<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 1998

                                       OR

[ ]             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: 0-19311


                        IDEC PHARMACEUTICALS CORPORATION
                        --------------------------------
             (Exact name of registrant as specified in its charter)


Delaware                                                            33-0112644
- -------------------------------                            -------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                             Identification No.)


                    11011 Torreyana Road, San Diego, CA 92121
              ---------------------------------------------------
              (Address of principal executive offices) (Zip code)

                                 (619) 550-8500
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


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
                                      -----   -----

As of July 31, 1998, the Registrant had 19,877,224 shares of its common stock,
$.001 par value, issued and outstanding.



<PAGE>   2




                        IDEC PHARMACEUTICALS CORPORATION

                          FORM 10-Q -- QUARTERLY REPORT
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                TABLE OF CONTENTS




<TABLE>
<S>       <C>                                                                                                   <C>    

PART I.    FINANCIAL INFORMATION


Item 1.    Financial Statements

           Condensed Consolidated Balance Sheets -- June 30, 1998 and December 31, 1997 ........................  1
           Condensed Consolidated Statements of Operations -- Three months ended June 30, 1998 and 1997
                and six months ended June 30, 1998 and 1997 ....................................................  2
           Condensed Consolidated Statements of Cash Flows -- Six months ended June 30, 1998 and 1997 ..........  3
           Notes to Condensed Consolidated Financial Statements ................................................  4


Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations ...............  6

           Risk Factors ........................................................................................ 10


PART II.   OTHER INFORMATION


Item 1.    Legal Proceedings ................................................................................... 17


Item 2.    Changes in Securities ............................................................................... 17


Item 3.    Defaults upon Senior Securities ..................................................................... 17


Item 4.    Submission of Matters to a Vote of Security Holders ................................................. 17


Item 5.    Other Information ................................................................................... 17


Item 6.    Exhibits and Reports on Form 8-K .................................................................... 17
</TABLE>







<PAGE>   3


                         PART I -- FINANCIAL INFORMATION


Item 1.  Financial Statements.


IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)



<TABLE>
<CAPTION>
                                                                      June 30,      December 31,
                                                                       1998            1997
                                                                    ---------        ---------
                                                                    (unaudited)
<S>                                                                 <C>              <C>      
ASSETS
Current assets:
   Cash and cash equivalents                                        $  31,817        $  34,847
   Securities available-for-sale                                       38,657           34,810
   Contract revenue receivables, net                                    2,698            3,971
   Due from related party, net                                          6,841               --
   Inventories                                                          8,324            4,134
   Prepaid expenses and other current assets                            1,247            1,431
                                                                    ---------        ---------
         Total current assets                                          89,584           79,193

Property and equipment, net                                            21,921           23,449
Investment and other assets                                             3,343            3,371
                                                                    ---------        ---------
                                                                    $ 114,848        $ 106,013
                                                                    =========        =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current portion of notes payable                                 $   3,146        $   3,908
   Accounts payable                                                     1,247            1,626
   Accrued expenses                                                     8,410            6,382
   Due to related party, net                                               --              870
   Deferred revenue                                                       346            6,646
                                                                    ---------        ---------
         Total current liabilities                                     13,149           19,432
Notes payable, less current portion                                     2,826            3,886

Deferred rent                                                           2,223            2,016

Stockholders' equity:
   Convertible preferred stock, $.001 par value                            --               --
   Common stock, $.001 par value                                           20               19
   Additional paid-in capital                                         182,018          179,956
   Unrealized gains (losses) on securities available-for-sale             (35)              57
   Accumulated deficit                                                (85,353)         (99,353)
                                                                    ---------        ---------
         Total stockholders' equity                                    96,650           80,679
                                                                    ---------        ---------
                                                                    $ 114,848        $ 106,013
                                                                    =========        =========
</TABLE>



     See accompanying notes to condensed consolidated financial statements.





                                       1

<PAGE>   4


IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)




<TABLE>
<CAPTION>
                                                                 Three months                 Six months
                                                                ended June 30,               ended June 30,
                                                            -----------------------     -----------------------
                                                               1998          1997         1998           1997
                                                            ---------     ---------     ---------     ---------
<S>                                                         <C>           <C>           <C>           <C>      
Revenues:
   Revenues from unconsolidated joint business              $   9,567     $   1,878     $  18,756     $   1,878
   Contract revenues                                            4,496         2,524         7,141         5,188
   License fees                                                10,000         1,000        16,300         5,000
                                                            ---------     ---------     ---------     ---------
                                                               24,063         5,402        42,197        12,066

Operating expenses:
   Manufacturing costs                                          2,855         5,214         6,930         5,214
   Research and development                                     7,141        10,292        14,178        17,766
   Selling, general and administrative                          4,542         2,498         8,441         4,706
                                                            ---------     ---------     ---------     ---------
                                                               14,538        18,004        29,549        27,686
                                                            ---------     ---------     ---------     ---------
     Income (loss) from operations                              9,525       (12,602)       12,648       (15,620)

Other income (expenses):
   Interest income, net                                           737           731         1,482         1,517
   Income tax provision                                          (130)           --          (130)           --
                                                            ---------     ---------     ---------     ---------
                                                                  607           731         1,352         1,517
                                                            ---------     ---------     ---------     ---------

Net income (loss)                                           $  10,132     $ (11,871)    $  14,000     $ (14,103)
                                                            =========     =========     =========     =========

Earnings (loss) per share:
       Basic                                                $    0.51     $   (0.63)    $    0.71     $   (0.76)
       Diluted                                              $    0.44     $   (0.63)    $    0.60     $   (0.76)

Shares used in calculation of earnings (loss) per share:
       Basic                                                   19,805        18,724        19,722        18,461
       Diluted                                                 23,264        18,724        23,513        18,461
</TABLE>



See accompanying notes to condensed consolidated financial statements.



                                       2


<PAGE>   5

IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)



<TABLE>
<CAPTION>
                                                                    Six months ended
                                                                         June 30,
                                                                  ---------------------
                                                                    1998         1997
                                                                  --------     --------
<S>                                                               <C>          <C>      
Cash flows from operating activities:
           Net cash provided by (used in) operating activities    $  1,299     $(11,523)
                                                                  --------     --------

Cash flows from investing activities:
     Purchase of property and equipment                               (631)      (3,841)
     Purchase of securities available-for-sale                     (30,877)     (24,084)
     Sales and maturities of securities available-for-sale          26,938       26,311
                                                                  --------     --------
           Net cash used in investing activities                    (4,570)      (1,614)
                                                                  --------     --------

Cash flows from financing activities:
     Proceeds from issuance of common stock                          2,063        1,185
     Payments on notes payable                                      (1,822)      (1,761)
                                                                  --------     --------
           Net cash provided by (used in) financing activities         241         (576)
                                                                  --------     --------

Net decrease in cash and cash equivalents                           (3,030)     (13,713)
Cash and cash equivalents, beginning of period                      34,847       25,337
                                                                  --------     --------
Cash and cash equivalents, end of period                          $ 31,817     $ 11,624
                                                                  ========     ========
</TABLE>



See accompanying notes to condensed consolidated financial statements.





                                       3


<PAGE>   6

IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



NOTE 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The information at June 30, 1998, and for the three-
and six-month periods ended June 30, 1998 and 1997, is unaudited. In the
opinion of management, these financial statements include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
results for the interim periods presented. Interim results are not necessarily
indicative of results for a full year or for any subsequent interim period.
These financial statements should be read in conjunction with IDEC
Pharmaceuticals(R) Corporation's (the "Company") Annual Report on Form 10-K/A
for the year ended December 31, 1997.

Revenues from Unconsolidated Joint Business: Revenues from unconsolidated joint
business consist of the Company's share of the pretax copromotion profits
generated from its joint business arrangement with Genentech, Inc.
("Genentech"), revenue from bulk Rituxan(TM) sales to Genentech, reimbursement
from Genentech of the Company's sales force and development expenses and royalty
income on sales of Rituxan outside the United States and Canada. Revenue from
bulk Rituxan sales is recognized when bulk product is accepted by Genentech.
Under the joint business arrangement, all U.S. sales of Rituxan and associated
expenses will be recorded in the books and accounts of Genentech with the
Company recording its share of the pretax copromotion profits on a quarterly
basis, as defined in the Company's collaborative agreement with Genentech (Note
2). Pretax copromotion profits under the joint business arrangement are derived
by taking U.S. net sales of Rituxan to third-party customers less cost of sales,
third-party royalty expenses, distribution, selling and marketing expenses and
joint development expenses by the Company and Genentech.

Contract Revenues: Contract revenues consist of nonrefundable research and
development funding under collaborative agreements with the Company's various
strategic partners and other funding under contractual arrangements with other
parties. Contract research and development funding generally compensates the
Company for discovery, preclinical and clinical expenses related to the
collaborative development programs for certain products of the Company and is
recognized at the time research and development activities are performed under
the terms of the collaborative agreements. Contract revenues earned in excess of
contract payments received are classified as contract revenue receivables and
contract research and development funding received in excess of amounts earned
are classified as deferred revenue.

License Fees: License fees consist of nonrefundable fees from product
development milestone payments, the sale of license rights to the Company's
proprietary gene expression technology and nonrefundable fees from the sale of
product rights under collaborative development and license agreements with the
Company's strategic partners. Revenues from product development milestone
payments are recognized when the results or events stipulated in the agreement
have been achieved. License fee payments received in excess of amounts earned
are classified as deferred revenue.

Manufacturing Costs: Manufacturing costs consist of manufacturing costs related
to the production of bulk Rituxan sold to Genentech.

Earnings (Loss) Per Share: Earnings (loss) per share is calculated in accordance
with Statement of Financial Accounting Standards No. 128 "Earnings per Share."
Basic earnings per share excludes the dilutive effects of options, warrants and
other convertible securities compared to diluted earnings per share which
reflects the potential dilution of options, warrants and other convertible
securities that could share in the earnings of the Company. Calculations of
basic and diluted earnings (loss) per share use the weighted average number of
shares outstanding during the period. Diluted earnings per share for the three-
and six- months ended June 30, 1998 includes the dilutive effect of 3,458,000
shares and 3,791,000 shares, respectively, of common stock from options,
warrants and convertible preferred stock and excludes 1,658,000 shares and
1,308,000 shares, respectively, of common stock from options because the
options' exercise price were greater than the average market price of the
Company's common stock for the respective periods. Options, warrants and
convertible preferred stock were excluded from the calculations of diluted loss
per share for the three and six months ended June 30, 1997, as their effect was
antidilutive.




                                       4


<PAGE>   7

IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



NOTE 2.    RELATED PARTY ARRANGEMENTS

     In March 1995, the Company and Genentech entered into a collaborative
agreement for the clinical development and commercialization of the Company's
anti-CD20 monoclonal antibody, Rituxan, for the treatment of relapsed or
refractory, low-grade or fallicular, CD20 positive, B-cell non-Hodgkin's
lymphomas ("B-cell non-Hodgkin's lymphomas"). Concurrent with the collaborative
agreement the Company and Genentech also entered into an expression technology
license agreement for a proprietary gene expression technology developed by the
Company and a preferred stock purchase agreement providing for certain equity
investments in the Company by Genentech. Under the terms of these agreements,
the Company has received payments totaling $58,500,000 for the attainment of
certain product development objectives, which completes the initial contractual
development funding as stipulated under the collaborative agreement.
Additionally, the Company may be reimbursed by Genentech for certain other
development and regulatory approval expenses under the terms of the
collaborative agreement. Genentech may terminate this agreement at any time for
any reason with a resulting loss of product rights. Included in contract
revenues for the three and six months ended June 30, 1998 are $61,000 and
$126,000, respectively, to fund specific product development, which approximates
the research and development expenses incurred under the program. Included in
contract revenues for the six months ended June 30, 1997 is $394,000 to fund
specific product development, which approximates the research and development
expenses incurred under the program. Included in license fees for the three and
six months ended June 30, 1998 is $10,000,000, earned under these agreements.

     In addition, the Company and Genentech are copromoting Rituxan in the
United States under a joint business arrangement, with the Company receiving a
share of the pretax copromotion profits. Additionally, the Company has a
contractual obligation to manufacture and supply Rituxan to Genentech through
the end of 1999 with the Company having an option to continue supplying Rituxan
thereafter. Under the Company's collaborative agreement with Genentech, the
sales price of bulk Rituxan sold to Genentech is capped at a price that is
currently less than the Company's cost to manufacture bulk Rituxan. Included in
inventories at June 30, 1998, is $3,556,000 of bulk Rituxan inventory that will
be sold to Genentech.

     Under the terms of separate agreements with Genentech, commercialization of
Rituxan outside the United States will be the responsibility of F. Hoffmann-La
Roche Ltd. ("Hoffmann-La Roche"), except in Japan, where Zenyaku Kogyo Co., Ltd.
("Zenyaku") will be responsible for product development, marketing and sales.
The Company will receive royalties on sales outside the United States.
Additionally, the Company will receive royalties on sales, if any, of Genentech
products manufactured using the Company's proprietary gene expression system.

NOTE 3. COMPREHENSIVE INCOME

     As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" ("Statement No.
130"). Statement No. 130 establishes standards for the reporting and display of
comprehensive income and its components. The adoption of Statement No. 130 had
no impact on the Company's results of operations or financial position.
Statement No. 130 requires unrealized gains on securities available-for-sale to
be included as a component of comprehensive income in addition to net income
(loss) for the period. During the six months ended June 30, 1998 comprehensive
income totaled $14,059,000 and during the six months ended June 30, 1997
comprehensive loss totaled $14,218,000.



                                       5


<PAGE>   8



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

OVERVIEW

     IDEC Pharmaceuticals Corporation is primarily engaged in the
commercialization and research and development of targeted therapies for the
treatment of cancer and autoimmune and inflammatory diseases. In November 1997,
the Company received approval from the U.S. Food and Drug Administration ("FDA")
to market its first product, Rituxan, in the United States, and in June 1998,
Hoffmann-La Roche, the Company's European marketing partner was granted
marketing authorization for Rituxan in all European Union countries. Rituxan is
the trade name in the United States for the compound Rituximab (formerly known
as IDEC-C2B8). Outside the United States and Canada Rituxan is marketed as
MabThera (Rituximab, Rituxan and MabThera are collectively referred to herein as
Rituxan, except where otherwise indicated). Rituxan is being copromoted in the
United States under a joint business arrangement with Genentech, with the
Company receiving a share of the pretax copromotion profits. Under the terms of
separate agreements with Genentech, commercialization of Rituxan outside the
United States will be the responsibility of Hoffmann-La Roche, except in Japan
where Zenyaku will be responsible for product development, marketing and sales.
The Company will receive royalties on Rituxan sales outside the United States.

     Revenues for the Company consist of revenues from unconsolidated joint
business, contract revenues and license fees. To date a substantial portion of
the Company's revenues have been derived from contract revenues and license
fees, and the Company anticipates that revenues from unconsolidated joint
business will comprise an increasing portion of total revenues in the future.

     Revenues from unconsolidated joint business consist of the Company's share
of the pretax copromotion profits generated from its joint business arrangement
with Genentech, revenue from bulk Rituxan sales to Genentech and reimbursement
from Genentech for the Company's sales force and development expenses. Revenues
from unconsolidated joint business also include royalty income on sales of
Rituxan outside the United States. Under the joint business arrangement, all
U.S. sales of Rituxan and associated expenses will be recognized by Genentech,
with the Company recording its share of the pretax copromotion profits on a
quarterly basis, as defined in the Company's collaborative agreement with
Genentech. Pretax copromotion profits under the joint business arrangement are
derived by taking U.S. net sales of Rituxan to third-party customers less cost
of sales, third-party royalty expenses, distribution, selling and marketing
expenses and joint development expenses by the Company and Genentech.

     Contract revenues consist of nonrefundable research and development funding
under collaborative agreements with the Company's various strategic partners and
other funding under contractual arrangements with other parties. Contract
research and development funding generally compensates the Company for
discovery, preclinical and clinical expenses related to the collaborative
development programs for certain products of the Company.

     License fees consist of nonrefundable fees from product development
milestone payments, the sale of license rights to the Company's propriety gene
expression technology and nonrefundable fees from the sale of product rights
under collaborative development and license agreements with the Company's
strategic partners.

     The Company is obligated to manufacture and supply bulk Rituxan to
Genentech through the end of 1999 with an option to continue supplying Rituxan
thereafter. The cost of bulk Rituxan sold to Genentech is recorded as
manufacturing costs in the Company's condensed consolidated statements of
operations. Under the Company's collaborative agreement with Genentech, the
sales price of bulk Rituxan sold to Genentech is capped at a price that is
currently less than the Company's cost to manufacture bulk Rituxan.

     The Company has incurred increasing annual operating expenses and, with the
commercialization of Rituxan, the Company expects such trends to continue. The
Company has incurred annual operating losses since its inception in 1985 and the
sustained profitability of the Company will be dependent upon the commercial
success of Rituxan, product investment and development and revenues from the
achievement of product development objectives and licensing transactions. As of
June 30, 1998, the Company had an accumulated deficit of $85.4 million.




                                       6


<PAGE>   9

RESULTS OF OPERATIONS

     Revenues from unconsolidated joint business for the three and six months
ended June 30, 1998 totaled $9.6 million and $18.8 million, respectively,
compared to $1.9 million for the comparable periods in 1997. Revenues from
unconsolidated joint business for the three and six months ended June 30, 1998
reflect the financial results from the commercialization of Rituxan through the
Company's collaboration with Genentech. These revenues consist primarily of the
Company's share of pretax copromotion profits, sales of bulk Rituxan to
Genentech, reimbursement from Genentech for the Company's Rituxan related sales
force and development expenses and royalty income from Hoffmann-La Roche on
sales of Rituxan outside the United States. The Company's share of the pretax
copromotion profits for the three months ended June 30, 1998 amounted to 18% of
U.S. net sales of Rituxan before reimbursements to the Company for certain
manufacturing, sales and development expenses. Under its agreement with
Genentech, the Company will receive a higher share of the pretax copromotion
profits upon achievement of an annual fixed profit target by the joint business
arrangement from the commercialization of Rituxan. Based upon year-to-date sales
progression in the first year of Rituxan commercialization, the Company believes
that it may begin receiving this higher share of pretax copromotion profits by
the fourth quarter of 1998. Revenues from unconsolidated joint business for the
three and six months ended June 30, 1997 consist of sales of bulk Rituxan to
Genentech.

     Rituxan net sales to third-party customers in the United States by
Genentech for the first and second quarter of 1998 amounted to $35.2 million and
$32.0 million respectively. This pattern of sales is consistent with the Company
and Genentech's expectations, as initial pent-up demand for Rituxan was
satisfied during the first quarter of 1998 and is being replaced by subsequent
sales growth driven by increased adoption and use of Rituxan. While the Company
is encouraged by the volume of Rituxan sales to existing and new customers, not
enough time has passed for these figures to be indicative of future sales.

     Contract revenues for the three and six months ended June 30, 1998 totaled
$4.5 million and $7.1 million, respectively, compared to $2.5 million and $5.2
million for the comparable periods in 1997. The increase in contract research
revenues for the three and six months ended June 30, 1998 is primarily due to
increased funding under a collaborative and license agreement with Eisai Co.
Ltd. ("Eisai").

     License fees for the three and six months ended June 30, 1998 totaled $10.0
million and $16.3 million, respectively, compared to $1.0 million and $5.0
million for the comparable periods in 1997. The increase in license fees for the
three and six months ended June 30, 1998 is primarily due to a $10.0 million
product development milestone payment from Genentech for European approval of
Rituxan. Contract revenues and license fees may vary from period to period and
are in part dependent upon achievement of certain research and development
objectives. The magnitude and timing of contract revenues and license fees may
influence the achievement and level of profitability for the Company. The
Company continues to pursue other collaborative and license arrangements,
however, no assurance can be given that discussions in this regard will result
in any such arrangements or that the Company will receive significant revenues
from any such collaborative or license arrangements.

     Manufacturing costs totaled $2.9 million and $6.9 million for the three and
six months ended June 30, 1998, respectively, compared to $5.2 million and $5.2
million for the comparable periods in 1997. Manufacturing costs for 1998 and
1997 consist of manufacturing costs related to production of bulk Rituxan sold
to Genentech. Manufacturing costs are recognized when bulk Rituxan inventory is
sold to Genentech. The decrease in manufacturing costs for the three months
ended June 30, 1998 is due to the timing of bulk Rituxan sales to Genentech. The
Company expects to continue incurring substantial additional manufacturing costs
as the Company continues to manufacture and ship bulk Rituxan to Genentech.

     Research and development expenses totaled $7.1 million and $14.2 million
for the three and six months ended June 30, 1998, respectively, compared to
$10.3 million and $17.8 million for the comparable periods in 1997. The decrease
in research and development expenses for the three and six months ended June 30,
1998 is due to certain one-time charges related to acquisition of product rights
and development incurred during the three months ended June 30, 1997. The
Company expects to continue incurring substantial additional research and
development expenses in the future, due to expansion or addition of research and
development programs; technology in-licensing and regulatory-related expenses;
preclinical and clinical testing of the Company's various products under
development; and production scale-up and manufacturing of products used in
clinical trials.




                                       7

<PAGE>   10

     Selling, general and administrative expenses totaled $4.5 million and $8.4
million for the three and six months ended June 30, 1998, respectively, compared
to $2.5 million and $4.7 million for the comparable periods in 1997. Selling,
general and administrative expenses increased in 1998 due to increased sales and
marketing expenses resulting from the commercialization of Rituxan. Selling,
general and administrative expenses necessary to support expanded manufacturing
capacity, expanded clinical trials, research and development and the potential
expansion of the sales and marketing organization are expected to increase in
the foreseeable future.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has financed its operating and capital expenditures since
inception principally through the sale of equity securities, license fees,
contract revenues, lease financing transactions and interest income. The Company
expects to finance its current and planned operating requirements principally
through cash on hand, funds from its joint business arrangement with Genentech
and with funds from existing collaborative agreements and contracts which the
Company believes will be sufficient to meet its near-term operating
requirements. Existing agreements and contracts, however, could be canceled by
the contracting parties. In addition, the Company may, from time to time seek
additional funding through a combination of new collaborative agreements,
strategic alliances and additional equity and debt financing or from other
sources. There can be no assurance that such additional funds will be obtained
through these sources on acceptable terms, if at all. Should the Company not
enter into any such arrangements, the Company anticipates its cash, cash
equivalents and securities available-for-sale, together with the existing
agreements and contracts and cash generated from its joint business arrangement,
will be sufficient to finance the Company's currently anticipated needs for
operating and capital expenditures for the foreseeable future. If adequate funds
are not available from the joint business arrangement, operations or additional
sources of financing, the Company's business could be materially and adversely
affected.

     The Company's working capital and capital requirements will depend upon
numerous factors, including: the progress of the Company's preclinical and
clinical testing; fluctuating or increasing manufacturing requirements and
research and development programs; timing and expense of obtaining regulatory
approvals; levels of resources that the Company devotes to the development of
manufacturing, sales and marketing capabilities; technological advances; status
of competitors; and the ability of the Company to establish collaborative
arrangements with other organizations.

     Until required for operations, the Company's policy under established
guidelines is to keep its cash reserves in bank deposits, certificates of
deposit, commercial paper, corporate notes, United States government instruments
and other readily marketable debt instruments, all of which are investment-grade
quality.

     At June 30, 1998, the Company had $70.5 million in cash, cash equivalents
and securities available-for-sale compared to $69.7 million at December 31,
1997. Sources of cash, cash equivalents and securities available-for-sale during
the six months ended June 30, 1998, include $2.1 million from the issuance of
common stock issued under employee stock option and purchase plans and $1.3
million provided by operations. Uses of cash, cash equivalents and securities
available-for-sale during the six months ended June 30, 1998, included $0.6
million used to purchase capital equipment and $1.8 million used to pay notes
payable.

     In September 1997, the Company entered into an agreement with a financial
institution under which the Company purchased in a private transaction a capped
call option, exercisable only at maturity, representing the Company's right to
purchase from the financial institution up to 600,000 shares of the Company's
common stock. The Company has the right to settle the capped call option by
receiving cash or stock. The capped call option which the Company purchased is
expected to be settled, if exercised, with cash paid to the Company in an amount
equal to the difference between the strike price and the market price, subject
to caps which will limit the total amount of cash the Company could receive. The
capped call option will expire prior to the end of 1998.

     Simultaneously, with the purchase of the capped call option, the Company
sold to the same financial institution a call option, exercisable only at
maturity, entitling the financial institution to purchase from the Company up to
900,000 shares of the Company's common stock at a certain strike price per
share. The Company has the right to settle the call option with cash or stock
and, if exercised, the Company expects the settle the call option by issuing up
to 900,000 shares of the Company's common stock to the financial institution.
The call option will expire prior to the end of 1998. The financial institution
has advised the Company that it has engaged, and may continue to engage,





                                       8

<PAGE>   11

in transactions, including buying and selling shares of the Company's common
stock, to offset its risk relating to the call options, which could affect the
market price of the Company's common stock.

     In February 1997, the Company acquired worldwide rights from Pharmacia &
Upjohn S.p.A. ("Pharmacia") to 9-aminocamptothecin ("9-AC"), a broad spectrum
anti-cancer agent. Under the terms of the 9-AC asset transfer agreement, the
Company may make payments to Pharmacia totaling up to $16.0 million, subject to
the attainment of certain product development objectives. The Company
anticipates that it may achieve a product development objective in 1999
(commencement of a Phase III trial) that would result in the Company making a
$6.0 million payment to Pharmacia. The Company is currently seeking a strategic
partner for development, marketing, distribution and sale of 9-AC in Europe,
however, no assurances can be given that any such arrangement will result.

     In August 1995, the Company completed the receipt of funding under a $10.0
million lease financing agreement to finance both equipment and facility
improvements. In July 1998, the Company made a $1.1 million principal payment as
required under the terms of the financing agreement.

YEAR 2000 COMPLIANCE

     The Company has appointed a program manager for its Year 2000 Program and
is presently assessing in detail the affected computer systems and software
products. The Company has completed an initial review of all computer systems
and software products in order to identify potential Year 2000 problems within
the Company and has begun to communicate with all known suppliers, service
providers and other entities with which it has a business relationship
(collectively, "Third-Party Businesses") regarding compliance with Year 2000
requirements. While the Company has begun evaluating potential strategies and
required modifications for resolving Year 2000 problems (including several
manufacturing software systems which have been identified as not being Year
2000-compliant), the dollar amount that the Company will spend to remediate its
Year 2000 issues remains uncertain. While management has not completed its
assessment of the Year 2000 compliance expenses and related potential effect on
the Company's operations, the Company presently intends to utilize internal and
external resources to identify, correct or reprogram and test its computer
systems for Year 2000 compliance.

     The Company anticipates that its Year 2000 Program will be completed before
January 1, 2000. However, there can be no assurance that the Year 2000 Program,
or computer systems and applications of Third-Party Businesses on which the
Company's operations rely, will be converted on a timely basis, or that any such
failure to convert by another company would not have a material adverse effect
on the Company's systems. Moreover, a failure to correct any noncompliant
manufacturing software could disable the Company's manufacturing capacity,
resulting in inventory and product shortages and ultimately creating higher
manufacturing costs for the Company. See "Risk Factors -- Limited Manufacturing
Experience."






                                       9

<PAGE>   12
     This Form 10-Q contains predictions, estimates and other forward-looking
statements within the meaning of Section 27A of the Securities Act of 1993, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
that involve a number of risks and uncertainties. While this outlook represents
our current judgment on the future direction of the business, such risks and
uncertainties could cause actual results to differ materially from any future
performance suggested in this Form 10-Q. The Company undertakes no obligation to
release publicly the results of any revisions to these forward-looking
statements to reflect events or circumstances arising after the date hereof
other than required by the Securities Exchange Act of 1934, as amended, or the
rules and regulations promulgated thereunder.

                                  RISK FACTORS

HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT

     IDEC Pharmaceuticals Corporation has incurred annual operating losses since
its inception in 1985 and may incur additional losses in the future. As of June
30, 1998, the Company's accumulated deficit was approximately $85.4 million.
There is no guarantee that the Company will achieve profitable operations on an
annual basis. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

OPERATING RESULTS SUBJECT TO SIGNIFICANT FLUCTUATIONS

     The Company's reported quarterly revenues, expenses and operating results
are likely to vary significantly in the future due to a variety of factors such
as demand for the Company's products, the Company's achievement of certain
product development objectives, hospital and pharmacy buying decisions,
physician acceptance rates, changes in government or private reimbursement
policies, manufacturing constraints, the ability of the Company to obtain
approvals of additional products for commercial sale on a timely basis, changes
in the Company's level of operating expenses, the Company's ability to attract
and retain qualified personnel, changes in the Company's sales incentive plans
or copromotion agreements, timeliness of financial reporting by certain
strategic partners, foreign currency exchange rates and overall economic
conditions. Because the Company's expense levels are based to a significant
extent on the Company's expectations of future revenues and, therefore, will
vary only slightly in the short term, if revenues fall below expectations,
operating results are likely to be adversely and disproportionately affected.




                                       10

<PAGE>   13
VOLATILITY OF STOCK PRICE

     The stock market has from time to time experienced significant price and
volume fluctuations that may be unrelated to the operating performance of
particular companies. In addition, the market price of the Company's common
stock, like the stock prices of many publicly traded biotechnology companies,
has been highly volatile. Between August 1, 1997 and July 31, 1998, the
Company's stock price has fluctuated between $21 7/8 per share and $47 3/8 per
share. Numerous factors, both directly and indirectly related to the Company and
unrelated to the Company may have a significant impact on the market price of
the Company's common stock. Furthermore, in September 1997, the Company entered
into an agreement with a financial institution under which the Company sold to
the financial institution a call option, exercisable only at maturity, entitling
the financial institution to purchase from the Company up to 900,000 shares of
the Company's common stock at a certain strike price per share. The financial
institution has advised the Company that it has engaged, and may continue to
engage, in transactions, including buying and selling shares of the Company's
common stock, to offset its risk relating to the call option, which could affect
the market price of the Company's common stock.

MANUFACTURING RISKS AND DEPENDENCE ON CONTRACT MANUFACTURERS AND SOLE SOURCE
SUPPLIERS

     The Company has the ability to produce only limited quantities of Rituxan
and its other product candidates, and it has no fill finish experience and
capacity. In addition, the Company's manufacturing experience is limited to
preclinical quantities of product candidates and, in the case of Rituxan, 20
months of commercial production; the Company has no experience in the field of
chemical manufacturing (as opposed to biologics manufacturing). Furthermore,
any microbial or viral contamination of the process, equipment failure or
operator error could cause the loss of the entire batch of product being
manufactured. Certain bacterial or viral contaminations could cause the closure
of the manufacturing plant for an extended period of time, until the cause of
the contamination is identified and corrective action is taken, and certain
items of manufacturing equipment may have long lead times to perform repair and
revalidation prior to use. Loss of regulatory approval of the Company's
manufacturing facility could cause closure of the manufacturing plant for an
extended period of time, until such approval is re-obtained. While the Company
has attempted to plan for most equipment failure contingencies, not all
problems can be appropriately addressed ahead of time nor spare parts obtained
in a reasonable time frame. Thus, no assurance can be given as to the ultimate
performance of the Company's manufacturing facility or the Company's ability to
sustain ongoing commercial production. Any unplanned plant shutdowns will
ultimately create higher manufacturing costs for the Company and could result
in product shortages. See "Lengthy Regulatory Process; No Assurance of
Regulatory Approvals."

     The Company's copromotion agreement with Genentech stipulates that the
Company commit its full manufacturing capacity to supply Genentech with bulk
Rituxan at the higher of a fixed price or Genentech's cost to manufacture per
gram until the end of 1999. The Company currently manufactures Rituxan at a
cost in excess of the Genentech contract's fixed price, decreased margins on
returns from the copromotion agreement. Furthermore, although the Company has
the ability to manufacture limited commercial bulk quantities of Rituxan, it is
dependent upon Genentech to supplement its Rituxan manufacturing capabilities,
to manufacture additional worldwide requirements and to complete all the
fill/finish production of Rituxan. There are no assurances that Genentech will
be able to manufacture and fill/finish Rituxan on a timely and cost-effective
basis to avoid an insufficient supply of Rituxan inventory, which could
materially and adversely affect the Company's business, results of operations
and financial condition.

     The Company is contractually dependent upon SmithKline Beecham, p.l.c.
("SmithKline Beecham") to fulfill all of the manufacturing requirements for
IDEC-CE9.1 and IDEC-151. The Company is currently accepting proposals for
a qualified commercial contractor to meet the long-term manufacturing demands
for IDEC-Y3B8 and IDEC-In2B8. In addition, as the Company does not have
expertise or facilities for small molecule chemical manufacturing, the Company
will need to establish a long-term manufacturing arrangement for 9-AC with an
appropriate contract manufacturer. The Company's 9-AC clinical material
requirements will be met through February 2000 by Pharmacia as part of the
product in-license agreement. Additionally, as the Company does not have
fill-finish capacity, the Company will be dependent on outside contractors to
meet all of the Company's current and future fill/finish requirements. There
can be no assurance as to the ultimate performance of any of the Company's
current or future contract manufacturers.

     The Company has several vendors for raw materials that are used in the
manufacture of products for commercial or clinical trial use that are the sole
source available. Any disruption in the supply of these materials would have a
material adverse effect on the Company's ability to meet its manufacturing
commitments or requirements, would ultimately have a negative effect on
manufacturing costs, or could delay significantly current clinical trials. The
Company has initiated a program for identifying alternative suppliers for
certain raw materials, where possible.    





                                       11

<PAGE>   14
PATENTS AND PROPRIETARY RIGHTS

     The Company's success will depend, in large part, on its ability to
maintain a proprietary position in its products through patents, trade secrets
and orphan drug designation. The Company owns by assignment 15 issued and 7
allowed U.S. patents, 17 U.S. patent applications and numerous corresponding
foreign patent applications, and has licenses to patents or patent applications
that are assigned to other entities. No assurance can be given, however, that
the patent applications of the Company or the Company's licensors will be issued
or that any issued patents will provide competitive advantages for the Company's
products or will not be successfully challenged or circumvented by its
competitors. Moreover, there can be no assurance that any patents issued to the
Company or the Company's licensors will not be infringed by others or will be
enforceable against others. In addition, there can be no assurance that the
patents, if issued, would not be held invalid or unenforceable by a court of
competent jurisdiction. Enforcement of the Company's patents may require
substantial financial and human resources. Moreover, the Company or its
licensees may have to participate in interference proceedings if declared by the
U.S. Patent and Trademark Office ("PTO") to determine priority of inventions,
which typically take several years to resolve and could result in diminished
scope of patent protection and substantial cost to the Company.

     A substantial number of patents have already been issued to other
biotechnology and biopharmaceutical companies. Particularly in the monoclonal
antibody field, competitors may have filed applications for or have been issued
patents and may obtain additional patents and proprietary rights relating to
products or processes competitive with or similar to those of the Company. To
date, no consistent policy has emerged regarding the breadth of claims allowed
in biopharmaceutical patents. Moreover, United States and foreign country patent
laws are distinct and the interpretations thereunder unique to each country.
Thus, patentability, validity and infringement issues for the same technology or
invention may be resolved differently in different jurisdictions. There can be
no assurance that patents do not exist in the United States or in foreign
countries or that patents will not be issued that would have an adverse effect
on the Company's ability to market its products. Specifically, the Company is
aware of several patents and patent applications which may affect the Company's
ability to make, use and sell its products. Accordingly, the Company expects
that commercializing monoclonal antibody-based products may require licensing
and/or cross-licensing of patents with other companies or entities in this
field. There can be no assurance that the licenses, which might be required for
the Company's processes or products, would be available, if at all, on
commercially acceptable terms. The ability to license any such patents and the
likelihood of successfully contesting infringement, enforceability or validity
of such patents are uncertain and the costs associated therewith may be
significant. If the Company is required to acquire rights to valid and
enforceable patents but cannot do so at a reasonable cost, the Company's ability
to manufacture or market its products would be materially adversely affected.

     The owners, or licensees of the owners, of these patents may assert that
one or more of the Company's products infringe one or more claims of such
patents. If legal action is commenced against the Company to enforce any of
these patents and the plaintiff in such action prevails, the Company could be
prevented from making, using, offering to sell, selling or importing the subject
matter claimed in such patents. In such event or under other appropriate
circumstances, the Company may attempt to obtain licenses to such patents.
However, no assurance can be given that any owner would license the patents to
the Company at all or on terms that would permit commercialization of the
Company's products. An inability to commercialize such products could have a
material adverse effect on the Company's business, results of operations and
financial condition.

     Furthermore, the patent position worldwide of biotechnology companies in
relation to proprietary products is highly uncertain and involves complex legal
and factual questions. There is a substantial backlog of biotechnology patents
at the PTO. The Company also relies on trade secrets and proprietary know-how
which it seeks to protect, in part, by confidentiality agreements with its
employees, collaborators and consultants. There can be no assurance that these
agreements will not be breached, that the Company will have adequate remedies
for any breach, or that the Company's trade secrets will not otherwise become
known or be independently developed by competitors.

LIMITED SALES AND MARKETING EXPERIENCE

     The Company has limited experience in commercial sales and marketing. The
Company has adopted a strategy of pursuing collaborative agreements with
strategic partners which may provide for copromotion of certain of the Company's
products within the United States. The Company will also need either to build a
sales and marketing support services or else rely on its strategic partners to
perform these functions. There can be no assurance that the Company will be able
to establish and maintain a successful direct sales and marketing capability in
any or all targeted markets or that it will be successful in gaining market
acceptance for its products.

     Outside of the United States, the Company has adopted a strategy of
pursuing collaborative arrangements with established pharmaceutical companies
for marketing, distribution and sale of its products. There can be no assurance
that any of these companies or their sublicensees will successfully market,
distribute or sell the Company's products or that the Company will be able to
establish and maintain successful copromotion or distribution arrangements.
Failure to establish a sales capability either in the United States or outside
the United States may have a material adverse effect on the Company's business,
results of operations and financial condition.





                                       12

<PAGE>   15
RELIANCE ON THIRD-PARTY DEVELOPMENT AND MARKETING EFFORTS

     The Company has adopted a research, development and product
commercialization strategy that is dependent upon various arrangements with
strategic partners and others. The success of the Company's products is
substantially dependent upon the success of these outside parties in performing
their obligations, which include, but are not limited to, providing funding and
performing research and development with respect to the Company's products. The
Company's strategic partners may also develop products that may compete with the
Company's products. There can be no assurance that these parties will perform
their obligations as expected, that they will not terminate the agreements, that
any revenue will be derived from such arrangements or that these arrangements
will be successful in general. If one or more of the Company's strategic
partners fail to achieve certain product development objectives, such failure
could have a material adverse effect on the Company's ability to fund the
related programs and to develop any products that may have resulted from such
collaborations. 

LENGTHY REGULATORY PROCESS; NO ASSURANCE OF ADDITIONAL REGULATORY APPROVALS;
UNCERTAINTIES ASSOCIATED WITH CLINICAL TRIALS

     The testing, manufacturing, labeling, advertising, promotion, export and
marketing, among other things, of the Company's proposed products are subject to
extensive regulation by governmental authorities in the United States and other
countries. The testing and approval process required before a product may be
approved requires substantial time, effort and financial resources and there can
be no assurance that any approval will be granted on a timely basis, if at all.
There can be no assurance that clinical testing will be completed successfully
within any specific time period, if at all, with respect to any of the Company's
product candidates. Furthermore, the FDA may suspend clinical trials at any time
on various grounds, including a finding that the subjects or patients are being
exposed to an unacceptable health risk.

      Before approving a product the FDA will inspect the facilities at which
the product is manufactured and will not approve the product unless cGMP
compliance is satisfactory. Also, if regulatory approval of a product is
granted, such approval may entail limitations on the indicated uses for which it
may be marketed and/or require postmarketing testing and surveillance to monitor
the safety or efficacy of a product. Manufacturers of biologics or drugs may
also be subject to state regulation.

     The Company will also be subject to a variety of foreign regulations
governing clinical trials and sales of its products. Whether or not FDA approval
has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must be obtained prior to the commencement of
marketing of the product in those countries. The approval process varies from
country to country and the time may be longer or shorter than that required for
FDA approval. At least initially, the Company intends, to the extent possible,
to rely on foreign licensees to obtain regulatory approval for marketing its
products in foreign countries.

     Under the Orphan Drug Act an approved product that has been granted orphan
drug designation by the FDA is entitled to orphan drug exclusivity, i.e., the
FDA may not approve any other applications to market the same drug for the same
indication, except in certain very limited circumstances, for a period of seven
years. Rituxan has received orphan drug exclusivity in the United States and in
1994, the Company obtained orphan drug designation for IDEC-Y2B8 and IDEC-In2B8
from the FDA to treat certain B-cell non-Hodgkin's lymphomas. However, there can
be no assurance that IDEC-Y2B8 or IDEC-In2B8 will receive orphan drug
exclusivity for the B-cell non-Hodgkin's lymphoma indication, and it is possible
that competitors of the Company could obtain approval, and attendant orphan drug
exclusivity, for IDEC-Y2B8 or IDEC-In2B8 for the B-cell non-Hodgkin's lymphoma
indication, thus precluding the Company from marketing IDEC-Y2B8 or IDEC-In2B8
for that indication in the United States. In addition, there can be no assurance
that competitors will not receive approval of other, different drugs or
biologics for B-cell non-Hodgkin's lymphoma. Although obtaining FDA approval to
market a product with orphan drug exclusivity can be advantageous, there can be
no assurance that the scope of protection or the level of marketing exclusivity
that is currently afforded by orphan drug designation will remain in effect in
the future.

SUBSTANTIAL COMPETITION

     Substantial competition exists in the biotechnology industry from
pharmaceutical and biotechnology companies which may have technical or
competitive advantages. The Company competes with these companies in the
development of technologies and processes and sometimes competes with them in
acquiring technology from academic institutions, government agencies, and other
private and public research organizations. There can be no assurance that the
Company will be able to produce or acquire rights to products that have
commercial potential. Even if the Company achieves product commercialization,
there can be no assurance that one or more of the Company's competitors may not:
(i) achieve product commercialization earlier than the Company, (ii) receive
patent protection that dominates or adversely affects the Company's activities,
(iii) have significantly greater sales and marketing capabilities or (iv)
develop products that are more widely accepted than those developed by the
Company.





                                       13

<PAGE>   16
UNCERTAINTIES REGARDING HEALTH CARE REIMBURSEMENT AND REFORM

     The future revenues and profitability of biopharmaceutical companies as
well as the availability of capital may be affected by the continuing efforts of
government and third-party payors to contain or reduce costs of health care
through various means. In the United States, there have been, and the Company
expects that there will continue to be, a number of federal and state proposals
to implement similar government controls. While the Company cannot predict
whether any such legislative or regulatory proposals will be adopted, the
announcement or adoption of such proposals could have a material adverse effect
on the Company's business, operating results and financial condition.

     The Company's ability to commercialize its products successfully will
depend in part on the extent which appropriate reimbursement levels for the cost
of such products and related treatment are obtained from governmental
authorities, private health insurers and other organizations, such as health
maintenance organizations ("HMOs"). The cost containment measures that health
care payors and providers are instituting, the effect of any health care reform
and the rate of acceptance of the product into reimbursement programs could
delay the adoption of the Company's products into the marketplace and could
materially adversely affect the Company's business, results of operations and
financial condition.

PRODUCT LIABILITY EXPOSURE

     Clinical trials, manufacturing, marketing and sale of any of the products
or products under development owned or licensed by the Company may expose the
Company to product liability claims. The Company currently carries limited
product liability insurance. There can be no assurance that the Company or its
strategic partners will be able to continue to maintain or obtain additional
insurance or, if available, that sufficient coverage can be acquired at a
reasonable cost. An inability to obtain sufficient insurance coverage at an
acceptable cost or otherwise protect against potential product liability claims
could prevent or inhibit the commercialization of pharmaceutical products
developed by the Company or its strategic partners. A product liability claim or
recall could have a material adverse effect on the Company's business, operating
results and financial condition.

YEAR 2000 COMPLIANCE

     The Company has appointed a program manager for its Year 2000 Program and
is presently assessing in detail the affected computer systems and software
products. The Company has completed an initial review of all computer systems
and software products in order to identify potential Year 2000 problems within
the Company and has begun to communicate with all known suppliers, service
providers and other entities with which it has a business relationship
(collectively, "Third-Party Businesses") regarding compliance with Year 2000
requirements. While the Company has begun evaluating potential strategies and
required modifications for resolving Year 2000 problems (including several
manufacturing software systems which have been identified as not being Year
2000-compliant), the dollar amount that the Company will spend to remediate its
Year 2000 issues remains uncertain. While management has not completed its
assessment of the Year 2000 compliance expenses and related potential effect on
the Company's operations, the Company presently intends to utilize internal and
external resources to identify, correct or reprogram and test its computer
systems for Year 2000 compliance.

     The Company anticipates that its Year 2000 Program will be completed before
January 1, 2000. However, there can be no assurance that the Year 2000 Program,
or computer systems and applications of Third-Party Businesses on which the
Company's operations rely, will be converted on a timely basis, or that any such
failure to convert by another company would not have a material adverse effect
on the Company's systems. Moreover, a failure to correct any noncompliant
manufacturing software could disable the Company's manufacturing capacity,
resulting in inventory and product shortages and ultimately creating higher
manufacturing costs for the Company. See "-- Limited Manufacturing Experience."





                                       14

<PAGE>   17
ADDITIONAL FINANCING REQUIREMENTS AND UNCERTAIN ACCESS TO CAPITAL MARKETS

     The Company has expended and will continue to expend substantial funds to
increase sales of Rituxan and to complete the research, development,
manufacturing and marketing of its other products under development. The Company
has obtained and intends to seek additional funding for these purposes through a
combination of new collaborative arrangements, strategic alliances, and
additional equity or debt financings or from other sources. There can be no
assurance that such future additional funds will be available on acceptable
terms, if at all. Even if available, the cost of funds may result in substantial
dilution to current stockholders. If adequate funds are not available from
operations or additional sources of financing, the Company's business, results
of operations and financial condition could be materially and adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

ENVIRONMENTAL RISKS

     The Company's business involves the controlled use of hazardous materials,
chemicals and radioactive compounds. Although the Company believes that its
safety procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for any damages
that result and any such liability could exceed the resources of the Company. In
addition, disposal of radioactive materials used by the Company in its research
efforts may only be made at approved facilities. Approval of a site in
California for all California-based companies has been delayed indefinitely. The
Company currently stores such radioactive materials on site. The Company may
incur substantial cost to comply with environmental regulations.

DEPENDENCE ON KEY PERSONNEL

     The Company's success depends in part upon the continued contributions of
its senior management and key scientific and technical personnel. The Company's
success is also dependent upon its ability to attract and retain additional
qualified scientific, technical, manufacturing and managerial personnel and to
develop and maintain relationships with qualified clinical researchers.
Significant competition exists among pharmaceutical and biotechnology companies
for such personnel, and there can be no assurance that the Company will retain
such personnel or that it will be able to attract, assimilate and retain such
personnel as may be required in the future or to develop and maintain
relationships with such researchers. The Company does not maintain or intend to
purchase "key person" life insurance on any of its personnel.

EFFECT OF ANTI-TAKEOVER PROVISIONS

     The Company has taken a number of actions that could have the effect of
discouraging a takeover attempt that might be beneficial to stockholders who
wish to receive a premium for their shares from a potential bidder. The Company
has adopted a Stockholder Rights Plan that would cause substantial dilution to a
person who attempts to acquire the Company on terms not approved by the
Company's Board of Directors. The Stockholder Rights Plan may therefore have the
effect of delaying or preventing any change in control and deterring any
prospective acquisition of the Company. In addition, the Company's Certificate
of Incorporation grants the Board of Directors the authority to issue up to
8,000,000 shares of preferred stock and to determine the price, rights,
preferences and privileges of those shares without any further vote or action by
the Company's stockholders. The rights of the holders of common stock will be
subject to, and may be adversely affected by, the rights of the holders of any
shares of preferred stock that may be issued in the future. While the Company
has no present intention to issue shares of preferred stock, such issuance,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect of making it more difficult
or less attractive for a third party to acquire a majority of the outstanding


                                       15

<PAGE>   18
voting stock of the Company. Such preferred stock may also have other rights,
including economic rights senior to the common stock, and, as a result, the
issuance thereof could have a material adverse effect on the market value of the
common stock. Furthermore, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law ("Section
203"), which prohibit the Company from engaging in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person first becomes an "interested stockholder,"
unless the business combination is approved in a prescribed manner. The
application of Section 203 also could have the effect of delaying or preventing
a change of control of the Company.



                                       16

<PAGE>   19


 
                         PART II -- OTHER INFORMATION



ITEM 1.     LEGAL PROCEEDINGS.  None


ITEM 2.     CHANGES IN SECURITIES.  None


ITEM 3.     DEFAULTS UPON SENIOR SECURITIES.  None


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

                 On May 21, 1998, the Company held its Annual Meeting of
            Stockholders at which the stockholders approved all of the proposals
            listed below:

            (1)   The election of Kazuhiro Hashimoto, Franklin P. Johnson, Jr.,
                  and Bruce R. Ross to the Board of Directors to serve for a
                  three year term ending in the year 2001, or until their
                  successors shall have been duly elected or appointed.

            (2)   The amendment to the Company's 1988 Stock Option Plan to
                  increase the total number of common shares authorized for
                  issuance thereunder from 5,480,000 shares to a total of
                  6,335,000 shares.

            (3)   A series of amendments to the Company's 1993 Non-Employee
                  Option Plan, including an increase in the total number of
                  common shares authorized for issuance thereunder from 250,000
                  shares to a total of 370,000 shares.

            (4)   The selection of KPMG Peat Marwick LLP as the Company's
                  independent public accountants for the fiscal year ending
                  December 31, 1998.

                 The following directors received the number of votes set
            opposite their respective names:


<TABLE>
<CAPTION>
                                       For Election      Withheld
                                        ----------       -------
<S>                                    <C>              <C>    
            Kazuhiro Hashimoto          17,740,846       164,608
            Franklin P. Johnson, Jr.    17,737,346       168,108
            Bruce R. Ross               17,740,538       164,916
</TABLE>


                 The proposal to amend the 1988 Stock Option Plan received
            13,380,252 affirmative votes (for the amendment), 4,490,106 negative
            votes (against the amendment) and 35,096 votes abstained. This
            proposal did not receive any broker nonvotes.

                 The proposal to amend the 1993 Non-Employee Option Plan
            received 14,188,587 affirmative votes (for the amendment), 3,679,234
            negative votes (against the amendment) and 37,633 votes abstained.
            This proposal did not receive any broker nonvotes.

                 The proposal to select KPMG Peat Marwick LLP as the Company's
            independent public accountants received 17,856,985 affirmative votes
            (for the selection), 20,683 negative votes (against the selection),
            and 27,786 votes abstained. This proposal did not receive any broker
            nonvotes.


ITEM 5.     OTHER INFORMATION.  None


ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K.

   (a)      Exhibits. The following exhibit is referenced -- Exhibit 27.1 - 
            Financial Data Schedule

   (b)      Report on Form 8-K.  None




                                       17


<PAGE>   20


                                   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.


                                         IDEC PHARMACEUTICALS CORPORATION


Date: August 12, 1998                By: /s/ William H. Rastetter
     ----------------------              ------------------------------------
                                         William H. Rastetter
                                         Chairman of the Board, President and
                                         Chief Executive Officer
                                         (Principal Executive Officer)
     
Date: August 12, 1998                By: /s/ Phillip M. Schneider
     ----------------------              ------------------------------------
                                         Phillip M. Schneider
                                         Vice President and
                                         Chief Financial Officer
                                         (Principal Financial and 
                                         Accounting Officer)






                                       18





<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS CONTAINED IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIALS STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               JUN-30-1998
<CASH>                                          31,817
<SECURITIES>                                    38,657
<RECEIVABLES>                                    2,698
<ALLOWANCES>                                         0
<INVENTORY>                                      8,324
<CURRENT-ASSETS>                                89,584
<PP&E>                                          36,354
<DEPRECIATION>                                  14,433
<TOTAL-ASSETS>                                 114,848
<CURRENT-LIABILITIES>                           13,149
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            20
<OTHER-SE>                                      96,630
<TOTAL-LIABILITY-AND-EQUITY>                    96,650
<SALES>                                              0
<TOTAL-REVENUES>                                42,197
<CGS>                                                0
<TOTAL-COSTS>                                   21,108
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 364
<INCOME-PRETAX>                                      0
<INCOME-TAX>                                       130
<INCOME-CONTINUING>                                  0
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    14,000
<EPS-PRIMARY>                                     0.71
<EPS-DILUTED>                                     0.60
        

</TABLE>