April 22, 1999   RECOMMENDATION: BUY

Market Data: Exchange Symbol........................CTIC (NASDAQ) Price of Common Stock (4/21/98)............$3.31 30-Day Average Trading Volume............72,954 Shares Outstanding.........................15.5 million 52-Week High/Low......................$4.75/$1.50

CTIC Corporate Information: Address..........201 Elliott Avenue West, Ste. 400 .............................................Seattle, WA 98119 Telephone................................(206) 282-7100 President & CEO......................James Bianco, M.D. Executive VP, Finance..................Louis A. Bianco Website...............................www.cticseattle.com

Summary Investment Considerations

CTIC is an emerging pharmaceutical company focusing on the discovery, development, and commercialization of drugs useful in treating cancer and the serious side effects of various cancer treatments. The Company is building a deep, vertically integrated pipeline of cancer products targeting major unmet treatment needs, each with independent technology. This strategy enables use of multiple CTIC products by the same clinician and patient, and protects against the failure or ineffectiveness of any one particular technology. CTIC's lead product, Lisofylline ("LSF"), is in trials for two different indications: treating the side effects of high-dose chemotherapy and radiation, and for treatment of patients with acute respiratory distress syndrome (ARDS) and acute lung injury (ALI). CTIC has partnered with Johnson & Johnson ("JNJ") for the development of Lisofylline; CTIC is actively seeking additional corporate partners for other drug candidates. We are initiating coverage of CTIC with a BUY rating, and recommend purchase of CTIC by investors tolerant of the risks associated with small-cap equity investments.

I.      Integrated Oncology Strategy -- Broad, Late-Stage Product Pipeline

• Strategy: CTIC has a pipeline of promising products, two in late-stage clinical trials, addressing significant oncology market opportunities. The market for cancer drugs continues to grow; by 2000, cancer is expected to surpass heart disease as the leading cause of death in the U.S.
• Lisofylline: LSF is in Phase III trials for acute myelogenous leukemia (AML); CTIC anticipates completion of enrollment in June 1999 and announcement of results this summer. Results from the LSF Phase II/III trial for ARDS/ALI, sponsored by the National Heart, Lung and Blood Institute, should be announced in June 1999.
• Apra: Apra is in Phase II trials to treat patients with cancers resistant to conventional chemotherapy such as prostate, lung, colon and breast cancer, as well as soft tissue sarcomas.
• PG-TXL is a polymer conjugate derivative of Taxol, the world's most popular cancer drug. Binding Taxol to a polymer enhances delivery of the drug to the tumor site and anti-cancer effectiveness, while reducing systemic side effects. PG-TXL is entering Phase I clinical trials for breast, colon, lung and other cancers. SC-7, an anti-angiogenic drug currently in preclinical research, is a copper chelator that binds with copper at a molecular level to block multiple steps in the growth of new blood vessels in tumors.

II.      Strong Financial Position, Low Burn and Partnering Opportunities -- Trading at Cash Value

• As of 12/31/98, CTIC had approximately $50 million in cash and equivalents (approximately $3.25 per share). CTIC anticipates a reduction in burn rate this year, assuming additional corporate partnerships are secured.
• Since November 1996, CTIC has been collaborating with JNJ to develop LSF. JNJ has paid a total of $40.8 million to CTIC for LSF, and has an option to continue the collaboration following review of the results from the AML and ARDS/ALI studies (anticipate decision 4Q99). If JNJ does not exercise its option, we believe CTIC will be able to partner LSF in a timely fashion. CTIC is actively seeking partners on other programs.

III.      Milestones - Strong Flow of Near-Term Corporate Events

• June 1999: Announce interim results from the Phase II/III study of LSF for ALI/ARDS; complete enrollment in Phase III trials of LSF for induction chemotherapy/AML.
• 2H99: Announce results of the Phase III trials for LSF for AML and the Phase II trials for Apra for prostate cancer patients; complete enrollment in Phase III of the LSF bone marrow transplant (BMT) trials, complete Phase II LSF trials for mucositis; initiation of trials of PG-TXL; filing of an NDA for LSF in early 2000.

Company Background

We are initiating coverage of CTIC with a BUY recommendation with this abbreviated research report. We plan to publish a full-length report, with a detailed analysis of CTIC, its products and the competitive environment (including a detailed financial model), in the near future.

CTIC is an emerging pharmaceutical company focusing on the discovery, development, and commercialization of drugs useful in treating cancer and the serious side effects of cancer treatment. The Company is building a deep, vertically integrated pipeline of cancer products targeting major unmet treatment needs, each with independent technology. CTIC was incorporated in September 1991, and commenced operations in 1992. On March 26, 1997, CTIC completed its IPO, selling 3 million shares at a price of $10.00 per share. CTIC sold 300,000 shares to Johnson & Johnson at the same time, also for $10.00 per share, raising a combined net proceeds of roughly $30 million. A secondary offering of 2.3 million shares at $16.00 per share was completed on October 27, 1997, which resulted in net proceeds of $34.3 million.

CTIC's Diversification Strategy -- Enhancing the Risk/Reward Profile; Creating The BUYing Opportunity

Over the past 12 months, CTIC has undergone a significant transformation from a single product/single indication/one partner company, into a diversified oncology company with multiple products in advanced clinical trials. Despite significant progress on many fronts, including:

• Diversifying development risk over several products and technologies;
• Moving multiple products with large target markets into advanced clinical trials;
• Strengthening the management team; and
• Maintaining a strong balance sheet by successfully managing its cash balances;

CTIC stock trades at approximately 20% of the value of approximately 12-months ago, and at roughly the value of cash on the balance sheet.

12-Months Ago: The value being attributed to CTIC was based almost entirely on the potential for Lisofylline (LSF) in the BMT indication (preventing infections in patients undergoing BMTs), and on the value attributed to the partnership with JNJ. In early March 1998, CTIC stock traded around $15 per share. On March 25, 1998, CTIC announced that preliminary results of the first Phase III trial of LSF for BMT were not confirmatory. Despite the Company's belief that these results were negatively affected by patient recruitment issues at certain clinical trial sites, and not the clinical and commercial potential of LSF, the stock sold off aggressively following this announcement. Interestingly, JNJ stuck with CTIC and LSF.

CTIC Today: We believe management has done an impressive job at diversifying CTIC's development activities, getting new products into clinical trials, strengthening the management team and managing its cash resources. With respect to product diversification and enhancement of shareholder value, CTIC investors have gained:

• The ARDS/ALI opportunity for LSF in pivotal phase II/III trials -- the results of which should be announced shortly;
• Apra, in pivotal trials for prostate cancer and soft tissue sarcoma -- the results to be announced 2H99;
• A significant corporate partnering opportunity on Apra;
• PG-TXL, the polymer conjugate of the world's most successful cancer drug, Taxol -- entering Phase I trials in large cancer indications;
• A significant corporate partnering opportunity for PG-TXL -- CTIC has been approached by multiple potential partners interested in this compound;
• SC-7, an oral, once-a-day, anti-angiogenic drug, in pre-clinical studies;
• And a stronger management team;

Management has successfully diversified its product risk across a broad pipeline of oncology drug candidates. The investment risk/reward profile has been enhanced dramatically and the Company has a stream of anticipated announcements this year that could drive significant interest in the stock.

We have developed a detailed financial model which will be included in the full-length report. We have also generated a number of valuations, based upon different methodologies, including discounted cash flow, terminal P/E multiples and terminal operating income multiples. Regardless of the valuation methodology, CTIC's share price appears to be significantly undervalued at its current level, particularly for a biotechnology company with multiple products in advanced clinical trials.

CTIC's stock is basically trading "at cash value," meaning the market is attributing no value to CTIC's products and technologies. Clearly, JNJ and the National Heart, Lung and Blood Institute have looked at the value of Lisofylline, and believe its value is greater than zero! We believe that to be the case as well. Additionally, we believe the value of Apra, PG-TXL and SC-7 will all become significantly clearer in the near future as clinical results are reported, and CTIC begins to establish corporate partnership arrangements for these other products.

We believe current fair value for CTIC to be in the range of $14 to $17 per share. We are initiating coverage of CTIC with a BUY rating, and recommend purchase of CTIC by investors tolerant of the risks associated with small-cap equity investments.

This section of the document is provided to remind potential investors to undertake a prudent level of due diligence prior to making an investment in the securities of CTIC. For a complete description of risks and uncertainties to CTIC's business, see the "Risk Factors" section in CTIC's SEC filings, which can be accessed directly from the SEC Edgar filings at www.SEC.gov on the Internet. Other potential risks include:

• Market risk: Investors should consider technical risks common to many small-cap or micro-cap stock investments, including liquidity levels, small float, risk of dilution, dependence upon key personnel, dependence upon single products or technologies, and the strength of competitors that may be larger, better capitalized and hold dominant market positions.
• Business risk: CTIC has limited experience in the manufacturing, marketing, and the distribution of cancer treatments. Many of its products are in the early stages of development. Additionally, CTIC intends to license rights to its products to other companies. There can be no assurance that these licensing agreements will be completed, or that the market will accept any products under development.
• Regulatory risk: There is no guarantee that CTIC's products will be approved by the US FDA or international regulatory bodies for marketing in the US or abroad.

The following are website addresses offering related information, and links to other sources of information.

www.cticseattle.com CTIC's corporate website

www.johnsonandjohnson.com  Johnson & Johnson's corporate website

www.SmallCapsOnline.com  SmallCaps Online's site for company information and research

www.FDA.gov US Food and Drug Administration homepage

www.sec.gov US Securities and Exchange Commission, with links to EDGAR filings

www.cancer.org American Cancer Society

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