UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934

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

For the fiscal year ended December 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________ to __________________

Commission file number 0-29574
------------------------------------------------------

ALTAREX CORP.
(Exact name of Registrant as specified in its charter)

Province of Alberta, Canada
(Jurisdiction of incorporation or organization)

303 Wyman Street, Waltham, MA 02451
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each Class Name of each exchange on which registered

None
- --------------------------------------------------------------------------------

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Common Shares without par value
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:

None
(Title of Class)

Number of outstanding shares of each of the Company's classes of capital or
common stock as of May 15, 2000: 63,308,908 Common Shares

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

Yes X No ---
---
Indicate by check mark which financial statement item the registrant has elected
to follow.

Item 17 X Item 18 ----
---
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes ___ No ___

TABLE OF CONTENTS

PART I............................................................................................................1

ITEM 1 - DESCRIPTION OF THE BUSINESS..............................................................................1

ITEM 2 - DESCRIPTION OF PROPERTY.................................................................................26

ITEM 3 - LEGAL PROCEEDINGS.......................................................................................27

ITEM 4 - CONTROL OF REGISTRANT...................................................................................27

ITEM 5 - NATURE OF TRADING MARKET................................................................................27

ITEM 6 - EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS......................................28

ITEM 7 - TAXATION................................................................................................29

ITEM 8 - SELECTED FINANCIAL DATA.................................................................................33

ITEM 9 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................34

ITEM 9A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................................37

ITEM 10 - DIRECTORS AND OFFICERS OF REGISTRANT AS OF MAY 15, 2000................................................37

ITEM 11 - COMPENSATION OF DIRECTORS AND OFFICERS.................................................................39

ITEM 12 - OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.........................................41

ITEM 13 - INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.........................................................42

PART II..........................................................................................................43

ITEM 14 - DESCRIPTION OF SECURITIES TO BE REGISTERED.............................................................43

PART III.........................................................................................................43

ITEM 15 - DEFAULTS UPON SENIOR SECURITIES........................................................................43

ITEM 16 - CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES................................43

PART IV..........................................................................................................43

ITEM 17 - FINANCIAL STATEMENTS...................................................................................43

ITEM 18 - FINANCIAL STATEMENTS...................................................................................43

ITEM 19 - FINANCIAL STATEMENTS AND EXHIBITS......................................................................43

GLOSSARY OF TERMS................................................................................................45

Note Regarding Forward Looking Statements

Certain statements in this document constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors which may cause the actual results, performance or
achievements of the company, or industry results, to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: the need for capital; changing market conditions; completion of
clinical trials; patient enrollment rates; uncertainty of preclinical,
retrospective and early clinical trial results; the establishment of
manufacturing processes and new corporate alliances; the timely development,
regulatory approval and market acceptance of the Company's products and the risk
associated with new products. See "Item 1. Description of the Business - Risk
Factors".

Exchange Rate Information

In this Registration Statement, unless otherwise specified, all monetary amounts
are expressed in Canadian dollars ("$" or "cdn. $"). The following table sets
out the exchange rates, based on the noon buying rates in New York City for
cable transfers in foreign currencies as certified for customs purposes by The
Federal Reserve Bank of New York, for the conversion of Canadian dollars into
United States dollars in effect at the end of the following periods, and the
average exchange rates (based on the average of the exchange rates on the last
day of each month in such periods) and the range of high and low exchange rates
for such periods.

U.S. Dollars Per Canadian Dollar
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----

End of Period 0.6925 0.6504 0.6988 0.7301 0.7323
High for the period 0.6925 0.7092 0.7484 0.7513 0.7527
Low for the period 0.6535 0.6341 0.6951 0.7235 0.7023
Average for the period 0.6744 0.6740 0.7224 0.7329 0.7305

The information set forth in this Registration Statement is as at December 31,
1999 unless an earlier or later date is indicated. On May 12, 2000, the noon
rate of exchange, as reported by the Federal Reserve Bank of New York for the
conversion of United States dollars into Canadian dollars, was U.S. $.6724 (U.S.
$1.00 = Cdn. $1.4872).

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PART I

ITEM 1 - DESCRIPTION OF THE BUSINESS

AltaRex Corp. (the "Company" or "AltaRex") develops and intends to commercialize
unique antibody-based therapeutics for cancer. The Company's lead product,
OvaRex(TM) MAb, is in late-stage clinical testing for ovarian cancer. The
Company's technology platform, Antibody-based ImmunoTherapy or AIT(R), has given
rise to four additional proprietary antibody-based cancer therapeutics.

Monoclonal antibodies ("MAbs") were one of the first classes of therapeutic
products upon which the biotechnology industry was founded. With nine U.S.
regulatory approvals in the last five years, and with MAbs representing more
than 25% of biotechnology products in clinical development (Hambrecht & Quist
Industry Report, March 15, 1999), the Company believes that there is a renewed
optimism in the medical community for the use of MAbs as anti-cancer
therapeutics. Genentech's Rituxan(R) and Herceptin(R) illustrate the potential
of antibody-based cancer therapeutics, sales of each surpassing $150 million in
their first year, exceeding first-year sales of all previously launched
anti-cancer therapeutics. Industry analysts estimate that the total therapeutic
antibody market in 1999 was $1.3 billion (Hambrecht & Quist Industry Report,
March 15, 1999).

The Company's unique AIT(R) products are modified murine monoclonal antibodies
that are administered in low dosages by intravenous ("IV") infusion. Most
chemotherapeutics on the market today are toxic to both cancerous and healthy
cells. The Company believes that AIT(R) MAbs will elicit an immune response that
kills cancer cells without impacting healthy cells. Furthermore, the Company
expects that AIT(R) MAbs will complement and/or supplement other cancer
therapeutics while preserving quality of life. The Company anticipates that its
manufacturing partners can supply the Company's AIT(R) MAbs within current
capacity with a very low cost of goods. This means the Company is unlikely to
expend substantial capital resources on manufacturing facilities as others have
had to do.

OvaRex(TM) MAb targets a tumor associated antigen ("TAA") known as CA 125,
over-expressed in greater than 80% of ovarian cancer patients (Bast, et al.
International Journal of Gynecological Pathology, 1983). TAAs are self-proteins
produced by the majority of solid tumors. They are thought to be released into
the bloodstream so that the immune system does not recognize the tumor as being
foreign. To counter this disguise, the Company's OvaRex(TM) MAb activates the
immune system to recognize the TAA and associated tumor and to mount a cellular
and humoral immune response. OvaRex(TM) MAb has been granted both Orphan Drug
status and Fast Track designation from the United States Food and Drug
Administration ("FDA") for the treatment of ovarian cancer following surgery and
initial chemotherapy.

Ovarian cancer will strike one in 55 women in the United States (National
Ovarian Cancer Coalition). This year approximately 23,000 new cases of ovarian
cancer will be diagnosed in the U.S. (American Cancer Society, 2000 Cancer Facts
& Figures) while those with disease will number roughly 191,000 (American Cancer
Society (SEER) 1996-1999). Treatment of ovarian cancer has not significantly
changed in the last fifteen years. The majority of women will respond to a
surgical procedure followed by chemotherapy and enter into a period of remission
popularly known as "watchful waiting". Most women, however, will experience
relapse. In spite of the widespread adoption of Bristol-Myers Squibb's
chemotherapeutic Taxol(R) (estimated worldwide sales of $1.5 billion) in the
management of late-stage ovarian cancer, long-term survival rates remain dismal.

OvaRex(TM) MAb is being tested in the watchful waiting period to prolong the
time to relapse with good quality of life and to extend life. Currently there is
no therapy approved for this population.

Initial clinical trial results indicate that OvaRex(TM) MAb is generally safe
and well tolerated and demonstrate evidence of clinical activity. For example,
in a retrospective analysis of 60 OvaRex(TM) MAb treated patients (compared to
247 control patients) with relapsed ovarian cancer, 5-year survival was 40% as
compared to 11% for those patients receiving only chemotherapy; median survival
was 59 months for patients receiving OvaRex(TM) MAb compared to 30 months for
controls - a highly significant difference. In a smaller (13 patients),
prospective, ongoing phase II trial in a similar patient population, some
patients have experienced a prolonged time to disease progression and prolonged
survival. Both studies have provided similar evidence of immune system
activation.

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The Company's three controlled ovarian cancer trials treat patients following
surgery and initial chemotherapy. Each trial has a primary endpoint of time to
disease relapse as well as secondary endpoints of survival and quality of life,
any of which can form the basis for regulatory approval. The Company's first
large scale North American double blind placebo-controlled trial of OvaRex(TM)
MAb has completed enrollment (345 patients) and the primary analysis for
efficacy will occur in the third quarter of 2001. A smaller double blind
placebo-controlled trial, initiated in December 1998, has also completed
enrollment (55 patients) and is scheduled for primary analysis in the second
quarter of 2001. An additional controlled trial of approximately 150 ovarian
cancer patients is planned for initiation in the second quarter of 2000. Primary
efficacy analysis for this trial is projected for 2002, but evolving interim
data will be supportive to an earlier submission with the lead 345 patient
trial. This new trial is anticipated to provide the basis for "bridging" to a
state of the art, low-cost manufacturing process and for potential registration
in Europe.

Key elements of the Company's AIT(R) Technology research, development and
commercialization strategies are:

- Focus exclusively on antibodies;

- Access public genomic and other data regarding new antibody
targets;

- Focus initially on cancer, subsequently on infectious and
autoimmune diseases;

- Realize value through partnerships and/or joint ventures (or by
directly marketing in market niches in North America).

The Company has four additional AIT(R) antibodies in various stages of
preclinical and clinical development. AR54 is an antibody targeting the tumor
associated antigen TAG72, another antigen different from CA 125, also expressed
in the majority of ovarian cancer patients (Schlom et al., in Serological Cancer
Markers 1992). The Company believes that multiple AIT(R) antibodies targeted to
different TAAs expressed in a variety of cancers - one antibody, multiple tumors
and one tumor, multiple antigens - will enhance clinical efficacy in any one
malignancy and will enable one antibody to be used in a variety of tumors
expressing a common TAA. AR54 affords the Company an opportunity to build
quickly and cost effectively on the OvaRex(TM) MAb development experience.

CORPORATE STRUCTURE

AltaRex Corp. ("AltaRex" or the "Company") was established on May 31, 1997 under
the laws of the Province of Alberta by the amalgamation of AltaRex Corp.
(formerly known as Allrich Energy Group Inc. ("Allrich")) and AltaRex Inc. Prior
to such amalgamation, Allrich, an inactive public company, acquired all of the
outstanding shares of AltaRex Inc. resulting in AltaRex Inc.'s shareholders
holding a controlling interest in Allrich. On June 27, 1997 articles of
amendment were filed to provide that meetings of shareholders may be held at any
place within Canada and the United States. The registered office of AltaRex is
located at 1900, 715-5 Avenue SW, Calgary, Alberta, T2P 2X6. The principal
business and administrative offices of AltaRex are located at Suite 125, 303
Wyman Street, Waltham, Massachusetts 02451.

AltaRex US, Corp. ("AltaRex US"), the Company's only subsidiary, was
incorporated under the laws of the State of Delaware and is wholly-owned by the
Company. With offices located in Waltham, Massachusetts, AltaRex US directs the
executive, business development, clinical, regulatory, development,
manufacturing, finance and investor relations efforts of the Company.

HISTORY

AltaRex was founded in November 1995 by Dr. Antoine Noujaim and a team of
collaborators to commence a business engaged in the discovery and development of
anti-cancer immunotherapeutics. Prior to founding AltaRex, Dr. Noujaim was
President of Biomira Research Inc. ("Biomira Research"), a wholly-owned
subsidiary of Biomira Inc. ("Biomira"). The Company believes that in 1995
Biomira decided to discontinue funding the operations of Biomira Research. Dr.
Noujaim and other collaborators believed that the B43 antibody research project
undertaken by Biomira Research (known as the OvaRex(TM) MAb Program) had the
potential to be further developed into a commercial product. As a result, in
November 1995, AltaRex acquired certain components of the OvaRex(TM) MAb

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Program and the OvaRex(TM) MAb trade name and trademark from Biomira and Biomira
Research and entered into an exclusive licensing agreement with Biomira pursuant
to which it acquired the exclusive worldwide right to use, develop, manufacture
and commercialize (for anti-idiotype induction therapy applications) products
based on the B43 antibody. See "Strategic Alliances and License Agreements -
Biomira License Agreement" and "Strategic Alliances and License Agreements -
Biomira Settlement".

BUSINESS STRATEGY

The Company's strategy is to focus its antibody development expertise to produce
unique, patent-protected, antibody-based cancer therapeutics based on its AIT(R)
Technology platform for commercialization by partners or on its own. The key
elements of the Company's strategy are to:

- Focus exclusively on antibodies for immunotherapy;

- Access general research and genomic data regarding disease
targets from partners, academic institutions, and from scientific
literature;

- Employ the AIT(R) Technology and related proprietary technology
of the Company to generate highly specific immune responses to
MAbs associated with TAAs and other disease related antigens;

- Coordinate further discovery and preclinical research and conduct
preclinical activities and clinical trials to enable the Company
to pursue regulatory approval for the products; and

- Realize value through strategic partnerships and/or joint
ventures or by marketing products in certain niche markets in the
U.S. and Canada ourselves.

The Company believes that this strategy will enable it to achieve the
patent-protected commercialization of antibody-based cancer therapeutics to
treat various cancers and other diseases including infectious and autoimmune
diseases.

PLAN OF OPERATION FOR FISCAL 2000

AltaRex's plan of operation for the year ending December 31, 2000 will focus on
continuing its clinical and product development of its lead product candidate,
OvaRex(TM) MAb, as well as additional development efforts on BrevaRex(TM) MAb
and AR54 MAb.

Regarding OvaRex(TM) MAb, the Company will continue to treat patients in its
on-going clinical trials. In addition, the Company plans to initiate and achieve
significant patient enrollment in another well controlled trial for OvaRex(TM)
MAb. This trial will be initiated in the second quarter of 2000 and the Company
expects to enroll 150 ovarian cancer patients. The Company also plans to report
on clinical data from its open label trials for OvaRex(TM) MAb as such data
becomes available during the year.

The Company plans to continue its product development activities on OvaRex(TM)
MAb in conjunction with Lonza Biologics plc ("Lonza Biologics"). Lonza Biologics
is currently producing cell-culture derived antibody for use in comparability
testing and clinical trials as well as to demonstrate commercial scale
production for regulatory approval purposes.

Regarding its other antibodies, the Company plans to conduct additional product
development work on AR54 MAb and BrevaRex(TM) MAb in anticipation of initiating
advanced clinical trials with these product candidates in the future. The
Company's ability to carry out this additional product development is contingent
upon the Company raising additional funding. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Description of
the Business - Risk Factors".

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MARKET FOR CANCER THERAPEUTICS

Overall, the annual costs for cancer in the United States are estimated at U.S.
$107 billion which includes U.S. $37 billion for direct medical costs, U.S. $11
billion for morbidity costs (loss of productivity) and U.S. $59 billion for
mortality cases. The world market for cancer therapeutics was U.S. $11.7 billion
in 1997 and is expected to reach U.S. $14.7 billion by 2000. (SCRIP Reports -
The Complete Guide to Cancer - Second Edition, 1998). North America
(predominantly the United States) represents 47% of the worldwide anti-cancer
drug market.

The majority of cancer patients are over the age of 65 and it is anticipated
that as the population continues to age, cancer treatment will likely become the
single largest health care expenditure in the United States and other
industrialized nations (Frost and Sullivan, World Cancer Therapeutic Markets,
August 1996).

APPROACHES TO CANCER THERAPY

Conventional approaches for the treatment of cancer have been based on a
combination of surgery, radiation and chemotherapy. Despite increasing resources
to develop new therapies for cancer, survival rates for cancer patients have not
materially improved over the last 15 years (American Cancer Society, 1998 Cancer
Facts & Figures). This ongoing inability to significantly improve survival or
quality of life for cancer patients creates a compelling need for alternative
medical strategies.

The potential market for antibody-based therapies in the management of advanced
cancer has rapidly expanded, as evidenced by the acceptance of IDEC
Pharmaceuticals Corp.'s Rituxan(R) (rituximab) for the treatment of
non-Hodgkin's lymphoma and Genentech Inc.'s Herceptin(R) (trastuzumab), sales of
each surpassing $150 million in the first year.

IMMUNOTHERAPEUTIC APPROACHES TO CANCER

The immunotherapeutic approach to cancer therapy is based on the principle that
the human immune system is capable of recognizing and eliminating cancer cells.
In cancer patients, the immune system has failed, for unknown reasons, to
respond to the presence of cancer cells. Immunotherapeutic approaches attempt to
stimulate and enhance an anti-cancer response by the patient's own immune
system.

The immunotherapeutic approach has inherent advantages in comparison to current
conventional treatment practices, which are often radical in nature and
associated with severe toxicities, thereby compromising the patient's quality of
life. In addition, tumors treated conventionally often re-emerge in more
aggressive and treatment-resistant forms. Immunotherapy, which can be utilized
in combination with conventional treatments or as a single treatment, can be
substantially less toxic than chemotherapy and therefore may improve the
patient's quality of life.

ALTAREX'S ANTIBODY-BASED IMMUNOTHERAPY (AIT(R))

The Company believes its AIT(R) approach to immunotherapy is fundamentally
different from conventional approaches to immunotherapy. AIT(R) Technology
involves the development of a murine antibody specific to a tumor associated
antigen. This antibody is subsequently modified by a proprietary technique and,
after appropriate processing, is injected by IV infusion into a patient.
Multiple immunological pathways are then invoked. This results in the formation
of a complex between the antibody and the patient's own circulating tumor
antigen. The tumor antigen is thereby targeted for an immune response.
Mechanistic studies have demonstrated the induction of the anti-idiotype network
or cascade and, more particularly, of the reconformation of the TAA presentation
and humoral and cellular responses to multiple epitopes of the TAA. It is the
Company's belief that this in turn results in an immune response having unique
characteristics, mobilizing both cellular and humoral pathways against the TAA
and the tumor cells, triggered by a tumor antigen specific modified murine
monoclonal antibody. The Company's interpretation of its AIT(R) mechanism is
depicted in the following schematic.

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[SCHEMATIC DEMONSTRATING THE MECHANISM OF THE COMPANY'S AIT(R)TECHNOLOGY]

AIT(R) TECHNOLOGY

OVERVIEW

The development of the Company's AIT(R) Technology and related products has been
facilitated by advances in the field of oncology that have demonstrated the
existence of cellular components known as tumor associated antigens.

The AIT(R) Technology is the process by which the Company produces, selects,
modifies and administers unique murine MAbs that can selectively bind to TAAs
that are highly associated with certain types of cancers. The Company has found
that the selective binding of MAbs to TAAs can induce a number of specific
anti-tumor immune responses in a cancer patient.

The Company believes that is has developed a method to isolate groups of TAAs
associated with specific cancers. The Company develops murine MAbs having a high
degree of specificity to a particular TAA. The Company has shown that the MAb
B43, the primary component of OvaRex(TM) MAb, has a high degree of specificity
to the TAA CA 125, an antigen over-expressed by over 80% of ovarian cancer
patients. The Company has developed murine MAbs that have specificity for TAAs
associated with seven of the ten most lethal forms of cancer in the United
States.

The Company believes that its AIT(R) approach to immunotherapy may provide the
following advantages over conventional approaches to immunotherapy:

- The AIT(R) immunotherapeutic induction approach uses a foreign
(murine) antibody to a single epitope of a multi-epitopic TAA
that induces the immune system to mount its own generalized
anti-tumor response to multiple epitopes of the TAA. The
technology mobilizes an immune response that is not restricted by
selection of idiotype or vaccine fragment;

- The AIT(R) immunotherapeutic approach has demonstrated in
clinical trials to date the stimulation of both a humoral and
cellular immune response;

- The AIT(R) immunotherapeutic approach utilizes low dosages and
intravenous infusion of antibody, minimizing the risk of toxicity
and lowering the cost of the treatment; and

- The use of a murine MAb induces a potent immune response that
would not result from chimeric or humanized antibodies.

The AIT(R) Technology is the subject of eight patent applications filed by the
Company with the United States, six of which have been filed in countries
throughout the world. The Company has been issued a patent by the Australian
patent office entitled "Method and Composition for Reconforming Multi-Epitopic
Antigens to Initiate an Immune Response" which broadly covers its AIT(R)
Technology platform. In addition, the Company has received from the U.S. Patent
and Trademark Office a notice of allowance of its claims in a separate patent
application covering a technique using ultraviolet light to modify antibodies
while enhancing the production of certain beneficial immune responses, being the
technique employed in, among other products of the Company, OvaRex(TM) MAb. The
Company's lead product, OvaRex(TM) MAb, is based on a murine MAb that is
licensed to the Company from Biomira. AltaRex may license (as it has for AR54)
or develop (as it has for BrevaRex(TM), GivaRex(TM) and ProstaRex(TM) MAbs)
other MAbs for future AIT(R) products.

MECHANISM OF ACTION OF THE AIT(R) TECHNOLOGY

The mechanism of action of the Company's AIT(R) Technology is based on what the
Company believes is the ability of the human immune system to generate a tumor
specific immune response to MAbs associated with specific TAAs. The Company
believes that certain murine MAbs may, upon administration to a cancer patient,
induce both a humoral and a cellular response by the patient's immune system.

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There are four basic steps in the AIT(R) Technology process:

STEP 1 - IDENTIFICATION OF THE TUMOR ASSOCIATED ANTIGEN

AltaRex has isolated specific antigens that have a high association with
particular cancers. To date, TAAs have been identified and isolated for ovarian,
breast, prostate, lung, pancreatic, colorectal and stomach cancers.

STEP 2 - DEVELOPMENT OF THE MONOCLONAL ANTIBODY

Using conventional techniques, AltaRex uses the identified antigens to develop a
murine monoclonal antibody (MAb)

STEP 3 - MODIFICATION OF MONOCLONAL ANTIBODY

Using the Company's proprietary technology, antibodies from step two are
modified to increase the degree to which the antibody is capable of eliciting an
immune response. This process results in a modified murine MAb that is ready for
use.

STEP 4 - INITIATION OF THE AIT(R) INDUCED RESPONSE

The Company believes that administration of the modified murine MAb into the
patient initiates a cascade characterized by at least three major events. The
uniqueness of the AIT(R) Technology may be attributed, in part, to these three
different mechanisms by which the antibody may exert its influence on tumor
cells. These mechanisms have been elucidated by the Company's detailed analysis
of the anti-idiotype network or cascade. In the first instance, the modified MAb
induces the production of an anti-idiotype network or cascade of antibodies.
Second, the immunogenicity of the antibody leads to a cellular immune response.
Finally, and most importantly, administration of the antibody results in the
formation of a TAA antibody complex in the blood, and a novel presentation of
the TAA to the immune system inducing a multi-epitopic response to the TAA. The
Company believes that the immune response is enhanced in the presence of human
anti-mouse antibodies ("HAMA") resulting from the administration of its murine
antibodies. The result of this cascade of events is a tumor specific humoral and
cellular response capable of killing cancer cells.

THE COMPANY'S PRODUCTS

AltaRex has selected five tumor-associated antigens for initial therapeutic
product development. The first and most advanced of these product candidates is
OvaRex(TM) MAb for the treatment of patients with tumors expressing CA 125.
Other products in development include AR54 MAb (for tumors expressing TAG72),
BrevaRex(TM) MAb (for tumors expressing MUC1), ProstaRex(TM) MAb (for tumors
expressing PSA) and GivaRex(TM) MAb (for tumors expressing CA 19.9). The
following chart sets forth the current development status of the Company's
products.

[CHART DEMONSTRATING THE CURRENT DEVELOPMENT STATUS OF THE COMPANY'S PRODUCTS]

OVAREX(TM) MAB OVERVIEW

In the United States, Canada and Europe, ovarian cancer causes more deaths than
any other cancer of the female reproductive tract. It is estimated that in the
United States approximately 23,000 new cases of ovarian cancer will be diagnosed
and approximately 14,000 women will die from this disease annually (American
Cancer Society, 2000 Cancer Facts & Figures).

Although detection of ovarian cancer at an early stage is now associated with an
improved chance for curative treatment, survival figures have not changed
significantly over the past 15 years. This is partially due to a lack of
efficient diagnostic methods or markers for routine tests that could increase
the number of patients diagnosed at the early stage of their disease.
Consequently, in approximately three-quarters of diagnosed patients, the tumor
has already progressed to an advanced stage (Stage III or IV), making treatment
more difficult. Of these Stage III and IV patients, more than 80% express the
tumor associated antigen CA 125. Patients diagnosed with advanced

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ovarian cancer usually demonstrate a survival time of less than two years
(Hoskins et al., Journal of Clinical Oncology, October 1992).

Prior to 1995, a research program for OvaRex(TM) MAb was initiated at Biomira
Research. In November 1995, the Company acquired from Biomira certain assets and
licensed certain technologies, including the antibody B43, which is utilized in
OvaRex(TM) MAb. Under the terms of a license agreement with Biomira, the Company
has a license to, among other things, use the antibody B43 in connection with
the development of anti-idiotype induction therapy products and applications.

OvaRex(TM) MAb uses a murine MAb having a high degree of specificity to a TAA
(CA 125) over-expressed by the majority of ovarian cancer patients. The Company
believes that the product acts as an immunotherapeutic agent by inducing or
amplifying the human body's immune response against ovarian cancer. This
response is characterized by a cascade of events involving the production of
specific antibodies and cytotoxic T-cells in the body which target the tumor
cells. The Company believes that the immune response is enhanced in the presence
of HAMA resulting from the administration of OvaRex(TM) MAb. The Company
believes that this combination of a humoral and cellular immune response
accounts for the observed improvement in the clinical outcome of patients
receiving the OvaRex(TM) MAb.

OVAREX(TM) MAB REGULATORY APPROVAL STRATEGY

AltaRex has received Orphan Drug status from the FDA for OvaRex(TM) MAb for the
treatment of ovarian cancer which may result in seven years of market
exclusivity provided that the Company continues to meet certain conditions
established by the FDA. See "Regulatory Approval Process - Orphan Drug Status".

Generally, the FDA approves the marketing of a drug based on adequate and
well-controlled trials. The FDA also has regulations which are intended to
expedite the development, evaluation and marketing of a new drug used for the
treatment of serious diseases for which there is no other satisfactory
treatment. In appropriate circumstances, the FDA may, in its discretion, approve
the marketing of a drug based on one adequate and well-controlled trial, if
supported by information from other related adequate and well-controlled studies
or if the trial is a single multi-centre trial. Fast Track designation makes a
product eligible for consideration for a number of programs, including meeting
with the FDA to discuss research protocol design and the possibility that the
marketing of the product may be approved immediately after the conclusion of
Phase II studies. As a result of FDAMA, obtaining Fast Track designation from
the FDA can result in approval based on a surrogate endpoint that is reasonably
likely to predict clinical benefit. Such approval may be subject to the
requirements that the sponsor conduct appropriate post-approval studies and
submit all promotional materials related to the Fast Track product at several
different points in time.

The Company has received a letter from the FDA dated December 17, 1998 stating
that its Request for Fast Track designation had been reviewed and, subject to
the Company continuing to meet certain criteria, the FDA has designated
OvaRex(TM) MAb as a Fast Track Development program (for the effect of OvaRex(TM)
MAb in delaying time to recurrence in patients with Stage III or IV ovarian
cancer who have undergone standard treatment, surgery and chemotherapy and have
minimal or no evidence of disease).

As part of the Company's regulatory approval strategy, it has conducted or will
conduct three controlled trials based on the surrogate endpoint of time to
disease relapse. The Company is also conducting open-label Phase II trials in
the United States and Canada with ovarian cancer patients populations that have
already experienced disease relapse. The Company intends to treat 500 patients
or more with OvaRex(TM) MAb (or an earlier radiolabelled imaging product) prior
to submission for approval by the FDA and other regulatory agencies. The Company
is also working with Lonza Biologics to scale-up cell culture-based OvaRex(TM)
MAb antibody that is expected to be studied in comparability trials with the
Company's current ascites-derived antibody material. Scaling-up production of
cell culture-derived materials will enable the Company to further pursue
regulatory approval and commercialization of OvaRex(TM) MAb. See "Risk Factors -
Reliance Upon Strategic Relationships".

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CLINICAL EXPERIENCE WITH OVAREX(TM) MAb

An earlier formulation of OvaRex(TM) MAb was administered to more than 200
patients for imaging purposes. Of the patients that received the imaging
antibody, about 50% were evaluated for an immunological response to OvaRex(TM)
MAb. The principal investigators observed that following the administration of
the imaging antibody, particularly in those patients who received more than one
dose, the patients developed a clinical response to treatment characterized by
what appeared to be unusually long survival times.

A subsequent retrospective statistical analysis, initially prepared by an
independent statistician at the University of Dortmund in Germany, identified a
statistically significant treatment effect in the survival time of patients
receiving the earlier OvaRex(TM) MAb, when compared to a historical control
group treated with conventional chemotherapy. An additional independent analysis
by a statistician at the University of Western Ontario in Canada was undertaken
with almost identical results. The following graph illustrates the adjusted
survival curves. In this Cox Statistical Analysis (described below), the median
length of survival was 30 months for the group treated with conventional
chemotherapy and 59 months for the group that received the earlier formulation
of OvaRex(TM) MAb. Additionally the five year survival rates as determined by
this analysis were 11.4% for the chemotherapy group and 40.7% for the group that
received the earlier formulation of OvaRex(TM) MAb.

[GRAPH ILLUSTRATING SURVIVAL CURVES OF PATIENTS WHO ARE TREATED WITH AND WITHOUT
OVAREX(TM)MAb]

Cox Statistical Analysis is a statistical method of comparing two different
populations with respect to the length of survival of patients who received a
drug with those who did not, while balancing the effect of other parameters that
can also affect survival.

CURRENT TRIALS WITH OVAREX(TM) MAb

Based on the encouraging results obtained in the early retrospective analysis
and a substantial body of evidence supporting the retrospective analysis based
on immunological laboratory research, the Company initiated a prospective
multi-center double blind placebo-controlled North American clinical trial with
ovarian cancer patients to evaluate the clinical utility of OvaRex(TM) MAb. In
Canada, the Company received approval from the HPB on October 1, 1996 to conduct
a Phase IIb clinical trial. Patient enrollment commenced in a number of major
cancer centers in Canada in early 1997. In the United States, the Company
received Orphan Drug status for the OvaRex(TM) MAb drug on November 26, 1996 and
received approval from the FDA on May 23, 1997 to proceed with a U.S. Phase IIb
trial. The first patient was treated in April 1998. In 1998, the FDA approved
the combination of the Canadian and United States clinical trials into one
combined, placebo-controlled and potentially pivotal trial that as of January
31, 2000 was completely enrolled with 345 patients participating. This trial is
expected to be completed with respect to the primary endpoint in July 2001.

The Company is also conducting a second and smaller double blind
placebo-controlled trial in the United States with an ovarian cancer patient
population with more advanced disease than the initial trial. In November 1998,
the Company passed the 30 day FDA Investigational New Drug Application waiting
period and in December 1998, began recruiting centers for this approximately 60
patient, multi-center clinical trial. As of March 31, 2000, this trial has
completed enrollment with 55 patients, principally in the United States. This
trial is currently scheduled for completion with respect to the primary endpoint
of time to disease relapse in 2001.

The Company will initiate an additional well controlled trial in the second
quarter of this year. The trial is expected to enroll 150 patients, using the
placebo group from the potentially pivotal trial as a contemporary control, and
should be completed with respect to the primary endpoint of time to disease
relapse in 2002.

The Company is also conducting additional open Phase II trials in relapsed
ovarian cancer patients in Canada and the U.S. The open Phase II trial underway
in Vancouver is fully enrolled with 13 patients.

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BREVAREX(TM) MAb

The Company is developing cancer therapeutics based on the AIT(R) Technology for
the treatment of MUC1 expressing cancers including multiple myeloma, lung and
prostate cancer. This tumor marker, also known as CA15.3 is mutated in 100% of
individuals with multiple myeloma (Treon et. al., Blood, 1999).

Multiple myeloma is a rarely curable disease that was previously considered to
be a bone cancer. It is actually a hematological malignancy related to leukemias
and lymphomas. It accounts for about 10% of all hematologic cancers. It is
estimated that approximately 14,000 new cases will be diagnosed in the United
States in 2000 with a total of about 11,000 deaths (American Cancer Society,
2000 Cancer Facts & Figures). A steady increase in incidence of the disease has
been noted over the past 30 years. Although multiple myeloma is sensitive to
chemotherapy, with a median survival of three to four years, most patients are
not cured and eventually succumb to their disease.

Multiple myeloma cells express tumor associated antigens that are ideal targets
for immunotherapy. One such antigen is the core protein of MUC1. The ability of
an antibody to bind to MUC1 is largely dependent on the extent of "mutation" of
the antigen. In contrast to breast and certain other more common cancers, MUC1
in multiple myeloma patients is highly mutated in virtually every patient,
thereby making antibody therapy targeting the core peptide more accessible.

The combination of MUC1 antigen target and the nature of the disease in question
(i.e. a discrete population for whom there is currently no curative alternative)
makes multiple myeloma ideally suited for AltaRex's development strategy. The
Company intends to apply for Orphan Drug status for BrevaRex(TM) MAb and should
be in a position to petition for Fast track designation.

The Company filed an Investigational New Drug Application or IND in late October
1998 to initiate a BrevaRex(TM) MAb Phase I clinical trial. In this trial, the
Company monitored safety and surrogate markers of immunological effect. The
Company has completed treatment without apparent toxicity. The Company also
intends to initiate a safety/efficacy trial in multiple myeloma patients in
2001.

AR54 MAb

The Company recently in-licensed a monoclonal antibody (AR54) to the TAA TAG 72
from the National Institutes of Health that will be developed with the Company's
proprietary AIT(R) Technology for the treatment of ovarian and other cancers.
This antibody, as a radiolabelled diagnostic, has been studied extensively,
including more recently at the University of Miami and several centers in
Europe. This prior experience will greatly expedite clinical development and the
Company believes that, following the production of cGMP antibody and preclinical
characterization, clinical evaluation could commence at the Phase II level in
2001.

At the recent Annual Meeting of the Society of Gynecological Oncologists, Dr.
Michael Method presented an abstract of encouraging data supporting the use of
AR54 for ovarian cancer on February 8, 2000, entitled, "Clinical Course of
Advanced Stage Ovarian Cancer Patients Following Stimulation of HAMA using
Radiolabeled MoAb B72.2 Prior to Reassessment Laparotomy". Data were from an
open-label clinical study involving consolidation therapy in 25 ovarian cancer
patients (in the same patient population as one of the OvaRex(TM) MAb double
blind placebo-controlled trials using a single dose of radiolabelled antibody).
Dr. Method reported that the 11 patients (44%) who developed a HAMA response
demonstrated an overall prolonged survival.

[CHART DEMONSTRATING SURVIVAL CURVES OF PATIENTS TREATED WITH AR54 WHO DEVELOP A
HAMA RESPONSE VERSUS PATIENTS TREATED WITH AR54 WHO DO NOT DEVELOP A HAMA
RESPONSE]

OTHER AIT(R) TECHNOLOGY INDICATIONS AND PRODUCTS

The Company's registration strategy is to pursue an initial indication based on
obtaining both Orphan Drug status and Fast Track designation and then to expand
clinical use to additional indications following FDA approval. In addition to
ovarian cancer and multiple myeloma, OvaRex(TM), BrevaRex(TM) and AR54 MAbs may
have applicability

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to other tumors expressing the target antigens. In the case of OvaRex(TM) and
AR54 MAbs, this would include endometrial, breast and non-small cell lung
cancers, and in respect of BrevaRex(TM) MAb would include breast, prostate and
non-small cell lung cancers. As depicted below, these types of cancer express
multiple tumor associated antigens to which the Company's products are targeted.

[CHART DEMONSTRATING THE EXPRESSION OF VARIOUS TUMOR ASSOCIATED ANTIGENS IN
VARIOUS CANCER TYPES AND THE ALTAREX PRODUCTS ASSOCIATED WITH SUCH TUMOR
ASSOCIATED ANTIGENS]

The Company's Scientific Advisory Board has endorsed a strategy of pursuing
multiple AIT(R) antibodies for the same tumor type, e.g. ovarian cancer, thereby
enhancing the possibility of effecting additional "cures" than from the use of a
single AIT(R) antibody.

The Company has commenced further exploratory research and early preclinical
work on two additional antibodies specific to the tumor associated antigens PSA
and CA19.9 for two other potential products, ProstaRex(TM) MAb and GivaRex(TM)
MAb, respectively. In addition, a component of the Company's strategy is to
continue to engage in discovery research activities, particularly the
possibility of accessing genomic data pertaining to additional TAAs as part of
an external collaboration, and to develop new technologies for antibody-based
immunotherapeutics to treat diseases in addition to cancer.

CANCER THERAPIES

OVERVIEW

Cancer is a disease characterized by uncontrolled growth and spread of abnormal
cells. The disease is believed to occur as a result of a number of factors such
as genetic predisposition and external (chemicals, radiation) and internal
(immune status, hormones) causes. Epidemiologists estimate that the disease is
responsible for the yearly death of approximately six million individuals
throughout the world including approximately 555,000 in the United States. It is
estimated that 40% of all Americans will ultimately be stricken with the
disease. The majority of industrialized nations report similar statistics
(Scientific American, September 1996).

The world market for cancer therapeutics totals approximately US$ 6.5 billion,
and is expected to increase to US$14.7 billion by the year 2002. The majority of
cancer patients are people over the age of 65 and it is anticipated that as the
population continues to age, cancer treatment will likely become the single
largest health care expenditure in the United States, Canada and other
industrialized nations (Frosst and Sullivan, World Cancer Therapeutic Markets,
August 1996).

To date, traditional approaches to the treatment of cancer have been based on a
combination of surgery, radiation and chemotherapy. Despite the increasing
amount of resources to develop new therapies for cancer, survival rates for
cancer patients have not materially improved over the last 15 years (American
Cancer Society, 1995 Cancer Facts & Figures). Furthermore, the incidence of
cancer is increasing annually, largely the result of the aging of the general
population and increased exposure to environmental carcinogens (Frosst and
Sullivan, World Cancer Therapeutic Markets, August 1996).

OVARIAN CANCER

Although detection of the tumor at an early stage is now associated with an
improved chance for curative treatment, survival figures have not changed
significantly over the past 15 years. This is partially due to a lack of
efficient diagnostic methods or markers for routine tests which could increase
the number of patients diagnosed at the early stage of their disease.
Consequently, in most diagnosed patients, the tumor has already progressed to an
advanced

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stage (Stage III or IV), making therapeutic approaches more difficult. The five
year survival rates for women with regional (Stage III) and distant (Stage IV)
ovarian cancer are 79% and 28%, respectively (American Cancer Society, 2000
Cancer Facts & Figures). Patients diagnosed with advanced ovarian cancer usually
demonstrate a survival time of less than two years (Hoskins et al., Journal of
Clinical Oncology, October 1992).

The therapeutic approach prescribed for those patients whose tumors have
progressed to an advanced stage consists of surgery (debulking) in combination
with adjuvant chemotherapy, which improves the patient's prognosis, particularly
if the residual tumor is smaller than two centimeters in diameter. Despite the
high rate of patients whose advanced stage cancer enters into clinical
remission, 90% of them will eventually suffer a recurrence of their disease, the
median time to disease relapse being 18 months (Hoskins et al., Journal of
Clinical Oncology, October 1992).

Those patients who either have residual tumors larger than two centimeters or
are left with progressive disease, or a no change situation after first-line
chemotherapy, have a particularly poor prognosis. These individuals typically
require additional chemotherapy within a period of only a few weeks or months.
Second-line chemotherapy, however, suffers from a lack of suitable therapeutic
agents as the tumors have usually become chemoresistant due to their inherent
heterogeneity and adaptability to preceding first-line treatment.

In recent years, new chemotherapeutic agents used either as single treatments or
in combination with other therapeutic agents have demonstrated an increase in
survival time by as much as 50%. However, despite their apparent positive effect
on survival time, these agents are generally associated with significant
toxicity and side effects which reduce the patient's quality of life.

Given the rigors of repeated chemotherapeutic treatments, and taking into
account the low response rates and the modest effects on survival time, patient
quality of life has become a major issue. This is increasingly true as ovarian
cancer affects a large number of older and postmenopausal women.

BREAST CANCER

Breast cancer is the most frequently diagnosed cancer in women. In North
America, breast cancer accounts for close to 18% of female cancer deaths; it is
exceeded only by lung cancer which has shown a resurgence since 1985. In 2000,
approximately 183,000 new cases of breast cancer are expected to be diagnosed in
the United States alone, with approximately 41,000 patients dying from it during
the year (American Cancer Society, 2000 Cancer Facts & Figures).

Breast cancer is typically considered a slow growing tumor. However, some
patients suffer from a more aggressive form of the disease and do not respond
well to any intervention. The disease has a propensity to metastasize to distant
sites in the body, beginning with nearby lymph nodes and then to other sites
such as the bone, liver and brain.

Survival is excellent with early stage disease and poor when extensive disease
is present. The use of aggressive screening with technologies such as digital
mammography appears to play an important role in mitigating early death due to
the disease. For the treatment of breast cancer, surgical treatment, either
lumpectomy or mastectomy, is usually combined with radiation therapy,
chemotherapy or hormonal therapy. Multi-agent chemotherapy is the usual form of
treatment. The five year survival rate is 96% for patients with localized breast
cancer, 77% for patients with regional disease and 21% in women with distant
metastases (American Cancer Society, 2000 Cancer Facts & Figures).

GASTROINTESTINAL CANCERS

Cancers of the gastrointestinal tract consist of three significant cancer
diseases; colorectal, stomach and pancreatic. New cases in the U.S. in 2000 for
these three diseases are estimated to be 130,000, 22,000 and 28,000
respectively. Moreover, it is estimated that 56,000, 13,000 and 28,000 Americans
will die in 2000 from these three cancers, respectively (American Cancer
Society, 2000 Cancer Facts & Figures).

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Colorectal cancer comprises the largest group, about 72%, of all new cases of
gastrointestinal cancer. At the time of diagnosis, approximately 75% of patients
with colon cancer have local or regional disease and 25% have metastatic disease
(Rubin (ed), Clinical Oncology, 7th Edition, 1993). The primary method of
treatment of colorectal cancer is surgery, often in conjunction with subsequent
radiation therapy. Approximately 61% of patients who undergo surgery for
locoregional colon cancer have developed recurrence of the disease. Most
recurrences (70%) occur within two years and almost all (90%) within five years
(Rubin (ed.), Clinical Oncology, 7th Edition, 1993). Adjuvant chemotherapy has
been shown to increase survival in patients with locoregional (Dukes' C) colon
cancer. The five year survival rate for early localized colorectal cancer is
about 90% for regional disease 65%, and less than 8% for metastatic disease
(American Cancer Society, 2000 Cancer Facts & Figures).

PROSTATE CANCERS

Prostate cancer is the second most common cause of cancer death of men in the
United States. It is estimated that there will be 180,000 new cases and 32,000
deaths from prostrate cancer in the U.S. during 2000. Fifty-eight percent of all
cases are discovered while still localized. The 5-year relative survival rate
for patients whose tumor is diagnosed at this stage is 100%. Overall, 67% of men
diagnosed with prostate cancer survive 10 years and 50% survive 15 years
(American Cancer Society, 2000 Cancer Facts & Figures).

Management believes that notwithstanding these impressive survival figures, with
an aging population the numbers of deaths due to prostate cancer will increase
with time. More importantly, there is a significant opportunity in patients with
advanced disease since current therapy for this population is very limited.

REGULATORY APPROVAL PROCESS

REGULATORY REQUIREMENTS

Regulations imposed by governmental authorities in Canada and the United States,
as well as their counterparts in other countries, are a significant factor in
the conduct of the research, development, manufacturing and eventual marketing
activities for the Company's proposed products. In Canada, these activities are
regulated by the Food and Drug Act (Canada) and the rules and regulations
promulgated thereunder, which are enforced by the Therapeutic Products Programme
of the HPB. Drugs and biological products are subject to rigorous regulation by
the FDA in the United States and by the European Medicines Evaluation Agency or
EMEA in Europe. The regulatory processes in Canada, the United States and Europe
follow similar essential steps although timing and results may be different.

The regulatory process for the development and approval of a new drug includes
the conduct of preclinical and clinical trials. The duration of those trials and
number of subjects required to meet the requirements of the various authorities
may vary according to, among other things, the disease studied, the seriousness
of the side effects, whether there is any current or conventional therapy, the
size of the target population, and the nature of the proposed treatment.

PRECLINICAL EVALUATION

The purpose of preclinical evaluation is essentially to determine the safety,
pharmacokinetics and efficacy of a new drug in animals before it is administered
to humans. The data collected during preclinical studies must be presented in
the form of an IND application to the regulatory authorities in the country
where clinical trials will be conducted. In the United States, unless otherwise
notified, clinical trials may begin 30 days after the IND application is filed,
whereas in Canada, clinical trials may not begin until 60 days after the
application is submitted and upon receipt of a "no objection" letter.

CLINICAL TRIALS

PHASE I CLINICAL TRIALS

Phase I clinical trials are commonly performed in healthy human subjects or,
more rarely, in selected patients with the targeted disease or disorder. The
objective of these trials is to study the pharmacokinetics and

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pharmacodynamics of the drug, as well as the toxicity of the treatment and the
patient's tolerance to it. Data regarding the absorption, distribution,
metabolism and excretion of the drug is also compiled in Phase I clinical
trials.

PHASE II CLINICAL TRIALS

In Phase II clinical trials, preliminary evidence is sought regarding the
pharmacological effects of the drug and the desired therapeutic efficacy with a
small number of patients with the targeted disease. At this stage, efforts are
made to evaluate the effects of various dosages and to establish an optimal
dosage level and dosage schedule. Additional safety data may also be compiled
from these trials.

Phase IIb (sometimes called Phase II/III) trials can be undertaken for serious
or fatal diseases and consist of well-controlled trials to evaluate efficacy
(and safety) in patients with the disease or condition to be treated, diagnosed
or prevented which may be deemed to be pivotal. Phase IIb trials can lead to
expedited review and accelerated approval by the FDA of the product for
commercial sale conditional upon the completion of subsequent Phase III
post-market information studies. Phase IIb trials incorporate certain design and
control features of Phase III trials. If data collected from Phase IIb trials is
statistically significant, authorization for accelerated approval may be sought
from the FDA.

PHASE III CLINICAL TRIALS

The Phase III clinical development program generally consists of expanded,
large-scale studies of patients with the targeted disease or disorder so as to
obtain definitive statistical evidence of the efficacy and safety of the
proposed product and dosing regimen in comparison with standard therapy.

After an appropriate analysis, the HPB, FDA or EMEA may interrupt clinical
trials at any stage if the drug has a clear efficacy advantage or,
alternatively, if the health of the subjects is threatened or the side effects
are not compensated for by the drug's benefits.

REGULATORY APPROVAL

Once Phase III clinical trials have been completed, the applicant will compile
all results, as well as all information concerning the product and its
composition, synthesis, manufacture, packaging and labeling methods, for the
purpose of obtaining approval to market the product. This application is known
either as a New Drug Application ("NDA") or a Biologics License Application
("BLA") for a well-characterized biologic, such as a monoclonal antibody, or a
combination of a Product License Application ("PLA") and an Establishment
License Application ("ELA") for all other biologicals in the United States and
as a New Drug Submission ("NDS") in Canada. Government authorities may require
that additional trials be performed after the product is marketed to assess its
long-term effects.

Since drug manufacturing is also regulated, the applicant is required to ensure
that it complies with cGMP's, which are quality standards that require the
control of production activities, raw-material procurement, complaint
management, product recalls, labeling and promotional material. In addition to
these standards, which are common to all drugs, certain biologics are subject to
ELAs and lot by lot release agreed to by FDA to ensure batch to batch
comparability.

In certain circumstances, the FDA may expedite the development, evaluation and
marketing of new drugs used for the treatment of serious diseases for which
there is no other satisfactory treatment by granting such programs a Fast Track
designation.

ORPHAN DRUG STATUS

Orphan Drug designation is designed to facilitate the introduction of drugs into
the market in the United States for use in treating rare diseases or conditions.
The disease must affect fewer than 200,000 patients in the United States. Upon
obtaining marketing approval for the drug, the FDA will grant a period of seven
years during which no

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approval will be given to a subsequent sponsor of the same drug product for the
same indication. The only exception to this is if a competitor can show
superiority of a second product which generally requires a head to head
comparison. Written application for Orphan Drug status must be submitted to the
Office of Orphan Drug Products Development of the FDA and must include
documentation supporting the request for the particular indication. Orphan Drug
designation also allows the manufacturer to apply for grants from the United
States government to help defray the cost of the clinical testing of the drug in
the United States and may allow for faster review of pending United States
patent applications filed with the United States Patent and Trademark Office.

AltaRex has received Orphan Drug status for OvaRexTM MAb for ovarian cancer
(prevalence of 191,000 patients, ACS SEER 1996-1999) and expects to file similar
applications for its other antibodies.

FAST TRACK DESIGNATION

Fast Track designation is a result of the FDA Modernization Act (FDAMA) of 1997
and is intended to facilitate development and expedite review of drugs to treat
serious and life-threatening conditions that fill an unmet medical need. It
allows the FDA to approve a marketing application for a product that shows
efficacy on either a defined clinical endpoint or a reasonably predictive
surrogate endpoint. It also allows the FDA to review the marketing submission on
a rolling basis, thereby shortening the review time. FDAMA also specifies FDA's
ability to approve marketing applications based on one, well controlled trial if
sufficient supporting data is available.

In December 1998, AltaRex received FDA Fast Track designation for OvaRex(TM) MAb
for the treatment of late stage ovarian cancer.

STRATEGIC ALLIANCES AND LICENSE AGREEMENTS

As part of its business strategy the Company may license the products it
develops to strategic partners. These partners would participate in the later
stage clinical development as required by the FDA, HPB, EMEA and other
international drug regulatory agencies and/or in the commercialization process.
The major objectives in seeking to license products to strategic partners
include:

- Minimizing development expenditures through cost sharing
programs;

- Arranging for access to the resources and experience of
pharmaceutical and large biotechnology corporations; and

- Maximizing long term revenue streams from royalties on the sale
of the Company's products.

The Company has no current plans for developing in-house manufacturing,
marketing or sales capabilities. The Company believes that the biopharmaceutical
industry has adequate manufacturing, marketing and sales capacity, which the
Company believes it may access through contractual or partnership arrangements.

The Company's current alliances and collaborative partnerships are described
below.

DRAXIMAGE INC.

The Company is a party to an alliance agreement with Frosst Radiopharmaceuticals
(a division of Merck Frosst Canada Inc.) dated February 20, 1996 and assigned to
Draximage Inc. ("Draximage"), a wholly-owned subsidiary of Draxis Health Inc.
("Draxis Health"), by agreement dated August 1, 1997 (the "Draxis Alliance
Agreement"). Under the Draxis Alliance Agreement, the Company and Draximage have
agreed to collaborate on the manufacture of pilot and scale-up batches of
OvaRexTM MAb. Draximage has agreed to manufacture (fill/finish) vials of
OvaRexTM MAb for clinical trials at a fixed price per vial and may have certain
rights with respect to the manufacture and/or marketing of the OvaRexTM MAb drug
in Canada for commercial purposes. There are various conditions to be fulfilled
by the parties before such manufacturing and/or marketing can commence.

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UNIVERSITY OF ALBERTA & NOUJAIM INSTITUTE

In 1998, the Company entered into a three year collaborative research agreement
(the "NI Research Agreement") with the University of Alberta and its Noujaim
Institute for Pharmaceutical Oncology Research (the "Noujaim Institute"). Under
the NI Research Agreement, the Noujaim Institute performed research on behalf of
and at the direction of the Company in the development of tumor binding agents
and therapeutic compositions. During the term of the NI Research Agreement the
Company compensated the University for services rendered in an amount not to
exceed $300,000 per year. The NI Research Agreement terminated on March 31,
2000. The Company may also owe to the University a royalty on any net sales (as
defined in the NI Research Agreement) derived from a prostate cancer
immunotherapeutic composition developed under the NI Research Agreement.

ALBERTA HERITAGE FOUNDATION AGREEMENT

The Alberta Heritage Foundation for Medical Research ("AHFMR") is a foundation
established by the Government of the Province of Alberta to support medical
research in the Province of Alberta. AHFMR contributed $500,000 to the funding
of the current Canadian double blind placebo-controlled trial of OvaRex(TM) MAb
pursuant to an agreement dated March 1, 1997 (the "AHFMR Agreement"). Commencing
on the earlier of March 1, 2002 and the first anniversary of regulatory approval
of OvaRex(TM) MAb, the Company is required to pay to AHFMR on an annual basis an
amount equal to the lesser of 5% of the gross product sales (as defined in the
AHFMR Agreement) received from commercialization of OvaRex(TM) MAb and $100,000.
The maximum total payments by the Company under the AHFMR Agreement are $1
million. In addition, in connection with the AHFMR Agreement, the Company
granted to AHFMR warrants to purchase 41,667 Common Shares at an exercise price
of $12.00 per share which expired on March 1, 2000.

BIOMIRA LICENSE AGREEMENT

The Company holds an exclusive worldwide license from Biomira for the use of the
murine working hybridoma cell bank and murine antibody MAb B43 (the "B43
Technology") for all anti-idiotype induction applications and products, as well
as for the use of such related experimental and clinical data for anti-idiotype
induction applications and products. MAb B43 is the functional component of the
OvaRex(TM) MAb product.

The Company obtained the license from Biomira pursuant to a license agreement
dated November 24, 1995 (the "Biomira License Agreement"). Under the terms of
the Biomira License Agreement:

- The Company paid an up-front fee of $150,000;

- The Company agreed to use its best efforts to commercialize the
B43 Technology;

- The Corporation agreed to spend a minimum of $3,000,000 to
develop the B43 Technology from December 1, 1995 to December 1,
1999; and

- The Company agreed to pay a royalty to Biomira on the sale of any
products developed using the B43 Technology as set out in the
Biomira License Agreement.

The Biomira License Agreement only pertains to the products that will
potentially use MAb B43 or a derivative thereof. Products developed by the
Company which do not incorporate the B43 Technology are not subject to the
Biomira License Agreement.

BIOMIRA SETTLEMENT

In February 1999, Biomira commenced legal action against AltaRex and certain
individuals affiliated with AltaRex asserting Biomira's ownership of an
invention disclosed in an international patent application filed by AltaRex. In
March 1999, AltaRex filed suit against Biomira seeking a declaratory judgement
concerning the terms of a license agreement between the companies and for
certain breaches of contract. On September 3, 1999, AltaRex and Biomira Inc.
announced that they had reached a settlement with respect to issues that were
the subject of litigation

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between the two biotechnology companies. In addition to the termination of the
respective lawsuits the settlement included the following:

- The license agreement that was the subject of AltaRex's suit
against Biomira was amended and restated to clarify certain terms
of the agreement that had given rise to issues raised by each of
the parties.

- Biomira agreed to assign to AltaRex any interest Biomira might
have in the patent application that was the subject of Biomira's
lawsuit against AltaRex. AltaRex granted to Biomira a
royalty-free, non-exclusive license, if and when this patent
issues, in relation to antigen-based or idiotypic cancer
vaccines. This agreement will also extend to two additional
antibodies, one of which will be royalty-bearing to AltaRex.

- AltaRex has paid, on behalf of Biomira, a $4.2 million repayment
of Biomira's liability to Industry Canada, an agency of the
Canadian government, under a 1991 contribution agreement. AltaRex
will similarly fund a $250,000 liability to the Alberta
Government, under a separate contribution agreement, upon
successful commercialization of OvaRex(TM) MAb. Both governments
had financially supported research and development work at
Biomira, and Biomira Research Inc., that ultimately principally
benefited AltaRex. As a result of the above, the Industry Canada
agreement has been terminated.

MANUFACTURING

The Company does not currently manufacture any of its products and it has no
immediate plans to establish manufacturing facilities for commercial production
of its therapeutic products. To date, the products for clinical trials are
manufactured by third parties. Instead, the Company's strategy, beyond the pilot
phase, is to manufacture and commercialize its products through strategic
alliances and licensing agreements with major pharmaceutical companies.

HUMAN RESOURCES

As at May 15, 2000, the Company had 25 employees, 3 of whom were located at the
Company's locations in Edmonton, Alberta and 22 of whom were located at the
Company's executive office in Waltham, Massachusetts. There were 8 employees
working in research and product development, 5 in clinical and regulatory
affairs, 7 in finance and administration and 5 in corporate affairs. Four of the
research and development employees hold Ph.D.s and one is an M.D.

None of the employees are governed by a collective bargaining agreement. The
Company believes that working relationships with its employees are excellent.

COMPETITION

The biopharmaceutical industry is intensely competitive. Many companies,
including other biopharmaceutical companies and biotechnology companies, are
actively engaged in activities similar to those of the Company, including
research and development of drugs for the treatment of cancer. More
specifically, competitors for the development of new therapeutic products to
treat cancer focus on MAb based cancer therapeutics, cancer vaccines and other
approaches that are based on either stimulation of the body's own immune
response or on MAbs. Many of these companies have substantially greater
financial and other resources, larger research and development capabilities and
more extensive marketing and manufacturing organizations than the Company. In
addition, some such companies have considerable experience in pre-clinical
testing, clinical trials and other regulatory approval procedures. There are
also academic institutions, governmental agencies and other research
organizations which are conducting research in areas in which the Company is
working; they may also market commercial products, either on their own or
through collaborative efforts.

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21

The Company expects to encounter significant competition for the pharmaceutical
products it plans to develop. Companies that complete clinical trials, obtain
required regulatory approvals and commence commercial sales of their products
before their competitors may achieve a significant competitive advantage. In
addition, certain pharmaceutical and biotechnology firms, including major
pharmaceutical companies and specialized structure-based drug design companies,
have announced efforts in the field of immunological therapy that exploit the
presence of TAAs, and the Company is aware that other companies or institutions
are pursuing development of new drugs and technologies directly targeted at
applications for which the Company is developing its biopharmaceutical products.

Based on its review of the industry, the Company is not aware of any other
company that is focusing on anti-idiotype induction therapy as practiced by the
Company. There are a number of companies however, that focus on the broader use
of antibodies to treat various diseases. These companies include Centocor Inc.,
Coulter Pharmaceuticals Inc., Genentech, IDEC, Medarex Inc. and Immunex Corp,
among others. The Company expects that its platform AIT(R) Technology will
attract significant additional competitors over time. In order to compete
successfully, the Company's goal is to develop proprietary positions in patented
drugs for therapeutic markets which have not been satisfactorily addressed by
conventional research strategies and, in the process, extend its expertise in
biopharmaceutical products design. See "Risk Factors - Competition".

PROPRIETARY PROTECTION

The Company vigorously pursues a policy of seeking patent protection to preserve
its proprietary technology and its right to capitalize on the results of its
research and development activities and, to the extent it may be necessary or
advisable, to exclude others from appropriating its proprietary technology. The
Company also relies upon trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop and maintain its competitive
position. The Company plans to prosecute and defend its intellectual property,
including any patents that may issue, and proprietary technology. The Company
regularly searches for third-party patents in its fields of endeavor, both to
shape its own patent strategy as effectively as possible and to identify
licensing opportunities.

PATENTS

In general, the Company pursues a policy of obtaining patent protection both in
the United States and in selected foreign countries for subject matter
considered patentable and important to its business. In addition, a portion of
the Company's proprietary position is based upon the use of technology and
products the Company has licensed from others, including MAb B43 that binds to
an ovarian cancer antigen. This license agreement generally requires the Company
to pay royalties upon commercialization of products covered by the licensed
technology.

The Company owns eight pending United States patent applications for its
therapeutic products and processes. The Company also owns 21 corresponding
national patent applications in foreign countries and 2 international patent
applications. These patent applications cover various aspects of the Company's
core technology products, processes, and the methods for their production and
use. These patent applications include both broad and specific claims to various
tumor therapies. The Company will continue to aggressively protect its
technology with new patent filings with the intent of further extending its
patent coverage.

The Company has been issued a patent by the Australian patent office entitled
"Method and Composition for Reconforming Multi-Epitopic Antigens to Initiate an
Immune Response" which broadly covers its AIT(R) Technology platform. The issued
patent covers a method for treating cancer where a foreign antibody binds to a
single epitope of a multi-epitopic non-immunogenic TAA circulating in the blood
and forms a complex, which enables the immune system to recognize it as foreign
and to mount a vigorous humoral and cellular response to the TAA and
consequently the tumor. In addition, the Company has received from the U.S.
Patent and Trademark Office a notice of allowance of its claims in a separate
patent application covering a technique using ultraviolet light to modify
antibodies while enhancing the production of certain beneficial immune
responses, being the technique employed in, among other products of the Company,
OvaRex MAb.

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22

TRADEMARKS AND TRADE NAMES

The Company also relies upon trademarks and trade names to protect its
technology. The Company has a registered trademark for its AIT(R) mark in the
United States and Canada and owns a Canadian registration for the trademark
IRT(R). As well, the Company has pending applications to register trademarks in
various countries for the AltaRex name as well as for the brand names
(OvaRex(TM), BrevaRex(TM) and GivaRex(TM) MAbs) relating to its developing
products.

TRADE SECRETS

The Company also relies in part on trade secrets, unpatented know-how and
continuing technological advancements to maintain its competitive position. It
is the practice of the Company to enter into confidentiality agreements with
employees, consultants and corporate sponsors. There can be no assurance,
however, that these measures will prevent the unauthorized disclosure or use of
the Company's trade secrets and know-how.

CLINICAL ADVISORY BOARD

The Company maintains a Clinical Advisory Board (the "Advisory Board") composed
of outside internationally recognized clinicians and scientists. The Advisory
Board meets periodically to review the operational aspects of the Company's
clinical program and make appropriate recommendations with regard to the
perceived trends and direction of other companies. The members of the Advisory
Board have no rights to the Company's technology and each member has signed a
confidentiality agreement with the Company. Advisory Board members receive an
honorarium of U.S. $15,000 per year. The current composition of the Advisory
Board is:

Name Institution
- ---- -----------

Robert Ozols, M.D., Ph.D. Fox Chase Cancer Center, United States
Roger Cohen, M.D. University of Virginia, United States
Richard Margolese, M.D. McGill University, Canada
Daniel Von Hoff, M.D. Cancer Therapy and Research Center, United States,
James Holland, M.D. Mount Sinai School of Medicine, New York, United States.

ROBERT OZOLS, M.D. AND Ph.D is Senior Vice President for Medical Science at Fox
Chase Cancer Center, Philadelphia. Dr. Ozol serves as Chairman of the Advisory
Board and is also Medical Director at the Hospital of the Fox Chase Cancer
Center and Professor of Medicine at Temple University. He is currently serving
on the Oncologic Drugs Advisory Committee of the FDA. The recipient of the 1990
Cancer Research Award from the Milken Medical Foundation, Dr. Ozols has also
been elected to the American Society for Clinical Investigation. Dr. Ozols
received his medical degree and a Ph.D. in Biochemistry at the University of
Rochester in New York.

ROGER COHEN, M.D. is Associate Professor at the University of Virginia,
Department of Medicine, Division of Haematology-Oncology and Director of the
Clinical Trials Office. Dr. Cohen is also currently an advisor and consultant to
the FDA at the Center for Biologics Evaluation and Research. Dr. Cohen received
his medical degree at Harvard Medical School and is the recipient of several
awards including the FDA Special Recognition Award.

RICHARD MARGOLESE, M.D. is a Professor in the Department of Oncology, and
Herbert Black Chair in Surgical Oncology, McGill University. Dr. Margolese is
also Associate Director of Research at Lady Davis Institute, past President of
the National Cancer Institute of Canada and past Co-Chairman of the Management
Committee of the Canadian Breast Cancer Research Initiative. Dr. Margolese
received his medical degree at McGill University and was awarded the Order of
Canada in 1997 - Canada's highest honour for lifetime achievement.

DANIEL VON HOFF, M.D. is Director of the Institute for Drug Development at the
Cancer Therapy and Research Center in San Antonio, Texas. Dr. Von Hoff is
President-Elect of the American Association for Cancer Research and recipient of
the Richard and Hinda Rosenthal Award for clinical investigation. He is also a
Professor for the Department of Cellular and Structural Biology and a Clinical
Professor in the Division of Medical Oncology at The University of Texas Health
Science Center. He is currently serving as President of the American Association
for

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Cancer Research, which is the largest cancer research organization for
professionals in the United States. Dr. Von Hoff is internationally known for
his work in drug development research and has been involved in laboratory and
clinical studies of more than a dozen new anticancer agents that have been
approved by the FDA. Dr. Von Hoff received his medical degree from Columbia
College of Physicians and Surgeons in New York.

JAMES HOLLAND, M.D. is Distinguished Professor of Neoplastic Diseases,
Department of Medicine, Mount Sinai School of Medicine, New York. Dr. Holland
holds both a Medical Doctorate degree from Columbia University and a Doctor of
Science degree from State University of New York. He is past-President of both
the American Society of Clinical Oncology and the American Association of Cancer
Research and has contributed to over 590 scientific publications.

SCIENTIFIC ADVISORY BOARD

The Scientific Advisory Board of the Company is composed of internationally
recognized scientists. The Board meets to review the operational aspects of the
Company's technology and discovery research programs. With the exclusion of Dr.
Noujaim, Scientific Advisory Board members receive an annual honorarium of
U.S.$5,000 plus additional per diem amounts as outlined in their agreements with
the Company.

Name Institution
- -------------------------------- --------------------------------------------------------

Antoine Noujaim, Ph.D. AltaRex Corp. (Chief Scientific Officer), USA and Canada

Jeffrey Schlom, Ph.D. National Cancer Institute at the National Institutes of Health, USA

Louis Weiner, M.D. Fox Chase Cancer Center, USA

Aldo Serafini, M.D. University of Miami, USA

Constantin Bon, M.D., Ph.D. Mt. Sinai School of Medicine, USA

Dean Mann, M.D., Ph.D. University of Maryland, USA

ANTOINE NOUJAIM, Ph.D. is Chairman of the Board of Directors, Chairman of the
Scientific Advisory Board and Chief Scientific Officer at AltaRex Corp. He is
also presently a Professor Emeritus at the University of Alberta. He was the
co-founder of Biomira Inc. in 1985 where he assumed the position of Senior Vice
President and Chief Operating Officer for the Immunoconjugate Division of the
Company. In 1994, he became President of Biomira Research Inc., a fully owned
subsidiary of Biomira Inc. In December 1995, he founded AltaRex. Dr. Noujaim
received his undergraduate degree in Pharmacy from Cairo University in 1958. He
obtained his Master and Ph.D. degree in Bionucleonics from Purdue University in
1963 and 1965 respectively. He joined the University of Alberta as an Assistant
Professor of Nuclear Pharmacy in 1966, was promoted to full Professor in 1973,
and chaired this Division for several years.

JEFFREY SCHLOM, Ph.D. is Chief of the Laboratory of Tumor Immunology and Biology
at the National Cancer Institute at the National Institutes of Health. Dr.
Schlom received his B.S. from Ohio State University in 1964, his M.S. from
Adelphi University in 1966, and his Ph.D. in 1969 from the Waksman Institute of
Microbiology at Rutgers University. He is a member of several professional
societies and advisory boards. In addition, he has authored more than 500
scientific publications and holds numerous patents for monoclonal antibody and
recombinant vaccine generation and uses. Dr. Schlom currently serves on the
editorial boards of nine scientific journals and has won numerous scientific
awards.

LOUIS WEINER, M.D. is Chairman of the Department of Medical Oncology at the Fox
Chase Cancer Center. Dr. Weiner joined the Fox Chase Cancer Center in 1984 where
he has served as Chairman of the Department of Medical Oncology since 1994. He
is a Senior Member in the Division of Medical Sciences. Dr. Weiner's research
focuses on the use of antibody-based molecules to target tumors, with emphasis
on understanding the principles of tumor targeting and the use of antibodies to
initiate tumor specific immune responses. Dr. Weiner is the Eastern Cooperative
Oncology Group's (ECOG) Principal Investigator for Fox Chase Cancer Center, the
Chairman of the ECOG Committee on Biologic Response Modifiers, and is a member
of the ECOG Gastrointestinal Cancer Steering

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24

Committee. He is an active lecturer and has been published extensively on the
subject of cancer therapies. Dr. Weiner received his M.D. from Mount Sinai
School of Medicine.

ALDO SERAFINI, M.D. has been a Professor of Medicine and Radiology at the
University of Miami, School of Medicine since 1984. Dr. Serafini received a M.D.
degree from the University of Witwatersrand, Johannesburg, South Africa in 1966.
From 1967 to 1972, he was a resident physician at the Jackson Memorial Hospital
in Miami. Dr. Serafini is a member of the attending staff at the University of
Miami Hospital and Clinic, the University of Miami/Jackson Memorial Medical
Center and at the Cedars Medical Center in Miami. Dr. Serafini has numerous
teaching, university committee and administrative responsibilities and is on the
editorial board and acts as a reviewer for several academic journals. Dr.
Serafini has had 10 visiting professorships awarded to him and has had over 233
publications including articles, books, monograms and abstracts.

CONSTANTIN BONA, M.D. is professor of Microbiology at the Mt. Sinai School of
Medicine, New York, New York. As the author of more than 280 scientific
publications and 12 textbooks in the field, Professor Bona's contributions have
been most influential in bringing forth the potential of this technology in the
area of cancer therapy. He is also a member of the Royal Society of Medicine,
Chief Editor of four International Scientific journals, and serves on the
Editorial Board of more than 16 other journals.

DEAN MANN, M.D., Ph.D. is head of the Division of Immunogenetics at the
University of Maryland and has served for more than 25 years at the National
Cancer Institute (NCI) in various capacities including Head of Biochemical
Epidemiology and Head of Immunogenetics at the NCI. His work, which was
published in more than 220 scientific manuscripts, is recognized for its
contribution in the field of viral immunology and its relationship to cancer.
Dr. Mann received a M.D. degree from the St. Louis University School of
Medicine, St. Louis, MO.

RISK FACTORS

The following risk factors and other information included in this document
should be carefully considered. The risks and uncertainties described below are
not the only ones the Company faces. Additional risks and uncertainties not
presently known to the Company or that the Company currently deems immaterial
also may impair its business operations. If any of the following risks actually
occur, the Company's business, financial condition and operating results could
be materially adversely affected.

CAPITAL REQUIREMENTS

As of December 31, 1999, the Company had cash, cash equivalents and short-term
investments of $7.2 million. The Company believes that its available cash, cash
equivalents and short-term investments, including the proceeds of the sale of
Special Warrants on February 29, 2000, and interest earned thereon, should be
sufficient to finance its operations and capital needs into the fourth quarter
of 2000. The Company's future capital requirements will depend on many factors,
including continued scientific progress in its product discovery and development
program, progress in its preclinical and clinical evaluation of product
candidates, time and expense associated with filing, prosecuting and enforcing
its patent claims and costs associated with obtaining regulatory approvals.

In order to meet such capital requirements, the Company intends to pursue
additional capital raising opportunities as well as strategic relationships with
pharmaceutical or large biotechnology companies. These activities would likely
result in the issuance of additional equity securities of the Company. The
Company has filed a Preliminary Prospectus in Canada for the sale of Common
Shares. The amount of capital to be raised and the number of shares to be issued
have not been determined. There can be no assurance that additional funding will
be available or, if available, that it will be available on acceptable terms. If
adequate funds are not available, the Company may have to reduce substantially
or eliminate expenditures for research and development, testing, production and
marketing of its proposed products, or obtain funds through arrangements with
corporate partners that require the Company to relinquish rights to certain of
its technologies or products. There can be no assurance that the Company will be
able to raise additional capital if its capital resources are exhausted. The
ability of the Company to arrange such financing in the future will depend in
part upon the prevailing capital market conditions as well as the business
performance of the Company. There can be no assurance that the Company will be
successful in its efforts to arrange additional financing if needed or that any
such additional financing will be available on terms satisfactory to the
Company.

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NO ASSURANCE OF SUCCESSFUL DEVELOPMENT OR MARKET ACCEPTANCE

Prospects for companies in the biotechnology industry generally may be regarded
as uncertain given the nature of the industry and, accordingly, investments in
biotechnology companies should be regarded as highly speculative. The Company's
realization of its long-term potential will be dependent upon the successful
development and commercialization of products currently under development. There
can be no assurance that these products will be developed successfully or
receive regulatory approval. The new products of the Company are currently in
the research and development stages, the riskiest stages for a company in the
biotechnology industry. There can be no assurance that the research and
development programs conducted by the Company will result in commercially viable
products. To achieve profitable operations, the Company, alone or with others,
must successfully develop, introduce and market its products. To obtain
regulatory approvals for the products being developed and to achieve commercial
success, clinical trials must demonstrate that the products are safe for human
use and that they demonstrate efficacy. Unsatisfactory results obtained from a
particular study relating to a program may cause the Company to abandon its
commitment to that program. No assurances can be provided that any future animal
or human test, if undertaken, will yield favourable results.

There can be no assurance that any products successfully developed by the
Company, if approved for marketing, will ever achieve market acceptance. The
Company's products, if successfully developed, will compete with a number of
traditional drugs and therapies manufactured and marketed by major
pharmaceutical and other biotechnology companies, as well as new products
currently under development by such companies and others. The degree of market
acceptance of any products developed by the Company will depend on the clinical
efficacy and safety of the product candidates, their potential advantage over
alternative treatment methods, and reimbursement policies of government and
third-party payors. There can be no assurance that physicians, patients or the
medical community in general will accept and utilize any products that may be
developed by the Company, and the lack of such market acceptance would have a
material adverse effect on the Company's business, financial condition and
results of operations.

RELIANCE ON STRATEGIC RELATIONSHIPS

The Company's future success is dependent on the development and maintenance of
strategic relationships. The Company is not presently a party to any strategic
relationship relating to any of its products, including OvaRex(TM) MAb. The
Company intends to seek to enter into strategic relationships with strategic
partners to participate in and finance the later stage clinical development of
products and/or to commercialize product(s). Alternatively, the Company may
elect to market an AIT(R) product(s) on its own.

If the Company fails to enter into such strategic relationships on terms
favorable to the Company or if these strategic partners fail to effectively
complete the clinical trials, the regulatory approval of such products may be
delayed, and such delay may have a materially adverse effect on the Company's
results of operations and business. The Company may also rely on strategic
partners to market its products. If the Company fails to enter such strategic
partnerships or if these strategic partners fail to effectively market such
products, the Company may lose the opportunity to successfully commercialize the
products. There can be no assurance that the Company will be able to enter these
strategic partnerships on terms that are acceptable to the Company. Similarly if
the Company decides to market an AIT(R) product(s) on its own, there can be no
assurance that the Company will be successful in developing or commercializing
the product(s).

The Company does not manufacture its own antibodies but has, and will seek to
enter into, agreements with third parties to manufacture its antibodies.
Pursuant to the Draximage Alliance Agreement referred to above under
"Business-Draximage Inc.", Draximage Inc. will fill/finish OvaRex(TM) MAb vials
for clinical trials and may have certain contingent rights with respect to the
manufacture and/or marketing in Canada of the OvaRex(TM) MAb drug for commercial
purposes. In addition, the Company is working with other vendors to fill/finish
OvaRex(TM) MAb vials. The Company has an agreement with Lonza Biologics plc to
scale-up OvaRex(TM) MAb cell culture-derived material to the commercial level.
Similarly the Company is working with Lonza and other vendors to begin the
scale-up processes for cell culture BrevaRex(TM) and AR54 MAbs and to
fill/finish BrevaRex(TM) and AR54 MAbs vials. If these contract suppliers fail
to perform under the terms of the agreement, the Company may incur significant
costs and risks.

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26

Scaling-up production of cell culture-derived materials will enable the Company
to further pursue regulatory approval and commercialization of OvaRex(TM) MAb.
Such regulatory approval and commercialization is dependent upon the Company's
ability to achieve such production.

The Company also relies on a number of alliances and collaborative partnerships
for the development of its products. There is no guarantee that these
relationships will continue or result in any successful developments.

POSSIBLE TERMINATION OF LICENSE AGREEMENT FOR MAb B43

The Company's OvaRex(TM) MAb incorporates technology licensed in 1995 from
Biomira, Inc. During 1999, the Company and Biomira were engaged in litigation
relating to the ownership of certain intellectual property and alleged breaches
of certain obligations under the Biomira License Agreement referred to below
under "Business - Biomira License Agreement" and related matters. The Company
and Biomira settled the litigation in September 1999 and entered into an amended
and restated license agreement relating to the licensed technology (the "Amended
Agreement").

Under the terms of the Amended Agreement, the Company has undertaken a number of
obligations, including an obligation to use its best efforts to commercialize
the licensed technology, certain reporting obligations and the payment of
royalties on sales of OvaRex(TM) MAb-based products. Under the terms of the
Amended Agreement, either party has the right to terminate the Amended Agreement
upon 45 days prior written notice if the other party defaults in the
performance, observance or fulfillment of any of its obligations under the
Amended Agreement and fails to cure the breach within the 45-day period.
Although the Company believes that it is currently in compliance with all of the
terms of the Amended Agreement and intends to continue to comply with such
terms, there can be no assurance that the Company would not enter into further
disputes over the interpretation of the Amended Agreement resulting in further
litigation. Such litigation would have a material adverse effect on the
Company's business, results of operations, and financial condition, as well as
its ability to market OvaRex(TM) MAb.

UNCERTAINTY ASSOCIATED WITH PRECLINICAL AND CLINICAL TESTING

The Company has not completed the clinical trials necessary to confirm the
efficacy of its AIT(R) Technology. As a result, while the preliminary results
from trials with its OvaRex(TM) MAb product are encouraging, there can be no
assurance that the Company's products will demonstrate sufficient therapeutic
benefit in the treatment of cancer patients that would lead to obtaining
regulatory approval.

Before obtaining regulatory approvals for the commercial sale of any of the
Company's potential new products, the products will be subjected to extensive
preclinical and clinical testing to demonstrate their safety and efficacy in
humans. Results of the initial preclinical and clinical testing of products
under development by the Company or any interim analyses of clinical trials are
not necessarily indicative of results that will be obtained from subsequent or
more extensive preclinical and clinical testing. Furthermore, there can be no
assurance that clinical trials of products under development will be completed
or will demonstrate the safety and efficacy of such products at all or to the
extent necessary to obtain regulatory approvals. Companies in the biotechnology
industry have suffered significant setbacks in advanced clinical trials, even
after achieving promising results in earlier trials. The failure to adequately
demonstrate the safety and efficacy of a therapeutic product under development
could delay or prevent regulatory approval of such product.

The rate of completion of clinical trials depends on, among other factors, the
enrollment of patients. Patient accrual is a function of many factors, including
the size of the patient population, the proximity of patients to clinical sites,
the eligibility criteria for the study and the existence of competitive clinical
trials. Delays in planned patient enrollment in the Company's current clinical
trials or future clinical trials may result in increased costs, program delays,
or both.

LACK OF PRODUCT REVENUES; HISTORY OF LOSSES

To date, the Company has not recorded any revenues from the sale of
biopharmaceutical products and there can be no assurance that significant
additional losses will not occur in the near future or that the Company will be
profitable

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27

in the future. The Company has accumulated net losses of approximately $44.2
million to December 31, 1999. The Company anticipates that it will continue to
incur significant operating losses as it advances its products through
development and clinical trials to commercialization. The amounts and timing of
expenditures will depend on the progress of ongoing research and development,
the results of preclinical testing and clinical trials, the rate at which
operating losses are incurred, the execution of any development and licensing
agreements with strategic partners, the Company's development of additional
products, the FDA, Health Protection Branch ("HPB") in Canada, and the European
Medicines Evaluation Agency ("EMEA") and other regulatory processes and other
factors, many of which are beyond the Company's control.

The Company does not expect to receive revenues from commercial sales of its new
products for several years, if at all. The Company expects to continue to incur
losses unless and until such time as strategic alliance payments, product sales
and royalty payments generate sufficient revenues to fund its continuing
operations. The ability of the Company to achieve profitability in subsequent
years depends upon, among other things, successfully completing product
development efforts and obtaining regulatory approval for its lead clinical
products. The development of the Company's products will require the commitment
of substantial resources to conduct the time-consuming development of products
to meet market and regulatory requirements and to establish strategic
relationships for production capabilities. There can be no assurance that the
Company will generate any revenues or achieve profitability.

The Company has two licensing agreements that require payments of royalties
based on sales of the OvaRex(TM) MAb. On the successful commercialization of
OvaRex(TM) MAb, the Company will be required to pay royalties from the gross
revenue received by the Company on the sale of this product. There can be no
assurance that the Company will generate sufficient revenues from the sale of
OvaRex(TM) MAb to achieve profitability.

The Company anticipates that, based on its current operating plan, its existing
cash reserves, including the net proceeds from the sale of Special Warrants on
February 29, 2000, are sufficient to meet its planned cash requirements until
the fourth quarter of 2000. Beyond that, the Company intends to rely on cash
from capital raising activities including the sale of Common Shares and, if any,
cash generated from licensing revenues, collaborative agreements and other
capital-raising activities which will be highly dependent on the Company's
successful development and commercialization of its clinical products. There can
be no assurance that these products will be successfully developed or
commercialized or that the underlying assumed levels of expenses will prove to
be accurate.

KEY PERSONNEL

The Company is highly dependent on its senior officers, scientific personnel,
consultants and management staff, the loss of whose services might significantly
delay or prevent the Company's achievement of its scientific or business
objectives. Competition among biotechnology and biopharmaceutical companies for
qualified employees is intense, and the ability to retain and attract qualified
individuals is critical to the Company's success. There can be no assurance that
the Company will be able to attract and retain such individuals currently or in
the future on acceptable terms, or at all, and the failure to do so would have a
material adverse effect on the Company's business, financial condition and
results of operations.

REGULATORY ENVIRONMENT; NO ASSURANCE OF PRODUCT APPROVAL

The FDA, HPB, EMEA and comparable agencies in foreign countries impose
substantial requirements on biotechnology and pharmaceutical companies prior to
the introduction of therapeutic products. These requirements include lengthy and
detailed laboratory and clinical testing procedures, sampling activities and
other costly and time-consuming procedures, together which involve the
expenditure of substantial resources. Satisfaction of these requirements
typically takes a number of years and varies substantially based on the type,
complexity and novelty of the pharmaceutical product.

Any future FDA, HPB, EMEA or other governmental approval of products developed
by the Company may entail limitations on the indicated uses for which such
product may be marketed. Approved products may be subject to additional testing
and surveillance programs as required by regulatory agencies. In addition,
product approvals may

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be withdrawn or limited for noncompliance with regulatory standards or the
occurrence of unforeseen problems following initial marketing.

The effect of governmental regulation may be to delay marketing the Company's
products for a considerable period of time, to impose costly requirements on the
Company's activities or to provide a competitive advantage to other companies
that compete with the Company. Adverse clinical results could have a negative
impact on the regulatory process and timing. A delay in obtaining or failure to
obtain regulatory approvals could adversely affect the marketing of the
Company's products and the Company's liquidity and capital resources. In
addition, future legislation or administrative action may result in governmental
regulations adverse to the Company. The extent of potentially adverse
governmental regulation that might arise from future legislation or
administrative action cannot be predicted.

To date, the Company has submitted Investigational New Drug Applications
("INDs") to the HPB and FDA for OvaRex(TM) MAb and BrevaRex(TM) MAb products,
but has not submitted such documentation for other products currently under
development. There can be no assurance that the Company will obtain regulatory
approval to commercialize OvaRex(TM) MAb and BrevaRex(TM) MAb, or that it will
be in a position to file the regulatory applications for its future products.

The Company has developed in conjunction with the FDA a clinical plan to study
the comparability of cell culture-based OvaRex(TM) MAb with its current
ascites-based material. The establishment of a clinical development plan or
program in conjunction with regulatory authorities provides no assurance that
such plan or program will be sufficient to gain regulatory approval of a product
upon submission of a licensing application. The insufficiency of a program could
delay or prevent regulatory approval of such product.

COMPETITION

Technological competition in the pharmaceutical industry is intense. There are
many companies and institutions, both public and private, including
pharmaceutical companies, chemical companies, specialized biotechnology
companies and research, government or academic institutions, that are engaged in
developing synthetic pharmaceuticals and biotechnological products for human
therapeutic applications, including the applications targeted by the Company.
The Company may have to compete with these competitors to develop products aimed
at treating similar conditions. Many of these competitors have substantially
greater resources than the Company. There can be no assurance that developments
by others will not render the Company's products or technologies non-competitive
or adversely affect the commitment of the Company's commercial collaborators to
the Company's programs.

The pharmaceutical industry is also characterized by extensive research efforts
and rapid technological change. Competition can be expected to increase as
technological advances are made and commercial applications for
biopharmaceutical products increase. Competitors of the Company may use
different technologies or approaches to develop products similar to products
which the Company is seeking to develop, or may develop new or enhanced products
for processes that may be more effective, less expensive, safer or more readily
available before the Company obtains approval of its products. There can be no
assurance that the Company's products will compete successfully or that research
and development will not render the Company's products obsolete or uneconomical.

PROPRIETARY RIGHTS AND PATENT PROTECTION

Due to the length of time and expense associated with bringing new products
through development and the governmental approval process to the marketplace,
the pharmaceutical industry has traditionally placed considerable importance on
obtaining and maintaining patent and trade secret protection for significant new
technologies, products and processes.

The patent protection afforded to biotechnology and pharmaceutical firms is
uncertain and involves many complex legal, scientific and factual questions.
There is no clear law or policy involving the breadth of claims allowed in such
cases, or the degree of protection afforded under patents. These issues are
further complicated in this field by the abundance of publications and/or prior
art, including publications by the Company. Thus, while the Company

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believes that its proprietary information is protected to the fullest extent
practicable, there can be no assurance that (i) additional patents will be
issued to the Company in any or all appropriate jurisdictions, (ii) litigation
will not be commenced seeking to challenge the Company's patent protection or
that such challenges will not be successful, (iii) processes or products of the
Company do not or will not infringe upon the patents of third parties, or (iv)
the scope of patents that may be issued to the Company will successfully prevent
third parties from developing similar and competitive products. It is not
possible to predict how any patent litigation will affect the Company's efforts
to develop, manufacture or market its products. The cost of litigation to uphold
the validity and prevent infringement of any patents issued to the Company may
be significant.

The products developed by the Company also incorporate technology and processes
that will not be protected by any patent and are capable of being duplicated or
improved upon by competitors. Accordingly, the Company may be vulnerable to
competitors, which develop competing technology, whether independently or as a
result of acquiring access to the proprietary products and trade secrets of the
Company. In addition, the Company may be required to obtain licenses under
patents or other proprietary rights of third parties. No assurance can be given
that any licenses required under such patents or proprietary rights will be
available on terms acceptable to the Company. If the Company does not obtain
such licenses, it could encounter delays in introducing one or more of its
products to the market while it attempts to design around such patents, or could
find that the development, manufacture or sale of products requiring such
licenses could be foreclosed.

There can be no assurance that the Company's patent applications will further
mature into issued patents, or will afford legal protection against competitors,
or will provide significant proprietary protection or competitive advantage. In
addition, there can be no assurance that the Company's patents will not be held
invalid or unenforceable by a court, infringed or circumvented by others or that
others will not obtain patents that the Company would need to license or
circumvent. Competitors or potential competitors may have filed patent
applications or received patents, and may obtain additional patents and
proprietary rights relating to the products or processes competitive with those
of the Company.

MANUFACTURING AND MARKETING

The Company has limited experience in manufacturing biopharmaceuticals. The
Company intends to rely primarily on contract manufacturers to produce
antibodies and other components of its products for research and development,
preclinical and clinical trial purposes. The Company's products have never been
manufactured on a commercial scale, and there can be no assurance that such
products can be manufactured at a cost or in quantities necessary to make them
commercially viable. There can be no assurance that third party manufacturers
will be able to meet the Company's needs with respect to timing, quantity or
quality. If the Company is unable to contract for a sufficient supply of
required products and substances on acceptable terms, or if it should encounter
delays or difficulties in its relationships with manufacturers, the Company's
preclinical and clinical testing would be delayed, thereby delaying the
submission of products for regulatory approval or the market introduction and
subsequent sales of such products. Any such delay may have a material adverse
effect on the Company's business, financial condition and results of operations.
Moreover, contract manufacturers that the Company may use must continually
adhere to current Good Manufacturing Practices ("cGMP") regulations enforced by
the FDA through its facilities inspection program. If the facilities of such
manufacturers cannot pass a pre-approval plant inspection, the FDA premarket
approval of the Company's products will not be granted.

The Company currently has no sales, marketing or distribution experience. The
Company intends to rely on its future strategic partners to market its products;
however, there can be no assurance that such corporate partners have effective
sales forces and distribution systems. If the Company is unable to maintain or
establish such relationships and is required to market any of its products
directly, the Company will have to develop a marketing and sales force with
technical expertise and with supporting distribution capabilities. There can be
no assurance that the Company will be able to maintain or establish such
relationships with third parties or develop in-house sales and distribution
capabilities. To the extent that the Company depends on its strategic partners
or third parties for marketing and distribution, any revenues received by the
Company will depend upon the efforts of such strategic partners or third
parties, and there can be no assurance that such efforts will be successful.

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PRODUCT LIABILITY AND INSURANCE

The testing, marketing, sale and use of products under development by the
Company may entail risk of product liability. Such risk exists in human clinical
trials and even with respect to those products that receive regulatory approval
for commercial sale. There can be no assurance that the Company can avoid
significant product liability exposure. The Company currently has in place
product liability insurance for its biopharmaceutical products and expects that
as it expands, it will require additional insurance. There can be no assurance
that it will be able to obtain appropriate levels of product liability insurance
prior to any sale of its biopharmaceutical products. An inability to obtain
insurance on economically feasible terms or to otherwise protect against
potential product liability claims could inhibit or prevent the
commercialization of products developed by the Company. The obligation to pay
any product liability claim or recall a product could have a material adverse
effect on the business, financial condition and future prospects of the Company.

UNSTABLE SHARE PRICE

Market prices for securities of biotechnology companies generally, and of common
shares in particular, are volatile. Factors such as announcements (publicly made
or at scientific conferences) of technological innovations, new commercial
products, patents, the development of proprietary rights by the Company or
others, results of clinical trials, regulatory actions, publications, quarterly
financial results or public concern over the safety of biotechnological
products, future sales of Common Shares by the Company or by its current
shareholders and other factors could have a significant effect on the market
price of the Common Shares.

FUTURE SALES OF COMMON SHARES IN THE PUBLIC MARKET COULD CAUSE THE COMPANY'S
SHARE PRICE TO FALL AND DECREASE THE VALUE OF AN INVESTOR'S INVESTMENT

The market price of the Common Shares could decline if the Company's existing
shareholders sell substantial amounts of their Common Shares, including shares
issued upon the exercise of outstanding options, in the public market. These
sales might also make it more difficult for the Company to sell equity
securities in the future at a time and price that the Company deems appropriate.

THE COMPANY'S BOARD OF DIRECTORS MAY ISSUE, WITHOUT SHAREHOLDER APPROVAL,
ADDITIONAL COMMON SHARES AND PREFERRED SHARES THAT COULD HAVE RIGHTS AND
PREFERENCES SUPERIOR TO THOSE OF COMMON SHARES, WHICH ISSUANCES MAY DELAY OR
PREVENT A CHANGE OF CONTROL

The Company's Board of Directors may issue an unlimited number of Common Shares
and an unlimited number of preferred shares, issuable in one or more series,
without any vote or action by the Company's shareholders. If the Company issues
any additional Common Shares or any preferred shares, the percentage ownership
of existing shareholders may be reduced and diluted. In addition, the Company's
Board of Directors may determine the price, rights, preferences, privileges and
restrictions, including voting, dividend and conversion rights, of the preferred
shares and determine to whom they shall be issued. There are no preferred shares
outstanding and the Company has no present plans to issue any preferred shares.
However, the rights of the holders of any preferred shares that may be issued in
the future may be senior to the rights of holders of Common Shares, which could
preclude holders of Common Shares from receiving dividends, proceeds of a
liquidation or other benefits. The issuance of preferred shares, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could make it more difficult for a third party to acquire
control of the Company by, for example, discouraging an unsolicited acquisition
proposal or a proxy contest, the effect of which may be to deprive the Company's
shareholders of a control premium that might otherwise be realized in connection
with an acquisition of the Company.

ITEM 2 - DESCRIPTION OF PROPERTY

LEASED PROPERTIES

AltaRex's Canadian office is located at Campus Tower, Suite 300, 8625 - 112
Street, Edmonton, Alberta, Canada T6G 1K8. Its research and development facility
is located at 1134 Dentistry Pharmacy Building, University of

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Alberta, Edmonton, Alberta T6G 2N8. The Company's U.S. office is located at
Suite 125, 303 Wyman Street, Waltham, Massachusetts 02451. All of the above
premises are leased by AltaRex.

The Canadian leases are each for a term of five years, with the Canadian office
and the research and development facility terminating on December 30, 2001 and
July 31, 2002 respectively. The U.S. lease is for a term expiring on December
31, 2000. The total lease costs under such leases for the Corporation were
approximately $353,000 for the fiscal year ended December 31, 1999 and are
expected to be the same amounts for the fiscal year ending December 31, 2000.

In January 1999, the Company entered into a letter of intent for the lease of
approximately 25,000 square feet of laboratory and office facilities in Waltham,
Massachusetts. In October 1999, the Company cancelled its intent to execute a
lease for such space. In April 2000, the Company entered into a letter of intent
for the lease of approximately 16,000 square feet of office space in Waltham,
Massachusetts. The facilities are expected to be available by the end of 2000.
If leased as proposed, the initial term would extend into 2002 and the expected
annual lease cost to the Company would be approximately $672,000 plus operating
expenses.

ITEM 3 - LEGAL PROCEEDINGS

Except for non-material legal proceedings against it in the normal course of its
operations, the Company is not aware of any material existing or pending legal
proceedings against it.

ITEM 4 - CONTROL OF REGISTRANT

Insofar as it is aware, the Company is not directly or indirectly owned or
controlled by another corporation(s) or by the provincial government of Alberta,
the federal government of Canada or any foreign government.

To the knowledge of the Company, no person of record owns beneficially, directly
or indirectly, more than 10% of the issued and outstanding Common Shares of the
Company as at May 15, 2000.

ITEM 5 - NATURE OF TRADING MARKET

The Common Shares of the Company are listed and posted for trading on The
Toronto Stock Exchange.

The following table sets forth the reported high and low sale prices of the
Common Shares of the Company on the Toronto Stock Exchange for the period
indicated. On May 7, 1999 and June 1, 1999, the Company sold an aggregate of
39,100,000 Common Shares for an aggregate purchase price of $19,550,000 in a
public offering outside the U.S. On April 20, 2000, the Company issued 5,687,546
Common Shares upon the exercise of previously issued Special Warrants.

Period Price Range
------ ------------------
High Low
---- ---

1st Quarter, 1998 3.25 2.25
2nd Quarter, 1998 2.54 1.01
3rd Quarter, 1998 1.92 0.71
4th Quarter, 1998 0.85 0.42
1st Quarter, 1999 0.74 0.42
2nd Quarter, 1999 1.38 0.42
3rd Quarter, 1999 1.14 0.76
4th Quarter, 1999 1.00 0.24
1st Quarter, 2000 5.10 0.49
2nd Quarter, 2000 2.50 0.75
(Through May 15, 2000)

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The closing price of the Common Shares of the Company on The Toronto Stock
Exchange on May 15, 2000 was $1.40 per Common Share.

The Company's shares are not listed on any exchange in the United States. At May
15, 2000, approximately 21% of the outstanding shares of the Company are held of
record by approximately 20 persons resident in the United States.

ITEM 6 - EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

There are no laws, governmental decrees or regulations in Canada that restrict
the export or import of capital or which affect the remittance of dividends,
interest or other payments to non-resident holders of the Company's Shares,
other than specific embargoes enacted by regulations under the United Nations
Act (Canada) and withholding tax requirements. See "Item 7. Taxation."

There are no limitations under the laws of Canada or the Province of Alberta, or
in the Articles of Amalgamation of the Company, with respect to the right of
non-resident or foreign owners to hold or vote the Common Shares of the Company
other than those imposed by the Investment Canada Act (Canada) (the "Investment
Act").

The following summarizes the principal features of the Investment Act for
non-residents other than WTO investors (defined in section 14.1(b) of the
Investment Act as being individual investors who are nationals of, or have the
right of permanent residence in, a Member of the World Trade Organization and
corporate investors who are either WTO investor-controlled in fact, or
two-thirds of whose board of directors is comprised of any combination of
Canadians and WTO investors) who propose to acquire Common Shares of the
Company.

The Investment Act prohibits implementation of a reviewable investment by an
individual, government (or agency thereof), company, partnership, trust or joint
venture which is not a "Canadian" (as defined in the Investment Act (a
"non-Canadian")) or a WTO investor, unless after review the minister responsible
for the Investment Act (the "Minister") is satisfied that the investment is
likely to be of net benefit to Canada. A reviewable investment under the
Investment Act is characterized as an investment for control of a Canadian
business with assets valued at $5,000,000 or more, or in the case where the
total assets of the Canadian business are less than half of the total assets
acquired, the Canadian business assets are $50,000,000 or more. Notwithstanding
the above limits, an investment can become a reviewable investment if an order
for review is made by the Federal cabinet on the grounds that the investment is
related to Canada's cultural heritage or national identity.

An investment in Common Shares of the Company by a WTO investor would only be
reviewable under the Investment Act if it was an investment to acquire control
of the Company and the value of the assets of the Company equals or exceeds an
amount determined annually by the Minister pursuant to a formula specified in
the Investment Act ($192,000,000 for 2000).

A non-Canadian, whether a WTO investor or otherwise, would acquire control of
the Company for the purposes of the Investment Act if he acquired a majority of
the Common Shares of the Company. The acquisition of less than a majority, but
one-third or more, of the Common Shares of the Company would be presumed to be
an acquisition of control of the Company unless it could be established that the
Company was not controlled in fact by the acquirer through the ownership of
Common Shares.

Certain transactions in relation to Common Shares of the Company would be exempt
from the Investment Act, including:

1. the acquisition of Shares by a person in the ordinary course of the
person's business as a trader or dealer in securities;

2. the acquisition of control of the Company in connection with the
realization of security granted for a loan or other financial
assistance and not for any purpose related to the provisions of the
Investment Act; and

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3. the acquisition of control of the Company by reason of an
amalgamation, merger, consolidation or corporate reorganization
following which the ultimate direct or indirect control in fact of the
Company, through the ownership of voting interests, remains unchanged.

The Investment Act further contains provisions which require notification to be
given under the Investment Act in the circumstances where a "non-Canadian" (as
defined in the Investment Act) acquires control of the Company notwithstanding
that such investment is not a reviewable investment as described above.

In addition to the foregoing, certain transactions involving the Company and its
security holders may be subject to notification and review under the Competition
Act (Canada). In general, in order for a transaction to be notifiable, the
parties together with their affiliates (defined to include parent, subsidiary
and sister companies) must have assets in Canada or gross revenues from sales
in, from or into Canada that exceed $400,000,000. Assuming this threshold is
met, additional thresholds based on the type of transaction must be met before
notification is required. If a transaction is ultimately notifiable, the parties
must provide the Commissioner of Competition (the "Commissioner") with detailed
information about the transaction and the parties, and observe a waiting period
prior to closing the transaction. However, in the event that the Commissioner
determines that a proposed transaction may result in a substantial lessening of
competition, the Commissioner may bring a proceeding before the Competition
Tribunal to enjoin the transaction or to seek other remedies.

ITEM 7 - TAXATION

The following is a general summary only and should not be considered as income
tax advice or relied upon for tax planning purposes.

CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES

The following is a general summary of certain Canadian federal income tax
considerations generally applicable to a holder of the Company's Shares who is
not a resident of Canada for the purposes of the Income Tax Act (Canada) (the
"Act"). The discussion does not address all potentially relevant federal income
tax matters and it does not address consequences peculiar to persons subject to
special provisions of federal income tax law.

The summary is based on the current provisions of the Act and the regulations
thereunder and the Company's understanding of the current published
administrative practices of the Canada Customs and Revenue Agency, and press
announcements released by Revenue Canada. This summary takes into account
proposals to amend the Act announced prior to the date hereof (although no
assurances can be given that such changes will be enacted in the form presented
or at all), but does not otherwise take into account or anticipate any other
changes in law, whether by judicial, governmental or legislative action or
decision nor does it take into account any provincial, territorial, local or
foreign tax considerations. Accordingly, holders and prospective holders of the
Company's Shares should consult their own tax advisors about the federal,
provincial, territorial, local and foreign tax consequences of purchasing,
owning and disposing of such shares.

The Act provides in subsection 212(2) that dividends and other distributions
which are deemed to be dividends and which are paid or credited or are deemed to
be paid or credited by a Canadian resident company to a non-resident of Canada
shall be subject to non-resident withholding tax equal to 25 percent of the
gross amount of the dividend or deemed dividend.

Subsections 2(3) and 115(1) of the Act provide that a non-resident person is
subject to tax in Canada at the rates generally applicable to residents of
Canada on any "taxable capital gain" arising on the disposition of the shares of
a company which are listed on a prescribed stock exchange if such non-resident,
persons with whom the non-resident did not deal at arm's length, or the
non-resident together with such persons, owned 25 percent or more of the issued
shares of any class of the capital stock of the Company at any time in the 60
month period immediately preceding the date of disposition of the shares. For
purposes of this computation, such holders are considered to own shares which
they have an interest in or an option to acquire. Subsections 2(3) and 115(1)
also provide that a non-resident person is subject to tax in Canada on taxable
capital gains arising on the disposition of shares that constitute capital
property used in carrying on a business in Canada. The taxable portion of a
capital gain is equal to two-thirds of the

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amount by which the proceeds of disposition of such shares, net of any
reasonable costs associated with the disposition of such shares, exceeds the
adjusted cost base to the holder of the shares.

Provisions in the Act relating to dividend and deemed dividend payments and
gains realized by non-residents of Canada who are residents of the United States
are subject to the Canada-United States Income Tax Convention (1980), as amended
(the "1980 Convention").

Article X of the 1980 Convention provides that for 1997 and subsequent taxation
years pursuant to the Third Protocol to the 1980 Convention the rate of Canadian
non-resident withholding tax on dividends paid to a U.S. company that
beneficially owns at least 10% of the voting stock of the Company shall not
exceed 5% of the dividends. Otherwise, and except in the case of dividends
received by a resident of the United States who carries on business in Canada
through a Canadian permanent establishment and the shares in respect of which
the dividends are paid are effectively connected with that permanent
establishment, the rate of non-resident withholding tax shall not exceed 15
percent of the dividend. Where the dividends are received by a United States
person carrying on business in Canada through a Canadian permanent establishment
and the shares in respect of which the dividends are paid are effectively
connected with that permanent establishment the dividends are generally subject
to Canadian tax as business profits, generally without limitation under the 1980
Convention.

Article XIII of the 1980 Convention provides that gains realized by a United
States resident on the disposition of shares of a Canadian company may not
generally be taxed in Canada unless the value of those shares is derived
principally from real property situated in Canada or the shares form part of the
business property of a permanent establishment which the United States
shareholder has or had in Canada within the 12 month period preceding the date
of disposition. Canada also retains the right to tax gains on property owned at
the time of departure from Canada if it is sold by a person (other than a trust)
who was during the 120 month period immediately preceding the sale a resident in
Canada for more than 60 months, subject to certain restrictions.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following is a general discussion of certain possible United States federal
income tax consequences, under current law, generally applicable to a U.S.
Holder (as defined below) of the Company's Shares. This discussion does not
address all potentially relevant federal income tax matters and it does not
address consequences peculiar to persons subject to special provisions of
federal income tax law, such as those described below as excluded from the
definition of a U.S. Holder. In addition, this discussion does not cover any
state, local or foreign tax consequences. (See "Taxation - Certain Canadian
Federal Income Tax Consequences" above.)

The following discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, published Internal Revenue Service
("IRS") rulings, published administrative positions of the IRS and court
decisions that are currently applicable, any or all of which could be materially
and adversely changed, possibly on a retroactive basis, at any time. This
discussion does not consider the potential effects, both adverse and beneficial,
of any recently proposed legislation which, if enacted, could be applied,
possibly on a retroactive basis, at any time. This discussion is for general
information only and it is not intended to be, nor should it be construed to be,
legal or tax advice to any holder or prospective holder of the Company's Shares
and no opinion or representation with respect to the United States federal
income tax consequences to any such holder or prospective holder is made.
Accordingly, holders and prospective holders of the Company's Shares should
consult their own tax advisors about the federal, state, local, and foreign tax
consequences of purchasing, owning and disposing of the Company's Shares.

HOLDERS

As used herein, a "U.S. Holder" means a holder of the Company's Shares who is a
citizen or individual resident of the United States, a Company or partnership
created or organized in or under the laws of the United States or of any
political subdivision thereof or a trust or estate whose income is taxable in
the United States irrespective of source. This summary does not address the tax
consequences to, and U.S. Holder does not include, persons subject to specific
provisions of federal income tax law, such as tax-exempt organizations,
qualified retirement plans, individual retirement accounts and other
tax-deferred accounts, financial institutions, insurance companies, real estate
investment trusts, regulated investment companies, broker-dealers, nonresident
alien individuals, persons or

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entities that have a "functional currency" other than the U.S. dollar,
shareholders who hold the Company's Shares as part of a straddle, hedging or a
conversion transaction, and shareholders who acquired their stock through the
exercise of employee stock options or otherwise as compensation for services.
This summary is limited to U.S. Holders who own Company's Shares as capital
assets. This summary does not address the consequences to a person or entity
holding an interest in a shareholder or the consequences to a person of the
ownership, exercise or disposition of any options, warrants or other rights to
acquire Company's Shares.

DISTRIBUTIONS ON THE COMPANY'S SHARES

U.S. Holders receiving dividend distributions (including constructive dividends)
with respect to Company's Shares are required to include in gross income for
United States federal income tax purposes the gross amount of such distributions
equal to the U.S. dollar value of such dividends on the date of receipt (based
on the exchange rate on such date) to the extent that the Company has current or
accumulated earnings and profits, without reduction for any Canadian income tax
withheld from such distributions. Such Canadian tax withheld may be credited,
subject to certain limitations, against the U.S. Holder's United States federal
income tax liability or, alternatively, may be deducted in computing the U.S.
Holder's United States federal taxable income by those who itemize deductions.
(See more detailed discussion at "Foreign Tax Credit" below.) To the extent that
distributions exceed current or accumulated earnings and profits of the Company,
they will be treated first as a return of capital up to the U.S. Holder's
adjusted basis in the Company's Shares and thereafter as gain from the sale or
exchange of the Company's Shares. Preferential tax rates for long-term capital
gains are applicable to a U.S. Holder which is an individual, estate or trust.
There are currently no preferential tax rates for long-term capital gains for a
U.S. Holder which is a Company.

In the case of foreign currency received as a dividend that is not converted by
the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have
a tax basis in the foreign currency equal to its U.S. dollar value on the date
of receipt. Generally any gain or loss recognized upon a subsequent sale or
other disposition of the foreign currency, including the exchange for U.S.
dollars, will be ordinary income or loss.

Dividends paid on the Company's Shares will not generally be eligible for the
dividends received deduction provided to corporations receiving dividends from
certain United States companies. A U.S. Holder which is a corporation may, under
certain circumstances, be entitled to a 70% deduction of the United States
source portion of dividends received from the Company (unless the Company
qualifies as a "foreign personal holding company" or a "passive foreign
investment company," as defined below) if such U.S. Holder owns shares
representing at least 10% of the voting power and value of the Company. The
availability of this deduction is subject to several complex limitations which
are beyond the scope of this discussion.

Dividends paid on the Company's Shares, if any, generally will not be subject to
information reporting and generally will not be subject to U.S. backup
withholding tax, however, dividends paid, and the proceeds of a sale of
Company's Shares, in the U.S. through a U.S. or U.S. related paying agent
(including a broker) will be subject to U.S. information reporting requirements
and may also be subject to the 31% U.S. backup withholding tax, unless the
paying agent is furnished with a duly completed and signed Form W-9 or the U.S.
holder is otherwise exempt. Any amounts withheld under the U.S. backup
withholding tax rules will be allowed as a refund or a credit against the U.S.
Holder's U.S. federal income tax liability, provided the required information is
furnished to the IRS. Treasury regulations applicable to payments made after
December 31, 2000 generally expand the circumstances under which information
reporting and backup withholding may apply unless a U.S. holder provides the
required certification on Form W-9.

FOREIGN TAX CREDIT

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax
with respect to the ownership of the Company's Shares may be entitled, at the
option of the U.S. Holder, to either a deduction or a tax credit for such
foreign tax paid or withheld. Generally, it will be more advantageous to claim a
credit because a credit reduces United States federal income taxes on a
dollar-for-dollar basis, while a deduction merely reduces the taxpayer's income
subject to tax. This election is made on a year-by-year basis and applies to all
foreign taxes paid by (or withheld from) the U.S. Holder during that year. There
are significant and complex limitations which apply to the credit, among which
is the general limitation that the credit cannot exceed the proportionate share
of the U.S.

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Holder's United States income tax liability that the U.S. Holder's foreign
source income bears to his or its worldwide taxable income. In the determination
of the application of this limitation, the various items of income and deduction
must be classified into foreign and domestic sources. Complex rules govern this
classification process. In addition, this limitation is calculated separately
with respect to specific classes of income such as "passive income," "high
withholding tax interest," "financial services income," "shipping income," and
certain other classifications of income. Dividends distributed by the Company
will generally constitute "passive income" or, in the case of certain U.S.
Holders, "financial services income" for these purposes. The availability of the
foreign tax credit and the application of the limitations on the credit are fact
specific, and holders and prospective holders of the Company's Shares should
consult their own tax advisors regarding their individual circumstances.

DISPOSITION OF COMPANY'S SHARES

A U.S. Holder will recognize gain or loss upon the sale of the Company's Shares
equal to the difference, if any, between (i) the amount of cash plus the fair
market value of any property received, and (ii) the shareholder's tax basis in
the Company's Shares. This gain or loss will be capital gain or loss if the
Company's Shares are a capital asset in the hands of the U.S. Holder, which will
be a short-term or long-term capital gain or loss depending upon the holding
period of the U.S. Holder. Gains and losses are netted and combined according to
special rules in arriving at the overall capital gain or loss for a particular
tax year. Deductions for net capital losses are subject to significant
limitations. For U.S. Holders which are individuals, any unused portion of such
net capital loss may be carried over to be used in later tax years until such
net capital loss is thereby exhausted. For U.S. Holders that are corporations
(other than corporations subject to Subchapter S of the Code), an unused net
capital loss may be carried back three years from the loss year and carried
forward five years from the loss year to be offset against capital gains until
such net capital loss is thereby exhausted.

OTHER CONSIDERATIONS

In the following circumstances, the above sections of this discussion may not
describe the United States federal income tax consequences resulting from the
holding and disposition of the Company's Shares:

FOREIGN PERSONAL HOLDING COMPANY

If at any time during a taxable year more than 50% of the total combined voting
power or the total value of the Company's outstanding shares is owned, directly
or indirectly, by five or fewer individuals who are citizens or residents of the
United States and 60% or more of the Company's gross income for such year was
derived from certain passive sources, the Company may be treated as a "foreign
personal holding company." In that event, U.S. Holders that hold the Company's
Shares would be required to include in gross income for such year their
allocable portions of such passive income to the extent the Company does not
actually distribute such income.

PASSIVE FOREIGN INVESTMENT COMPANY

As a foreign corporation with U.S. Holders, the Company could potentially be
treated as a passive foreign investment company ("PFIC"), as defined in Section
1297 of the Code, depending upon the percentage of the Company's income which is
passive, or the percentage of the Company's assets which is producing passive
income. U.S. Holders owning Common Shares of a PFIC are subject to an additional
tax and to an interest charge based on the value of deferral of tax for the
period during which the Common Shares of the PFIC are owned, in addition to
treatment of gain realized on the disposition of Common Shares of the PFIC as
ordinary income rather than capital gain. However, if the U.S. Holder makes a
timely election to treat a PFIC as a qualified electing fund ("QEF") with
respect to such shareholder's interest therein, the above-described rules
generally will not apply. Instead, the electing U.S. Holder would include
annually in his gross income his pro rata share of the PFIC's ordinary earnings
and net capital gain regardless of whether such income or gain was actually
distributed. A U.S. Holder of a QEF can, however, elect to defer the payment of
United States federal income tax on such income inclusions. In addition,
taxpayers owning (actually or constructively) marketable stock in a PFIC will be
permitted to elect to mark that stock to market annually, rather than be subject
to the excess-distribution regime of Section 1291. Amounts included in or
deducted from income under this regime (and actual gains and losses realized
upon disposition, subject to certain limitations) will be treated as ordinary.
Special rules apply to U.S. Holders who own their interests in a PFIC through
intermediate entities or persons.

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37

The Company believes that it was not a PFIC for its fiscal years ended December
31, 1998 and 1999. If in its current or in a subsequent year the Company
concludes that it is a PFIC, it intends to make information available to enable
a U.S. Holder to make a QEF election in that year. There can be no assurance
that the Company's determination concerning PFIC status will not be challenged
by the IRS, or that it will be able to satisfy record-keeping requirements which
will be imposed on QEF's.

CONTROLLED FOREIGN CORPORATION

If more than 50% of the voting power of all classes of stock or the total value
of the stock of the Company is owned, directly or indirectly, by citizens or
residents of the United States, United States domestic partnerships and
corporations or estates or trusts other than foreign estates or trusts, each of
whom owns 10% or more of the total combined voting power of all classes of stock
of the Company ("United States shareholder"), the Company could be treated as a
"controlled foreign corporation" ("CFC") under subpart F of the Code. This
classification would effect many complex results one of which is the inclusion
of certain income of a CFC which is subject to current U.S. tax. The United
States generally taxes the United States shareholders of a CFC currently on
their pro rata shares of the subpart F income of the CFC. In effect, the Code
treats those United States shareholders as having received a current
distribution out of the CFC's subpart F income. Such shareholders also are
subject to current U.S. tax on their pro rata shares of the CFC's earnings
invested in U.S. property. The foreign tax credit may reduce the U.S. tax on
these amounts. In addition, under Section 1248 of the Code, gain from the sale
or exchange of stock by a holder of Common Shares of the Company who is or was a
United States shareholder at any time during the five year period ending with
the sale or exchange is treated as ordinary dividend income to the extent of
earnings and profits of the Company attributable to the stock sold or exchanged.
Note that the overlap between the PFIC and CFC rules generally will be
eliminated for United States shareholders of a CFC. Where a foreign corporation
is both a PFIC and a CFC, the provision generally will treat the foreign
corporation as a non-PFIC with respect to United States shareholders of the CFC.
Because of the complexity of subpart F, and because it is not clear that subpart
F would apply to the holders of Common Shares of the Company, a more detailed
review of these rules is outside of the scope of this discussion.

ITEM 8 - SELECTED FINANCIAL DATA

The following table presents selected financial data for the Company which are
for the periods indicated below and which are derived from the Consolidated
Financial Statements of the Company and are prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP"). These
principles, as applied to the Company, do not differ materially from those
accounting principles and requirements of the Securities and Exchange Commission
in the United States ("U.S. GAAP") except as disclosed in Note 9 to the
Company's Consolidated Financial Statements. All figures are in Canadian funds.
The selected financial data should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto and Management's Discussion
and Analysis of Financial Condition and Results of Operations. To date, the
Company has not generated sufficient cash flow from operations to fund ongoing
operational requirements and cash commitments. The Company has financed its
operations principally through the sale of its equity securities and its ability
to continue operations is dependent on the ability of the Company to obtain
additional financing. See "Item 9 - Management's Discussion and Analysis of
Financial Condition and Results of Operations".

YEAR ENDED DECEMBER 31
Dec. 1 - Dec. 31,
-----------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----

Income Statement Data

Revenues .......................... $ 687,710 $ 1,013,742 $ 1,619,836 $ 88,257 $ 23,520
Expenses
Research and development ...... 12,828,617 9,433,681 4,733,918 1,720,031 207,801
General and administration..... 6,802,546 4,695,990 1,563,555 540,285 41,618
Settlement Costs .............. 5,074,714 -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss .......................... $(24,018,167) $(13,115,929) $ (4,677,637) $ (2,172,059) $ (225,899)
============ ============ ============ ============ ============
Net loss per common share ......... $ (0.58) $ (0.79) $ (0.29) $ (0.24) $ (.03)
============ ============ ============ ============ ============

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38

As at December 31

1999 1998 1997 1996 1995
---- ---- ---- ---- ----

Balance Sheet Data

Cash and cash equivalents........ $ 2,328,641 $ 8,581,688 $ 4,204,155 $27,215,914 $ 32,129
Short-term investments .......... $ 4,878,039 $ 4,241,732 $20,797,951 -- --
Total assets .................... $ 8,567,429 $15,159,774 $27,299,744 $28,016,056 $ 911,640
Working capital ................. $ 5,057,620 $10,997,161 $24,495,936 $27,050,923 $ 216,548
Shareholders' equity ............ $ 6,217,956 $12,646,840 $25,708,769 $27,526,133 $ 774,101

The Company has paid no dividends on its shares since incorporation and does not
anticipate doing so for the foreseeable future. The declaration of dividends on
the Common Shares of the Company is within the discretion of the Company's board
of directors and will depend upon, among other factors, earnings, capital
requirements, and the operating and financial condition of the Company.

ITEM 9 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis explains trends in the Company's financial
condition and results of operation for the years ending December 31, 1999, 1998
and 1997. This discussion and analysis of the results of operations and
financial condition should be read in conjunction with the financial statements
and the related notes included elsewhere in this document. The financial
statements have been prepared by management in accordance with accounting
principles generally accepted in Canada.

OVERVIEW

The Company's business is the research, development and commercialization of
biopharmaceutical products for the treatment of cancer. Substantially all of the
Company's products are subject to regulation by the HPB in Canada, the FDA in
the United States, the EMEA in Europe and similar agencies in other countries.
None of the Company's products have been approved by regulatory agencies for
sale to date. The Company has not been profitable since inception and expects to
continue to incur substantial losses in continuing the research, development and
clinical trials of its products. The Company does not expect to generate
significant revenues until such time as, and unless, its cancer therapeutic
products are approved by the various regulatory agencies and become commercially
viable.

ACQUISITION AND AMALGAMATION

Effective July 17, 1996, the Company (at that time known as Allrich Energy Group
Inc.) acquired all of the outstanding shares of AltaRex Inc. for a purchase
price satisfied through the issue of 7.5 million of the Company's Common Shares.
These shares gave AltaRex Inc.'s shareholders a controlling interest in the
Company and effectively constituted a reverse take-over by the shareholders of
AltaRex Inc. At the time of acquisition, Allrich was an inactive public company.
The purpose of the acquisition was to realize funds associated with a private
placement and special warrant offering that were completed at that time and to
provide future access to public market funding. Effective May 31, 1997, the
Company amalgamated with AltaRex Inc. and continued under the name of AltaRex
Corp.

RESULTS OF OPERATIONS

Through the Company's predecessor AltaRex Inc., the Company commenced operations
on December 1, 1995 and completed its first full year of operations on December
31, 1996. As of December 31, 1999, the Company has incurred cumulative losses of
$44.2 million. This includes annual losses of $24.0 million, $13.1 million, and
$4.7 million for the years ended December 31, 1999, 1998 and 1997 respectively,
and a loss of $2.4 million for the period from inception on December 1, 1995 to
December 31, 1996. These losses are primarily due to the increased cost of
clinical and product development activities, supporting efforts in product
commercialization and the settlement of outstanding litigation in 1999. Costs
for research and development and supporting activities are expected to decrease
in 2000 as a result of cost reduction activities in late 1999. However, the
Company expects such costs to

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39

increase beyond 2000 as it pursues its development, clinical trials and
commercialization programs prior to receiving regulatory approvals and the
successful introduction of its products.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998.

REVENUES

Revenues for the year ended December 31, 1999 decreased by $0.32 million, from
$1.01 million in 1998 to $0.69 million in 1999. Interest income decreased by
$0.34 million, from $0.96 million in 1998 to $0.62 million in 1999, due to a
lower average balance of cash, cash equivalents and short-term investments in
1999. Research contract revenue from government research contracts remained
relatively constant in 1998 and 1999, being $0.05 million and $0.06 million
respectively.

EXPENSES

Expenses for the year ended December 31, 1999 increased by $10.58 million, from
$14.13 million in 1998 to $24.71 million in 1999. Research and development
expenses increased by $3.39 million, from $9.43 million in 1998 to $12.83
million in 1999. This increase is primarily due to the advancement and continued
expansion of the Company's clinical trial programs which included the
acceleration of and increase in enrollment in the North American OvaRex(TM) MAb
potentially pivotal trial, the commencement of a second double blind
placebo-controlled trial for OvaRex(TM) MAb and the completion of enrollment in
the OvaRex(TM) MAb open-label Phase II and the BrevaRex(TM) MAb Phase I trials.
The increase includes costs related to production of antibody for clinical trial
purposes.

General and administrative expenses increased by $2.11 million, from $4.69
million in 1998 to $6.80 million in 1999. This increase is due to the costs
associated with the first full year of operation of the Company's management
office in the United States, the related support costs for increasing research
and development activities and increased corporate development activities and
patent related costs.

Settlement costs of $5.07 million incurred in 1999 related to the settlement of
outstanding litigation with Biomira that pertained to the claimed ownership of
certain intellectual property rights and breaches of the Biomira license
agreement. These costs incurred included the settlement payment and legal fees.

The Company anticipates that research and development expenses will decrease
slightly in 2000 as a result of steps the Company took in the fourth quarter of
1999 to reduce the Company's net cash burn, including suspending the development
activities on product candidates other than OvaRex(TM) MAb. However, the Company
expects that such expenses will increase in 2001 as the Company approaches the
submissions for regulatory approval for OvaRex(TM) MAb and continues development
of other product candidates. Similarly, the Company anticipates that general and
administrative expenses will decrease in 2000 as a result of cost-reduction
initiatives it put in place in the fourth quarter of 1999. The actual levels of
research and development and general and administrative expenditures are
dependent on many factors, including the progress and results of ongoing
clinical and development work, the cost, timing and outcome of the regulatory
process, the costs of materials, the cost of preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims, the availability and cost of
required personnel, the cash resources available to the Company and the extent
to which the Company enters into affiliations with one or more corporate
partners for the ongoing development and commercialization of its products. See
"Liquidity and Capital Resources".

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997.

REVENUES

Revenues for the year ended December 31, 1998 decreased by $0.61 million, from
$1.62 million in 1997 to $1.01 million in 1998. Interest income increased by
$0.06 million, from $0.90 million in 1997 to $0.96 million in 1998, due to
higher effective interest rates on cash, cash equivalents and short-term
investments in 1998. Research contract

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40

revenue decreased by $0.63 million, from $0.68 million to $0.05 million in 1998,
due to the completion of government research contracts in late 1997 and early
1998.

EXPENSES

Expenses for the year ended December 31, 1998 increased by $7.83 million, from
$6.30 million in 1997 to $14.13 million in 1998. Research and development
expenses increased by $4.70 million, from $4.73 million in 1997 to $9.43 million
in 1998. This increase is primarily due to the expansion and progress of the
Company's clinical trial program for OvaRex MAb, which involved the
consolidation of the Company's Phase II clinical trial commenced in Canada in
1997 with its United States Phase IIb clinical trial initiated in 1998 to form a
potentially pivotal Phase IIb North American trial. The increase is also due to
the costs related to production of antibody for clinical trial purposes.

General and administrative expenses increased by $3.13 million, from $1.56
million in 1997 to $4.69 million in 1998. This increase is primarily due to the
addition of key management personnel in 1998, the establishment of an office in
the United States in May 1998 and the relocation of certain personnel to such
office, as well as the related support costs for increasing research and
development activities and patent and corporate development activities.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At December 31, 1999, the Company had cash and short-term investments of $7.2
million. Included in this balance were short-term financial instruments with a
carrying value, including accrued interest, of $4.9 million, consisting of
obligations of Canadian federal and provincial governments, as well as corporate
obligations. These instruments carry maturities of six months or less and their
carrying value approximates fair value. These instruments have a weighted
average interest rate of 5.0%. The Company purchased such financial instruments
for investment purposes only and not for trading or speculative purposes.

The Company's risks relative to these securities are credit risk and interest
rate risk. Regarding credit risk, the Company mitigates such risk by investing
only in federal or provincial government securities or investment grade
corporate obligations in the form of commercial paper or bankers' acceptances.
Regarding interest rate risk, exposure results from changes in short-term
interest rates or early redemption of securities. These risks are mitigated by
the short-term nature of the portfolio.

FOREIGN CURRENCY EXPOSURE

The Company currently has a significant portion of its operations in the United
States, including the operation of its U.S. office and the ongoing
administration of several clinical trials. As well, the Company has significant
development and production activities with foreign suppliers, particularly
including the development and production of the Company's current antibody
supply. Accordingly, a significant portion of the Company's transactions are
denominated in U.S. dollars and other foreign currencies and the Company has an
exposure risk to foreign exchange rates. The Company partially offsets this risk
by maintaining cash balances and short-term investments denominated in U.S.
currency. At year-end 1999 the Company had $1.4 million (or 19.5 % of the total
cash and short-term investments) invested in U.S. denominated financial
instruments and cash deposits. Other than as mentioned here, the Company does
not actively engage in hedging or other activities to control the risk of its
foreign currency exposure.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents and short-term investments totaled $7.2 million at
December 31, 1999. Since AltaRex's inception through December 31, 1999 the
Company has financed its operations primarily through private placements and
public offerings of equity securities, amounting to $50.4 million, interest
income on invested balances, amounting to $2.5 million and amounts received
under research contracts of $0.8 million. On February 29, 2000, the Company
closed the sale of 5.7 million Special Warrants, convertible into Common Shares
at no additional cost, for gross proceeds of approximately $6.0 million. Net
proceeds after deduction of the Agent's fees and expenses are expected to be
approximately $5.4 million. On April 20, 2000, all of the Special Warrants were
exercised for an

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41

equal number of Common Shares. The Company sold 39,100,000 Common Shares in 1999
for net proceeds of $17.6 million. The Company currently has no contributing
cash flows from operations. As a result, the Company relies on external sources
of financing such as the issue of equity or debt securities, the exercise of
options or warrants and investment income.

The Company's net cash used in operating activities amounted to $23.2 million,
$11.4 million and $4.0 million for the years ended December 31, 1999, 1998 and
1997, respectively, and resulted primarily from its net operating losses. The
Company's investing activities resulted in a net use of cash of $0.8 million and
$9.9 million, respectively for the years ended December 31, 1999 and 1997 and a
net provision of cash of $4.2 million for the year ended December 31, 1998.

The Company expects to continue to incur substantial research and development
expenses, including expenses related to preclinical studies, clinical trials,
manufacturing and commercialization activities, and supporting general and
administrative expenses. The Company believes that its available cash, cash
equivalents and short-term investments, including the proceeds of the sale of
Special Warrants on February 29, 2000, and interest earned thereon, should be
sufficient to finance its operations and capital needs into the fourth quarter
of 2000. The Company's funding needs may vary depending on a number of factors
including progress of its research and development programs, the number and
breadth of these programs, the results of preclinical studies and clinical
trials, the cost, timing and outcome of the regulatory process, the
establishment of collaborations, the cost of preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims, the status of competitive
products and the availability of other financing.

In order to meet such capital requirements, the Company intends to pursue
additional capital raising opportunities as well as collaborative arrangements.
The Company has filed a Preliminary Prospectus in Canada for the sale of Common
Shares. The amount of capital to be raised and the number of Common Shares to be
issued have not been determined. The Company's ability to access the capital
markets or to enlist strategic partners is substantially dependent on the
progress of its research and development programs and regulatory approval of its
products. There can be no assurance that additional financing will be available
on acceptable terms, if at all. If adequate funds are not available, the Company
may be required to delay, reduce the scope of, or eliminate one or more of its
research and development programs.

ITEM 9A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is included in the discussion under Item
9, above.

ITEM 10 - DIRECTORS AND OFFICERS OF REGISTRANT AS OF MAY 15, 2000

NAME AND MUNICIPALITY POSITION PRESENT OCCUPATION AND POSITION DURING
THE LAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------

Dr. Antoine A. Noujaim Chairman of the Board and Present and Chief Executive Officer from
Edmonton, Alberta Chief Scientific Officer November, 1995 to February 22, 1998;
President of Biomira Research Inc., a
division of Biomira Inc. (A
biopharmaceutical company), from 1994 to
1995; Senior Vice-President of the
Immunoconjugate Division of Biomira Inc.
from 1989 to 1994; director of Biomira
Inc. from 1985 to 1995.

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42

Richard E. Bagley(2) President, Chief Executive President, Chief Executive Officer and
Weston, Massachusetts Officer and Director Director since February 23, 1998.
Chairman and Chief Executive Officer of
Proscript Inc. from September, 1995 to
February, 1998. President and Chief
Executive Officer of Immulogic
Pharmaceutical Corporation from 1990 to
1994.
William R. McMahan(1) (2) Director Director since January 1, 1996.
Calgary, Alberta President of Oxbow Capital Corporation
(a merchant banking company) from
October, 1993 to present. A Director of
International Marketing, Oxbow Resources
Limited (a merchant banking company)
from January, 1992 to present.
Consultant for Safety Boss Limited (an
oilfield service company) from August 1,
1991 to December 31, 1991.
Monique Begin(1) Director Director since May 14, 1998. Professor
Ottawa, Ontario emeritus, University of Ottawa. Dean,
Faculty of Health Sciences, University
of Ottawa from 1990 to 1997. Former
Minister of National Health and Welfare
Canada from September 1977 to September
1984.
Jim A. Wright(2) Director Director since May 14, 1998. Chairman of
Winnipeg, Manitoba of the Board, President and Chief
Scientific Officer of GeneSense
Technologies Inc. since 1997. Terry Fox
Senior Research Scientist of the
National Cancer Institute of Canada
since 1990. Associate Director, Manitoba
Institute of Cell Biology since 1989.
Normand Balthazard(1) (2) Director Director since December 22, 1999.
Montreal, Quebec President and Chief Executive Officer of
BioCapital Investments, Limited
Partnership since 1990.
Edward M. Fitzgerald Senior Vice President, Chief Senior Vice President, Chief Financial
Dover, Massachusetts Financial Officer and Officer and Secretary since September
Secretary 28, 1998. Consultant in private
practice, 1998. Director, Mergers &
Acquisitions and Director, Consumer
Lending Group at BankBoston Corporation
from 1992 to 1997. With Arthur Andersen
& Co. from 1978 to 1992 serving as
Partner from 1989 to 1992.

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43

Dr. Christopher F. Nicodemus Senior Vice President, Senior Vice President, Clinical Research
Charlestown, Massachusetts Clinical Research and Research and Development since January
Development 25, 1999. Vice President, Medical
Affairs from 1998 to 1999 and Vice
President, Clinical Operations from 1997
to 1998 of Diatide, Inc. With Immulogic
Pharmaceutical Corporation from 1993 to
1997 serving as Vice President, Medical
Affairs from 1994 to 1997. Senior
Associate Medical Director with Pfizer
Labs from 1992 to 1993.
Marlene R. Booth Vice President, Regulatory Vice President, Regulatory Affairs and
Norwell, Massachusetts Affairs and Project Project Management since June 1, 1999.
Management Vice President, Project Management, QA and
Regulatory at Proscript, Inc. from 1997 to
1999. Senior Director Regulatory Affairs
at Biopure Corporation from 1995 to
1997. Vice President, Regulatory Affairs
and Quality Assurance from 1992 to 1994
at Ares Serono.
Peter C. Gonze Senior Vice President, Senior Vice President, Operations and
Sudbury, Massachusetts Operations and Investor Investor Relations since February 2000.
Relations Vice President, Investor Relations and
Medical Marketing from October 1999 to
February 2000. With MediSense Products,
Abbott Laboratories as Divisional Vice
President from 1996 to 1999. With The
Griffin Group from 1994 to 1996.
Robert A. Newman Vice President, Vice President, Business Development
Maynard, Massachusetts Business Development since February 2000. Executive
Director, Business Development from 1998
to 2000. Director of Marketing from 1997
to 1998. With Ligand Pharmaceuticals as
Marketing Manager, Canada from 1995 to
1997. With QLT Phototherapeutics as
Marketing/Program Manager from 1994 to
1995.

Notes:

(1) Member of Audit Committee.
(2) Member of Compensation Committee.

ITEM 11 - COMPENSATION OF DIRECTORS AND OFFICERS

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the compensation paid to Mr. Bagley, Dr. Antoine
A. Noujaim, Mr. Fitzgerald, Dr. Nicodemus and Ms. Booth (the "Named Executive
Officers") for each of the fiscal years ended December 31, 1999, 1998 and 1997.

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44

- --------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM
COMPENSATION
AWARDS
- --------------------------------------------------------------------------------------------------------------
NAME AND YEAR SALARY BONUS COMMON SHARES ALL OTHER
PRINCIPAL POSITION ($) ($) UNDER OPTIONS COMPENSATION
GRANTED (#) ($)(5)
- --------------------------------------------------------------------------------------------------------------

Richard E. Bagley(1)President 1999 386,158 Nil 1,031,250 1,304
and Chief Executive Officer 1998 315,179 Nil 825,000 Nil
- --------------------------------------------------------------------------------------------------------------
Dr. Antoine A. Noujaim(1)
Chairman of the Board, Chief
Scientific Officer and Former 1999 220,000 Nil Nil 6,777
President and Chief Executive 1998 220,000 Nil Nil 6,880
Officer 1997 220,000 Nil Nil 6,312
- --------------------------------------------------------------------------------------------------------------
Edward M. Fitzgerald(2)
Senior Vice President, Chief 1999 293,480 218,750
Financial Officer and Secretary 1998 92,374 Nil 175,000 298
- --------------------------------------------------------------------------------------------------------------
Christopher F. Nicodemus(3)
Senior Vice President, Clinical 1999 290,696 14,973 218,750 274
Research and Development 1998 175,000
- --------------------------------------------------------------------------------------------------------------
Marlene R. Booth(4)
Vice President, Regulatory
Affairs and Project Management 1999 120,660 Nil 100,000 273
- --------------------------------------------------------------------------------------------------------------

Notes:

(1) Dr. Noujaim became an officer of the Company on July 17, 1996 upon the
acquisition by the Company of all of the issued shares of AltaRex Inc. Dr.
Noujaim's salary was paid by AltaRex Inc. until May of 1997. Dr. Noujaim
ceased to be the President and Chief Executive Officer of the Company on
February 23, 1998. Mr. Richard E. Bagley was appointed President and Chief
Executive Officer of the Company on that date.

(2) Mr. Fitzgerald joined the Company on September 28, 1998.

(3) Dr. Nicodemus was hired by the Company in December 1998 and commenced work
in January 1999.

(4) Ms. Booth joined the Company on June 1, 1999. Prior to employment by the
Company, Ms. Booth performed consulting services for the Company and was
paid consulting fees of $6,790 in 1999.

(5) Compensation under the column "All Other Compensation" is with respect to
employee benefits such as health care, life insurance and a group
retirement savings plan.

Total Annual Compensation for 1999 for the Named Executive Officers equals
$1,310,994.

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45

STOCK OPTIONS

The following table details information with respect to the grant of options by
the Company to the named executive officers during the financial year of the
Company ended December 31, 1999.

- -----------------------------------------------------------------------------------------------------------------------
OPTION/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
- -----------------------------------------------------------------------------------------------------------------------
MARKET VALUE OF
% OF TOTAL COMMON SHARES
COMMON OPTIONS UNDERLYING OPTIONS
SHARES UNDER GRANTED TO EXERCISE OR ON THE DATE OF
OPTIONS EMPLOYEES IN BASE PRICE GRANT ($/COMMON
NAME GRANTED (#) FINANCIAL YEAR ($/COMMON SHARE) SHARE) EXPIRY DATE
- -----------------------------------------------------------------------------------------------------------------------

Richard E. Bagley 1,031,250 55% $1.03 $1.03 July 8, 2009
- -----------------------------------------------------------------------------------------------------------------------
Edward M. Fitzgerald 218,750 12% 1.03 1.03 July 8, 2009
- -----------------------------------------------------------------------------------------------------------------------
Christopher F. Nicodemus 218,750 12% 1.03 1.03 July 8, 2009
- -----------------------------------------------------------------------------------------------------------------------
Marlene R. Booth 100,000 5% 0.46 0.46 May 11, 2009
- -----------------------------------------------------------------------------------------------------------------------

The following table details all options held by the named executive officers and
outstanding on December 31, 1999. There were no options of the Company exercised
by the named executive officers during the last financial year.

- ------------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL
YEAR-END AND FINANCIAL YEAR-END OPTIONS VALUES
- ------------------------------------------------------------------------------------------------------------------------
VALUE OF
UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
COMMON SHARES AGGREGATE AT FINANCIAL OPTIONS AT
ACQUIRED ON VALUE YEAR-END FINANCIAL YEAR-END
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE(#) UNEXERCISABLE($)
- ------------------------------------------------------------------------------------------------------------------------

Richard E. Bagley Nil Nil 618,750/1,237,500 NA/NA
- ------------------------------------------------------------------------------------------------------------------------
Dr. Antoine A. Noujaim Nil Nil 375,000/0 NA/NA
- ------------------------------------------------------------------------------------------------------------------------
Edward M. Fitzgerald Nil Nil 131,249/262,501 NA/NA
- ------------------------------------------------------------------------------------------------------------------------
Christopher F. Nicodemus Nil Nil 131,249/262,501 NA/NA
- ------------------------------------------------------------------------------------------------------------------------
Marlene R. Booth Nil Nil Nil/100,000 NA/3,000
- ------------------------------------------------------------------------------------------------------------------------

COMPENSATION OF DIRECTORS

In 1999, each director, with the exception of Dr. Antoine A. Noujaim and Mr.
Bagley, received a fee of US $10,000 per annum. Further, all directors are
eligible to receive stock options and are entitled to receive their reasonable
out-of pocket disbursements incurred on the business of the Company. In the
aggregate, a total of $66,670 in fees was paid to the members of the Board of
Directors during the period from January 1, 1999 to December 31, 1999.

ITEM 12 - OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

On May 3, 2000 the shareholders approved an amendment to the Company Stock
Option Plan (the "Plan") increasing the Common Shares reserved for issuance from
4,180,000 to 11,500,000. As at May 15, 2000 there were outstanding options to
purchase a total of 8,161,567 Common Shares under the Plan and the following
table sets out in detail all stock options issued and outstanding under the
Plan.

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46

- ----------------------------------------------------------------------------------------------------------------
Group Number of Shares Date of Grant Exercise Price Expiry Date
Under Option per Share
- ----------------------------------------------------------------------------------------------------------------

Directors (excluding 382,500 July 26, 1996 1.80 July 26, 2006
Executive Officers) 2,500 July 8, 1997 3.68 July 8, 2007
(five in total) 80,000 May 21, 1998 2.18 May 21, 2008
300,000(1) December 22, 1999 0.35 December 22, 2009
420,000(1) February 17, 2000 1.49 February 17, 2010
- ----------------------------------------------------------------------------------------------------------------
Executive Officers 824,130 March 4, 1998 3.00 March 4, 2008
(five in total) 870 July 6, 1998 3.00 July 6, 2008
175,000 September 15, 1998 0.91 September 15, 2008
175,000 December 23, 1998 0.53 December 23, 2008
100,000 May 11, 1999 0.46 May 11, 2009
1,468,750 July 8, 1999 1.03 July 8, 2009
75,000 October 8, 1999 0.90 October 8, 2009
1,490,000(1) December 22, 1999 0.35 December 22, 2009
1,450,000(1) February 17, 2000 1.49 February 17, 2010
- ----------------------------------------------------------------------------------------------------------------
Employees 51,500 July 26, 1996 1.80 July 26, 2006
(15 in total) 10,000 December 31, 1996 5.90 December 31, 2006
13,333 February 4, 1997 6.00 February 4, 2007
5,000 July 8, 1997 3.68 July 8, 2007
10,000 February 1, 1998 2.84 February 1, 2008
87,000 May 21, 1998 2.18 May 21, 2008
50,000 August 4, 1998 1.15 August 4, 2008
33,334 November 30, 1998 0.80 November 30, 2008
112,900 July 8, 1999 1.03 July 8, 2009
31,750 August 19, 1999 0.90 August 19, 2009
583,000(1) February 17, 2000 1.49 February 17, 2010
- ----------------------------------------------------------------------------------------------------------------
Consultants 100,000 July 8, 1997 3.68 July 8, 2007
(15 in total) 5,000 November 7, 1997 3.30 November 7, 2007
25,000 July 17, 1998 1.40 July 17, 2008
100,000(1) February 17, 2000 1.49 February 17, 2010
- ----------------------------------------------------------------------------------------------------------------

Notes:

(1) On December 22, 1999, the Board of Directors of the Company approved the
grant of options to acquire an aggregate of 1,790,000 Common Shares at a
price of $0.35 per share to certain officers of the Company and on February
17, 2000, the Board of Directors of the Company approved the grant of
options to acquire an aggregate of 2,553,000 shares at a price of $1.49 per
share, to directors, officers and employees of, and a consultant to the
Company. All of these additional options expire on the tenth anniversary of
the date of grant thereof. The ability to exercise any such options was
conditioned upon the approval by the shareholders of the increase in the
number of shares reserved under the Plan. The shareholders of the Company
authorized an increase in the number of shares reserved under the Plan from
4,180,000 to 11,500,000 at the annual and special meeting of the
shareholders held on May 3, 2000.

ITEM 13 - INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

There are no material interests, direct or indirect, of directors, senior
officers or shareholders of the Company who beneficially own, directly or
indirectly, more than 10% of the outstanding Common Shares or any known
associate or affiliates of such persons, in any transaction since March, 1997 or
in any proposed transaction which has materially affected or will materially
affect the Company, except for the following:

1. Directors and officers of the Company (including associates thereof)
purchased an aggregate of 1,160,189 Special Warrants of the Company on
February 29, 2000; and

2. BioCapital Investments, Limited Partnership purchased 650,000 Special
Warrants of the Company on February 29, 2000.

-42-
47

PART II

ITEM 14 - DESCRIPTION OF SECURITIES TO BE REGISTERED

Not Applicable.

PART III

ITEM 15 - DEFAULTS UPON SENIOR SECURITIES

Not Applicable

ITEM 16 - CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES

Not Applicable

PART IV

ITEM 17 - FINANCIAL STATEMENTS

See the Financial Statements listed in Item 19 hereof and attached hereto as
EXHIBIT A, which are filed and incorporated herein as part of this Annual
Report.

These financial statements were prepared in accordance with generally accepted
accounting principles in Canada and are expressed in Canadian dollars. Such
financial statements have been reconciled to United States generally accepted
accounting principles. For a history of exchange rates in effect for Canadian
dollars as against U.S. dollars see page iv of this Annual Report.

ITEM 18 - FINANCIAL STATEMENTS

Not Applicable

ITEM 19 - FINANCIAL STATEMENTS AND EXHIBITS

FINANCIAL STATEMENTS

Report of Arthur Andersen LLP, Chartered Accountants

Report of Ernst & Young LLP, Independent Chartered Accountants

Consolidated balance sheets as at December 31, 1999 and December 31, 1998

Consolidated statements of loss for the years ended December 31, 1999, 1998 and
1997, and for the period December 1, 1995 to December 31, 1999

Consolidated statements of shareholders' equity and accumulated deficit for the
years ending December 31, 1999, 1998, 1997, 1996, 1995

Consolidated statements of cash flows for the year ended December 31, 1999, 1998
and 1997, and for the period December 1, 1995 to December 31, 1999

Notes to the Consolidated Financial Statements

-43-
48

EXHIBITS

The list of Exhibits filed as part of this Annual Report on Form 20-F are set
forth on the Exhibit Index immediately preceding such Exhibits, and is
incorporated herein by this reference.

-44-
49

GLOSSARY OF TERMS

Adjuvant: An immunogenic substance administered with a
vaccine to increase the immune response.

Antibody: A protein agent developed in response to, and
binding specifically with, an antigen.

Antibody-based Immunotherapy
or AIT(R): An immunotherapeutic antibody approach that
induces the human immune system to produce
its own anti-tumor response through several
immune pathways.

Anti-idiotype Cascade or
Network: An in vivo immune response characterized by
antibodies to antibodies resulting in antigen
mimics and secondarily by native antibodies
reactive to the same antigen as the antibody
inducing the cascade.

Antigen: Substance which elicits a specific immune
response.

Ascites-derived material: Obtained from the fluid of the abdominal
cavity of mice that have been implanted with
cells that secrete the desired substance
(antibody).

B-cell: A form of immune cell that produces
antibodies and is a precursor to a plasma
cell.

Cell culture-derived
material: Obtained from the secretion of cells grown in
artificial media, often in flasks or tanks.

Cellular response: An immune system response mediated by immune
cells, often cytotoxic and antigen specific.

Current Good
Manufacturing Practices or
cGMP: Government promulgated guidelines governing
the manufacture of human and animal drugs and
biologicals.

Chemotherapy
or chemotherapeutic: Generally, the use of drugs in the treatment
of disease. Specifically the use of cytotoxic
drugs to treat cancer.

Cytokine: Low molecular weight proteins that can either
stimulate or inhibit the proliferation or
function of immune cells.

Cytotoxic T-cells: Immune system cells capable of killing other
cells.

-45-
50

Epitope: Specific region on an antigen which is
recognized by a specific antibody or T-cell.

European Medicines
Evaluation Agency or
EMEA: The agency responsible for drug product
approval in the European Economic Community.

First line chemotherapy
(in ovarian cancer): The administration of one or more of a
combination of chemotherapeutic agent usually
consisting of a platinum-based drug and
paclitaxel.

Gene: The basic unit of heredity. Genes are nucleic
acid sequences encoding specific proteins
that occupy a specific location on a
chromosome and are self-producing,
submicroscopic structures capable under
certain circumstances of giving rise to a new
character.

Health Protection
Branch or HPB: The government department responsible for
supervising the drug development and approval
process in Canada.

Humoral response: An immune response mediated by antibodies in
the blood.

Immunogenicity: The degree to which an antigen is capable of
eliciting an immune response.

Immunotherapy: A therapeutic approach to treat diseases by
modifying the immune response against the
disease.

Immunological tolerance: Characteristic state in which the immune
system is rendered unresponsive to an antigen
that, under other conditions, would provoke
an immune response.

Investigational New Drug
Application or IND: An application to the FDA or other regulatory
bodies, which is submitted for approval prior
to beginning clinical trials.

Intravenous infusion: Administration of a medication directly into
a vein.

In vitro: Studies or phenomena which take place outside
the body.

In vivo: Studies or phenomena which take place in the
body.

Master Cell Bank or MCB: A well characterized stock containing
specific hybridoma cells that are used in the
manufacture of antibodies.

Master Working Cell Bank: "Manufacturer's" or "Master" Working Cell
Bank, often referred to as the "Working Cell
Bank" (WCB): a bank derived from the Master
Cell Bank which acts as the starting source
for (antibody) bioproduction.

Monoclonal antibody

-46-
51

MAb: Antibody produced by hybridoma cells, which
is homogeneous in structure and specificity.

MUC1: A mucinous antigen associated with breast and
other cancers.

Multi-epitopic response: Immune response to an antigen that is
directed to multiple regions on the antigen
recognized by antibodies or T-cells.

Multiple myeloma: A haematologic malignancy or blood cancer
related to leukemia and lymphoma
characterized by over-production of abnormal
plasma cells in the bone marrow.

Murine: Of mouse origin.

New Drug Application or
NDA: A document submitted to the FDA or other
regulatory bodies containing all the
pre-clinical and clinical data collected on a
drug to obtain approval for marketing.

New Drug Submission or
NDS: A document submitted to the HPB which is the
Canadian counterpart to the NDA.

Potentially pivotal: A term used to describe clinical trials that
would form the basis for a submission seeking
marketing approval from regulatory
authorities if the statistical goals of the
trial are met.

Primary endpoint: The primary clinical outcome which forms the
a priori basis of the statistical hypothesis
(including sample size estimation) of a well
controlled clinical trial. A fully successful
study confirms a treatment effect of the
magnitude sufficient to provide a
statistically significant demonstration of
the "primary end point" for regulatory
approval of a product.

PSA: An antigen associated with prostate cancer.

Sera: The fluid component of blood after separation
of cellular components.

Secondary endpoint: Secondary clinical or biological outcomes
that can be assessed in analysis of a
clinical trial. Although supportive and
potentially important, these endpoints are
not the a priori primary experimental
question proposed for a clinical protocol.

Second-line chemotherapy
(in ovarian cancer): Any one of a combination of drugs consisting
of Paclitaxel, Etoposide, CAP
(cyclophosphamide, adriamycin, cis-platin) or
HCAP (hexamethylmelamine and CAP) or other
drugs administered into patients, who are
either partial or non-responders to first
line chemotherapy.

Surrogate endpoint: A laboratory or physical sign that is used in
clinical trials as a substitute for a
clinically meaningful endpoint that is a
direct measure of how a patient feels,
functions, or survives and that is reasonably
likely to predict the effect of therapy.

-47-
52

Surrogate marker: A laboratory measurement of biological
activity within the body that indirectly
indicates the effect of treatment on disease
state.

T-cell: A form of immune cell that mediates humoral
and cellular immune responses.

Tumor: An abnormal proliferation of malignant cells.

Tumor antigen or tumor
associated antigen or TAA: An antigen that is predominantly expressed in
tumor tissues and may be released into the
blood stream in association with the tumor.

Tumor marker: A biological product (protein or other) that
is expressed on tumor cells and secreted
usually into the serum, such that presence or
activity of the tumor can be measured
indirectly through measurement of the marker.

United States Food and
Drug Administration or
FDA: The regulatory body that oversees the drug
development and approval process in the
United States.

-48-
53

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.

ALTAREX CORP.

Per: /s/ Richard E. Bagley
------------------------------------------
Richard E. Bagley
President and Chief Executive Officer

DATED this 24th day of May, 2000.

-49-
54

CONSOLIDATED FINANCIAL STATEMENTS

ALTAREX CORP.

DECEMBER 31, 1999 AND 1998

F-1

AUDITORS' REPORT

To the Shareholders of

ALTAREX CORP.

We have audited the consolidated balance sheet of AltaRex Corp. (an Alberta
corporation in the development stage) as at December 31, 1999, and the
consolidated statements of loss, shareholders' equity and cash flows for the
year then ended and for the period from inception (December 1, 1995) through
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of AltaRex Corp. as at December 31,
1999 and the results of its operations and its cash flows for the year then
ended and for the period from inception through December 31, 1999 in accordance
with generally accepted accounting principles in Canada.

ARTHUR ANDERSEN LLP
CHARTERED ACCOUNTANTS

Calgary, Canada
February 9, 2000
(except with respect to the matter
discussed in Note 10 as to which the
date is February 29, 2000 and April 20, 2000)

F-2

AUDITORS' REPORT

To the Directors of

ALTAREX CORP.

We have audited the consolidated balance sheet of AltaRex Corp. as at December
31, 1998 and the consolidated statements of loss, consolidated statements of
shareholders' equity and the consolidated statements of cash flows for the years
ended December 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1998
and the results of its operations and its cash flows for the years ended
December 31, 1998 and 1997 in accordance with accounting principles generally
accepted in Canada.

Edmonton, Canada Ernst & Young LLP
February 12, 1999 Chartered Accountants
Accountants

F-3

ALTAREX CORP.
(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

As of December 31,
---------------------
1999 1998
---- ----
(In Canadian dollars)
- ---------------------
ASSETS

CURRENT ASSETS

Cash and cash equivalents $2,328,641 $8,581,688

Short-term investments 4,878,039 4,241,732

Accounts receivable 89,773 78,616

Prepaid expenses 64,127 174,293
---------- -----------
7,360,580 13,076,329

DEPOSITS AND OTHER ASSETS 235,671 322,840

NOTES RECEIVABLE FROM EMPLOYEES 36,285 106,186

CAPITAL ASSETS 934,893 1,654,419
---------- -----------
$8,567,429 $15,159,774
---------- -----------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable and accrued liabilities $2,302,960 $2,079,168
---------- -----------
2,302,960 2,079,168
DEFERRED LEASE CREDIT 46,513 433,766
---------- -----------
TOTAL LIABILITIES 2,349,473 2,512,934
---------- -----------

COMMITMENTS AND CONTINGENCIES
[Notes 6 and 10]

SHAREHOLDERS' EQUITY

Share Capital 50,427,647 32,838,364

Accumulated deficit during the
development stage (44,209,691) (20,191,524)
---------- -----------

TOTAL SHAREHOLDERS' EQUITY 6,217,956 12,646,840
---------- -----------
$8,567,429 $15,159,774
---------- -----------

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

On behalf of the Board:

(Signed) Antoine A. Noujaim (Signed) Richard E. Bagley
Director Director

F-4

ALTAREX CORP.
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF LOSS

DEC. 1, 1995
YEAR ENDED DECEMBER 31, - DEC. 31,
---------------------------------- ------------
1999 1998 1997 1999

(In Canadian dollars)

REVENUES

Research contracts $ 65,000 $ 50,000 $ 680,000 $ 810,000

Sale of research materials -- -- 39,760 71,869

Interest income 622,710 963,742 900,076 2,551,196
------------- ------------- ----------- ------------
687,710 1,013,742 1,619,836 3,433,065
------------- ------------- ----------- ------------

EXPENSES

Research and development 12,828,617 9,433,681 4,733,918 28,924,048

General and administrative 6,802,546 4,695,990 1,563,555 13,643,994

Settlement costs (Note 8) 5,074,714 -- -- 5,074,714
------------- ------------- ----------- ------------
24,705,877 14,129,671 6,297,473 47,642,756
------------- ------------- ----------- ------------

NET LOSS FOR THE YEAR $(24,018,167) $(13,115,929) $(4,677,637) $(44,209,691)
------------- ------------ ----------- ------------
NET LOSS PER COMMON SHARE ($0.58) ($0.79) ($0.29)
------------- ------------- -----------

Weighted average number of
common shares 41,389,736 16,503,764 15,894,880
------------- ------------- -----------

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

F-5

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY

ACCUMULATED
DEFICIT
COMMON SHARE DURING THE TOTAL
-------------------------- DEVELOPMENT SHAREHOLDERS'
SHARES AMOUNT STAGE EQUITY
------ ------ ----------- -------------

BALANCE AT DECEMBER 1, 1995 1,169,330 $ -- $ -- $ --
Issue of shares 25,000 -- -- --
Initial capitalization of Company -- 1,000,000 -- 1,000,000
Net loss -- -- (225,899) (225,899)
--------- ------------ ----------- -----------

BALANCE AT DECEMBER 31, 1995 1,194,330 1,000,000 (225,899) 774,101
Private placement of shares
of AltaRex Inc. -- 175,200 -- 175,200
Issue of shares of AltaRex Inc.
in settlement of interest payable -- 12,066 -- 12,066
Shares issued in private placement
of unit sales 1,497,500 2,310,424 -- 2,310,424
Shares issued to acquire AltaRex Inc. 7,525,000 1 -- 1
Exercise of Special Warrants 797,500 1,210,000 -- 1,210,000
Issuance of common shares in
public offering 4,100,000 25,036,466 -- 25,036,466
Exercise of stock options 116,933 76,014 -- 76,014
Exercise of warrants 43,300 103,920 -- 103,920
Net loss -- -- (2,172,059) (2,172,059)
--------- ------------ ----------- -----------

BALANCE, DECEMBER 31, 1996 15,274,563 29,924,091 (2,397,958) 27,526,133
Exercise of stock options 95,000 170,931 -- 170,931
Exercise of warrants 1,113,050 2,689,342 -- 2,689,342
Net loss -- -- (4,677,637) (4,677,637)
--------- ------------ ----------- -----------

BALANCE, DECEMBER 31, 1997 16,482,613 32,784,364 (7,075,595) 25,708,769
Exercise of stock options 30,000 54,000 -- 54,000
Net loss -- -- (13,115,929) (13,115,929)
--------- ------------ ----------- -----------
BALANCE, DECEMBER 31, 1998 16,512,613 32,838,364 (20,191,524) 12,646,840
Issuance of common shares in
public offering 39,100,000 17,589,283 -- 17,589,283
Net loss -- -- (24,018,167) (24,018,167)
--------- ------------ ----------- -----------
Balance, December 31, 1999 55,612,613 $ 50,427,647 $(44,209,691) $ 6,217,956
--------- ------------ ----------- -----------

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

F-6

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED
DECEMBER 31, DEC. 1, 1995
--------------------------------------------- - DEC. 31,
1999 1998 1997 1999

(In Canadian dollars)
- ----------------------------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES
Net loss $(24,018,167) $(13,115,929) $ (4,677,637) $(44,209,691)
Adjustments to reconcile net loss to
Depreciation and amortization 565,218 548,687 366,268 1,617,706
Amortization of deferred (78,920) (168,551) (64,324) (311,795)
Interest expense satisfied
issuance of common shares -- -- -- 12,066
Net changes in non-cash
capital balances 291,491 1,301,468 374,431 1,913,388
------------ ------------ ------------ ------------
(23,240,378) (11,434,325) (4,001,262) (40,978,326)
------------ ------------ ------------ ------------

CASH USED IN INVESTING ACTIVITIES
Purchase of capital assets (154,026) (573,698) (853,826) (2,194,293)
Maturities and purchases of
short-term investments (636,307) 4,794,268 (9,036,000) (4,878,039)
Acquisition of AltaRex Corp. -- -- -- (30,250)
------------ ------------ ------------ ------------
(790,333) 4,220,570 (9,889,826) (7,102,582)
------------ ------------ ------------ ------------

CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES
Issue of common shares, net 17,589,283 54,000 2,860,273 46,895,157
Issue of Private Placement Units, -- -- -- 2,340,674
Issue of Special Warrants, net -- -- -- 1,210,000
Deferred finance costs 118,477 (118,477) (219,028) --
Employee relocation loans 69,904 (106,186) -- (36,282)
------------ ------------ ------------ ------------
17,777,664 (170,663) 2,641,245 50,409,549
------------ ------------ ------------ ------------

NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (6,253,047) (7,384,418) (11,249,843) 2,328,641
Cash and cash equivalents,
Beginning of period 8,581,688 15,966,106 27,215,949 --
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 2,328,641 $ 8,581,688 $ 15,966,106 $ 2,328,641
------------ ------------ ------------ ------------

Supplemental disclosure of noncash investing and financing activities:
Leasehold improvements financed

F-7

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1999

(In Canadian dollars)

with deferred lease credit $-- $46,641 $620,000 $ 666,641

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

F-8
62
ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

1. BASIS OF PRESENTATION

DESCRIPTION OF BUSINESS

AltaRex Corp. (the Company), incorporated under the Business Corporations Act
(Alberta), is a development-stage biotechnology company that is engaged in the
research and development of biopharmaceutical products for the therapy of
cancer.

The Company's ability to complete its research and development program and
commercialize its technology is dependent on the Company continuing to arrange
the necessary financing and the receipt of regulatory approvals to use its
products in the therapy of cancer.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared by management in accordance with
accounting principles generally accepted in Canada, which do not differ
materially from those established in the United States, except as disclosed in
Note 9. The preparation of financial statements in accordance with such
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting periods. Actual results could
differ from those estimates.

CONSOLIDATION OF SUBSIDIARIES

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, AltaRex US, Corp. All significant intercompany
balances have been eliminated in consolidation.

F-9

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

Research material sales are recognized as revenue when materials are delivered.

Revenue from research contracts, which includes government funding of research
projects, is recognized as the services are performed based on costs incurred
or, for those contracts that provide for milestone payments, as milestones are
achieved. Amounts received in advance of services to be performed are recorded
as unearned revenue.

CASH AND CASH EQUIVALENTS

Cash equivalents are stated at cost, which approximates fair value. The Company
considers highly liquid investments with original maturities of ninety days or
less to be cash equivalents and includes money market accounts and commercial
paper that are readily convertible to cash.

SHORT-TERM INVESTMENTS

Short-term investments consist of investments with original maturities between
three and twelve months. These investments consist of government and commercial
instruments and are carried at cost, which approximates their fair market value.
At December 31, 1999, short term investments have maturity periods averaging 2.5
months (1998 - 2.5 months) and average interest rates approximating 5.0% (1998 -
5.1%).

DEPOSITS AND OTHER ASSETS

Deposits and other assets primarily consist of down payments on service
contracts. These payments are deferred and expensed as services are provided
under the terms of the contract.

F-10

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CAPITAL ASSETS

Capital assets are stated at cost net of investment tax credits, accumulated
amortization and depreciation. Depreciation and amortization are provided at
rates which are designed to allocate the cost of the assets, on a straight-line
basis, over their estimated useful lives as follows:
Scientific equipment 5 years
Computer software and equipment 3 years
Office equipment 5 years
Leasehold improvements 3 - 5 years, term of lease

Property and equipment at December 31, 1999 and 1998 consisted of the following:

1999 1998
------------------------- ---------------------------
ACCUMULATED ACCUMULATED
DEPRECIATION/ DEPRECIATION/
COST AMORTIZATION COST AMORTIZATION
---- ------------- ---------- -------------

Scientific equipment $1,195,173 $ 783,076 $1,187,996 $ 543,893

Computer software and
equipment 440,540 266,344 301,968 150,688

Office equipment 424,836 205,525 416,559 117,151

Leasehold improvements 281,040 151,751 781,041 221,413
---------- ---------- ---------- ----------

$2,341,589 $1,406,696 $2,687,564 $1,033,145
---------- ---------- ---------- ----------

NET BOOK VALUE $934,893 $1,654,419
-------- ----------

F-11

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DEFERRED LEASE CREDIT

The deferred lease credit relates to leasehold improvements provided to the
Company by the landlord for its leased office and research facilities. The
deferred lease credit is being amortized over the terms of the lease agreements
which are three to five years. Certain deferred lease credits were reduced
during 1999 along with the related leasehold improvements as a result of the
Company's reduced utilization of certain facilities.

RESEARCH AND DEVELOPMENT COSTS

Research costs are expensed in the period incurred. Development costs are
expensed in the period incurred unless the Company believes a development
project meets generally accepted accounting principles for deferral and
amortization. No development costs have been deferred to date.

FOREIGN CURRENCY TRANSLATION

Monetary assets and liabilities in foreign currencies are translated into
Canadian dollars at the rate of exchange at the period end; transactions during
the period are translated at the rate of exchange in effect at the date of the
transaction. Gains and losses arising from these translation adjustments are
included in the consolidated statements of loss.

INVESTMENT TAX CREDITS

The Company is permitted to offset Canadian federal income taxes payable with
unapplied investment tax credits which are based on the cost of carrying on
qualifying research and development activities and the cost of qualifying new
equipment (see note 5).

Refundable investment tax credits received by the Company relating to the
acquisition of assets are deducted from the cost of the related asset.
Refundable investment tax credits received by the Company relating to current
expenses have been included in the determination of net loss as a reduction of
research and development costs.

F-12

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES

Income taxes have been provided on a deferred tax allocation basis whereby the
provision for income taxes is determined on the basis of income and expenses
included on the statement of income rather than the related amounts reported in
the income tax returns of the Company. Deferred income taxes relate primarily to
differences between the amount of depreciation and amortization recorded for
accounting purposes and capital cost allowance claimed for income tax purposes.
Due to the fact that the Company has incurred losses since inception, no income
tax provision or benefit has been recorded.

CONCENTRATION OF CREDIT RISK

The Company has no significant off-balance-sheet concentrations of credit risk
such as foreign exchange contracts, option contracts or other hedging
arrangements. Financial instruments that potentially subject the Company to
concentrations of credit risk are principally cash equivalents, short-term
investments, accounts receivable and accounts payable.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments consist principally of cash and cash equivalents, accounts
receivable and accounts payable and notes receivable. The estimated fair value
of these instruments approximates their carrying value.

NET LOSS PER SHARE

Basic and diluted net loss per common share was determined by dividing net loss
by the weighted average common shares outstanding during the period. Basic and
diluted net loss per share are the same, as outstanding common stock options and
warrants are antidilutive as the Company has recorded a net loss for all periods
presented. Options and warrants to purchase a total of 4,020,149 and 1,966,667
common shares have been excluded from the computation of diluted weighted
average shares outstanding for the year ended December 31, 1999. (1998 -
2,270,749 and 41,667 respectively; 1997 - 978,833 and 1,325,317 respectively)

F-13

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

3. NOTES RECEIVABLE FROM EMPLOYEES

The notes receivable from employees balance is comprised of employee relocation
loans. The notes are unsecured, non-interest bearing, denominated in U.S.
dollars, and have maturity dates ranging from March to October 2001.

4. SHARE CAPITAL

AUTHORIZED

The authorized share capital of the Company consists of an unlimited number of
common shares and an unlimited number of preferred shares.

The preferred shares may be issued in one or more series and the directors are
authorized to fix the number of shares in each series and to determine the
designation, rights, privileges, restrictions and conditions attached to the
shares of each series.

On May 7 and June 1, 1999, the Company issued a total of 39,100,000 common
shares in a public offering for net proceeds of $17,589,283 after related issue
expenses of $1,960,717. In connection with this transaction, the Company granted
options to the agents of this issue to purchase 1,955,000 common shares at the
issue price of $0.50 per share for a period of two years as additional
compensation.

As at December 31, 1999, a total of 38,250 (December 31, 1998 - 2,649,552)
common shares of the Company are being held in escrow for regulatory purposes
and will be released in 2000. A total of 2,611,302 and 2,611,442 common shares
were released from escrow in 1999 and 1998, respectively.

F-14

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

4. SHARE CAPITAL (CONTINUED)

WARRANTS AND STOCK OPTION PLAN

In 1999, the Company amended its stock option plan for directors, officers,
employees and consultants. Pursuant to the amended plan, a total of 4,180,000
(December 31, 1998 - 2,480,000) common shares of the Company are reserved for
issue of stock options, of which 34,851 (December 31, 1998 - 209,251) are
available for grant at December 31, 1999. At December 31, 1999, there were
3,863,483 (December 31, 1998 - 2,114,083) stock options outstanding for
directors, officers and employees and 156,666 (December 31, 1998 - 156,666)
options for consultants. See Note 10 for subsequent issue of warrants and
options.

F-15

69
ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

The following schedule details the warrants and stock options granted,
exercised, expired and cancelled.

SHARES ISSUABLE ON EXERCISE OF
------------------------------
WARRANTS
STOCK AND OTHER EXERCISE PRICE
OPTIONS OPTIONS PER SHARE
--------- --------- --------------

BALANCE AT DECEMBER 31, 1996 858,500 2,396,700 $1.80 - 3.00

Granted 217,833 41,667 3.20 - 12.00

Exercised (95,000) (1,113,050) 1.80 - 3.00

Cancelled (2,500) 3.68
--------- ---------- -------------

BALANCE AT DECEMBER 31, 1997 978,833 1,325,317 1.80 - 12.00

Granted 1,723,666 1.80 - 12.00

Exercised (30,000) 1.80

Cancelled (401,750) 1.15 - 5.90

Expired (1,283,650) 1.80 - 3.00
--------- ---------- -------------

BALANCE AT DECEMBER 31, 1998 2,270,749 41,667 0.53 - 12.00

Granted 1,869,400 1,955,000 0.46 - 1.03

Cancelled (120,000) 1.80 - 5.90
--------- ---------- -------------

BALANCE AT DECEMBER 31, 1999 4,020,149 1,996,667 $0.46 - 12.00
========= ========== =============

F-16

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

4. SHARE CAPITAL (CONTINUED)

The following table summarizes information relating to currently outstanding and
exercisable options as of December 31, 1999.

OUTSTANDING EXERCISABLE
---------------------------------------------- ----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER OF CONTRACTUAL LIFE AVERAGE NUMBER OF AVERAGE
EXERCISE PRICE SHARES (YEARS) EXERCISE PRICE SHARES EXERCISE PRICE
- -------------- ---------- ----------------- -------------- ---------- --------------

$0.46 - 0.53 275,000 9.1 $0.50 150,000 $0.51
0.72 - 1.03 2,021,066 9.3 1.00 766,466 0.98
1.15 - 1.40 75,000 8.6 1.23 50,000 1.23
1.80 - 2.18 656,250 7.1 1.92 588,250 1.89
2.84 - 3.68 969,500 8.1 3.09 691,167 3.13
5.90 - 6.00 23,333 7.1 5.96 23,333 5.96
---------- ----------------- -------------- --------- --------------
4,020,149 $1.65 2,269,216 $1.90
---------- ----------------- -------------- --------- --------------

F-17

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

4. SHARE CAPITAL (CONTINUED)

The following warrants and options to purchase common shares are outstanding at
December 31, 1999.

SHARES ISSUABLE ON
EXERCISE OF
- ------------------------------------
WARRANTS
STOCK AND OTHER EXERCISE PRICE
OPTIONS OPTIONS PER SHARE YEAR OF EXPIRY
- ---------- --------- -------------- --------------

26,666 $0.72 2000
41,667 12.00 2000
1,955,000 0.50 2001
452,250 1.80 2006
10,000 5.90 2006
134,500 3.30-3.68 2007
13,333 6.00 2007
400,000 0.53-1.40 2008
75,000 1.15-1.40 2008
1,039,000 2.18-3.00 2008
287,750 0.46-0.90 2009
1,581,650 1.03 2009
- --------- ---------- ------------- --------------
4,020,149 1,996,667
========= ========== ============= ==============

5. INCOME TAX

The Company is eligible for scientific research and development investment tax
credits which may be applied against federal taxes payable. The accumulated
non-refundable investment tax credits as at December 31, 1999 is approximately
$2,570,000 (December 31, 1998 - $1,923,000).

F-18

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

5. INCOME TAX (CONTINUED)

As at December 31, 1999, the Company has scientific research and experimental
development expenditures for tax purposes of approximately $10,900,000 (December
31, 1998 - $8,146,000) which may be carried forward indefinitely and utilized by
reducing income for income tax purposes.

As at December 31, 1999, the Company has approximately $35,900,000 (December 31,
1998 - $12,984,000) of non-capital losses available to be applied to taxable
income of future years. These losses expire between 2001 and 2006.

Due to the uncertainty surrounding the Company's ability to utilize its
carryforwards, no recognition has been given in these financial statements to
the potential tax benefits which may result from these carry forward amounts.

6. COMMITMENTS AND CONTINGENCIES (SEE NOTE 10)

(a) Leases

The Company leases office and research facilities and is committed to annual
minimum basic rent payments as follows:

2000 $353,123
2001 107,289
2002 42,895
---- --------
$503,307
========

F-19

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

6. COMMITMENTS AND CONTINGENCIES (SEE NOTE 10) (CONTINUED)

(b) License and Other Agreements

On December 1, 1995, AltaRex Inc. acquired from Biomira Inc. ("Biomira") an
exclusive world-wide right and license to a certain antibody, its cell bank,
related data, records and proprietary rights (the "Technology") for a
non-refundable cash fee of $150,000, which was charged to research and
development expenses. In 1999, in connection with the settlement of litigation
between the Company and Biomira, (see note 8) the license agreement was amended
and restated. As amended, the license agreement requires the Company to use its
best efforts to commercialize the Technology, to spend certain minimum amounts
to develop the Technology and to pay royalties to Biomira upon commercialization
of products developed from the Technology. The term of the agreement extends to
the later of the ten year anniversary of first commercialization of a product or
the expiration date of certain patent rights included in the Technology. At the
end of the term of the agreement, the Company will have a world-wide, exclusive,
fully paid up right and license to use the Technology for certain applications.
The Company and Biomira have the right to terminate the agreement upon
forty-five days notice if the other party defaults in the performance,
observance or fulfillment of any of its obligations under the agreement.

The Company is party to an agreement with the Alberta Heritage Foundation for
Medical Research to jointly fund clinical trials, with the Company controlling,
through ownership or licensing, all of the technology. Total funding available
of $500,000 was received and recorded as revenue in 1997. The Company is
required to repay this funding and a royalty equivalent to the amount actually
received, from the commercial success of the resulting products and technology,
at a rate of the lesser of 5% of gross sales or $100,000 per annum. In addition,
the Company granted Warrants in connection with this agreement which entitle the
holder to obtain 41,667 common shares. These warrants are exercisable at $12.00
per share and expire in 2000.

The Company has contracted certain research projects to a third party consultant
for a three year period ending March 2000. Fees will be paid to the consultant
to a maximum of $300,000 per annum.

F-20

74
ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

7. SEGMENTED DISCLOSURE

The Company has considered the reporting requirements of the Canadian Institute
of Chartered Accountants on segment disclosures. The Company has determined that
it manages its operations as one reportable segment of a biotechnology company
engaged in the research and development of biopharmaceutical products for the
therapy of cancer. All of the Company's revenues are generated in Canada. The
Company's capital assets are located in Canada with the exception of $336,000
(1998 - $332,000) located in the United States.

8. LEGAL MATTERS

On February 26, 1999, Biomira commenced legal action against the Company, the
founder of the Company and certain other individuals associated with the
Company, claiming ownership of an invention disclosed in an international patent
application filed by the Company. On March 16, 1999, the Company commenced legal
action against Biomira related to certain breaches of the Biomira license
agreement between the parties. On September 3, 1999, the Company and Biomira
reached a settlement of this litigation which provided for:

- - The assignment to the Company of any interest Biomira might have in the
patent application that was the subject of the lawsuit filed by
Biomira,

- - The payment by the Company, on behalf of Biomira, of a $4.2 million
liability of Biomira to Industry Canada, an agency of the Canadian
government, under a 1991 contribution agreement which, in part, funded
research related to the Technology licensed by Biomira to the Company,
and termination of the contribution agreement,

- - The agreement by the Company to pay up to $250,000 to an agency of the
government of the Province of Alberta upon successful commercialization
of OvarexTM MAb, also related to funding provided to Biomira in support
of the Technology and

- - The amendment and restatement of the license agreement between the
parties (see Note 6).

The Company incurred total costs related to this litigation and settlement,
including the settlement payment and legal fees, of $5.1 million in 1999.

F-21

75
ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

9. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
IN THE UNITED STATES

These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada (Canadian GAAP) which conform in all
material respects to those accounting principles generally accepted in the
United States (U.S. GAAP), except as follows:

(a) Accounting for income taxes

For U.S. GAAP purposes, the Company would be required to account for income
taxes in accordance with the provisions of Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year. In
addition, for U.S. GAAP purposes, a deferred tax asset, net of a valuation
allowance, would be recorded to recognize the future benefit of loss
carryforwards when the realization of the benefit is determined to be more
likely than not. For Canadian GAAP purposes, the benefits of such losses may
only be recorded in the period incurred if realization is virtually certain. At
December 31, 1999, the Company has determined that the deferred tax asset net of
a valuation allowance of $23,700,000 (December 31, 1998 - $11,066,000) would be
nil (nil at December 31, 1998).

Beginning in the first quarter of 2000, Canadian GAAP will require the Company
to account for their income taxes on a basis similar to SFAS 109. Management
does not expect this change to have a material effect on its consolidated
financial position or results of operations.

(b) Accounting for stock-based compensation

For U.S. GAAP purposes, the Company would account for stock-based compensation
to employees in accordance with Accounting Principles Board (APB) Opinion No.
25. For U.S. GAAP purposes, no compensation expense would be recognized on the
Company's stock options and warrants granted, since the exercise price of these
instruments equal the fair value of the Company's stock as at the date of the
grant. Stock-based compensation to non-employees would be recorded at the fair
value of the options and warrants granted. This compensation expense would be
amortized over the appropriate vesting periods. As at December 31, 1999, the
unamortized compensation benefit that the Company would record as additional
compensation

F-22

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

9. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
IN THE UNITED STATES (CONTINUED)

expense in future periods for options granted to non-employees amounts to
$12,000 (December 31, 1998 - $89,000). Additionally, during 1999, the Company
issued 1,955,000 options to agents of its offering of common shares. The
compensation related to this issuance of $554,000 would be recognized as a
reduction in the net proceeds of the offering and an increase in share capital
for the value of the options. Accordingly, there would be no net effect on the
share capital of the Company.

For Canadian GAAP purposes, costs incurred in connection with the Company's
reverse take-over are presented as a charge against shareholders' equity. For
U.S. GAAP purposes, these costs totalling $495,000 would be charged to expense.
Accordingly, net loss for the year ended December 31, 1996 and share capital for
each of the periods presented would increase by $495,000.

(d) Comprehensive income

For U.S. GAAP purposes, the Company would adopt the disclosure requirements of
Financial Accounting Standard No. 130 (`SFAS 130'). SFAS 130 requires the
presentation of comprehensive income and its components. Comprehensive income
includes all changes in equity during a period except shareholder transactions.
For the periods presented, comprehensive income would equal net loss determined
for U.S. GAAP purposes as set out in the following table.

The following table reconciles the net loss as reported on the statements of
loss to the net loss that would have been reported had the financial statements
been prepared in accordance with U.S. GAAP.

F-23

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

9. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
IN THE UNITED STATES (CONTINUED)

YEARS ENDED
DECEMBER 31, DEC. 1, 1995
---------------------------------------- - DEC. 31,
1999 1998 1997 1999
----------- ----------- ---------- ------------

Net loss per Canadian GAAP $24,018,167 $13,115,929 $4,840,637 $44,209,691

Adjustment for stock-based
compensation 17,000 130,000 163,000 385,000

Adjustments of reverse take-
over costs -- -- -- 495,000
----------- ----------- ---------- -----------
Net loss per U.S. GAAP $24,035,167 $13,245,929 $4,840,637 $45,089,691
=========== =========== ========== ===========
Basic and diluted net loss
per share, U.S. GAAP $ (0.58) $ (0.80) $ (0.30)
=========== =========== ==========

Basic and diluted weighted-average

Number of common share 41,389,736 16,503,764 15,894,880
=========== =========== ==========

The following summarizes balance sheet items with material variations under U.S.
GAAP.

DECEMBER 31, DECEMBER 31,
1999 1998

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

Share capital $51,307,647 $33,701,364

Accumulated deficit 45,089,691 21,054,524

F-24

ALTAREX CORP.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998

(In Canadian dollars)

10. SUBSEQUENT EVENTS

On February 29, 2000, the Company issued 5,687,546 special warrants in a private
placement at $1.06 per special warrant, resulting in gross proceeds of $6.03
million. Each special warrant was converted into one common share, at no
additional cost to the investor, on April 20, 2000.

On February 17, 2000, the Board of Directors of the Company approved an increase
in the number of common shares reserved under the Company's stock option plan
from 4,180,000 to 11,500,000 shares and awarded stock option grants to
directors, officers and employees of and a consultant to the Company in the
total amount of 4,343,000 common shares. The increase in the number of shares
reserved under the plan is subject to shareholder approval at the Company's next
annual meeting of shareholders. The ability of optionees to exercise the options
currently granted is conditioned upon shareholder approval of the increase in
shares reserved under the plan.

F-25

EXHIBIT INDEX

EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
- ------ -------------------- ------

1.1+ The Articles of the Company dated November 18, 1993 as amended by Articles of
Amendment dated June 25, 1996 and November 28, 1996.
1.2+ Articles of Amalgamation of the Company dated May 31, 1997 as amended by Articles
of Amendment dated June 27, 1997.
1.3+ The Bylaws of the Company dated March 1, 1995.
1.4+ Asset Purchase Agreement dated November 24, 1995 among AltaRex Inc., Biomira
Research Inc. and Biomira Inc.*
1.5+ The Share Purchase Agreement.
1.6*** Settlement Agreement by and among Biomira Inc. and AltaRex Corp., dated September 3,
1999.
1.7+ Letter Agreement dated February 20, 1996 between AltaRex Corp. and Merck Frosst
Canada Inc.
1.8*** Amended and Restated License Agreement between Biomira Inc. and AltaRex Corp., dated
September 3, 1999.
1.9*** Patent License Agreement between AltaRex Corp. and the National Institute of Health, the
Centers for Disease Control and Prevention and the Food and Drug Administration, dated
September 21, 1999.
1.10+ License Agreement dated November 24, 1995 between Biomira Inc. and AltaRex Corp.*
1.11+ Assignment of Patent Agreement dated April 4, 1996 between Biomira Inc. and
AltaRex Corp.
1.12+ Employment Contracts dated January 1, 1996, between AltaRex Corp. and Dr. Antoine Noujaim.
1.13*** Stock Option Plan
1.15+ Assignment of Letter Agreement dated February 20, 1996 between AltaRex Corp. and Merck Frosst
Canada Inc. See "Business of AltaRex -- Strategic Alliances and License Agreement."
1.16** Sublease Agreement by and between Tufts Associated Health Plans, Inc. and AltaRex U.S. Corp.
dated April 15, 2000.
1.17+ Employment Arrangement dated February 18, 1998 and amended as of March 30, 1998 between
AltaRex Corp. and Richard E. Bagley.
1.18** Amendments to Employment Arrangement between AltaRex Corp. and Richard E. Bagley,
dated June 1, 1999 and December 22, 1999.
1.19** Amendments to Employment Contract between AltaRex Corp. and Dr. Antoine Noujaim
dated June 3, 1999 and December 22, 1999.
1.20** Employment Contract between AltaRex Corp. and Dr. Christopher Nicodemus dated December 16, 1998,
as amended on June 1, 1999 and December 22, 1999.
1.21** Employment Contract between AltaRex Corp. and Edward Fitzgerald dated September 14, 1998,
as amended on June 1, 1999 and December 2, 1999.
1.22** Employment Contract between AltaRex Corp. and Peter C. Gonze dated January 24,
2000.

* Confidential treatment granted as to certain portions, which portions are
omitted and filed separately with the Commission.

** Filed herewith.

*** To be filed by amendment

+ Incorporated by reference to Exhibits to the Company's Registration
Statement on Form 20-F.