SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________

FORM 10-Q

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

For the Quarterly Period Ended September 30, 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 No. 0-19153
________________________

NEXELL THERAPEUTICS INC.
(Exact name of Registrant as specified in its Charter)
________________________

Delaware 06-1192468
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)

9 Parker, Irvine, CA 92618
(Address of principal executive offices)

Registrant's telephone number, including area code: (949) 470-9011

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 [_]

The aggregate number of Registrant's shares outstanding on November 12, 1999
was 72,714,901 shares of Common Stock, $.001 par value.

________________________

NEXELL THERAPEUTICS INC.

INDEX
-----

PART I - FINANCIAL INFORMATION

Page
----

Item 1. Financial Statements:
Condensed Consolidated Balance Sheets (unaudited) as of
September 30, 1999 and December 31, 1998.................... 3

Condensed Consolidated Statements of Operations (unaudited)
for the three and nine months ended September 30, 1999
and 1998.................................................... 4

Condensed Consolidated Statements of Cash Flows (unaudited)
for the nine months ended September 30, 1999 and 1998....... 5

Notes to Condensed Consolidated Financial
Statements (unaudited)...................................... 6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 11

Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 16

PART II - OTHER INFORMATION

Item 1. Legal Proceedings............................................... 16

Item 2. Changes in Securities and Use of Proceeds....................... 16

Item 3. Defaults upon Senior Securities................................. 16

Item 4. Submission of Matters to a Vote of Security Holders............. 16

Item 5. Other Information............................................... 16

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

SIGNATURES...................................................................... 18

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NEXELL THERAPEUTICS INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

September 30, December 31,
1999 1998
---------------- ---------------

ASSETS
Current assets:
Cash and cash equivalents $ 18,162,000 $ 33,091,000
Trade receivables 1,826,000 --
Receivables from related party 293,000 2,450,000
Inventory - finished goods 4,764,000 2,389,000
Other current assets 1,527,000 842,000
---------------- ---------------
Total current assets 26,572,000 38,772,000

Fixed assets, net 11,116,000 10,942,000
Intangible assets, net 44,106,000 37,635,000
Other assets 1,059,000 252,000
---------------- ---------------
Total assets $ 82,853,000 $ 87,601,000
================ ===============

LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 5,388,000 $ 4,508,000
Accounts payable to related party 12,158,000 1,979,000
Long-term debt, current portion -- 96,000
Capital leases current portion 116,000 172,000
---------------- ---------------
Total current liabilities 17,662,000 6,755,000

Long-term debt due to related party 33,583,000 32,031,000
---------------- ---------------
Total liabilities 51,245,000 38,786,000
---------------- ---------------

Commitments and contingencies -- --

SHAREHOLDERS' EQUITY

Class A Convertible Preferred Stock; $.001 par value
1,150,000 authorized shares; 70,282 issued and outstanding at
September 30, 1999 and at December 31, 1998 (liquidation value 100 100
$73,598,000 and $70,458,000).
Common Stock; $.001 par value, 160,000,000 shares authorized,
72,715,000 and 67,830,000 shares issued and outstanding
at September 30, 1999 and December 31, 1998, respectively. 73,000 68,000
Additional paid-in capital 192,319,900 182,537,900
Unearned compensation (216,000) (278,000)
Accumulated other comprehensive income (loss) (4,000) 20,000
Accumulated deficit (160,565,000) (133,533,000)
---------------- ---------------
Total shareholders' equity 31,608,000 48,815,000
---------------- ---------------
Total liabilities and shareholders' equity $ 82,853,000 $ 87,601,000
================ ===============

The accompanying notes are an integral part of the financial statements.

NEXELL THERAPEUTICS INC. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------

Revenue $ 2,243,000 $ 3,039,000 $ 9,320,000 $ 9,125,000
Cost of goods sold 1,920,000 1,841,000 6,657,000 5,998,000
------------ ------------ ------------ ------------
Gross profit 323,000 1,198,000 2,663,000 3,127,000
------------ ------------ ------------ ------------

Operating expenses:
Research and development 5,382,000 5,668,000 13,623,000 20,640,000
General and administrative 3,147,000 2,536,000 7,657,000 8,383,000
Goodwill amortization 1,017,000 883,000 2,764,000 2,644,000
Selling and marketing 3,023,000 1,305,000 5,146,000 3,161,000
Restructuring costs -- 1,930,000 504,000 1,930,000
------------ ------------ ------------ ------------
Total operating expenses 12,569,000 12,322,000 29,694,000 36,758,000

Operating (loss) (12,246,000) (11,124,000) (27,031,000) (33,631,000)
------------ ------------ ------------ ------------

Other (income) expenses:
Royalty, licensing and other related
income (622,000) (52,000) (924,000) (472,000)
Royalty expense 30,000 -- 70,000 100,000
Minority interest in net loss of
consolidated subsidiaries -- (925,000) -- (3,842,000)
Contract settlement -- 900,000 -- 900,000
Interest income (255,000) (674,000) (844,000) (2,156,000)
Interest expense 523,000 498,000 1,553,000 1,544,000
Other, net -- (219,000) 146,000 22,000
------------ ------------ ------------ ------------
Total other (income) expenses, net (324,000) (472,000) 1,000 (3,904,000)

Net (loss) (11,922,000) (10,652,000) (27,032,000) (29,727,000)

Preferred stock dividends (1,051,000) (986,000) (3,142,000) (2,962,000)
------------ ------------ ------------ ------------
Net (loss) applicable to common stock $(12,973,000) (11,638,000) (30,174,000) (32,689,000)
============ ============ ============ ============
Basic and diluted loss per share $ (0.18) $ (0.17) $ (0.43) $ (0.49)
------------ ------------ ------------ ------------
Weighted average number of shares of
common stock outstanding-basic and diluted 72,672,000 67,494,000 70,997,000 67,099,000
============ ============ ============ ============

The accompanying notes are an integral part of the financial statements.

NEXELL THERAPEUTICS INC. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Nine months ended September 30,
-------------------------------
1999 1998
------------ ------------

Cash flows from operating activities:
Net loss............................................................. $(27,032,000) $(29,727,000)
Adjustments to reconcile net (loss) to net cash (used in) operating
Activities:
Depreciation and amortization..................................... 5,126,000 5,459,000
Noncash compensation.............................................. 143,000 128,000
Closure of facilities and related costs........................... 112,000 1,930,000
Minority interest in net loss..................................... -- (3,842,000)
Changes in operating assets and liabilities:
Increase in trade receivables.................................... (1,826,000) --
Increase in other current assets and other assets................ (3,842,000) (269,000)
Decrease in receivable from related party........................ 2,157,000 3,575,000
Increase in accounts payable and accrued expenses................ 880,000 4,751,000
Increase in accounts payable to related party.................... 10,179,000 1,272,000
------------ ------------
Net cash (used in) operating activities................................ (14,103,000) (16,723,000)
------------ ------------

Cash flows from investing activities:
Unrealized gain on securities........................................ -- 570,000
Purchases of equipment............................................... (2,675,000) (1,337,000)
Proceeds from sale of equipment...................................... 150,000 --
------------ ------------
Net cash (used in) investing activities................................ (2,525,000) (767,000)

Cash flows from financing activities:
Proceeds from issuance of common stock in connection with the
exercise of underwriter options................................... 921,000 --
Repurchase/retirement of common stock................................ (627,000) --
Increase in long term debt due to related party...................... 1,552,000 1,469,000
Repayment of long term debt.......................................... (96,000) --
Repayment of capital leases.......................................... (56,000) (253,000)
------------ ------------
Net cash provided by financing activities......................... 1,694,000 1,216,000
------------ ------------

Effect of exchange rate changes on cash................................ 5,000 11,000
------------ ------------
Net decrease in cash and cash equivalents.............................. (14,929,000) (16,263,000)

Cash and cash equivalents at beginning of period....................... 33,091,000 57,830,000
------------ ------------

Cash and cash equivalents at end of period............................. $ 18,162,000 $ 41,567,000
============ ============
Supplemental disclosure of cash flow information:
. Cash paid during the period for:
--- Interest 1,000 60,000
--- Income Taxes -- --

Non-cash investing and financing activities:
. In January 1999, the Company issued 1,882,215 shares of common stock valued at $3,000,000 in exchange
for certain intangible assets.

. In May 1999, the Company issued 3,000,000 shares of common stock valued at $6,282,000 to Baxter
Healthcare Corporation in exchange for its minority interest in Nexell of California, Inc.

. In June 1999, the Company issued 70,000 shares of common stock valued at $153,000 to certain Innovir
shareholders in exchange for their outstanding Innovir preferred stock.

The accompanying notes are an integral part of the financial statements

NEXELL THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(unaudited)

(1) Financial Statement Presentation

The unaudited condensed consolidated financial statements and notes thereto
of Nexell Therapeutics Inc. ("Nexell") and subsidiaries (collectively, the
"Company") herein have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"), and in the opinion of
management, reflect all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the results of operations for the
interim periods presented. Certain information and footnote disclosures
normally included in financial statements, prepared in accordance with
generally accepted accounting principles, have been condensed or omitted
pursuant to such rules and regulations. However, management believes that
the disclosures are adequate to make the information presented not
misleading. These condensed consolidated unaudited financial statements and
notes thereto have been prepared in conformity with the accounting
principles applied in our 1998 Annual Report on Form 10-K for the year ended
December 31, 1998 and should be read in conjunction with such Report. The
results for the interim periods are not necessarily indicative of the
results for the full fiscal year.

(2) Principles of Consolidation

These condensed consolidated financial statements include the accounts of
Nexell, Nexell of California, Inc. ("NCI") and its subsidiary, VIMRX
Genomics, Inc. ("VGI"), Innovir Laboratories, Inc. ("Innovir") and its
subsidiaries. All significant intercompany balances and transactions have
been eliminated.

(3) Comprehensive Loss

The Company's total comprehensive loss is summarized as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------------------------
1999 1998 1999 1998
--------------------------------------------------------------

Net loss $(11,922,000) $ 10,652,000 $(27,032,000) $(29,727,000)
Foreign currency translation (9,000) (83,000) (24,000) 76,000
adjustment
Unrealized gain on investments -- 444,000 -- 570,000
--------------------------------------------------------------
Total comprehensive loss $(11,913,000) $(10,291,000) $(27,056,000) $(29,081,000)
==============================================================

(4) Per Share Information

Stock options and warrants outstanding were excluded from the computation of
diluted loss per share as the impact would be antidilutive. As of September
30, 1999, the Company had 8,669,000 stock options, 7,643,000 warrants
outstanding, and Series A preferred stock which is convertible into
25,557,090 shares of Nexell's common stock, $.001 par value (the "Common
Stock").

(5) Restructuring Costs

In 1998, the Company discontinued funding its 85% owned subsidiary, Innovir,
and in order to reduce operating expenses, Innovir closed all operations and
discontinued research and development activities. Innovir continues to seek
partners, licensees or purchasers of its technology.

The three Innovir operating locations, Cambridge, England; Gottingen,
Germany; and New York, New York, were closed in 1998. The total number of
employees terminated as a result of the restructuring was 44, all of which
were terminated by December 31, 1998. Termination payments, however,
continued into 1999.

Fixed assets of the closed facilities, consisting mainly of laboratory
equipment, were sold or are held for sale. Costs of $2,625,000 related to
the restructuring were expensed in 1998. During the first nine months of
1999, the Company made restructuring related cash payments of $243,000. The
balance of the remaining restructuring related accrual was $123,000 at
September 30, 1999, and cash payments will be made throughout the remainder
of 1999.

In January 1999, the Company announced that it intended to acquire 100% of
its 80.5% held subsidiary, NCI, and to restructure the Company by changing
its name from VIMRX Pharmaceuticals Inc. to Nexell Therapeutics Inc. and
relocating its corporate headquarters to NCI's offices in Irvine,
California. This transaction was completed during May 1999. A total of eight
employees were terminated as a result of the restructuring. Related expenses
consist of the following:

Restructuring Payments Balance
Provision Made/Applied September 30, 1999
---------------------------------------------------

Severance related $392,000 $351,000 $41,000
Fixed asset impairment 112,000 112,000 --
---------------------------------------------------
Total $504,000 $463,000 $41,000
===================================================

(6) Restructuring of Sales, Marketing and Distribution Arrangement with Baxter

Effective June 30, 1999, Nexell signed final agreements with Baxter Healthcare
Corporation ("Baxter") for the transfer of sales, marketing and distribution
responsibilities for the Company's Isolex(R) systems and other cell therapy
products from Baxter to Nexell, giving Nexell direct control of sales and
distribution of such products. Baxter will receive royalties on Nexell's sales
of Isolex(R) and related products. As part of this process, Nexell repurchased
inventory previously sold to Baxter. The agreements are being handled
separately for the U.S. and the non-U.S. closings. The cost of repurchasing the
U.S. inventory is reflected as a reduction in Nexell's reported second quarter
sales, and the European inventory repurchase is reflected as a reduction in
third quarter sales. Nexell recorded related charges associated with the U.S.
transfer of approximately $500,000 at June 30, 1999 and approximately $400,000
at September 30, 1999. Baxter will continue to manufacture and provide
equipment service support for the Isolex(R) systems and also agreed to provide a
$20,000,000 line of credit. The full integration of U.S. sales and distribution
operations by Nexell called for in the agreement, including the transfer of
certain Baxter personnel to Nexell's new 20-person U.S. field sales group, has
been completed. An interim arrangement is in place in Europe until the
completion of the European transition, currently expected to be finalized by the
end of the fourth quarter of 1999. European operations will be based in
Nexell's new European headquarters in Belgium.

Under the Credit Agreement with Baxter effective June 30, 1999, the Company may
borrow up to $20,000,000 in no more than three advances until the Termination
Date, with no more than one advance in any calendar quarter. The Company
currently has no outstanding borrowing under this line of credit. Interest on
each advance accrues at the rate of 6.5% per annum until December 31, 2001, and
thereafter becomes payable quarterly with the final installment due on October
1, 2006. The Termination Date is the earlier of September 30, 2000, the maturity
date or a Financing Event, defined in the Agreement as a financing where the net
cash proceeds to the Company equal or exceed $50,000,000.

(7) Acquisition of CellPro Assets

On January 29, 1999, NCI consummated an agreement with CellPro Incorporated
("CellPro"), formerly one of NCI's principal competitors, to purchase
substantially all the intellectual property assets of CellPro, together with
certain related tangible and intangible assets in exchange for 1,882,215 shares
of Common Stock, valued by the parties at $3,000,000.

In March 1999, the Company repurchased from CellPro 627,405 shares of Common
Stock at $1.00 per share.

(8) Acquisition of Minority Interest in NCI

In May 1999, Nexell changed its name from VIMRX Pharmaceuticals Inc. to Nexell
Therapeutics Inc. and acquired the minority interest of Baxter in the Company's
principal business unit and then 80.5% subsidiary, Nexell of California, Inc.
(formerly Nexell Therapeutics Inc.). NCI is now a wholly-owned subsidiary of
Nexell. Baxter retained its right to certain milestone payments in NCI.

Baxter's 19.5% interest in NCI (consisting of common stock, warrants and
convertible subordinated debentures), was exchanged for:

. 3,000,000 shares of Common Stock;

. an adjustment of the conversion price of the 70,282 outstanding shares of the
Company's Series A Preferred Stock owned by Baxter from $5.50 per share to
$2.75 per share, which Series A Preferred Stock is convertible after June 17,
1999 into approximately 25,577,000 shares of Common Stock, subject to
adjustment for stock splits and combinations, certain dividends and
distributions and reclassification, exchange or substitution;

. a warrant expiring May 27, 2006 to purchase 5,200,000 shares of Common Stock
at a price of $1.15 per share, subject to adjustment from time to time in the
event of cash dividends, stock dividends, stock subdivisions, stock splits,
stock combinations or reverse stock splits; and

. $32,884,537.50 principal amount of 6 1/2% Convertible Subordinated Debentures
("Debentures") (replacing the $30,000,000 principal amount of Nexell's 6 1/2%
convertible subordinated debentures plus accrued interest through the closing
date of the acquisition) convertible, commencing November 30, 2002, into
Common Stock at a conversion price equal to 95% of the average of the closing
prices of the Common Stock on the NASDAQ Stock Market for the 30 consecutive
trading days preceding the date of conversion. The Debentures bear interest at
6 1/2% per annum and are due November 30, 2004. Interest accrues until
November 30, 2002, and, together with one-third of the outstanding principal,
is payable annually commencing November 30, 2002. Approximately $22,000,000 in
principal amount of Debentures is convertible into Common Stock commencing
November 30, 2002 at the discretion of Baxter, and approximately $11,000,000
in principal amount of Debentures is convertible only with the permission of
Nexell.

As a result of this transaction, the Company recorded approximately $6,282,000
in goodwill which is equal to the fair value of the Common Stock issued. Such
goodwill is being amortized over twelve years.

(9) Sale of Innovir Assets

On August 13, 1999 Innovir closed the sale of a family of patents and patent
applications to Ribozyme Pharmaceuticals, Inc. ("RPI"), a Boulder, Colorado-
based company engaged in the research and development of ribozyme technology.
The patent and patent applications sold are related to certain proprietary
chemically modified ribozymes. In the sale, Innovir received $25,000 cash,
134,000 shares of RPI common stock and seven-year warrants to purchase 350,000
additional shares of RPI common stock at $12.00 per share.

Additionally, on May 6, 1999, Innovir agreed to license to Amgen, Inc. certain
rights under two patents in consideration of $300,000. Innovir is continuing
its efforts to license or sell its technology to other parties.

(10) Equity

In January 1999, DH Blair exercised 481,140 underwriter options to purchase
Common Stock at an exercise price of $1.91.

In May 1999, the Company issued 3,000,000 shares of Common Stock valued at
$6,282,000 to Baxter in exchange for Baxter's minority interest in NCI. Baxter
retains the rights to certain milestone payments.

In June 1999, the Company issued 70,000 shares of Common Stock valued at
$153,000 to certain Innovir shareholders in exchange for their outstanding
Innovir preferred stock.

NEXELL THERAPEUTICS INC.

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

The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto included elsewhere in this Quarterly
Report on Form 10-Q and with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998.

Three Months Ended September 30, 1999 and 1998

For the quarter ended September 30, 1999, total revenues were $2,243,000, a
decrease of $796,000 compared to the quarter ended September 30, 1998. The 1998
revenues reflect product sales by NCI to its former distributor Baxter while the
1999 revenues reflect sales to the end-user customer. The decrease primarily
reflects the effect of the repurchase of $3,380,000 of non-U.S. inventory
previously sold to Baxter under the sales, marketing and distribution
arrangement with Baxter (the "Baxter Distribution Arrangement") which was
restructured on June 30, 1999, partially offset by increased sales to end-users.
The decrease in gross profit was the result of spreading substantially constant
costs over a smaller sales base, and the charges related to the European Baxter
Distribution Arrangement restructuring recorded in 1999.

Total operating expenses increased by $247,000 or 2% due to increases in selling
and marketing expenses of $1,718,000 or 132%, general and administrative
expenses of $611,000 or 24%, and goodwill amortization of $134,000 or 15%,
partially offset by decreases in research and development expenses of $286,000
or 5%, and restructuring costs of $1,930,000 or 100%.

The increase in selling and marketing expenses relates to the ramp up of NCI's
sales and marketing efforts for the U.S. launch of the Isolexa300 and
Isolexa300i, which received final approval from the U.S. Food and Drug
Administration ("FDA") on July 2, 1999 and costs related to the assumption of
direct sales and distribution responsibilities in Europe from Baxter in the
third quarter of 1999.

General and administrative expenses increased primarily due to costs related to
the Company's European operations and costs related to the assumption of direct
sales and distribution responsibilities in Europe from Baxter.

Goodwill amortization increased due to the amortization of CellPro intangible
assets acquired in the first quarter of 1999 and the additional amortization of
goodwill recorded in the second quarter of 1999 related to the acquisition of
Baxter's interest in NCI.

The decrease in research and development expenses results primarily from
discontinuing all Innovir operations and related research and development
activities and scaling back research programs within the Company for development
projects other than Hypericin, the Company's chemically synthesized hypericin
product, and the Company's wound healing agent, VM301.

Restructuring expenses for a one-time charge for the closure of Innovir
facilities and related costs was recorded in the third quarter of 1998, while no
such costs were recorded during the same quarter of 1999.

Royalty, licensing and other related income increased $620,000. A $25,000 cash
payment, 134,000 shares of RPI common stock and seven-year warrants were
received from RPI in exchange for certain Innovir assets.

The minority interest in the net loss of consolidated subsidiaries was fully
recognized in 1998.

The decrease in interest income of $419,000 or 62% is due to the decrease in the
cash and cash equivalents average balance in 1999 as compared to the average
balance in the same period in 1998.

A contract settlement expense was recorded in the third quarter of 1998 related
to the termination of a research agreement with Columbia University, while no
such expense was recorded in the same period in 1999.

Nine Months Ended September 30, 1999 and 1998

For the nine months ended September 30, 1999, total revenues were $9,320,000, an
increase of $195,000 compared to the nine months ended September 30, 1998. The
increase primarily reflects the launch of the Isolex(R) 300i in the U.S.
following FDA approval on July 2, 1999, offset by the second quarter charge for
the U.S. inventory repurchase and the third quarter charge for the non-U.S.
inventory repurchase from Baxter, for a total of $4,767,000. Gross profit on
sales of $2,663,000 in the first nine months of 1999 represents a $464,000
decrease from the same period in 1998, primarily due to the charges related to
the Baxter Distribution Arrangement restructuring. The nine-month gross profit
percentage in 1999 at 29% is five percentage points below the same period in
1998, due primarily to the impact of the inventory repurchase and the charges
related to the Baxter Distribution Arrangement restructuring.

Total operating expenses decreased by $7,064,000 or 19% due to decreases in
research and development expenses of $7,017,000 or 34%, general and
administrative expenses of $726,000 or 9%, and restructuring costs of $1,426,000
or 74%, partially offset by an increase in sales and marketing expenses of
$1,985,000 or 63%.

General and administrative expenses decreased primarily due to the closing of
Innovir operations and the relocation of the Company's headquarters to Irvine,
California, offset partially by the creation of a European operation
headquarters.

The increase in sales and marketing expenses relates to the ramp up of NCI's
marketing efforts for the U.S. launch of the Isolexa300 and Isolexa300i, which
received final approval from the FDA on July 2, 1999, and the assumption of the
direct sales and distribution responsibilities from Baxter.

Costs related to the restructuring and relocation of the corporate headquarters
were expensed during the first quarter of 1999, and costs related to the closure
of Innovir facilities were recorded in the third quarter of 1998.

Royalty, licensing and other related income increased $452,000 due to
consideration received from RPI in exchange for certain Innovir assets.

The minority interest in the net loss of consolidated subsidiaries was fully
recognized in 1998.

The decrease in interest income of $1,312,000 or 61% is due to the decrease in
the cash and cash equivalents average balance in 1999, as compared to the
average balance in the same period in 1998, and a realized loss on investments,
which are classified as trading securities, for the first nine months of 1999 of
$330,000.

Liquidity and Capital Resources

The Company had $18,162,000 in cash and cash equivalents as of September 30,
1999 as compared to $33,091,000 as of December 31, 1998, and working capital of
$8,910,000 at September 30, 1999 as compared to $32,017,000 at December 31,
1998. Most of the decrease in cash and cash equivalents resulted from cash used
in the operations of the Company of $14,103,000 and purchases of equipment for
$2,675,000. The decrease in working capital resulted from the decrease in cash
and the increase of approximately $6,700,000 in liabilities related to the
Baxter Distribution Arrangement restructuring.

Net cash used in operating activities decreased $2,620,000 or 16% from the nine
months ended September 30, 1998 due principally to discontinuing all Innovir
operations, scaling back research programs within the Company for development
projects other than Hypericin, VM301, and spending reductions related to the
relocation of the Company's headquarters to Irvine, California.

Effective June 30, 1999, Nexell signed a Credit Agreement with Baxter under
which the Company may borrow up to $20,000,000. The Company currently has no
outstanding borrowing under this line of credit. See Note (6) to the Condensed
Consolidated Financial Statements.

The Company expects to incur substantial expenditures in the foreseeable future
for the research and development and commercialization of its proposed products
as well as the step-up of sales and marketing activities at NCI. Based on
current projections, which are subject to change, the Company's management
believes that the current balance of cash and cash equivalents, together with a
$20 million line of credit available from Baxter, is sufficient to fund its
operations for approximately the next 24 months. Thereafter, the Company will
require additional funds, which it may seek to raise through public or private
equity or debt financings, collaborative or other arrangements with corporate
sources, or through other sources of financing. There can be no guarantee that
the Company's present cash and cash equivalents balance and the Baxter line of
credit will be sufficient to fund operations for the period expected, or that
additional funds will be available to the Company at the expiration of such
period on terms favorable to the Company, or at all.

Year 2000 Issues

The Company is aware of and has addressed many of the "Year 2000" issues
associated with both information technology ("IT") and non-IT systems which
could cause problems and network failures should the systems fail to recognize
year designations after 1999.

The Company has reviewed its own computer, communication, software and operating
systems and is satisfied they are Year 2000 compliant. Furthermore, the Company
has taken proactive measures to ensure the system servers and workstations have
been reprogrammed and are Year 2000 compliant.

The Company has upgraded all productivity, communication and accounting software
to meet Year 2000 compliance. The Company has tested the accounting systems
with the Year 2000 date and management is confident that they are compliant.

The Company has completed most of the identification and testing in the third
quarter of 1999. The Company will complete its system-wide testing in the
fourth quarter of 1999 and intends to correct any system failures by the end of
the fourth quarter of 1999. The Company feels its Year 2000 risks are minimal.
The Company spent approximately $750,000 in 1998 to upgrade its systems which
brought it into Year 2000 readiness. Management does not expect any
significant additional upgrade costs.

The Company will continue to contact critical suppliers, collaborators, partners
and vendors to determine if their operations, as they relate to the Company, are
Year 2000 compliant. During the fourth quarter of 1999, the Company will
complete and implement certain contingency plans if any such critical third
parties are determined to be Year 2000 non-compliant.

Although the Company will take all practical measures to prevent problems
related with the Year 2000 issue, such problems and failures may occur which
could seriously affect the Company's operations. Because of the unprecedented
nature of such problems, the extent of the effect on the Company's operations
cannot be certain.

The Company's product lines all operate independently of the date or time of
day. Thus, the transition to the year 2000 is not expected to affect their
operation.

Disclosure Regarding Forward Looking Statements

This Report on Form 10-Q contains certain statements that are "Forward Looking
Statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Those statements include, among other things, the discussions of the Company's
expectations contained in "Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations." Although the Company believes
that the expectations reflected in Forward Looking Statements are reasonable,
management can give no assurance that such expectations will prove to have been
correct. Generally, these statements relate to business plans or strategies,
projected or anticipated benefits or other consequences of such plans or
strategies, or projections involving anticipated revenues, expenses, earnings,
levels of capital expenditures, liquidity or indebtedness or other aspects of
operating results of financial position. All phases of the operations of the
Company are subject to a number of uncertainties, risks and other influences
(including the timely commencement and success of the Company's clinical trials
and other research endeavors, delays in receiving FDA or other regulatory
approvals, the development of competing therapies and/or technologies, the terms
of any future strategic alliances, and the possible need for additional
capital), many of which are outside the control of the Company and any one of
which, or a combination of which, could materially affect the results of the
Company's operations and whether the Forward Looking Statements made by the
Company ultimately prove to be accurate.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company maintains excess cash in a mutual fund, the "BlackRock Low Duration
Bond Portfolio" (the "Fund"), which invests in asset backed securities, bonds
and various other commercial obligations.

Two of the main risks disclosed by the Fund are interest rate risk and credit
risk. Typically, when interest rates rise, there is a corresponding decline in
the market value of bonds such as those held by the Fund. Credit risk refers to
the possibility that the issuer of the bond will not be able to make principal
and interest payments.

Part II - OTHER INFORMATION

Item 1. Legal Proceedings.

Not applicable.

Item 2. Changes in Securities and Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:
---------

10.43 Letter Agreement dated as of April 15, 1999 between Filed herewith
Nexell and Richard L. Dunning. electronically

10.44 Letter Agreement dated as of August 20, 1999 between Filed herewith
Nexell and L. William McIntosh. electronically

10.45 Letter Agreement dated as of April 15, 1999 between Filed herewith
Nexell and David A. Jackson, Ph.D. electronically

27 Financial Data Schedule

(b) Reports on Form 8-K:
-------------------

The Company filed a Current Report on Form 8-K filed July 9, 1999, under
Item 5, announcing the FDA approval to market the Isolex(R) magnetic cell
selection system, including the Isolex(R) 300 and the Isolex(R) 300i, in
the United States. FDA approval was effective July 2, 1999.

SIGNATURES

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

Dated: November 12, 1999

NEXELL THERAPEUTICS INC.
a Delaware Corporation
(Registrant)

By: /s/ Richard L. Dunning

----------------------------
Richard L. Dunning
Chairman of the Board and
Chief Executive Officer

By: /s/ William A. Albright
---------------------------------------
William A. Albright
Chief Financial Officer