 2012), (2) provide for financial covenants to be determined by mutual agreement (which covenants may restrict our ability to access the full covenant available under the facility), and (3) be guaranteed by all existing and future wholly-owned domestic subsidiaries.

9.0% Senior Notes and 10.75% Senior Subordinated Notes

On August 20, 2004, we sold $300.0 million in aggregate principal amount of our existing 9% senior notes due 2012 and $275.0 million in aggregate principal amount of our existing 10.75% senior subordinated notes due 2014.

Our existing senior notes mature on August 15, 2012 and bear fixed interest at a rate of 9% per annum, payable semi-annually in arrears on February 15 and August 15. Our existing senior notes are unconditionally guaranteed, jointly and severally, by most of our subsidiaries. In connection with the issuance of the notes offered hereby, our existing senior notes will be amended to add the same security that will secure our obligations under the notes offered hereby. Our existing senior notes will share ratably in all collateral that secures the notes offered hereby. Our existing 10.75% senior subordinated notes mature on August 15, 2014 and bear interest at a fixed rate of 10.75% per annum, payable semiannually in arrears on February 15 and August 15. Our existing 10.75% senior subordinated notes are unconditionally guaranteed, jointly and severally and on an unsecured senior subordinated basis, by most of our subsidiaries.

On and after August 15, 2008 and 2009, we are entitled at our option to redeem all or a portion of our existing senior notes and our existing 10.75% senior subordinated notes, respectively, at the following redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued interest to the redemption date, if redeemed during the 12-month period ending on August 15 of the years set forth below:

	Redemption Price
Period	Senior Notes		Senior Subordinated Notes
2009	104.500	%	—
2010	102.500	%	105.375	%
2011	100.000	%	103.583	%
2012	100.000	%	101.792	%
2013 & thereafter	100.000	%	100.000	%

We are not required to make any mandatory redemption or sinking fund payments with respect to the senior notes or the senior subordinated notes. However, upon the occurrence of any change of control of us, each holder of our existing senior notes or 10.75% senior subordinated notes shall have the right to require us to repurchase

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such holder’s notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase.

The indentures governing our existing senior notes and our existing 10.75% senior subordinated notes contain customary events of default and affirmative and negative covenants that, among other things, limit our ability and the ability of its restricted subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, enter into arrangements that restrict dividends from subsidiaries, transfer and sell assets, engage in certain transactions with affiliates and effect a consolidation or merger.

9.625% Senior Subordinated Notes

We have senior subordinated notes with an original aggregate principal amount of $175.0 million maturing February 1, 2012. Interest on these notes accrues at a fixed rate of 9.625% per annum payable semi-annually in arrears on each February 1 and August 1 to the holders of record of such notes as of each January 15 and July 15 prior to each such respective payment date.

In August 2004, we commenced a tender offer to acquire the outstanding 9.625% senior subordinated notes due 2012, obtain holder consents to eliminate substantially all of the restrictive covenants and make other amendments to the indenture governing such notes. As a result, we acquired $172.0 million in aggregate principal amount of such 9.625% senior subordinated notes and, as of March 31, 2009, $3.0 million remain outstanding.

Subordinated Notes

Subordinated notes were issued to certain physicians with whom we entered into service agreements. Substantially all of the subordinated notes outstanding at December 31, 2008 bear interest from 6% to 7%, are due in installments through 2014 and are subordinated to senior bank and certain other debt. During the year ended December 31, 2008, $34.3 million in subordinated notes were issued in affiliation transactions. If we fail to make payments under any of the notes, the respective practice can terminate its service agreement with us.

Mortgages and Capital Lease Obligations

In January, 2005, we incurred mortgage indebtedness of $13.1 million to finance the acquisition of real estate and construction of a cancer center. The mortgage debt bears interest at a fixed annual rate of 6.2% on $8.5 million of the initial balance and the remaining balance bears interest at variable rate equal to 30-day LIBOR plus 2.15%. We pay monthly installments of principal and interest and the mortgage matures in January, 2015. In December 2006, we incurred an additional $4.5 million to finance the acquisition of real estate and construction of a cancer center. This mortgage debt bears interest at a fixed annual rate of 7.25% on $2.9 million of the initial balance and the remaining balance bears interest at variable rate equal to 30-day LIBOR plus 2.15%. We pay monthly installments of principal and interest and the mortgage matures in December 2016. In April 2008, we incurred an additional $4.0 million to finance the acquisition of real estate and construction of a cancer center. This mortgage debt bears interest at a fixed annual rate of 6.25%. We pay monthly installments of principal and interest and the mortgage matures in May 2018. As of December 31, 2008, the outstanding indebtedness on total mortgages was $19.6 million.

Leases for medical and office space, which meet the criteria for capitalization, are capitalized using effective interest rates between 8.0% and 12.0% with original lease terms up to 20 years. In March, 2006, we amended the lease agreements for two cancer centers operated through capital leases in a manner that resulted in the modified leases being classified as operating leases. Consequently, the remaining capital lease obligation of $11.0 million and the carrying value of the related capital assets of $10.7 million were retired, resulting in a $0.3 million gain that has been deferred and recognized as a reduction to rent expense over the remaining term of the leases. As of December 31, 2008 and 2007, capitalized lease obligations were approximately $2.6 million and $2.3 million and relate to cancer centers in which we are the sole tenant.

3

EX-99.8

Exhibit 99.8

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Audited Consolidated Financial Statements:
Reports of Independent Registered Public Accounting Firm	1
Consolidated Balance Sheets as of December 31, 2008 and 2007	3
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December  31, 2008, 2007 and 2006	4
Consolidated Statement of Stockholders’ Equity (Deficit) for the years ended December  31, 2008, 2007 and 2006	5
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006	7
Notes to Consolidated Financial Statements	9

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of US Oncology Holdings, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income (loss), of stockholders’ deficit and of cash flows present fairly, in all material respects, the financial position of US Oncology Holdings, Inc. and its subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. 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 of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for noncontrolling interests effective January 1, 2009 and uncertain tax positions effective January 1, 2007.

PricewaterhouseCoopers LLP

Houston, Texas

March 6, 2009, except insofar as it relates to the effects of the change in accounting for noncontrolling interests described in Note 2, as to which the date is June 1, 2009.

1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of US Oncology, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income (loss), of stockholder’s equity and of cash flows present fairly, in all material respects, the financial position of US Oncology, Inc. and its subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. 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 of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for noncontrolling interests effective January 1, 2009 and uncertain tax positions effective January 1, 2007.

PricewaterhouseCoopers LLP

Houston, Texas

March 6, 2009, except insofar as it relates to the effects of the change in accounting for noncontrolling interests described in Note 2, as to which the date is June 1, 2009.

2

CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)

	US Oncology Holdings, Inc.						US Oncology, Inc.
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007
ASSETS
Current assets:
Cash and equivalents	$	104,477		$	149,257		$	104,476		$	149,256
Accounts receivable		364,336			341,860			364,336			341,860
Other receivables		25,707			97,401			25,707			97,401
Prepaid expenses and other current assets		26,182			26,544			20,682			22,801
Inventories		130,967			82,822			130,967			82,822
Deferred income taxes		9,749			7,428			4,373			4,260
Due from affiliates		75,884			71,021			66,428			60,295
Total current assets		737,302			776,333			716,969			758,695
Property and equipment, net		410,248			399,621			410,248			399,621
Service agreements, net		273,646			223,850			273,646			223,850
Goodwill		377,270			757,270			377,270			757,270
Other assets		72,434			79,299			64,720			69,214
	$	1,870,900		$	2,236,373		$	1,842,853		$	2,208,650
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term indebtedness	$	10,677		$	38,613		$	10,677		$	38,613
Accounts payable		266,443			242,172			266,190			241,093
Due to affiliates		136,913			170,432			136,913			177,265
Accrued compensation cost		40,776			30,045			40,776			30,045
Accrued interest payable		26,266			24,949			26,266			24,949
Income taxes payable		—			—			2,727			6,735
Other accrued liabilities		45,341			37,763			34,804			37,763
Total current liabilities		526,416			543,974			518,353			556,463
Deferred revenue		6,894			8,380			6,894			8,380
Deferred income taxes		15,783			23,289			35,139			33,532
Long-term indebtedness		1,517,884			1,456,569			1,061,133			1,031,569
Other long-term liabilities		47,472			39,492			12,347			11,166
Total liabilities		2,114,449			2,071,704			1,633,866			1,641,110
Commitments and contingencies (Note 10)
Preferred stock Series A, 15,000,000 shares authorized, 13,938,657 shares issued and outstanding, respectively		329,322			308,174			—			—
Preferred stock Series A-1, 2,000,000 shares authorized, 1,948,251 shares issued and outstanding		56,629			53,431			—			—
Stockholders’ (deficit) equity:
Common stock, $0.001 par value, 300,000,000 shares authorized, 148,281,420 and 140,618,380 shares issued and outstanding, respectively		148			141			—			—
Common stock, $0.01 par value, 100 shares authorized, issued and outstanding		—			—			1			1
Additional paid-in capital		—			—			560,768			549,186
Accumulated other comprehensive income (loss), net of tax		—			(1,534	)		—			—
Retained (deficit) earnings		(643,220	)		(208,760	)		(365,354	)		5,136
Total Company stockholders’ (deficit) equity		(643,072	)		(210,153	)		195,415			554,323
Noncontrolling interests		13,572			13,217			13,572			13,217
Total stockholders’ (deficit) equity		(629,500	)		(196,936	)		208,987			567,540
Total liabilities and stockholders’ (deficit) equity	$	1,870,900		$	2,236,373		$	1,842,853		$	2,208,650

The accompanying notes are an integral part of these statements.

3

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands)

	US Oncology Holdings, Inc.									US Oncology, Inc.
	Year Ended December 31,									Year Ended December 31,
	2008			2007			2006			2008			2007			2006
Product revenue	$	2,224,704		$	1,970,106		$	1,822,141		$	2,224,704		$	1,970,106		$	1,822,141
Service revenue		1,079,473			1,030,672			989,242			1,079,473			1,030,672			989,242
Total revenue		3,304,177			3,000,778			2,811,383			3,304,177			3,000,778			2,811,383
Cost of products		2,163,943			1,925,547			1,753,638			2,163,943			1,925,547			1,753,638
Cost of services:
Operating compensation and benefits		523,939			479,177			458,006			523,939			479,177			458,006
Other operating costs		321,947			293,677			274,665			321,947			293,677			274,665
Depreciation and amortization		72,790			73,159			69,351			72,790			73,159			69,351
Total cost of services		918,676			846,013			802,022			918,676			846,013			802,022
Total cost of products and services		3,082,619			2,771,560			2,555,660			3,082,619			2,771,560			2,555,660
General and administrative expense		77,265			84,423			77,180			76,883			84,326			76,948
Impairment and restructuring charges		384,929			15,126			—			384,929			15,126			—
Depreciation and amortization		30,017			16,172			13,983			30,017			16,172			13,983
		3,574,830			2,887,281			2,646,823			3,574,448			2,887,184			2,646,591
Income (loss) from operations		(270,653	)		113,497			164,560			(270,271	)		113,594			164,792
Other income (expense):
Interest expense, net		(136,474	)		(137,496	)		(117,088	)		(92,757	)		(95,342	)		(92,870	)
Loss on early extinguishment of debt		—			(12,917	)		—			—			—			—
Loss on interest rate swap		(21,219	)		(11,885	)
Other income (expense)		2,213			—			—			2,213			—			—
Income (loss) before income taxes		(426,133	)		(48,801	)		47,472			(360,815	)		18,252			71,922
Income tax benefit (provision)		16,923			17,447			(18,926	)		(6,351	)		(7,447	)		(27,509	)
Net income (loss)		(409,210	)		(31,354	)		28,546			(367,166	)		10,805			44,413
Less: Net income attributable to noncontrolling interests		(3,324	)		(3,619	)		(2,388	)		(3,324	)		(3,619	)		(2,388	)
Net income (loss) attributable to the Company	$	(412,534	)	$	(34,973	)	$	26,158		$	(370,490	)	$	7,186		$	42,025
Other comprehensive income (loss):
Net income (loss)	$	(409,210	)	$	(31,354	)	$	28,546		$	(367,166	)	$	10,805		$	44,413
Change in unrealized gain (loss) on cash flow hedge, net of tax		1,534			(2,485	)		39			—			—			—
Comprehensive income (loss)		(407,676	)		(33,839	)		28,585			(367,166	)		10,805			44,413
Comprehensive income attributable to noncontrolling interests		(3,324	)		(3,619	)		(2,388	)		(3,324	)		(3,619	)		(2,388	)
Other comprehensive income (loss) attributable to the Company	$	(411,000	)	$	(37,458	)	$	26,197		$	(370,490	)	$	7,186		$	42,025

The accompanying notes are an integral part of these statements.

4

US ONCOLOGY HOLDINGS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

	Shares Issued		Par Value			Additional Paid-In Capital			Deferred Compensation			Accumulated Other Comprehensive Income			Retained Earnings (Deficit)			Noncontrolling Interests			Total
Balance at December 31, 2005	119,546			120			61,990			(3,536	)		912			4,911			13,069			77,466
Private equity offering proceeds	21,650			22			98,644			—			—			—			—			98,666
Shares issued in affiliation transactions	70			—			321			—			—			—			—			321
Restricted stock award issuances	600			—			—			—			—			—			—			—
Forfeiture of restricted stock awards	(1,146	)		(1	)		—			—			—			—			—			(1	)
Share-based compensation	—			—			2,149			—			—			—			—			2,149
Elimination of unamortized deferred compensation	—			—			(3,536	)		3,536			—			—			—			—
Exercise of options to purchase common stock	302			—			338			—			—			—			—			338
Dividend declared	—			—			(159,906	)		—			—			(30,094	)		—			(190,000	)
Accretion of preferred stock dividends	—			—			—			—			—			(20,104	)		—			(20,104	)
Accumulated other comprehensive income for unrealized gain on interest rate swap, net of tax	—			—			—			—			39			—			—			39
Distribution to noncontrolling interests	—			—			—			—			—			—			(2,324	)		(2,324	)
Contribution from noncontrolling interests	—			—			—			—			—			—			1,015			1,015
Net income	—			—			—			—			—			26,158			2,388			28,546
Balance at December 31, 2006	141,022			141			—			—			951			(19,129	)		14,148			(3,889	)
Restricted stock award issuances	250			—			—			—			—			—			—			—
Forfeiture of restricted stock awards	(1,129	)		—			—			—			—			—			—			—
Share-based compensation	—			—			753			—			—			—			—			753
Exercise of options to purchase common stock	476			—			1,227			—			—			—			—			1,227
Dividends paid	—			—			—			—			—			(133,580	)		—			(133,580	)
Accretion of preferred stock dividends	—			—			(1,980	)		—			—			(21,078	)		—			(23,058	)
Accumulated other comprehensive loss for unrealized loss on interest rate swap, net of tax	—			—			—			—			(2,485	)		—			—			(2,485	)
Distribution to noncontrolling interests	—			—			—			—			—			—			(4,550	)		(4,550	)
Net loss	—			—			—			—			—			(34,973	)		3,619			(31,354	)
Balance at December 31, 2007	140,619		$	141		$	—		$	—		$	(1,534	)	$	(208,760	)	$	13,217		$	(196,936	)
Shares issued in affiliation transactions	193			—			300			—			—			—			—			300
Restricted stock award issuances	9,754			9			—			—			—			(9	)					—
Forfeiture of restricted stock awards	(2,310	)		(2	)		—			—			—			—			—			(2	)
Share-based compensation	—			—			2,103			—			—			—			—			2,103
Exercise of options to purchase common stock	25			—			25			—			—			—			—			25
Accretion of preferred stock dividends	—			—			(2,428	)		—			—			(21,917	)					(24,345	)
Accumulated other comprehensive loss for unrealized loss on interest rate swap, net of tax	—			—			—			—			1,534			—			—			1,534
Distribution to noncontrolling interests	—			—			—			—			—			—			(3,545	)		(3,545	)
Contribution from noncontrolling interests	—			—			—			—			—			—			576			576
Net loss	—			—			—			—			—			(412,534	)		3,324			(409,210	)
Balance at December 31, 2008	148,281		$	148		$	—		$	—		$	—		$	(643,220	)	$	13,572		$	(629,500	)

The accompanying notes are an integral part of these statements.

5

US ONCOLOGY, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY

(in thousands, except share information)

	Shares Issued	Par Value		Additional Paid-In Capital			Deferred Compensation			Retained Earnings (Deficit)			Noncontrolling Interests			Total
Balance at December 31, 2005	100		1		583,778			(3,536	)		20,006			13,069			613,318
Contribution of shares issued in affiliation transactions	—		—		321			—			—			—			321
Share-based compensation	—		—		2,149			—			—			—			2,149
Elimination of unamortized deferred compensation	—		—		(3,536	)		3,536			—			—			—
Dividends declared	—		—		(2,031	)		—			(38,578	)		—			(40,609	)
Dividends paid	—		—		(260	)		—			(23,453	)		—			(23,713	)
Contribution of proceeds from exercises of options to purchase common stock	—		—		319			—			—			—			319
Distribution to noncontrolling interests	—		—		—			—			—			(2,324	)		(2,324	)
Contribution from noncontrolling interests	—		—		—			—			—			1,015			1,015
Net income	—		—		—			—			42,025			2,388			44,413
Balance at December 31, 2006	100		1		580,740			—			—			14,148			594,889
Share-based compensation	—		—		753			—			—			—			753
Contribution of proceeds from exercises of options to purchase common stock	—		—		535			—			—			—			535
Dividends paid	—		—		(32,842	)		—			(2,050	)		—			(34,892	)
Distribution to noncontrolling interests	—		—		—			—			—			(4,550	)		(4,550	)
Net income	—		—		—			—			7,186			3,619			10,805
Balance at December 31, 2007	100	$	1	$	549,186		$	—		$	5,136		$	13,217		$	567,540
Share-based compensation	—		—		2,103			—			—			—			2,103
Contribution of proceeds from exercises of options to purchase common stock	—		—		25			—			—			—			25
Non-cash capital contribution	—		—		22,458			—			—			—			22,458
Dividends paid	—		—		(13,004	)		—									(13,004	)
Distribution to noncontrolling interests	—		—		—			—			—			(3,545	)		(3,545	)
Contribution from noncontrolling interests	—		—		—			—			—			576			576
Net loss	—		—		—			—			(370,490	)		3,324			(367,166	)
Balance at December 31, 2008	100	$	1	$	560,768		$	—		$	(365,354	)	$	13,572		$	208,987

The accompanying notes are an integral part of this statement.

6

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	US Oncology Holdings, Inc.									US Oncology, Inc.
	Year Ended December 31,									Year Ended December 31,
	2008			2007			2006			2008			2007			2006
Cash flows from operating activities:
Net income (loss)	$	(409,210	)	$	(31,354	)	$	28,546		$	(367,166	)	$	10,805		$	44,413
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization, including amortization of deferred financing costs		112,286			98,151			90,628			109,901			96,115			89,896
Deferred income taxes		(10,728	)		(11,689	)		4,422			1,494			992			4,422
Non-cash compensation		2,103			753			2,149			2,103			753			2,149
(Gain)/Loss on sale of assets		(2,213	)		151			(196	)		(2,213	)		151			(196	)
Loss on early extinguishment of debt, net		—			12,917			—			—			—			—
Impairment and restructuring charges		384,929			15,126			—			384,929			15,126			—
Equity earnings in joint venture		(1,929	)		(1,576	)		—			(1,929	)		(1,576	)		—
Loss on interest rate swap		22,372			11,885			—			—			—			—
Non-cash interest under PIK option		29,768			13,154			—			—			—			—
(Increase) Decrease in:
Accounts and other receivables		49,218			7,589			(42,073	)		49,218			7,589			(42,073	)
Prepaid expenses and other current assets		2,087			(4,906	)		1,235			2,086			(4,553	)		1,235
Inventories		(47,428	)		(4,441	)		(30,178	)		(47,428	)		(4,441	)		(30,178	)
Other assets		79			(5,650	)		3,206			79			(5,387	)		3,206
Increase (Decrease) in:
Accounts payable		31,059			47,427			(39,882	)		31,885			46,813			(39,717	)
Due from/to affiliates		(38,102	)		17,655			14,713			(32,054	)		29,519			13,949
Income taxes receivable/payable		(1,758	)		(3,670	)		(5,565	)		3,562			(3,033	)		3,021
Other accrued liabilities		5,966			3,155			(6,488	)		7,020			9,157			(6,488	)
Net cash provided by operating activities		128,499			164,677			20,517			141,487			198,030			43,639
Cash flows from investing activities:
Acquisition of property and equipment		(88,743	)		(90,850	)		(82,571	)		(88,743	)		(90,850	)		(82,571	)
Net payments in affiliation transactions		(52,467	)		(134	)		(3,630	)		(52,467	)		(134	)		(3,630	)
Net proceeds from sale of assets		5,347			750			9,261			5,347			750			9,261
Acquisition of business, net of cash acquired		—			—			(31,378	)		—			—			(31,378	)
Investments in unconsolidated subsidiaries		—			—			(2,450	)		—			—			(2,450	)
Distributions from unconsolidated subsidiaries		2,116			254			—			2,116			254			—
Investment in joint venture		(3,257	)		(4,745	)		—			(3,257	)		(4,745	)		—
Proceeds from contract separations		—			1,555			—			—			1,555			—
Net cash used in investing activities		(137,004	)		(93,170	)		(110,768	)		(137,004	)		(93,170	)		(110,768	)

(Continued on following page)

The accompanying notes are an integral part of these statements.

7

CONSOLIDATED STATEMENTS OF CASH FLOWS-continued

(in thousands)

	US Oncology Holdings, Inc.									US Oncology, Inc.
	Year Ended December 31,									Year Ended December 31,
	2008			2007			2006			2008			2007			2006
Cash flows from financing activities:
Proceeds from Term Loan		—			—			100,000			—			—			100,000
Proceeds from Senior Floating Rate Notes		—			413,232			—			—			—			—
Proceeds from other indebtedness		4,000			1,323			4,522			4,000			1,323			4,522
Repayment of Term Loan		(34,937	)		(7,487	)		(1,000	)		(34,937	)		(7,487	)		(1,000	)
Repayment of advance from parent		—			—			—			—			(150,000	)		—
Repayment of Senior Subordinated Notes		—			(256,766	)		—			—			—			—
Repayment of other indebtedness		(2,235	)		(136	)		(5,047	)		(2,235	)		(136	)		(5,047	)
Debt financing costs		(159	)		(1,575	)		(714	)		(143	)		(1,554	)		(714	)
Net distributions to parent		—			—			—			(13,004	)		(75,501	)		(23,713	)
Distributions to noncontrolling interests		(3,545	)		(4,550	)		(2,324	)		(3,545	)		(4,550	)		(2,324	)
Contributions from noncontrolling interests		576			—			1,015			576			—			1,015
Issuance of stock, net of offering costs		—			—			149,391			—			—			—
Advance from parent		—			—			—			—			—			150,000
Payment of dividends on preferred stock		—			(25,000	)		—			—			—			—
Payment of dividends on common stock		—			(323,580	)		—			—			—			—
Proceeds from exercise of stock options		25			521			338			—			—			—
Contributions of proceeds from exercise of stock options		—			—			—			25			535			319
Net cash provided by (used in) financing activities		(36,275	)		(204,018	)		246,181			(49,263	)		(237,370	)		223,058
Increase (decrease) in cash and cash equivalents		(44,780	)		(132,511	)		155,930			(44,780	)		(132,510	)		155,929
Cash and cash equivalents:
Beginning of year		149,257			281,768			125,838			149,256			281,766			125,837
End of year	$	104,477		$	149,257		$	281,768		$	104,476		$	149,256		$	281,766
Interest paid	$	93,932		$	129,493		$	114,740		$	85,784		$	92,822		$	90,250
Taxes paid (refunded)		(4,412	)		3,053			20,029			(4,412	)		3,053			20,029
Non-cash investing and financing transactions:
Notes issued in affiliation transactions		34,328			650			—			34,328			650			—
Notes issued for interest paid-in-kind		31,751			—			—			—			—			—
Accretion of dividends on preferred stock		24,345			23,058			20,104			—			—			—
Issuance of common stock in affiliation transactions		—			—			321			—			—			321
Non-cash capital contribution		—			—			—			22,458			—			—

The accompanying notes are an integral part of these statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—DESCRIPTION OF THE BUSINESS

The Company was formed in March, 2004, when a wholly owned subsidiary of US Oncology Holdings, Inc. (“Holdings”) agreed to merge with and into US Oncology, with US Oncology continuing as the surviving corporation and a wholly owned subsidiary of Holdings (the “Merger”). On August 20, 2004, the Merger, valued at approximately $1.6 billion, was consummated. Currently, Holdings’ principal asset is 100% of the shares of common stock of US Oncology, Inc. (“US Oncology”). Holdings conducts all of its business through US Oncology and its subsidiaries which provide services to a network of affiliated practices, made up of 1,211 affiliated physicians in 456 locations, with the mission of expanding access to and improving the quality of cancer care in local communities. The services the Company offers include:

• Medical Oncology Services. Under its comprehensive service arrangements, the Company acts as the exclusive manager and administrator for non-medical business functions connected with its affiliated practices. As such, the Company is responsible for billing and collecting for medical oncology services, physician recruiting, data management, accounting, information systems and capital allocation to facilitate growth in practice operations. The Company also purchases and manages specialty oncology pharmaceuticals for its affiliated practices (part of the $2 billion of pharmaceuticals mentioned below).

• Cancer Center Services. For practices affiliated under comprehensive service arrangements, the Company develops and manages community-based cancer centers, that integrate all aspects of outpatient cancer care, from laboratory and radiology diagnostic capabilities to chemotherapy and radiation therapy. The Company operates 94 community-based radiation facilities, including 80 integrated cancer centers that include medical oncology and radiation oncology operations, and 14 radiation-only facilities. The Company also has installed and manages 37 Positron Emission Tomography (“PET”) systems including 26 Positron Emission Tomography/Computerized Tomography (“PET/CT”) systems. Additionally, the Company operates 62 CT systems and also provides the comprehensive management and financial services described above in connection with the cancer centers.

• Pharmaceutical Services. The Company contracts with practices solely for the purchase and management of specialty oncology pharmaceuticals under the oncology pharmaceutical services (“OPS”) model, which does not encompass all of the Company’s other practice management services. During 2008, the Company was responsible for purchasing, delivering and managing over $2 billion of pharmaceuticals through a network of 45 licensed pharmacies, 154 pharmacists and 337 pharmacy technicians. OPS revenues are included in the pharmaceutical services segment. In addition to providing services to affiliated physicians, in this segment the Company capitalizes on the network’s size and scope by providing services to pharmaceutical manufacturers and payers, to improve the delivery of cancer care in America.

• Research/Other Services. The Company facilitates a broad range of cancer research and drug development activities through its network. It contracts with pharmaceutical and biotechnology companies to provide a comprehensive range of services relating to clinical trials. During 2008, the Company supervised 74 clinical trials, supported by a network of 657 participating physicians in 234 research locations and enrolled 3,447 new patients in research studies.

The Company provides these services through two business models. Under the comprehensive services model known as Comprehensive Service Agreements (“CSA”), the Company owns or leases all of the real and personal property used by its affiliated practices. In addition, the Company generally manages the non-medical business operations of its affiliated practices and facilitates communication with its affiliated physicians. Each management agreement contemplates a policy board consisting of representatives from the affiliated physician practice and the Company. The responsibilities of each board include strategic planning, decision-making and preparation of an annual budget for that practice. While both the Company and the affiliated practice have an equal vote in matters before the policy board, the practice physicians are solely responsible for all medical decisions, including the hiring and termination of physicians. The Company is responsible for non-medical decisions, including facilities management and information systems management.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Under most comprehensive service agreements, the Company is compensated under the earnings model. Under that model, the Company accounts for all expenses that it incurs in connection with managing a practice, including rent, pharmaceutical expenses, salaries and benefits of non-physician employees of the practices, and is paid a management fee based on a percentage of the practice’s earnings before income taxes, subject to certain adjustments. During the year ended December 31, 2008, 80.9% of revenue was derived from comprehensive service agreements related to practices managed under the earnings model. The Company’s other comprehensive service agreements are on a fixed management fee basis, as required in some states.

The Company’s services are increasingly being offered through targeted arrangements where a subset of the services offered through its comprehensive management agreements are provided separately to oncologists on a fee-for-service basis. Targeted physician services represented 15.8% of revenue during the year ended December 31, 2008 which was primarily fees for payment for pharmaceuticals and supplies used by the practice and reimbursement for certain pharmacy-related expenses under the oncology pharmaceutical services (“OPS”) model. A smaller portion of revenue from targeted arrangements was payment for billing, collection and reimbursement support service and payment for the other services we provide. Rates for services typically are based on the level of services desired by the practice.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated. The Company has determined that none of its existing service agreements meet the requirements for consolidation under accounting principles generally accepted in the United States of America. Specifically, the Company does not have an equity ownership interest in any of the practices managed under any service agreement. Furthermore, the Company’s service agreements specifically do not give the Company “control” as described in EITF No. 97-2, “Application of FASB Statement No. 94 and APB Opinion No. 16 to Physician Practice Management Entities and Certain Other Entities with Contractual Management Arrangements” which would be required for the Company to consolidate the managed practices based upon such service agreements. As discussed below related to consolidated subsidiaries that are less than 100% owned, we have adopted the provisions of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51,” effective January 1, 2009. The presentation of the noncontrolling interests in the financial statements for all periods in this Form 8-K have been revised in accordance with this pronouncement.

Reclassifications

Certain previously reported financial information has been reclassified to conform to the current presentation. Such reclassifications did not materially affect the Company’s financial condition, net income or cash flows. In the December 31, 2007 balances, $22.9 million was reclassified from Other Receivables to Accounts Receivable on the Company’s consolidated balance sheet related to amounts due from manufacturers and sponsors for research studies.

Use of estimates

The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities.

Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates. Among the factors that may be considered by management in these processes include: choosing a particular accounting principle from a range of accounting principles permitted by GAAP, expected rates of business and operational change, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in the selection of estimates which could be viewed as conservative or aggressive—based upon the quantity, quality and risks relating to the estimate, possible variability that might be expected in the actual outcome and the factors considered in developing the estimate. Because of inherent uncertainties in this process, actual future amounts will differ from those estimated amounts used in the preparation of the financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Revenues

The Company derives revenue primarily in four areas:

• GPO, data and other pharmaceutical service revenues. The Company receives fees from pharmaceutical companies for acting as a distributor, as a group purchasing organization (“GPO”) for its affiliated practices, and for providing informational and other services to pharmaceutical companies. GPO fees are typically based upon the volume of drugs purchased by the practices. Fees for other services include amounts paid for data the Company collects, compiles and analyzes, as well as fees for other services provided to pharmaceutical companies, including reimbursement support.

• Clinical research revenues. The Company receives fees for clinical research services from pharmaceutical and biotechnology companies. These fees are separately negotiated for each study and typically include a management fee, per patient accrual fees and fees for achieving various study milestones.

• Oncology pharmaceutical service revenues. Under the Company’s OPS agreements, the Company bills practices for services rendered. These revenues include payment for the pharmaceutical agents used by the practice for which the Company must pay the pharmaceutical manufacturers and a service fee for the pharmacy-related services provided by the Company.

• Comprehensive service revenues. Under the comprehensive services agreement (“CSA”) model, the Company recognizes revenues equal to the reimbursement it receives for all expenses it incurs in connection with managing a practice plus an additional management fee based upon a percentage of the practice’s earnings before income taxes, subject to certain adjustments.

GPO, data and other service revenues

The Company receives group purchasing organization (“GPO”) fees for providing services to pharmaceutical manufacturers and other suppliers. The Company recognizes revenue for GPO fees as it performs the services. GPO fees are distinct from discounts and rebates in that they are not passed back to affiliated practices and are paid to the Company for identifiable services provided to the drug supplier rather than in respect of drug purchases. The Company also provides suppliers with, among other things, data relating to, and analysis of, pharmaceutical use by affiliated practices, access to electronic order entry software from its pharmacy locations and physician practice sites, contract management services and other informational services.

Clinical research revenues

Research revenue is derived from services provided to pharmaceutical companies and other trial sponsors and includes the initial activity to begin the research trial, patient enrollment and completion of the treatment cycle. Revenue is recognized as the Company performs its obligations related to such research. On occasion, the Company receives an upfront fee for administrative services necessary to perform the research trial. These amounts are deferred and recognized over the duration of the trial as services are rendered.

Oncology pharmaceutical services revenues

Under its OPS arrangements, the Company recognizes revenue as drugs are accepted by the affiliated practices. The Company recognizes revenue based upon the cost of pharmaceuticals purchased by the affiliated practice plus a fee for pharmaceutical services. Such amounts are recorded as product revenues and the related costs are included as cost of products. The Company recognizes revenue for admixture services as those services are performed.

Comprehensive service revenues

For both product and service revenues under the CSA model, the Company recognizes revenue when the fees are earned and are deemed realizable based upon the contractual amount of such fees. Product revenues are recognized as drugs are dispensed by affiliated physician practices. Service fee revenues are recognized when the fees are deemed determinable

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

and realizable, which is typically at the time these services are provided. Revenue is based upon established or negotiated rates, net of contractual adjustments, allowances for doubtful accounts and amounts to be retained by affiliated practices.

On a monthly basis, under the CSA model, fees are paid to the Company and adjustments are made to its fees to reconcile prior estimates to actual amounts. Adjustments are recognized as increases or reductions in revenue in the period they become known. Such reconciliation would also occur upon termination of a contract. Historically, the effect of these adjustments has not been material.

Under the CSA model, the revenue recognized includes specific reimbursements related to practice operations and an additional fee based upon practice performance. In recognizing revenue, the Company takes into consideration the priority of payments relating to amounts retained by practices. The Company does not recognize revenue to the extent funds are unavailable to pay such fees as a result of such priority of payments.

Approximately 80.9% of the Company’s 2008 revenue was derived from practices under earnings model service agreements. Under this model, the Company receives a service fee that includes an amount equal to the direct expenses associated with operating the practice plus an amount that is calculated based on the service agreement for each of the practices. The direct expenses include rent, depreciation, amortization, provision for uncollectible accounts, pharmaceutical expenses, medical supply expenses, interest, and salaries and benefits of non-physician employees who support the practices. The direct expenses do not include salaries and benefits of physicians. The non-expense reimbursement related portion of the service fee is a percentage, ranging from approximately 15% to 30%, of the earnings before income taxes of the affiliated practice subject to certain adjustments relating to practice efficiency in the deployment of capital and use of its pharmaceuticals distribution function. The earnings of an affiliated practice are determined by subtracting direct expenses from revenues.

A portion of the Company’s revenue under its comprehensive service arrangements and its revenue with OPS affiliated practices is derived from sales of pharmaceutical products and is reported as product revenues. The Company’s remaining revenues under its comprehensive service arrangements and its revenues from GPO fees, data fees and research fees are reported as service revenues. Physician practices that enter into comprehensive service agreements with the Company receive pharmaceutical products and a broad range of services. These products and services represent multiple deliverables rendered under a single contract, with a single fee. The Company has analyzed the component of the contract attributable to the provision of products (pharmaceuticals) and the component of the contract attributable to the provision of services and attributed fair value to each component. For revenue recognition purposes, the product revenues and service revenues have each been accounted for separately under the guidance in EITF No. 00-21, “Revenue Arrangements with Multiple Deliverables.”

In a minority of the Company’s comprehensive services arrangements, if the affiliated practice were to incur losses prior to the payment of any physician compensation during a quarter, the Company would be required to bear a portion of those losses up to the amount of the performance-based portion of the fee recognized in previous quarters during the year. This reduction would be reported as a reduction in fees from that practice in the quarter during which such losses were incurred. Historically, such reductions have not been material.

Product Revenues

Product revenues consist of sales of pharmaceuticals to practices in connection with the CSA and OPS models. Under all of its arrangements with affiliated practices, the Company furnishes the practice with pharmaceuticals and supplies. In certain cases, the Company takes legal title to the pharmaceuticals and resells them to practices. In other cases, title to the pharmaceuticals passes directly from the supplier to the practices under arrangements negotiated and managed by the Company pursuant to its service agreements with practices. The Company has analyzed its contracts with physician practices and suppliers of pharmaceutical products purchased pursuant to its arrangements with affiliated practices and determined that, in all cases, it acts as a principal within the meaning of EITF Issue No. 99-19, “Reporting Gross Revenue as a Principal vs. Net as an Agent.” For this reason, the Company recognizes the gross amounts from pharmaceuticals as revenue because the Company (i) has separate contractual relationships with affiliated practices and with suppliers of pharmaceutical products under which it is the primary obligor, and has discretion to select those suppliers (ii) is physically responsible for managing, ordering and processing the pharmaceuticals until they are used by affiliated practices, (iii) bears the carrying cost and maintains the equipment, staff and facilities used to manage the inventory of pharmaceuticals, (iv) manages the overall pharmaceutical program, including management of admixture and implementation of programs to minimize waste, enhance charge capture, and otherwise increase the efficiency of the operations of affiliated practices, and (v) bears credit risk for the amounts due from affiliated practices.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Because the Company acts as principal, revenues are recognized as the cost of the pharmaceutical product (which is reimbursed to the Company pursuant to all of its contractual arrangements with physician practices) plus an additional amount. Under the OPS model, this additional amount is the actual amount charged to practices as such services are directly related to and not separable from the delivery of the products. Under the CSA model, the contracts do not provide for a separate fee for supplying pharmaceuticals other than reimbursement of the cost of pharmaceuticals. Accordingly, the additional amount included in product revenue reflects the Company’s estimate of the portion of its service fee that represents fair value of product sales. The portion of the service fee allocated to product revenue is based upon the terms upon which the Company offers pharmaceuticals under its OPS model. The Company provides the same services related to delivery and management of pharmaceutical products under its comprehensive service agreements as under its OPS model agreements. Accordingly, the Company believes this allocation is appropriate. Discounts and rebates are deducted from product revenues and costs.

Service Revenues

Under the Company’s CSA model, service fees are recognized and paid on a monthly basis pursuant to contractual terms. The Company’s fees are calculated based upon (i) reimbursement of costs incurred by the Company on the affiliated practice’s behalf in accordance with the contract terms plus (ii) an additional amount based on performance of the practice that is generally a percentage of earnings before income taxes and physician compensation of the practice for the month. Certain expenses and other allowances included in the calculation of fees are based upon estimates made by the Company. The Company may make certain changes in these estimates in subsequent periods to reflect subsequent events or circumstances. Historically, these changes in estimates have not been material. Upon termination of an agreement, fees recognized through the date of termination would not be refundable by the Company, other than as a result of such insignificant adjustments as of the date of termination.

Concentration of Revenue

Changes in payer reimbursement rates, particularly Medicare and Medicaid, or in affiliated practices’ payer mix could materially and adversely affect the Company’s revenues. Governmental programs, such as Medicare and Medicaid, are collectively the affiliated practices’ largest payers. For the years ended December 31, 2008, 2007 and 2006, the affiliated practices derived approximately 38.2%, 37.8%, and 37.8%, respectively, of their net patient revenue from services provided under the Medicare program (of which 5.5%, 3.8%, and 3.0%, respectively, relates to Medicare managed care programs) and approximately 3.3%, 3.0%, and 3.1%, respectively of their net patient revenue from services provided under state Medicaid programs. During the years ended December 31, 2008, 2007 and 2006, capitation revenues were less than 1% of total net patient revenue. The Company has one additional commercial payer that represented more than 10% of net revenues in 2006. That payer represented 11% of net revenues in 2006, and less than 10% in 2008 and 2007.

On July 30, 2007, CMS issued a national coverage decision (“NCD”) establishing criteria for reimbursement by Medicare for ESA usage which led to a significant decline in utilization of these drugs by oncologists, including those affiliated with US Oncology. Because the NCD relates to specific clinical determinations in connection with administration of ESAs and the Company does not make clinical decisions for affiliated physicians, analysis of the financial impact of the NCD is a complex process and continues to be closely monitored. The NCD has resulted in a significant decline in the use of ESAs by oncologists, including those affiliated with the Company. A significant decline in ESA usage has had a significant adverse affect on the Company’s results of operations, and, particularly, its Medical Oncology Services and Pharmaceutical Services segments.

In addition, the Oncology Drug Advisory Committee of the FDA (“ODAC”) met on March 13, 2008, to further consider the use of ESAs in oncology. Based upon the ODAC findings, on July 30, 2008, FDA published a final new label for the ESA drugs Aranesp and Procrit. Unlike the NCD from CMS, which governs reimbursement, rather than prescribing, for Medicare beneficiaries only, the label indication directs appropriate physician prescribing and applies to all patients and payers.

FDA also mandated that a Risk Evaluation and Mitigation Strategy (“REMS”) with respect to ESAs be adopted. A REMS proposal by manufacturers was filed with the FDA in late August, 2008. The REMS will focus on future ESA prescribing and is projected to require additional patient consent/education requirements, medical guides and physician registration procedures. The

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

length of time required for the FDA to approve the REMS and for the manufacturers to implement the new program is uncertain, however we believe it may be released during the first quarter of 2009. Once implemented, the REMS will outline additional, if any, procedural steps that will be required for qualified physicians to order and prescribe ESAs for their patients. It is not possible to estimate the impact of the REMS on the financial results of the Company as it relates to prescribing patterns, until the REMS is in effect (expected to be sometime in 2009). We believe a possible impact of the REMS could be further reductions in ESA utilization.

Operating income attributable to ESAs administered by our network of affiliated physicians was $32.1 million, $58.0 million and $49.2 million in 2008, 2007 and 2006, respectively. The operating income reflects results from our Medical Oncology Services segment which relate primarily to the administration of ESAs by practices receiving comprehensive management services and from our Pharmaceutical Services segment which includes purchases by physicians affiliated under the OPS model, as well as distribution and group purchasing fees received from manufacturers. As the NCD was effective July 30, 2007, the impact of reduced ESA utilization was not fully reflected in the results for the last half of 2007. In addition, there was a net increase in ESA pricing, the impact of which is included in the 2008 financial results.

The Company’s only service agreement that represents more than 10% of revenue is with Texas Oncology, P.A. (“Texas Oncology”). Texas Oncology accounted for approximately 25% of revenue for the years ended December 31, 2008, 2007 and 2006. Set forth below is selected, unaudited financial and statistical information for Texas Oncology (in thousands):

	Year ended December 31,
	2008		2007		2006
Net revenue	$	1,021,430	$	977,959	$	924,131
Service fees paid to the Company:
Reimbursement of expenses		744,951		715,521		666,049
Earnings component		33,446		63,646		64,062
Net operating revenue		778,397		779,167		730,111
Amounts retained by Texas Oncology	$	243,033	$	198,792	$	194,020
Physicians associated with Texas Oncology at end of period		299		277		257
Cancer centers utilized by Texas Oncology at end of period		37		38		38

The Company’s operating margin for the Texas Oncology service agreement was 5.2%, 8.2%, and 8.8% for the years ended December 31, 2008, 2007 and 2006. Operating margin is computed by dividing the earnings component of the service fee by the total service fee.

Cost of Products

Cost of products includes the cost of pharmaceuticals, personnel costs for pharmacy staff, shipping and handling fees and other related costs. Cost of products is net of rebates earned from pharmaceutical manufacturers and cash discounts, if any. Rebates receivable from pharmaceutical manufacturers are accrued in the period earned by multiplying rebate eligible drug purchases of affiliated practices by the estimated contractually agreed manufacturer rebate amount. Rebate estimates are revised to actual, with the difference recorded to cost of products, upon billing to the manufacturer, generally within 30 days subsequent to the end of the applicable quarter, based upon usage data. The effect of adjustments to estimates, resulting from the reconciliation of rebates recorded to actual amounts billed has not historically been material to the Company’s results of operations. Cash discounts for prompt payments to manufacturers are recognized as a reduction to cost of products when payment for the related pharmaceutical purchases are made. The cost of pharmaceutical drugs in inventory is reduced for estimated rebates.

Cost of Services

Cost of services consists principally of personnel costs, lease costs or depreciation for real estate and equipment used in providing the service and other operating costs.

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other Income (Expense)

Other income (expense) for the year ended December 31, 2008 includes a $1.4 million gain on the sale of an investment in a tissue banking company and $0.8 million gain on the sale of undeveloped property.

Cash and Cash equivalents

The Company considers all highly liquid securities with original maturities of three months or less to be cash equivalents.

Accounts receivable

Reimbursements relating to healthcare accounts receivable, particularly governmental receivables, are complex, change frequently and could in the future adversely impact the Company’s ability to collect accounts receivable and the accuracy of its estimates.

To the extent the Company is legally permitted to do so, the Company purchases accounts receivable generated by treating patients from its CSA practices. The Company purchases these receivables at their estimated net realizable value, which in management’s judgment is the amount that it expects to collect, taking into account contractual agreements that reduce gross fees billed and allowances for accounts that may otherwise be uncollectible. For accounts receivable that the Company is not legally permitted to purchase (generally receivables from government payers), the Company lends an amount equal to the net realizable value of such receivables to the practice, secured by the applicable receivable and payable from proceeds of collecting such receivables. Whether receivables are purchased or funds are advanced in the form of a loan, such amounts appear on the balance sheet as accounts receivable. If the Company determines that accounts are uncollectible after purchasing them from a practice, its contracts require the practice to reimburse the Company for the additional uncollectible amount. Such reimbursement reduces the practice’s earnings for the applicable period. Because the Company’s management fees are partly based upon practice earnings, this adjustment would also reduce its service fees. Typically, the impact of adjustments such as these on the Company’s fees is not significant.

The Company maintains decentralized billing systems, which vary by individual practice. The Company evaluates the realizability of receivables and records appropriate reserves, based upon the risks of collection inherent in such a structure. In the event subsequent collections are higher or lower than the Company’s estimates, results of operations in subsequent periods could be either positively or negatively impacted as a result of prior estimates. This risk is particularly relevant for periods in which there is a significant shift in reimbursement from large payers.

The Company’s accounts receivable are a function of net patient revenue of the affiliated practices rather than the Company’s revenue. Receivables from the Medicare and state Medicaid programs accounted for approximately 45.6% and 43.7% of the Company’s gross trade receivables for the year ended December 31, 2008 and 2007, respectively, and are considered to have minimal credit risk. No other payer accounted for more than 10.0% of accounts receivable for the years ended December 31, 2008 or 2007.

Accounts receivable also include amounts due from practices affiliated under the OPS model which relate primarily to their purchases of pharmaceuticals. Unlike practices affiliated through the CSA model, the Company does not maintain billing and collection systems for practices affiliated under the OPS model and its collection of receivables from OPS customers is subject to their willingness and ability to pay for products and services delivered by the Company. Payment terms for OPS customers vary, ranging from daily debit to 45 days from the date products and services are delivered. Where appropriate, the Company seeks to obtain personal guarantees from affiliated physicians to support the collectability of these receivables. The Company provides an allowance for uncollectible amounts based upon both an estimate for specifically-identified doubtful accounts and an estimate based on an evaluation of the aging of receivable balances.

Other receivables

Other receivables consist of amounts due from pharmaceutical manufacturers and other miscellaneous receivables. Rebates are accrued based upon internally monitored usage data and expectations of usage during the measurement period for which rebates are accrued. Rebate estimates accrued prior to invoicing manufacturers (which generally occurs 10-30 days after the end of the measurement period) are revised to reflect actual usage data for the measurement period invoiced. For certain agreements, the Company records market share rebates at the time it invoices the manufacturer, as information necessary to reliably assess whether such amounts will be earned is not available until that time. Billings are subject to review, and possible adjustment, by the manufacturer. Adjustments to estimates of rebates earned, based on manufacturers’ review of the billings, have not been material to the Company’s financial position or results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At December 31, 2007, other receivables include amounts due from one manufacturer that represent nearly 90%, or $86.5 million, of the Company’s other receivables. Effective October 7, 2008, this manufacturer converted a substantial portion of rebates to discounts which impact cash flow upon invoicing from the manufacturer. At December 31, 2008, this manufacturer balance decreased by $74.6 million, from December 31, 2007, as a result.

Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of prepaid expenses, such as insurance, and certain other assets expected to be realized within one year.

Inventories

Inventories consist of pharmaceutical drugs and are stated at the lower of cost, using the average cost method, or market. Inventory quantities are determined from physical counts.

Due from and to affiliates

The Company has advanced to certain of its practices amounts needed for working capital purposes, primarily to purchase pharmaceuticals. In addition, from time to time the Company advances funds to assist with the development of new markets, to support the addition of physicians, and support the development of new services. Depending on the terms of specific transactions, certain advances bear interest at a market rate which may be based on either the prime interest rate or at the Company’s average cost of capital. These advances are unsecured and are repaid in accordance with the terms of the agreement evidencing the advance.

Amounts due from affiliates are reviewed when events or changes in circumstances indicate their recorded amount may not be recoverable. If the review indicates that the anticipated recoverable amount is less than the carrying value, the Company’s carrying value of the asset is reduced accordingly.

Amounts due to affiliates represent amounts to be retained by affiliated practices under comprehensive service agreements.

Property and equipment

Property and equipment is stated at cost. Depreciation of property and equipment is provided using the straight-line method over the estimated useful lives of (i) three to ten years for computers and software, clinical equipment, and furniture and fixtures, (ii) the lesser of ten years or the remaining lease term for leasehold improvements and (iii) twenty-five years for buildings. These lives reflect management’s best estimate of the respective assets’ useful lives, and subsequent changes in operating plans or technology could result in future impairment charges to these assets. Interest costs incurred during the construction of major capital additions, primarily cancer centers, are capitalized.

Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the capitalized cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the Consolidated Statements of Operations and Comprehensive Income.

Service agreements, net

Service agreements represent the consideration paid for the Company’s rights to manage practices. Consideration paid may include the assumption of certain liabilities, the estimated value of nonforfeitable commitments by the Company to issue common stock at specified future dates for no additional consideration, short-term and subordinated notes, cash payments and related transaction costs.

During the initial terms of the agreements, the affiliated practices have agreed to provide medical services on an exclusive basis only through facilities managed by the Company. The agreements are noncancelable except for performance defaults. The Company amortizes these costs on a straight-line basis over the lesser of the term of each agreement or 20 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Should these agreements be terminated prior to their full amortization, the Company may experience a charge to its operating results for the unamortized portion of the service agreement intangible assets. Under the service agreements, the Company is the exclusive provider of certain services to its affiliated practices which include providing facilities, management information systems, clinical research services, personnel management and strategic, financial and administrative services. Specifically, the Company, among other things, (i) develops, constructs and manages free-standing cancer centers which provide for treatment areas and equipment for medical oncology, radiation therapy and diagnostic radiology, (ii) expands diagnostic capabilities of practices through installation and management of PET technology, (iii) coordinates and manages cancer drug research for pharmaceutical and biotechnology companies, (iv) purchases and manages the inventory of cancer-related drugs for affiliated practices, and (v) provides management and capital resources to affiliated practices including data management, accounting, compliance and other administrative services.

Each service agreement provides for the formation of a policy board for each practice. The policy board meets periodically, approves those items having a significant impact on the affiliated practice and develops the practice’s strategic initiatives. Two significant items reviewed and approved by the policy board are the annual budget for the practice and the addition of facilities, services or physicians. Each service agreement provides a mechanism to adjust the Company’s service fee, if a change in law modifies the underlying financial arrangement between the Company and the affiliated practice.

Impairment of Property and Equipment and Service Agreements, net

Property and equipment that is intended to be held and used by the Company and service agreement intangible assets are reviewed to determine whether any events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If factors exist that indicate the carrying amount of the asset may not be recoverable, the Company determines whether an impairment has occurred through the use of an undiscounted cash flow analysis and, if necessary, recognizes a loss for the difference between the carrying amount and the fair value of the asset. Impairment analysis is subjective and assumptions regarding future growth rates and operating expense levels can have a significant impact on the expected future cash flows and impairment analysis (see Note 6).

Goodwill

The Company tests for the impairment of goodwill on at least an annual basis. The Company’s goodwill impairment test involves a comparison of the fair value of each operating segment with its carrying amount. The Company considers its operating segments to which goodwill has been allocated, Medical Oncology Services, Cancer Center Services and Pharmaceutical Services, to be the reporting units subject to impairment review. With the assistance of a third party valuation firm, fair value is estimated using discounted cash flows and other market-related valuation models, including earnings multiples and comparable asset market values. If the fair value is less than the carrying value, goodwill is considered impaired (see Note 5).

Other assets

Other assets consist primarily of deferred debt financing costs, which are capitalized and amortized over the terms of the related debt agreements, investments in unconsolidated subsidiaries, an intangible asset relating to customer relationships, acquired as part of the AccessMed purchase in 2006, and a receivable from a former affiliated practice (see Notes 5 and 10).

Income taxes

US Oncology, Inc. and subsidiaries are included in the consolidated tax return of its parent, US Oncology Holdings, Inc., and accounts for income taxes based on the “separate return” method. This method provides that current and deferred taxes are accounted for as if US Oncology were a separate taxpayer. Any differences between the tax provision (or benefit) allocated to US Oncology under the separate return method and payments to be made to (or received from) Holdings for tax expense is treated as either dividends or capital contributions. As such, the amount by which US Oncology’s tax liability as stated under the separate return method exceeds the amount of tax liability ultimately settled due to utilizing incremental expenses of the parent, is periodically settled as a capital contribution from Holdings to US Oncology.

The Company reports its consolidated results of operations for federal and state income tax purposes. For operations subject to income taxes, the Company uses the liability method of accounting for taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted marginal tax rates and laws that will be in effect when such differences reverse. Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109” (“FIN 48”) which clarifies the accounting for uncertainty in income taxes recognized (see Note 9 - Income Taxes).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock-based compensation

For all awards issued after January 1, 2006, compensation expense is recognized in the Company’s financial statements over the requisite service period, usually the vesting period, net of estimated forfeitures, based on the fair value as of the grant date. No compensation expense is recognized for options awarded prior to January 1, 2006, unless these awards are subsequently modified. The Company applies the Black-Scholes method to value option awards granted. Because the Company does not have publicly-traded equity, it has developed a volatility assumption to be used for option valuation based upon an index of publicly-traded peer companies.

Fair value of financial instruments

The Company’s receivables, payables, prepaids and accrued liabilities are current assets and obligations on normal terms and, accordingly, the recorded values are believed by management to approximate fair value. The fair value of indebtedness differs from its carrying value based on current market interest rate conditions as evidenced by market transactions (see Note 7). In September, 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company has partially applied, as permitted, the provisions of the statement to its disclosures related to assets and liabilities which are measured at fair value on a recurring basis (at least annually). As a result, SFAS No. 157 currently applies only to the Company’s interest rate swap liability (see Note 4).

Comprehensive income (loss)

Comprehensive income (loss) includes net income (loss) and all other non-owner changes in stockholders’ equity during a period including unrealized fair value adjustments on certain derivative instruments. For the years ended December 31, 2008, 2007 and 2006, the Company had recorded other comprehensive income, net of tax, for unrealized gains (losses) related to interest rate swaps designated as cash flow hedges, totaling $1.5 million, $(2.5) million and $39 thousand, respectively.

Recent Accounting Pronouncements

In September, 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Statement does not require new fair value measurements, however for some entities, the application of this Statement changed current practice. In developing this standard, the FASB considered the need for increased consistency and comparability in fair value measurements and for expanded disclosures about fair value measurements. Effective January 1, 2008, the Company partially adopted SFAS No. 157 as allowed by the FASB issued Staff Position No. 157-2 (“FSP 157-2”), which defers the effective date of SFAS No. 157 for one year for certain non-financial assets and liabilities. Due to the Company’s election under FSP 157-2, the Company has applied the provisions of the statement to financial assets and liabilities which are measured at fair value on a recurring basis (at least annually), which for the Company is limited to its interest rate swap. Partial adoption of the standard did not have a material impact on the Company’s consolidated results of operations or financial condition (see Note 4). The provisions of SFAS No. 157 related to other non-financial assets and liabilities, specifically the Company’s management service agreements and goodwill assets and its fixed-rate long-term liabilities, was effective for the Company on January 1, 2009, and will be applied prospectively. The Company is currently evaluating the impact that these additional SFAS 157 provisions will have on the Company’s consolidated financial statements.

In February, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS No. 159 permits an entity to choose, at specified election dates, to measure eligible financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 was effective beginning January 1, 2008. The Company did not apply the fair value election under SFAS No. 159 and, therefore, the statement did not have an impact on the Company’s consolidated financial statements.

In June, 2007, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues Task Force Issue (“EITF”) No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (“EITF 06-11”). EITF 06-11 requires companies to recognize a realized income tax benefit associated with dividends or dividend equivalents paid on nonvested equity-classified employee share-based payment awards that are charged to retained earnings as an increase to additional paid-in capital. EITF 06-11 was effective beginning January 1, 2008 and was adopted prospectively by the Company as of January 1, 2008 with no material impact on the Company’s consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In December, 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,” (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements identifiable assets acquired, liabilities assumed, any non-controlling interest in an acquiree and the resulting goodwill. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. This statement is effective for annual reporting periods beginning after December 15, 2008. SFAS 141R is to be applied prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The Company expects SFAS 141R will have an impact on the Company’s accounting for future business combinations once adopted, however the effect is dependent upon acquisitions which may occur in the future.

In December, 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51,” which establishes new standards governing the accounting for and reporting of non-controlling interests (NCIs) in partially-owned subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, rather than a liability; that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions, rather than as step acquisitions or dilution gains or losses; and that losses of a partially-owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also requires changes to certain presentation and disclosure requirements. SFAS No. 160 is effective for annual reporting periods beginning after December 15, 2008. The provisions of the standard were applied to all NCIs prospectively, except for the presentation and disclosure requirements, which were applied retrospectively to all periods presented and have been disclosed as such in the Company’s consolidated financial statements contained herein.

In March, 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities – An Amendment of SFAS No. 133” (“SFAS 161”). SFAS 161 seeks to improve financial reporting for derivative instruments and hedging activities by requiring enhanced disclosures regarding the impact on financial position, financial performance, and cash flows. SFAS 161 is effective for the Company on January 1, 2009. The Company is currently in the process of evaluating the new disclosure requirements under SFAS 161 and does not expect it to have a material impact to the Company’s consolidated financial statements.

In April, 2008, the FASB issued Staff Position No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”). This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under other U.S. generally accepted accounting principles. FSP 142-3 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. These disclosure requirements will be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. The Company is in the process of evaluating the impact of FSP 142-3 particularly as it relates to any future service agreements (see Note 5 regarding intangible assets currently held by the Company). The adoption of FSP 142-3 is not expected to have a material impact on the Company’s consolidated financial statements.

In May, 2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (“GAAP”) for nongovernmental entities. Any effect of applying the provisions of SFAS 162 is to be reported as a change in accounting principle in accordance with FASB Statement No. 154, Accounting Changes and Error Corrections. SFAS 162 was effective November 15, 2008, and was adopted without impact on the Company’s consolidated financial statements.

In October, 2008, the FASB issued Staff Position No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP 157-3”). This FSP clarifies the application of SFAS 157 in determining the fair values of assets or liabilities in a market that is not active. This staff position became effective upon issuance, including prior periods for which financial statements have not been issued. The Company has adopted this FSP without material impact to the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 3—PROPERTY AND EQUIPMENT

As of December 31, 2008 and 2007, the Company’s property and equipment consisted of the following (in thousands):

	December 31,
	2008			2007
Land	$	38,084		$	39,028
Buildings and leasehold improvements		234,102			223,649
Clinical equipment and furniture		386,803			322,168
Construction in progress		50,155			38,665
		709,144			623,510
Less accumulated depreciation and amortization		(298,896	)		(223,889	)
	$	410,248		$	399,621

Amounts recorded as construction in progress at December 31, 2008 and 2007 primarily relate to construction costs incurred in the development of cancer centers for the Company’s affiliated practices. Interest costs incurred during the construction of major capital additions, primarily cancer centers, is capitalized. Capitalized interest for the years ended December 31, 2008, 2007 and 2006 was $1.1 million, $1.0 million, and $0.9 million, respectively.

Depreciation expense for the years ended December 31, 2008, 2007 and 2006 was $81.8 million, $74.1 million, and $68.5 million, respectively.

NOTE 4—FAIR VALUE MEASUREMENTS

In September, 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Effective January 1, 2008, the Company partially adopted SFAS No. 157 as allowed by the FASB-issued Staff Position No. 157-2 (“FSP 157-2”), which defers the effective date of SFAS No. 157 for one year for certain non-financial assets and liabilities. Due to the Company’s election under FSP 157-2, the Company has applied the provisions of the statement to its disclosures related to financial assets and liabilities which are measured at fair value on a recurring basis (at least annually). As a result, SFAS No. 157 currently applies only to the Company’s interest rate swap liability.

SFAS No. 157 requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly through market-corroborated inputs. Level 3 inputs are unobservable inputs for the asset or liability reflecting our assumptions about pricing by market participants. The Company classifies assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s methodology for categorizing assets and liabilities that are measured at fair value pursuant to this hierarchy gives the highest priority to unadjusted quoted prices in active markets and the lowest level to unobservable inputs.

Liabilities consist of the Company’s interest rate swap, only, which is valued using models based on readily observable market parameters for all substantial terms of the derivative contract and, therefore, is classified as Level 2. Under the interest rate swap the Company pays a fixed rate of 4.97% and receives a floating rate based on the six-month LIBOR on a notional amount of $425.0 million. The floating rate is set at the start of each semi-annual interest period with the final interest settlement date on March 15, 2012. The fair value of the interest rate swap is estimated based upon the expected future cash settlements, as reported by the counterparty, using observable market information. The most significant factors in estimating the value of the interest rate swap is the assumption made regarding the future interest rates that will be used to establish the variable rate payments to be received by the Company and the discount rate used to determine the present value of those estimated future payments. The Company considers both counterparty credit risk and its own credit risk when estimating the fair market value of the interest rate swap. Because of negative differential between the current (and projected) LIBOR rate and the fixed interest rate paid by the Company, as well as the counterparty’s credit rating, counterparty credit risk

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

is assessed to be minimal and did not impact the fair value of the interest rate swap. The Company also assesses its own credit risk in the valuation of its obligation under the interest rate swap using Company-specific market information. The most significant market information considered was the credit spread between the Holdings Notes, an instrument with a similar credit profile and term as the interest rate swap, and the like term treasury spread (as an estimate of a risk free rate). As a result of evaluating the Company’s nonperformance risk, the estimated fair value of the interest rate swap was reduced by $10.8 million during the year ended December 31, 2008. An increase in future LIBOR rates of 1.00 percent would increase (in the Company’s favor) the fair value of the of the interest rate swap by $8.8 million and a decrease in future interest rates of 1.00 percent would negatively impact its fair value by the same amount. Because a portion of the Company’s indebtedness, approximately $468.4 million, remains exposed to changes in variable interest rates, movements that favorably impact the fair market value of the interest rate swap will increase the interest expense associated with our indebtedness that remains subject to variable interest rate risk.

The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of December 31, 2008 (in thousands).

	Fair Value as of December 31, 2008			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets	$	—		$	—	$	—		$	—
Liabilities
Other accrued liabilities		(10,537	)		—		(10,537	)		—
Other long-term liabilities		(19,999	)		—		(19,999	)		—
Total	$	(30,536	)	$	—	$	(30,536	)	$	—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 5—INTANGIBLE ASSETS AND GOODWILL

The following table summarizes changes in the Company’s service agreement, customer relationship intangible assets and goodwill from December 31, 2005 to December 31, 2008 (in thousands):

	Service Agreements, net			Customer Relationships, net			Goodwill (1)
Balance at December 31, 2005	$	242,687		$	—		$	716,732
Acquisition of new business		—			4,990			27,451
Adjustment for new basis		—			—			13,687
Practice affiliations and other additions, net		11,740			—			—
Amortization expense		(14,327	)		(250	)		—
Balance at December 31, 2006		240,100			4,740			757,870
Practice affiliations and other additions, net		7,573			—			—
Impairment charges		(9,339	)		—			—
Amortization expense and other		(14,484	)		(498	)		(600	)
Balance at December 31, 2007		223,850			4,242			757,270
Practice affiliations and other additions, net		70,806			—			—
Impairment charges		—			—			(380,000	)
Amortization expense and other		(21,010	)		(499	)		—
Balance at December 31, 2008	$	273,646		$	3,743		$	377,270
Average of straight-line based amortization period in years as of December 31, 2008		14			10			n/a

(1) Changes in goodwill noted in the table above impacted the Company’s reporting segments as follows:

	Medical Oncology Services			Cancer Center Services			Pharmaceutical Services			Total
December 31, 2005	$	409,322		$	177,898		$	129,512		$	716,732
New business acquisition		—			—			27,451			27,451
Adjustment for new basis		—			13,717			(30	)		13,687
December 31, 2006		409,322			191,615			156,933			757,870
Other		(409	)		(191	)		—			(600	)
December 31, 2007		408,913			191,424			156,933			757,270
Impairment charges		(380,000	)		—			—			(380,000	)
December 31, 2008	$	28,913		$	191,424		$	156,933		$	377,270

As of December 31, 2008, goodwill associated with the Medical Oncology Services, Cancer Center Services and Pharmaceutical Services segments was $28.9 million, $191.4 million and $157.0 million, respectively. The carrying values of goodwill and service agreements are subject to impairment tests on at least an annual basis and more frequently if events or circumstances arise that indicate the recorded value of goodwill may not be recoverable. The Company’s practice has been to perform its annual assessment of goodwill for each operating segment during the fourth quarter and to complete the assessment in connection with preparation of its year-end financial statements. The Company considers its operating segments to which goodwill has been allocated, Medical Oncology Services, Cancer Center Services and Pharmaceutical Services, to be the reporting units subject to impairment review. In connection with the preparation of the financial statements for the three months ended March 31, 2008, and as a result of the decline in the financial performance of the medical oncology services segment, the Company assessed the recoverability of goodwill related to that segment. Through strategic initiatives to broaden operations, the Company has become less dependent on its medical oncology segment as a source of earnings since goodwill was initially recorded in connection with the Merger in August 2004. During the year ended December 31, 2007, earnings in the medical oncology segment were negatively impacted by reduced coverage for ESAs as a result of revised product labeling issued by the FDA and coverage restrictions imposed by CMS. As a result of declining earnings, goodwill was tested for impairment during both the three months ended September 30, 2007 and December 31, 2007 and no impairment was identified. During the three months ended March 31, 2008, price increases from manufacturers of ESAs and additional safety concerns related to the use of ESAs continued to result in reduced utilization by affiliated physicians and adversely impact both current and projected operating results for the medical oncology services segment. As a result of these safety concerns, on March 13, 2008, the Oncology Drug Advisory Committee (“ODAC”) met to consider the use of these drugs in oncology

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

and recommended further restrictions. These factors, along with a lower market valuation at March 31, 2008 resulting from unstable credit markets, led the Company to recognize a non-cash goodwill impairment charge in the amount of $380.0 million related to its medical oncology services segment during the three months ended March 31, 2008. The impairment charge is not expected to result in future cash expenditures. Further, the charge is a non-cash item that does not impact the financial covenants of US Oncology’s senior secured credit facility. There were no additional impairments identified through the end of December 31, 2008. However, future adverse changes in actual or anticipated operating results, as well as unfavorable changes in economic factors and market multiples used to estimate the fair value of the Company, could result in future non-cash impairment charges.

When an impairment is identified, an impairment charge is necessary to state the carrying value of goodwill at its implied fair value, based upon a hypothetical purchase price allocation assuming the segment was acquired for its estimated fair value. With the assistance of a third party valuation firm, the fair value of the medical oncology services segment was estimated by considering the segment’s recent and expected financial performance as well as a market analysis of transactions involving comparable entities for which public information is available. Determining the implied fair value of goodwill also requires the identification and valuation of intangible assets that have either increased in value or have been created through the Company’s initiatives and investments since the goodwill was initially recognized. In connection with assessing the impairment charge, the Company identified previously unrecognized intangible assets, as well as increases to the fair value of the recognized management service agreement intangible assets, which amounted to approximately $160 million in the aggregate. Value assigned to these intangible assets reduced the amount attributable to goodwill in a hypothetical purchase price allocation and, consequently, increased the impairment charge necessary to state goodwill at its implied fair value by a like amount. In accordance with GAAP, these increases in the fair value of other intangible assets have not been recorded in the Company’s consolidated balance sheet as of December 31, 2008.

During 2008, additions to service agreements of $70.8 million (consideration of $39.2 in cash, $34.3 million in notes and $0.3 million in equity less $3.0 million accrued in 2007) included affiliation transactions with 75 physicians under contracts with remaining terms between 10 and 20 years. During the year ended December 31, 2007, the Company impaired service agreement intangibles with a carrying value of $9.3 million (see Note 6 “Impairment and Restructuring Charges”). During April, 2006 the Company disaffiliated with a 35 physician net revenue model practice.

Accumulated amortization relating to service agreements was $52.6 million and $33.0 million at December 31, 2008 and 2007, respectively.

NOTE 6—IMPAIRMENT AND RESTRUCTURING CHARGES

During the years ended December 31, 2008 and 2007, the Company recognized impairment and restructuring charges of $384.9 million and $15.1 million, respectively. No impairment and restructuring charges were recognized during the year ended December 31, 2006.

The components of the 2008 and 2007 charges are as follows (in thousands):

	Year Ended December 31,
	2008		2007
Goodwill	$	380,000	$	—
Severance costs		3,891		—
Services agreement, net		—		9,339
Property and equipment, net		—		4,974
Future lease obligations		950		792
Other		88		21
Total	$	384,929	$	15,126

During 2008, the Company recognized restructuring charges of $4.8 million related to employee severance and lease termination fees. Also during 2008, we recognized a $380.0 million impairment charge to goodwill in our medical oncology services segment (see Note 5).

The impairment and restructuring charges of $15.1 million recognized during the year ended December 31, 2007 relate to four markets in which the Company operates. During the three months ended March 31, 2007, we recognized

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

impairment and restructuring charges amounting to $7.4 million. In the large majority of our markets, we believe our strategies of practice consolidation, expansion of services and process improvement continue to be effective. In a minority of our geographic markets, however, specific local factors have prevented effective implementation of our strategies, and practice performance has declined. Specifically, in two markets in which we have affiliated practices, these market-specific conditions resulted in recognizing impairment and restructuring charges.

In the first of these two markets (during the three months ended September 30, 2006), state regulators reversed a prior determination and ruled that, under the state’s certificate of need law, the affiliated practice was required to cease providing radiation therapy services to patients at a newly constructed cancer center. The Company appealed this determination, however, during the three months ended March 31, 2007, efforts had not advanced sufficiently, and, therefore, the resumption of radiation services or other means to recover the investment were not considered likely. Consequently, an impairment charge of $1.6 million was recorded during the three months ended March 31, 2007. During the three months ended March 31, 2008, the Company received a ruling in its appeal, which mandated a rehearing by the state agency. The state agency conducted a rehearing and issued a new ruling upholding the practice’s right to provide radiation services. That decision was appealed, and the appellants also sought a stay of the state’s decision. The request for a stay was denied in July 2008 while the appeal is still pending. As a result, the practice resumed diagnostic services in September, 2008 and radiation services in February, 2009.

In the second market, financial performance deteriorated as a result of an excessive cost structure relative to practice revenue. During the three months ended March 31, 2007, the Company recorded impairment and restructuring charges of $5.8 million because, based on anticipated operating results, it did not expect that practice performance would be sufficient to recover the value of certain assets and the intangible asset associated with the management service agreement. Along with the affiliated practice, the Company has restructured the market to establish a base for future growth and to otherwise improve financial performance.

During the year ended December 31, 2007, we agreed to terminate comprehensive service agreements with two practices previously affiliated with us and to instead contract with them under our OPS model. We recognized impairment and restructuring charges of $7.7 million related to these practices, which relate primarily to a $5.0 million write-off of our service agreement intangible assets, where the comprehensive service agreement was terminated in connection with the conversions. Also included in the impairment charge is $2.5 million related to assets operated by the practices, which represents the excess of our carrying value over the acquisition price paid by the practices.

NOTE 7—INDEBTEDNESS

As of December 31, 2008 and 2007, the Company’s long-term indebtedness consisted of the following (in thousands):

	December 31,
	2008			2007
US Oncology, Inc.
Senior Secured Credit Facility	$	436,666		$	471,602
9.0% Senior Notes, due 2012		300,000			300,000
10.75% Senior Subordinated Notes, due 2014		275,000			275,000
9.625% Senior Subordinated Notes, due 2012		3,000			3,000
Subordinated notes		34,956			1,606
Mortgages and capital lease obligations		22,188			18,974
		1,071,810			1,070,182
Less current maturities		(10,677	)		(38,613	)
	$	1,061,133		$	1,031,569
US Oncology Holdings, Inc.
Senior Floating Rate PIK Toggle Notes, due 2012		456,751			425,000
	$	1,517,884		$	1,456,569

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Scheduled maturities of indebtedness for the next five years are as follows (in thousands):

	2009		2010		2011		2012		2013		Thereafter
US Oncology payments due	$	10,677	$	229,521	$	224,158	$	308,308	$	8,407	$	290,739
Holdings payments due		—		—		—		456,751		—		—

Summarized below are the principal terms of the agreements that govern the Company’s outstanding indebtedness.

Senior Secured Credit Facility

The senior secured credit facility provides for senior secured financing of up to $660.0 million. The facility consists of:

• a $160.0 million revolving credit facility, including a letter of credit sub-facility and a swingline loan sub-facility that will terminate on August 20, 2010. At December 31, 2008 and 2007, no amounts had been borrowed under the revolving credit facility. As of December 31, 2008, outstanding letters of credit amounting to $23.3 million reduced the balance available for borrowing to $136.7 million (further limited to approximately $130 million due to leverage ratio requirements under financial covenants as of December 31, 2008), and

• a $500.0 million term loan facility with a final maturity date in August, 2011 (quarterly payments of approximately $110 million due beginning in September, 2010) which has been drawn in full. The amount outstanding under the term loan amounted to $436.7 million as of December 31, 2008. No additional amounts may be borrowed under the term loan facility without future amendment to the facility.

The interest rates applicable to loans, other than swingline loans, under the senior secured credit facility are, at the Company’s option, equal to either an alternate base rate or an adjusted LIBOR for a one, two, three or six month interest period chosen by the Company (or a nine or 12 month period if all lenders agree to make an interest period of such duration available) in each case, plus an applicable margin percentage. Based on the six-month LIBOR at December 31, 2008, borrowings under the revolving credit facility have an effective interest rate of 4.5%. Swingline loans bear interest at the interest rate applicable to alternate base rate revolving loans.

As of December 31, 2008, the alternate base rate is the greater of (i) the prime rate or (ii) one-half of 1% over the weighted average of the rates on overnight Federal funds transactions as published by the Federal Reserve Bank of New York. The adjusted LIBOR is based upon offered rates in the London interbank market. Currently, the applicable margin percentage is a percentage per annum equal to (i) 1.75% for alternate base rate term loans, (ii) 2.75% for adjusted LIBOR term loans, (iii) 1.75% for alternate base rate revolving loans and (iv) 2.75% for adjusted LIBOR revolving loans. The applicable margin percentage under the revolving credit facility and term loan facility are subject to adjustment based upon the ratio of the Company’s total indebtedness to the Company’s consolidated EBITDA (as defined in the credit agreement). For the years ended December 31, 2008, 2007 and 2006 the average interest rate was 5.54%, 7.90% and 7.81%, respectively.

On the last business day of each calendar quarter the Company is required to pay each lender a commitment fee in respect of any unused commitment under the revolving credit facility. The commitment fee is currently 0.50% annually and is subject to adjustment based upon the ratio of the Company’s total indebtedness to the Company’s consolidated EBITDA.

The senior secured credit facility requires scheduled quarterly payments of $1.2 million on the term loan each until September 2010, with the balance at that time paid in four equal quarterly installments thereafter.

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The senior secured credit facility requires mandatory prepayments of term loans, subject to certain exceptions, in amounts equal to:

• 100% of the net cash proceeds from asset sales, except, in certain cases, when proceeds are reinvested by the Company within a specified period,

• 50% of the net cash proceeds from the issuance of certain equity securities by Holdings or US Oncology,

• 100% of the net cash proceeds from the issuance of certain debt securities by Holdings or US Oncology, and

• 75% (subject to reduction based upon the ratio of the Company’s total indebtedness to the Company’s consolidated EBITDA) of the Company’s annual excess cash flow as defined.

Voluntary prepayments of loans under the senior secured credit facility and voluntary reductions of revolving credit commitments are permitted, in whole or in part, in minimum amounts without premium or penalty, other than customary breakage costs with respect to adjusted LIBOR loans.

Indebtedness under the senior secured credit facility is guaranteed by all of US Oncology’s current restricted subsidiaries, all of US Oncology’s future restricted subsidiaries and by Holdings, and is secured by a first priority security interest in substantially all of US Oncology’s existing and future real and personal property, including accounts receivable, inventory, equipment, general intangibles, intellectual property, investment property, cash and a first priority pledge of US Oncology’s capital stock and the capital stock of the guarantor subsidiaries.

The senior secured credit facility contains the most restrictive covenants related to the Company’s indebtedness and requires US Oncology to comply, on a quarterly basis, with certain financial covenants, including a minimum interest coverage ratio test and a maximum leverage ratio test, which become more restrictive over time. The Company may be obligated (based on certain leverage thresholds) to make payments on its term loan facility of up to 75% of “excess cash flow”, as defined. A payment of $29.4 million under this provision was required based on cash flow for the year ended December 31, 2007, and was paid in April, 2008. No such payment was required for the years ended December 31, 2008 and 2006. In addition, the senior secured credit facility includes various negative covenants, including with respect to indebtedness, liens, investments, permitted businesses and transactions and other matters, as well as certain customary representations and warranties, affirmative covenants and events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, actual or asserted failure of any guaranty or security document supporting the senior secured credit facility to be in full force and effect and change of control. If such an event of default occurs, the lenders under the senior secured credit facility are entitled to take various actions, including the acceleration of amounts due under the senior secured credit facility and all actions permitted to be taken by a secured creditor.

On November 30, 2007, the Company amended its senior secured credit facility to increase the maximum leverage and decrease the minimum interest coverage ratios required under the facility. The amended terms provided flexibility as the Company responded to the adverse impact of reduced ESA reimbursement. In addition, the amendment increased the Company’s ability to invest in future growth by increasing capital available for practice affiliations and other investments, as well as making other revisions necessary to support expansion into additional service offerings. In connection with the amendment, the LIBOR spread on outstanding borrowings increased from 225 basis points to 275 basis points and consenting lenders were paid an amendment fee of 25 basis points. The aggregate amendment fee paid was approximately $1.5 million and was capitalized as debt issuance costs which is being amortized over the remaining term of the senior secured facility. At December 31, 2008, the minimum interest coverage ratio was 1.95:1 and the maximum leverage ratio was 5.60:1. The ratios become more restrictive (generally on a quarterly basis) and, at maturity in 2011, the minimum interest coverage ratio required will be at least 2.50:1 and the maximum leverage ratio may not be more than 4.75:1.

As of December 31, 2008, the Company is in compliance with all financial covenants related to the Senior Secured Credit Facility.

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

9.0% Senior Notes and 10.75% Senior Subordinated Notes

On August 20, 2004, the Company sold $300.0 million in aggregate principal amount of 9% Senior Notes due 2012 and $275.0 million in aggregate principal amount of 10.75% Senior Subordinated Notes due 2014.

The 9.0% senior notes mature on August 15, 2012 and bear fixed interest at a rate of 9% per annum, payable semi-annually in arrears on February 15 and August 15. The senior notes are unconditionally guaranteed, jointly and severally and on an unsecured senior basis, by most of the Company’s subsidiaries. The 10.75% Senior Subordinated Notes mature on August 15, 2014 and bear interest at a fixed rate of 10.75% per annum, payable semiannually in arrears on February 15 and August 15. The senior subordinated notes are unconditionally guaranteed, jointly and severally and on an unsecured senior subordinated basis, by most of the Company’s subsidiaries.

On and after August 15, 2008 and 2009, the Company is entitled at its option to redeem all or a portion of the senior notes and senior subordinated notes, respectively, at the following redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued interest to the redemption date, if redeemed during the 12-month period ending on August 15 of the years set forth below:

	Redemption Price
Period	Senior Notes		Senior Subordinated Notes
2009	104.500	%	—
2010	102.250	%	105.375	%
2011	100.000	%	103.583	%
2012	100.000	%	101.792	%
2013 & thereafter	100.000	%	100.000	%

The Company is not required to make any mandatory redemption or sinking fund payments with respect to the senior notes or the senior subordinated notes. However, upon the occurrence of any change of control of the Company, each holder of senior notes or senior subordinated notes shall have the right to require the Company to repurchase such holder’s notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase.

The indentures governing the senior notes and senior subordinated notes contain customary events of default and affirmative and negative covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, enter into arrangements that restrict dividends from subsidiaries, transfer and sell assets, engage in certain transactions with affiliates and effect a consolidation or merger.

9.625% Senior Subordinated Notes

US Oncology has senior subordinated notes with an original aggregate principal amount of $175.0 million maturing February 2012. Interest on these notes accrues at a fixed rate of 9.625% per annum payable semi-annually in arrears on each February 1 and August 1 to the holders of record of such notes as of each January 15 and July 15 prior to each such respective payment date.

In August 2004, US Oncology commenced a tender offer to acquire the outstanding 9.625% senior subordinated notes due 2012, obtain holder consents to eliminate substantially all of the restrictive covenants and make other amendments to the indenture governing such notes. The Company acquired $172.0 million in aggregate principal amount of the Company’s existing 9.625% senior subordinated notes.

27

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Subordinated Notes

Subordinated notes were issued to certain physicians with whom the Company entered into service agreements. Substantially all of the subordinated notes outstanding at December 31, 2008 bear interest from 6% to 7%, are due in installments through 2014 and are subordinated to senior bank and certain other debt. During the year ended December 31, 2008, $34.3 million in subordinated notes were issued in affiliation transactions. If the Company fails to make payments under any of the notes, the respective practice can terminate its service agreement with the Company.

Mortgages and Capital Lease Obligations

In January, 2005, the Company incurred mortgage indebtedness of $13.1 million to finance the acquisition of real estate and construction of a cancer center. The mortgage debt bears interest at a fixed annual rate of 6.2% on $8.5 million of the initial balance and the remaining balance bears interest at variable rate equal to 30-day LIBOR plus 2.15%. The Company pays monthly installments of principal and interest and the mortgage matures in January, 2015. In December, 2006, the Company incurred an additional $4.5 million to finance the acquisition of real estate and construction of a cancer center. This mortgage debt bears interest at a fixed annual rate of 7.25% on $2.9 million of the initial balance and the remaining balance bears interest at variable rate equal to 30-day LIBOR plus 2.15%. The Company pays monthly installments of principal and interest and the mortgage matures in December 2016. In April, 2008, the Company incurred an additional $4.0 million to finance the acquisition of real estate and construction of a cancer center. This mortgage debt bears interest at a fixed annual rate of 6.25%. The Company pays monthly installments of principal and interest and the mortgage matures in May, 2018. As of December 31, 2008, the outstanding indebtedness on total mortgages was $19.6 million.

Leases for medical and office space, which meet the criteria for capitalization, are capitalized using effective interest rates between 8.0% and 12.0% with original lease terms up to 20 years. In March, 2006, the Company amended the lease agreements for two cancer centers operated through capital leases in a manner that resulted in the modified leases being classified as operating leases. Consequently, the remaining capital lease obligation of $11.0 million and the carrying value of the related capital assets of $10.7 million were retired, resulting in a $0.3 million gain that has been deferred and recognized as a reduction to rent expense over the remaining term of the leases. As of December 31, 2008 and 2007 capitalized lease obligations were approximately $2.6 million and $2.3 million and relate to cancer centers in which the Company is the sole tenant.

Holdings Senior Floating Rate Notes

US Oncology Holdings, Inc. issued $250 million Senior Floating Rate Notes, due 2015 (“the Holdings Notes”) in March, 2005. The Holdings Notes (refinanced in March, 2007) were senior unsecured obligations with interest at a floating rate, reset semi-annually, equal to 6-month LIBOR plus 5.25%. Simultaneously with the financing, Holdings entered into an interest rate swap agreement, effectively fixing the interest rate at 9.4% for a period of two years ended March 15, 2007.

In March, 2007 the Company completed a $425.0 million floating rate debt offering, the terms of which are described below. Proceeds from the Notes were used to repay the $250.0 million Floating Rate Notes and, after payment of transaction fees and expenses, a $158.6 million dividend to common and preferred shareholders. Simultaneously with the financing, Holdings entered into an interest rate swap agreement effectively fixing the interest rate at 9.5% for a period of five years ending March 15, 2012. The Company recognized a $12.9 million extinguishment loss related to payment of a 2.0% call premium, interest expense during a 30 day call period, and the write off of unamortized issuance costs related to the retired debt.

Holdings Senior Floating Rate PIK Toggle Notes

On March 13, 2007, Holdings issued $425.0 million aggregate principal amount of Senior Unsecured Floating Rate PIK Toggle Notes due 2012 (the “Notes”) in a private offering to institutional investors. In connection with the issuance of the Notes, Holdings entered into a Purchase Agreement providing for the initial sale of the Notes and a Registration Rights Agreement with respect to registration rights for the benefit of the holders of the Notes. As required under the Registration Rights Agreement, the exchange offer was completed within 240 days after issuance of the Notes.

Holdings may elect to pay interest on the Notes entirely in cash, by issuing additional Notes (“PIK interest”), or by paying 50% in cash and 50% by issuing additional Notes. Cash interest accrues on the Notes at a rate per annum equal to six-month LIBOR plus the applicable spread. PIK interest accrues on the Notes at a rate per annum equal to the cash interest rate

28

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

plus 0.75%. LIBOR is reset semiannually. The applicable spread is 4.50% and is scheduled to increase by 0.50% on March 15, 2009 and increase again by 0.50% on March 15, 2010. The Notes mature on March 15, 2012. Simultaneously with the financing, Holdings entered into an interest rate swap fixing the LIBOR base interest on the Notes at 4.97% throughout their term. The initial interest payment due September 15, 2007 was made in cash. The Company must make an election regarding whether subsequent interest payments will be made in cash or through PIK interest prior to the start of the applicable interest period. The Company elected to settle the interest payment due March 15, 2008 entirely by issuing additional notes which, on that date, increased the outstanding principal amount by $22.8 million as settlement for interest due, of which $13.2 million related to the period from September 15, 2007 to December 31, 2007 and $9.6 million related to the period from January 1, 2008 to March 15, 2008. The Company elected to pay interest due on September 15, 2008, 50% in cash and 50% in kind, which is an alternative available under the notes. To settle this payment, the Company paid $8.1 million in cash and issued an additional $8.9 million in notes. For the interest payment due March 15, 2009, the Company elected to settle the interest payment entirely by increasing the principal amount of the outstanding notes and expects to issue $18.9 million on that date.

Holdings may redeem all or any of the Notes at the redemption prices set forth below, plus accrued and unpaid interest, if any, to the redemption date:

Redemption period	Price
On or after September 15, 2008 and prior to September 15, 2009	102.0	%
On or after September 15, 2009 and prior to September 15, 2010	101.0	%
On or after September 15, 2010	100.0	%

Because Holdings’ principal asset is its investment in US Oncology, US Oncology provides funds to service Holdings’ indebtedness through payment of dividends to Holdings. During the year ended December 31, 2007, US Oncology paid dividends of $34.9 million to Holdings to finance the semi-annual interest payment due March 15, 2007 on the $250.0 million senior floating rate notes, certain costs related to the issuance of the senior floating rate PIK toggle notes and the semi-annual interest payment due September 15, 2007 on the $425.0 million floating rate toggle notes. During 2008, US Oncology paid dividends of $13.0 million to Holdings to finance the semi-annual interest payment and the interest rate swap obligation due September 15, 2008. The terms of the existing senior secured credit facility, as well as the indentures governing US Oncology’s senior notes and senior subordinated notes, and certain other agreements, restrict it and certain of its subsidiaries from making payments or transferring assets to Holdings, including dividends, loans or other distributions. Such restrictions include prohibition of dividends in an event of default and limitations on the total amount of dividends paid to Holdings. The senior notes and senior subordinated notes also require that US Oncology be solvent both at the time, and immediately following, a dividend payment to Holdings. In the event these agreements do not permit US Oncology to provide Holdings with sufficient distributions to fund interest payments, Holdings would be unable to pay interest on the notes in cash and would instead be required to pay PIK interest. Based on the Company’s financial projections, which include the adverse impact of reduced ESA coverage, and due to recent financial market volatility, the Company intends to pay PIK interest as permitted under the terms of the Notes. In addition, unlike interest on the Holdings Notes, which may be settled in cash or through the issuance of additional notes, payments due to the swap counterparty must be made in cash (see Note 8). As a result of the current and projected low interest rate environment, and the related expectation that payments due on the interest rate swap will increase, the Company believes that cash payments for interest rate swap obligations will reduce the availability under the restricted payments provisions in US Oncology’s indebtedness to a level that additional payments for cash interest for the Holdings Notes no longer remain probable. As of December 31, 2008, amounts available under the restricted payments provision of our senior subordinated note agreements amounted to $29.7 million. Based on projected interest rates as of December 31, 2008, there will be available funds under the restricted payments provision in order to service, at a minimum, the estimated interest rate swap obligations through the end of 2009. The amount available under the restricted payments provision is based upon a portion of US Oncology’s cumulative net income adjusted upward for certain transactions, primarily receipt of equity proceeds and other capital contributions, and reduced principally by cumulative dividends paid to Holdings, among other transactions. Reductions in the Company’s net income, excluding certain non-cash charges such as the $380.0 million goodwill impairment during 2008, would reduce the amount of cash that is available to the Company for debt service and capital expenditures.

Among other provisions, the Notes contain certain covenants that limit the ability of Holdings and certain restricted subsidiaries, including US Oncology, to incur additional debt, pay dividends, redeem or repurchase capital stock, issue capital stock of restricted subsidiaries, make certain investments, enter into certain types of transactions with affiliates, engage in unrelated businesses, create liens securing the debt of Holdings and sell certain assets or merge with or into other companies.

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair value of Notes

As of January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), and has estimated the fair value of its financial instruments in accordance with this framework. The fair value of the fixed rate long term indebtedness is estimated based on quoted market prices or prices quoted from third party financial institutions. The carrying amount and fair values of the long term indebtedness, including the current portion, are as follows:

	As of December 31,
	2008				2007
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)
9.0% Senior Notes, due 2012	$	300,000	$	273,000	$	300,000	$	295,875
10.75% Senior Subordinated Notes, due 2014		275,000		224,125		275,000		271,563
Holdings Senior Floating Rate PIK Toggle Notes, due 2012		456,751		262,632		425,000		352,750

Deferred Debt Financing Costs

The carrying value of deferred debt financing costs for US Oncology was $24.5 million and $31.4 million at December 31, 2008 and 2007, respectively. US Oncology recorded amortization expense related to debt financing costs of $7.1 million, $6.8 million, and $6.6 million for the years ended December 31, 2008, 2007 and 2006, respectively.

The incremental carrying value of deferred debt financing costs for Holdings was $7.7 million and $10.0 million at December 31, 2008 and 2007, respectively. Holdings recorded amortization expense related to debt financing costs of $2.4 million, $2.0 million and $0.7 million for the years ended December 31, 2008, 2007 and 2006, respectively.

NOTE 8—DERIVATIVE FINANCIAL INSTRUMENTS

Holdings has entered into derivative financial agreements for the purpose of hedging risks relating to the variability of cash flows caused by movements in interest rates. The Company documents its risk management strategy and hedge effectiveness at the inception of the hedge, and, unless the instrument qualifies for the short-cut method of hedge accounting, over the term of each hedging relationship. Holdings’ use of derivative financial instruments has historically been limited to interest rate swaps, the purpose of which is to hedge the cash flows of variable-rate indebtedness. Holdings does not hold or issue derivative financial instruments for speculative purposes.

Derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value. The gain or loss on the effective portion of the hedge is initially reported as a component of other comprehensive income (loss) in Holdings’ Consolidated Statement of Stockholders’ Equity. The gain or loss that does not effectively hedge the identified exposure, if any, is recognized currently in earnings. Amounts in accumulated other comprehensive income are reclassified into net income in the same period in which the hedged forecasted transaction affects earnings.

When it is determined that a derivative has ceased to be a highly effective hedge or when a hedge is de-designated, hedge accounting is discontinued prospectively. When hedge accounting is discontinued for cash flow hedges, the derivative asset or liability remains on the consolidated balance sheet at its fair value, and gains and losses that were recorded as accumulated other comprehensive income are frozen and amortized to earnings as the hedged transaction affects income unless it becomes probable that the hedged transactions will not occur. If it becomes probable that a hedged transaction will not occur, amounts in accumulated other comprehensive income are reclassified to earnings when that determination is made.

In connection with issuing the Notes, Holdings entered into an interest rate swap agreement, with a notional amount of $425.0 million, fixing the LIBOR base rate at 4.97% through maturity in 2012. The swap agreement was initially designated as a cash flow hedge against the variability of cash future interest payments on the Notes. Due to the uncertainty regarding the impact of reduced Medicare coverage for ESA’s, the Company elected to pay interest in kind on the Notes for the semiannual period ending March 15, 2008. Based on its financial projections, which include the adverse impact of reduced ESA coverage, and due to limitations on the amount of restricted payments that will be available to service the Notes, the Company no longer believes that payment of cash interest on the entire principal of the outstanding Notes remains

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

probable. As a result of these circumstances, the Company discontinued cash flow hedge accounting for this interest rate swap effective September 30, 2007. Subsequent to discontinuation of hedge accounting, the Company recognized all unrealized gains and losses in earnings, rather than deferring such amounts in accumulated other comprehensive income. As a result of discontinuing cash flow hedge accounting for this instrument, Holdings recognized an unrealized loss of $19.9 million and $11.9 million related to the interest rate swap as Other Expense in its Consolidated Statement of Operations for the years ended December 31, 2008 and 2007, respectively.

At December 31, 2007, accumulated other comprehensive income included $1.5 million related to the interest rate swap which represents the activity while the instrument was designated as a cash flow hedge that is associated with future interest payments that cannot be considered probable of not occurring. For interest periods beginning March 15, 2008, and thereafter, cash interest payments on Notes with a principal amount of $225.0 million could not be considered probable of not occurring as of December 31, 2007. This amount was based upon the principal amount of Notes on which cash interest was expected to be paid, taking into consideration approximately $22.7 million incremental Notes issued for the semiannual interest payment due March 15, 2008. As a result of the current and projected low interest rate environment, and the related expectation that payments due on the interest rate swap will increase, the Company believes that cash payments for interest rate swap obligations will reduce the availability under the restricted payments provisions in US Oncology’s indebtedness to a level that additional payments for cash interest for the Holdings Notes no longer remain probable. As a result, at December 31, 2008 all amounts previously recorded in accumulated other comprehensive income related to interest rate swap activity while that instrument was designated as a cash flow hedge (amounting to $0.8 million, net of tax) were reclassified to Other Income (Expense), Net in the consolidated statement of income for US Oncology Holdings, Inc.

At December 31, 2006, Holdings was party to an interest rate swap agreement used to convert the $250.0 million floating rate notes issued by Holdings to a fixed interest rate of 9.4% through March 15, 2007. During the year ended December 31, 2006, Holdings recognized unrealized gains of $0.9 million for this cash flow hedge as Accumulated Other Comprehensive Income, net of tax in the Statements of Stockholders’ Equity. During the year ended December 31, 2006, $0.8 million was reclassified and recognized into earnings, net of tax, as interest expense on the hedged note was recognized. The interest rate swap qualified for the short-cut method of hedge accounting and, accordingly, no ineffectiveness was assumed or reflected in Holdings’ Consolidated Statement of Operations.

The following is a summary of the changes in the net loss included in accumulated other comprehensive income (loss) for Holdings (in thousands):

	Year Ended December 31,
	2008			2007
Balance, beginning of year	$	(2,435	)	$	1,585
Net loss during the year		—			(2,004	)
Amounts reclassified to earnings		2,435			(2,016	)
Unrealized loss		—			(2,435	)
Deferred income taxes on unrealized loss		—			901
Balance, end of year	$	—		$	(1,534	)

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 9—INCOME TAXES

The Company’s income tax provision consisted of the following (in thousands):

	US Oncology Holdings, Inc.								US Oncology, Inc.
	Year Ended December 31,								Year Ended December 31,
	2008			2007			2006		2008			2007			2006
Federal:
Current	$	(7,328	)	$	(7,755	)	$	12,686	$	2,635		$	3,893		$	21,228
Deferred		(10,530	)		(11,177	)		2,746		2,371			1,359			2,746
State:
Current		1,621			1,997			1,818		1,621			2,562			1,859
Deferred		(686	)		(512	)		1,676		(276	)		(367	)		1,676
Income tax provision (benefit)	$	(16,923	)	$	(17,447	)	$	18,926	$	6,351		$	7,447		$	27,509

The effective tax rate for the years ended December 31, 2008, 2007 and 2006 was as follows (in thousands):

	US Oncology Holdings, Inc.									US Oncology, Inc.
	Year Ended December 31,									Year Ended December 31,
	2008			2007			2006			2008			2007			2006
Income (loss) before income taxes	$	(426,133	)	$	(48,801	)	$	47,472		$	(360,815	)	$	18,252		$	71,922
Less: Income before income taxes attributable to noncontrolling interests		(3,324	)		(3,619	)		(2,388	)		(3,324	)		(3,619	)		(2,388	)
Income (loss) before income taxes attributable to the Company	$	(429,457	)	$	(52,420	)	$	45,084		$	(364,139	)	$	14,633		$	69,534
Income tax benefit (provision) attributable to the Company	$	16,923		$	17,447		$	(18,926	)	$	(6,351	)	$	(7,447	)	$	(27,509	)
Effective tax rate attributable to the Company		3.9	%		33.3	%		42.0	%		-1.7	%		50.9	%		39.6	%

The difference between the effective income tax rate and the amount that would be determined by applying the statutory U.S. income tax rate before income taxes is as follows:

	US Oncology Holdings, Inc.						US Oncology, Inc.
	Year Ended December 31,						Year Ended December 31,
	2008		2007		2006		2008		2007		2006
U.S. statutory income tax rate	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit (1)	(0.2	)	(0.2	)	4.4		(0.3	)	4.0		2.9
Non-deductible expenses (2)	(30.9	)	(2.0	)	3.2		(36.4	)	7.2		2.1
Reserve for uncertain tax positions	—		(1.3	)	—		—		4.8		—
Other	—		1.8		(0.6	)	—		(0.1	)	(0.4	)
Effective tax rate	3.9	%	33.3	%	42.0	%	-1.7	%	50.9	%	39.6	%

(1) The Texas state margin tax became effective January 1, 2007. Under the Texas margin tax, a Company’s tax obligation is computed based on its receipts less, in the case of the Company, the cost of pharmaceuticals. As such, significant costs which are deductible for income tax purposes of an entity may not be deductible for calculating the margin tax obligation.

(2) Includes the impact of non-deductible portion of the goodwill impairment charge recorded during 2008.

Holdings effective tax rate was a benefit of 3.9% and 33.3% for the years ended December 31, 2008 and 2007, respectively, and a provision of 42.0% for the year ended December 31, 2006. The difference between the effective tax rate for Holdings and US Oncology relates to the incremental interest expense and general and administrative expenses incurred by Holdings which increase its taxable loss and, consequently, increase the impact that non-deductible costs have on its effective tax rate.

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

US Oncology, Inc. and subsidiaries are included in the consolidated tax return of its parent, US Oncology Holdings, and accounts for income taxes based on the “separate return” method. This method provides that current and deferred taxes are accounted for as if US Oncology were a separate taxpayer. During the fourth quarter of 2008, Holdings contributed tax benefits associated with its taxable loss from the date of the Merger (August 20, 2004) through December 31, 2007 of $22.5 million to US Oncology. These tax benefits have been realized through the utilization of Holdings’ losses in the consolidated tax return of Holdings, which includes its wholly-owned subsidiary, US Oncology and subsidiaries. The forgiveness of this intercompany receivable by Holdings is shown as a contribution of realized tax benefits in US Oncology’s Consolidated Statement of Stockholder’s Equity for the year ended December 31, 2008. The year ended December 31, 2008 also reflects a $380.0 million goodwill impairment charge without a corresponding tax benefit. The year ended December 31, 2007 includes a loss on extinguishment of debt incurred by Holdings.

The effective tax rate for US Oncology, Inc. was a provision of 1.7% on the 2008 net loss and provisions of 50.9% and 39.6% for net income in 2007 and 2006, respectively. The 2008 provision is attributable to the impairment of goodwill in the medical oncology services segment, the majority of which is not deductible for tax purposes. Of the $380.0 million impairment charge $4.0 million is deductible through annual amortization for tax purposes. Consequently, there is no tax benefit associated with the majority of the goodwill impairment.

Deferred income taxes are comprised of the following (in thousands):

	US Oncology Holdings, Inc.						US Oncology, Inc.
	December 31,						December 31,
	2008			2007			2008			2007
Deferred tax assets:
Net operating loss	$	15,808		$	8,476		$	1,269		$	388
Unrealized loss on interest rate swap		11,443			5,327			—			—
Allowance for bad debts		4,946			3,838			4,946			3,838
Deferred revenue		1,511			1,441			1,511			1,441
Debt issue and loan costs		1,145			1,433			1,145			1,433
Accrued compensation costs		453			731			453			731
Accrued expenses		294			717			294			717
Stock options		206			121			206			121
Other		876			602			876			158
Deferred tax liabilities:
Service agreements and other intangibles		(33,870	)		(28,377	)		(33,870	)		(28,377	)
Depreciation		(6,005	)		(7,844	)		(6,005	)		(7,844	)
Prepaid expenses		(1,349	)		(1,185	)		(1,349	)		(1,185	)
Original issue discount		(1,249	)		(448	)		—			—
Restricted stock		(242	)		(693	)		(242	)		(693	)
Net deferred tax asset (liability)	$	(6,033	)	$	(15,861	)	$	(30,766	)	$	(29,272	)

At December 31, 2008 the Company’s deferred tax assets include a federal net operating loss carryforward (expiring in 2027-2028) of approximately $41.5 million. In assessing the realizability of deferred tax assets, management evaluates a variety of factors in considering whether it is more likely than not that some portion or all of the deferred tax assets will ultimately be realized. Management considers earnings expectations, the existence of taxable temporary differences, tax planning strategies, and the periods in which estimated losses can be utilized. Based upon this analysis, management has concluded that it is more likely than not that the Company will realize the benefits of its deferred tax assets. Accordingly, the Company has no valuation allowance recorded for federal deferred tax assets. A portion of the federal 2008 net operating losses will be applied to earlier tax periods and will generate $9.3 million in tax refunds. This receivable is recorded as a component of other current assets as of December 31, 2008.

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Upon adoption of FIN 48, effective January 1, 2007, the Company had no adjustment for unrecognized income tax benefits. As of the effective date, January 1, 2007, and as of December 31, 2008, the Company had unrecognized tax benefits amounting to $2.5 million and $2.2 million, respectively. The Company expects the $2.2 million accrual for uncertain tax positions to settle within the next twelve months. A reconciliation of unrecognized tax benefits is as follows (in thousands):

	2008			2007
Balance at January 1	$	2,270		$	2,478
Additions for tax positions relating to prior years		97			568
Additional interest		156			225
Reductions for tax positions relating to prior years		—			(96	)
Settlements with tax authorities		(350	)		(905	)
Balance at December 31	$	2,173		$	2,270

The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. The tax years 2005, 2006 and 2007 remain open to examination by the major taxing jurisdictions to which the Company is subject. US Oncology Holdings, Inc., and its subsidiaries, are currently under audit by the Internal Revenue Service for the period from January 1, 2004 through August 31, 2004.

NOTE 10—COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office space, certain comprehensive cancer centers and certain equipment under noncancelable operating lease agreements. As of December 31, 2008, total future minimum lease payments, including escalation provisions are as follows (in thousands):

	2009		2010	2011	2012	2013	Thereafter
Payments due	$	81,011	71,910	60,308	52,737	45,181	218,209

Rental expense was $98.5 million, $89.1 million, and $79.8 million for the years ended December 31, 2008, 2007, and 2006, respectively.

The Company enters into commitments with various construction companies and equipment suppliers primarily in connection with the development of cancer centers. As of December 31, 2008, the Company’s commitments amounted to approximately $4.5 million.

Insurance

The Company and its affiliated practices maintain insurance with respect to medical malpractice and associated vicarious liability risks on a claims-made basis in amounts believed to be customary and adequate. The Company is not aware of any outstanding claims or unasserted claims that are likely to be asserted against the Company or its affiliated practices, which would have a material impact on its financial position or results of operations.

The Company maintains all other traditional insurance coverage on either a fully insured or high deductible basis, using loss funds for any estimated losses within the retained deductibles.

Guarantees

Beginning January 1, 1997, the Company guaranteed that the amounts retained by one of the Company’s affiliated practices will amount to a minimum of $5.2 million annually under the terms of the related service agreement, provided that certain targets are met. The Company has not been required to make any payments associated with this guarantee.

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Litigation

The provision of medical services by the Company’s affiliated practices entails an inherent risk of professional liability claims. The Company does not control the practice of medicine by the clinical staff or their compliance with regulatory and other requirements directly applicable to practices. In addition, because the practices purchase and prescribe pharmaceutical products, they face the risk of product liability claims. In addition, because of licensing requirements and affiliated practices’ participation in governmental healthcare programs, the Company and affiliated practices are, from time to time, subject to governmental audits and investigations, as well as internally initiated audits, some of which may result in refunds to governmental programs. Although the Company and its practices maintain insurance coverage, successful malpractice, regulatory or product liability claims asserted against the Company or one of the practices in excess of insurance coverage could have a material adverse effect on the Company.

During the fourth quarter of 2005, the Company received a subpoena from the United States Department of Justice’s Civil Litigation Division (“DOJ”) requesting a broad range of information about the Company and its business, generally in relation to its contracts and relationships with pharmaceutical manufacturers. The Company has cooperated fully with the DOJ in responding to the subpoena. All outstanding document requests from the DOJ were addressed in early 2008, and we continue to await further direction and feedback from the DOJ. At the present time, the DOJ has not made any allegation of wrongdoing on the part of the Company. However, the Company cannot provide assurance that such an allegation or litigation will not result from this investigation. While the Company believes that it is operating and has operated its business in compliance with law, including with respect to the matters covered by the subpoena, the Company cannot provide assurance that the DOJ will not make a determination that wrongdoing has occurred. In addition, the Company has devoted significant resources to responding to the DOJ subpoena and anticipates that such resources may be required on an ongoing basis to fully respond to the subpoena.

The Company has also received requests for information relating to class action litigation against pharmaceutical manufacturers relating to alleged manipulation of AWP and alleged inappropriate marketing practices with respect to AWP.

From time to time, the Company has become aware that the Company and certain of its subsidiaries and affiliated practices have been the subject of qui tam lawsuits (commonly referred to as “whistle-blower” suits). Because qui tam actions are filed under seal, it is possible that the Company is the subject of other qui tam actions of which it is unaware.

In previous qui tam suits which the Company has been made aware of, the DOJ has declined to intervene in such suits and the suits have been dismissed. Qui tam suits are brought by private individuals, and there is no minimum evidentiary or legal threshold for bringing such a suit. The DOJ is legally required to investigate the allegations in these suits. The subject matter of many such claims may relate both to alleged actions of the Company and alleged actions of an affiliated practice. Because the affiliated practices are separate legal entities not controlled by the Company, such claims necessarily involve a more complicated, higher cost defense, and may adversely impact the relationship between the Company and the practices. If the individuals who file complaints and/or the United States were to prevail in these claims against the Company, and the magnitude of the alleged wrongdoing were determined to be significant, the resulting judgment could have a material adverse financial and operational effect on the Company, including potential limitations in future participation in governmental reimbursement programs. In addition, addressing complaints and government investigations requires the Company to devote significant financial and other resources to the process, regardless of the ultimate outcome of the claims.

The Company and its affiliated physicians are defendants in a number of lawsuits involving employment and other disputes and breach of contract claims. In addition, the Company is involved from time to time in disputes with, and claims by, its affiliated practices against the Company.

Specifically, the Company is involved in litigation with a practice in Oklahoma that was affiliated with the Company until April, 2006. The Company initiated arbitration proceedings pursuant to a provision in the service agreement providing for contract reformation in certain events. The practice countered with a lawsuit that alleges, among other things, that the Company has breached the service agreement and that its service agreement is unenforceable as a matter of public policy due to alleged violations of healthcare laws. The practice sought unspecified damages and a termination of the contract. The Company believes that its service agreement is lawful and enforceable and that it is operating in accordance with applicable law. As a result of alleged breaches of the service agreement by the practice, the Company terminated the service agreement in April 2006. In March, 2007, the Oklahoma Supreme Court overturned a lower court’s ruling that would have compelled arbitration in this matter and remanded the case back to the lower court to hold hearings to determine whether and to what extent the arbitration provisions of the service agreement will be applicable to the dispute. The Company expects these hearings to occur in late 2009 or 2010. Because of the need for further proceedings, the Company believes that the Oklahoma Supreme Court ruling will extend the amount of time it will take to resolve this dispute and increase the risk of the litigation to the Company. In any event, as with any complex litigation, the Company anticipates that this dispute may take several years to resolve.

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the first quarter of 2006 (prior to the termination of the service agreement in April), the practice represented 4.6% of the Company’s consolidated revenue. In October, 2006, the Company sold, for cash, the property, plant and equipment to the practice for an amount that approximated its net book value at the time of sale. In connection with the purchase price allocation relating to the Merger in August, 2004, no value was assigned to goodwill or its management service agreement with this practice due to the ongoing dispute that existed at that time.

As a result of the ongoing litigation, the Company has been unable to collect on a timely basis a receivable owed to the Company relating to accounts receivable purchased by the Company under the service agreement and amounts for reimbursement of expenses paid by the Company on the practice’s behalf. At December 31, 2008, the total receivable owed to the Company of $22.4 million is reflected on its balance sheet as other assets. Currently, approximately $11.4 million are held in an escrowed bank account into which the practice has been making, and is required to continue to make, monthly deposits. These amounts will be released upon resolution of the litigation. In addition, approximately $7.5 million is being held in a bank account that has been frozen pending the outcome of related litigation regarding that account. In addition, the Company has filed a security lien on the receivables of the practice. Based on financial information available to the Company, management currently expects that the amounts held in the bank accounts combined with the receivables of the practice in which the Company has filed a security lien represent adequate collateral to recover the $22.4 million receivable recorded as other noncurrent assets at December 31, 2008. Accordingly, the Company expects to realize the amount that it believes to be owed by the practice. Realization, however, is subject to a successful conclusion to the litigation with the practice, and the Company cannot provide assurance as to when the litigation will be finally concluded or as to what the ultimate outcome of the litigation will be. The Company expects to incur expenses in connection with its litigation with the practice.

The Company believes the allegations in suits against it are customary for the size and scope of its operations. However, adverse judgments, individually or in the aggregate, could have a material adverse effect on the Company.

Antitrust Inquiry

The United States Federal Trade Commission (“FTC”) and a state Attorney General have informed one of the Company’s affiliated physician practices that they have opened an investigation to determine whether a recent transaction in which another group of physicians became employees of that affiliated group violated relevant state or federal antitrust laws. In addition, the FTC has informed the Company that it intends to request information regarding the Company’s role in that transaction. The affiliated practice is in the process of responding to a request for information on this matter. At present, the Company believes that the scope of the investigation is limited to a single transaction, but management cannot assure you that the scope will remain limited. Management believes that the Company and the affiliated physician practices comply with relevant antitrust laws. However, if this investigation were to result in a claim against the Company or its affiliated physician practice in which the FTC or attorney general prevails, the resulting judgment could have a material adverse financial and operational effect on the Company or that practice, including the possibility of monetary damages or fines, a requirement that the Company unwinds the transaction at issue or the imposition of restrictions on the Company’s future operations and development. In addition, addressing government investigations requires the Company to devote significant financial and other resources to the process, regardless of the ultimate outcome of the claims. Furthermore, because of the size and scope of our network, there is a risk that the Company could be subjected to greater scrutiny by government regulators with regard to antitrust issues.

NOTE 11—COMPENSATION AND BENEFIT PROGRAMS

The Company maintains health, dental and life insurance plans for the benefit of eligible employees, including named executive officers. Each of these benefit plans requires the employee to pay a portion of the premium, with the Company paying the remainder of the premiums. These benefits are offered on the same basis to all employees. The Company also maintains a 401(k) retirement plan that is available to all eligible employees. The Company currently matches elective employee-participant contributions on a basis of 100% of the employee’s contribution up to 3.0% of their compensation and 50% of the employee’s contribution of up to an additional 2.0% of their compensation. The Company’s contributions amounted to $4.7 million, $4.3 million, and $4.1 million for the years ended December 31, 2008, 2007 and 2006, respectively. Life, accidental death, dismemberment and disability, and short and long-term disability insurance coverage is also offered to all eligible employees and premiums are paid in full by the Company. Other voluntary benefits, such as vision insurance, supplemental life and specific coverage insurance supplements are also made available and paid for by the employee.

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 12—STOCK INCENTIVE PLANS

The following disclosures relate to the Company’s stock incentive plans involving shares of Holdings common stock or options to purchase Holdings’ common stock. Activity related to Holding’s stock-based compensation is included in the financial statements of US Oncology as the participants in such plans are employees of US Oncology.

US Oncology Holdings, Inc. 2004 Equity Incentive Plan

The Holdings’ Board of Directors adopted the US Oncology Holdings, Inc. 2004 Equity Incentive Plan (the “Equity Incentive Plan”) effective in August, 2004. The purpose of the plan is to attract and retain the best available personnel and to provide additional incentives to employees and consultants to promote the success of the business. Effective January 1, 2008, the Company amended the Equity Incentive Plan to (i) eliminate the distinction between shares available for grant under restricted common shares and those available for grant under stock options and (ii) increase the number of shares available for awards from 27,223,966 to 32,000,000. Also, on January 1, 2008, the Company awarded 7,882,000 shares of restricted stock to employees, a portion of which related to the cancellation of 2,606,250 employee stock options. The cancellation of options in exchange for restricted shares was accounted for as a modification of the original award. As a result, the unrecognized compensation expense associated with the original award continues to be recognized over the service period related to the original award. In addition, incremental compensation cost equal to the excess of the fair value of the new award over the fair value of the original award as of the date the new award was granted, is recognized over the service period related to the new award. Depending on the individual grants, awards vest either at the grant date or over defined service periods. At December 31, 2008, 2,696,750 shares were available for future awards of restricted stock or stock options. A committee of not less than two persons appointed by the Board of Directors of Holdings administers the Equity Incentive Plan. If no such committee is appointed, the Board of Directors serves as the administrator and has all authority and obligations under the Equity Incentive Plan. The administrator has the sole discretion to grant restricted stock and options to employees and to determine the terms of awards granted under the plan. Incentive and non-qualified stock options, however, are not transferable other than by will or the laws of descent and distribution and are not issued at an exercise price less than the fair market value of the underlying shares.

Based on the individual vesting criteria for each award, the Company recorded total amortization expense of approximately $2.1 million, $0.8 million, and $2.1 million for the years ended December 31, 2008, 2007 and 2006, respectively, related to restricted stock and stock option awards made under the Equity Incentive Plan. Shares of common stock related to expired or terminated options may again be subject to an option or award under the Equity Incentive Plan, subject to any limitation required by the United States Internal Revenue Code of 1986, as amended, or the Code.

Restricted Stock

Holdings granted 9,754,500 (which includes the January 1, 2008 awards discussed above), 250,000 and 600,000 shares of common stock as restricted stock awards during the years ended December 31, 2008, 2007 and 2006, respectively. The aggregate fair value at the time of grant of the restricted stock awards issued during each of the three years ended December 31, 2008 was approximately $13.1 million, $0.7 million, and $0.9 million, respectively. Depending on the individual grants, awards vest either at the grant date, over defined service periods, or upon achieving a return on invested capital in excess of established thresholds. During 2008, 2007 and 2006, 2,310,000, 1,129,000 and 1,146,000 restricted shares were forfeited by holders and previously recognized expense of $0.5 million was reversed in 2008 and $0.3 million related to the forfeited shares was reversed in both 2007 and 2006.

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following summarizes 2008 activity for restricted shares awarded under the Equity Incentive Plan:

	Restricted Shares
Restricted shares outstanding, December 31, 2005	3,398,467
Granted	600
Vested	(3,557	)
Forfeited	(1,146	)
Restricted shares outstanding, December 31, 2006	3,394,364
Granted	250
Vested	(6,485	)
Forfeited	(1,129	)
Restricted shares outstanding, December 31, 2007	3,387,000
Granted	9,754,500
Vested	(1,317,000	)
Forfeited	(2,310,000	)
Restricted shares outstanding, December 31, 2008	9,514,500

Compensation expense for each of the next five years, based on restricted stock awards granted as of December 31, 2008, is estimated to be as follows (in millions):

	2009		2010		2011		2012		2013		Thereafter
Compensation expense	$	2.1	$	2.0	$	1.9	$	1.8	$	—	$	—

Stock Options

For the years ended December 31, 2008, 2007 and 2006 the Company granted 105,000, 785,500 and 1,201,000 options, respectively. The stock options are granted based on the fair value of common stock as of the date of grant (as determined with the assistance of an independent valuation), vest over 5 years (or upon specified performance objectives) and have an option term not to exceed 10 years. As of December 31, 2008, 588,750 options are outstanding (net of forfeitures).

The following summarizes the activity for the Equity Incentive Plan (shares in thousands):

	Shares Represented by Options		Weighted Average Exercise Price
Balance, December 31, 2005	2,800,500		$	1.13
Granted	1,201,000			1.45
Exercised	(218,750	)		1.03
Forfeited	(201,250	)		1.00
Balance, December 31, 2006	3,581,500		$	1.25
Granted	785,500			2.48
Exercised	(472,500	)		1.10
Forfeited	(555,500	)		1.45
Balance, December 31, 2007	3,339,000		$	1.53
Granted	105,000			0.67
Exercised	(25,000	)		1.00
Cancelled	(2,606,250	)		1.55
Forfeited	(224,000	)		1.14
Balance, December 31, 2008	588,750		$	1.44

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes information about the Company’s stock options outstanding under the Equity Incentive Plan at December 31, 2008 (in thousands):

Options Outstanding
Range of Exercise Price		Number Outstanding at 12/31/08	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)
$	0.23 to $2.72	588,750	7.4 years	$	1.44	$	(612	)

Options Exercisable
Number Exercisable at 12/31/08	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
251,150	$	1.30	6.3 years	$	(326	)

Holdings 2004 Director Stock Option Plan

The Holdings’ Board of Directors adopted the US Oncology Holdings 2004 Director Stock Option Plan (the “Director Stock Option Plan”), which became effective in October 2004 upon stockholder approval. The total number of shares of common stock for which options may be granted under the Director Stock Option Plan is 500,000 shares. Under this plan, each eligible director at the plan’s adoption and each eligible director who joined the board after adoption is automatically granted an option to purchase 5,000 shares of common stock at fair value. In addition, each such director is automatically granted an option to purchase 1,000 shares of common stock for each board committee on which such director served. Through December 31, 2008, options to purchase 169,000 shares of common stock, net of forfeitures, have been granted to directors under the Director Stock Option Plan with exercise prices ranging from $0.23 to $2.72. At December 31, 2008, 86,000 options to purchase Holdings common stock were outstanding and 331,000 options were available for future awards. The options vest six months after the date of grant. During the year ended December 31, 2008, there were no exercises of options issued under the Director Stock Option Plan.

Holdings 2004 Long-Term Cash Incentive Plan

In addition to stock-based incentive plans, Holdings has adopted the US Oncology Holdings, Inc. 2004 Long-Term Cash Incentive Plan (the “Cash Incentive Plan”). As of December 31, 2007, no amounts were available for payment under the 2004 Cash Incentive Plan. Effective January 1, 2008, the 2004 Cash Incentive Plan was cancelled and the 2008 Long-Term Cash Incentive Plan (“2008 Cash Incentive Plan”) was adopted. Under the 2008 Cash Incentive Plan, which is administered by the Compensation Committee of the Board of Directors of Holdings, management will receive a portion of the enterprise value created as determined by the plan provided that the maximum value that can be paid to management under the plan is limited to $100 million. The value of the awards under the 2008 Cash Incentive Plan is based upon financial performance of the Company for the period beginning January 1, 2008 and ending on the earlier of the occurrence of a payment event or December 31, 2012, and will only be paid in the event of an initial public offering or a change of control, provided that all shares of preferred stock, together with accrued dividends, have been redeemed or exchanged for common stock. No events occurred during 2008 that would require a payment under the 2008 Cash Incentive Plan.

If any of the payment events described above occur, the Company may incur an additional obligation and compensation expense as a result of such an event. As of December 31, 2008, $3.7 million was available for payment under the 2008 Cash Incentive Plan. Because payments of awards under the Plan are based upon occurrence of a specific event, obligations arising under the 2008 Cash Incentive Plan will be recognized in the period when a payment event, as discussed above, occurs.

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 13—STOCKHOLDERS’ EQUITY

Capital Stock of US Oncology Holdings, Inc.

The capital stock of Holdings consists of the following (shares and dollars in thousands):

	Authorized Shares	December 31, 2008			December 31, 2007
		Outstanding Shares	Carrying Value		Outstanding Shares	Carrying Value
Common Stock	300,000	148,281	$	148	140,618	$	141
Participating Preferred Stock Series A	15,000	13,939		329,322	13,939		308,174
Participating Preferred Stock Series A-1	2,000	1,948		56,629	1,948		53,431

Because no ready market exists for Holding’s equity securities, the outstanding common and preferred shares were recorded at their respective fair values, as determined with the assistance of an independent valuation firm on the date of issuance.

Common Stock

Holders of Holdings’ common stock are entitled to one vote per share on all matters submitted to a vote of stockholders, including the election of directors, subject to the rights of holders of participating preferred stock to elect directors. Dividends cannot be paid on Holdings’ common stock without the consent of holders of a majority of Holdings’ participating preferred stock. Upon any liquidation, dissolution or winding up of Holdings, subject to the rights of the holders of Holdings’ participating preferred stock, holders of Holdings’ common stock will be entitled to share ratably in Holdings’ assets legally available for distribution to stockholders in such event. On December 21, 2006, Holdings declared a $190.0 million dividend of which $170.1 million was due to its common shareholders of record as of December 20, 2006, which was paid on January 3, 2007 (see “Series A-1 Participating Preferred Stock”). During the quarter ended March 31, 2007, Holdings declared and paid a dividend of $158.6 million to holders of its common stock.

As of December 31, 2008 and 2007, the outstanding shares of common stock include 27,989,000 and 20,545,000 shares, respectively, of common stock issued pursuant to restricted stock awards granted to members of Holdings’ management, which shares are subject to forfeiture until the satisfaction of vesting requirements. Excluding the shares which have met the vesting requirements, 9,514,500 and 3,387,000 restricted shares of common stock were outstanding as of December 31, 2008 and 2007, respectively.

Series A Participating Preferred Stock

The following table presents activity related to the outstanding Series A participating preferred stock (shares and dollars in thousands):

	Shares Issued	Carrying Value			Unpaid Dividends			Unpaid Dividends Per Share
Balance at December 31, 2005	13,939		292,716			14,341
Accretion of cumulative 7% dividends	—		20,033			20,033
Balance at December 31, 2006	13,939		312,749			34,374		2.47
Accretion of cumulative 7% dividends	—		20,068			20,068
Dividend paid	—		(24,643	)		(24,643	)
Balance at December 31, 2007	13,939		308,174			29,799		2.14
Accretion of cumulative 7% dividends	—		21,148			21,148
Balance at December 31, 2008	13,939	$	329,322		$	50,947		3.65

Series A participating preferred stock is entitled to receive cumulative preferred dividends on a non-cash accrual basis at a rate equal to 7% per annum, compounded quarterly. Such dividends are not eligible to be paid in cash until a liquidation event, a qualified public offering, a change of control transaction or certain other events or actions, each as

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

described below. During the years ended December 31, 2008, 2007 and 2006, accretion of this dividend was recorded in the amount of $21.1 million, $20.1 million, and $20.0 million, respectively, and is recorded as a component of the carrying value of preferred stock and as a reduction of retained earnings.

Dividends cannot be paid on the common stock without the consent of holders of a majority of the participating preferred stock. If a dividend is paid on the common stock, each share of participating preferred stock shall receive an amount equal to the amount payable with respect to such dividend on one (subject to adjustment) share of common stock. In connection with these participating rights, holders of Series A preferred stock received a dividend in the amount of $19.9 million during the year ended December 31, 2006 in connection with the $190.0 million dividend declared to Holdings’ shareholders. Special dividends may be paid to holders of participating preferred stock when and if declared by the Company’s board of directors out of funds legally available therefore.

Upon any liquidation, dissolution or winding-up of Holdings, each share of participating preferred stock shall be entitled to receive: (i) $18.97 plus the total amount of accrued dividends on such share (such amount being referred to as the “accreted value” per share), plus (ii) the amount payable in connection with such liquidation, dissolution or winding-up of Holdings with respect to one (subject to adjustment) share of common stock. At December 31, 2008, the liquidation preference was $22.63 per share. Consent of holders of a majority of the participating preferred stock will be required to pay such preferred liquidation amounts other than in cash. Thereafter, holders of participating preferred stock participate ratably with the holders of common stock in any distribution of the remaining assets of Holdings, or proceeds thereof, available for distribution to the stockholders of Holdings based on the number of shares of common stock then outstanding (assuming for such purposes that each share of participating preferred stock was converted into one (subject to adjustment) share of common stock immediately prior to such liquidation, dissolution or winding-up of Holdings even though such conversion does not actually occur). As of December 31, 2008, the total liquidation value of the participating Series A preferred stock was approximately $315.4 million.

Upon the consummation of a registered underwritten public offering of common stock yielding gross proceeds to Holdings of not less than $100 million:

• the total accreted value per share of participating preferred stock shall convert to common stock through the issuance of an equivalent value of common stock based on the public offering price of the common stock and shall be redeemed by Holdings to the extent the public offering (and any related financings) result in sufficient cash for Holdings to pay the redemption price per share and meet Holdings’ other financial obligations; and

• Holdings shall also issue one (subject to adjustment) share of common stock for each share of participating preferred stock then outstanding. If the holders of not less than a majority of the participating preferred stock so elect, accrued dividends on the participating preferred stock will be paid in cash at the time of conversion rather than converted into common stock.

The participating preferred stock is mandatorily redeemable upon a sale of all or substantially all of Holdings’ assets or other change of control transactions that may be beyond control of Holdings at a price per share equal to (i) accreted value per share plus (ii) the issuance of one share of common stock for each share of participating preferred stock then outstanding (such newly issued shares of common stock to receive the same consideration as the other shares of common stock then outstanding for purposes of such change of control transaction).

The holders of participating preferred stock will vote together with the holders of the common stock (other than in director elections), with each share of participating preferred stock having voting rights equivalent to one share of common stock, except that the holders of participating preferred stock, voting as a separate class, are entitled to elect two members of the board of directors.

Series A-1 Participating Preferred Stock

On December 22, 2006, Holdings consummated a private offering of 21,649,849 shares of common stock and 1,948,251 shares of Series A-1 participating preferred stock to Morgan Stanley Principal Investments for aggregate proceeds of $150.0 million. In January 2007, proceeds from the private offering, along with cash on hand, were used to pay a $190.0 million dividend to holders of common shares and preferred stock, under their participating rights, immediately before consummation of the private offering.

41

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

With the assistance of a third party valuation firm, the Company attributed proceeds of $99.3 million, or $4.59 per share, to the common shares issued and attributed proceeds of $50.7 million, or $26.04 per share, to the Series A-1 participating preferred shares issued. The value attributed to the Series A-1 participating preferred shares reflects their liquidation preference of $21.45 per share on the date of issuance plus the value of a participating right, which is substantially identical to a common share, of $4.59 per unit.

Upon any liquidation, dissolution or winding-up of Holdings, each share of Series A-1 participating preferred stock shall be entitled to receive: (i) $21.45 plus the total amount of accrued dividends on such share (such amount being referred to as the “accreted value” per share), plus (ii) the amount payable in connection with such liquidation, dissolution or winding-up of Holdings with respect to one (subject to adjustment) share of common stock. At December 31, 2008, the liquidation preference was $24.48 per share. As of December 31, 2008, the total liquidation value of the participating preferred stock was approximately $47.7 million.

The Series A-1 participating preferred shares bear terms, including dividend rights and liquidation preferences, substantially identical to those of the outstanding Series A participating preferred shares.

The following table presents activity related to the outstanding Series A-1 participating preferred stock (shares and dollars in thousands):

	Shares Issued	Carrying Value			Unpaid Dividends			Unpaid Dividends Per Share
Balance at December 31, 2005	—	$	—		$	—
Issuance in connection with private offering	1,948		50,725			—
Accretion of cumulative 7% dividends	—		72			72
Balance at December 31, 2006	1,948		50,797			72		0.04
Accretion of cumulative 7% dividends	—		2,990			2,990
Dividend paid	—		(356	)		(356	)
Balance at December 31, 2007	1,948		53,431			2,706		1.39
Accretion of cumulative 7% dividends	—		3,198			3,198
Balance at December 31, 2008	1,948	$	56,629		$	5,904		3.03

Capital Stock of US Oncology, Inc.

The capital stock of US Oncology, Inc. consists of 100 authorized, issued and outstanding common shares, with a par value of $0.01 per share, all of which are owned by US Oncology Holdings, Inc.

Because Holdings’ principal asset is its investment in US Oncology, US Oncology provides funds to service the indebtedness of Holdings through payment of semi-annual dividends. US Oncology also provides funds for payment of general and administrative expenses incurred by Holdings to maintain its corporate existence and comply with the terms of the indenture governing its senior floating rate notes (the “Notes”). During the years ended December 31, 2008 and 2007, US Oncology paid Holdings dividends of $13.0 million and $34.9 million, respectively, to finance the semi-annual interest payments on its indebtedness and to support its corporate existence.

US Oncology may make additional distributions to Holdings to the extent permitted by restrictive covenants within its indebtedness and subject to the approval of its Board of Directors. During the year ended December 31, 2006, and in connection with a private offering of US Oncology Holdings, Inc. common and Series A-1 participating preferred stock, the Board of Directors approved a dividend to Holdings in the amount of $40.6 million. In January, 2007, the dividend, along with proceeds from the offering, were used to pay related transaction costs and a distribution to the holders of US Oncology Holdings, Inc. capital stock immediately prior to the offering.

NOTE 14—SEGMENT FINANCIAL INFORMATION

The Company’s reportable segments are based on internal management reporting that disaggregates the business by service line. The Company’s reportable segments are medical oncology services, cancer center services, pharmaceutical services, and research/other services (primarily consisting of cancer research services). The Company provides comprehensive practice management services for the non-clinical aspects of practice management to affiliated practices in its

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US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

medical oncology and cancer center services segments. In addition to managing their non-clinical operations, the medical oncology segment provides oncology pharmaceutical services to practices affiliated under comprehensive service agreements. The cancer center services segment develops and manages comprehensive, community-based cancer centers, which integrate various aspects of outpatient cancer care, from laboratory and radiology diagnostic capabilities to radiation therapy for practices affiliated under comprehensive service agreements. The pharmaceutical services segment distributes oncology pharmaceuticals to affiliated practices, including practices affiliated under the OPS model, and provides informational and other services to pharmaceutical manufacturers. The research/other services segment contracts with pharmaceutical and biotechnology firms to provide a comprehensive range of services relating to clinical trials.

Balance sheet information by reportable segment is not reported since the Company does not prepare such information internally.

The tables below present information about reported segments for the years ended December 31, 2008, 2007 and 2006, respectively (in thousands):

	Year Ended December 31, 2008
	Medical Oncology Services			Cancer Center Services			Pharmaceutical Services			Research/ Other			Corporate Costs			Eliminations (1)			Total
US Oncology, Inc.
Product revenues	$	1,658,484		$	—		$	2,426,155		$	—		$	—		$	(1,859,935	)	$	2,224,704
Service revenues		592,890			367,062			60,530			58,991			—			—			1,079,473
Total revenues		2,251,374			367,062			2,486,685			58,991			—			(1,859,935	)		3,304,177
Operating expenses		(2,178,154	)		(241,147	)		(2,386,718	)		(63,744	)		(76,884	)		1,859,935			(3,086,712	)
Impairment and restructuring charges		(380,018	)		(150	)		—			—			(4,761	)		—			(384,929	)
Depreciation and amortization		—			(37,916	)		(4,332	)		(374	)		(60,185	)		—			(102,807	)
Income (loss) from operations	$	(306,798	)	$	87,849		$	95,635		$	(5,127	)	$	(141,830	)	$	—		$	(270,271	)
US Oncology Holdings, Inc.
Operating expenses	$	—		$	—		$	—		$	—		$	(382	)	$	—		$	(382	)
Income (loss) from operations	$	(306,798	)	$	87,849		$	95,635		$	(5,127	)	$	(142,212	)	$	—		$	(270,653	)
Goodwill (2)	$	28,913		$	191,424		$	156,933		$	—		$	—		$	—		$	377,270
	Year Ended December 31, 2007
	Medical Oncology Services			Cancer Center Services			Pharmaceutical Services			Research/ Other			Corporate Costs			Eliminations (1)			Total
US Oncology, Inc.
Product revenues	$	1,541,186		$	—		$	2,200,178		$	—		$	—		$	(1,771,258	)	$	1,970,106
Service revenues		547,000			349,900			82,583			51,189			—			—			1,030,672
Total revenues		2,088,186			349,900			2,282,761			51,189			—			(1,771,258	)		3,000,778
Operating expenses		(2,008,528	)		(223,059	)		(2,186,632	)		(51,440	)		(84,326	)		1,771,258			(2,782,727	)
Impairment and restructuring charges		(1,552	)		(4,235	)		—			—			(9,339	)		—			(15,126	)
Depreciation and amortization		—			(39,131	)		(5,196	)		(542	)		(44,462	)		—			(89,331	)
Income (loss) from operations	$	78,106		$	83,475		$	90,933		$	(793	)	$	(138,127	)	$	—		$	113,594
US Oncology Holdings, Inc.
Operating expenses	$	—		$	—		$	—		$	—		$	(97	)	$	—		$	(97	)
Income (loss) from operations	$	78,106		$	83,475		$	90,933		$	(793	)	$	(138,224	)	$	—		$	113,497
Goodwill	$	408,913		$	191,424		$	156,933		$	—		$	—		$	—		$	757,270

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

	Year Ended December 31, 2006
	Medical Oncology Services			Cancer Center Services			Pharmaceutical Services			Research/ Other			Corporate Costs			Eliminations (1)			Total
US Oncology, Inc.
Product revenues	$	1,518,975		$	—		$	1,945,018		$	—		$	—		$	(1,641,852	)	$	1,822,141
Service revenues		561,459			323,917			50,646			53,220			—			—			989,242
Total revenues		2,080,434			323,917			1,995,664			53,220			—			(1,641,852	)		2,811,383
Operating expenses		(1,955,969	)		(207,940	)		(1,911,946	)		(52,306	)		(76,948	)		1,641,852			(2,563,257	)
Depreciation and amortization		—			(38,423	)		(3,960	)		(871	)		(40,080	)		—			(83,334	)
Income (loss) from operations	$	124,465		$	77,554		$	79,758		$	43		$	(117,028	)	$	—		$	164,792
US Oncology Holdings, Inc.
Operating expenses	$	—		$	—		$	—		$	—		$	(232	)	$	—		$	(232	)
Income (loss) from operations	$	124,465		$	77,554		$	79,758		$	43		$	(117,260	)	$	—		$	164,560
Goodwill (3)	$	409,322		$	191,615		$	156,933		$	—		$	—		$	—		$	757,870

(1) Eliminations represent the sale of pharmaceuticals from the distribution center (pharmaceuticals services segment) to the Company’s practices affiliated under comprehensive service agreements (medical oncology segment).

(2) During the year ended December 31, 2008, the Company recognized a $380.0 million impairment charge to goodwill in the medical oncology services segment.

(3) Goodwill in the amount of $27.5 million recorded as a result of the purchase price allocation for AccessMed acquisition in July, 2006 has been assigned to the pharmaceutical services segment based upon the nature of services and organizational integration of the acquired company.

NOTE 15—RELATED PARTY TRANSACTIONS

The Company receives a contractual service fee for providing services to its CSA practices. The Company also advances to its affiliated practices amounts needed for the purchase of pharmaceuticals and medical supplies necessary in the treatment of cancer. The advances are reflected on the Company’s Consolidated Balance Sheet as due from/to affiliated practices and are reimbursed to the Company as part of the service fee payable under its service agreements with its affiliated practices. Additionally, the Company may advance affiliated practices funds necessary to invest in or establish new ventures, including ventures in which the affiliated practice, rather than the Company, may have a direct interest.

The Company leases a portion of its medical office space and equipment from entities affiliated with certain of the stockholders of practices affiliated with the Company. Payments under these leases were $10.1 million in 2008, $8.0 million in 2007, and $7.3 million in 2006. Total future commitments are $143.8 million as of December 31, 2008.

As of December 31, 2008 and 2007, two of the Company’s directors, Dr. Mark Myron and Dr. Steven Paulson, are practicing physicians, whose practices are affiliated with the Company. In 2008, the practices in which these directors participate generated total net revenue of $1,126.4 million of which $266.2 million was retained by the practices and $860.2 million was included in the Company’s revenue. In 2007, those practices generated total net revenue of $1,087.9 million of which $221.4 million was retained by the practices and $866.5 million was included in the Company’s revenue.

As of December 31, 2006, the Company’s directors who were also practicing physicians with affiliated practices were Dr. Burton Schwartz and Dr. Steven Paulson. In 2006, the practices in which these directors participate generated total net revenue of $1,061.8 million of which $226.1 million was retained by the practices and $835.7 million was included in the Company’s revenue.

On December 21, 2006, the Company consummated a private offering of 21,649,849 shares of common stock and 1,948,251 shares of Series A-1 participating preferred stock to Morgan Stanley Principal Investments for aggregate proceeds of $150.0 million. In January, 2007, proceeds from the private offering, along with cash on hand, were used to pay a $190.0 million dividend to holders of common shares and preferred stock, under their participating rights, immediately before consummation of the private offering. In connection with the investment by Morgan Stanley, the Company agreed, subject to certain conditions, to give preferential consideration to retaining Morgan Stanley, or its designated affiliate, in connection with future securities offerings, financings and certain other transactions, to provide financial services. Mr. Doster, a member of the Company’s board of directors, is a Managing Director at Morgan Stanley & Co Incorporated. Morgan Stanley served as Joint Book Running Manager and was an initial purchaser of $191,250,000 of the Holdings Notes issued in March 2007, which notes were sold to Morgan Stanley for 97.5% of face value.

44

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 16—QUARTERLY FINANCIAL DATA

The following table presents unaudited quarterly information (in thousands):

	US Oncology Holdings, Inc.
	2008 Quarter Ended												2007 Quarter Ended
	Mar 31			Jun 30			Sep 30			Dec 31			Mar 31			Jun 30			Sep 30			Dec 31
Revenue	$	810,607		$	829,175		$	821,736		$	842,659		$	732,041		$	753,353		$	743,814		$	771,570
Income (loss) from operations		(355,503	)		30,431			28,170			26,249			28,469			31,188			26,311			27,529
Other expense, net		(51,632	)		(19,120	)		(38,033	)		(28,800	)		(44,664	)		(35,759	)		(35,265	)		(50,229	)
Net income (loss)		(396,673	)		8,159			(5,038	)		(15,658	)		(14,864	)		251			(3,655	)		(13,086	)
	US Oncology, Inc.
	2008 Quarter Ended												2007 Quarter Ended
	Mar 31			Jun 30			Sep 30			Dec 31			Mar 31			Jun 30			Sep 30			Dec 31
Revenue	$	810,607		$	829,175		$	821,736		$	842,659		$	732,041		$	753,353		$	743,814		$	771,570
Income (loss) from operations		(355,452	)		30,479			28,308			26,394			28,510			31,233			26,344			27,507
Other expense, net		(23,544	)		(23,452	)		(23,394	)		(25,691	)		(24,529	)		(24,654	)		(23,888	)		(25,890	)
Net income (loss)		(377,359	)		4,256			4,590			1,347			2,772			3,050			2,940			2,043

NOTE 17—FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-SUBSIDIARY GUARANTORS

The 9% Senior Secured Notes (the “Senior Notes”) and 10.75% Senior Subordinated Notes (the “Senior Subordinated Notes”) issued by US Oncology, Inc. are guaranteed fully and unconditionally, and on a joint and several basis, by all of the US Oncology’s wholly-owned subsidiaries. Certain of US Oncology’s subsidiaries, primarily joint ventures, do not guarantee the Senior Notes and the Senior Subordinated Notes.

Presented on the following pages are consolidating financial statements for US Oncology, Inc. (the issuer of the Senior Notes and the Senior Subordinated Notes), the subsidiary guarantors and the non-guarantor subsidiaries as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006. The equity method has been used with respect to US Oncology’s investments in its subsidiaries.

As of December 31, 2008, the non-guarantor subsidiaries include Cancer Treatment Associates of Northeast Missouri, Ltd., Colorado Cancer Centers, L.L.C., Southeast Texas Cancer Centers, L.P., East Indy CC, L.L.C., KCCC JV, L.L.C., AOR Real Estate of Greenville, L.P., The Carroll County Cancer Center, Ltd, Oregon Cancer Center, Ltd., and CCCN NW Building JV, LLC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

US Oncology, Inc.

Condensed Consolidating Balance Sheet

As of December 31, 2008

(in thousands, except share information)

	US Oncology, Inc. (Parent Company Only)			Subsidiary Guarantors		Non-guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and equivalents	$	—		$	104,475	$	1		$	—		$	104,476
Accounts receivable		—			354,889		9,447			—			364,336
Other receivables		—			25,707		—			—			25,707
Prepaid expenses and other current assets		527			20,155		—			—			20,682
Inventories		—			131,062		—			—			131,062
Deferred income taxes		4,373			—		—			—			4,373
Due from affiliates		649,233			—		—			(582,900	)(a)		66,333
Investment in subsidiaries		381,549			—		—			(381,549	)(b)		—
Total current assets		1,035,682			636,288		9,448			(964,449	)		716,969
Property and equipment, net		—			368,145		42,103			—			410,248
Service agreements, net		—			269,211		4,435			—			273,646
Goodwill		—			371,677		5,593			—			377,270
Other assets		24,339			38,724		1,657			—			64,720
	$	1,060,021		$	1,684,045	$	63,236		$	(964,449	)	$	1,842,853
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Current maturities of long-term indebtedness	$	9,507		$	—	$	1,170		$	—		$	10,677
Accounts payable		—			265,311		879			—			266,190
Intercompany accounts		(249,113	)		252,374		(3,261	)		—			—
Due to affiliates		—			714,957		4,856			(582,900	)(a)		136,913
Accrued compensation cost		—			40,070		706			—			40,776
Accrued interest payable		26,266			—		—			—			26,266
Income taxes payable		2,727			—		—			—			2,727
Other accrued liabilities		—			35,636		(832	)		—			34,804
Total current liabilities		(210,613	)		1,308,348		3,518			(582,900	)		518,353
Deferred revenue		—			6,894		—			—			6,894
Deferred income taxes		35,139			—		—			—			35,139
Long-term indebtedness		1,040,080			2,418		18,635			—			1,061,133
Other long-term liabilities		—			8,797		3,550			—			12,347
Total liabilities		864,606			1,326,457		25,703			(582,900	)		1,633,866
Commitments and contingencies
Stockholder’s equity
Common stock, $0.01 par value, 100 shares authorized issued and outstanding		1			—		—			—			1
Additional paid-in capital		560,768			—		—			—			560,768
Retained earnings		(365,354	)		—		—			—			(365,354	)
Total Company stockholder’s equity		195,415			—		—			—			195,415
Noncontrolling interests		—			—		13,572			—			13,572
Subsidiary equity		—			357,588		23,961			(381,549	)(b)		—
Total stockholder’s equity		195,415			357,588		37,533			(381,549	)		208,987
	$	1,060,021		$	1,684,045	$	63,236		$	(964,449	)	$	1,842,853

(a) Elimination of intercompany balances

(b) Elimination of investment in subsidiaries

46

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

US Oncology, Inc.

Condensed Consolidating Balance Sheet

As of December 31, 2007

(in thousands, except share information)

	US Oncology, Inc. (Parent Company Only)			Subsidiary Guarantors		Non-guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and equivalents	$	—		$	149,255	$	1		$	—		$	149,256
Accounts receivable		—			331,914		9,946			—			341,860
Other receivables		—			97,401		—			—			97,401
Prepaid expenses and other current assets		7			22,794		—			—			22,801
Inventories		—			82,822		—			—			82,822
Deferred income taxes		4,260			—		—			—			4,260
Due from affiliates		740,894			—		—			(680,599	)(a)		60,295
Investment in subsidiaries		651,999			—		—			(651,999	)(b)		—
Total current assets		1,397,160			684,186		9,947			(1,332,598	)		758,695
Property and equipment, net		—			360,837		38,784			—			399,621
Service agreements, net		—			218,832		5,018			—			223,850
Goodwill		—			751,677		5,593			—			757,270
Other assets		31,426			36,258		1,530			—			69,214
	$	1,428,586		$	2,051,790	$	60,872		$	(1,332,598	)	$	2,208,650
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Current maturities of long-term indebtedness	$	37,550		$	95	$	968		$	—		$	38,613
Accounts payable		—			240,318		775			—			241,093
Intercompany accounts		(249,113	)		251,812		(2,699	)		—			—
Due to affiliates		7,132			841,866		8,866			(680,599	)(a)		177,265
Accrued compensation cost		—			29,366		679			—			30,045
Accrued interest payable		24,949			—		—			—			24,949
Income taxes payable		6,735			—		—			—			6,735
Other accrued liabilities		—			38,549		(786	)		—			37,763
Total current liabilities		(172,747	)		1,402,006		7,803			(680,599	)		556,463
Deferred revenue		—			8,380		—			—			8,380
Deferred income taxes		33,532			—		—			—			33,532
Long-term indebtedness		1,013,478			2,239		15,852			—			1,031,569
Other long-term liabilities		—			7,435		3,731			—			11,166
Total liabilities		874,263			1,420,060		27,386			(680,599	)		1,641,110
Commitments and contingencies
Stockholder’s equity
Common stock, $0.01 par value, 100 shares authorized issued and outstanding		1			—		—			—			1
Additional paid-in capital		549,186			—		—			—			549,186
Retained earnings		5,136			—		—			—			5,136
Total Company stockholder’s equity		554,323			—		—			—			554,323
Noncontrolling interests		—			—		13,217			—			13,217
Subsidiary equity		—			631,730		20,269			(651,999	)(b)		—
Total stockholder’s equity		554,323			631,730		33,486			(651,999	)		567,540
	$	1,428,586		$	2,051,790	$	60,872		$	(1,332,598	)	$	2,208,650

(a) Elimination of intercompany balances

(b) Elimination of investment in subsidiaries

47

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

US Oncology, Inc.

Condensed Consolidating Statement of Operations

For the Year Ended December 31, 2008

(in thousands)

	US Oncology, Inc. (Parent Company Only)			Subsidiary Guarantors			Non-guarantor Subsidiaries			Eliminations			Consolidated
Product revenue	$	—		$	2,178,113		$	46,591		$	—		$	2,224,704
Service revenue		—			1,044,411			35,062			—			1,079,473
Total revenue		—			3,222,524			81,653			—			3,304,177
Cost of products		—			2,118,624			45,319			—			2,163,943
Cost of services:
Operating compensation and benefits		—			507,192			16,747			—			523,939
Other operating costs		—			317,419			4,528			—			321,947
Depreciation and amortization		—			68,650			4,140			—			72,790
Total cost of services		—			893,261			25,415			—			918,676
Total cost of products and services		—			3,011,885			70,734			—			3,082,619
General and administrative expense		343			76,540			—			—			76,883
Impairment, restructuring and other charges, net		—			384,929			—			—			384,929
Depreciation and amortization		—			30,017			—			—			30,017
		343			3,503,371			70,734			—			3,574,448
Income (loss) from operations		(343	)		(280,847	)		10,919			—			(270,271	)
Other income (expense)
Interest expense, net		(93,235	)		1,881			(1,403	)		—			(92,757	)
Intercompany interest								—			—			—
Other income (expense), net		—			2,213						—			2,213
Income (loss) before income taxes		(93,578	)		(276,753	)		9,516			—			(360,815	)
Income tax provision		(6,351	)		—			—			—			(6,351	)
Equity in subsidiaries		(270,561	)		—			—			270,561	(a)		—
Net income (loss)		(370,490	)		(276,753	)		9,516			270,561			(367,166	)
Less: Net income attributable to noncontrolling interests		—			(567	)		(2,757	)					(3,324	)
Net income (loss) attributable to the Company	$	(370,490	)	$	(277,320	)	$	6,759		$	270,561		$	(370,490	)

(a) Elimination of intercompany balances

48

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

US Oncology, Inc.

Condensed Consolidating Statement of Operations

For the Year Ended December 31, 2007

(in thousands)

	US Oncology, Inc. (Parent Company Only)			Subsidiary Guarantors			Non-guarantor Subsidiaries			Eliminations			Consolidated
Product revenue	$	—		$	1,923,071		$	47,035		$	—		$	1,970,106
Service revenue		—			997,280			33,392			—			1,030,672
Total revenue		—			2,920,351			80,427			—			3,000,778
Cost of products		—			1,879,576			45,971			—			1,925,547
Cost of services:
Operating compensation and benefits		—			463,088			16,089			—			479,177
Other operating costs		—			289,301			4,376			—			293,677
Depreciation and amortization		—			69,217			3,942			—			73,159
Total cost of services		—			821,606			24,407			—			846,013
Total cost of products and services		—			2,701,182			70,378			—			2,771,560
General and administrative expense		201			84,125			—			—			84,326
Impairment, restructuring and other charges, net		—			15,126			—			—			15,126
Depreciation and amortization		—			16,172			—			—			16,172
		201			2,816,605			70,378			—			2,887,184
Income (loss) from operations		(201	)		103,746			10,049			—			113,594
Other income (expense)
Interest expense, net		(98,831	)		4,885			(1,396	)		—			(95,342	)
Intercompany interest		24,167			(24,167	)		—			—			—
Income (loss) before income taxes		(74,865	)		84,464			8,653			—			18,252
Income tax provision		(7,447	)		—			—			—			(7,447	)
Equity in subsidiaries		89,498			—			—			(89,498	)(a)		—
Net income		7,186			84,464			8,653			(89,498	)		10,805
Less: Net income attributable to noncontrolling interests		—			(1,191	)		(2,428	)		—			(3,619	)
Net income attributable to the Company	$	7,186		$	83,273		$	6,225		$	(89,498	)	$	7,186

(a) Elimination of intercompany balances

49

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

US Oncology, Inc.

Condensed Consolidating Statement of Operations

For the Year Ended December 31, 2006

(in thousands)

	US Oncology, Inc. (Parent Company Only)			Subsidiary Guarantors			Non-guarantor Subsidiaries			Eliminations			Consolidated
Product revenue	$	—		$	1,775,084		$	47,057		$	—		$	1,822,141
Service revenue		—			958,525			30,717			—			989,242
Total revenue		—			2,733,609			77,774			—			2,811,383
Cost of products		—			1,726,924			26,714			—			1,753,638
Cost of services:
Operating compensation and benefits		—			442,789			15,217			—			458,006
Other operating costs		—			251,087			23,578			—			274,665
Depreciation and amortization		—			65,243			4,108			—			69,351
Total cost of services		—			759,119			42,903			—			802,022
Total cost of products and services		—			2,486,043			69,617			—			2,555,660
General and administrative expense		425			76,523			—			—			76,948
Depreciation and amortization		—			13,983			—			—			13,983
		425			2,576,549			69,617			—			2,646,591
Income (loss) from operations		(425	)		157,060			8,157			—			164,792
Other income (expense)
Interest expense, net		(93,227	)		1,307			(950	)		—			(92,870	)
Intercompany interest		26,411			(26,411	)		—			—			—
Income (loss) before income taxes		(67,241	)		131,956			7,207			—			71,922
Income tax provision		(27,509	)		—			—			—			(27,509	)
Equity in subsidiaries		136,775			—			—			(136,775	)(a)		—
Net income		42,025			131,956			7,207			(136,775	)		44,413
Less: Net income attributable to noncontrolling interests		—			—			(2,388	)		—			(2,388	)
Net income attributable to the Company	$	42,025		$	131,956		$	4,819		$	(136,775	)	$	42,025

(a) Elimination of investment in subsidiaries

50

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

US Oncology, Inc.

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2008

(in thousands)

	US Oncology, Inc. (Parent Company Only)			Subsidiary Guarantors			Non-guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(370,490	)	$	(276,753	)	$	9,516		$	270,561	(a)	$	(367,166	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including amortization of deferred financing costs		7,195			98,410			4,296			—			109,901
Deferred income taxes		1,494			—			—			—			1,494
Non-cash compensation expense		2,103			—			—			—			2,103
(Gain)/Loss on sale of assets		—			(2,213	)		—			—			(2,213	)
Impairment and restructuring charges		—			384,929			—			—			384,929
Equity earnings in joint venture		—			(1,929	)		—			—			(1,929	)
Equity in earnings of subsidiaries		270,561			—			—			(270,561	)(a)		—
(Increase) Decrease in:
Accounts and other receivables		—			48,719			499			—			49,218
Prepaid expenses and other current assets		(520	)		2,606			—			—			2,086
Inventories		—			(47,428	)		—			—			(47,428	)
Other assets		8			7			64			—			79
Increase (Decrease) in:
Accounts payable		—			31,781			104			—			31,885
Due from/to affiliates		7,653			(35,697	)		(4,010	)		—			(32,054	)
Income taxes receivable/payable		3,562			—			—			—			3,562
Other accrued liabilities		1,317			5,903			(200	)		—			7,020
Intercompany accounts		91,537			(88,475	)		(3,062	)		—			—
Net cash provided by operating activities		14,420			119,860			7,207			—			141,487
Cash flows from investing activities:
Acquisition of property and equipment		—			(81,727	)		(7,016	)		—			(88,743	)
Net payments in affiliation transactions		34,328			(86,795	)		—			—			(52,467	)
Net proceeds from sale of assets		—			5,347			—			—			5,347
Distribution from minority interest		—			2,116			—			—			2,116
Investment in joint venture		—			(3,257	)		—			—			(3,257	)
Net cash provided by (used in) investing activities		34,328			(164,316	)		(7,016	)		—			(137,004	)
Cash flows from financing activities:
Proceeds from other indebtedness		—			—			4,000			—			4,000
Repayment of term loan		(34,937	)		—			—			—			(34,937	)
Repayment of other indebtedness		(832	)		(324	)		(1,079	)		—			(2,235	)
Debt issuance costs		—			—			(143	)		—			(143	)
Net distributions to parent		(13,004	)		—			—			—			(13,004	)
Distributions to noncontrolling interests		—			—			(3,545	)		—			(3,545	)
Contributions from noncontrolling interests		—			—			576			—			576
Contributions of proceeds from exercise of stock options		25			—			—			—			25
Net cash used in financing activities		(48,748	)		(324	)		(191	)		—			(49,263	)
Increase (decrease) in cash and cash equivalents		—			(44,780	)		—			—			(44,780	)
Cash and cash equivalents:
Beginning of period		—			149,255			1			—			149,256
End of period	$	—		$	104,475		$	1		$	—		$	104,476

(a) Elimination of intercompany balances

51

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

US Oncology, Inc.

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2007

(in thousands)

	US Oncology, Inc. (Parent Company Only)			Subsidiary Guarantors			Non-guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	7,186		$	84,464		$	8,653		$	(89,498	)(a)	$	10,805
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including amortization of deferred financing costs		6,786			85,387			3,942			—			96,115
Deferred income taxes		992			—			—			—			992
Non-cash compensation expense		753			—			—			—			753
(Gain)/Loss on sale of assets		—			151			—			—			151
Impairment and restructuring charges		—			15,126			—			—			15,126
Equity earnings in joint venture		—			(1,576	)		—			—			(1,576	)
Equity in earnings of subsidiaries		(89,498	)		—			—			89,498	(a)		—
(Increase) Decrease in:
Accounts and other receivables		—			4,890			2,699			—			7,589
Prepaid expenses and other current assets		137			(4,690	)		—			—			(4,553	)
Inventories		—			(4,441	)		—			—			(4,441	)
Other assets		—			(5,413	)		26			—			(5,387	)
Increase (Decrease) in:
Accounts payable		(55	)		47,013			(145	)		—			46,813
Due from/to affiliates		(259	)		38,432			(8,654	)		—			29,519
Income taxes receivable/payable		(3,033	)		—			—			—			(3,033	)
Other accrued liabilities		528			8,676			(47	)		—			9,157
Intercompany accounts		311,614			(310,370	)		(1,244	)		—			—
Net cash provided by (used in) operating activities		235,151			(42,351	)		5,230			—			198,030
Cash flows from investing activities:
Acquisition of property and equipment		—			(88,618	)		(2,232	)		—			(90,850	)
Net payments in affiliation transactions		—			(134	)		—			—			(134	)
Net proceeds from sale of assets		—			750			—			—			750
Distribution from minority interest		—			254			—			—			254
Investment in joint venture		—			(4,745	)		—			—			(4,745	)
Proceeds from contract separation		—			1,555			—			—			1,555
Net cash used in investing activities		—			(90,938	)		(2,232	)		—			(93,170	)
Cash flows from financing activities:
Proceeds from other indebtedness		658			—			665			—			1,323
Repayment of term loan		(7,487	)		—			—			—			(7,487	)
Repayment of advance to parent		(150,000	)		—			—			—			(150,000	)
Repayment of other indebtedness		(1,802	)		778			888			—			(136	)
Debt issuance costs		(1,554	)		—			—			—			(1,554	)
Net distributions to parent		(75,501	)		—			—			—			(75,501	)
Distributions to noncontrolling interests		—			—			(4,550	)		—			(4,550	)
Contributions of proceeds from exercise of stock options		535			—			—			—			535
Net cash provided by (used in) financing activities		(235,151	)		778			(2,997	)		—			(237,370	)
Increase (decrease) in cash and cash equivalents		—			(132,511	)		1			—			(132,510	)
Cash and cash equivalents:
Beginning of period		—			281,766			—			—			281,766
End of period	$	—		$	149,255		$	1		$	—		$	149,256

(a) Elimination of intercompany balances

52

US ONCOLOGY HOLDINGS, INC. AND US ONCOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

US Oncology, Inc.

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2006

(in thousands)

	US Oncology, Inc. (Parent Company Only)			Subsidiary Guarantors			Non-guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	42,025		$	131,956		$	7,207		$	(136,775	)(a)	$	44,413
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization, including amortization of deferred financing costs		6,562			79,226			4,108			—			89,896
Deferred income taxes		4,422			—			—			—			4,422
Non-cash compensation expense		2,149			—			—			—			2,149
Gain on sale of assets		—			(196	)		—			—			(196	)
Equity in earnings of subsidiaries		(136,775	)		—			—			136,775	(a)		—
(Increase) Decrease in:
Accounts and other receivables		—			(40,340	)		(1,733	)		—			(42,073	)
Prepaid expenses and other current assets		(8	)		331			912			—			1,235
Inventories		—			(31,521	)		1,343			—			(30,178	)
Other assets		(351	)		3,557			—			—			3,206
Increase (Decrease) in:
Accounts payable		—			(39,123	)		(594	)		—			(39,717	)
Due from/to affiliates		(6,226	)		19,882			293			—			13,949
Income taxes receivable/payable		2,998			23			—			—			3,021
Other accrued liabilities		(757	)		(4,760	)		(971	)		—			(6,488	)
Intercompany accounts		(134,510	)		138,601			(4,091	)		—			—
Net cash provided by (used in) operating activities		(220,471	)		257,636			6,474			—			43,639
Cash flows from investing activities:
Net proceeds from sale of assets		—			9,261			—			—			9,261
Acquisition of property and equipment		—			(73,372	)		(9,199	)		—			(82,571	)
Acquisition of business, net of cash acquired		—			(31,378	)		—			—			(31,378	)
Net payments in affiliation transactions		—			(3,630	)		—			—			(3,630	)
Investment in unconsolidated subsidiary		—			(2,450	)		—			—			(2,450	)
Net cash used in investing activities		—			(101,569	)		(9,199	)		—			(110,768	)
Cash flows from financing activities:
Proceeds from term loan		100,000			—			—			—			100,000
Proceeds from other indebtedness		—			—			4,522			—			4,522
Repayment of term loan		(1,000	)		—			—			—			(1,000	)
Repayment of other indebtedness		(4,421	)		(137	)		(489	)		—			(5,047	)
Debt issuance costs		(714	)		—			—			—			(714	)
Net distributions to parent		(23,713	)		—			—			—			(23,713	)
Distributions to noncontrolling interests		—			—			(2,324	)		—			(2,324	)
Contributions from noncontrolling interests		—			—			1,015			—			1,015
Advance from parent		150,000			—			—			—			150,000
Proceeds from exercise of options		319			—			—			—			319
Net cash provided by (used in) financing activities		220,471			(137	)		2,724			—			223,058
Increase (decrease) in cash and cash equivalents		—			155,930			(1	)		—			155,929
Cash and cash equivalents:
Beginning of period		—			125,836			1			—			125,837
End of period	$	—		$	281,766		$	—		$	—		$	281,766

(a) Elimination of intercompany balances

53