<PAGE>

                                  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 SECURITIESEXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

                                       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: 0-10736
                        -------

                                MGI PHARMA, INC.
                                ----------------
             (Exact name of registrant as specified in its charter)

            Minnesota                             41-1364647
---------------------------------        -------------------------------
  (State or other jurisdiction                 (I.R.S. employer
of incorporation or organization)            identification number)

  5775 West Old Shakopee Road
           Suite 100
  Bloomington, Minnesota 55437                  (952) 346-4700
---------------------------------        -------------------------------
(Address of principal executive          (Registrant's telephone number,
offices and zip code)                         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
    -----             -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

  Common Stock, $.01 par value                  24,056,389 shares
--------------------------------       ----------------------------------
          (Class)                      (Outstanding at November 12, 2001)
<PAGE>

                                MGI PHARMA, INC.

                                 FORM 10-Q INDEX



                                                                         Page
                                                                        Number
                                                                        ------
PART I.  FINANCIAL INFORMATION

     Item 1. Financial Statements (Unaudited)

                 Balance Sheets - December 31, 2000
                 and September 30, 2001                                    3

                 Statements of Operations - Three Months and
                 Nine Months Ended September 30, 2000 and 2001             5

                 Statements of Cash Flows - Nine Months
                 Ended September 30, 2000 and 2001                         6

                 Notes to Financial Statements                             7

     Item 2. Management's Discussion and Analysis of
                 Financial Condition and Results of Operations            13

     Item 3. Quantitative and Qualitative Disclosure About
                 Market Risk                                              17

PART II. OTHER INFORMATION

     Item 4. Submission of Matters to a Vote of Security                  18
                 Holders

     Item 5. Other Information                                            18

     Item 6. Exhibits and Reports on Form 8-K                             18

SIGNATURES                                                                19

                                       2
<PAGE>

                 PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
----------------------------

                                MGI PHARMA, INC.

                                 BALANCE SHEETS

                                   (unaudited)


                                       December 31,     September 30,
                                            2000            2001
                                       -------------    -------------
ASSETS
------

Current assets:
  Cash and cash equivalents            $  11,031,714    $  19,290,075
  Cash - restricted                             --          6,000,000
  Short-term investments                  18,867,073       16,237,445
  Receivables, less allowances of
    $158,579 and $180,840                  2,806,462        3,131,788
  Inventories                              1,476,275        1,599,854
  Prepaid expenses                         5,826,260        1,095,663
                                       -------------    -------------

     Total current assets                 40,007,784       47,354,825

Equipment and furniture, at cost
  less accumulated depreciation of
  $1,192,171 and $1,223,333                1,510,859        3,282,387

Long-term investments                      3,800,000        6,800,000

Intangible assets, at cost
  less accumulated amortization of
  $98,498 and $984,982                     6,993,372        6,106,888

Other assets                                 431,555          463,741
                                       -------------    -------------

Total assets                           $  52,743,570    $  64,007,841
                                       =============    =============

(Continued)

                                       3
<PAGE>

BALANCE SHEETS
(Unaudited)
Page 2

                                       December 31,     September 30,
                                            2000            2001
                                       -------------    -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
  Accounts payable                     $   1,426,828    $   2,076,894
  Accrued expenses                        11,785,849       12,136,613
  Deferred revenue                           731,883          794,383
  Other current liabilities                   21,411          140,484
                                       -------------    -------------

     Total current liabilities            13,965,971       15,148,374
                                       -------------    -------------

Noncurrent liabilities:
  Long-term deposit payable                1,550,000        3,200,000
  Deferred revenue                         9,981,982       10,026,819
  Other noncurrent liabilities             1,200,000           40,006
                                       -------------    -------------

     Total noncurrent liabilities         12,731,982       13,266,825
                                       -------------    -------------

     Total liabilities                    26,697,953       28,415,199
                                       -------------    -------------

Stockholders' equity:
  Preferred stock, 10,000,000
    authorized and unissued shares              --               --
  Common stock, $.01 par value,
    30,000,000 authorized shares,
    16,509,008 and 21,001,266
    issued shares                            165,090          210,013
  Additional paid-in capital             114,431,198      148,509,825
  Accumulated deficit                    (88,550,671)    (113,127,196)
                                       -------------    -------------

     Total stockholders' equity           26,045,617       35,592,642
                                       -------------    -------------

Total liabilities and
  stockholders' equity                 $  52,743,570    $  64,007,841
                                       =============    =============

----------
See accompanying notes to financial statements.

                                       4
<PAGE>

                                MGI PHARMA, INC.

                            STATEMENTS OF OPERATIONS

                                  (Unaudited)

<TABLE>
<CAPTION>
                                               Three Months Ended             Nine Months Ended
                                                 September 30,                   September 30,
                                          ----------------------------    ----------------------------
                                              2000           2001            2000             2001
                                          ------------    ------------    ------------    ------------
<S>                                       <C>             <C>             <C>             <C>
Revenues:
  Sales                                   $  4,859,684    $  5,992,329    $ 15,560,061    $ 23,137,823
  Promotion                                    250,000            --           769,874            --
  Licensing                                  1,219,175         957,060       2,477,044       2,399,631
                                          ------------    ------------    ------------    ------------
                                             6,328,859       6,949,389      18,806,979      25,537,454
                                          ------------    ------------    ------------    ------------

Costs and Expenses:
  Cost of sales                                331,684         757,392       1,028,897       2,578,228
  Selling, general and administrative        4,466,957       6,551,976      12,627,259      20,327,597
  Research and development                   8,575,167       5,807,071      12,604,732      27,550,578
  Amortization                                    --           295,495            --           886,484
                                          ------------    ------------    ------------    ------------
                                            13,373,808      13,411,934      26,260,888      51,342,887
                                          ------------    ------------    ------------    ------------

Loss from operations                        (7,044,949)     (6,462,545)     (7,453,909)    (25,805,433)

Interest income                                686,703         415,102       1,599,229       1,228,908
                                          ------------    ------------    ------------    ------------

Loss before taxes and cumulative effect
   of change in accounting principle        (6,358,246)     (6,047,443)     (5,854,680)    (24,576,525)

Provision for income taxes                      51,537            --           148,000            --
                                          ------------    ------------    ------------    ------------

Loss before cumulative effect
   of change in accounting principle        (6,409,783)     (6,047,443)     (6,002,680)    (24,576,525)

Cumulative effect of change
   in accounting principle                        --              --        (9,402,643)           --
                                          ------------    ------------    ------------    ------------

Net loss                                  $ (6,409,783)   $ (6,047,443)   $(15,405,323)   $(24,576,525)
                                          ============    ============    ============    ============


Net loss per common share:

Basic:
Loss before effect of accounting change   $      (0.39)   $      (0.29)   $      (0.38)   $      (1.30)
Cumulative effect of accounting change            0.00            0.00           (0.59)           0.00
                                          ------------    ------------    ------------    ------------
Net loss                                  $      (0.39)   $      (0.29)   $      (0.97)   $      (1.30)
                                          ============    ============    ============    ============

Assuming dilution:
Loss before effect of accounting change   $      (0.39)   $      (0.29)   $      (0.38)   $      (1.30)
Cumulative effect of accounting change            0.00            0.00           (0.59)           0.00
                                          ------------    ------------    ------------    ------------
Net loss                                  $      (0.39)   $      (0.29)   $      (0.97)   $      (1.30)
                                          ============    ============    ============    ============

Weighted average number of
   common shares outstanding:
           Basic                            16,452,089      20,986,992      15,829,416      18,852,053

           Assuming dilution                16,452,089      20,986,992      15,829,416      18,852,053
</TABLE>

----------
See accompanying notes to financial statements.

                                       5
<PAGE>

                                MGI PHARMA, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       Nine Months Ended September 30,
                                                       -------------------------------
                                                            2000            2001
                                                       --------------  ---------------
<S>                                                     <C>             <C>
OPERATING ACTIVITIES:
Net loss                                                $(15,405,323)   $(24,576,525)
Adjustments for non-cash items:
  Cumulative effect of change in accounting principle      9,402,643            --
  Stock issuance for palonosetron license                       --         2,999,992
  Depreciation and asset amortization                        226,418       1,389,739
  Benefit plan contribution                                  126,729         237,436
  Deferred rent                                                 --            40,006
  Other                                                       10,000         108,147
Change in operating assets and liabilities:
  Receivables                                             (1,247,776)       (325,326)
  Inventories                                               (261,717)       (123,579)
  Prepaid expenses                                          (116,619)      5,247,201
  Accounts payable and accrued expenses                    2,571,755       3,645,844
  Deferred revenue                                           999,193         107,337
  Other current liabilities                                  128,304         119,073
                                                        ------------    ------------

Net cash used in operating activities                     (3,566,393)    (11,130,655)
                                                        ------------    ------------

INVESTING ACTIVITIES:
  Purchase of investments                                (38,049,285)    (25,474,914)
  Maturity of investments                                 26,459,725      25,104,542
  Acquisition of Hexalen(R)Capsules                             --        (3,600,000)
  Purchase of equipment and furniture                       (485,543)     (2,319,230)
  Other                                                      (71,487)        (32,186)
                                                        ------------    ------------

Net cash used in investing activities                    (12,146,590)     (6,321,788)
                                                        ------------    ------------

FINANCING ACTIVITIES:
  Net proceeds from stock issuance                        16,448,138      29,168,655
  Restricted cash                                               --        (6,000,000)
  Receipt of deposit payable                               1,000,000       1,650,000
  Issuance of shares under stock
    plans                                                  3,972,219         892,149
                                                        ------------    ------------

Net cash provided by financing activities                 21,420,357      25,710,804
                                                        ------------    ------------

Increase in cash and cash equivalents                      5,707,374       8,258,361

Cash and cash equivalents at
  beginning of period                                      8,249,248      11,031,714
                                                        ------------    ------------

Cash and cash equivalents at
  end of period                                         $ 13,956,622    $ 19,290,075
                                                        ============    ============

Supplemental disclosure of cash information:
  Cash paid for income taxes                            $    150,000    $      1,500
</TABLE>

----------
See accompanying notes to financial statements.

                                       6
<PAGE>

                                MGI PHARMA, INC.

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

(1)      Basis of Presentation

MGI PHARMA, INC. (MGI or the Company) is an oncology-focused pharmaceutical
company that acquires, develops and commercializes proprietary products that
address unmet needs of cancer patients. The Company focuses its sales efforts
solely within the United States and creates alliances with other pharmaceutical
or biotechnology companies for the commercialization of its products in other
countries.

The Company promotes products directly to physicians in the United States using
its own specialty sales force. These products include Company owned Salagen(R)
Tablets (pilocarpine hydrochloride), Hexalen(R) Capsules (altretamine), and
Didronel(R) I.V. Infusion (etidronate disodium). The Company also sells
Mylocel(TM) Tablets (hydroxyurea) under an exclusive marketing and distribution
agreement with Barr Laboratories. Salagen Tablets are approved in the United
States for two indications: symptoms of dry mouth associated with radiation
treatment in head and neck cancer patients and the symptoms of dry mouth
associated with Sjogren's syndrome, an autoimmune disease that damages the
salivary glands. Sales of Salagen Tablets in the United States accounted for 88
percent of product sales in the first nine months of 2001. Hexalen Capsules,
which the Company began selling since acquiring the product from MedImmune, Inc.
in November 2000, is an orally administered chemotherapeutic agent approved in
the United States for treatment of refractory ovarian cancer patients. Didronel
I.V. Infusion is approved for the treatment of hypercalcemia (elevated blood
calcium) in late-stage cancer patients. Mylocel Tablets are approved for the
treatment of melanoma, resistant chronic myelocytic leukemia, and recurrent,
metastatic, or inoperable carcinoma of the ovary. Outside the United States, MGI
commercializes its products through various alliances and recognizes licensing
revenues. MGI has licensing agreements with several international pharmaceutical
companies to develop and commercialize Salagen Tablets in Europe, Canada and
Japan. Exclusive rights in Japan to irofulven and the other acylfulvene analogs
were granted to Dainippon under a development and commercialization agreement in
1995. MGI relies on third parties to manufacture its commercialized and
development stage products.

The Company's current product development efforts include preclinical studies
and clinical trials for irofulven, the lead product candidate in MGI's novel
family of proprietary cancer therapy compounds called the acylfulvenes. In April
2001, MGI obtained the exclusive U.S. and Canadian license and distribution
rights to palonosetron, a cancer supportive care product candidate in Phase 3
development for the prevention of chemotherapy-induced nausea and vomiting. MGI
is also developing MG98 and other inhibitors of DNA methyltransferase for North
American markets. DNA methyltransferase is an enzyme that has been associated
with uncontrolled tumor growth. In addition, we provide ongoing clinical support
of Salagen Tablets.

The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information. Accordingly, they do not include all of the
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal, recurring adjustments) considered necessary for fair presentation
have been included. Interim results may not be indicative of annual results.
Certain prior year amounts have been reclassified to conform with the current
year presentation. For further information, refer to the financial statements
and footnotes included in the Company's report on Form 10-K for the year ended
December 31, 2000.

                                       7
<PAGE>

(2)      Income (Loss) Per Common Share

Income (loss) per share for the three month and nine month periods ended
September 30, 2000 and 2001 are based on weighted average shares outstanding as
summarized in the following table:

Three months ended September 30                  2000         2001
                                              ----------   ----------

Weighted-average shares - basic               16,452,089   20,986,992
Effect of dilutive stock options                    --           --
                                              ----------   ----------
Weighted-average shares - assuming dilution   16,452,089   20,986,992
                                              ==========   ==========


Nine months ended September 30                   2000         2001
                                              ----------   ----------

Weighted-average shares - basic               15,829,416   18,852,053
Effect of dilutive stock options                    --           --
                                              ----------   ----------
Weighted-average shares - assuming dilution   15,829,416   18,852,053
                                              ==========   ==========

For loss periods, basic and diluted share amounts are identical, as the effect
of potentially dilutive common stock is antidilutive.


(3)      Short-Term Investments

Because the Company has the intent and ability to hold its investments to
maturity, they are considered held-to-maturity investments. As such, they are
stated at amortized cost, which approximates estimated fair value.
Held-to-maturity investments at December 31, 2000 and September 30, 2001 are
summarized in the following table:

                                          2000                 2001
                                      -----------          -----------
Commercial paper                      $13,333,117          $16,237,445
Certificates of deposit                 5,533,956                 --
                                      -----------          -----------
                                      $18,867,073          $16,237,445
                                      ===========          ===========

                                       8
<PAGE>

(4)      Inventories

Inventories at December 31, 2000 and September 30, 2001 are summarized as
follows:

                                                      2000            2001
                                                   ----------      ----------
Raw materials and supplies                         $  339,039      $  348,623
Work in process                                       699,598         612,809
Finished products                                     437,638         638,422
                                                   ----------      ----------
                                                   $1,476,275      $1,599,854
                                                   ==========      ==========

Inventories are stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis.


(5)      Prepaid Expenses

Prepaid expenses at December 31, 2000 and September 30, 2001 are summarized in
the following table:

                                                      2000            2001
                                                   ----------      ----------
Palonosetron letter of intent deposit              $5,000,000      $     --
Financing transaction costs                              --           516,604
Other prepaid expenses                                826,260         579,059
                                                   ----------      ----------
                                                   $5,826,260      $1,095,663
                                                   ==========      ==========

(6)      Accrued Expenses

Accrued expenses at December 31, 2000 and September 30, 2001 are summarized in
the following table:

                                                     2000            2001
                                                  -----------     -----------
Product development commitments                   $ 3,500,784     $ 4,971,689
Hexalen Capsules business purchase obligation       4,800,000       2,400,000
Bonuses                                               889,499       1,290,513
Lease accrual                                            --           755,923
Product return accrual                                600,768         745,205
Other accrued expenses                              1,994,798       1,973,283
                                                  -----------     -----------
                                                  $11,785,849     $12,136,613
                                                  ===========     ===========


(7)      Promotion Revenue

In September 2000, MGI concluded its promotion agreement with Connetics
Corporation for the promotion of Ridaura(R) (auranofin). Under the terms of the
agreement, MGI recognized $250,000 per quarter through September 30, 2000 for
making a minimum number of sales calls related to this rheumatology product.

                                       9
<PAGE>

(8)      Stock Incentive Plans

Under stock incentive plans, designated persons (including officers, directors,
employees and consultants) are granted rights to acquire Company common stock.
These rights include stock options and other equity rights.

At September 30, 2001, 3,709,964 shares of common stock remain reserved for
issuance, of which
267,169 remain available for grant. Options to purchase 3,442,795 shares of
common stock were outstanding, of which 1,281,533 were exercisable. Options
outstanding had a weighted average exercise price of $12.42 per share.


(9)      Stockholders' Equity

Changes in selected stockholders' equity accounts for the nine months ended
September 30, 2001 were as follows:

                                         Common Stock              Additional
                                -----------------------------       paid-in
                                  Shares          Par value         capital
                                ------------     ------------     ------------
Balance at December 31, 2000      16,509,008     $    165,090     $114,431,198
Issuance of shares                 4,000,000           40,000       29,128,655
License for technology               297,338            2,973        2,997,018
Exercise of stock options            134,062            1,341          662,444
Employee retirement savings
  plan contribution                   32,903              329          482,121
Employee stock purchase plan          21,483              215          228,150
Financing transaction costs             --               --            516,604
Other issuances                        6,472               65           63,635
                                ------------     ------------     ------------
Balance at September 30, 2001     21,001,266     $    210,013     $148,509,825
                                ============     ============     ============

In the second quarter of 2001, the Company completed a sale of 4,000,000 newly
issued shares of common stock to U.S. Bancorp Piper Jaffray Inc. which offered
the shares at the public offering price of $8 per share. The net proceeds to the
Company, after fees and expenses, were approximately $29.2 million.

The Company has one million shares remaining for sale on a shelf registration
statement with the Securities and Exchange Commission. Under a shelf
registration statement, the Company may sell securities from time to time in one
or more separate offerings in amounts, at prices and on terms to be determined
at the time of sale.

On February 28, 2001, the Company entered into a common stock underwriting
agreement with Ramius Securities, LLC (Ramius Securities) and a stand-by
purchase agreement with Ramius Capital Group, LLC (Ramius Capital). Under the
terms of the underwriting agreement, Ramius Securities is obligated to sell, on
a best-efforts basis and at the Company's election from time to time, the
Company's common stock over a two-year period in individual offerings of $2
million to $15 million. Under the terms of the stand-by purchase agreement, if
Ramius Securities fails to sell the requisite amount of shares during any given
selling period pursuant to the terms of the underwriting agreement, Ramius
Capital is obligated to

                                       10
<PAGE>

purchase the remaining shares. In connection with these agreements, Ramius
Securities was granted a purchase option for 100,000 shares of the Company's
common stock for a two-year period at prices ranging from $16.95 to $24.72 per
share. The $516,604 aggregate fair value of the purchase option issued is
presented as prepaid financing costs at September 30, 2001. This fair value was
determined by use of a Black-Scholes model using the following assumptions:
expected dividend yield of 0%, risk-free interest rate of 4.8%, volatility of
80%, and expected warrant life of two years.


(10)     Leases

The Company leases office space under noncancellable lease agreements that
contain renewal options and require the Company to pay operating costs,
including property taxes, insurance and maintenance. In January 2001, the
Company executed a lease agreement for new office space, beginning in May 2001.
At September 30, 2001, the Company has an accrual of $756,000 for lease
obligations for the former office space in excess of estimated sublease rental
income. Future minimum lease payments under noncancellable leases, including
both the current and former office spaces, are as follows:

Remainder of 2001                            $  338,000
2002                                          1,571,000
2003                                          1,598,000
2004                                          1,618,000
2005                                          1,461,000
Thereafter                                    3,012,000
                                             ----------
                                             $9,598,000
                                             ==========


(11)      Licensing Arrangements

In January 2001, MGI entered into an agreement with Barr Laboratories, Inc. for
the exclusive marketing and distribution rights for Mylocel(TM) Tablets
(hydroxyurea) in the United States. Mylocel Tablets are approved for the
treatment of melanoma, resistant chronic myelocytic leukemia, and recurrent,
metastatic, or inoperable carcinoma of the ovary. MGI began marketing and
distributing Mylocel Tablets in March 2001. Under the terms of the agreement,
Barr Laboratories will receive royalty payments based upon product contribution
derived from MGI's sale of product. The agreement has an initial term of ten
years, with automatic annual renewals unless either party gives 90 days prior
notice. Early termination provisions exist for both MGI and Barr Laboratories.

In April 2001, MGI obtained the exclusive North American license and
distribution rights to palonosetron, from Helsinn Healthcare SA. Palonosetron is
a 5-HT3 antagonist with an extended half-life, in Phase 3 development for the
prevention of chemotherapy-induced nausea and vomiting. Under the terms of the
agreement, MGI made $11 million in upfront payments. These upfront fees were
funded using the $5 million deposit made upon the execution of the letter of
intent in October 2000, $3 million in cash paid in April 2001, and $3 million of
MGI's common shares delivered in April 2001. An additional $27 million in
milestone payments will become payable upon achievement of the underlying
development objectives, including marketing approval of palonosetron in the
United States. Under the terms of the agreement, MGI placed $6 million into an
escrow account to fund the next two milestone payments. Helsinn will continue to
fund and conduct all development of palonosetron.

                                       11
<PAGE>

(12)     Research and Development Expense

Research and development expenses for the three month and nine month periods
ended September 30, 2000 and 2001 consist of the following:

Three months ended September 30            2000               2001
                                       -----------        -----------
License fees                           $ 5,700,000        $         0
Other research and development           2,875,167          5,807,071
                                       -----------        -----------
                                       $ 8,575,167        $ 5,807,071
                                       ===========        ===========

Nine months ended September 30             2000               2001
                                       -----------        -----------
License fees                           $ 5,925,000        $13,016,250
Other research and development           6,679,732         14,534,328
                                       -----------        -----------
                                       $12,604,732        $27,550,578
                                       ===========        ===========


(13)     New Accounting Pronouncement

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations," and
SFAS No. 142 "Goodwill and Other Intangible Assets," which change the accounting
for business combinations and goodwill. SFAS No. 141 requires that the purchase
method of accounting be used for business combinations initiated after June 30,
2001. Use of the pooling-of-interests method will be prohibited. SFAS No. 142
changes the accounting for goodwill from an amortization method to an
impairment-only approach. Amortization of goodwill, including goodwill recorded
in past business combinations, will therefore cease upon adoption of SFAS No.
142, which will be January 1, 2002 for the Company.

As of January 1, 2002, the date of adoption of SFAS No. 142, the Company expects
to have unamortized identifiable intangible assets in the amount of $5,811,394
which will be subject to the provisions of SFAS No. 142. The Company does not
expect any transitional impairment losses which would be required to be
recognized as a cumulative effect of a change in accounting principle. The
Company does not expect that SFAS No. 141 and SFAS No. 142 will have a material
effect on its financial statements because the identifiable intangible assets
will continue to be amortized.


(14)     Subsequent Event

On October 31, 2001, the Company completed a private placement of 3,025,000
newly issued shares of stock to accredited investors at $11 per share, with U.S.
Bancorp Piper Jaffray Inc. acting as the placement agent. The net proceeds to
the Company, after fees and expenses, were approximately $31 million.

                                       12
<PAGE>

Item 2.
-------

Management's Discussion and Analysis of Financial Condition and Results of
Operations

This form 10-Q contains forward-looking statements within the meaning of federal
securities laws that may include statements regarding intent, belief or current
expectations of the Company and its management. These forward-looking statements
are not guarantees of future performance and involve a number of risks and
uncertainties that may cause the Company's actual results to differ materially
from the results discussed in these statements. For more information, see
Exhibit 99 to this Form 10-Q.

Overview

We are an oncology-focused pharmaceutical company that acquires, develops and
commercializes proprietary products that address unmet needs of cancer patients.
We focus our sales efforts solely within the United States and create alliances
with other pharmaceutical or biotechnology companies for the commercialization
of our products in other countries.

We promote products directly to physicians in the United States using our own
specialty sales force. These products include our Salagen(R) Tablets
(pilocarpine hydrochloride), Hexalen(R) Capsules (altretamine), and Didronel(R)
I.V. Infusion (etidronate disodium). We also sell Mylocel(TM) Tablets
(hydroxyurea) under an exclusive marketing and distribution agreement with Barr
Laboratories. Salagen Tablets are approved in the United States for two
indications: symptoms of dry mouth associated with radiation treatment in head
and neck cancer patients and the symptoms of dry mouth associated with Sjogren's
syndrome, an autoimmune disease that damages the salivary glands. Sales of
Salagen Tablets in the United States accounted for 88 percent of our product
sales in the first nine months of 2001. Hexalen Capsules, which we are selling
since acquiring the product from MedImmune, Inc. in November 2000, are an orally
administered chemotherapeutic agent approved in the United States for the
treatment of refractory ovarian cancer patients. Didronel I.V. Infusion is
approved for the treatment of hypercalcemia (elevated blood calcium) in
late-stage cancer patients. Mylocel Tablets are approved for the treatment of
melanoma, resistant chronic myelocytic leukemia, and recurrent, metastatic, or
inoperable carcinoma of the ovary. Outside the United States, we commercialize
our products through various alliances from which we recognize licensing
revenues. We have licensing agreements with several international pharmaceutical
companies to develop and commercialize Salagen Tablets in Europe, Canada and
Japan. Exclusive rights in Japan to irofulven and other acylfulvenes were
granted to Dainippon Pharmaceutical Co., Ltd., under a development and
commercialization agreement in 1995. We rely on third parties to manufacture our
commercialized and development stage products.

Our current product development efforts include preclinical studies and clinical
trials for irofulven, the lead product candidate in our novel family of
proprietary cancer therapy compounds called the acylfulvenes. In April 2001, we
obtained the exclusive U.S and Canadian license and distribution rights to
palonosetron, a cancer supportive care product candidate in Phase 3 development
for the prevention of chemotherapy-induced nausea and vomiting. Our expenses
related to palonosetron are almost exclusively due to license fees. We are also
developing MG98 and other inhibitors of DNA methyltransferase for the North
American markets. DNA methyltransferase is an enzyme that has been associated
with uncontrolled tumor growth. In addition, we provide ongoing clinical support
of Salagen Tablets.

                                       13
<PAGE>

Results of Operations

Revenues

Sales: Total sales revenue increased 23 percent from $4,859,684 in the third
quarter of 2000 to $5,992,329 in the third quarter of 2001, and increased 49
percent from $15,560,061 in the first nine months of 2000 to $23,137,823 in the
first nine months of 2001. The increases in sales revenue reflect increased
revenue for Salagen Tablets, resulting from an increase in demand and increased
stocking of inventory by wholesalers and retail pharmacies, and revenue for
Hexalen(R) Capsules and Mylocel Tablets. We purchased Hexalen Capsules from
MedImmune Inc. in November 2000, with sales commencing in December 2000, and
active field promotion commencing in March 2001. We began selling and promoting
Mylocel Tablets in March 2001 under an exclusive marketing and distribution
agreement with Barr Laboratories.

Sales of Salagen Tablets in the United States provided 87 percent of our product
sales in the third quarter of 2001, and provided 88 percent of our product sales
in the first nine months of 2001. As is common in the pharmaceutical industry,
our domestic sales are made to pharmaceutical wholesalers for further
distribution through pharmacies to the ultimate consumers of our products. Sales
of Salagen Tablets in the third quarter of 2001 approximated underlying demand
as measured by wholesaler shipments to pharmacies. We expect total product sales
in 2001 to grow approximately 30 percent compared to 2000.

Promotion: We have not recognized any promotion revenue in the third quarter of
2001 or in the first nine months of 2001, after recognizing $250,000 in the
third quarter of 2000 and $769,874 in the first nine months of 2000. In 2000, we
promoted Ridaura under a promotion agreement with Connetics Corporation. Under
this agreement, we recognized $250,000 in promotion revenue per quarter, based
on achieving certain sales call activity. We concluded our agreement for the
promotion of this rheumatology market product in the third quarter of 2000.

Licensing: Licensing revenue decreased 21 percent from $1,219,175 in the third
quarter of 2000 to $957,060 in the third quarter of 2001, and decreased three
percent from $2,477,044 in the first nine months of 2000 to $2,399,631 in the
first nine months of 2001. Prior year results have been restated to reflect the
adoption of Staff Accounting Bulletin No. 101 as of January 1, 2000. Both the
quarterly and the first nine month changes reflect decreased revenue related to
our license to Kissei Pharmaceuticals for the development of Salagen tablets in
Japan. We received an $830,000 performance milestone from Kissei in the third
quarter of 2000, which resulted in recognition of approximately $229,000 in that
quarter using the contingency-adjusted performance method that we adopted under
the provisions of SAB 101. The remainder of the milestone payment will be
amortized to licensing revenue over the estimated life of the licensing
relationship. This decrease in 2001 licensing revenue was partially reduced by
an increase in royalties from our license relationship with Novartis Ophthalmics
AG for the development and commercialization of Salagen Tablets in Europe.

Future licensing revenues will fluctuate from quarter to quarter depending on
the level of recurring royalty generating activities and the initiation of
additional licensing arrangements. We expect licensing revenue for 2001 to be
approximately $3 million.

Costs and Expenses

Cost of sales: Cost of sales as a percent of sales was seven percent for the
first nine months of 2000, and 11 percent for the first nine months of 2001. The
increase results from a change in our product mix, including the addition of
Hexalen Capsules and Mylocel Tablets to our oncology product portfolio. We

                                       14
<PAGE>

believe that cost of sales as a percent of product sales for our marketed
products for 2001 will range from 10 to 15 percent, as a result of changes in
our product mix and increasing production costs.

Selling, general and administrative: Selling, general and administrative
expenses increased 47 percent from $4,466,957 in the third quarter of 2000 to
$6,551,976 in the third quarter of 2001, and increased 61 percent from
$12,627,259 in the first nine months of 2000 to $20,327,597 in the first nine
months of 2001. The increases resulted from increased costs related to our
expanded business objectives, such as costs associated with the expansion of our
U.S. based sales force by approximately two-thirds during the first half of
2000, costs related to the marketing launches and continued promotion of Hexalen
Capsules and Mylocel Tablets, and increased facility costs in conjunction with
our move to a new office location in June 2001. We expect selling, general and
administrative expenses for 2001 to be approximately $26 million.

Research and development: Research and development expense decreased 32 percent
from $8,575,167 in the third quarter of 2000 to $5,807,071 in the third quarter
of 2001, but increased 119 percent from $12,604,732 in the first nine months of
2000 to $27,550,578 in the first nine months of 2001. Both the quarterly and
nine month changes include non-recurring license payments: $5.7 million in the
third quarter of 2000 related to our license agreement with MethylGene Inc., and
$13 million in the second quarter of 2001 related to our license agreement for
palonosetron. Exclusive of non-recurring licensing payments, research and
development expense increased 102 percent from $2,875,167 in the third quarter
of 2000 to $5,807,071 in the third quarter of 2001, and increased 118 percent
from $6,679,732 in the first nine months of 2000 to $14,534,328 in the first
nine months of 2001.

The increases reflect the expanding development of irofulven, the lead drug
candidate in our novel family of proprietary compounds called acylfulvenes, and
expenses related to the development of MG98 and other inhibitors of DNA
methyltransferase. Enrollment in a Phase 1 and three Phase 2 clinical trials of
irofulven, sponsored by us, began in 1998 and increased throughout 1999 and
2000. An additional Phase 1 trial and two additional Phase 2 trials of irofulven
were initiated in 2000. A pivotal Phase 3 trial, four additional Phase 2 trials,
and two additional Phase 1 trials were initiated in the first nine months of
2001. These trials are designed to evaluate the efficacy and safety of irofulven
for the treatment of patients with pancreatic, ovarian, prostate, sarcoma,
glioma or liver cancer who are generally refractory to current therapies. We
expect research and development expenses to be approximately $35 million for
2001.

Tax expense: Our provisions for income taxes for the third quarter and first
nine months of 2000 reflect a 10 percent foreign tax rate on Dainippon licensing
payments and a two percent tax rate for alternative minimum tax. There are no
provisions for the 2001 periods, given that we expect to incur a net loss for
2001 and we did not receive any payments subject to foreign tax. We continue to
maintain a valuation allowance against our deferred tax asset since we had an
accumulated deficit of $113,127,196 at September 30, 2001, and our ability to
sustain profitable operations is likely dependent upon the successful launch of
our next significant oncology product.

Interest Income

Interest income decreased 40 percent from $686,703 in the third quarter of 2000
to $415,102 in the third quarter of 2001, and decreased 23 percent from
$1,599,229 in the first nine months of 2000 to $1,228,908 in the first nine
months of 2001. The decreases are a result of a decrease in the investment
yield, partially reduced by an increase in the average amount of funds available
for investment.

Net Loss

We had a net loss of $6,409,783 in the third quarter of 2000, compared to a net
loss of $6,047,443 in the third quarter of 2001. We had a net loss of
$15,405,323 for the first nine months of 2000, which included a non-cash charge
of $9,402,643 related to the adoption of SAB 101, compared to a net loss of
$24,576,525

                                       15
<PAGE>

for the first nine months of 2001. The decreased net loss from the third quarter
of 2000 to the third quarter of 2001 is a result of a 10 percent increase in
revenues from 2000 to 2001, and essentially no change in costs and expenses from
2000 to 2001. Costs and expenses in the third quarter of 2000 include $5.7 in
nonrecurring licensing fees. The increased net loss from the first nine months
of 2000 to the first nine months of 2001, before the cumulative effect of SAB
101, is a result of a 96 percent increase in costs and expenses from 2000 to
2001, and a 36 percent increase in revenues from 2000 to 2001. Costs and
expenses in the nine month periods include $5.9 million in nonrecurring
licensing fees for 2000 and $13 million in nonrecurring licensing fees for 2001.
During the next several years, we expect to direct our efforts toward activities
intended to grow long-term revenues, including expanded development of irofulven
and other product candidates. Increased spending on these initiatives, including
development of the licensed anti-cancer technology from MethylGene and the
license of palonosetron, will likely result in substantial net losses until
after the launch of our next significant oncology product. We expect our net
loss to be approximately $35 million for 2001.

Liquidity and Capital Resources

At September 30, 2001, we had cash and short-term investments of $41,527,520 and
working capital of $32,206,451 compared with $29,898,787 and $26,041,813,
respectively, at December 31, 2000. Our cash and short-term investments balance
at September 30, 2001 includes $6,000,000 in restricted cash for payments
related to the license of palonosetron. For the nine month period ended
September 30, 2001, we used $11,130,655 to fund our operating activities, paid
$3,600,000 related to the acquisition of Hexalen Capsules, and purchased
$2,319,230 in furniture and equipment. We received $29,168,655 in cash as net
proceeds from the sale of stock, $1,650,000 in cash as a deposit from one of our
international partners, and $892,149 in cash from issuance of shares under stock
award plans.

Significant cash payments for the remainder of 2001 will be required to fund
operating activities, pay $2,000,000 related to the license of palonosetron, and
pay $1,200,000 related to the purchase of Hexalen Capsules. Substantial amounts
of capital are required for pharmaceutical development and commercialization
efforts. For continued development and commercialization of our product
candidates and marketed products, and the acquisition and development of
additional product candidates, we plan to utilize cash provided from product
sales, collaborative arrangements and existing liquid assets. We will also seek
other sources of funding, including additional equity or debt issuances.

We have one million common shares remaining for sale on a shelf registration
statement that was filed with the Securities and Exchange Commission. Under a
shelf registration, we may sell securities from time to time in one or more
separate offerings in amounts, at prices and on terms to be determined at the
time of sale. On February 28, 2001, we entered into a financing facility with
Ramius Securities, LLC and Ramius Capital Group, LLC. Under this facility, at
our election from time to time, Ramius Securities is obligated to place, on a
best efforts basis, our common stock over a two-year period in individual
offerings of $2 million to $15 million, subject to limitations such as a
limitation based on the daily trading volumes of our stock. If Ramius Securities
fails to sell the requisite amount of shares during any given selling period,
Ramius Capital is obligated to purchase the remaining shares. As part of
implementing this facility, Ramius Securities was granted a purchase option for
100,000 shares of our common stock for a two-year period at prices ranging from
$16.95 to $24.72 per share.

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations," and
SFAS No. 142 "Goodwill and Other Intangible Assets," which change the accounting
for business combinations and goodwill. SFAS No. 141 requires that the purchase
method of accounting be used for business combinations initiated after June 30,
2001. Use of the pooling-of-interests method will be prohibited. SFAS No. 142
changes the accounting for goodwill from an amortization method to an
impairment-only approach. Amortization of

                                       16
<PAGE>

goodwill, including goodwill recorded in past business combinations, will
therefore cease upon adoption of SFAS No. 142, which will be January 1, 2002 for
the Company.

As of January 1, 2002, the date of adoption of SFAS No. 142, the Company expects
to have unamortized identifiable intangible assets in the amount of $5,811,394
which will be subject to the provisions of SFAS No. 142. The Company does not
expect any transitional impairment losses which would be required to be
recognized as a cumulative effect of a change in accounting principle. The
Company does not expect that SFAS No. 141 and SFAS No. 142 will have a material
effect on its financial statements because the identifiable intangible assets
will continue to be amortized.

Cautionary Statements

This Form 10-Q contains forward-looking statements within the meaning of federal
securities laws that may include statements regarding intent, belief or current
expectations of the Company and its management. These forward-looking statements
are not guarantees of future performance and involve a number of risks and
uncertainties that may cause the Company's actual results to differ materially
from the results discussed in these statements. Factors that might affect our
results include, but are not limited to the ability of irofulven, or our other
product candidates, to be proven safe and effective in humans and to ultimately
compete successfully with other therapies, continued sales of Salagen(R)
Tablets, development or acquisition of additional products, reliance on contract
manufacturing, changes in strategic alliances, continued access to capital, and
other risks and uncertainties detailed from time to time in the Company's
filings with the Securities and Exchange Commission, including Exhibit 99 to
this Form 10-Q. We do not intend to update any of the forward-looking statements
after the date of this Form 10-Q to conform them to actual results.


Item 3.
-------

Quantitative and Qualitative Disclosures About Market Risk

Our operations are not subject to material risks of material foreign currency
fluctuations, nor do we use derivative financial instruments in our investment
practices. We place our short-term investments in instruments that meet high
credit quality standards, as specified in our investment policy guidelines. We
do not expect material losses with respect to our investment portfolio or
exposure to market risks associated with interest rates.

                                       17
<PAGE>

                                MGI PHARMA, INC.

                           PART II - OTHER INFORMATION

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

None

Item 5.  Other Information
-------

The Company has amended its security trading policy to allow outside directors,
officers and other employees to implement stock trading plans under Rule 10b5-1
of the Securities Exchange Act of 1934. Rule 10b5-1 allows people who adopt
plans to purchase or sell a company's securities at a time when they are unaware
of material, nonpublic information about the company to purchase or sell those
securities according to that plan even if they subsequently come into possession
of "inside" information. The Company anticipates that some of its outside
directors or associates will implement trading plans, which comply with MGI's
amended trading policy that allows implementation of 10b5-1 stock trading plans.

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is hereby filing cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in forward looking statements of the
Company made by, or on behalf of the Company. See Exhibit 99 to this report.

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

(a)      LISTING OF EXHIBITS:

          Exhibit Number                 Description
          --------------                 -----------

               99                   Cautionary Statements



(b)      REPORTS ON FORM 8-K


         There were no reports on Form 8-K filed during the three months ended
         September 30, 2001.

                                       18
<PAGE>

                                   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.


                                       MGI PHARMA, INC.


Date: November 12, 2001                By:   /s/ William C. Brown
                                          -------------------------------
                                          William C. Brown,
                                          Chief Financial Officer and Secretary

                                       19
<PAGE>

                                MGI PHARMA, INC.

                          Quarterly Report on Form 10-Q
                                     for the
                        Quarter Ended September 30, 2001

                                  EXHIBIT INDEX
                                  -------------

         Exhibit
          Number                              Description
          ------                              -----------

            99                           Cautionary Statements
[{"type": "10-Q", "sequence": "1", "filename": "d10q.txt", "description": "FORM 10-Q", "secsgml_size_bytes": 57714}]
{"company-data": {"conformed-name": "MGI PHARMA INC", "cik": "0000702131", "assigned-sic": "2834", "irs-number": "411364647", "state-of-incorporation": "MN", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-10736", "film-number": "1783699"}, "business-address": {"street1": "6300 WEST OLD SHAKOPEE RD", "street2": "SUITE 110", "city": "BLOOMINGTON", "state": "MN", "zip": "55438", "phone": "6129357335"}, "mail-address": {"street1": "OPUS CENTER", "street2": "9900 BREN ROAD EAST  SUITE 300E", "city": "MINNEAPOLIS", "state": "MN", "zip": "55343"}, "former-company": {"former-conformed-name": "MOLECULAR GENETICS INC", "date-changed": "19900812"}}
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 SECURITIESEXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

                                       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: 0-10736
                        -------

                                MGI PHARMA, INC.
                                ----------------
             (Exact name of registrant as specified in its charter)

            Minnesota                             41-1364647
---------------------------------        -------------------------------
  (State or other jurisdiction                 (I.R.S. employer
of incorporation or organization)            identification number)

  5775 West Old Shakopee Road
           Suite 100
  Bloomington, Minnesota 55437                  (952) 346-4700
---------------------------------        -------------------------------
(Address of principal executive          (Registrant's telephone number,
offices and zip code)                         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
    -----             -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

  Common Stock, $.01 par value                  24,056,389 shares
--------------------------------       ----------------------------------
          (Class)                      (Outstanding at November 12, 2001)
MGI PHARMA, INC.

                                 FORM 10-Q INDEX

                                                                         Page
                                                                        Number
                                                                        ------
PART I.  FINANCIAL INFORMATION

     Item 1. Financial Statements (Unaudited)

                 Balance Sheets - December 31, 2000
                 and September 30, 2001                                    3

                 Statements of Operations - Three Months and
                 Nine Months Ended September 30, 2000 and 2001             5

                 Statements of Cash Flows - Nine Months
                 Ended September 30, 2000 and 2001                         6

                 Notes to Financial Statements                             7

     Item 2. Management's Discussion and Analysis of
                 Financial Condition and Results of Operations            13

     Item 3. Quantitative and Qualitative Disclosure About
                 Market Risk                                              17

PART II. OTHER INFORMATION

     Item 4. Submission of Matters to a Vote of Security                  18
                 Holders

     Item 5. Other Information                                            18

     Item 6. Exhibits and Reports on Form 8-K                             18

SIGNATURES                                                                19

                                       2
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
----------------------------

                                MGI PHARMA, INC.

                                 BALANCE SHEETS

                                   (unaudited)

                                       December 31,     September 30,
                                            2000            2001
                                       -------------    -------------
ASSETS
------

Current assets:
  Cash and cash equivalents            $  11,031,714    $  19,290,075
  Cash - restricted                             --          6,000,000
  Short-term investments                  18,867,073       16,237,445
  Receivables, less allowances of
    $158,579 and $180,840                  2,806,462        3,131,788
  Inventories                              1,476,275        1,599,854
  Prepaid expenses                         5,826,260        1,095,663
                                       -------------    -------------

     Total current assets                 40,007,784       47,354,825

Equipment and furniture, at cost
  less accumulated depreciation of
  $1,192,171 and $1,223,333                1,510,859        3,282,387

Long-term investments                      3,800,000        6,800,000

Intangible assets, at cost
  less accumulated amortization of
  $98,498 and $984,982                     6,993,372        6,106,888

Other assets                                 431,555          463,741
                                       -------------    -------------

Total assets                           $  52,743,570    $  64,007,841
                                       =============    =============

(Continued)

                                       3
BALANCE SHEETS
(Unaudited)
Page 2

                                       December 31,     September 30,
                                            2000            2001
                                       -------------    -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
  Accounts payable                     $   1,426,828    $   2,076,894
  Accrued expenses                        11,785,849       12,136,613
  Deferred revenue                           731,883          794,383
  Other current liabilities                   21,411          140,484
                                       -------------    -------------

     Total current liabilities            13,965,971       15,148,374
                                       -------------    -------------

Noncurrent liabilities:
  Long-term deposit payable                1,550,000        3,200,000
  Deferred revenue                         9,981,982       10,026,819
  Other noncurrent liabilities             1,200,000           40,006
                                       -------------    -------------

     Total noncurrent liabilities         12,731,982       13,266,825
                                       -------------    -------------

     Total liabilities                    26,697,953       28,415,199
                                       -------------    -------------

Stockholders' equity:
  Preferred stock, 10,000,000
    authorized and unissued shares              --               --
  Common stock, $.01 par value,
    30,000,000 authorized shares,
    16,509,008 and 21,001,266
    issued shares                            165,090          210,013
  Additional paid-in capital             114,431,198      148,509,825
  Accumulated deficit                    (88,550,671)    (113,127,196)
                                       -------------    -------------

     Total stockholders' equity           26,045,617       35,592,642
                                       -------------    -------------

Total liabilities and
  stockholders' equity                 $  52,743,570    $  64,007,841
                                       =============    =============

----------
See accompanying notes to financial statements.

                                       4
MGI PHARMA, INC.

                            STATEMENTS OF OPERATIONS

                                  (Unaudited)
Three Months Ended             Nine Months Ended
                                                 September 30,                   September 30,
                                          ----------------------------    ----------------------------
                                              2000           2001            2000             2001
                                          ------------    ------------    ------------    ------------
Revenues:
  Sales                                   $  4,859,684    $  5,992,329    $ 15,560,061    $ 23,137,823
  Promotion                                    250,000            --           769,874            --
  Licensing                                  1,219,175         957,060       2,477,044       2,399,631
                                          ------------    ------------    ------------    ------------
                                             6,328,859       6,949,389      18,806,979      25,537,454
                                          ------------    ------------    ------------    ------------

Costs and Expenses:
  Cost of sales                                331,684         757,392       1,028,897       2,578,228
  Selling, general and administrative        4,466,957       6,551,976      12,627,259      20,327,597
  Research and development                   8,575,167       5,807,071      12,604,732      27,550,578
  Amortization                                    --           295,495            --           886,484
                                          ------------    ------------    ------------    ------------
                                            13,373,808      13,411,934      26,260,888      51,342,887
                                          ------------    ------------    ------------    ------------

Loss from operations                        (7,044,949)     (6,462,545)     (7,453,909)    (25,805,433)

Interest income                                686,703         415,102       1,599,229       1,228,908
                                          ------------    ------------    ------------    ------------

Loss before taxes and cumulative effect
   of change in accounting principle        (6,358,246)     (6,047,443)     (5,854,680)    (24,576,525)

Provision for income taxes                      51,537            --           148,000            --
                                          ------------    ------------    ------------    ------------

Loss before cumulative effect
   of change in accounting principle        (6,409,783)     (6,047,443)     (6,002,680)    (24,576,525)

Cumulative effect of change
   in accounting principle                        --              --        (9,402,643)           --
                                          ------------    ------------    ------------    ------------

Net loss                                  $ (6,409,783)   $ (6,047,443)   $(15,405,323)   $(24,576,525)
                                          ============    ============    ============    ============

Net loss per common share:

Basic:
Loss before effect of accounting change   $      (0.39)   $      (0.29)   $      (0.38)   $      (1.30)
Cumulative effect of accounting change            0.00            0.00           (0.59)           0.00
                                          ------------    ------------    ------------    ------------
Net loss                                  $      (0.39)   $      (0.29)   $      (0.97)   $      (1.30)
                                          ============    ============    ============    ============

Assuming dilution:
Loss before effect of accounting change   $      (0.39)   $      (0.29)   $      (0.38)   $      (1.30)
Cumulative effect of accounting change            0.00            0.00           (0.59)           0.00
                                          ------------    ------------    ------------    ------------
Net loss                                  $      (0.39)   $      (0.29)   $      (0.97)   $      (1.30)
                                          ============    ============    ============    ============

Weighted average number of
   common shares outstanding:
           Basic                            16,452,089      20,986,992      15,829,416      18,852,053

           Assuming dilution                16,452,089      20,986,992      15,829,416      18,852,053
----------
See accompanying notes to financial statements.

                                       5
MGI PHARMA, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)
Nine Months Ended September 30,
                                                       -------------------------------
                                                            2000            2001
                                                       --------------  ---------------
OPERATING ACTIVITIES:
Net loss                                                $(15,405,323)   $(24,576,525)
Adjustments for non-cash items:
  Cumulative effect of change in accounting principle      9,402,643            --
  Stock issuance for palonosetron license                       --         2,999,992
  Depreciation and asset amortization                        226,418       1,389,739
  Benefit plan contribution                                  126,729         237,436
  Deferred rent                                                 --            40,006
  Other                                                       10,000         108,147
Change in operating assets and liabilities:
  Receivables                                             (1,247,776)       (325,326)
  Inventories                                               (261,717)       (123,579)
  Prepaid expenses                                          (116,619)      5,247,201
  Accounts payable and accrued expenses                    2,571,755       3,645,844
  Deferred revenue                                           999,193         107,337
  Other current liabilities                                  128,304         119,073
                                                        ------------    ------------

Net cash used in operating activities                     (3,566,393)    (11,130,655)
                                                        ------------    ------------

INVESTING ACTIVITIES:
  Purchase of investments                                (38,049,285)    (25,474,914)
  Maturity of investments                                 26,459,725      25,104,542
  Acquisition of Hexalen(R)Capsules                             --        (3,600,000)
  Purchase of equipment and furniture                       (485,543)     (2,319,230)
  Other                                                      (71,487)        (32,186)
                                                        ------------    ------------

Net cash used in investing activities                    (12,146,590)     (6,321,788)
                                                        ------------    ------------

FINANCING ACTIVITIES:
  Net proceeds from stock issuance                        16,448,138      29,168,655
  Restricted cash                                               --        (6,000,000)
  Receipt of deposit payable                               1,000,000       1,650,000
  Issuance of shares under stock
    plans                                                  3,972,219         892,149
                                                        ------------    ------------

Net cash provided by financing activities                 21,420,357      25,710,804
                                                        ------------    ------------

Increase in cash and cash equivalents                      5,707,374       8,258,361

Cash and cash equivalents at
  beginning of period                                      8,249,248      11,031,714
                                                        ------------    ------------

Cash and cash equivalents at
  end of period                                         $ 13,956,622    $ 19,290,075
                                                        ============    ============

Supplemental disclosure of cash information:
  Cash paid for income taxes                            $    150,000    $      1,500
----------
See accompanying notes to financial statements.

                                       6
MGI PHARMA, INC.

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

(1)      Basis of Presentation

MGI PHARMA, INC. (MGI or the Company) is an oncology-focused pharmaceutical
company that acquires, develops and commercializes proprietary products that
address unmet needs of cancer patients. The Company focuses its sales efforts
solely within the United States and creates alliances with other pharmaceutical
or biotechnology companies for the commercialization of its products in other
countries.

The Company promotes products directly to physicians in the United States using
its own specialty sales force. These products include Company owned Salagen(R)
Tablets (pilocarpine hydrochloride), Hexalen(R) Capsules (altretamine), and
Didronel(R) I.V. Infusion (etidronate disodium). The Company also sells
Mylocel(TM) Tablets (hydroxyurea) under an exclusive marketing and distribution
agreement with Barr Laboratories. Salagen Tablets are approved in the United
States for two indications: symptoms of dry mouth associated with radiation
treatment in head and neck cancer patients and the symptoms of dry mouth
associated with Sjogren's syndrome, an autoimmune disease that damages the
salivary glands. Sales of Salagen Tablets in the United States accounted for 88
percent of product sales in the first nine months of 2001. Hexalen Capsules,
which the Company began selling since acquiring the product from MedImmune, Inc.
in November 2000, is an orally administered chemotherapeutic agent approved in
the United States for treatment of refractory ovarian cancer patients. Didronel
I.V. Infusion is approved for the treatment of hypercalcemia (elevated blood
calcium) in late-stage cancer patients. Mylocel Tablets are approved for the
treatment of melanoma, resistant chronic myelocytic leukemia, and recurrent,
metastatic, or inoperable carcinoma of the ovary. Outside the United States, MGI
commercializes its products through various alliances and recognizes licensing
revenues. MGI has licensing agreements with several international pharmaceutical
companies to develop and commercialize Salagen Tablets in Europe, Canada and
Japan. Exclusive rights in Japan to irofulven and the other acylfulvene analogs
were granted to Dainippon under a development and commercialization agreement in
1995. MGI relies on third parties to manufacture its commercialized and
development stage products.

The Company's current product development efforts include preclinical studies
and clinical trials for irofulven, the lead product candidate in MGI's novel
family of proprietary cancer therapy compounds called the acylfulvenes. In April
2001, MGI obtained the exclusive U.S. and Canadian license and distribution
rights to palonosetron, a cancer supportive care product candidate in Phase 3
development for the prevention of chemotherapy-induced nausea and vomiting. MGI
is also developing MG98 and other inhibitors of DNA methyltransferase for North
American markets. DNA methyltransferase is an enzyme that has been associated
with uncontrolled tumor growth. In addition, we provide ongoing clinical support
of Salagen Tablets.

The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information. Accordingly, they do not include all of the
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal, recurring adjustments) considered necessary for fair presentation
have been included. Interim results may not be indicative of annual results.
Certain prior year amounts have been reclassified to conform with the current
year presentation. For further information, refer to the financial statements
and footnotes included in the Company's report on Form 10-K for the year ended
December 31, 2000.

                                       7
(2)      Income (Loss) Per Common Share

Income (loss) per share for the three month and nine month periods ended
September 30, 2000 and 2001 are based on weighted average shares outstanding as
summarized in the following table:

Three months ended September 30                  2000         2001
                                              ----------   ----------

Weighted-average shares - basic               16,452,089   20,986,992
Effect of dilutive stock options                    --           --
                                              ----------   ----------
Weighted-average shares - assuming dilution   16,452,089   20,986,992
                                              ==========   ==========

Nine months ended September 30                   2000         2001
                                              ----------   ----------

Weighted-average shares - basic               15,829,416   18,852,053
Effect of dilutive stock options                    --           --
                                              ----------   ----------
Weighted-average shares - assuming dilution   15,829,416   18,852,053
                                              ==========   ==========

For loss periods, basic and diluted share amounts are identical, as the effect
of potentially dilutive common stock is antidilutive.

(3)      Short-Term Investments

Because the Company has the intent and ability to hold its investments to
maturity, they are considered held-to-maturity investments. As such, they are
stated at amortized cost, which approximates estimated fair value.
Held-to-maturity investments at December 31, 2000 and September 30, 2001 are
summarized in the following table:

                                          2000                 2001
                                      -----------          -----------
Commercial paper                      $13,333,117          $16,237,445
Certificates of deposit                 5,533,956                 --
                                      -----------          -----------
                                      $18,867,073          $16,237,445
                                      ===========          ===========

                                       8
(4)      Inventories

Inventories at December 31, 2000 and September 30, 2001 are summarized as
follows:

                                                      2000            2001
                                                   ----------      ----------
Raw materials and supplies                         $  339,039      $  348,623
Work in process                                       699,598         612,809
Finished products                                     437,638         638,422
                                                   ----------      ----------
                                                   $1,476,275      $1,599,854
                                                   ==========      ==========

Inventories are stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis.

(5)      Prepaid Expenses

Prepaid expenses at December 31, 2000 and September 30, 2001 are summarized in
the following table:

                                                      2000            2001
                                                   ----------      ----------
Palonosetron letter of intent deposit              $5,000,000      $     --
Financing transaction costs                              --           516,604
Other prepaid expenses                                826,260         579,059
                                                   ----------      ----------
                                                   $5,826,260      $1,095,663
                                                   ==========      ==========

(6)      Accrued Expenses

Accrued expenses at December 31, 2000 and September 30, 2001 are summarized in
the following table:

                                                     2000            2001
                                                  -----------     -----------
Product development commitments                   $ 3,500,784     $ 4,971,689
Hexalen Capsules business purchase obligation       4,800,000       2,400,000
Bonuses                                               889,499       1,290,513
Lease accrual                                            --           755,923
Product return accrual                                600,768         745,205
Other accrued expenses                              1,994,798       1,973,283
                                                  -----------     -----------
                                                  $11,785,849     $12,136,613
                                                  ===========     ===========

(7)      Promotion Revenue

In September 2000, MGI concluded its promotion agreement with Connetics
Corporation for the promotion of Ridaura(R) (auranofin). Under the terms of the
agreement, MGI recognized $250,000 per quarter through September 30, 2000 for
making a minimum number of sales calls related to this rheumatology product.

                                       9
(8)      Stock Incentive Plans

Under stock incentive plans, designated persons (including officers, directors,
employees and consultants) are granted rights to acquire Company common stock.
These rights include stock options and other equity rights.

At September 30, 2001, 3,709,964 shares of common stock remain reserved for
issuance, of which
267,169 remain available for grant. Options to purchase 3,442,795 shares of
common stock were outstanding, of which 1,281,533 were exercisable. Options
outstanding had a weighted average exercise price of $12.42 per share.

(9)      Stockholders' Equity

Changes in selected stockholders' equity accounts for the nine months ended
September 30, 2001 were as follows:

                                         Common Stock              Additional
                                -----------------------------       paid-in
                                  Shares          Par value         capital
                                ------------     ------------     ------------
Balance at December 31, 2000      16,509,008     $    165,090     $114,431,198
Issuance of shares                 4,000,000           40,000       29,128,655
License for technology               297,338            2,973        2,997,018
Exercise of stock options            134,062            1,341          662,444
Employee retirement savings
  plan contribution                   32,903              329          482,121
Employee stock purchase plan          21,483              215          228,150
Financing transaction costs             --               --            516,604
Other issuances                        6,472               65           63,635
                                ------------     ------------     ------------
Balance at September 30, 2001     21,001,266     $    210,013     $148,509,825
                                ============     ============     ============

In the second quarter of 2001, the Company completed a sale of 4,000,000 newly
issued shares of common stock to U.S. Bancorp Piper Jaffray Inc. which offered
the shares at the public offering price of $8 per share. The net proceeds to the
Company, after fees and expenses, were approximately $29.2 million.

The Company has one million shares remaining for sale on a shelf registration
statement with the Securities and Exchange Commission. Under a shelf
registration statement, the Company may sell securities from time to time in one
or more separate offerings in amounts, at prices and on terms to be determined
at the time of sale.

On February 28, 2001, the Company entered into a common stock underwriting
agreement with Ramius Securities, LLC (Ramius Securities) and a stand-by
purchase agreement with Ramius Capital Group, LLC (Ramius Capital). Under the
terms of the underwriting agreement, Ramius Securities is obligated to sell, on
a best-efforts basis and at the Company's election from time to time, the
Company's common stock over a two-year period in individual offerings of $2
million to $15 million. Under the terms of the stand-by purchase agreement, if
Ramius Securities fails to sell the requisite amount of shares during any given
selling period pursuant to the terms of the underwriting agreement, Ramius
Capital is obligated to

                                       10
purchase the remaining shares. In connection with these agreements, Ramius
Securities was granted a purchase option for 100,000 shares of the Company's
common stock for a two-year period at prices ranging from $16.95 to $24.72 per
share. The $516,604 aggregate fair value of the purchase option issued is
presented as prepaid financing costs at September 30, 2001. This fair value was
determined by use of a Black-Scholes model using the following assumptions:
expected dividend yield of 0%, risk-free interest rate of 4.8%, volatility of
80%, and expected warrant life of two years.

(10)     Leases

The Company leases office space under noncancellable lease agreements that
contain renewal options and require the Company to pay operating costs,
including property taxes, insurance and maintenance. In January 2001, the
Company executed a lease agreement for new office space, beginning in May 2001.
At September 30, 2001, the Company has an accrual of $756,000 for lease
obligations for the former office space in excess of estimated sublease rental
income. Future minimum lease payments under noncancellable leases, including
both the current and former office spaces, are as follows:

Remainder of 2001                            $  338,000
2002                                          1,571,000
2003                                          1,598,000
2004                                          1,618,000
2005                                          1,461,000
Thereafter                                    3,012,000
                                             ----------
                                             $9,598,000
                                             ==========

(11)      Licensing Arrangements

In January 2001, MGI entered into an agreement with Barr Laboratories, Inc. for
the exclusive marketing and distribution rights for Mylocel(TM) Tablets
(hydroxyurea) in the United States. Mylocel Tablets are approved for the
treatment of melanoma, resistant chronic myelocytic leukemia, and recurrent,
metastatic, or inoperable carcinoma of the ovary. MGI began marketing and
distributing Mylocel Tablets in March 2001. Under the terms of the agreement,
Barr Laboratories will receive royalty payments based upon product contribution
derived from MGI's sale of product. The agreement has an initial term of ten
years, with automatic annual renewals unless either party gives 90 days prior
notice. Early termination provisions exist for both MGI and Barr Laboratories.

In April 2001, MGI obtained the exclusive North American license and
distribution rights to palonosetron, from Helsinn Healthcare SA. Palonosetron is
a 5-HT3 antagonist with an extended half-life, in Phase 3 development for the
prevention of chemotherapy-induced nausea and vomiting. Under the terms of the
agreement, MGI made $11 million in upfront payments. These upfront fees were
funded using the $5 million deposit made upon the execution of the letter of
intent in October 2000, $3 million in cash paid in April 2001, and $3 million of
MGI's common shares delivered in April 2001. An additional $27 million in
milestone payments will become payable upon achievement of the underlying
development objectives, including marketing approval of palonosetron in the
United States. Under the terms of the agreement, MGI placed $6 million into an
escrow account to fund the next two milestone payments. Helsinn will continue to
fund and conduct all development of palonosetron.

                                       11
(12)     Research and Development Expense

Research and development expenses for the three month and nine month periods
ended September 30, 2000 and 2001 consist of the following:

Three months ended September 30            2000               2001
                                       -----------        -----------
License fees                           $ 5,700,000        $         0
Other research and development           2,875,167          5,807,071
                                       -----------        -----------
                                       $ 8,575,167        $ 5,807,071
                                       ===========        ===========

Nine months ended September 30             2000               2001
                                       -----------        -----------
License fees                           $ 5,925,000        $13,016,250
Other research and development           6,679,732         14,534,328
                                       -----------        -----------
                                       $12,604,732        $27,550,578
                                       ===========        ===========

(13)     New Accounting Pronouncement

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations," and
SFAS No. 142 "Goodwill and Other Intangible Assets," which change the accounting
for business combinations and goodwill. SFAS No. 141 requires that the purchase
method of accounting be used for business combinations initiated after June 30,
2001. Use of the pooling-of-interests method will be prohibited. SFAS No. 142
changes the accounting for goodwill from an amortization method to an
impairment-only approach. Amortization of goodwill, including goodwill recorded
in past business combinations, will therefore cease upon adoption of SFAS No.
142, which will be January 1, 2002 for the Company.

As of January 1, 2002, the date of adoption of SFAS No. 142, the Company expects
to have unamortized identifiable intangible assets in the amount of $5,811,394
which will be subject to the provisions of SFAS No. 142. The Company does not
expect any transitional impairment losses which would be required to be
recognized as a cumulative effect of a change in accounting principle. The
Company does not expect that SFAS No. 141 and SFAS No. 142 will have a material
effect on its financial statements because the identifiable intangible assets
will continue to be amortized.

(14)     Subsequent Event

On October 31, 2001, the Company completed a private placement of 3,025,000
newly issued shares of stock to accredited investors at $11 per share, with U.S.
Bancorp Piper Jaffray Inc. acting as the placement agent. The net proceeds to
the Company, after fees and expenses, were approximately $31 million.

                                       12
Item 2.
-------

Management's Discussion and Analysis of Financial Condition and Results of
Operations

This form 10-Q contains forward-looking statements within the meaning of federal
securities laws that may include statements regarding intent, belief or current
expectations of the Company and its management. These forward-looking statements
are not guarantees of future performance and involve a number of risks and
uncertainties that may cause the Company's actual results to differ materially
from the results discussed in these statements. For more information, see
Exhibit 99 to this Form 10-Q.

Overview

We are an oncology-focused pharmaceutical company that acquires, develops and
commercializes proprietary products that address unmet needs of cancer patients.
We focus our sales efforts solely within the United States and create alliances
with other pharmaceutical or biotechnology companies for the commercialization
of our products in other countries.

We promote products directly to physicians in the United States using our own
specialty sales force. These products include our Salagen(R) Tablets
(pilocarpine hydrochloride), Hexalen(R) Capsules (altretamine), and Didronel(R)
I.V. Infusion (etidronate disodium). We also sell Mylocel(TM) Tablets
(hydroxyurea) under an exclusive marketing and distribution agreement with Barr
Laboratories. Salagen Tablets are approved in the United States for two
indications: symptoms of dry mouth associated with radiation treatment in head
and neck cancer patients and the symptoms of dry mouth associated with Sjogren's
syndrome, an autoimmune disease that damages the salivary glands. Sales of
Salagen Tablets in the United States accounted for 88 percent of our product
sales in the first nine months of 2001. Hexalen Capsules, which we are selling
since acquiring the product from MedImmune, Inc. in November 2000, are an orally
administered chemotherapeutic agent approved in the United States for the
treatment of refractory ovarian cancer patients. Didronel I.V. Infusion is
approved for the treatment of hypercalcemia (elevated blood calcium) in
late-stage cancer patients. Mylocel Tablets are approved for the treatment of
melanoma, resistant chronic myelocytic leukemia, and recurrent, metastatic, or
inoperable carcinoma of the ovary. Outside the United States, we commercialize
our products through various alliances from which we recognize licensing
revenues. We have licensing agreements with several international pharmaceutical
companies to develop and commercialize Salagen Tablets in Europe, Canada and
Japan. Exclusive rights in Japan to irofulven and other acylfulvenes were
granted to Dainippon Pharmaceutical Co., Ltd., under a development and
commercialization agreement in 1995. We rely on third parties to manufacture our
commercialized and development stage products.

Our current product development efforts include preclinical studies and clinical
trials for irofulven, the lead product candidate in our novel family of
proprietary cancer therapy compounds called the acylfulvenes. In April 2001, we
obtained the exclusive U.S and Canadian license and distribution rights to
palonosetron, a cancer supportive care product candidate in Phase 3 development
for the prevention of chemotherapy-induced nausea and vomiting. Our expenses
related to palonosetron are almost exclusively due to license fees. We are also
developing MG98 and other inhibitors of DNA methyltransferase for the North
American markets. DNA methyltransferase is an enzyme that has been associated
with uncontrolled tumor growth. In addition, we provide ongoing clinical support
of Salagen Tablets.

                                       13
Results of Operations

Revenues

Sales: Total sales revenue increased 23 percent from $4,859,684 in the third
quarter of 2000 to $5,992,329 in the third quarter of 2001, and increased 49
percent from $15,560,061 in the first nine months of 2000 to $23,137,823 in the
first nine months of 2001. The increases in sales revenue reflect increased
revenue for Salagen Tablets, resulting from an increase in demand and increased
stocking of inventory by wholesalers and retail pharmacies, and revenue for
Hexalen(R) Capsules and Mylocel Tablets. We purchased Hexalen Capsules from
MedImmune Inc. in November 2000, with sales commencing in December 2000, and
active field promotion commencing in March 2001. We began selling and promoting
Mylocel Tablets in March 2001 under an exclusive marketing and distribution
agreement with Barr Laboratories.

Sales of Salagen Tablets in the United States provided 87 percent of our product
sales in the third quarter of 2001, and provided 88 percent of our product sales
in the first nine months of 2001. As is common in the pharmaceutical industry,
our domestic sales are made to pharmaceutical wholesalers for further
distribution through pharmacies to the ultimate consumers of our products. Sales
of Salagen Tablets in the third quarter of 2001 approximated underlying demand
as measured by wholesaler shipments to pharmacies. We expect total product sales
in 2001 to grow approximately 30 percent compared to 2000.

Promotion: We have not recognized any promotion revenue in the third quarter of
2001 or in the first nine months of 2001, after recognizing $250,000 in the
third quarter of 2000 and $769,874 in the first nine months of 2000. In 2000, we
promoted Ridaura under a promotion agreement with Connetics Corporation. Under
this agreement, we recognized $250,000 in promotion revenue per quarter, based
on achieving certain sales call activity. We concluded our agreement for the
promotion of this rheumatology market product in the third quarter of 2000.

Licensing: Licensing revenue decreased 21 percent from $1,219,175 in the third
quarter of 2000 to $957,060 in the third quarter of 2001, and decreased three
percent from $2,477,044 in the first nine months of 2000 to $2,399,631 in the
first nine months of 2001. Prior year results have been restated to reflect the
adoption of Staff Accounting Bulletin No. 101 as of January 1, 2000. Both the
quarterly and the first nine month changes reflect decreased revenue related to
our license to Kissei Pharmaceuticals for the development of Salagen tablets in
Japan. We received an $830,000 performance milestone from Kissei in the third
quarter of 2000, which resulted in recognition of approximately $229,000 in that
quarter using the contingency-adjusted performance method that we adopted under
the provisions of SAB 101. The remainder of the milestone payment will be
amortized to licensing revenue over the estimated life of the licensing
relationship. This decrease in 2001 licensing revenue was partially reduced by
an increase in royalties from our license relationship with Novartis Ophthalmics
AG for the development and commercialization of Salagen Tablets in Europe.

Future licensing revenues will fluctuate from quarter to quarter depending on
the level of recurring royalty generating activities and the initiation of
additional licensing arrangements. We expect licensing revenue for 2001 to be
approximately $3 million.

Costs and Expenses

Cost of sales: Cost of sales as a percent of sales was seven percent for the
first nine months of 2000, and 11 percent for the first nine months of 2001. The
increase results from a change in our product mix, including the addition of
Hexalen Capsules and Mylocel Tablets to our oncology product portfolio. We

                                       14
believe that cost of sales as a percent of product sales for our marketed
products for 2001 will range from 10 to 15 percent, as a result of changes in
our product mix and increasing production costs.

Selling, general and administrative: Selling, general and administrative
expenses increased 47 percent from $4,466,957 in the third quarter of 2000 to
$6,551,976 in the third quarter of 2001, and increased 61 percent from
$12,627,259 in the first nine months of 2000 to $20,327,597 in the first nine
months of 2001. The increases resulted from increased costs related to our
expanded business objectives, such as costs associated with the expansion of our
U.S. based sales force by approximately two-thirds during the first half of
2000, costs related to the marketing launches and continued promotion of Hexalen
Capsules and Mylocel Tablets, and increased facility costs in conjunction with
our move to a new office location in June 2001. We expect selling, general and
administrative expenses for 2001 to be approximately $26 million.

Research and development: Research and development expense decreased 32 percent
from $8,575,167 in the third quarter of 2000 to $5,807,071 in the third quarter
of 2001, but increased 119 percent from $12,604,732 in the first nine months of
2000 to $27,550,578 in the first nine months of 2001. Both the quarterly and
nine month changes include non-recurring license payments: $5.7 million in the
third quarter of 2000 related to our license agreement with MethylGene Inc., and
$13 million in the second quarter of 2001 related to our license agreement for
palonosetron. Exclusive of non-recurring licensing payments, research and
development expense increased 102 percent from $2,875,167 in the third quarter
of 2000 to $5,807,071 in the third quarter of 2001, and increased 118 percent
from $6,679,732 in the first nine months of 2000 to $14,534,328 in the first
nine months of 2001.

The increases reflect the expanding development of irofulven, the lead drug
candidate in our novel family of proprietary compounds called acylfulvenes, and
expenses related to the development of MG98 and other inhibitors of DNA
methyltransferase. Enrollment in a Phase 1 and three Phase 2 clinical trials of
irofulven, sponsored by us, began in 1998 and increased throughout 1999 and
2000. An additional Phase 1 trial and two additional Phase 2 trials of irofulven
were initiated in 2000. A pivotal Phase 3 trial, four additional Phase 2 trials,
and two additional Phase 1 trials were initiated in the first nine months of
2001. These trials are designed to evaluate the efficacy and safety of irofulven
for the treatment of patients with pancreatic, ovarian, prostate, sarcoma,
glioma or liver cancer who are generally refractory to current therapies. We
expect research and development expenses to be approximately $35 million for
2001.

Tax expense: Our provisions for income taxes for the third quarter and first
nine months of 2000 reflect a 10 percent foreign tax rate on Dainippon licensing
payments and a two percent tax rate for alternative minimum tax. There are no
provisions for the 2001 periods, given that we expect to incur a net loss for
2001 and we did not receive any payments subject to foreign tax. We continue to
maintain a valuation allowance against our deferred tax asset since we had an
accumulated deficit of $113,127,196 at September 30, 2001, and our ability to
sustain profitable operations is likely dependent upon the successful launch of
our next significant oncology product.

Interest Income

Interest income decreased 40 percent from $686,703 in the third quarter of 2000
to $415,102 in the third quarter of 2001, and decreased 23 percent from
$1,599,229 in the first nine months of 2000 to $1,228,908 in the first nine
months of 2001. The decreases are a result of a decrease in the investment
yield, partially reduced by an increase in the average amount of funds available
for investment.

Net Loss

We had a net loss of $6,409,783 in the third quarter of 2000, compared to a net
loss of $6,047,443 in the third quarter of 2001. We had a net loss of
$15,405,323 for the first nine months of 2000, which included a non-cash charge
of $9,402,643 related to the adoption of SAB 101, compared to a net loss of
$24,576,525

                                       15
for the first nine months of 2001. The decreased net loss from the third quarter
of 2000 to the third quarter of 2001 is a result of a 10 percent increase in
revenues from 2000 to 2001, and essentially no change in costs and expenses from
2000 to 2001. Costs and expenses in the third quarter of 2000 include $5.7 in
nonrecurring licensing fees. The increased net loss from the first nine months
of 2000 to the first nine months of 2001, before the cumulative effect of SAB
101, is a result of a 96 percent increase in costs and expenses from 2000 to
2001, and a 36 percent increase in revenues from 2000 to 2001. Costs and
expenses in the nine month periods include $5.9 million in nonrecurring
licensing fees for 2000 and $13 million in nonrecurring licensing fees for 2001.
During the next several years, we expect to direct our efforts toward activities
intended to grow long-term revenues, including expanded development of irofulven
and other product candidates. Increased spending on these initiatives, including
development of the licensed anti-cancer technology from MethylGene and the
license of palonosetron, will likely result in substantial net losses until
after the launch of our next significant oncology product. We expect our net
loss to be approximately $35 million for 2001.

Liquidity and Capital Resources

At September 30, 2001, we had cash and short-term investments of $41,527,520 and
working capital of $32,206,451 compared with $29,898,787 and $26,041,813,
respectively, at December 31, 2000. Our cash and short-term investments balance
at September 30, 2001 includes $6,000,000 in restricted cash for payments
related to the license of palonosetron. For the nine month period ended
September 30, 2001, we used $11,130,655 to fund our operating activities, paid
$3,600,000 related to the acquisition of Hexalen Capsules, and purchased
$2,319,230 in furniture and equipment. We received $29,168,655 in cash as net
proceeds from the sale of stock, $1,650,000 in cash as a deposit from one of our
international partners, and $892,149 in cash from issuance of shares under stock
award plans.

Significant cash payments for the remainder of 2001 will be required to fund
operating activities, pay $2,000,000 related to the license of palonosetron, and
pay $1,200,000 related to the purchase of Hexalen Capsules. Substantial amounts
of capital are required for pharmaceutical development and commercialization
efforts. For continued development and commercialization of our product
candidates and marketed products, and the acquisition and development of
additional product candidates, we plan to utilize cash provided from product
sales, collaborative arrangements and existing liquid assets. We will also seek
other sources of funding, including additional equity or debt issuances.

We have one million common shares remaining for sale on a shelf registration
statement that was filed with the Securities and Exchange Commission. Under a
shelf registration, we may sell securities from time to time in one or more
separate offerings in amounts, at prices and on terms to be determined at the
time of sale. On February 28, 2001, we entered into a financing facility with
Ramius Securities, LLC and Ramius Capital Group, LLC. Under this facility, at
our election from time to time, Ramius Securities is obligated to place, on a
best efforts basis, our common stock over a two-year period in individual
offerings of $2 million to $15 million, subject to limitations such as a
limitation based on the daily trading volumes of our stock. If Ramius Securities
fails to sell the requisite amount of shares during any given selling period,
Ramius Capital is obligated to purchase the remaining shares. As part of
implementing this facility, Ramius Securities was granted a purchase option for
100,000 shares of our common stock for a two-year period at prices ranging from
$16.95 to $24.72 per share.

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations," and
SFAS No. 142 "Goodwill and Other Intangible Assets," which change the accounting
for business combinations and goodwill. SFAS No. 141 requires that the purchase
method of accounting be used for business combinations initiated after June 30,
2001. Use of the pooling-of-interests method will be prohibited. SFAS No. 142
changes the accounting for goodwill from an amortization method to an
impairment-only approach. Amortization of

                                       16
goodwill, including goodwill recorded in past business combinations, will
therefore cease upon adoption of SFAS No. 142, which will be January 1, 2002 for
the Company.

As of January 1, 2002, the date of adoption of SFAS No. 142, the Company expects
to have unamortized identifiable intangible assets in the amount of $5,811,394
which will be subject to the provisions of SFAS No. 142. The Company does not
expect any transitional impairment losses which would be required to be
recognized as a cumulative effect of a change in accounting principle. The
Company does not expect that SFAS No. 141 and SFAS No. 142 will have a material
effect on its financial statements because the identifiable intangible assets
will continue to be amortized.

Cautionary Statements

This Form 10-Q contains forward-looking statements within the meaning of federal
securities laws that may include statements regarding intent, belief or current
expectations of the Company and its management. These forward-looking statements
are not guarantees of future performance and involve a number of risks and
uncertainties that may cause the Company's actual results to differ materially
from the results discussed in these statements. Factors that might affect our
results include, but are not limited to the ability of irofulven, or our other
product candidates, to be proven safe and effective in humans and to ultimately
compete successfully with other therapies, continued sales of Salagen(R)
Tablets, development or acquisition of additional products, reliance on contract
manufacturing, changes in strategic alliances, continued access to capital, and
other risks and uncertainties detailed from time to time in the Company's
filings with the Securities and Exchange Commission, including Exhibit 99 to
this Form 10-Q. We do not intend to update any of the forward-looking statements
after the date of this Form 10-Q to conform them to actual results.

Item 3.
-------

Quantitative and Qualitative Disclosures About Market Risk

Our operations are not subject to material risks of material foreign currency
fluctuations, nor do we use derivative financial instruments in our investment
practices. We place our short-term investments in instruments that meet high
credit quality standards, as specified in our investment policy guidelines. We
do not expect material losses with respect to our investment portfolio or
exposure to market risks associated with interest rates.

                                       17
MGI PHARMA, INC.

                           PART II - OTHER INFORMATION

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

None

Item 5.  Other Information
-------

The Company has amended its security trading policy to allow outside directors,
officers and other employees to implement stock trading plans under Rule 10b5-1
of the Securities Exchange Act of 1934. Rule 10b5-1 allows people who adopt
plans to purchase or sell a company's securities at a time when they are unaware
of material, nonpublic information about the company to purchase or sell those
securities according to that plan even if they subsequently come into possession
of "inside" information. The Company anticipates that some of its outside
directors or associates will implement trading plans, which comply with MGI's
amended trading policy that allows implementation of 10b5-1 stock trading plans.

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is hereby filing cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in forward looking statements of the
Company made by, or on behalf of the Company. See Exhibit 99 to this report.

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

(a)      LISTING OF EXHIBITS:

          Exhibit Number                 Description
          --------------                 -----------

               99                   Cautionary Statements

(b)      REPORTS ON FORM 8-K

         There were no reports on Form 8-K filed during the three months ended
         September 30, 2001.

                                       18
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.

                                       MGI PHARMA, INC.

Date: November 12, 2001                By:   /s/ William C. Brown
                                          -------------------------------
                                          William C. Brown,
                                          Chief Financial Officer and Secretary

                                       19
MGI PHARMA, INC.

                          Quarterly Report on Form 10-Q
                                     for the
                        Quarter Ended September 30, 2001

                                  EXHIBIT INDEX
                                  -------------

         Exhibit
          Number                              Description
          ------                              -----------

            99                           Cautionary Statements