CTI BioPharma Annual Report 2017

FY2017 Annual Report · CTI BioPharma

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Targeted Therapies for Blood-Related Cancers

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2 0 1 7 A N N U A L R E P O R T

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CTI BioPharma is a biopharmaceutical company

headquartered in Seattle, Washington. We are publicly

traded on NASDAQ under the symbol “CTIC”.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2017

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: 001-12465

CTI BIOPHARMA CORP.

(Exact name of registrant as specified in its charter)

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

Washington

91-1533912

3101 Western Avenue, Suite 800
Seattle, WA

(Address of principal executive offices)

98121

(Zip Code)

Registrant’s telephone number, including area code: (206) 282-7100
Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common Stock, no par value

Name of each exchange on which registered

The NASDAQ Stock Market LLC

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

Preferred Stock Purchase Rights

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and

will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company.

See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with

any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes

As of June 30, 2017, the aggregate market value of the registrant’s common equity held by non-affiliates was $88,062,209. Shares of common stock
held by each executive officer and director and by each person known to the registrant who beneficially owns more than 5% of the outstanding shares of the
registrant’s common stock have been excluded in that such persons may under certain circumstances be deemed to be affiliates. This determination of executive
officer or affiliate status is not necessarily a conclusive determination for other purposes. The registrant has no non-voting common stock outstanding.

The number of outstanding shares of the registrant’s common stock as of February 28, 2018 was 57,982,860.

Portions of the registrant’s definitive proxy statement relating to its 2018 annual meeting of shareholders, or the 2018 Proxy Statement, are
incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2018 Proxy Statement will be filed with the U.S. Securities
and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

DOCUMENTS INCORPORATED BY REFERENCE

CTI BIOPHARMA CORP.

TABLE OF CONTENTS

BUSINESS

RISK FACTORS

UNRESOLVED STAFF COMMENTS

PROPERTIES

LEGAL PROCEEDINGS

MINE SAFETY DISCLOSURES

PART I

PART II

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

SELECTED FINANCIAL DATA

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

ITEM 1.
ITEM 1A.

ITEM 1B.

ITEM 2.

ITEM 3.

ITEM 4.

ITEM 5.

ITEM 6.

ITEM 7.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8.

ITEM 9.

ITEM 9A.

ITEM 9B.

ITEM 10.

ITEM 11.

ITEM 12.

ITEM 13.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

CONTROLS AND PROCEDURES

OTHER INFORMATION

PART III

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

EXECUTIVE COMPENSATION

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED SHAREHOLDER MATTERS

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

FORM 10-K SUMMARY

PART IV

ITEM 15.
ITEM 16.
SIGNATURES

Page

102

103

104

105

114

Forward Looking Statements

This Annual Report on Form 10-K and the documents we incorporate by reference herein or therein may contain
“forward-looking statements” within the meaning of the United States, or the U.S., federal securities laws. All statements other
than statements of historical fact are forward-looking statements, including, without limitation:

•

any statements regarding future operations, plans, expectations, intentions, regulatory filings or approvals;

any statements regarding the performance, or likely performance, outcomes or economic benefit of any licensing
collaboration or other arrangement;

any projections of revenues, operating expenses or other financial terms, and any projections of cash resources,
including regarding our potential receipt of future milestone payments under any of our agreements with third parties
and expected sales of PIXUVRI;

any statements of the plans and objectives of management for future operations or programs;

any statements concerning proposed new products;

any statements regarding the safety and efficacy or future availability of any of our compounds;

any statements regarding our ability to interpret clinical trial data and results or expectations with respect to the
potential therapeutic utility of pacritinib and the prevalence of myelofibrosis in the U.S.;

any statements on plans regarding proposed or potential clinical trials or new drug filing strategies, timelines or
submissions, including expectations with respect to the timing and planned enrollment of PAC203, the timing of
PIX306 top-line results, and submission of responses to Day 120 list of questions;

any statements regarding the Company’s intent to continue efforts to commercialize PIXUVRI in Europe in partnership
with Servier and expand the market potential for PIXUVRI;

any statement regarding the Company’s intent to develop and commercialize pacritinib for adult patients with
myelofibrosis and potentially additional inactions.

any statements regarding the Company’s plans to continue advancing the development of its pipeline candidates
through strategic product collaborations or cooperative group and investigator-sponsored trials, as well as the
identification and acquisition of additional pipeline opportunities;

any significant disruptions in our information technology systems;

any statements regarding compliance with the listing standards of the NASDAQ Stock Market;

any statements regarding potential future partnerships, licensing arrangements, mergers, acquisitions or other
transactions;

any statements regarding future economic conditions or performance; and

any statements of assumption underlying any of the foregoing.

In some cases, forward-looking statements can be identified by terms such as “anticipates,” “believes,” “continue,”

“could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should” or “will” or the
negative thereof, variations thereof and similar expressions. Such statements are based on management’s current expectations
and are subject to risks and uncertainties, which may cause actual results to differ materially from those set forth in the
forward-looking statements. In particular, this Annual Report on Form 10-K addresses top-line results regarding data from
PERSIST-2, our Phase 3 trial of pacritinib for the treatment of patients with myelofibrosis whose platelet counts are less than or
equal to 100,000 per microliter. Meaningful interpretation of PERSIST-2 may not be possible because the pre-specified
minimum evaluable patient goal was not met. The statements are based on assumptions about many important factors and
information currently available to us to the extent we have thus far had an opportunity to fully and carefully evaluate such
information in light of all surrounding facts, circumstances, recommendations and analyses. There can be no assurance that
such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially
from those projected or assumed in the forward-looking statements. We urge you to carefully review the disclosures we make
concerning risks and other factors that may affect our business and operating results, including those made under Part I, Item 1,
“Business,” Part I, Item 1A, “Risk Factors,” Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” and elsewhere in this Annual Report on Form 10-K and any risk factors contained in subsequent
Quarterly Reports on Form 10-Q that we file with the U.S. Securities and Exchange Commission, or the SEC.

We do not intend to update any of the forward-looking statements after the date of this Annual Report on Form 10-K to
conform these statements to actual results or changes in our expectations. Readers are cautioned not to place undue reliance on
these forward-looking statements, which apply only as of the date of this Annual Report on Form 10-K.

In this Annual Report on Form 10-K, all references to “we,” “us,” “our,” the “Company” and “CTI” mean CTI

BioPharma Corp. and our subsidiaries, except where it is otherwise made clear.

Item 1. Business

Overview

PART I

We are a biopharmaceutical company focused on the acquisition, development and commercialization of novel targeted

therapies covering a spectrum of blood-related cancers that offer a unique benefit to patients and healthcare providers. Our
goal is to build a profitable company by generating income from products we develop and commercialize, either alone or with
partners. We are currently concentrating our efforts on treatments that target blood-related cancers where there is an unmet
medical need. In particular, we are primarily focused on evaluating pacritinib for the treatment of adult patients with
myelofibrosis and the further development of PIXUVRI worldwide, for which our partner, Les Laboratoires Servier and
Institut de Recherches Internationales Servier, or collectively Servier, has commercialization rights outside the United States,
or the U.S.

PIXUVRI

PIXUVRI is a novel aza-anthracenedione with unique structural and physiochemical properties. In May 2012, the
European Commission granted conditional marketing authorization in the European Union, or the E.U. for PIXUVRI as a
monotherapy for the treatment of adult patients with multiply relapsed or refractory aggressive B-cell non-Hodgkin
lymphoma, or NHL. PIXUVRI is the first approved treatment in the E.U. for patients with multiply relapsed or refractory
aggressive B-cell NHL who have failed two or three prior lines of therapy. As part of our conditional marketing authorization
in the E.U., we are required to conduct a post-authorization trial, which we refer to as PIX306, comparing PIXUVRI and
rituximab with gemcitabine and rituximab in the setting of aggressive B-cell NHL and follicular grade 3 lymphoma.
Enrollment for PIX306 was completed in August 2017 and topline results, which are event-driven, are expected by the end of
the first half of 2018. Although we do not have and are not currently pursuing regulatory approval of PIXUVRI in the U.S., we
may reevaluate a possible submission strategy in the U.S. based on the data generated from the PIX306 study. Pursuant to our
conditional marketing authorization in the E.U., and an extension granted in September 2016, we are required to submit the
requisite clinical study report for PIX306 by December 2018.

In April 2017, we entered into an Amended and Restated Exclusive License and Collaboration Agreement, or the
Restated Agreement, with Servier. Under the Restated Agreement, Servier will have rights to PIXUVRI in all markets except
in the U.S. where we will retain the commercialization rights. Previously, Servier had rights to commercialize the drug
globally except in Austria, Denmark, Finland, Germany, Israel, Norway, Sweden, Turkey, the United Kingdom, or the U.K.,
and the U.S. Servier paid us €12.0 million in May 2017 and purchased PIXUVRI drug product for an additional €0.9 million
in July 2017. In September 2017, we attained a regulatory milestone under the Restated Agreement and recognized a €1.0
million milestone revenue.We are eligible to receive up to €75.0 million in additional sales and regulatory milestone payments
as well as royalties on net product sales.

For additional information on our collaboration with Servier, please see the discussion in “License Agreements and

Additional Milestone Activities - Servier” below.

Pacritinib

Our lead development candidate, pacritinib, is an investigational oral kinase inhibitor with specificity for JAK2, FLT3,
IRAK1 and CSF1R. The JAK family of enzymes is a central component in signal transduction pathways, which are critical to
normal blood cell growth and development, as well as inflammatory cytokine expression and immune responses. Mutations in
these kinases have been shown to be directly related to the development of a variety of blood-related cancers, including
myeloproliferative neoplasms, leukemia and lymphoma. In addition to myelofibrosis, the kinase profile of pacritinib suggests
its potential therapeutic utility in conditions such as acute myeloid leukemia, or AML, myelodysplastic syndrome, or MDS,
chronic myelomonocytic leukemia, or CMML, and chronic lymphocytic leukemia, or CLL, due to its inhibition of c-fms,
IRAK1, JAK2 and FLT3. We believe pacritinib has the potential to be delivered as a single agent or in combination therapy
regimens.

Pacritinib was evaluated in two Phase 3 clinical trials, known as the PERSIST program, for patients with myelofibrosis,

with one trial in a broad set of patients without limitations on platelet counts, the PERSIST-1 trial, and the other in patients
with low platelet counts, the PERSIST-2 trial. In August 2014, pacritinib was granted Fast Track designation by the Food and
Drug Administration, or the FDA, for the treatment of intermediate and high risk myelofibrosis including, but not limited to,
patients with disease-related thrombocytopenia (low platelet counts); patients experiencing treatment-emergent

thrombocytopenia on other JAK2 inhibitor therapy; or patients who are intolerant of or whose symptoms are not well
controlled (sub-optimally managed) on other JAK2 therapy.

In May 2015, we announced the final results from PERSIST-1, our Phase 3 trial evaluating the efficacy and safety of

pacritinib compared to the Best Available Therapy, or BAT, excluding JAK2 inhibitors, which included a broad range of
currently utilized treatments, in 327 patients with myelofibrosis regardless of the patients' platelet counts. The study included
patients with severe or life-threatening thrombocytopenia. Patients were randomized to receive 400 mg pacritinib once daily or
BAT, excluding JAK2 inhibitors. The trial met its primary endpoint of spleen volume reduction, or SVR, (35 percent or greater
from baseline to Week 24 by magnetic resonance imaging, or MRI, or computerized tomography, or CT). The most common
treatment-emergent adverse events, or AEs, occurring in 20 percent or more of patients treated with pacritinib within 24
weeks, of any grade, were gastrointestinal (generally manageable diarrhea and nausea) and anemia.

In February 2015, we received a recommendation from the Independent Data Monitoring Committee, or IDMC, in

place at the time to terminate the PERSIST-1 trial and hold enrollment of new patients in the PERSIST-2 trial. The IDMC’s
recommendation was based on non-statistically significant safety concerns, including mortality, in patients on pacritinib,
particularly those who crossover after 24 weeks, which crossover potentially confounds evaluation of survival. The IDMC
agreed that the recommendation would be only preliminary until we were unblinded to and could review the primary and
secondary endpoint data as well as safety results from the PERSIST-1 trial. The IDMC recommendation was reviewed with
the PERSIST Steering Committee, comprised of external experts and the study’s principal investigators. who disagreed with
the IDMC’s recommendation and expressed the view that the studies should continue as planned. We also asked an
independent clinician and a statistician experienced in oversight of clinical trial safety to evaluate the safety profile of
pacritinib in the PERSIST-1 trial. Neither was told of the recommendation reached by either the IDMC or the Steering
Committee. Both experts agreed with the Steering Committee that the studies could continue. The firm that assembled the
IDMC hired a second external independent statistician to review the IDMC’s analyses and recommendation, who also
disagreed with the IDMC recommendation and concurred with the other independent experts that the studies need not be
terminated nor enrollment held. In June 2015, the IDMC made its recommendation final and we provided to the FDA the
information reviewed by the IDMC, the IDMC’s meeting minutes, and the written opinion of the Steering Committee co-
chairs, the independent experts, and the second independent statistician. In July 2015, we requested a meeting with the FDA to
confirm if we should continue the studies. The FDA assigned the request to a type C meeting. In its written response, the FDA
did not mandate any modifications to the studies or place pacritinib on clinical hold at that time, but indicated that it had not
yet reviewed the data and noted the difficulty in attempting to draw meaningful conclusions from non-significant results, and
that the crossover designs may confound the analysis of survival. We determined that no modifications to the ongoing trials
were required. Because we had concerns about the original IDMC’s impartiality, we decided to discharge it, and retained a
new IDMC through an independent firm specializing in IDMCs. The newly constituted IDMC met on several occasions and
its recommendation was to continue PERSIST-2 as planned.

In December 2015, we submitted the new drug application, or NDA, to the FDA for pacritinib with an indication

statement based on the PERSIST-1 trial data.

In February 2016, clinical studies under the investigational new drug, or IND, for pacritinib were placed on a full
clinical hold issued by the FDA. A full clinical hold is a suspension of the clinical work requested under the IND application.
Under the full clinical hold, all patients on pacritinib at the time were required to discontinue pacritinib immediately and no
patients could be enrolled or start pacritinib as initial or crossover treatment. In its written notification, the FDA stated that the
reasons for the full clinical hold were that it noted interim overall survival results from the PERSIST-2 Phase 3 trial showing a
detrimental effect on survival consistent with the results from PERSIST-1, as well as hemorrhagic/cardiac toxicities. The FDA
had earlier put a partial hold on pacritinib on February 4, 2016.

In February 2016, prior to the clinical hold, we completed patient enrollment in the PERSIST-2 Phase 3 clinical trial.

Under the full clinical hold, all patients participating in the PERSIST-2 clinical trial discontinued pacritinib treatment.

In August 2016, we announced the top-line results from PERSIST-2, our Phase 3 trial of pacritinib for the treatment of
patients with myelofibrosis whose platelet counts are less than or equal to 100,000 per microliter. Three hundred eleven (311)
patients were enrolled in the study, which formed the basis for the safety analysis. Two hundred twenty-one (221) patients had
a chance to reach Week 24 (the primary analysis time point) at the time the clinical hold was imposed and constituted the
intent-to-treat analysis population utilized for the evaluation of efficacy. Results demonstrated that the PERSIST-2 trial met
one of the co-primary endpoints showing a statistically significant response rate in SVR in patients with myelofibrosis treated
with pacritinib compared to BAT, including the approved JAK2 inhibitor ruxolitinib. The co-primary endpoint of reduction of
Total Symptom Score, or TSS, was not achieved but trended toward improvement in TSS. There was no significant difference
in overall survival across treatment arms, censored at the time of clinical hold. The most common treatment-emergent AEs,
4

occurring in 20 percent or more of patients treated with pacritinib within 24 weeks, of any grade, were gastrointestinal
(generally manageable diarrhea, nausea and vomiting) and hematologic (anemia and thrombocytopenia) and were generally
less frequent for twice-daily, or BID, versus once-daily, or QD, administration. Details of the trial were presented in a late-
breaking oral session at the American Society of Hematology Annual Meeting in December 2016.

In January 2017, the FDA removed the full clinical hold following review of our complete response submission which
included, among other items, final Clinical Study Reports for both PERSIST-1 and 2 trials and a dose-exploration clinical trial
protocol that the FDA requested. At that time, we reached agreement with the FDA on the design of a new trial, PAC203, that
plans to enroll up to approximately 105 patients with primary myelofibrosis who have failed prior ruxolitinib therapy, and that
includes new cardiac entry criteria, to evaluate the dose response relationship for safety and efficacy (SVR at 12 and 24
weeks) of three dose regimens: 100 mg QD, 100 mg BID and 200 mg BID. The 200 mg BID dose regimen was used in
PERSIST-2.We enrolled our first patient in PAC203 in July 2017 and expect to complete enrollment in mid 2018. We expect to
have interim data from PAC203 by the end of the second quarter of 2018 and topline data in the first quarter of 2019.

The original Marketing Authorization Application, or MAA, for pacritinib was submitted to the European Medicines
Agency, or EMA, in February 2016 with an indication statement based on the PERSIST-1 trial data. In its initial assessment
report, the Committee for Medicinal Products for Human Use, or CHMP, determined that the original application was not
approvable at that point in the review cycle because of major objections in the areas of efficacy, safety (hematological and
cardiovascular toxicity) and the overall risk-benefit profile of pacritinib. Subsequent to the filing of the original MAA, data
from the second phase 3 trial of pacritinib, PERSIST-2, were reported. These data suggest that pacritinib may show clinical
benefit in patients who have failed or are intolerant to ruxolitinib therapy, a population for which there is no approved therapy.

Following discussions with the EMA about how PERSIST-2 data might address the major objections and how to
integrate the data into the current application, we withdrew the original MAA, and submitted a new application for the
treatment of patients with myelofibrosis who have thrombocytopenia (platelet counts less than 100,000 per microliter). The
new MAA was validated by the EMA in July 2017. Validation confirms that the submission is complete and initiates the
centralized review process by the CHMP. The CHMP review period is 210 days, excluding question or opinion response
periods, after which the CHMP opinion is reviewed by the European Commission, which usually issues a final decision on
E.U. authorization within three months. If authorized, pacritinib would be granted a marketing license valid in all 28 E.U.
member states, Norway, Iceland and Liechtenstein.

On January 25, 2018, we were granted a three month extension for submitting our response to the Day 120 List of

Questions (D120 LoQ) from the CHMP of the EMA, with regard to the MAA for pacritinib. As a result of the extension, we
anticipate submitting our response to the D120 LoQ in May 2018. We primarily requested the extension in order to provide the
EMA with new pharmacokinetic analyses that include data from the ongoing phase 2 PAC203 study. The Day 120 LoQ were
received by the Company in November 2017 and included Major Objections in areas including efficacy, safety (including
hematological, cardiovascular and infectious toxicities) and other concerns including the size of the data set and the
pharmacokinetic analyses of the two dosing regimens studied in PERSIST-2. The extension request was submitted following a
clarification meeting with the rapporteur and co-rapporteur and members of the EMA. We also plan to address with the EMA
deficiencies identified in a January 2018 interim GCP inspection report which concluded that PERSIST-2 was in most aspects
conducted in compliance with GCP and internationally accepted ethical standards, but compliance was not verified in the areas
of protocol compliance, safety reporting and data integrity, where significant deficiencies were cited.

Other Pipeline Candidates

Tosedostat, is a novel oral, once-daily aminopeptidase inhibitor that has demonstrated significant responses in patients

with AML. Enrollment in the randomized Phase 2 cooperative group-sponsored trials in elderly patients with AML (the LI1
trial) was halted in March 2017 after target recruitment had been attained. Following a Data Monitoring Committee meeting in
November 2017, the trial Steering Committee decided to not reopen randomization as a sufficient survival benefit had not
been demonstrated in patients receiving tosedostat combination therapy.

Our Strategy

Our objective is to become a leader in the acquisition, development and commercialization of novel therapeutics for the

treatment of blood-related cancers. The key elements of our strategy to achieve these objectives are to:

• Commercialize PIXUVRI. Together with Servier, we intend to continue our efforts to build a successful PIXUVRI
franchise in Europe as well as other markets. Our partner is currently focused on educating physicians on the unmet
medical need and building brand awareness for PIXUVRI among physicians in the countries where PIXUVRI is

available. A successful outcome from the post-authorization trial, PIX306, will enable us to potentially obtain full
marketing authorization from the European Commission and expand the market potential for PIXUVRI.

• Develop Pacritinib in Myelofibrosis and Additional Indications. We intend to develop and commercialize

pacritinib for adult patients with myelofibrosis and potentially additional indications.

• Evaluate Strategic Product Collaborations to Accelerate Development and Commercialization. Where we

believe it may be beneficial, we intend to evaluate additional collaborations to broaden and accelerate clinical trial
development and potential commercialization of our product candidates. Collaborations have the potential to generate
non-equity based operating capital, supplement our own internal expertise and provide us with access to the
marketing, sales and distribution capabilities of our collaborators in specific territories.

•

Identify and Acquire Additional Pipeline Opportunities. Our current pipeline is the result of licensing and
acquiring assets that we believe were initially undervalued opportunities. We plan to continue to seek out additional
product candidates in an opportunistic manner.

Product and Development Portfolio

The following table summarizes our current product and development portfolio as of March 7, 2018:

Oncology Market Overview and Opportunity

According to the American Cancer Society, or ACS, cancer is the second leading cause of death in the U.S., resulting in

close to 609,640 deaths annually, or more than 1,670 people per day. Approximately 1.7 million new cases of cancer were
expected to be diagnosed in 2018 in the U.S. The most commonly used methods for treating patients with cancer are surgery,
radiation and chemotherapy. Patients usually receive a combination of these treatments depending upon the type and extent of
their disease.

We believe our expertise in blood-related cancers, together with our ability to identify unique therapies that address
unmet medical needs that are potentially less toxic and more effective at treating and curing patients, may fill a significant
unmet medical need for cancer patients.

Commercialized Product

PIXUVRI

Overview

PIXUVRI is a novel aza-anthracenedione with unique structural and physiochemical properties. In May 2012, the
European Commission granted conditional marketing authorization in the E.U., for PIXUVRI as a monotherapy for the
treatment of adult patients with multiply relapsed or refractory aggressive B-cell non-Hodgkin lymphoma, or NHL. PIXUVRI
is the first approved treatment in the E.U. for patients with multiply relapsed or refractory aggressive B-cell NHL who have
failed two or three prior lines of therapy. As part of our conditional marketing authorization in the E.U., we are required to
conduct a post-authorization trial, which we refer to as PIX306, comparing PIXUVRI and rituximab with gemcitabine and
rituximab in the setting of aggressive B-cell NHL. In August 2017, we announced the completion of enrollment in the trial. If
positive, the results from this trial could support broader indications. Top-line results are event-driven and are expected by the
end of the first half of 2018. Although we do not have and are not currently pursuing regulatory approval of PIXUVRI in the
U.S., we may reevaluate a possible submission strategy in the U.S. based on the data generated from the PIX306 study.
Pursuant to our conditional marketing authorization in the E.U., and an extension granted in September 2016, we are required
to submit the requisite clinical study report for PIX306 by December 2018.

PIXUVRI for the Treatment of NHL

We are specifically developing and commercializing PIXUVRI for the treatment of aggressive NHL. NHL is caused by

the abnormal proliferation of lymphocytes, which are cells key to the functioning of the immune system. NHL usually
originates in lymph nodes and spreads through the lymphatic system. The ACS estimated that there would be 72,240 people
diagnosed with NHL in the U.S. and approximately 20,140 people would die from this disease in 2017. The World Health
Organization’s International Agency for Research on Cancer’s 2012 GLOBOCAN database estimates that, in the
E.U., approximately 79,312 people will be diagnosed with NHL and 30,730 people are estimated to die from NHL annually.
NHL is the seventh most common type of cancer. NHL can be broadly classified into two main forms, each with many
subtypes; aggressive NHL is a rapidly growing form of the disease that moves into advanced stages much faster than indolent
NHL, which progresses more slowly.

Aggressive B-cell NHL is the most common subtype, accounting for about 55 percent of NHL cases. After initial
therapy for aggressive NHL with anthracycline-based combination therapy, one-third of patients typically develop progressive
disease. Approximately half of these patients are likely to be eligible for intensive second-line treatment and stem cell
transplantation, although 50 percent are expected not to respond. For those patients who fail to respond or relapse following
second line treatment, treatment options are limited and usually palliative only. PIXUVRI is the first treatment approved in the
E.U. for patients with multiply relapsed or refractory aggressive B-cell NHL.

Commercialization of PIXUVRI in the E.U.

In September 2012, we initiated E.U. commercialization of PIXUVRI and in September 2014 we entered into a

collaboration arrangement with Servier. In April 2017, we entered into an Amended and Restated Exclusive License and
Collaboration Agreement, or the Restated Agreement, with Servier. Under the Restated Agreement, Servier will have rights to
PIXUVRI in all markets except in the U.S. where we will retain the commercialization rights. Previously, Servier had rights to
commercialize the drug globally except in Austria, Denmark, Finland, Germany, Israel, Norway, Sweden, Turkey, the United
Kingdom, or the U.K., and the U.S. Servier paid us €12.0 million in May 2017 and purchased PIXUVRI drug product for an
additional €0.9 million in July 2017. In September 2017, we attained a regulatory milestone under the Restated Agreement and
recognized a €1.0 million milestone revenue.W e are eligible to receive up to €75.0 million in additional sales and regulatory
milestone payments as well as royalties on net product sales.

For additional information on our collaboration with Servier, please see the discussion in “License Agreements and

Additional Milestone Activities - Servier.”

As discussed in Part I, Item 1, “Business-Manufacturing, Distribution and Associated Operations,” we utilize third
parties for the manufacture, storage and distribution of PIXUVRI, as well as for other associated supply chain operations. Our
strategy of utilizing third parties in such manner allows us to direct our resources to the development and commercialization of
compounds rather than to the establishment and maintenance of facilities for such operational activities.

Development Candidates

Pacritinib

Development in Myelofibrosis

In August 2014, pacritinib was granted Fast Track designation by the FDA for the treatment of intermediate and high

risk myelofibrosis, including, but not limited to patients with disease-related thrombocytopenia, patients experiencing
treatment-emergent thrombocytopenia on other JAK2 therapy or patients who are intolerant of, or whose symptoms are sub-
optimally managed on, other JAK2 therapy. The FDA’s Fast Track process is designed to facilitate the development and
expedite the review of drugs to treat serious conditions and fill an unmet medical need.

Pacritinib was evaluated in two Phase 3 clinical trials, known as the PERSIST program, for patients with myelofibrosis,

with one trial in a broad set of patients without limitations on platelet counts, the PERSIST-1 trial; and the other in patients
with low platelet counts, the PERSIST-2 trial. Myelofibrosis is a rare blood cancer associated with significantly reduced
quality of life and shortened survival. As the disease progresses, the body slows production of important blood cells and within
one year of diagnosis, the incidence of disease-related thrombocytopenia (very low blood platelet counts), severe anemia and
red blood cell transfusion requirements increase significantly. Among other complications, most patients with myelofibrosis
present with enlarged spleens (splenomegaly), as well as many other potentially devastating physical symptoms such as
abdominal discomfort, bone pain, feeling full after eating little, severe itching, night sweats and extreme fatigue. Currently
patients with very low blood platelets (<50,000/µL) or those ineligible to receive, intolerant of or have insufficient response to
the approved JAK1/JAK2 inhibitor have no effective treatment options. Patients have poor survival following discontinuation
of therapy with the approved JAK1/JAK2 therapy. We believe pacritinib may offer effective treatment of symptoms for
patients following prior exposure to the approved JAK1/JAK2 inhibitor and / or those with thrombocytopenia.

PERSIST-1 was a randomized (2:1), open-label, multi-center Phase 3 trial comparing the efficacy and safety of
pacritinib with that of best available therapy other than JAK inhibitors, in 327 patients with myelofibrosis, without exclusion
for low platelet counts. The primary endpoint for PERSIST-1 was the proportion of patients achieving a 35 percent or greater
reduction in spleen volume from baseline to Week 24 as measured by MRI or CT, when compared with physician-specified
BAT, excluding treatment with JAK2 inhibitors. The secondary endpoint was the percentage of patients achieving a 50 percent
or greater reduction in Total Symptom Score, or TSS, from baseline to week 24 as measured by tracking specific symptoms on
a form, or Patient Reported Outcome, or PRO, instrument. At study entry, 46 percent of patients were thrombocytopenic; 32
percent of patients had platelet counts less than 100,000 per microliter (<100,000/µL); and 16 percent of patients had platelet
counts less than 50,000 per microliter (<50,000/µL); normal platelet counts range from 150,000 to 450,000 per microliter. At
the time of initiation of the trial, PERSIST-1 utilized the Myeloproliferative Neoplasm Symptom Assessment Form, or MPN-
SAF TSS, the PRO instrument developed by Mayo Clinic, to measure TSS reduction. We collaborated with Mayo Clinic and
the FDA and developed a modified instrument to be used as the endpoint for pacritinib clinical development. As a result, we
amended the PERSIST-1 trial protocol to replace the original MPN-SAF TSS instrument with a new instrument, known as the
MPN-SAF TSS 2.0, which is also being used for recording patient-reported outcomes for the PERSIST-2 trial. In connection
with this amendment, we increased patient enrollment in the PERSIST-1 study from 270 to 327 patients.

In May 2015, data from PERSIST-1 showed that compared to BAT (exclusive of a JAK inhibitor) pacritinib therapy
resulted in a significantly higher proportion of patients with spleen volume reduction and control of disease-related symptoms
meeting the primary endpoint of the trial. Results were presented at a late-breaking oral session at the 51st Annual Meeting of
the American Society of Clinical Oncology. Additionally, in June 2015, results from PERSIST-1 PRO and other quality of life
measures presented at a late-breaking oral session at the 20th Congress of the European Hematology Association showed
significant improvements in symptom score with pacritinib therapy compared to BAT (exclusive of a JAK inhibitor) across the
symptoms reported in the presentation.

The following table shows the proportion of patients randomized to pacritinib or BAT who achieved a 35% reduction

in spleen volume from baseline at Week 24 or up to Week 24 in the intent-to-treat, or ITT, population or evaluable patient
population. The greatest difference in treatment arms was observed in evaluable patients with the lowest platelet counts
(<50,000/µL platelets) (33.3 percent with pacritinib vs 0 percent with BAT) (p=0.037).

Spleen Volume Reduction of 35% at Week 24 by Platelet Levels

Pacritinib

BAT

19% (n=220)
25% (n=168)

17% (n=72)
24% (n=51)

23% (n=35)
33% (n=24)

5% (n=107)
6% (n=85)

0% (n=34)
0% (n=24)

0% (n=16)
0% (n=11)

All Platelet Levels

ITT*
Evaluable**

<100,000/µL platelets
ITT
Evaluable

<50,000/µL platelets
ITT
Evaluable

p-value

0.0003
<0.0001

0.0086
0.0072

0.0451
0.0370

* ITT - primary analysis included all patients randomized. Patients who missed MRI or CT scans at baseline or at Week 24
were counted as non-responders.
** Evaluable - analysis included patients who had assessment at both baseline and at Week 24.

Results from PERSIST-1 PRO and other quality of life measures showed significant improvements in symptom score

with pacritinib therapy compared to BAT (exclusive of a JAK inhibitor) across the symptoms reported in the presentation.
Patients treated with pacritinib experienced greater improvement in their disease-related symptoms (ITT patient population:
24.5 percent of pacritinib-treated patients vs 6.5 percent of BAT-treated patients, p<0.0001; evaluable patient population: 40.9
percent of pacritinib-treated patients vs 9.9 percent of BAT-treated patients, p<0.0001).

Additionally, 25 percent of patients treated with pacritinib who were severely anemic and transfusion dependent -

requiring at least six units of blood in the 90 days prior to study entry - became transfusion independent, compared to zero
patients treated with BAT (p<0.05). Among patients with the lowest baseline platelets (<50,000/µL) who received treatment
with pacritinib, a significant increase in platelet counts was observed over time compared to BAT (p=0.003) - with a 35
percent increase in platelet counts from baseline to Week 24.

The most common adverse events, occurring in 10 percent or more of patients treated with pacritinib within 24 weeks,
of any grade, were: mild to moderate diarrhea, nausea, anemia, thrombocytopenia, and vomiting. Of the patients treated with
pacritinib, 3 discontinued therapy and 13 patients required dose interruption (average one week) for diarrhea. Patients received
a daily full dose of pacritinib over the duration of treatment. Gastrointestinal symptoms typically lasted for approximately one
week and few patients discontinued treatment due to side effects. There were no Grade 4 gastrointestinal events reported.

In December 2015, primarily based on the results of the PERSIST-1 trial, we submitted a NDA to the FDA, for

pacritinib requesting U.S. marketing approval of pacritinib for the treatment of patients with intermediate and high-risk
myelofibrosis with low platelet counts of less than 50,000 per microliter (<50,000/µL) for whom there are no approved
therapies.

The PERSIST-2 trial was a randomized (2:1), open-label, multi-center registration-directed Phase 3 trial evaluating

pacritinib compared to BAT, including the approved JAK inhibitor dosed according to product label, for patients with
myelofibrosis whose platelet counts are less than or equal to 100,000 per microliter ( 100,000/µL). Patients were randomized
to receive 200 mg pacritinib twice daily, 400 mg pacritinib once daily or BAT. In October 2013, we reached an agreement with
the FDA on a Special Protocol Assessment, or SPA, for the PERSIST-2 trial regarding the planned design, endpoints and
statistical analysis approach of the trial. The SPA is a written agreement between us and the FDA regarding the design,
endpoints and planned statistical analysis approach of the trial to be used in support of a NDA submission. Under the SPA, the
agreed upon co-primary endpoints are the percentage of patients achieving a 35% or greater reduction in spleen volume
measured by MRI or CT scan from baseline to Week 24 of treatment and the percentage of patients achieving a TSS reduction
of 50 percent or greater using eight key symptoms as measured by the modified MPN-SAF TSS 2.0 diary from baseline to
Week 24. The design of PERSIST-1 and PERSIST-2 allowed for patients on the BAT arm to crossover and receive treatment
with pacritinib if their disease progresses or after they achieve the 24-week measurement endpoint. Although crossover design

of clinical trials may confound evaluation of survival, such designs are frequently used in cancer studies, and the FDA has
approved multiple oncology drugs that utilized crossover design in Phase 3 trials.

In February 2015, we received a recommendation from the Independent Data Monitoring Committee, or IDMC, in

place at the time to terminate the PERSIST-1 trial and hold enrollment of new patients in the PERSIST-2 trial. The IDMC’s
recommendation was based on non-statistically significant safety concerns, including mortality, in patients on pacritinib,
particularly those who crossover after 24 weeks, which crossover potentially confounds evaluation of survival. The IDMC
agreed that the recommendation would be only preliminary until we were unblinded to and could review the primary and
secondary endpoint data as well as safety results from the PERSIST-1 trial. The IDMC recommendation was reviewed with
the PERSIST Steering Committee, comprised of external experts and the study’s principal investigators who disagreed with
the IDMC’s recommendation and expressed the view that the studies should continue as planned. We also asked an
independent clinician and a statistician experienced in oversight of clinical trial safety to evaluate the safety profile of
pacritinib in the PERSIST-1 trial. Neither was told of the recommendation reached by either the IDMC or the Steering
Committee. Both experts agreed with the Steering Committee that the studies could continue. The firm that assembled the
IDMC hired a second external independent statistician to review the IDMC’s analyses and recommendation, who also
disagreed with the IDMC recommendation and concurred with the other independent experts that the studies need not be
terminated nor enrollment held. In June 2015, the IDMC made its recommendation final and we provided to the FDA the
information reviewed by the IDMC, the IDMC’s meeting minutes, and the written opinion of the Steering Committee co-
chairs, the independent experts, and the second independent statistician. In July 2015, we requested a meeting with the FDA to
confirm if we should continue the studies. The FDA assigned the request to a type C meeting. In its written response, the FDA
did not mandate any modifications to the studies or place pacritinib on clinical hold at that time, but indicated that it had not
yet reviewed the data and noted the difficulty in attempting to draw meaningful conclusions from non-significant results, and
that the crossover designs may confound the analysis of survival. We determined that no modifications to the ongoing trials
were required. Because we had concerns about the original IDMC’s impartiality, we decided to discharge it, and retained a
new IDMC through an independent firm specializing in IDMCs. The newly constituted IDMC met on several occasions and
its recommendation was to continue PERSIST-2 as planned.

On February 8, 2016, the FDA notified us that a full clinical hold had been placed on pacritinib clinical studies. A full
clinical hold is a suspension of the clinical work requested under the investigational new drug, or an IND, application. Under
the full clinical hold, all patients on pacritinib at the time were required to discontinue pacritinib immediately and no patients
could be enrolled or start pacritinib as initial or crossover treatment. In its written notification, the FDA cited the reasons for
the full clinical hold were that it noted interim overall survival results from the PERSIST-2 Phase 3 trial showing a detrimental
effect on survival consistent with the results from PERSIST-1. The deaths in PERSIST-2 in pacritinib-treated patients include
intracranial hemorrhage, cardiac failure and cardiac arrest. In connection with the full clinical hold, the FDA has
recommended that we conduct Phase 1 dose exploration studies of pacritinib in patients with myelofibrosis, submit final
clinical study reports, or CSRs, and datasets for PERSIST-1 and PERSIST-2, provide certain notifications, revise relevant
statements in the related Investigator’s Brochure and informed consent documents and make certain modifications to
protocols. In addition, the FDA recommended that we request a meeting prior to submitting a response to full clinical hold. As
a result of the full clinical hold of pacritinib, the SPA agreement is no longer binding for PERSIST-2, and we have withdrawn
the NDA.

In February 2016, prior to the clinical hold we completed patient enrollment in the PERSIST-2 Phase 3 clinical trial.

Under the full clinical hold, all patients participating in the PERSIST-2 clinical trial discontinued pacritinib treatment.

In August 2016, we announced the top-line results from PERSIST-2, and the detailed results were presented in a late-

breaking oral session at the American Society of Hematology Annual Meeting in December 2016. In the PERSIST-2 trial three
hundred eleven (311) patients were randomized to receive 200 mg pacritinib BID, 400 mg pacritinib QD or BAT. Two hundred
twenty-one (221) patients (74 pacritinib BID; 75 pacritinib QD; 72 BAT) were enrolled at least 24 weeks prior to the full
clinical hold and were potentially evaluable for the Week 24 efficacy endpoint (ITT efficacy population). In the ITT efficacy
population at study entry, 46 percent (101/221) of patients had platelet counts less than 50,000 per microliter (<50,000/µL),
and 59 percent (130/221) were anemic (hemoglobin <10 g/dL). Normal platelet counts range from 150,000 to 450,000 per
microliter. The percentage of patients in the ITT efficacy population who received prior ruxolitinib was as follows: 41 percent
(31/75) pacritinib QD; 42 percent (31/74) pacritinib BID; and 46 percent (33/72) BAT. Safety analyses were based on all
patients exposed to study treatment of any duration.

The co-primary endpoints of the trial were the proportion of patients achieving a 35 percent or greater reduction in

spleen volume from baseline to Week 24 as measured by MRI or CT scan and the proportion of patients achieving a TSS
reduction of 50 percent or greater using the modified Myeloproliferative Neoplasm Symptom Assessment (MPN-SAF TSS
2.0) diary from baseline to Week 24. The primary objective of the study was to compare pooled pacritinib arms versus BAT
10

and the secondary objectives were to compare pacritinib BID and QD arms individually to BAT. Study was designed to
evaluate its objectives with a sample size of 300. At the time of clinical hold, study enrollment was completed with thre
hundred eleven (311) patients randomized, but only two hundred twenty one (221) patients had the potential to be evaluated
for efficacy endpoints at Week 24.

The PERSIST-2 trial met one of the co-primary endpoints showing a statistically significant response rate in SVR in
patients with myelofibrosis treated with pacritinib combining the once- and twice-daily arms compared to BAT. Although the
PERSIST-2 trial did not meet the other co-primary endpoint of greater than 50 percent reduction in TSS, the results
approached marginal significance compared to BAT. Although secondary objectives could not be evaluated formally due to the
study not achieving one of the primary objectives, when the two pacritinib dosing arms were evaluated separately versus BAT,
pacritinib given twice daily showed a higher percent of SVR and TSS responses compared to BAT; whereas, pacritinib given
once daily showed only a higher percent SVR responses compared to BAT.

Spleen Volume Reduction of 35%; Total Symptom Score Reduction of 50% at Week 24

Co-Primary
Pacritinib BID + QD
(n=149)

Secondary
Pacritinib BID
(n=74)

Secondary
Pacritinib QD
(n=75)

18%
(n=27;p=0.001)

22%
(n=16;p=0.001)

15%
(n=11;p=0.017)

25%
(n=37;p=0.079)

32%
(n=24;p=0.011)

17%
(n=13;p=0.652)

BAT
(n=72)

3%
(n=2)

14%
(n=10)

Percent of Patients

baseline to Week 24

Percent of Patients

in TSS from baseline
to Week 24

A total of 45 percent of the BAT patients randomized received ruxolitinib at some point on the study.

There was no significant difference in overall survival, or OS, across treatment arms, censored at the time of clinical

hold. Hazard ratios (95% confidence intervals, or CI) were 0.68 (0.30-1.53) for pacritinib BID versus BAT and 1.18
(0.57-2.44) for pacritinib QD versus BAT. Overall mortality rates at that time were comparable between arms: 9 percent BID
versus 14 percent QD and 14 percent BAT.

The most common treatment-emergent AEs, occurring in 20 percent or more of patients treated with pacritinib within

24 weeks, of any grade, were gastrointestinal (generally manageable diarrhea, nausea and vomiting) and hematologic (anemia
and thrombocytopenia) and were generally less frequent for BID versus QD administration. The most common serious
treatment-emergent AEs (incidence of 5 percent reported in any treatment arm irrespective of grade) were anemia,
thrombocytopenia, pneumonia and acute renal failure none of which exceeded 8 percent individually in any arm.

In July 2017, we enrolled our first patient in the PAC203 trial which plans to enroll up to approximately 105 patients

with primary myelofibrosis who have failed prior ruxolitinib therapy to evaluate the dose response relationship for safety and
efficacy (SVR at 12 and 24 weeks) of three dose regimens: 100 mg QD, 100 mg BID and 200 mg BID. The 200 mg BID dose
regimen was used in PERSIST-2. We expect to complete enrollment by mid-2018. We expect to have interim data from
PAC203 by the end of the second quarter of 2018 and topline data in the first quarter of 2019.

Marketing Authorization Application

The Marketing Authorization Application, or MAA, for pacritinib was submitted to the European Medicines Agency, or

EMA, in February 2016 with an indication statement based on the PERSIST-1 trial data. In its initial assessment report, the
Committee for Medicinal Products for Human Use, or CHMP, determined that the current application is not approvable at this
point in the review cycle because of major objections in the areas of efficacy, safety (hematological and cardiovascular
toxicity) and the overall risk-benefit profile of pacritinib. Subsequent to the filing of the MAA, data from the second phase 3
trial of pacritinib, PERSIST-2, were reported. These data suggest that pacritinib may show clinical benefit in patients who

have failed or are intolerant to ruxolitinib therapy, a population for which there is no approved therapy. Following discussions
with the EMA about how PERSIST-2 data might address the major objections and how to integrate the data into the current
application, we withdrew the original MAA, and submitted a new application for the treatment of patients with myelofibrosis
who have thrombocytopenia (platelet counts less than 100,000 per microliter). The new MAA was validated by the EMA in
July 2017. Validation confirms that the submission is complete and initiates the centralized review process by the CHMP. The
CHMP review period is 210 days, excluding question or opinion response periods, after which the CHMP opinion is reviewed
by the European Commission, which usually issues a final decision on E.U. authorization within three months. If authorized,
pacritinib would be granted a marketing license valid in all 28 E.U. member states, Norway, Iceland and Liechtenstein.

On January 25, 2018, we were granted a three-month extension for submitting our response to the Day 120 List of
Questions, or D120 LoQ, from the CHMP of the EMA, with regard to the MAA for pacritinib. As a result of the extension, we
anticipate submitting our response to the D120 LoQ in May 2018. We primarily requested the extension in order to provide the
EMA with new pharmacokinetic analyses that include data from the ongoing phase 2 PAC203 study. The Day 120 LoQ were
received by the Company in November 2017 and included Major Objections in areas including efficacy, safety (including
hematological, cardiovascular and infectious toxicities) and other concerns including the size of the data set and the
pharmacokinetic analyses of the two dosing regimens studied in PERSIST-2. The extension request was submitted following a
clarification meeting with the rapporteur and co-rapporteur and members of the EMA. We also plan to address with the EMA
deficiencies identified in a January 2018 interim GCP inspection report which concluded that PERSIST-2 was in most aspects
conducted in compliance with GCP and internationally accepted ethical standards, but compliance was not verified in the areas
of protocol compliance, safety reporting and data integrity, where significant deficiencies were cited.

Development in Other Indications

In December 2014, we announced results of a preclinical analysis of kinase inhibition by pacritinib that demonstrated a

unique kinome profile among agents in development for myelofibrosis and suggests potential therapeutic benefit across a
spectrum of blood-related cancers. Pacritinib’s potent inhibition of FLT3, c-fms, IRAK1 and c-kit highlight its potential
therapeutic utility in other indications, such as AML, MDS, CMML and CLL, some of which are currently being evaluated in
ISTs.

In October 2016, we regained worldwide rights for the development and commercialization of pacritinib following
termination of the Pacritinib License Agreement with Baxalta. For additional information relating to the termination of the
Pacritinib License Agreement, see “License Agreements and Additional Milestone Activities - Baxalta” below.

Tosedostat

Tosedostat, is a novel oral, once-daily aminopeptidase inhibitor that has demonstrated significant responses in patients

with AML. It has been evaluated in randomized Phase 2 cooperative group-sponsored trials in elderly patients with AML.

Enrollment in the randomized Phase 2 cooperative group-sponsored trials in elderly patients with AML (the LI1 trial)

was halted in March 2017 after target recruitment had been attained. Following a Data Monitoring Committee meeting in
November 2017, the trial Steering Committee decided to not reopen randomization as a sufficient survival benefit had not
been demonstrated in patients receiving tosedostat combination therapy.

Research and Development Expenses

Research and development is essential to our business. We spent $32.9 million, $65.0 million and $76.6 million in

2017, 2016 and 2015, respectively, on Company-sponsored research and development activities. The development of a
product candidate involves inherent risks and uncertainties, including, among other things, that we cannot predict with any
certainty the pace of enrollment of our clinical trials. As a result, we are unable to provide the nature, timing and estimated
costs of the efforts necessary to complete the development of pacritinib and tosedostat or to complete the post-approval
commitment study of PIXUVRI. Further, third parties are conducting clinical trials for tosedostat and pacritinib. Even after a
clinical trial is enrolled, preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude
regulatory approval and advancement of this compound through the development process. For these reasons, among others,
we cannot estimate the date on which clinical development of these product candidates will be completed or when, if ever, we
will generate material net cash inflows from PIXUVRI or be able to commence commercialization of pacritinib and
tosedostat. For additional information relating to our research and development expenses and associated risks, see Part II,
Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations -
Years ended December 31, 2017, 2016 and 2015 - Operating costs and expenses - Research and development expenses” and
Part I, Item 1A, “Risk Factors.”

License Agreements and Additional Milestone Activities

Servier

In April 2017, we entered into the Restated Agreement with Servier, pursuant to which the Original Agreement with

Servier, entered into in September 2014, was amended and restated in its entirety. Under the Original Agreement, we granted
Servier an exclusive and sublicensable (subject to certain conditions) royalty-bearing license with respect to the development
and commercialization of PIXUVRI for use in pharmaceutical products outside of Austria, Denmark, Finland, Germany,
Israel, Norway, Sweden, Turkey, the U.K. and the U.S. Under the Original Agreement, we received an upfront payment in
October 2014 of €14.0 million (or $17.8 million using the currency exchange rate as of the date we received the funds). In
addition, we received a €1.5 million (or $1.7 million upon conversion from euros as of the date we received the funds)
milestone payment relating to the attainment of reimbursement approval for PIXUVRI in Spain and a €7.5 million (or $8.0
million upon conversion from euros as of the date we achieved the milestone in December 2016) milestone payment relating
to the occurrence of a certain enrollment event in the PIX306 study.

Under the Restated Agreement, we granted Servier an exclusive, sublicensable (subject to certain exceptions) license

with respect to the development and commercialization of PIXUVRI for use in pharmaceutical products, or Licensed
Products, outside of the U.S. (and its territories and possessions). In accordance with the Restated Agreement, we will transfer
to Servier medical affairs and commercialization activities relating to the Licensed Products in Austria, Denmark, Finland,
Germany, Israel, Norway, Sweden, Turkey and the U.K. (collectively, the "Transition Territory"). We are in the process of
terminating or assigning certain distributor and wholesaler contracts to Servier in the Transition Territory, and expect the last
contract to be terminated in 2018. Each party will be responsible for the manufacture and supply of drug products and
substances in its respective territory.

We have obtained conditional marketing authorization in the E.U. to market PIXUVRI for the treatment of adult

patients with relapsed or refractory aggressive non-Hodgkin B-cell lymphomas. Under the Restated Agreement, we will
transfer our European marketing authorization to Servier upon positive, statistically significant results in an ongoing post-
authorization Phase 3 clinical trial, PIX306, unless Servier elects to terminate the Restatement Agreement within thirty (30)
days after the positive results.

We received an upfront payment of €12.0 million from Servier , which included €2.0 million for a new milestone
previously achieved, and Servier purchased PIXUVRI drug product for an additional €0.9 million in July 2017. Subject to the
achievement of certain conditions, the Restated Agreement provides for additional milestone payments from Servier in the
aggregate amount of up to €76.0 million, including up to €36.0 million in potential regulatory milestone payments and up to
€40.0 million in potential sales milestone payments. In September 2017, we attained a regulatory milestone under the
Restated Agreement and recorded a €1.0 million milestone revenue (or $1.2 million using the currency exchange rate as of the
date the milestone was achieved).

We are eligible to receive tiered royalty payments ranging from a low-double digit percentage up to a percentage in the

low-twenties based on net sales of the Licensed Products, subject to certain reductions of up to mid-double digit percentages
under certain circumstances. We will no longer use a joint marketing plan with Servier, and marketing costs will no longer be
shared equally; instead Servier will be solely responsible for marketing costs within Europe. Mutually agreed upon

development costs other than PIX306 will continue to be shared equally with Servier, which represents no change to the
development cost sharing.

The Restated Agreement also requires an amendment to the trademark license agreement entered into on June 8, 2015
between us and Servier to provide for Servier’s right to use of our trademark PIXUVRI in connection with Licensed Products
worldwide, excluding the U.S. (and its territories and possessions). The amendment was executed in October 2017.

Baxalta

In November 2013, we entered into a Development, Commercialization and License Agreement, dated as of November

14, 2013, with Baxter International Inc., or Baxter, for the development and commercialization of pacritinib for use in
oncology and potentially additional therapeutic areas, or the Original Pacritinib License Agreement. The Original Pacritinib
License Agreement, the rights and obligations to which Baxter had assigned to Baxalta, was amended by the License
Amendment, effective June 8, 2015. Under the Original Pacritinib License Agreement, as amended by the License
Amendment, or the Pacritinib License Agreement, Baxalta had an exclusive, worldwide (subject to co-promotion rights
discussed below), royalty-bearing, non-transferable license (which was sub-licensable under certain circumstances) relating to
pacritinib. Licensed products under the Pacritinib License Agreement consisted of products in which pacritinib is an
ingredient.

We received an upfront payment of $60.0 million under the Pacritinib License Agreement, which included a $30.0

million investment in our equity. The Pacritinib License Agreement also provided for us to receive potential additional
payments of up to $302.0 million upon the successful achievement of certain development and commercialization milestones,
comprised of $112.0 million of potential clinical, regulatory and commercial launch milestone payments, and potential
additional sales milestone payments of up to $190.0 million. We have received milestone payments of $52.0 million pursuant
to the Pacritinib License Agreement.

In June 2015, we entered into the License Amendment. Pursuant to the License Amendment, two potential milestone
payments in the aggregate amount of $32.0 million from Baxalta to us were accelerated from the schedule contemplated by
the Original Pacritinib License Agreement relating to the PERSIST-2 Milestone and the MAA Milestone. In the first quarter of
2016, we recorded $32.0 million in license and contract revenue upon attainment of these milestones.

In October 2016, we regained worldwide rights for the development and commercialization of pacritinib following

termination of the Pacritinib License Agreement with Baxalta. Pursuant to the termination, Baxalta paid us a one-time cash
payment in the amount of approximately $10.3 million as reimbursement for certain expenses incurred by us or to be incurred.
In exchange, we have agreed to provide a one-time payment to Baxalta, upon the first regulatory approval or any pricing and
reimbursement approvals of a product containing pacritinib, in the amount of approximately $10.3 million which represents
certain amounts paid by Baxalta for the benefit of the pacritinib program manufacturing efforts. We have also agreed not to
transfer, license, sublicense or otherwise grant rights with respect to intellectual property of pacritinib unless the transferee/
licensee/sublicensee agrees to be bound by the terms of the Asset Return and Termination Agreement with Baxalta.

University of Vermont

We entered into an agreement with the University of Vermont, or UVM, in March 1995, as amended, or the UVM

Agreement, which grants us an exclusive sublicensable license for the rights to PIXUVRI. Pursuant to the UVM Agreement,
we acquired the rights to make, have made, sell and use PIXUVRI, and we are obligated to make royalty payments to UVM
ranging from low single digits to mid-single digits as a percentage of net sales; such royalty expenses are included in Cost of
product sold in our consolidated financial statements. The higher royalty rate is payable for net sales in countries where
specified UVM licensed patents exist, or where we have obtained orphan drug protection, until such UVM patents or such
protection no longer exists. For a period of ten years after the first commercialization of PIXUVRI, the lower royalty rate is
payable for net sales in such countries after expiration of the designated UVM patents or loss of orphan drug protection, and in
all other countries without such specified UVM patents or orphan drug protection. Unless otherwise terminated, the term of
the UVM Agreement continues for the life of the licensed patents in those countries in which a licensed patent exists, and
continues for ten years after the first sale of PIXUVRI in those countries where no such patents exist. We may terminate the
UVM Agreement, on a country-by-country basis or on a patent-by-patent basis, at any time upon advance written notice.
UVM may terminate the UVM Agreement upon advance written notice in the event royalty payments are not made. In
addition, either party may terminate the UVM Agreement in the event of an uncured material breach of the UVM Agreement
by the other party or in the event of bankruptcy of the other party.

S*BIO

We acquired the compounds SB1518 (which is referred to as “pacritinib”) and SB1578, which inhibit JAK2 and FLT3,
from S*BIO in May 2012. Under our agreement with S*BIO, we are required to make milestone payments to S*BIO up to an
aggregate amount of $132.5 million if certain U.S., E.U. and Japanese regulatory approvals are obtained and if certain
worldwide net sales thresholds are met in connection with any pharmaceutical product containing or comprising any
compound that we acquired from S*BIO for use for specific diseases, infections or other conditions. At our election, we may
pay up to 50% of any milestone payments to S*BIO through the issuance of shares of our common stock or shares of our
preferred stock convertible into our common stock. In addition, S*BIO will be entitled to receive royalty payments from us at
incremental rates in the low single-digits based on certain worldwide net sales thresholds on a product-by-product and
country-by-country basis.

Vernalis

We entered into an amended and restated exclusive license agreement with Vernalis (R&D) Limited, or Vernalis, in

October 2014, or the Vernalis License Agreement, for the exclusive worldwide right to use certain patents and other
intellectual property rights to develop, market and commercialize tosedostat and certain other compounds. Under the Vernalis
License Agreement, we have agreed to make tiered royalty payments of no more than a high single-digit percentage of net
sales of products containing licensed compounds, with such obligation to continue on a country-by-country basis for the
longer of ten years following commercial launch or the expiry of relevant patent claims.

The Vernalis License Agreement will terminate when the royalty obligations expire, although the parties have early

termination rights under certain circumstances, including the following: (i) we have the right to terminate, with three months’
notice, upon the belief that the continued development of tosedostat or any of the other licensed compounds is not
commercially viable; (ii) Vernalis has the right to terminate in the event of our uncured failure to pay sums due; and (iii) either
party has the right to terminate in the event of the other party’s uncured material breach or insolvency.

Gynecologic Oncology Group

We entered into an agreement with the Gynecologic Oncology Group, now part of NRG Oncology, in March 2004, as

amended, related to the GOG-0212 trial of Opaxio it is conducting in patients with ovarian cancer. Pursuant to the terms of
such agreement, we paid an aggregate of $1.2 million in milestone payments during 2014 based on certain enrollment
milestones achieved. In addition, we made a milestone payment of $0.5 million relating to the transfer of final datasets during
the second quarter of 2017. The agreement was terminated in May 2017. No further development of Opaxio is planned.

PG-TXL

In November 1998, we entered into an agreement with PG-TXL, as amended in February 2006, or the PG-TXL
Agreement, which granted us an exclusive worldwide license for the rights to Opaxio and to all potential uses of PG-TXL’s
polymer technology. Pursuant to the PG-TXL Agreement, we acquired the rights to research, develop, manufacture, market
and sell anti-cancer drugs developed using this polymer technology. Pursuant to the PG-TXL Agreement, we were obligated to
make payments to PG-TXL upon the achievement of certain development and regulatory milestones of up to $14.4 million.
The timing of the remaining milestone payments under the PG-TXL Agreement was based on trial commencements and
completions for compounds protected by PG-TXL license rights, and regulatory and marketing approval of those compounds
by the FDA and the EMA. Additionally, we were required to make royalty payments to PG-TXL based on net sales. Our
royalty obligations ranged from low to mid-single digits as a percentage of net sales. In February 2017, we terminated our
agreement with PG-TXL and the exclusive worldwide license for rights to Opaxio and certain polymer technology under our
agreement with PG-TXL.

Novartis

In January 2014, we entered into a Termination Agreement with Novartis, or the Novartis Termination Agreement, to

reacquire the rights to PIXUVRI previously granted to Novartis under our agreement entered into in September 2006, as
amended, or the Original Novartis Agreement. Pursuant to the Novartis Termination Agreement, the Original Novartis
Agreement was terminated in its entirety, except for certain customary provisions, including those pertaining to confidentiality
and indemnification, which survive termination.

Under the Novartis Termination Agreement, we agreed not to transfer, license, sublicense or otherwise grant rights with

respect to intellectual property of PIXUVRI and Opaxio unless the recipient thereof agrees to be bound by the terms of the
Novartis Termination Agreement. We also agreed to provide potential payments to Novartis, including a percentage ranging
from the low double-digits to the mid-teens, of any consideration received by us or our affiliates in connection with any
transfer, license, sublicense or other grant of rights with respect to intellectual property of PIXUVRI or Opaxio; provided that
such payments will not exceed certain prescribed ceilings in the low single-digit millions. Novartis is entitled to receive
potential payments of up to $16.6 million upon the successful achievement of certain sales milestones of PIXUVRI and
Opaxio. We are also obligated to pay to Novartis tiered low single-digit percentage royalty payments for the first several
hundred million dollars in annual net sales, and 10% royalty payments thereafter based on annual net sales of each of
PIXUVRI and Opaxio, subject to reduction in the event generic drugs are introduced and sold by a third party, causing the sale
of PIXUVRI to fall by a percentage in the high double digits. Royalty payments for PIXUVRI are subject to certain minimum
floor percentages in the low single digits. The royalty expenses payable under the Novartis Termination Agreement are
included in Cost of product sold in our consolidated financial statements.

Teva Pharmaceutical Industries Ltd.

In June 2005, we entered into an acquisition agreement with Cephalon, Inc., or Cephalon, pursuant to which we
divested the compound, TRISENOX. Cephalon was subsequently acquired by Teva Pharmaceutical Industries Ltd., or Teva.
Under this agreement, we have the right to receive up to $100 million in payments upon achievement by Teva of specified
sales and development milestones related to TRISENOX. To date, we have received $50.0 million of such potential milestone
payments as a result of having achieved certain sales milestones.

Other Agreements

We have several agreements with CROs, third-party manufacturers and distributors that have durations of greater than

one year for the development and distribution of certain of our compounds.

Information about Customer and Geographic Concentrations

Information about customer and geographic revenue is set forth in Part II, Item 8, "Financial Statements and

Supplementary Data, Notes to Consolidated Financial Statements, Note 15. Customer and Geographic Concentrations" of this
Annual Report on Form 10-K.

Patents and Proprietary Rights

We dedicate significant resources to protecting our intellectual property, which is important to our business. We have
filed numerous patent applications in the U.S. and various other countries seeking protection of inventions originating from
our research and development, and we have also obtained rights to various patents and patent applications under licenses with
third parties and through acquisitions. Patents have been issued on many of these applications. We have pending patent
applications or issued patents in the U.S. and foreign countries directed to PIXUVRI, pacritinib, tosedostat and other product
candidates. However, the lives of these patents are limited. Patents for the individual products extend for varying periods
according to the date of the patent filing or grant and the legal term of patents in the various countries where patent protection
is obtained.

Our U.S. and foreign composition of matter patents for pacritinib expire as follows: US patents expire in 2029
(compound) / 2030 (salt); foreign patents expire in 2026 (compound) / 2029 (salt). Pacritinib has orphan drug designation for
myelofibrosis in the U.S. and the E.U.

Our various tosedostat-directed patents expire in 2018. Tosedostat has orphan drug designation for acute myeloid

leukemia in the U.S. and the E.U.

Each patent may be eligible for future patent term restoration of up to five years under certain circumstances. Also,
regulatory exclusivity tied to the protection of clinical data may be complementary to patent protection. During a period of
regulatory exclusivity, competitors generally may not use the original applicant’s data as the basis for a generic application. In
the U.S., the data protection generally runs for five years from first marketing approval of a new chemical entity, extended to
seven years for an orphan drug indication.

In the absence of a patent, we would, to the extent possible, need to rely on unpatented technology, know-how and

confidential information. Ultimately, the lack or expiration at any given time of a patent to protect our compounds may allow
our competitors to copy the underlying inventions and better compete with us.

The risks and uncertainties associated with our intellectual property, including our patents, are discussed in more detail

in Part I, Item 1A, “Risk Factors.”

Manufacturing, Distribution and Associated Operations

Our manufacturing strategy utilizes third party contractors for the procurement and manufacture, as applicable, of raw

materials, active pharmaceutical ingredients and finished drug product, as well as for labeling, packaging, storage and
distribution of our compounds and associated supply chain operations. As our business continues to expand, we expect that
our manufacturing, distribution and related operational requirements will increase correspondingly. Additionally, in October
2016, we resumed primary responsibility for the development and commercialization of pacritinib as a result of the
termination of the Pacritinib License Agreement. The development and commercialization of a major product candidate like
pacritinib without a collaborative partner would significantly increase our manufacturing, distribution and related operational
requirements.

Each third party contractor will always undergo a formal qualification process by CTI subject matter experts prior to

signing any service agreement and initiating any manufacturing work. We currently have a commercial supply arrangement for
PIXUVRI and pacritinib.

Integral to our manufacturing strategy is our quality control and quality assurance program, which includes standard

operating procedures and specifications with the goal that our compounds are manufactured in accordance with current Good
Manufacturing Practices, or cGMPs, and other applicable global regulations. The cGMP compliance includes strict adherence
to regulations for quality control, quality assurance and the maintenance of records and documentation. Manufacturing
facilities for products and product candidates must meet cGMP requirements, and commercialized products must have
acquired FDA, EMA and any other applicable regulatory approval. In this regard, we expect to continue to rely on contract
manufacturers to produce sufficient quantities of our compounds in accordance with cGMPs for use in clinical trials and
distribution.

We believe our operational strategy of utilizing qualified outside vendors in the foregoing manner allows us to direct
our financial and managerial resources to development and commercialization activities, rather than to the establishment and
maintenance of a manufacturing and distribution infrastructure.

Competition

Competition in the pharmaceutical and biotechnology industries is intense. We face competition from a variety of

companies focused on developing oncology drugs. We compete with large pharmaceutical companies and with other
specialized biotechnology companies. In addition to the specific competitive factors discussed below, new anti-cancer drugs
that may be developed and marketed in the future could compete with our various compounds.

With respect to PIXUVRI, while there are no other products approved in the E.U. as monotherapy for the treatment of

adult patients with multiply relapsed or refractory aggressive NHL, there are other agents approved to treat aggressive NHL
that could be used in this setting, including both branded and generic anthracyclines as well as mitoxantrone.

With respect to our other investigational candidates, if approved, they may face competition from compounds that are
currently approved or may be approved in the future. Pacritinib would compete with Jakafi®, which is marketed by Incyte in
the U.S., and potentially other candidates in development that target JAK inhibition to treat cancer such as fedratinib that was
recently acquired and now being developed by Celgene. Tosedostat would compete with currently marketed products such as
Dacogen®, Vidaza®, Revlimid®, Thalomid® and Clolar®.

Many of our existing or potential competitors have substantially greater financial, technical and human resources than

us and may be better equipped to develop, manufacture and market products. Smaller companies may also prove to be
significant competitors, particularly through collaborative arrangements with large pharmaceutical and established
biotechnology companies. Many of these competitors have products that have been approved or are in development and
operate large, well-funded research and development programs.

Companies that complete clinical trials, obtain required regulatory approvals and commence commercial sales of their

products before us may achieve a significant competitive advantage if their products work through a similar mechanism as our
products and if the approved indications are similar. A number of biotechnology and pharmaceutical companies are developing
new products for the treatment of the same diseases being targeted by us. In some instances, such products have already
entered late-stage clinical trials or received FDA or European Commission approval. However, cancer drugs with distinctly
different mechanisms of action are often used together in combination for treating cancer, allowing several different products
to target the same cancer indication or disease type. Such combination therapy is typically supported by clinical trials that
demonstrate the advantage of combination therapy over that of a single-agent treatment.

We believe that our ability to compete successfully will be based on our ability to create and maintain scientifically

advanced technology, develop proprietary products, attract and retain scientific personnel, obtain patent or other protection for
our products, obtain required regulatory approvals and manufacture and successfully market our products, either alone or
through outside parties. We will continue to seek licenses with respect to technology related to our field of interest and may
face competition with respect to such efforts. See the risk factor, “We face direct and intense competition from our competitors
in the biotechnology and pharmaceutical industries, and we may not compete successfully against them.” in Part I, Item 1A,
“Risk Factors” of this Annual Report on Form 10-K for additional information regarding the risks and uncertainties we face
due to competition in our industry.

Government Regulation

We are subject to extensive regulation by the FDA and other federal, state, and local regulatory agencies. The Federal

Food, Drug, and Cosmetic Act, or the FDCA, and its implementing regulations set forth, among other things, requirements for
the testing, development, manufacture, quality control, safety, effectiveness, approval, labeling, storage, record keeping,
reporting, distribution, import, export, advertising and promotion of our products. Our activities in other countries will be
subject to regulation that is similar in nature and scope as that imposed in the U.S., although there can be important
differences. Additionally, some significant aspects of regulation in the E.U. are addressed in a centralized way through the
EMA and the European Commission, but country-specific regulation by the competent authorities of the E.U. member states
remains essential in many respects.

U.S. Regulation

In the U.S., the FDA regulates drugs under the FDCA and its implementing regulations, through review and approval of

NDAs. NDAs require extensive studies and submission of a large amount of data by the applicant.

Drug Development

Preclinical Testing. Before testing any compound in human subjects in the U.S., a company must generate extensive
preclinical data. Preclinical testing generally includes laboratory evaluation of product chemistry and formulation, as well as
toxicological and pharmacological studies in several animal species to assess the quality and safety of the product. Animal
studies must be performed in compliance with the FDA’s Good Laboratory Practice regulations and the U.S. Department of
Agriculture’s Animal Welfare Act.

IND Application. Human clinical trials in the U.S. cannot commence until an IND application is submitted and
becomes effective. A company must submit preclinical testing results to the FDA as part of the IND application, and the FDA
must evaluate whether there is an adequate basis for testing the drug in initial clinical studies in human volunteers. Unless the
FDA raises concerns, the IND application becomes effective 30 days following its receipt by the FDA. Once human clinical
trials have commenced, the FDA may stop the clinical trials by placing them on “clinical hold” because of concerns about the
safety of the product being tested, or for other reasons.

Clinical Trials. Clinical trials involve the administration of the drug to healthy human volunteers or to patients, under

the supervision of a qualified investigator. The conduct of clinical trials is subject to extensive regulation, including
compliance with the FDA’s bioresearch monitoring regulations and Good Clinical Practice, or GCP, requirements, which
establish standards for conducting, recording data from and reporting the results of, clinical trials, and are intended to assure
that the data and reported results are credible and accurate, and that the rights, safety, and well-being of study participants are
protected. Clinical trials must be conducted under protocols that detail the study objectives, parameters for monitoring safety,
and the efficacy criteria, if any, to be evaluated. Each protocol is reviewed by the FDA as part of the IND application. In
addition, each clinical trial must be reviewed, approved, and conducted under the auspices of an institutional review board, or
IRB, at the institution conducting the clinical trial. Companies sponsoring the clinical trials, investigators, and IRBs also must
comply with regulations and guidelines for obtaining informed consent from the study subjects, complying with the protocol
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and investigational plan, adequately monitoring the clinical trial and timely reporting adverse events. Foreign studies
conducted under an IND application must meet the same requirements that apply to studies being conducted in the U.S. Data
from a foreign study not conducted under an IND application may be submitted in support of an NDA if the study was
conducted in accordance with GCP and the FDA is able to validate the data.

A study sponsor is required to submit certain details about active clinical trials and clinical trial results to the National

Institutes of Health for public posting on http://clinicaltrials.gov. Human clinical trials typically are conducted in three
sequential phases, although the phases may overlap with one another:

•

Phase 1 clinical trials include the initial administration of the investigational drug to humans, typically to a small
group of healthy human subjects, but occasionally to a group of patients with the targeted disease or disorder. Phase 1
clinical trials generally are intended to determine the metabolism and pharmacologic actions of the drug, the side
effects associated with increasing doses, and, if possible, to gain early evidence of effectiveness.

Phase 2 clinical trials generally are controlled studies that involve a relatively small sample of the intended patient
population, and are designed to develop data regarding the product’s effectiveness, to determine dose response and the
optimal dose range and to gather additional information relating to safety and potential adverse effects.

Phase 3 clinical trials are conducted after preliminary evidence of effectiveness has been obtained, and are intended to
gather the additional information about safety and effectiveness necessary to evaluate the drug’s overall risk-benefit
profile, and to provide a basis for physician labeling. Generally, Phase 3 clinical development programs consist of
expanded, large-scale studies of patients with the target disease or disorder to obtain statistical evidence of the
efficacy and safety of the drug, or the safety, purity, and potency of a biological product, at the proposed dosing
regimen.

The sponsoring company, the FDA or the IRB may suspend or terminate a clinical trial at any time on various grounds,

including a finding that the subjects are being exposed to an unacceptable health risk. Further, success in early-stage clinical
trials does not assure success in later-stage clinical trials. Data obtained from clinical activities are not always conclusive and
may be subject to alternative interpretations that could delay, limit or prevent regulatory approval.

The FDA and IND application sponsor may agree in writing on the design and size of clinical trials intended to form

the primary basis of an effectiveness claim in an NDA application. This process is known as a SPA. These agreements may not
be changed after the clinical trials begin, except in limited circumstances. The existence of a SPA, however, does not assure
approval of a product candidate.

Drug Approval

Assuming successful completion of the required clinical testing, the results of the preclinical studies and of the clinical

trials, together with other detailed information, including information on the manufacture and composition of the
investigational product, are submitted to the FDA in the form of an NDA requesting approval to market the product for one or
more indications. The testing and approval process requires substantial time, effort and financial resources. Submission of an
NDA requires payment of a substantial review user fee to the FDA. The FDA will review the application and may deem it to
be inadequate to support commercial marketing, and there can be no assurance that any product approval will be granted on a
timely basis, if at all. The FDA may also seek the advice of an advisory committee, typically a panel of clinicians practicing in
the field for which the product is intended, for review, evaluation and a recommendation as to whether the application should
be approved. The FDA is not bound by the recommendations of the advisory committee.

The FDA has various programs, including breakthrough therapy, fast track, priority review and accelerated approval,

that are intended to expedite or simplify the process for reviewing drugs and/or provide for approval on the basis of surrogate
endpoints. Generally, drugs that may be eligible for one or more of these programs are those for serious or life-threatening
conditions, those with the potential to address unmet medical needs and those that provide meaningful benefit over existing
treatments. We cannot be sure that any of our drugs will qualify for any of these programs, or that, if a drug does qualify, the
review time will be reduced or the product will be approved.

Before approving a NDA, the FDA usually will inspect the facility or the facilities where the product is manufactured,

tested and distributed and will not approve the product unless cGMP compliance is satisfactory. If the FDA evaluates the NDA
and the manufacturing facilities as acceptable, the FDA may issue an approval letter, or in some cases, a complete response
letter. A complete response letter contains a number of conditions that must be met in order to secure final approval of the
NDA. When and if those conditions have been met to the FDA’s satisfaction, the FDA will issue an approval letter. The
approval letter authorizes commercial marketing of the drug for specific indications. As a condition of approval, the FDA may
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require post-marketing testing and surveillance to monitor the product’s safety or efficacy, or impose other post-approval
commitment conditions.

In some circumstances, post-marketing testing may include post-approval clinical trials, sometimes referred to as Phase

4 clinical trials, which are used primarily to gain additional experience from the treatment of patients in the intended
population, particularly for long-term safety follow-up. In addition, the FDA may require a Risk Evaluation and Mitigation
Strategy, or REMS, to ensure that the benefits outweigh the risks. A REMS can include medication guides, physician
communication plans and elements to assure safe use, such as restricted distribution methods, patient registries or other risk
mitigation tools.

After approval, certain changes to the approved product, such as adding new indications, making certain manufacturing
changes or making certain additional labeling claims, are subject to further FDA review and approval. Obtaining approval for
a new indication generally requires that additional clinical trials be conducted.

Post-Approval Requirements

Holders of an approved NDA are required to: (i) report certain adverse reactions to the FDA; (ii) comply with certain

requirements concerning advertising and promotional labeling for their products; and (iii) continue to have quality control and
manufacturing procedures conform to cGMP after approval. The FDA periodically inspects the sponsor’s records related to
safety reporting and/or manufacturing and distribution facilities; this latter effort includes assessment of compliance with
cGMP. Accordingly, manufacturers must continue to expend time, money and effort in the area of production, quality control
and distribution to maintain cGMP compliance. Future FDA inspections may identify compliance issues at manufacturing
facilities that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of
problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved NDA,
including withdrawal of the product from the market.

Marketing of prescription drugs is also subject to significant regulation through federal and state agencies tasked with

consumer protection and prevention of medical fraud, waste and abuse. After approval in the U.S., we must comply with
FDA’s regulation of drug promotion and advertising, including restrictions on off-label promotion, and we comply with
federal anti-kickback statutes, limitations on gifts and payments to physicians and reporting of payments to certain third
parties, among other requirements.

Failure to comply with applicable U.S. requirements may subject us to administrative or judicial sanctions, such as

clinical holds, FDA refusal to approve pending NDAs or supplemental applications, warning letters, product recalls, product
seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution.

Non-U.S. Regulation

Before our products can be marketed outside of the U.S., they are subject to regulatory approval similar to that required

in the U.S., although the requirements governing the conduct of clinical trials, including additional clinical trials that may be
required, product licensing, pricing and reimbursement vary widely from country to country. No action can be taken to market
any product in a country until an appropriate application has been approved by the regulatory authorities in that country. The
current approval process varies from country to country, and the time spent in gaining approval varies from that required for
FDA approval. In certain countries, the sales price of a product must also be approved. The pricing review period often begins
after market approval is granted. Even if a product is approved by a regulatory authority, satisfactory prices may not be
approved for such product.

In the E.U., marketing authorizations for medicinal products can be obtained through several different procedures

founded on the same basic regulatory process. The centralized procedure is mandatory for certain medicinal products,
including orphan medicinal products, medicinal products derived from certain biotechnological processes, advanced therapy
medicinal products and certain other new medicinal products containing a new active substance for the treatment of certain
diseases. It is optional for certain other products, including medicinal products that are significant therapeutic, scientific or
technical innovations, or whose authorization would be in the interest of public or animal health. The centralized procedure
allows a company to submit a single application to the EMA which will provide a positive opinion regarding the application if
it meets certain quality, safety, and efficacy requirements. Based on the opinion of the EMA, the European Commission takes
a final decision to grant a centralized marketing authorization which is valid in all 28 E.U. Member States and three of the four
European Free Trade Association states (Iceland, Liechtenstein and Norway).

Unlike the centralized authorization procedure, the decentralized marketing authorization procedure requires a separate
application to, and leads to separate approval by, the competent authorities of each E.U. Member State in which the product is
to be marketed. One national competent authority selected by the applicant, the Reference Member State, assesses the
application for marketing authorization. Following a positive opinion by the competent authority of the Reference Member
State the competent authorities of the other E.U. Member States, Concerned Member States are subsequently required to grant
marketing authorization for their territory on the basis of this assessment except where grounds of potential serious risk to
public health require this authorization to be refused. The mutual recognition procedure is similarly based on the acceptance
by the competent authorities of the Concerned Member States of the marketing authorization of a medicinal product by the
competent authorities of other Reference Member States. The holder of a national marketing authorization granted by a
Reference Member State may submit an application to the competent authority of a Concerned Member State requesting that
this authority mutually recognize the marketing authorization delivered by the competent authority of the Reference Member
State.

Similar to accelerated approval regulations in the U.S., conditional marketing authorizations can be granted in the E.U.

by the European Commission in exceptional circumstances. A conditional marketing authorization can be granted for
medicinal products where a number of criteria are fulfilled; i) although comprehensive clinical data referring to the safety and
efficacy of the medicinal product have not been supplied, the benefit/risk balance of the product is positive, ii) it is likely that
the applicant will be in a position to provide the comprehensive clinical data, iii) unmet medical needs will be fulfilled and iv)
the benefit to public health of the immediate availability on the market of the medicinal product concerned outweighs the risk
inherent in the fact that additional data are still required. A conditional marketing authorization must be renewed annually.
Under the provisions of the conditional marketing authorization for PIXUVRI, we are required to complete a post-marketing
study to further investigate the effects of using PIXUVRI in patients who had received prior treatment with rituximab.

Even if a product receives authorization in the E.U., there can be no assurance that reimbursement for such product will

be secured on a timely basis or at all. Individual countries comprising the EU member states, rather than the EU, have
jurisdiction across the region over patient reimbursement or pricing matters. Therefore, we will need to expend significant
effort and expense to establish and maintain reimbursement arrangements in the various countries comprising the E.U. and
may never succeed in obtaining widespread reimbursement arrangements therein.

The national authorities of the individual E.U. Member States are free to restrict the range of medicinal products for

which their national health insurance systems provide reimbursement and to control the prices and/or reimbursement of
medicinal products for human use. Some E.U. Member States adopt policies according to which a specific price or level of
reimbursement is approved for the medicinal product. Other E.U. Member States adopt a system of direct or indirect controls
on the profitability of the company placing the medicinal product on the market, including volume-based arrangements and
reference pricing mechanisms.

Health Technology Assessment, or HTA, of medicinal products is becoming an increasingly common part of the pricing

and reimbursement procedures in some E.U. Member States. These E.U. Member States include the U.K, France, Germany
and Sweden. The HTA process, which is governed by the national laws of these countries, is the procedure according to which
the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given
medicinal product in the national healthcare systems of the individual country is conducted. The extent to which pricing and
reimbursement decisions are influenced by the HTA of the specific medicinal product vary between E.U. Member States.

Post-Approval Regulation

Similarly to the U.S., both marketing authorization holders and manufacturers of medicinal products are subject to
comprehensive regulatory oversight by the EMA and the competent authorities of the individual E.U. Member States both
before and after grant of the manufacturing and marketing authorizations. Failure by us or by any of our third-party partners,
including suppliers, manufacturers and distributors to comply with E.U. laws and the related national laws of individual E.U.
Member States governing the conduct of clinical trials, manufacturing approval, marketing authorization of medicinal
products and marketing of such products, both before and after grant of marketing authorization, may result in administrative,
civil or criminal penalties. These penalties could include delays or refusal to authorize the conduct of clinical trials or to grant
marketing authorization, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the
marketing authorization, total or partial suspension of production, distribution, manufacturing or clinical trials, operating
restrictions, injunctions, suspension of licenses, fines and criminal penalties.

The holder of an E.U. marketing authorization for a medicinal product must also comply with E.U. pharmacovigilance

legislation and its related regulations and guidelines, which entail many requirements for conducting pharmacovigilance, or
the assessment and monitoring of the safety of medicinal products. These rules can impose on central marketing authorization
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holders for medicinal products the obligation to conduct a labor intensive collection of data regarding the risks and benefits of
marketed products and to engage in ongoing assessments of those risks and benefits, including the possible requirement to
conduct additional clinical studies, which may be time consuming and expensive and could impact our profitability. Non-
compliance with such obligations can lead to the variation, suspension or withdrawal of the marketing authorization for the
product or imposition of financial penalties or other enforcement measures. In the E.U., PIXUVRI's label includes an inverted
black triangle, which indicates that it is subject to additional monitoring, as a condition of authorization of PIXUVRI.

The manufacturing process for medicinal products in the E.U. is highly regulated and regulators may shut down

manufacturing facilities that they believe do not comply with regulations. Manufacturing requires a manufacturing
authorization, and the manufacturing authorization holder must comply with various requirements set out in the applicable
E.U. laws, regulations and guidance, including Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004
and the European Commission Guidelines for Good Manufacturing Practice. These requirements include compliance with
E.U. cGMP standards when manufacturing medicinal products and active pharmaceutical ingredients, including the
manufacture of active pharmaceutical ingredients outside of the E.U. with the intention to import the active pharmaceutical
ingredients into the E.U. Similarly, the distribution of medicinal products into and within the E.U. is subject to compliance
with the applicable E.U. laws, regulations and guidelines, including the requirement to hold appropriate authorizations for
distribution granted by the competent authorities of the E.U. Member States.

We and our third-party manufacturers are subject to cGMP, which are extensive regulations governing manufacturing

processes, stability testing, record keeping and quality standards as defined by the EMA, the competent authorities of E.U.
Member States and other regulatory authorities. The EMA reviews Periodic Safety Update Reports for medicinal products
authorized in the E.U. If the EMA has concerns that the risk benefit profile of a product has varied, it can adopt an opinion
advising that the existing marketing authorization for the product be suspended or varied and can advise that the marketing
authorization holder be obliged to conduct post-authorization safety studies. The EMA opinion is submitted for approval by
the European Commission. Failure by the marketing authorization holder to fulfill the obligations for which the approved
opinion provides can undermine the on-going validity of the marketing authorization.

Sales and Marketing Regulations

In the E.U., the advertising and promotion of our products are subject to E.U. Member States’ laws governing

promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial
practices. In addition, other legislation adopted by individual E.U. Member States may apply to the advertising and promotion
of medicinal products. These laws require that promotional materials and advertising in relation to medicinal products comply
with the product’s Summary of Product Characteristics, or SmPC, as approved by the competent authorities. Promotion of a
medicinal product that does not comply with the SmPC is considered to constitute off-label promotion. The off-label
promotion of medicinal products is prohibited in the E.U.. The applicable laws at E.U. level and in the individual E.U.
Member States also prohibit the direct-to-consumer advertising of prescription-only medicinal products. Violations of the rules
governing the promotion of medicinal products in the E.U. could be penalized by administrative measures, fines and
imprisonment. These laws may further limit or restrict the advertising and promotion of our products to the general public and
may also impose limitations on our promotional activities with health care professionals.

Anti-Corruption Legislation

Our business activities outside of the U.S. are subject to anti-bribery or anti-corruption laws, regulations, industry self-

regulation codes of conduct and physicians’ codes of professional conduct or rules of other countries in which we operate,
including the U.K. Bribery Act of 2010.

Interactions between pharmaceutical companies and physicians are also governed by strict laws, regulations, industry

self-regulation codes of conduct and physicians’ codes of professional conduct developed at both E.U. level and in the
individual E.U. Member States. The provision of benefits or advantages to physicians to induce or encourage the prescription,
recommendation, endorsement, purchase, supply, order or use of medicinal products is prohibited in the E.U.. Violation of
these laws could result in substantial fines and imprisonment. Payments made to physicians in certain E.U. Member States
also must be publicly disclosed. Moreover, agreements with physicians must often be the subject of prior notification and
approval by the physician’s employer, his/her competent professional organization, and/or the competent authorities of the
individual E.U. Member States. Failure to comply with these requirements could result in reputational risk, public reprimands,
administrative penalties, fines or imprisonment.

Data Privacy and Protection

Data protection laws and regulations have been adopted at E.U. level with related implementing laws in individual E.U.

Member States which impose significant compliance obligations. For example, the E.U. Data Protection Directive, as
implemented into national laws by the E.U. Member States, imposes strict obligations and restrictions on the ability to collect,
analyze and transfer personal data, including health data from clinical trials and adverse event reporting.

Furthermore, there is a growth towards the public disclosure of clinical trial data in the E.U. which also adds to the
complexity of processing health data from clinical trials. Such public disclosure obligations are provided in the new E.U.
Clinical Trials Regulation, EMA disclosure initiatives, and voluntary commitments by industry. Data protection authorities
from the different E.U. Member States may interpret the E.U. Data Protection Directive and national laws differently, which
adds to the complexity of processing personal data in the E.U., and guidance on implementation and compliance practices are
often updated or otherwise revised. Failing to comply with these laws could lead to government enforcement actions and
significant penalties against us, and adversely impact our operating results. Apart from exceptional circumstances, the E.U.
Data Protection Directive prohibits the transfer of personal data to countries outside of the European Economic Area, that are
not considered by the European Commission to provide an adequate level of data protection, including the U.S.

Consequences of Non-Compliance

Failure to comply with applicable requirements may subject us to administrative or judicial sanctions, such as clinical
holds, refusal of regulatory authorities to approve or authorize pending product applications, warning letters, product recalls,
product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution.

Environmental Regulation

In connection with our research and development activities, we are subject to federal, state and local laws, rules,
regulations and policies, both internationally and domestically, governing the use, generation, manufacture, storage, air
emission, effluent discharge, handling, treatment, transportation and disposal of certain materials, biological specimens and
wastes and employee safety and health matters. Although we believe that we have complied with these laws, regulations and
policies in all material respects and have not been required to take any significant action to correct any noncompliance, we
may be required to incur significant costs to comply with environmental and health and safety regulations in the future. Our
research and development involves the controlled use of hazardous materials, including, but not limited to, certain hazardous
chemicals and radioactive materials. Although we believe that our safety procedures for handling and disposing of such
materials comply with applicable law and regulations, the risk of accidental contamination or injury from these materials
cannot be eliminated. In the event of such an accident, we could be held liable for any damages that result and any such
liability not covered by insurance could exceed our resources. See the risk factor, “We may be subject to claims relating to
improper handling, storage or disposal of these materials.” in Part I, Item 1A, “Risk Factors” of this Annual Report on Form
10-K for additional information regarding the risks and uncertainties we face due to the use of hazardous materials.

Employees

As of December 31, 2017, we employed 57 individuals in the U.S., including 1 employee at our majority-owned

subsidiary Aequus Biopharma, Inc., or Aequus, and 1 employee in Italy. Our U.S. employees do not have a collective
bargaining agreement. Our employee in Italy is subject to a collective bargaining agreement. We believe our relations with our
employees are good.

Corporate Information

We were incorporated in Washington in 1991. In May 2014, we changed our name from “Cell Therapeutics, Inc.” to

“CTI BioPharma Corp.” We completed our initial public offering in 1997 and our shares are listed on The NASDAQ Capital
Market in the U.S. where our symbol is CTIC. On January 24, 2018, we changed our state of incorporation from the State of
Washington to the State of Delaware by merging the Company with and into its wholly-owned Delaware subsidiary named
CTI Biopharma Corp. and delisted the Company from Borsa Italiana’s Main Market, or MTA. Our principal executive offices
are located at 3101 Western Avenue, Suite 800, Seattle, Washington 98121. Our telephone number is (206) 282-7100. Our
website address is http://www.ctibiopharma.com. We may post information that is important to investors on our website.
However, information found on our website is not incorporated by reference into this Annual Report on Form 10-K. “CTI
BioPharma”, “PIXUVRI” and “Opaxio” are our proprietary marks. All other product names, trademarks and trade names
referred to in this Annual Report on Form 10-K are the property of their respective owners. We make available free of charge
on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other
filings pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as
reasonably practicable after each is electronically filed with, or furnished to, the SEC.

In addition, you may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants, including the Company, that file electronically with the SEC.

Item 1A. Risk Factors

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. The occurrence
of any of the risks described below and elsewhere in this document, including the risk that our actual results may differ
materially from those anticipated in these forward-looking statements, could materially adversely affect our business,
financial condition, liquidity, operating results or prospects and the trading price of our securities. Additional risks and
uncertainties that we do not presently know or that we currently deem immaterial may also harm our business, financial
condition, operating results and prospects and the trading price of our securities.

Factors Affecting Our Business, Financial Condition, Operating Results and Prospects

We will need to raise additional funds to operate our business, but additional funds may not be available on
acceptable terms, or at all. Any inability to raise required capital when needed could harm our liquidity, financial condition,
business, operating results and prospects.

We have substantial operating expenses associated with the development of our compounds and the
commercialization of PIXUVRI, and we have significant contractual payment obligations. Our available cash, cash
equivalents and restricted cash were $43.2 million as of December 31, 2017. In February 2018, we received approximately
$64.2 million in net proceeds from the public offering of common stock as discussed in Part II, Item 8, "Financial
Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 21. Subsequent Events," which is
incorporated herein by reference. In addition, we received a $10.0 million milestone payment from Teva Pharmaceutical
Industries Ltd. relating to the achievement of a milestone for FDA approval of TRISENOX for first line treatment of acute
promyelocytic leukemia. We believe that our present financial resources, together with payments projected to be received
under certain of our contractual agreements and our ability to control costs, will be sufficient to fund our operations through
the first quarter of 2020. However, cash forecasts and capital requirements are subject to change as a result of a variety of
risks and uncertainties. Developments in and expenses associated with our clinical trials and other research and
development activities, including the resumption of primary responsibilities for the development and commercialization of
pacritinib as a result of the termination of the Pacritinib License Agreement in October 2016, acquisitions of compounds or
other assets, our ability to generate projected sales of PIXUVRI, any expansion of our sales and marketing organization for
PIXUVRI, regulatory approval developments, our ability to consummate appropriate collaborations for development and
commercialization activities, our ability to reach milestones triggering payments under applicable contractual arrangements,
receive the associated payments, litigation and other disputes, competitive market developments and other unplanned
expenses or business developments may consume capital resources earlier than planned. Due to these and other factors, any
forecast for the period for which we will have sufficient resources to fund our operations, as well as any other operational or
business projection we have disclosed, or may, from time to time, disclose, may fail.

On November 28, 2017, we entered into a Loan and Security Agreement with Silicon Valley Bank, or SVB, the

proceeds of which was partially used to repay in full all outstanding indebtedness under our Loan and Security Agreement,
dated March 26, 2013, as amended, with Systems Medicine LLC and Hercules Technology Growth Capital, Inc., or
Hercules, (and certain of its affiliates). As of December 31, 2017, we had an outstanding principal balance under our senior
secured term loan agreement of $16.0 million. We have an option to borrow an additional $2.0 million through July 31,
2018, subject to the satisfaction of certain conditions, which if borrowed would increase our outstanding principal balance.
We are required to make monthly interest only payments for at least 12 months after closing, through November 1, 2018,
which period of interest-only payments may be extended to 18 months upon the occurrence of a certain milestone event, in
the approximate amount of $0.1 million per month. After the initial 12-month interest-only period, we are required to pay
interest plus principal payments for 36 months, in the approximate amount of $0.5 million per month, with the final
principal plus interest payment of approximately $0.4 million as well as a back-end fee of $1.4 million on November 1,
2021. These borrowings are secured by a first priority security interest on substantially all of our personal property except
our intellectual property and subject to certain other exceptions. In addition, the senior secured term loan agreement requires
us to comply with restrictive covenants, including those that limit our operating flexibility and ability to borrow additional
funds. A failure to make a required loan payment or an uncured covenant breach could lead to an event of default, and in
such case, all amounts then outstanding may become due and payable immediately.

We may need to acquire additional funds in order to develop our business. We may seek to raise such capital

through public or private equity financings, partnerships, collaborations, joint ventures, disposition of assets, debt
financings or restructurings, bank borrowings or other sources of financing. However, our ability to do so is subject to a
number of risks, uncertainties, constraints and consequences, including, but not limited to, the following:

• our ability to raise capital through the issuance of additional shares of our common stock or convertible securities
is restricted by the limited number of our residual authorized shares, the potential difficulty of obtaining shareholder
approval to increase authorized shares and the restrictive covenants under our senior secured term loan agreement;

• issuance of equity-based securities will dilute the proportionate ownership of existing shareholders;

• our ability to obtain further funds from any potential loan arrangements is limited by our existing senior secured
term loan agreement;

• certain financing arrangements may require us to relinquish rights to various assets and/or impose more restrictive
terms than any of our existing or past arrangements; and

• we may be required to meet additional regulatory requirements, and we may be subject to certain contractual
limitations, which may increase our costs and harm our ability to obtain funding.

For these and other reasons, additional funding may not be available on favorable terms or at all. If we fail to

obtain additional capital when needed, we may be required to delay, scale back or eliminate some or all of our research and
development programs, reduce our selling, general and administrative expenses, be unable to attract and retain highly
qualified personnel, refrain from making our contractually required payments when due (including debt payments) and/or
be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection. Any of these consequences
could harm our business, financial condition, operating results and prospects.

We have in the past received and may in the future receive audit reports with an explanatory paragraph on our

consolidated financial statements.

Our independent registered public accounting firm included an explanatory paragraph in its reports on our

consolidated financial statements for each of the years ended December 31, 2007 through December 31, 2011 and for the years
ended December 31, 2014 and 2016 regarding their substantial doubt as to our ability to continue as a going concern. Although
our independent registered public accounting firm removed this going concern explanatory paragraph in its report on our
December 31, 2017 consolidated financial statements, we expect to continue to need to raise additional financing to fund our
operations and satisfy obligations as they become due. The inclusion of a going concern explanatory paragraph in future years
may negatively impact the trading price of our common stock and make it more difficult, time consuming or expensive to
obtain necessary financing, and we cannot guarantee that we will not receive such an explanatory paragraph in the future.

We expect to continue to incur net losses, and we may never achieve profitability.

We were incorporated in 1991 and have incurred a net operating loss every year since our formation. As of
December 31, 2017, we had an accumulated deficit of $2.2 billion, and we expect to continue to incur net losses. As part of
our business plan, we will need to continue to conduct research, development, testing and regulatory compliance activities
with respect to our compounds and ensure the procurement of manufacturing and drug supply services, the costs of which,
together with projected general and administrative expenses, is expected to result in operating losses for the foreseeable
future. There can be no assurances that we will ever achieve profitability.

In order to develop and commercialize pacritinib, we may need to raise additional financing or seek a new

collaboration partner for pacritinib.

We have resumed primary responsibility for the development and commercialization of pacritinib as a result of the

termination of the Pacritinib License Agreement in October 2016, and we are no longer eligible to receive cost sharing or
milestone payments for pacritinib’s development from Baxalta. Because obtaining regulatory approval requires substantial
time, effort and financial resources, the termination of this collaborative partnership could negatively impact our ability to
successfully develop and commercialize pacritinib. We currently have no commitments or arrangements for any additional
financing to fund the development and commercial launch of pacritinib, and we may need to seek additional funding, which
may not be available or may not be available on favorable terms. We could also seek another collaborative partnership for
the development and commercialization of pacritinib, which may not be available on reasonable terms or at all.

If our development and commercialization collaborations are not successful, or if we are unable to enter into

additional collaborations, we may not be able to effectively develop and/or commercialize our compounds, which could
have a material adverse effect on our business.

Our business is heavily dependent on the success of our development and commercialization collaborations. In
particular, under the Restated Agreement with Servier, we rely heavily on Servier to collaborate with us to develop and
commercialize PIXUVRI. As a result of our dependence on our relationship with Servier, the success or commercial
viability of PIXUVRI is, to a certain extent, beyond our control. We are subject to a number of specific risks associated with
our dependence on our collaborative relationship with Servier, including but not limited to the following: possible
disagreements as to the timing, nature and extent of development plans for the respective compound, including clinical trials
or regulatory approval strategy; changes in their respective personnel who are key to the collaboration efforts; any changes
in their respective business strategies adverse to our interests, whether in connection with a change of control or otherwise;
possible disagreements regarding ownership of proprietary rights; the ability to meet our financial and other contractual
obligations under the respective agreements; and the possibility that Servier could elect to terminate their agreement with us
pursuant to “at-will” termination clauses or breach their agreement with us. Furthermore, the contingent financial returns
under our collaboration with Servier depends in large part on the achievement of development and commercialization
milestones and the ability to generate applicable product sales to trigger royalty payments. Therefore, our success, and any
associated future financial returns to us and our investors, will depend in large part on the performance of Servier. If our
existing collaborations fail, or if we do not successfully enter into additional collaborations when needed, we may be unable
to further develop and commercialize the applicable compounds, generate revenues to sustain or grow our business or
achieve profitability, which would harm our business, financial condition, operating results and prospects.

The regulatory approval process for pacritinib has been subject to delay and uncertainty associated with clinical

holds placed on pacritinib clinical trials in February 2016 and the withdrawal of the original MAA in Europe. While the full
clinical hold on pacritinib trials has been removed and a new MAA has been validated by the EMA, our dose-exploration
trial for pacritinib and further clinical trials for pacritinib could be subject to further delay or we could be prevented from
further studying pacritinib or seeking its commercialization.

On February 8, 2016, the FDA notified us that a full clinical hold had been placed on pacritinib and we
subsequently withdrew our NDA for pacritinib until we determine next steps. A full clinical hold is a suspension of the
clinical work requested under an investigational new drug application. Under the full clinical hold, all patients on pacritinib
at the time the hold was placed were required to discontinue pacritinib, and we were not permitted to enroll any new
patients or start pacritinib as initial or crossover treatment. In its written notification, the FDA noted interim overall survival
results from PERSIST-2 showing a detrimental effect on survival consistent with the results from PERSIST-1, and that
deaths in PERSIST-2 in pacritinib-treated patients include intracranial hemorrhage, cardiac failure and cardiac arrest. On
January 3, 2017, the full clinical hold was removed. Our complete response submission included, among other items, final
Clinical Study Reports for both PERSIST-1 and 2 trials and the dose-exploration clinical trial protocol requested by the
FDA. In July 2017, we enrolled the first patient in the PAC203 trial. We plan to enroll up to approximately 105 patients in
our PAC203 trial with primary myelofibrosis who have failed prior ruxolitinib therapy to evaluate the dose response
relationship for safety and efficacy (spleen volume reduction at 12 or 24 weeks) of three dose regimens: 100 mg once-daily,
100 mg twice-daily (BID) and 200 mg BID. The 200 mg BID dose regimen was used in PERSIST-2. The trial is expected to
enroll up to 105 patients. We enrolled our first patient in PAC203 in July 2017 and expect to complete enrollment by
mid-2018. We expect to have interim data from PAC203 by the end of the second quarter of 2018 and full data in the first
quarter of 2019. The results of PAC203 may not address all of the FDA’s concerns regarding appropriate safe and
efficacious dosage for pacritinib, and the FDA may again request additional information or require us to pursue new clinical
safety trials with changes to, among other things, protocol, study design or sample size.

Further, in the EMA’s initial assessment report regarding our original MAA, the CHMP determined that the current

application was not approvable because of major objections in the areas of efficacy, safety (hematological and
cardiovascular toxicity) and the overall risk-benefit profile of pacritinib. Subsequent to the filing of the original MAA, data
from the second phase 3 trial of pacritinib, PERSIST-2, were reported. These data suggest that pacritinib may show clinical
benefit in patients who have failed or are intolerant to ruxolinitib therapy, a population for which there is no approved
therapy. Following discussions with the EMA about how PERSIST-2 data might address the major objections and how to
integrate the data into the current application, we withdrew our original MAA, and we submitted a new MAA that seeks to
address the major objections by including data from PERSIST-2. The new application is for the treatment of patients with
myelofibrosis who have thrombocytopenia (platelet counts less than 100,000 per microliter). The new MAA was validated
by the EMA in July 2017. Following discussions with the EMA about how PERSIST-2 data might address the major
objections and how to integrate the data into the current application, we withdrew the original MAA, and submitted a new
application for the treatment of patients with myelofibrosis who have thrombocytopenia (platelet counts less than 100,000
per microliter). The new MAA was validated by the EMA in July 2017. Validation confirms that the submission is complete
and initiates the centralized review process by the CHMP. The CHMP review period is 210 days, excluding question or
opinion response periods, after which the CHMP opinion is reviewed by the European Commission, which usually issues a

final decision on E.U. authorization within three months. If authorized, pacritinib would be granted a marketing license
valid in all 28 E.U. member states, Norway, Iceland and Liechtenstein.

The submission of new marketing applications, complying with any additional requests for information from the

FDA or EMA or making any changes to protocol, study design, or sample size may be time-consuming, expensive and delay
or prevent our ability to continue to study pacritinib. If we are unable to address any further recommendations, requests, or
objections in a manner satisfactory to the FDA or EMA, as applicable, in a timely manner, or at all, we could be delayed or
prevented from seeking commercialization of pacritinib. Delays in the commercialization of pacritinib would prevent us
from receiving future milestone or royalty payments, and otherwise significantly harm our business.

Compounds that appear promising in research and development may fail to reach later stages of development for a

number of reasons, including, among others, that clinical trials may take longer to complete than expected or may not be
completed at all, and top-line or preliminary clinical trial data reports may ultimately differ from actual results once
existing data are more fully evaluated.

Successful development of anti-cancer and other pharmaceutical products is highly uncertain, and obtaining

regulatory approval to market drugs to treat cancer is expensive, difficult and speculative. Compounds that appear
promising in research and development may fail to reach later stages of development for several reasons, including, but not
limited to:

• delay or failure in obtaining necessary U.S. and international regulatory approvals, or the imposition of a partial or
full regulatory hold on a clinical trial;

• difficulties in formulating a compound, scaling the manufacturing process, timely attaining process validation for
particular drug products and obtaining manufacturing approval;

• pricing or reimbursement issues or other factors that may make the product uneconomical to commercialize;

• production problems, such as the inability to obtain raw materials or supplies satisfying acceptable standards for
the manufacture of our products, equipment obsolescence, malfunctions or failures, product quality/contamination
problems or changes in regulations requiring manufacturing modifications;

• inefficient cost structure of a compound compared to alternative treatments;

• obstacles resulting from proprietary rights held by others with respect to a compound, such as patent rights;

• lower than anticipated rates of patient enrollment as a result of factors, such as the number of patients with the
relevant conditions, the proximity of patients to clinical testing centers, eligibility criteria for tests and competition
with other clinical testing programs;

• preclinical or clinical testing requiring significantly more time than expected, resources or expertise than originally
expected and inadequate financing, which could cause clinical trials to be delayed or terminated;

• failure of clinical testing to show potential products to be safe and efficacious, and failure to demonstrate desired
safety and efficacy characteristics in human clinical trials;

• suspension of a clinical trial at any time by us, an applicable collaboration partner or a regulatory authority on the
basis that the participants are being exposed to unacceptable health risks or for other reasons;

• delays in reaching or failing to reach agreement on acceptable terms with prospective CROs, and trial sites; and

• failure of third parties, such as CROs, academic institutions, collaborators, cooperative groups and/or investigator
sponsors, to conduct, oversee and monitor clinical trials and results.

In addition, from time to time, we report top-line data for clinical trials. Such data are based on a preliminary
analysis of then-available efficacy and safety data, and such findings and conclusions are subject to change following a
more comprehensive review of the data related to the particular study or trial. Top-line or preliminary data are based on
important assumptions, estimations, calculations and information then available to us to the extent we have had, at the time
of such reporting, an opportunity to fully and carefully evaluate such information in light of all surrounding facts,

circumstances, recommendations and analyses. As a result, top-line results may differ from future results, or different
conclusions or considerations may qualify such results once existing data have been more fully evaluated. In addition, third
parties, including regulatory agencies, may not accept or agree with our assumptions, estimations, calculations or analyses
or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the
approvability or commercialization of the particular compound and our business in general.

If the development of our compounds is delayed or fails, or if top-line or preliminary clinical trial data reported
differ from actual results, our development costs may increase and the ability to commercialize our compounds may be
harmed, which could harm our business, financial condition, operating results or prospects.

We or our collaboration partners may not obtain or maintain the regulatory approvals required to develop or

commercialize some or all of our compounds.

We are subject to rigorous and extensive regulation by the FDA in the U.S. and by comparable agencies in other

jurisdictions, including the EMA in the E.U. Some of our other product candidates are currently in research or development
and, other than conditional marketing authorization for PIXUVRI in the E.U., we have not received marketing approval for
our compounds. Our products may not be marketed in the U.S. until they have been approved by the FDA and may not be
marketed in other jurisdictions until they have received approval from the appropriate foreign regulatory agencies. Each
product candidate requires significant research, development and preclinical testing and extensive clinical investigation
before submission of any regulatory application for marketing approval. Obtaining regulatory approval requires substantial
time, effort and financial resources, and we may not be able to obtain approval of any of our products on a timely basis, or
at all. For instance, on February 8, 2016, the FDA placed pacritinib on full clinical hold and the clinical hold was not
removed until January 3, 2017. The number, size, design and focus of preclinical and clinical trials that will be required for
approval by the FDA, the EMA or any other foreign regulatory agency varies depending on the compound, the disease or
condition that the compound is designed to address and the regulations applicable to any particular compound. Preclinical
and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval. The FDA,
the EMA and other foreign regulatory agencies can delay, limit or deny approval of a compound for many reasons,
including, but not limited to:

• a compound may not be shown to be safe or effective;

• the clinical and other benefits of a compound may not outweigh its safety risks;

• clinical trial results may be negative or inconclusive, or adverse medical events may occur during a clinical trial;

• the results of clinical trials may not meet the level of statistical significance required by regulatory agencies for
approval;

• such regulatory agencies may interpret data from pre-clinical and clinical trials in different ways than we do;

• such regulatory agencies may not approve the manufacturing process of a compound or determine that a third-party
contract manufacturers manufactures a compound in accordance with current good manufacturing practices, or
cGMPs;

• a compound may fail to comply with regulatory requirements; or

• such regulatory agencies might change their approval policies or adopt new regulations.

If our compounds are not approved at all or quickly enough to provide net revenues to defray our operating expenses, our
business, financial condition, operating results and prospects could be harmed.

In the event that we seek and the FDA does not grant accelerated approval or priority review for a drug candidate,

we would experience a longer time to commercialization in the U.S., if commercialized at all, our development costs may
increase and our competitive position may be harmed.

We were seeking accelerated approval and requested Priority Review of our NDA for pacritinib. However, on

February 8, 2016, the FDA notified us that a full clinical hold had been placed on pacritinib and we subsequently withdrew
our NDA for pacritinib. On January 3, 2017, the full clinical hold was removed. In July 2017, we enrolled the first patient in
a new trial, PAC203, and we plan to enroll up to approximately 105 patients with primary myelofibrosis who have failed

prior ruxolitinib therapy to evaluate the dose response relationship for safety and efficacy (spleen volume reduction at 12
and 24 weeks) of three dose regimens: 100 mg once-daily, 100 mg twice-daily (BID) and 200 mg BID. The 200 mg BID
dose regimen was used in PERSIST-2.

We may in the future decide to seek accelerated approval pathway for our compounds. The FDA may grant

accelerated approval to a product designed to treat a serious or life-threatening condition that provides meaningful
therapeutic benefit over available therapies upon a determination that the product has an effect on a surrogate endpoint or
intermediate clinical endpoint that is reasonably likely to predict clinical benefit. A surrogate endpoint under an accelerated
approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct
therapeutic advantage, but is a clinically important improvement from a patient and public health perspective. There can be
no assurance that the FDA will agree that any endpoint we suggest with respect to any of our drug candidates is an
appropriate surrogate endpoint. Furthermore, there can be no assurance that any application will be accepted or that
approval will be granted. Even if a product candidate is granted accelerated approval, such accelerated approval is
contingent on the sponsor’s agreement to conduct one or more post-approval confirmatory trials. Such confirmatory trial(s)
must be completed with due diligence and, in some cases, the FDA may require that the trial(s) be designed and/or initiated
prior to approval. Moreover, the FDA may withdraw approval of a product candidate or indication approved under the
accelerated approval pathway for a variety of reasons, including if the trial(s) required to verify the predicted clinical benefit
of a product candidate fail to verify such benefit or do not demonstrate sufficient clinical benefit to justify the risks
associated with the drug, or if the sponsor fails to conduct any required post-approval trial(s) with due diligence.

In the event of priority review, the FDA has a goal to (but is not required to) take action on an application within a
total of eight months (rather than a goal of twelve months for a standard review). The FDA grants priority review only if it
determines that a product treats a serious condition and, if approved, would provide a significant improvement in safety or
effectiveness when compared to a standard application. The FDA has broad discretion whether to grant priority review, and,
while the FDA has granted priority review to other oncology product candidates, our drug candidates may not receive
similar designation. Moreover, receiving priority review from the FDA does not guarantee completion of review or approval
within the targeted eight-month cycle or thereafter.

A failure to obtain accelerated approval or priority review would result in a longer time to commercialization of the

applicable compound in the U.S., if commercialized at all, could increase the cost of development and could harm our
competitive position in the marketplace.

Even if our compounds are successful in clinical trials and receive regulatory approvals, we or our collaboration

partners may not be able to successfully commercialize them.

The development and ongoing clinical trials for our compounds may not be successful and, even if they are, the

resulting products may never be successfully developed into commercial products. Even if we are successful in our clinical
trials and in obtaining other regulatory approvals, the respective products may not reach or remain in the market for a
number of reasons including:

• they may be found ineffective or cause harmful side effects;

• they may be difficult to manufacture on a scale necessary for commercialization;

• they may experience excessive product loss due to contamination, equipment failure, inadequate transportation or
storage, improper installation or operation of equipment, vendor or operator error, inconsistency in yields or
variability in product characteristics;

• they may be uneconomical to produce;

• political and legislative changes emerging after the recent election of the President of the United States may make
the commercialization of our product candidates more difficult;

• we may fail to obtain reimbursement approvals or pricing that is cost effective for patients as compared to other
available forms of treatment or that covers the cost of production and other expenses;

• they may not compete effectively with existing or future alternatives;

• we may be unable to develop commercial operations and to sell marketing rights;

• they may fail to achieve market acceptance; or

• we may be precluded from commercialization of a product due to proprietary rights of third parties.

In particular, with respect to the commercialization of PIXUVRI, we will be heavily dependent on our
collaboration partner, Servier. The failure of Servier (or any other applicable collaboration partner) to fulfill its
commercialization obligations with respect to a compound, or the occurrence of any of the events in the list above, could
adversely affect the commercialization of our products. Additionally, uncertainty and speculation continue regarding the
possible repeal of all or a portion of the Patient Protection and Affordable Care Act through legislative action, as well as
possible changes to the regulations implemented under the Patient Protection and Affordable Care Act by the Department of
Health and Human Services. The uncertainty this causes for the healthcare industry could also adversely affect the
commercialization of our products. If we fail to commercialize products or if our future products do not achieve significant
market acceptance, we will not likely generate significant revenues or become profitable.

The pharmaceutical business is subject to increasing government price controls and other restrictions on pricing,

reimbursement and access to drugs, which could adversely affect our future revenues and profitability.

To the extent our products are developed, commercialized and successfully introduced to market, they may not be

considered cost-effective and third-party or government reimbursement might not be available or sufficient. Globally,
governmental and other third-party payors are becoming increasingly aggressive in attempting to contain health care costs
by strictly controlling, directly or indirectly, pricing and reimbursement and, in some cases, limiting or denying coverage
altogether on the basis of a variety of justifications, and we expect pressures on pricing and reimbursement from both
governments and private payors inside and outside the U.S. to continue. In the U.S., we are subject to substantial pricing,
reimbursement and access pressures from state Medicaid programs, private insurance programs and pharmacy benefit
managers, and implementation of U.S. health care reform legislation is increasing these pricing pressures. The Patient
Protection and Affordable Care Act instituted comprehensive health care reform, which includes provisions that, among
other things, reduce and/or limit Medicare reimbursement and impose new and/or increased taxes. In addition, members of
the Trump administration, including the President, have made public statements criticizing pricing practices within the
pharmaceutical industry, indicating that they may seek to increase pricing pressures on the pharmaceutical industry.

In almost all European markets, pricing and choice of prescription pharmaceuticals are subject to governmental

control. Therefore, the price of our products and their reimbursement in Europe is and will be determined by national
regulatory authorities. Reimbursement decisions from one or more of the European markets may impact reimbursement
decisions in other European markets. A variety of factors are considered in making reimbursement decisions, including
whether there is sufficient evidence to show that treatment with the product is more effective than current treatments, that
the product represents good value for money for the health service it provides and that treatment with the product works at
least as well as currently available treatments. The continuing efforts of governments and insurance companies, health
maintenance organizations and other payors of health care costs, to contain or reduce costs of health care may affect the
availability of capital, as well as our future revenues and profitability or those of our potential customers, suppliers and
collaborative partners.

We may never be able to generate significant product revenues from the sale of PIXUVRI.

We anticipate that, for at least the next several years, our ability to generate revenues and become profitable will

depend, in part, on our ability and that of our collaborator, Servier, to successfully commercialize our only currently
marketed product, PIXUVRI. PIXUVRI is not approved for marketing in the U.S., is presently available only in a limited
number of countries and is reimbursed in even fewer countries.

In addition, the successful commercialization of PIXUVRI depends heavily on the ability to obtain and maintain

favorable reimbursement rates for users of PIXUVRI, as well as on various additional factors, including, without limitation,
the ability to:

• obtain an annual renewal of our conditional marketing authorization for PIXUVRI;

• increase demand for and sales of PIXUVRI and obtain greater acceptance of PIXUVRI by physicians and patients;

• establish and maintain agreements with wholesalers and distributors on reasonable terms;

• maintain, and where necessary, enter into additional, commercial manufacturing arrangements with third parties,
cost-effectively manufacture necessary quantities and secure distribution, managerial and other capabilities; and

• further develop and maintain a commercial organization to market PIXUVRI.

If we are unable to successfully commercialize PIXUVRI as planned, our business, financial condition, operating

results and prospects could be harmed.

Post-approval or authorization regulatory reviews and obligations often result in significant expense and
marketing limitations, and any failure to satisfy such ongoing obligations, including, in particular, our post-authorization
commitment trial for PIXUVRI, could negatively affect our business, financial condition, operating results or prospects.

Even if a product receives regulatory approval or authorization, as applicable, we are and will continue to be

subject to numerous regulations and statutes regulating the manner of obtaining reimbursement for and selling the product,
including limitations on the indicated uses for which a product may be marketed. Approved or authorized products,
including PIXUVRI, are subject to extensive manufacturing, labeling, packaging, adverse event reporting, storage,
advertising, promotion and record-keeping regulations. These requirements include submissions of safety and other post-
marketing information and reports. In addition, such products are subject to ongoing maintenance of product registration
and continued compliance with cGMPs, good clinical practices, or GCPs, and good laboratory practices, or GLPs. Further,
distribution of products must be conducted in accordance with good distribution practices, or GDPs. The distribution
process and facilities of our third-party distributors are subject to, and our wholesale distribution authorization by the UK
Medicines and Healthcare Products Regulatory Agency subjects us to, continuing regulation by applicable regulatory
authorities with respect to the distribution and storage of products. Regulatory authorities may also impose new restrictions
on continued product marketing or may require the withdrawal of a product from the market if adverse events of
unanticipated severity or frequency are discovered following approval. In addition, regulatory agencies may impose post-
approval/post-authorization clinical trials, such as our ongoing PIX306 trial of PIXUVRI required by the EMA. We cannot
predict the outcome of PIX306 or whether we will be able to complete the associated requirements in a timely manner. If we
are unable to submit the requisite PIX306 clinical study report by the due date in December 2018 and are unable to obtain
an extension of such deadline, or if we are otherwise unable to satisfy all applicable requirements, our conditional marketing
authorization for PIXUVRI may be revoked.

Any other failure to comply with applicable regulations could result in warning or untitled letters, product recalls,

interruption of manufacturing and commercial supply processes, withdrawal or seizure of products, suspension of an
applicable wholesale distribution authorization and/or distribution of products, operating restrictions, injunctions,
suspension of licenses, revocation of the applicable product’s approval or authorization, other administrative or judicial
sanctions (including civil penalties and/or criminal prosecution) and/or unanticipated related expenditure to resolve
shortcomings, which could negatively affect our business, financial condition, operating results or prospects.

We may not be able to maintain our listings on the NASDAQ Capital Market, or the NASDAQ, or trading on the

NASDAQ may otherwise be halted or suspended, which may make it more difficult for investors to sell shares of our
common stock and consequently may negatively impact the price of our common stock.

We regained compliance in January 2017 with the minimum $1.00 bid price requirement by effecting a 1-for-10

reverse stock split on January 1, 2017, after receiving notice of non-compliance from the NASDAQ in March 2016.

We have in the past and may in the future fail to comply with the NASDAQ requirements. If our common stock
ceases to be listed for trading on the NASDAQ for failure to comply with the minimum $1.00 per share closing bid price
requirement or for any other reason, it may harm our stock price, increase the volatility of our stock price, decrease the level
of trading activity and make it more difficult for investors to buy or sell shares of our common stock. Our failure to maintain
a listing on the NASDAQ may constitute an event of default under our senior secured term loan and any future
indebtedness, which would accelerate the maturity date of such debt or trigger other obligations. In addition, certain
institutional investors that are not permitted to own securities of non-listed companies may be required to sell their shares
adversely affecting the market price of our common stock. If we are not listed on the NASDAQ or if our public float falls
below $75 million, we will be limited in our ability to file new shelf registration statements on SEC Form S-3 and/or to
fully use one or more registration statements on SEC Form S-3. We have relied significantly on shelf registration statements
on SEC Form S-3 for most of our financings in recent years, so any such limitations may harm our ability to raise the capital
we need. Trading in our common stock has been halted or suspended on the NASDAQ in the past and may also be halted or
suspended in the future on the NASDAQ due to market or trading conditions at the discretion of the NASDAQ. Any halt or
suspension in the trading in our common stock may negatively impact the market price of our common stock.

We may be unable to obtain a quorum for meetings of our shareholders or obtain requisite shareholder approval

and, consequently, be unable to take certain corporate actions, including financing activities.

Failure to meet the requisite quorum or obtain requisite shareholder approval can prevent us from raising capital

through equity financing or otherwise taking certain actions that may be in our best interest and that of our shareholders. We
have experienced such difficulties in the past.

We are required under the NASDAQ Marketplace Rules to obtain shareholder approval for any issuance of
additional equity securities that would comprise more than 20% of the total shares of our common stock outstanding before
the issuance of such securities sold at a discount to the greater of book or market value in an offering that is not deemed to
be a “public offering” by the NASDAQ Marketplace Rules, as well as under certain other circumstances. We have in the
past and may in the future issue additional equity securities that would comprise more than 20% of the total shares of our
common stock outstanding in order to fund our operations. However, we might not be successful in obtaining the required
shareholder approval for any future issuance that requires shareholder approval pursuant to applicable rules and regulations,
particularly in light of difficulties we have had in the past in obtaining a quorum and obtaining the requisite vote. If we are
unable to obtain financing or our financing options are limited due to shareholder approval difficulties, such failure may
harm our ability to continue operations.

As a result of the foregoing or for other reasons, we may be unable to obtain a quorum at annual or special

meetings of shareholders. Even if we are able to obtain a quorum at our shareholder meetings, we may not obtain enough
votes to approve matters to be resolved upon at those meetings. Any failure to obtain a quorum or the requisite vote on a
proposal in question could harm us.

We will incur a variety of costs for, and may never realize the anticipated benefits of, acquisitions, collaborations

or other strategic transactions.

We evaluate and undertake acquisitions, collaborations and other strategic transactions from time to time. The

process of negotiating these transactions, as well as integrating any acquisitions and implementing any strategic alliances,
may result in operating difficulties and expenditures. In addition, these transactions may require significant management
attention that would otherwise be available for ongoing development of our business, whether or not any such transaction is
ever consummated. These undertakings could also result in potentially dilutive issuances of equity securities, the incurrence
of debt, contingent liabilities and/or amortization expenses related to intangible assets, and we may never realize the
anticipated benefits. In addition, following the consummation of a transaction, our results of operations and the market price
of our common stock may be affected by factors different from those that affected our results of operations and the market
price of our common stock prior to such acquisition. Any of the foregoing consequences resulting from transactions of the
type described above could harm our business, financial condition, operating results or prospects.

We may be subject to fines, penalties, injunctions and other sanctions if we are deemed to be promoting the use of

our products for non-FDA-approved, or off-label, uses.

Our business and future growth depend on the development, ultimate sale and use of products that are subject to
FDA, EMA and or other regulatory agencies regulation, clearance and approval. Under the U.S. Federal Food, Drug, and
Cosmetic Act and other laws, we are prohibited from promoting our products for off-label uses. This means that in the U.S.,
we may not make claims about the safety or effectiveness of our products and may not proactively discuss or provide
information on the use of our products, except as allowed by the FDA.

Government investigations concerning the promotion of off-label uses and related issues are typically expensive,

disruptive and burdensome, generate negative publicity and may result in fines or payments of settlement awards. If our
promotional activities are found to be in violation of applicable law or if we agree to a settlement in connection with an
enforcement action, we would likely face significant fines and penalties and would likely be required to substantially
change our sales, promotion, grant and educational activities.

A failure to comply with the numerous laws and regulations that govern our business, including those related to

cross-border conduct, health care fraud and abuse, anti-corruption and false claims and the protection of health
information, could result in substantial penalties and prosecution.

We are subject to risks associated with doing business outside of the U.S., which exposes us to complex foreign

and U.S. regulations. For example, we are subject to regulations imposed by the Foreign Corrupt Practices Act, or the

FCPA, the Bribery Act 2010 and other anti-corruption laws. These laws generally prohibit U.S. companies and their
intermediaries from offering, promising, authorizing or making improper payments to foreign government officials for the
purpose of obtaining or retaining business. The SEC and U.S. Department of Justice have increased their enforcement
activities with respect to the FCPA. Internal control policies and procedures and employee training and compliance
programs that we have implemented to deter prohibited practices may not be effective in prohibiting our employees,
contractors or agents from violating or circumventing our policies and the law.

In addition, we are subject to various state and federal fraud and abuse laws, including, without limitation, the
federal Anti-Kickback Statute and federal False Claims Act. There are similar laws in other countries. These laws may
impact, among other things, the sales, marketing and education programs for our products. The federal Anti-Kickback
Statute prohibits persons from knowingly and willingly soliciting, offering, receiving or providing remuneration, directly or
indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or
service, for which payment may be made under a federal health care program. The federal False Claims Act prohibits
persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain
payment from the federal government. Suits filed under the False Claims Act can be brought by any individual on behalf of
the government and such individuals, commonly known as “whistleblowers,” may share in any amounts paid by the entity
to the government in fines or settlement. Many states have also adopted laws similar to the federal Anti-Kickback Statute
and False Claims Act.

We may also be subject to the Health Insurance Portability and Accountability Act of 1996, as amended by the
Health Information Technology for Economic and Clinical Health Act and their respective implementing regulations, or
HIPAA, which established uniform standards for certain “covered entities” (health care providers, health plans and health
care clearinghouses) governing the conduct of certain electronic health care transactions and protecting the security and
privacy of protected health information. Among other things, HIPAA’s privacy and security standards are directly applicable
to “business associates” - independent contractors or agents of covered entities that create, receive, maintain or transmit
protected health information in connection with providing a service for or on behalf of a covered entity. In addition to
possible civil and criminal penalties for violations, state attorneys general are authorized to file civil actions for damages or
injunctions in federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil
actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of
which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

We are unable to predict whether we could be subject to actions under any of the foregoing or similar laws and
regulations, or the impact of such actions. If we were to be found to be in violation of applicable laws or regulations, we
may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from government health care
reimbursement programs and the curtailment or restructuring of our operations, all of which could have a material adverse
effect on our business and results of operations.

We are dependent on third-party service providers for a number of critical operational activities including, in

particular, for the manufacture, testing and distribution of our compounds and associated supply chain operations, as well
as for clinical trial activities. Any failure or delay in these undertakings by third parties could harm our business.

Our business is dependent on the performance by third parties of their responsibilities under contractual
relationships. In particular, we rely heavily on third parties for the manufacture and testing of our compounds. We do not
have internal analytical laboratory or manufacturing facilities to allow the testing or production of compounds in
compliance with GLP and cGMP. As a result, we rely on third parties to supply us in a timely manner with manufactured
products/product candidates. We may not be able to adequately manage and oversee the manufacturers we choose, they may
not perform as agreed or they may terminate their agreements with us. In particular, we depend on third-party manufacturers
to conduct their operations in compliance with GLP and cGMP or similar standards imposed by the U.S. and/or applicable
foreign regulatory authorities, including the FDA and EMA. Any of these regulatory authorities may take action against a
contract manufacturer who violates GLP and cGMP. Failure of our manufacturers to comply with FDA, EMA or other
applicable regulations may cause us to curtail or stop the manufacture of such products until we obtain regulatory
compliance.

We may not be able to obtain sufficient quantities of our compounds if we are unable to secure manufacturers when

needed, or if our designated manufacturers do not have the capacity or otherwise fail to manufacture compounds according
to our schedule and specifications or fail to comply with cGMP regulations. In particular, in connection with the transition
of the manufacturing of PIXUVRI and pacritinib drug supply to successor vendors, respectively, we could face logistical,
scaling or other challenges that may adversely affect supply. Furthermore, in order to ultimately obtain and maintain
applicable regulatory approvals, any manufacturers we utilize are required to consistently produce the respective

compounds in commercial quantities and of specified quality or execute fill-finish services on a repeated basis and
document their ability to do so, which is referred to as process validation. In order to obtain and maintain regulatory
approval of a compound, the applicable regulatory authority must consider the result of the applicable process validation to
be satisfactory and must otherwise approve of the manufacturing process. Even if our compound manufacturing processes
obtain regulatory approval and sufficient supply is available to complete clinical trials necessary for regulatory approval,
there are no guarantees we will be able to supply the quantities necessary to effect a commercial launch of the applicable
drug, or once launched, to satisfy ongoing demand. Any compound shortage could also impair our ability to deliver
contractually required supply quantities to applicable collaborators, as well as to complete any additional planned clinical
trials.

We also rely on third-party service providers for certain warehousing, transportation, sales, order processing,
distribution and cash collection services. With regard to the distribution of our compounds, we depend on third-party
distributors to act in accordance with GDP, and the distribution process and facilities are subject to continuing regulation by
applicable regulatory authorities with respect to the distribution and storage of products.

In addition, we depend on medical institutions and CROs (together with their respective agents) to conduct clinical

trials and associated activities in compliance with GCP and in accordance with our timelines, expectations and
requirements. To the extent any such third parties are delayed in achieving or fail to meet our clinical trial enrollment
expectations, fail to conduct our trials in accordance with GCP or study protocol or otherwise take actions outside of our
control or without our consent, our business may be harmed. Furthermore, we conduct clinical trials in foreign countries,
subjecting us to additional risks and challenges, including, in particular, as a result of the engagement of foreign medical
institutions and foreign CROs, who may be less experienced with regard to regulatory matters applicable to us and may
have different standards of medical care.

With regard to certain of the foregoing clinical trial operations and stages in the manufacturing and distribution

chain of our compounds, we rely on single vendors. In particular, our current business structure contemplates, at least in the
foreseeable future, use of a single commercial supplier for PIXUVRI drug substance. In addition, in the event pacritinib is
approved, we are initially preparing to have only one commercial supplier for pacritinib. We may in the future seek to
qualify an additional manufacturer of pacritinib, but the process for qualifying a manufacturer can be lengthy and may not
occur on a timely basis or at all. The use of single vendors for core operational activities, such as clinical trial operations,
manufacturing and distribution, and the resulting lack of diversification, expose us to the risk of a material interruption in
service related to these single, outside vendors. As a result, our exposure to this concentration risk could harm our business.

Although we monitor the compliance of our third-party service providers performing the aforementioned services,

we cannot be certain that such service providers will consistently comply with applicable regulatory requirements or that
they will otherwise timely satisfy their obligations to us. Any such failure and/or any failure by us to monitor their services
and to plan for and manage our short and long term requirements underlying such services could result in shortage of the
compound, delays in or cessation of clinical trials, failure to obtain or revocation of product approvals or authorizations,
product recalls, withdrawal or seizure of products, suspension of an applicable wholesale distribution authorization and/or
distribution of products, operating restrictions, injunctions, suspension of licenses, other administrative or judicial sanctions
(including civil penalties and/or criminal prosecution) and/or unanticipated related expenditures to resolve shortcomings.
Such consequences could have a significant impact on our business, financial condition, operating results or prospects.

If we are unable to recruit, retain, integrate and motivate senior management, other key personnel and directors,

or if such persons are unable to perform effectively, our business could suffer.

Our future success depends, in part, on our ability to continue to attract and retain senior management, other key

personnel and directors to enable the execution of our business plan and to identify and pursue new opportunities.
Additionally, our productivity and the quality of our operations are dependent on our ability to integrate and train our new
personnel quickly and effectively. In February 2017, we announced the appointment of Adam Craig, M.D., Ph.D., as
President and Chief Executive Officer effective March 2017, and also in September 2017, we announced the appointment of
Bruce J. Seeley as Executive Vice President, Chief Operating Officer and David H. Kirske as Chief Financial Officer.
Leadership transitions and management changes can be difficult to manage and may create uncertainty or disruption to our
business or increase the likelihood of turnover in our other officers and employees. We may not be able to effectively
manage our transition to a new president and chief executive officer.

Directors and management of publicly traded corporations are increasingly concerned with the extent of their

personal exposure to lawsuits and shareholder claims, as well as governmental, creditor and other claims that may be made
against them. Due to these and other reasons, such persons are also becoming increasingly concerned with the availability of

directors and officers liability insurance to pay on a timely basis the costs incurred in defending such claims. We currently
carry directors and officers liability insurance. However, directors and officers liability insurance is expensive and can be
difficult to obtain. If we are unable to continue to provide directors and officers sufficient liability insurance at affordable
rates or at all, or if directors and officers perceive our ability to do so in the future to be limited, it may become increasingly
more difficult to attract and retain management and qualified directors to serve on our Board of Directors.

The loss of the services of senior management, other key personnel or directors and/or the inability to timely attract

or integrate such persons could significantly delay or prevent the achievement of our development and strategic objectives
and may adversely affect our business, financial condition and operating results.

We face direct and intense competition from our competitors in the biotechnology and pharmaceutical industries,

and we may not compete successfully against them.

Competition in the oncology market is intense and is accentuated by the rapid pace of technological and product
development. We anticipate that we will face increased competition in the future as new companies enter the market. Our
competitors in the U.S. and elsewhere are numerous and include, among others, major multinational pharmaceutical
companies, specialized biotechnology companies and universities and other research institutions. Specifically:

• In Europe, PIXUVRI faces competition from existing treatments for adults with multiply relapsed or refractory
aggressive B-cell NHL. For example, patients are currently being treated with ibrutinib, idelalisib, lenolidimide,
bendamustine, oxaliplatin and gemcitabine, although these particular agents do not have regulatory approval in
Europe for the foregoing indication. If we were to pursue bringing PIXUVRI to market in the U.S. (which is not
currently part of our near-term plan), PIXUVRI would face similar competition.

• If we are successful in bringing pacritinib to market, pacritinib will face competition from the currently approved
JAK1/JAK2 inhibitor, Jakafi®.

• If we are successful in bringing tosedostat to market, we will face competition from currently marketed products,
such as cytarabine, Dacogen®, Vidaza®, Clolar®, Revlimid® and Thalomid®.

In addition to the specific competitive factors discussed above, new anti-cancer drugs that may be under

development or developed and marketed in the future could compete with our various compounds.

Many of our competitors, particularly multinational pharmaceutical companies, either alone or together with their

collaborators, have substantially greater financial and technical resources and substantially larger development and
marketing teams than us, as well as significantly greater experience than we do in developing, commercializing,
manufacturing, marketing and selling products. As a result, products of our competitors might come to market sooner or
might prove to be more effective, less expensive, have fewer side effects or be easier to administer than ours. In any such
case, sales of PIXUVRI or any potential future product would likely suffer and we might never recoup the significant
investments we have made and will continue to make to develop and market these compounds.

If any of our license agreements for intellectual property underlying our compounds are terminated, we may lose

the right to develop or market that product.

We have acquired or licensed intellectual property from third parties, including patent applications and patents

relating to intellectual property for PIXUVRI, pacritinib and tosedostat. Some of our product development programs depend
on our ability to maintain rights under these arrangements. Each licensor has the power to terminate its agreement with us if
we fail to meet our obligations under these licenses. We may not be able to meet our obligations under these licenses. If we
default under any license agreement, we may lose our right to market and sell any products based on the licensed
technology and may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection. Bankruptcy
may result in the termination of agreements pursuant to which we license certain intellectual property rights.

If we are unable to in-license or acquire additional product candidates, our future product portfolio and potential

profitability could be harmed.

One component of our business strategy is the in-licensing and acquisition of drug compounds developed by other
pharmaceutical and biotechnology companies or academic research laboratories. PIXUVRI, pacritinib and tosedostat have
all been in-licensed or acquired from third parties. Competition for new promising compounds and commercial products can

be intense. If we are not able to identify future in-licensing or acquisition opportunities and enter into arrangements on
acceptable terms, our future product portfolio and potential profitability could be harmed.

We hold rights under numerous patents that we have acquired or licensed or that protect inventions originating

from our research and development, and the expiration of any of these patents may allow our competitors to copy the
inventions that are currently protected.

We dedicate significant resources to protecting our intellectual property, which is important to our business. We

have filed numerous patent applications in the U.S. and various other countries seeking protection of inventions originating
from our research and development, and we have also obtained rights to various patents and patent applications under
licenses with third parties and through acquisitions. Patents have been issued on many of these applications. We have
pending patent applications or issued patents in the U.S. and foreign countries directed to PIXUVRI, pacritinib, tosedostat
and other product candidates. However, the lives of these patents are limited. Patents for the individual products extend for
varying periods according to the date of the patent filing or grant and the legal term of patents in the various countries where
patent protection is obtained.

Our U.S. and foreign composition of matter patents for pacritinib expire as follows: US patents expire in 2029

(compound) / 2030 (salt); foreign patents expire in 2026 (compound) / 2029 (salt). Pacritinib has orphan drug designation
for myelofibrosis in the U.S. and the E.U.

Our various tosedostat-directed patents expire in 2018. Tosedostat has orphan drug designation for acute myeloid

leukemia in the U.S. and the E.U.

Each patent may be eligible for future patent term restoration of up to five years under certain circumstances. Also,

regulatory exclusivity tied to the protection of clinical data may be complementary to patent protection. During a period of
regulatory exclusivity, competitors generally may not use the original applicant’s data as the basis for a generic application.
In the U.S., the data protection generally runs for five years from first marketing approval of a new chemical entity,
extended to seven years for an orphan drug indication.

In the absence of a patent, we would, to the extent possible, need to rely on unpatented technology, know-how and

confidential information. Ultimately, the lack or expiration at any given time of a patent to protect our compounds may
allow our competitors to copy the underlying inventions and better compete with us.

If we fail to adequately protect our intellectual property, our competitive position and the potential for long-term

success could be harmed.

Development and protection of our intellectual property are critical to our business. If we do not adequately protect
our intellectual property, competitors may be able to practice our technologies. Our success depends in part on our ability to:

• obtain and maintain patent protection for our products or processes both in the U.S. and other countries;

• protect trade secrets; and

• prevent others from infringing on our proprietary rights.

The patent position of pharmaceutical and biotechnology firms, including ours, generally is highly uncertain and

involves complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy
regarding the breadth of claims that it will allow in biotechnology patents. If it allows broad claims, the number and cost of
patent interference proceedings in the U.S. and the risk of infringement litigation may increase. If it allows narrow claims,
the risk of infringement may decrease, but the value of our rights under our patents, licenses and patent applications may
also decrease. Patent applications in which we have rights may never issue as patents, and the claims of any issued patents
may not afford meaningful protection for our technologies or products. In addition, patents issued to us or our licensors may
be challenged and subsequently narrowed, invalidated or circumvented. Litigation, interference proceedings or other
governmental proceedings that we may become involved in with respect to our proprietary technologies or the proprietary
technology of others could result in substantial cost to us.

We also rely upon trade secrets, proprietary know-how and continuing technological innovation to remain
competitive. Third parties may independently develop such know-how or otherwise obtain access to our technology. While

we require our employees, consultants and corporate partners with access to proprietary information to enter into
confidentiality agreements, these agreements may not be honored.

Patent litigation is widespread in the biotechnology industry, and any patent litigation could harm our business.

Costly litigation might be necessary to protect a patent position or to determine the scope and validity of third-

party proprietary rights, and we may not have the required resources to pursue any such litigation or to protect our patent
rights. Any adverse outcome in litigation with respect to the infringement or validity of any patents owned by third parties
could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us
to cease using a product or technology. With respect to our in-licensed patents, if we attempt to initiate a patent infringement
suit against an alleged infringer, it is possible that our applicable licensor will not participate in or assist us with the suit, and
as a result, we may not be able to effectively enforce the applicable patents against the alleged infringers.

We may be unable to obtain or protect our intellectual property rights and we may be liable for infringing upon the
intellectual property rights of others, which may cause us to engage in costly litigation and, if unsuccessful, could cause us
to pay substantial damages and prohibit us from selling our products.

At times, we may monitor patent filings for patents that might be relevant to some of our products and product

candidates in an effort to guide the design and development of our products to avoid infringement, but may not have
conducted an exhaustive search. We may not be able to successfully challenge the validity of third-party patents and could
be required to pay substantial damages, possibly including treble damages, for past infringement and attorneys’ fees if it is
ultimately determined that our products infringe such patents. Further, we may be prohibited from selling our products
before we obtain a license, which, if available at all, may require us to pay substantial royalties.

Moreover, third parties may challenge the patents that have been issued or licensed to us. We do not believe that

PIXUVRI, pacritinib or any of the other compounds we are currently developing infringe upon the rights of any third parties
nor do we believe that they are materially infringed upon by third parties; however, there can be no assurance that our
technology will not be found in the future to infringe upon the rights of others or be infringed upon by others. In such a
case, others may assert infringement claims against us, and should we be found to infringe upon their patents, or otherwise
impermissibly utilize their intellectual property, we might be forced to pay damages, potentially including treble damages, if
we are found to have willfully infringed on such parties’ patent rights. In addition to any damages we might have to pay, we
may be required to obtain licenses from the holders of this intellectual property, enter into royalty agreements or redesign
our compounds so as not to utilize this intellectual property, each of which may prove to be uneconomical or otherwise
impossible. Conversely, we may not always be able to successfully pursue our claims against others that infringe upon our
technology and the technology exclusively licensed from any third parties. Thus, the proprietary nature of our technology or
technology licensed by us may not provide adequate protection against competitors.

Even if infringement claims against us are without merit, or if we challenge the validity of issued patents, lawsuits
take significant time, may, even if resolved in our favor, be expensive and divert management attention from other business
concerns. Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue our
operations.

The illegal distribution and sale by third parties of counterfeit versions of a product or stolen product could have a

negative impact on our reputation and business.

Third parties might illegally distribute and sell counterfeit or unfit versions of a product that do not meet our
rigorous manufacturing and testing standards. A patient who receives a counterfeit or unfit product may be at risk for a
number of dangerous health consequences. Our reputation and business could suffer harm as a result of counterfeit or unfit
product sold under our brand name. In addition, thefts of inventory at warehouses, plants or while in-transit, which are not
properly stored and which are sold through unauthorized channels, could adversely impact patient safety, our reputation and
our business.

We may owe additional amounts for VAT related to our operations in Europe.

Our European operations are subject to the VAT which is usually applied to all goods and services purchased and

sold throughout Europe. The VAT receivable was $4.8 million and $4.4 million as of December 31, 2017 and December 31,
2016, respectively. On April 14, 2009, December 21, 2009 and June 25, 2010, the ITA issued notices of assessment to CTI
(Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003, 2005, 2006 and 2007. The ITA audits
concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services

performed by CTI (Europe). The assessments, including interest and penalties, for the years 2003, 2006 and 2007 are
€0.5 million, €2.5 million and €0.8 million, respectively
. While we are defending ourselves against the assessments both on
procedural grounds and on the merits of the case, there can be no assurances that we will be successful in such defense. The
2005 VAT assessment was decided in favor of the Company by the Italian Supreme Court, with no further potential
liabilities for the Company. Further information pertaining to these cases can be found in Part I, Item 3, "Legal
Proceedings," and is incorporated by reference herein. If the final decision of the Italian Supreme Court is unfavorable to us,
or if, in the interim, the ITA were to make a demand for payment and we were to be unsuccessful in suspending collection
efforts, we may be requested to pay to the ITA an amount up to €3.9 million or approximately $4.7 million converted using
the currency exchange rate as of December 31, 2017, plus collection fees, notification expenses and additional interest for
the period lapsed between the date in which the assessments were issued and the date of effective payment.

We are currently subject to certain regulatory and legal proceedings, and may in the future be subject to additional

proceedings and/or allegations of wrong-doing, which could harm our financial condition and operating results.

We are currently, and may in the future be, subject to regulatory matters and legal claims, including possible

securities, derivative, consumer protection and other types of proceedings pursued by individuals, entities or regulatory
bodies. As described in Part I, Item 3, "Legal Proceedings," we are currently in the process of supplying documents in
response to a subpoena from the SEC in connection with an investigation into potential federal securities law violations.
Litigation is subject to inherent uncertainties, and we have had and may in the future have unfavorable rulings and
settlements. Adverse outcomes may result in significant monetary damages or injunctive relief against us. It is possible that
our financial condition and operating results could be harmed in any period in which the effect of an unfavorable final
outcome becomes probable and reasonably estimable. If an unfavorable ruling were to occur in any of the legal proceedings
we are or may be subject to, our business, financial condition, operating results and prospects could be harmed. The ultimate
outcome of litigation and other claims is subject to inherent uncertainties, and our view of these matters may change in the
future.

We cannot predict with certainty the eventual outcome of pending litigation. In addition, negative publicity

resulting from any allegations of wrong-doing could harm our business, regardless of whether the allegations are valid or
whether there is a finding of liability. Furthermore, we may have to incur substantial time and expense in connection with
such lawsuits and management’s attention and resources could be diverted from operating our business as we respond to the
litigation. Our insurance is subject to high deductibles and there is no guarantee that the insurance will cover any specific
claim that we currently face or may face in the future, or that it will be adequate to cover all potential liabilities and
damages. In the event of negative publicity resulting from allegations of wrong-doing and/or an adverse outcome under any
currently pending or future lawsuit, our business could be materially harmed.

If we fail to maintain effective internal controls over financial reporting, we may not be able to accurately report

our financial results, which could adversely effect on investor confidence, our business and the trading prices of our
securities.

If we fail to maintain the adequacy of our internal controls, we may be unable to provide financial information in a

timely and reliable manner within the time periods required for our financial reporting under SEC rules and regulations.
Internal controls over financial reporting may not prevent or detect misstatements or omissions in our financial statements
because of their inherent limitations, including the possibility of human error, the circumvention or overriding of controls or
fraud. We have recently implemented a reduction in force, which may result in changes to occur in our internal controls over
financial reporting. The changes could relate to different employees performing internal control activities than those who
have previously performed those activities or revisions to our actual control activities as we evaluate the appropriate internal
control structure after our workforce reduction. A changing internal control environment increases the risk that our system
of internal controls is not designed effectively or that internal control activities will not occur as designed. The occurrence
of or failure to remediate a significant deficiency material weakness may adversely affect our reputation and business and
the market price of shares of our common stock.

Our net operating losses may not be available to reduce future income tax liability.

We have substantial tax loss carryforwards for U.S. federal income tax purposes, but our ability to use such

carryforwards to offset future income or tax liability is limited under section 382 of the Internal Revenue Code of 1986, as
amended, as a result of prior changes in the stock ownership of the Company. Moreover, future changes in the ownership of
our stock, including those resulting from issuance of shares of our common stock upon exercise of outstanding warrants,
may further limit our ability to use our net operating losses.

Due to the fact that we have European branches and subsidiaries conducting operations, together with the fact that

we are party to certain contractual arrangements denoting monetary amounts in foreign currencies, we are subject to risk
regarding currency exchange rate fluctuations.

We are exposed to risks associated with the translation of euro-denominated financial results and accounts into

U.S. dollars for financial reporting purposes. The carrying value of the assets and liabilities, as well as the reported amounts
of revenues and expenses, in our European branches and subsidiaries will be affected by fluctuations in the value of the U.S.
dollar as compared to the euro. Any expansion of our commercial operations in Europe (including with regard to sales of
PIXUVRI) may increase our exposure to fluctuations in foreign currency exchange rates. In addition, certain of our
contractual arrangements, such as the Restated Agreement with Servier, denote monetary amounts in foreign currencies, and
consequently, the ultimate financial impact to us from a U.S. dollar perspective is subject to significant uncertainty.
Furthermore, the referendum in the United Kingdom in June 2016, in which the majority of voters voted in favor of an exit
from the European Union has resulted in increased volatility in the global financial markets and caused severe volatility in
global currency exchange rate fluctuations that resulted in the strengthening of the U.S. dollar against the euro. Changes in
the value of the U.S. dollar as compared to foreign currencies (in particular, the euro) might have an adverse effect on our
reported operating results and financial condition.

We may be unable to obtain the raw materials necessary to produce a particular product or product candidate.

We may not be able to purchase the materials necessary to produce a particular product or product candidate in

adequate volume and quality. If any raw material required to produce a product or product candidate is insufficient in
quantity or quality, if a supplier fails to deliver in a timely fashion or at all or if these relationships terminate, we may not be
able to qualify and obtain a sufficient supply from alternate sources on acceptable terms, or at all.

Because there is a risk of product liability associated with our compounds, we face potential difficulties in

obtaining insurance, and if product liability lawsuits were to be successfully brought against us, our business may be
harmed.

Our business exposes us to potential product liability risks inherent in the testing, manufacturing, marketing and

sale of human pharmaceutical products. In particular, as a result of the commercialization of PIXUVRI, our risk with
respect to potential product liability has increased. If our insurance covering a compound is not maintained on acceptable
terms or at all, we might not have adequate coverage against potential liabilities. Our inability to obtain sufficient insurance
coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or limit the
commercialization of any products we develop. A successful product liability claim could also exceed our insurance
coverage and could harm our financial condition and operating results.

We may be subject to claims relating to improper handling, storage or disposal of hazardous materials.

Our research and development activities involve the controlled use of hazardous materials, chemicals and various

radioactive compounds. We are subject to federal, state and local laws and regulations, both internationally and
domestically, governing the use, manufacture, storage, handlings, treatment, transportation and disposal of such materials
and certain waste products and employee safety and health matters. Although we believe that our safety procedures for
handling and disposing of such materials comply with applicable law and regulations, the risk of accidental contamination
or injury from these materials cannot be eliminated completely. In the event of such an accident, we could be held liable for
any damages that result and any such liability not covered by insurance could exceed our resources. Compliance with
environmental, safety and health laws and regulations may be expensive, and current or future environmental regulations
may impair our research, development or production efforts.

We depend on sophisticated information technology systems to operate our business and a cyber-attack or other

breach of these systems could have a material adverse effect on our business.

We rely on information technology systems to process, transmit and store electronic information in our day-to-day

operations. The size and complexity of our information technology systems makes them vulnerable to a cyber-attack,
malicious intrusion, breakdown, destruction, loss of data privacy or other significant disruption. Any such successful attacks
could result in the theft of intellectual property or other misappropriation of assets, or otherwise compromise our
confidential or proprietary information and disrupt our operations. Cyber-attacks are becoming more sophisticated and
frequent. We have invested in our systems and the protection of our data to reduce the risk of an intrusion or interruption,
and we monitor our systems on an ongoing basis for any current or potential threats. There can be no assurance that these
measures and efforts will prevent future interruptions or breakdowns. If we fail to maintain or protect our information

technology systems and data integrity effectively or fail to anticipate, plan for or manage significant disruptions to these
systems, we could have difficulty preventing, detecting and controlling fraud, have disputes with customers, physicians and
other health care professionals, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur
expenses or lose revenues or suffer other adverse consequences, any of which could have a material adverse effect on our
business, results of operations, financial condition, prospects and cash flows.

Risks Related to the Securities Markets

Shares of our common stock are subordinate to existing and any future indebtedness and to any preferred stock we

may issue.

Shares of our common stock rank junior to our existing indebtedness, including under our senior secured term loan
agreement and any future indebtedness we may incur, as well as to all creditor claims and other non-equity claims against us
and our assets available to satisfy claims on us, including claims in a bankruptcy or similar proceeding. Our senior secured
term loan agreement restricts, and any future indebtedness and preferred stock may restrict, payment of dividends on our
common stock. Shares of our common stock will also rank junior to any shares of our preferred stock that we may issue in
the future.

Additionally, unlike indebtedness, where principal and interest customarily are payable on specified due dates, in

the case of our common stock, (i) dividends are payable only when and if declared by our Board of Directors or a duly
authorized committee of our Board of Directors and (ii) as a corporation, we are restricted to making dividend payments and
redemption payments out of legally available assets. We have never paid a dividend on our common stock and have no
current intention to pay dividends in the future. Furthermore, our common stock places no restrictions on our business or
operations or on our ability to incur indebtedness or engage in any transactions, subject only to the voting rights available to
our shareholders generally.

The market price of shares of our common stock is extremely volatile, which may affect our ability to raise capital

in the future and may subject the value of your investment in our securities to sudden decreases.

The market price for securities of biopharmaceutical and biotechnology companies, including ours, historically has

been highly volatile, and the market from time to time has experienced significant price and volume fluctuations that are
unrelated to the operating performance of such companies. For example, during the 12-month period ended February 28,
2018, our stock price ranged from a low of $2.45 to a high of $4.65. Fluctuations in the market price or liquidity of our
common stock may harm the value of your investment in our common stock. Factors that may have an impact, which,
depending on the circumstances, could be significant, on the market price and marketability of our securities include:

• announcements by us or others of results of clinical trials and regulatory actions, such as the imposition of a
clinical trial hold;

• announcements by us or others of serious adverse events that have occurred during administration of our products
to patients;

• announcements by us or others relating to our ongoing development and commercialization activities;

• halting or suspension of trading in our common stock on the NASDAQ;

• announcements of technological innovations or new commercial therapeutic products by us, our collaborative
partners or our present or potential competitors;

• our issuance of debt or equity securities, which we expect to pursue to generate additional funds to operate our
business, or any perception from time to time that we will issue such securities;

• our quarterly operating results;

• liquidity, cash position or financing needs;

• developments or disputes concerning patent or other proprietary rights;

• developments in relationships with collaborative partners;

• acquisitions or divestitures;

• our ability to realize the anticipated benefits of our compounds;

• litigation and government proceedings;

• adverse legislation, including changes in governmental regulation;

• third-party reimbursement policies;

• changes in securities analysts’ recommendations;

• short selling of our securities;

• changes in health care policies and practices;

• a failure to achieve previously announced goals and objectives as or when projected; and

• general economic and market conditions.

Anti-takeover provisions in our charter documents, in our shareholder rights agreement, or rights plan, under

Delaware law and in other applicable instruments could make removal of incumbent management or an acquisition of us,
which may be beneficial to our shareholders, more difficult.

Provisions of our certificate of incorporation and bylaws may have the effect of deterring or delaying attempts by

our shareholders to remove or replace management, to commence proxy contests or to effect changes in control. These
provisions include:

• elimination of cumulative voting in the election of directors;

• procedures for advance notification of shareholder nominations and proposals;

• the ability of our Board of Directors to amend our bylaws without shareholder approval; and

• the ability of our Board of Directors to issue shares of preferred stock without shareholder approval upon the terms
and conditions and with the rights, privileges and preferences as our Board of Directors may determine.

Pursuant to our rights plan, an acquisition of 20% or more of our common stock by a person or group, subject to
certain exceptions, could result in the exercisability of the preferred stock purchase right accompanying each share of our
common stock (except those held by a 20% shareholder, which become null and void), thereby entitling the holder to
receive upon exercise, in lieu of a number of units of preferred stock, that number of shares of our common stock having a
market value of two times the exercise price of the right. The existence of our rights plan could have the effect of delaying,
deterring or preventing a third party from making an acquisition proposal for us and may inhibit a change in control that
some, or a majority, of our shareholders might believe to be in their best interest or that could give our shareholders the
opportunity to realize a premium over the then-prevailing market prices for their shares.

In addition, as a Delaware corporation, we are subject to Delaware’s anti-takeover statute, which imposes

restrictions on some transactions between a corporation and certain interested shareholders. Other existing provisions
applicable to us that could have an anti-takeover effect include our executive employment agreements and certain
provisions of our outstanding equity-based compensatory awards that allow for acceleration of vesting in the event of a
change in control.

The foregoing provisions, alone or together, could have the effect of deterring or delaying changes in incumbent

management, proxy contests or changes in control.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We currently lease approximately 66,000 square feet of space at 3101 Western Avenue in Seattle, Washington. The lease

commenced in May 2012 and expires in April 2022. Approximately 44,000 square feet of space at this address has been
subleased commencing December 2017 and ending April 2022. We also lease approximately 4,700 square feet of warehouse
space in Seattle, Washington under a lease expiring in May 2018. We believe our existing and planned facilities are adequate to
meet our present requirements. We anticipate that additional space will be available, when needed, on commercially reasonable
terms.

Item 3. Legal Proceedings

In April 2009, December 2009 and June 2010, the Italian Tax Authority, or the ITA, issued notices of assessment to CTI -

Sede Secondaria, or CTI (Europe), based on the ITA’s audit of CTI (Europe)’s value added tax, or VAT, returns for the years
2003, 2005, 2006 and 2007. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices
issued to non-Italian clients for services performed by CTI (Europe). The assessments, including interest and penalties, for the
years 2003, 2005, 2006 and 2007 are €0.5 million, €5.5 million, €2.5 million and €0.8 million, respectively
. We believe that the
services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally filed. We have
appealed against all the assessments. As better detailed below, three different procedures have started before the Italian tax
courts:

(i)
(ii)
(iii)

2003 VAT, currently pending before the Supreme Court;
2005 VAT, decided in favor of CTI with no further potential liabilities for the Company; and
2006 and 2007 VAT (joined by the judge).

We are defending ourselves against the assessments in the pending procedures (those under (i) and (ii) above) both on

procedural grounds and on the merits of the case, although we can make no assurances regarding the ultimate outcome of these
cases. If the final decision of the Italian Supreme Court is unfavorable to us, or if, in the interim, the ITA were to make a
demand for payment and we were to be unsuccessful in suspending collection efforts, we may be requested to pay the ITA an
amount up to €3.9 million or approximately $4.7 million converted using the currency exchange rate as of December 31, 2017,
plus collection fees, notification expenses and additional interest for the period lapsed between the date in which the
assessments were issued and the date of effective payment. Following is a summary of the status of the legal proceedings
surrounding each respective VAT year return at issue:

• 2003 VAT. In September 2011, the Provincial Tax Court issued decision no. 229/3/2011, which (i) fully accepted the
merits of our appeal, (ii) declared that no penalties can be imposed against us, and (iii) found the ITA liable to pay us
€10,000, as partial refund of the legal expenses we incurred for our appeal. In October 2012, the IT A appealed this
decision. In June 2013, the Regional Tax Court issued decision no. 119/50/13, which accepted the appeal of the ITA and
reversed the previous decision of the Provincial Tax Court. We believe that such decision has not carefully taken into
account our arguments and the documentation we filed, and therefore appealed such decision in front of the Supreme
Court both on procedural grounds and on the merits of the case in January 2014. In January 2014 the Company was
provided a notice of payment with which the ITA requested the advance payment of €0.4 million of VAT, interest and
penalties. We paid such amount in March 2014.

• 2005 VAT. In January 2011, the Provincial Tax Court issued decision No. 4/2010 which (i) partially accepted our
appeal and declared that no penalties can be imposed against us, (ii) confirmed the right of the ITA to reassess the VAT
(plus interest) in relation to the transactions identified in the 2005 notice of assessment and (iii) repealed the suspension
of the notice of deposit payment. Both the ITA and the Company appealed to the higher court against the decision. In
October 2012, the Regional Tax Court issued decision no. 127/31/2012, which (i) fully accepted the merits of our appeal
and (ii) confirmed that no penalties can be imposed against us. In April 2013, the ITA appealed the decision to the Italian
Supreme Court. On January 30, 2018, the Italian Supreme Court issued decision No. 02250/2018 which (i) rejected the
appeal of the ITA, (ii) confirmed decision of the Regional Tax Court which ruled fully in our favor, and (iii) due to the
novelty of the arguments at stake, compensated the legal expenses incurred by the parties. ITA may not use any ordinary
mean of appeal against the Supreme Court decision.

• 2006 VAT. In October 2011, the Provincial Tax Court issued decision no. 276/21/2011 (jointly with the 2007 VAT
case) in which it (i) fully accepted the merits of our appeal, (ii) declared that no penalties can be imposed against us, and
(iii) found that for the 2006 and 2007 VAT cases the ITA was liable to pay us €10,000 as partial refund of the legal
expenses incurred for the appeal. In December 2011, the ITA appealed this decision to the Regional Tax Court. On April
16, 2013, the Regional Tax Court issued decision no. 57/35/13 (jointly with the 2007 VAT case) in which it fully rejected
the merits of the ITA’s appeal, declared that no penalties can be imposed against us, and found the ITA liable to pay us
€12,000, as partial refund of the legal expenses we incurred for this appeal. In November 2013, the IT A appealed the
decision to the Supreme Court.

• 2007 VAT. In October 2011, the Provincial Tax Court issued decision no. 276/21/2011 (jointly with the 2006 VAT
case described above) in which the Provincial Tax Court (i) fully accepted the merits of our appeal, (ii) declared that no
penalties can be imposed against us, and (iii) found that for the 2006 and 2007 VAT cases the ITA was liable to pay us
€10,000 as partial refund of the legal expenses incurred for the appeal. In December 201 1, the ITA appealed this decision
to the Regional Tax Court. On April 16, 2013, the Regional Tax Court issued decision no. 57/35/13 (jointly with the
2006 VAT case) in which it fully rejected the merits of the ITA’s appeal, declared that no penalties can be imposed
against us, and found the ITA liable to pay us €12,000, as partial refund of the legal expenses we incurred for this appeal.
In November 2013, the ITA appealed the decision to the Supreme Court.

No hearing has been fixed yet for the 2003 and consolidated 2006/2007 VAT cases.

Securities and Exchange Commission Subpoena

We previously disclosed that we had received a subpoena from the SEC in January 2016. We believe that the SEC is
seeking to determine whether there have been possible violations of the antifraud and certain other provisions of the federal
securities laws related to the Company's disclosures concerning, among other things, the clinical test results of pacritinib. The
SEC Staff's letter sent with the subpoena stated that the investigation is a fact-finding inquiry, and the investigation and
subpoena do not mean that the SEC has concluded that we or anyone else has violated any law. We are cooperating with this
investigation, which is ongoing.

In re CTI BioPharma Corp. Securities Litigation

On February 10, 2016 and February 12, 2016, class action lawsuits entitled Ahrens v. CTI BioPharma Corp. et al., Case

No. 1:16-cv-01044 and McGlothlin v. CTI BioPharma Corp. et al., Case No. C16-216, respectively, were filed in the United
States District Court for the Southern District of New York and the United States District Court for the Western District of
Washington, respectively, on behalf of shareholders that purchased or acquired the Company’s securities pursuant to our
September 24, 2015 public offering and/or shareholders who otherwise acquired our stock between March 4, 2014 and
February 9, 2016, inclusive. The complaints assert claims against the Company and certain of our current and former directors
and officers for violations of the federal securities laws under Sections 11 and 15 of the Securities Act of 1933, as amended, or
the Securities Act, and Sections 10 and 20 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, Plaintiffs’
Securities Act claims allege that the Company’s Registration Statement and Prospectus for the September 24, 2015 public
offering contained materially false and misleading statements and failed to disclose certain material adverse facts about the
Company’s business, operations and prospects, including with respect to the clinical trials and prospects for pacritinib.
Plaintiffs’ Exchange Act claims allege that the Company’s public disclosures were knowingly or recklessly false and misleading
or omitted material adverse facts, again with a primary focus on the clinical trials and prospects for pacritinib. On May 2, 2016,
the Company filed a motion to transfer the Ahrens case to the United States District Court for the Western District of
Washington. The motion was unopposed and granted by the court on May 19, 2016. On June 3, 2016, the parties filed a joint
motion to consolidate the McGlothlin case with the Ahrens case in order to proceed as a single consolidated proceeding. On
June 13, 2016, the court granted the motion to consolidate with the action being captioned In re CTI BioPharma Corp.
Securities Litigation, Master File No. 2:16-cv-00216-RSL. On September 2, 2016, the court appointed Lead Plaintiffs and
Lead Counsel. On September 28, 2016, the court entered a scheduling order, as revised by order entered December 8, 2016,
setting November 8, 2016 as the deadline to file a consolidated class action complaint and deadlines for briefing defendants’
motion to dismiss. Briefing concluded on February 22, 2017. The consolidated class action complaint asserts claims similar to
those asserted in the initial complaints, although it no longer asserts claims relating to the September 24, 2015 public offering,
but adds claims relating to the Company’s October 27, 2015 and December 4, 2015 public offerings. On July 26, 2017, we
received a written offer for the global resolution and settlement of the consolidated action in exchange for cash payment of
$20.0 million. The Company had insurance coverage related to this matter that covered $18.0 million of the claim. In August
2017, we agreed in principle to the terms of the settlement and submitted the terms and proposed class notice to the court for its

preliminary approval. On October 24, 2017, the court granted preliminary approval, and on February 1, 2018, the court fully
and finally approved the settlement and dismissed all claims against the Company with prejudice.

Wei v. James A. Bianco, et al.; England v. James A Bianco, et al; Nahar v. James A. Bianco, et al.; Hill v. James A. Bianco,
et al.

On March 14, 2016, a Company shareholder filed the first of four similar derivative lawsuits on behalf of the Company
seeking damages for alleged harm to the Company caused by certain current and former officers and directors. The first suit,
Wei v. James A. Bianco, et al., 16-2-05818-3, was filed in King County Superior Court, Washington. A second suit, England v.
James A. Bianco, et al., 16-2-14422-5, was filed in King County Superior Court, Washington, on June 16, 2016. Two
additional derivative suits, Nahar v. James A. Bianco, et al., 2:16-cv-0756, and Hill v. James A. Bianco, et al., 2:16-cv-1250,
were filed in the United States District Court for the Western District of Washington on May 24, 2016 and August 9, 2016,
respectively. The four suits raise similar allegations and seek similar relief against certain current and former officers and
directors, including James A. Bianco, Louis A. Bianco, Jack W. Singer, Bruce J. Seeley, John H. Bauer, Phillip M. Nudelman,
Reed V. Tuckson, Karen Ignagni, Richard L. Love, Mary O. Mundinger and Frederick W. Telling. Consistent with the
requirements of a derivative action, the Company is named in each suit as a nominal defendant against which no monetary
relief is sought. The complaints generally allege claims of: (1) breach of fiduciary duty; (2) abuse of control; (3) gross
mismanagement; and (4) waste of corporate assets and (5) unjust enrichment (receiving compensation that was unjust in light
of the alleged conduct). Each claim is based on the assertion that the Company made materially false and misleading
statements and omitted material information from its disclosures about pacritinib and its safety. Plaintiffs in none of the suits
made a pre-suit demand on the current Board to investigate whether to pursue claims against officers or directors, instead
claiming demand is excused because the named defendants lack independence, are not disinterested because they lack
impartiality, received and want to continue to receive their compensation, have longstanding personal and business
relationships, and cannot evaluate a demand since they are facing personal liability. Each of plaintiffs’ suits requested the court
to award the Company the damages allegedly sustained as a result of the conduct and to direct the Company and the individual
defendants to reform and improve the Company’s corporate governance to avoid future damages. On March 29, 2017 during
mediation, the parties to the derivative suits reached an agreement in principle to settle all four suits subject to Board and court
approvals. Subject to the terms and conditions in the settlement agreement and court approval, CTI has agreed to adopt certain
corporate governance reforms relating to, among other things, the content of CTI-retained independent data monitoring
committee charters; engagement if an independent expert or entity to conduct yearly audits of compliance with Good Clinical
Practices; the creation of a risk compliance officer position; certain improvements to CTI’s Audit Committee, including the
requirement that the Audit Committee review CTI’s periodic public reports to facilitate proper disclosure of risks and risk
factors; establishment of an internal audit function that will monitor the Company’s adherence to its policies and procedures,
including those related to identification and disclosure of drug candidate safety issues; continuing-education requirements for
members of the Board; and improvements to CTI’s nominating committee, compensation committee, and clawback policy. CTI
also agreed not to object to an attorneys’ fee application by plaintiffs’ counsel of up to $0.8 million collectively, subject to the
terms and conditions in the settlement agreement and court approval. There is no admission of liability or any wrongdoing by
any of the individual defendants or CTI. On September 25, 2017, the King County Superior Court entered an order substituting
Kevin Hammond for former Lead Plaintiff Gang Wei and Maurio Eley for former Lead Plaintiff Michael England, and the two
case captions were amended as reflected above. The parties filed settlement-approval papers on October 26, 2017. On
November 21, 2017, the Court preliminarily approved the settlement, and on January 31, 2018, the Court fully and finally
approved the settlement and dismissed all claims against the Company and the individual defendants with prejudice.

In connection with the securities litigation and four derivative lawsuits described above, after taking into account our

existing insurance coverage, we recorded $2.2 million of settlement expense in Selling, general and administrative expenses in
our consolidated statement of operations for the year ended December 31, 2017.

In addition to the items discussed above, we are from time to time subject to legal proceedings and claims arising in the

ordinary course of business.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities

Our common stock is currently traded under the symbol “CTIC” on the NASDAQ Capital Market. The following table

sets forth, for the periods indicated, the high and low reported sales prices per share of our common stock as reported on the
NASDAQ Capital Market.

2016

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

2017

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

High

Low

$
$
$
$

13.20
5.80
4.58
5.80

6.48
4.52
3.84
3.45

$
$
$
$

2.51
3.07
3.16
3.60

3.87
2.70
3.07
2.45

On February 28, 2018, the last reported sale price of our common stock on the NASDAQ Capital Market was $4.02 per

share. As of February 28, 2018, there were 132 shareholders of record of our common stock.

Dividend Policy

We have never declared or paid cash dividends on our common stock and do not currently anticipate declaring or paying
cash dividends on our common stock in the foreseeable future. We currently intend to retain all of our future earnings, if any, to
finance operations. Any future determination relating to our dividend policy will be made at the discretion of our Board of
Directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions, future
prospects, contractual restrictions and other factors that our Board of Directors may deem relevant.

Sales of Unregistered Securities

Not applicable.

Stock Repurchases in the Fourth Quarter

The following table sets forth information with respect to purchases of our common stock during the three months ended

December 31, 2017:

Period
October 1 – October 31, 2017
November 1 – November 30, 2017
December 1 – December 31, 2017
Total

Total Number of
Shares
Purchased (1)

Average
Price Paid
per Share

6,799
345
775
7,919

$
$
$
$

3.31
2.79
2.63
3.22

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Programs

Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plans or
Programs

—
—
—
—

(1)

Represents purchases of shares in connection with satisfying tax withholding obligations on the vesting of restricted
stock awards to employees and not pursuant to a publicly announced plan or program.

Stock Performance Graph

The following graph sets forth the cumulative total shareholder return of our common stock with the cumulative total

return of the NASDAQ Stock Index (U.S.) and the NASDAQ Pharmaceutical Index for the five years ended December 31,
2017. The graph assumes $100 was invested in our common stock at the close of market on December 31, 2012. Stockholder
return over the indicated period should not be considered indicative of future stockholder returns.

The actual returns shown on the graph above are as follows:

CTI BioPharma Corp.
NASDAQ Stock Index (U.S.)
NASDAQ Pharmaceutical Index

12/31/2012
100.00
$
100.00
$
100.00
$

12/31/2013
146.92
$
133.48
$
135.68
$

12/31/2014
181.54
$
150.12
$
165.28
$

12/31/2015
94.62
$
150.84
$
174.27
$

12/30/2016
31.35
$
170.46
$
172.37
$

12/29/2017
20.62
$
206.91
$
205.33
$

The stock performance graph shall not be deemed soliciting material or to be filed with the SEC or subject to Regulation

14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Exchange Act, nor shall it be
incorporated by reference into any past or future filing under the Securities Act of 1933 or the Exchange Act, except to the
extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference into a filing
under the Securities Act of 1933 or the Exchange Act.

Item 6. Selected Financial Data

The data set forth below should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto appearing at Item 8
of this Annual Report on Form 10-K.

Consolidated Statements of Operations Data:

Revenues:

Product sales, net(1)

License and contract revenue(2)

Total revenues

Operating costs and expenses:

Cost of product sold(1)

Research and development

Selling, general and administrative

Acquired in-process research and development(3)

Other operating (income) expense, net

Total operating costs and expenses, net

Loss from operations

Non-operating income (expense):

Interest expense

Amortization of debt discount and issuance costs

Foreign exchange gain (loss)

Other non-operating expense

Total non-operating expense, net

Net loss before noncontrolling interest

Noncontrolling interest

Net loss attributable to CTI

Deemed dividends on preferred stock

Net loss attributable to common shareholders

Basic and diluted net loss per common share(4)

Shares used in calculation of basic and diluted net loss
per common share(4)

Year ended December 31,

2017

2016

2015

2014

2013

(In thousands, except per share data)

853

4,127

3,472

6,909

2,314

24,293

25,146

364

32,866

31,435

—

64,665
(39,519)

53,278

57,405

1,377

64,961

45,306

—
(5,077)
106,567
(49,162)

12,644

16,116

1,940

76,627

53,962

—

253

53,168

60,077

895

64,596

56,241

21,859

2,719

32,364

34,678

137

33,624

42,443

—

132,782
(116,666)

146,310
(86,233)

76,204
(41,526)

(2,614)
(214)
(484)
(479)
(3,791)
(52,953)
944
(52,009)
—

(1,872)
(163)
817
(94)
(1,312)
(40,831)
161
(40,670)
(4,350)

(1,026)
(513)
61
(546)
(2,024)
(43,550)
807
(42,743)
(6,900)
$ (45,020) $ (52,009) $(122,622) $ (95,992) $ (49,643)
(4.35)
$

(2,104)
(390)
(703)
(900)
(4,097)
(120,763)
1,341
(119,422)
(3,200)

(1,947)
(729)
(4,435)
(885)
(7,996)
(94,229)
862
(93,367)
(2,625)

(6.46) $

(1.86) $

(6.51) $

(1.24) $

36,445

27,948

18,837

14,853

11,419

Consolidated Balance Sheets Data:
Cash, cash equivalents and restricted cash
Working capital
Total assets
Current portion of long-term debt(5)
Long-term debt, less current portion(5)
Other liabilities
Common stock purchase warrants
Accumulated deficit
Total shareholders’ equity

Year ended December 31,

2017

2016

2015

2014

2013

(In thousands)

43,218
27,666
54,886
444
13,575
5,469
—
(2,195,346)
16,090

44,002
15,178
63,843
7,949
11,311
3,615
—
(2,150,326)
7,757

$ 128,182
62,566
144,197
37,371
19,124
4,141
—
(2,098,317)
47,413

70,933
44,165
92,122
9,014
8,198
5,882
1,445
(1,975,695)
38,478

71,639
60,446
93,464
3,155
9,893
5,657
13,461
(1,879,703)
42,758

(1) The amounts relate to commercial sales of PIXUVRI.

(2) The amounts primarily relate to license and development services revenue recognized in connection with the Pacritinib
License Agreement, the Servier Original Agreement and the Servier Restated Agreement as well as payments received from
Teva upon achievement of sales-based milestones. See Part II, Item 8 "Financial Statements and Supplementary Data, Notes to
Consolidated Financial Statements, Note 11. Collaboration, Licensing and Milestone Agreements" for additional information.

(3) The amount in 2014 represents the purchase of certain assets from Chroma Therapeutics Limited. These purchased assets
had not reached technological feasibility at the time of acquisition and were therefore expensed to Acquired in-process research
and development.

(4) The net loss per share calculation, including the number of shares used in basic and diluted net loss per share, has been
adjusted to reflect a one-for-ten reverse stock split on January 1, 2017.

(5) These amounts relate to our senior secured term loan agreements. Also included in 2015 is milestone advance received from
Baxalta in June 2015 which obligation was satisfied during the first quarter of 2016. See Part II, Item 8 "Financial Statements
and Supplementary Data, Notes to Consolidated Financial Statements, Note 7. Long-term Debt" for additional information.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a biopharmaceutical company focused on the acquisition, development and commercialization of novel targeted
therapies covering a spectrum of blood-related cancers that offer a unique benefit to patients and healthcare providers. Our goal
is to build a profitable company by generating income from products we develop and commercialize, either alone or with
partners. We are currently concentrating our efforts on treatments that target blood-related cancers where there is an unmet
medical need. In particular, we are primarily focused on evaluating pacritinib for the treatment of adult patients with
myelofibrosis and the further development of PIXUVRI worldwide, for which our partner, Les Laboratoires Servier and Institut
de Recherches Internationales Servier, or collectively Servier, has commercialization rights outside the United States.

Key Highlights

Select fiscal year 2017 highlights include:

Research and Development

In August 2017, enrollment was completed in the PIX306 Phase 3 trial of PIXUVRI® (pixantrone). The PIX306 trial is
evaluating PIXUVRI combined with rituximab in comparison to that of rituximab combined with gemcitabine in patients with
aggressive B-cell NHL. PIXUVRI has previously been granted conditional marketing authorization from the European
Commission for the treatment of adult patients with multiply relapsed or refractory aggressive B-cell NHL. The trial is being
conducted as a post-authorization requirement of conditional marketing authorization. If positive, the results from this trial
could support broader indications. Top-line results are expected by the end of the first half of 2018.

In July 2017, the first patient was enrolled in PAC203, a Phase 2 clinical trial of pacritinib in patients with primary
myelofibrosis who have failed prior ruxolitinib therapy. PAC203 is designed to evaluate the dose response relationship for
safety and efficacy (spleen volume reduction at 12 and 24 weeks) of three dose regimens: 100 mg once-daily, 100 mg twice-
daily (BID) and 200 mg BID. The 200 mg BID dose regimen was used in the Phase 3 PERSIST-2 trial of pacritinib in patients
with myelofibrosis. The trial is expected to enroll up to approximately 105 patients. We expect to complete enrollment by
mid-2018. We expect to have interim data from PAC203 by the end of the second quarter of 2018 and topline data in the first
quarter of 2019.

In July 2017, the EMA validated the MAA for pacritinib for the treatment of patients with myelofibrosis who have

thrombocytopenia (platelet counts less than 100,000 per microliter). Validation confirms that the submission is complete and
initiates the centralized review process by the EMA's Committee for Medicinal Products for Human Use.

In April 2017, we announced the expansion of the existing license and development collaboration agreement with
Servier for PIXUVRI®. Under the expanded agreement, Servier will have rights to PIXUVRI in all markets except in the U.S.
where we will retain the commercialization rights. Servier paid us €12.0 million in May 2017 and purchased PIXUVRI drug
product for an additional €0.9 million in July 2017. We are eligible to receive up to €75.0 million in additional sales and
regulatory milestone payments as well as royalties on net product sales.

Management and Board of Directors

Management

In September 2017, we announced the promotion of David Kirske as Chief Financial Officer, or CFO, of the Company.

Mr. Kirske joined the Company earlier in 2017 and served as the Principal Financial and Accounting Officer prior to being
appointed CFO. Mr. Kirske leads CTI BioPharma’s finance, accounting and investor relations teams. Prior to his appointment,
Mr. Kirske was an independent chief financial officer consultant since January 2013. As a consultant, he has provided financial
management services to public and emerging growth private companies primarily in the biotechnology industry, as well as in
the technology and manufacturing industries. Mr. Kirske's financial management experience includes overseeing finance,
accounting, operations, and capitalization, in both debt and equity. Prior to his time as a consultant, Mr. Kirske served as Vice
President and CFO of Helix BioMedix where he managed all financial and administrative activities. Previously, he was the
Treasurer and Corporate Controller for F-5 Networks and Redhook Brewery where he managed both corporate and
international entities, and was part of the management teams that led and executed each company’s successful initial public
offerings. Earlier in his career, he held a controllership position at Cray Computer. Mr. Kirske holds a B.A. in Business
Administration from the University of Puget Sound.

In September 2017, we announced the promotion of Bruce Seeley to Chief Operating Officer of the Company. Mr.

Seeley joined the Company in 2015 and served as the Chief Commercial and Administrative Officer and Secretary prior to
being appointed Chief Operating Officer. Mr. Seeley has more than 25 years of global commercial experience and a proven
track record of successfully launching products in various markets and regulatory environments. Most recently, Mr. Seeley was
Senior Vice President and General Manager of Diagnostics at NanoString Technologies Inc., overseeing the launch of the
diagnostic product PROSIGNA® for early stage breast cancer. Previously, he was Executive Vice President of Commercial
at Seattle Genetics where he built and led the commercial organization, including marketing, sales and managed markets, and
successfully launched Seattle Genetic's first product, ADCETRIS®, a targeted therapy for lymphoma. He also previously held
key leadership positions in marketing at Genentech (now a member of the Roche Group), where he led the launch of
HERCEPTIN® in adjuvant breast cancer. Earlier in his career he held various commercial roles at Aventis Pharmaceuticals
Inc. (a part of Sanofi) and Bristol-Myers Squibb Co. Mr. Seeley received a B.A. in Sociology from the University of California
at Los Angeles.

In February 2017, we announced the appointment of Adam Craig, M.D., Ph.D., as President and Chief Executive
Officer, or CEO, and member of the Company's Board of Directors effective March 20, 2017. Dr. Craig has over 20 years of
experience in hematology, oncology and drug development in both the U.S. and Europe. Dr. Craig worked as an independent
consultant providing strategic and operational advice and support to CTI BioPharma and other hematology/oncology
biotechnology companies. Prior to consulting, Dr. Craig was Chief Medical Officer, or CMO, and Executive Vice President of
Development at Sunesis Pharmaceuticals from 2012 to 2016. From 2008 to 2012, Dr. Craig was CMO and Senior Vice
President of Chemgenex Pharmaceuticals Ltd. Dr. Craig is a Member of the Royal College of Physicians in the United
Kingdom, or U.K., and undertook Post-Graduate Training in Pediatrics and Pediatric Oncology. Dr. Craig earned his Bachelor's
and Medical degrees from Charing Cross and Westminster Medical School, University of London, and holds a Ph.D. in
Molecular Oncology from Leeds University in the U.K. and an MBA from the Open Business School in the U.K. Dr. Craig
recently served as a Product Development Reviewer for the Cancer Prevention Research Institute of Texas.

Board of Directors

In July 2017, Laurent Fischer, M.D. was appointed to the Board of Directors, and in September 2017 he was appointed
Chairman of the Board. Dr. Fischer has more than 20 years of experience in developing and commercializing novel medicines
in the biopharmaceutical industry and currently serves as liver therapeutic area head at Allergan following its acquisition of
Tobira Therapeutics in 2016.

In June 2017, David Parkinson, M.D. was appointed to the Board of Directors. Dr. Parkinson has significant experience
in oncology clinical development and is currently President and Chief Executive Officer of Essa Pharmaceuticals, Inc. He and
has also served as a venture partner at New Enterprise Associates, Inc., or NEA, since 2012, moving into the role of venture
advisor to NEA in 2016.

In January 2017, Michael Metzger was appointed to the Board of Directors. Mr. Metzger has extensive experience
leading and growing companies in the biopharmaceutical industry over the last 20 years. Mr. Metzger is currently President and
Chief Operating Officer of Syndax Pharmaceuticals, Inc., a publicly traded immuno-oncology biopharmaceutical company. He
has served in executive and senior management positions at Regado Biosciences, Mersana Therapeutics, Forest Laboratories
and Onconova Therapeutics.

Financial summary

Our revenues are generated from a combination of PIXUVRI sales and collaboration and license agreements.

Collaboration revenues reflect the earned amount of upfront payments and milestone payments under our product
collaborations. Total revenues were $25.1 million, $57.4 million and $16.1 million for the years ended December 31, 2017,
2016 and 2015, respectively. Our loss from operations was $39.5 million, $49.2 million and $116.7 million for the years ended
December 31, 2017, 2016 and 2015, respectively. Our results of operations may vary substantially from year to year and from
quarter to quarter and, as a result, you should not rely on them as being indicative of our future performance.

See Part II, Item 8, "Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note

11. Collaboration, Licensing and Milestone Agreements" for further information relating to our collaboration agreements.

As of December 31, 2017, we had cash, cash equivalents and restricted cash of $43.2 million.

Results of Operations

Years ended December 31, 2017, 2016 and 2015

Product sales, net. Prior to April 2017 when we entered into an Amended and Restated Exclusive License and
Collaboration Agreement, or the Restated Agreement, with Servier, we sold PIXUVRI primarily through a limited number of
wholesale distributors. Servier is currently responsible for distribution of PIXUVRI in countries other than the U.S. (and its
territories and possessions.) We generally record product sales upon receipt of the product by the health care provider or
distributor at which time title and risk of loss pass.

Gross sales is defined as our contracted reimbursement price in each country. Gross sales from PIXUVRI for the years

ended December 31, 2017, 2016 and 2015 were $1.0 million, $4.2 million and $3.5 million, respectively. Product sales, net
represents gross sales, net of provisions for distributor discounts, estimated government-mandated discounts and rebates, trade
discounts and estimated product returns. After these provisions, product sales, net from PIXUVRI were $0.9 million, $4.1
million and $3.5 million for the years ended December 31, 2017, 2016 and 2015, respectively.

The provision for product returns relates to a limited right of return or replacement that we offer to certain customers.
Distributor discounts, return and rebates were $0.1 million during the year ended December 31, 2017. There was no material
activity related to distributor discounts, returns and rebates during the years ended December 31, 2016 and 2015, and no
material balances recorded as of December 31, 2017 and 2016.

The decrease in product sales, net for the year ended December 31, 2017 from the same period in 2016 was primarily
related to the Restated Agreement with Servier in April 2017 under which Servier assumed commercialization rights to
PIXUVRI in all markets except in the U.S. The increase in product sales, net of $0.7 million for the year ended December 31,
2016 compared to the year ended December 31, 2015 was primarily due to pricing and volume variances between the periods
presented, partially offset by a decline in the average exchange rate of the British pound for our pound-denominated sales.

License and contract revenue. License and contract revenue was as follows (in thousands):

Servier Milestone and license revenue
Development services revenue
Royalty revenue
Total Servier

Teva

Milestones revenue
Total Teva

Baxalta Milestone and license revenue
Development services revenue
Total Baxalta

Years ended December 31,

2017
12,665
1,098
530
14,293

10,000
10,000

—
—
—

2016

2015

7,998
639
204
8,841

—
—

32,000
12,437
44,437

1,702
103
24
1,829

10,000
10,000

—
815
815

Total license and contract revenue

24,293

53,278

12,644

Servier

In April 2017, in connection with the execution of the Restated Agreement with Servier, we allocated and recorded $11.5

million and $1.3 million of the upfront payment received to license revenue and deferred revenue, respectively. The Restated
Agreement with Servier amended and restated in its entirety the Exclusive License and Collaboration Agreement, or the
Original Agreement, entered into in September 2014. The remaining deferred revenue balance as of the date of the Restated
Agreement relating to the upfront payment under the Original Agreement was $0.6 million, which, along with the $1.3 million
of deferred revenue allocated from the Restated Agreement as mentioned above, will be recognized as revenue based upon a
proportional performance method.

During the year ended December 31, 2017, we recorded a €1.0 million milestone revenue (or $1.2 million upon
conversion from euros as of the date we achieved the milestone) relating to the attainment of a certain regulatory milestone
under the Restated Agreement. During the year ended December 31, 2016, we recorded a €7.5 million milestone revenue (or
$8.0 million upon conversion from euros as of the date we achieved the milestone) relating to the attainment of a certain

enrollment event in connection with our PIX306 study. During the year ended December 31, 2015, we received a €1.5 million
milestone payment (or $1.7 million upon conversion from euros as of the date we received the funds) relating to the attainment
of reimbursement approval for PIXUVRI in Spain.

License and contract revenue for the years ended December 31, 2017, 2016 and 2015 includes $0.6 million, $0.1 million

and $0.1 million, respectively, of development services revenue recognized from the upfront payments we received in
connection with the execution of the Restated Agreement in 2017 and the Original Agreement in September 2014. In addition,
we recorded revenue of $0.4 million for the reimbursement of expenses related to commercialization transition
under the Restated Agreement during the year ended December 31, 2017. There were no such revenues during the years ended
December 31, 2016 and 2015.

In February 2016, we entered into an agreement with one of Servier's affiliates whereby we were to conduct a

pharmacokinetic sub-study on behalf of Servier in conjunction with our ongoing clinical trial, PIX-306. During the years ended
December 31, 2017 and 2016, $0.1 million and $0.5 million, respectively, of expense reimbursements in relation to this study
was included in development services revenue. There was no such revenue during the year ended December 31, 2015. We
expect to receive no such development services revenue in future periods as the pharmacokinetic sub-study was completed in
September 2017.

Teva

For each of the years ended December 31, 2017 and 2015, we received $10.0 million in milestone payments upon the

achievement of worldwide net sales milestones of TRISENOX. We did not receive a milestone payment during the year ended
December 31, 2016.

Baxalta

In October 2016, we resumed primary responsibility for the development and commercialization of pacritinib as a result
of the termination of the Pacritinib License Agreement. As such, we are no longer eligible to receive cost sharing or milestone
payments for pacritinib’s development from Baxalta. For additional information relating to the Pacritinib License Agreement,
see Part II, Item 8, "Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note11.
Collaboration, Licensing and Milestone Agreements."

During the year ended December 31, 2016, we recorded milestone revenue of $32.0 million for achievement of the
PERSIST-2 Milestone and the MAA Milestone under the Pacritinib License Agreement. We received the cash advance for
these milestone payments in the second quarter of 2015; it was accounted for as long-term debt until the achievement of the
associated milestones in the first quarter of 2016. See Part II, Item 8, "Financial Statements and Supplementary Data, Notes to
Consolidated Financial Statements, Note 7. Long-term Debt," for further details. No milestone payments were received during
2015 under the Pacritinib License Agreement.

During the year ended December 31, 2016, we recorded $11.4 million of development services revenue relating to the

reimbursable development costs from Baxalta under the terms of the Pacritinib License Agreement. No such revenue was
recorded during the same period in 2015.

The license and contract revenue under the Pacritinib License Agreement for the years ended December 31, 2016 and
2015 also included $1.0 million and $0.8 million, respectively, of development services revenue which was recognized based
on a proportional performance method from the allocated upfront payment we received in connection with the execution of the
Pacritinib License Agreement in 2013.

Operating costs and expenses

Cost of product sold. Cost of product sold is related to sales of PIXUVRI and includes royalty expenses payable under

the agreement with University of Vermont and the Novartis Termination Agreement.

Cost of product sold was $0.4 million, $1.4 million and $1.9 million for the years ended December 31, 2017, 2016 and

2015, respectively. Royalty expenses were $0.3 million, $0.2 million and $0.2 million for the same periods.

The decrease in cost of product sold for the year ended December 31, 2017 compared to 2016 was primarily a result of

the Restated Agreement we entered into with Servier in April 2017 whereby Servier assumed responsibility for the manufacture
and supply of drug products and substances in its respective territories. For additional information, see Part II, Item 8,
"Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note11. Collaboration, Licensing
and Milestone Agreements."

The decrease in cost of product sold by $0.5 million for the year ended December 31, 2016 compared to 2015 was

primarily due to a reduction in reserve for excess obsolete or unsalable inventory between periods. Based on assessment of
shelf lives and net realizable value of the product, reserves of $0.7 million and $1.3 million were recorded during the years
ended December 31, 2016 and 2015, respectively. There was no reserve recorded during the year ended December 31, 2017.

Research and development expenses. Our research and development expenses for compounds under development and

preclinical development were as follows (in thousands):

Compounds under development:

PIXUVRI
Pacritinib
Opaxio
Tosedostat
Operating expenses

Research and preclinical development
Total research and development expenses

Years ended December 31,

2017

2016

2015

7,419
13,135
(18)
(3)
12,286
47
32,866

12,009
32,150
98
1,587
18,494
623
64,961

14,465
36,152
626
920
23,212
1,252
76,627

Costs for our compounds include external direct expenses such as principal investigator fees, charges from contract

research organizations, or CROs, and contract manufacturing fees incurred for preclinical, clinical, manufacturing and
regulatory activities associated with preparing the compounds for submissions of NDAs or similar regulatory filings to the
FDA, the EMA or other regulatory agencies outside the U.S. and Europe, as well as upfront license fees for acquired
technology. Subsequent to receiving a positive opinion for conditional approval of PIXUVRI in the E.U. from the EMA’s
CHMP, costs associated with commercial batch production, quality control, stability testing, and certain other manufacturing
costs of PIXUVRI were capitalized as inventory. Operating expenses include personnel costs and an allocation of occupancy,
depreciation and amortization expenses associated with developing these compounds. Research and preclinical development
costs primarily include costs associated with external laboratory services associated with the compound under development by
Aequus Biopharma, Inc. We are not able to capture the total cost of each compound because we do not allocate operating
expenses to all of our compounds. External direct costs incurred by us as of December 31, 2017 were $127.8 million for
PIXUVRI (excluding costs prior to our 2004 merger with Novuspharma S.p.A, formerly a public pharmaceutical company
located in Italy), $128.3 million for pacritinib (excluding costs for pacritinib prior to our acquisition of certain assets from
S*BIO in May 2012 and $29.1 million of in-process research and development expenses associated with the acquisition of
certain assets from S*BIO), $228.0 million for Opaxio and $13.9 million for tosedostat (excluding costs for tosedostat prior to
our co-development and license agreement with Chroma Therapeutics Limited, or Chroma, in 2011 and $21.9 million of
inprocess research and development expenses associated with the acquisition of certain assets from Chroma).

Research and development expenses decreased to $32.9 million for the year ended December 31, 2017 compared to
$65.0 million for the year ended December 31, 2016. The decrease of $32.1 million was primarily attributed to to a $19.0
million decrease in pacritinib development costs as a result of the full clinical hold, a $4.6 million reduction of PIXUVRI trial
costs and medical affairs and manufacturing activities in the E.U., a $1.6 million decrease in tosedostat drug manufacturing and
development costs, a $6.2 million decrease in operating expenses associated with supporting our research and development
efforts primarily due to a decline in personnel and a $0.7 million decrease in other development costs.

Research and development expenses decreased to $65.0 million for the year ended December 31, 2016 compared to

$76.6 million for the year ended December 31, 2015. The decrease of $11.6 million was primarily attributed to a decrease in
pacritinib development costs as a result of the full clinical hold, a reduction of PIXUVRI medical affairs and manufacturing
activities in the E.U. and a decrease in operating expenses associated with supporting our research and development efforts
primarily due to a decline in personnel.

Regulatory agencies, including the FDA and EMA, regulate many aspects of a product candidate’s life cycle, including

research and development and preclinical and clinical testing. We will need to commit significant time and resources to develop
our current and any future product candidates. Our product candidates pacritinib and tosedostat are currently in clinical
development, and our product PIXUVRI, which is currently being commercialized in parts of Europe, is undergoing a post-
authorization trial. Many drugs in human clinical trials fail to demonstrate the desired safety and efficacy characteristics. We
are unable to provide the nature, timing and estimated costs of the efforts necessary to complete the development of pacritinib

and tosedostat, and to complete the post-authorization PIX306 trial of PIXUVRI, because, among other reasons, we cannot
predict with any certainty the pace of patient enrollment of our clinical trials, which is a function of many factors, including the
availability and proximity of patients with the relevant condition and the availability of the compounds for use in the applicable
trials. We rely on third parties to conduct clinical trials, which may result in delays or failure to complete trials if the third
parties fail to perform or meet applicable standards. Even after a clinical trial is enrolled, preclinical and clinical data can be
interpreted in different ways, which could delay, limit or preclude regulatory approval and advancement of this compound
through the development process. We or regulatory authorities may suspend clinical trials at any time on the basis that the
participants are being exposed to unacceptable health risks. For example, on February 8, 2016, the FDA placed a full clinical
hold on pacritinib. Even if our drugs progress successfully through initial human testing in clinical trials, they may fail in later
stages of development. A number of companies in the pharmaceutical industry, including us, have suffered significant setbacks
in advanced clinical trials, even after reporting promising results in earlier trials. For these reasons, among others, we cannot
estimate the date on which clinical development of our product candidates will be completed, if ever, or when we will generate
material net cash inflows from PIXUVRI or be able to begin commercializing pacritinib, tosedostat or Opaxio to generate
material net cash inflows. In order to generate revenue from these compounds, our product candidates need to be developed to
a stage that will enable us to commercialize, sell or license related marketing rights to third parties.

We also enter into collaboration agreements for the development and commercialization of our product candidates. We

cannot control the amount and timing of resources our collaborators devote to product candidates, which may also result in
delays in the development or marketing of products. Because of these risks and uncertainties, we cannot accurately predict
when or whether we will successfully complete the development of our product candidates or the ultimate product development
cost.

The risks and uncertainties associated with completing development on schedule and the consequences to operations,

financial position and liquidity if the project is not timely completed are discussed in more detail in our risk factors, which can
be found in Part I, Item 1A, “Risk Factors.”

Selling, general and administrative expenses. Selling, general and administrative expenses were $31.4 million for the

year ended December 31, 2017 compared to $45.3 million for the year ended December 31, 2016 and $54.0 million for the year
ended December 31, 2015.

The decrease in 2017 from 2016 was primarily due to decreases of $11.2 million in personnel costs, $0.7 million in

travel costs, $0.2 million in professional fees for marketing initiatives related to our drug candidate, pacritnib, $0.4 million in
pacritnib promotional costs previously shared with our collaboration partner, Baxalta, $0.4 million in other professional
services associated with PIXUVRI, $1.6 million in legal fees, $0.3 million in general administrative costs and $0.3 million in
other expenses. These decreases were offset by $1.2 million primarily related to a loss associated with the December 2017
sublease of approximately 44,000 square feet of our office space.

The decrease between 2015 and 2016 was primarily due to decreases in consulting and other professional service costs

for PIXUVRI of $4.8 million, professional fees for marketing initiatives related to our drug candidate, pacritnib, of $2.2
million, administrative and travel costs of $2.1 million, primarily due to pacritnib being placed on full clinical hold by the FDA
in February 2016, recruiting and other general and administrative consulting fees of $1.9 million, and personel costs of $0.5
million. Offsetting these decreases were $1.4 million in pacritinib promotional costs previously shared with our collaboration
partner, Baxalta, and a $1.8 million increase in legal fees.

Other operating (income) expense, net. Other net operating income of $5.1 million for the year ended December 31,

2016 includes a gain of $5.9 million on termination of the Pacritinib License Agreement with Baxalta as well as a $0.8 million
expense payable to Novartis as a result of a certain enrollment event achieved in December 2016 under the Original Agreement
with Servier. Other operating expense of $0.3 million for the year ended December 31, 2015 relates to payments made to
Novartis as a result of the milestone achieved under the same agreement in February 2015 relating to the reimbursement
approval for PIXUVRI in Spain. There was no other operating expense or income for the year ended December 31, 2017.
Certain payments are required under the Novartis Termination Agreement. See Part II, Item 8, "Financial Statements and
Supplementary Data, Notes to Consolidated Financial Statements, Note 11. Collaboration, Licensing and Milestone
Agreements" for further details.

Non-operating income and expenses

Interest expense. Interest expense is primarily related to our senior secured term loans and was $1.9 million, $2.6

million and $2.1 million for the years ended December 31, 2017, 2016 and 2015, respectively. Interest expense decreased by
$0.7 million between 2016 and 2017 primarily due to the declining principal balance and refinancing of our senior secured term
55

loan. Interest expense increased by $0.5 million between 2016 and 2015 primarily due to the additional principal amounts of
our senior secured term loan funded in June 2015 and December 2015. See Part II, Item 8, "Financial Statements and
Supplementary Data, Notes to Consolidated Financial Statements, Note 7. Long-term Debt" for further details.

Amortization of debt discount and issuance costs. Amortization of debt discount and issuance costs for the years ended

December 31, 2017, 2016 and 2015 was primarily related to our senior secured term loans.

Foreign exchange gain (loss). The foreign exchange gain was $0.8 million for the year ended December 31, 2017, and

the foreign exchange loss was $0.5 million and $0.7 million for the years ended December 31, 2016 and 2015, respectively.
The variances were due to fluctuations in foreign currency exchange rates, primarily related to operations in our European
branches and subsidiaries denominated in foreign currencies.

Other non-operating expense. Other non-operating expense of $0.1 million for the year ended December 31, 2017
primarily relates to a loss on debt extinguishment in connection with the repayment of senior secured term loan from Hercules.
Other non-operating expense of $0.5 million for the year ended December 31, 2016 primarily represents the other-than-
temporary impairment recognized on our available-for-sale securities during the first quarter of 2016. Other non-operating
expense of $0.9 million for the year ended December 31, 2015 was primarily related to a $1.2 million loss on debt
extinguishment in connection with our entry into an amendment to our senior secured term loan agreement, partially offset by
the fair value adjustment of the warrant liability. See Part II, Item 8, "Financial Statements and Supplementary Data, Notes to
Consolidated Financial Statements, Note 7. Long-term Debt" for further details.

Deemed dividends on preferred stock. Deemed dividends on preferred stock, approximately $4.4 million and $3.2

million for the years ended December 31, 2017 and 2015, respectively, were related to issuances of our preferred stock. There
were no deemed dividends on preferred stock for the year ended December 31, 2016. See Part II, Item 8, "Financial Statements
and Supplementary Data, Notes to Consolidated Financial Statements, Note 8. Preferred Stock" for further details.

Liquidity and Capital Resources

Cash, cash equivalents and restricted cash. As of December 31, 2017, we had $43.2 million in cash, cash equivalents

and restricted cash.

Net cash used in operating activities. Net cash used in operating activities totaled $39.3 million, $76.7 million and $95.2

million for the years ended December 31, 2017, 2016 and 2015, respectively. The decrease in net cash used in operating
activities for the year ended December 31, 2017 as compared to the same period in 2016 was primarily due to the decrease in
research and development and selling, general and administrative expenses, and an increase in license and contract revenue
receipts. The decrease in net cash used in operating activities for the year ended December 31, 2016 as compared to the same
period in 2015 was primarily due to increased receipts from license and contract revenue and decreases in spending for research
and development and selling, general and administrative expenses, as well as timing of cash payments related to operating
activities between the two periods.

Net cash used in investing activities. Net cash used in investing activities totaled $38,000, $0.1 million and $0.1 million

for the years ended December 31, 2017, 2016 and 2015, respectively and primarily relates to purchases of property and
equipment.

Net cash provided by (used in) financing activities. Net cash provided by financing activities totaled $39.0 million and
$152.0 million for the years ended December 31, 2017 and 2015, respectively. Net cash used in financing activities was $7.4
million for the year ended December 31, 2016.

Net cash provided by financing activities for the year ended December 31, 2017 was primarily due to the issuance of our

Series N-3 preferred stock in June 2017 and the proceeds of our senior secured term loan with Silicon Valley Bank, or SVB,
partially offset by the repayment of our senior secured term loan with Hercules.

Net cash used in financing activities for the year ended December 31, 2016 was primarily due to principal repayments
made under the Loan and Security Agreement, or the Loan Agreement, with Hercules as well as the payment of a fee required
under the Loan Agreement to Hercules.

Net cash provided by financing activities for the year ended December 31, 2015 was primarily due to the acceleration of
the two milestone payments received in the aggregate amount of $32.0 million from Baxalta pursuant to the Pacritinib License
Amendment discussed above, as well as due to issuances of common stock, preferred stock and long-term debt. We received

$15.1 million in net proceeds from the issuance of our common stock in September 2015. We received $46.7 million in net
proceeds from the issuance of our Series N-1 preferred stock in October 2015. We received $52.8 million in net proceeds from
the issuance of our Series N-2 preferred stock in December 2015. In June 2015, we entered into the Third Amendment to the
Loan Agreement with Hercules, under which we received a total of $5.8 million. Further, we borrowed an additional $5.0
million in December 2015 under the Fourth Amendment to the Loan Agreement. These receipts were offset by repayments to
Hercules of $4.7 million made during the six months ended June 30, 2015.

See Part II, Item 8, "Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 8.

Preferred Stock and Note 7. Long-term Debt", which are incorporated herein by reference, for further details.

In October 2016, we resumed primary responsibility for the development and commercialization of pacritinib as a result
of the termination of the Pacritinib License Agreement. We currently have no commitments or arrangements for any additional
financing to fund the development and commercial launch of pacritinib, and we may need to seek additional funding. The
development and commercialization of a major product candidate like pacritinib without a collaborative partner will require a
substantial amount of our time and financial resources, and as a result, we could experience a decrease in our liquidity and a
new demand on our capital resources. For additional information relating to the Pacritinib License Agreement, see Part II, Item
8, "Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 11. Collaboration,
Licensing and Milestone Agreements." which is incorporated herein by reference.

Capital Resources

We have prepared our consolidated financial statements assuming that we will continue as a going concern, which
contemplates realization of assets and the satisfaction of liabilities in the normal course of business. We believe that our present
financial resources, together with payments projected to be received under certain contractual agreements and our ability to
control costs, will be sufficient to fund our operations through the first quarter of 2020. However, we have incurred net losses
since inception and expect to generate losses for the foreseeable future, primarily due to research and development costs for
PIXUVRI, pacritinib, and tosedostat. Because of our reacquisition of worldwide rights for pacritinib, we are no longer be
eligible to receive cost sharing or milestone payments for pacritinib’s development from Baxalta, and losses related to research
and development for pacritinib will increase. We have historically funded our operations through equity financings, borrowings
and funds obtained under product collaborations, any or all of which may not be available to us in the future.

As of December 31, 2017, our available cash, cash equivalents and restricted cash totaled $43.2 million. We had an

outstanding principal balance under our senior secured term loan agreement of $16.0 million. In February 2018, we received
approximately $64.2 million in net proceeds from the public offering of common stock as discussed in Part II, Item 8,
"Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 21. Subsequent Events,"
which is incorporated herein by reference. In addition, we received a $10.0 million milestone payment from Teva
Pharmaceutical Industries Ltd. relating to the achievement of a milestone for FDA approval of TRISENOX for first line
treatment of acute promyelocytic leukemia.

Financial resource forecasts are subject to change as a result of a variety of risks and uncertainties. Changes in
manufacturing, developments in and expenses associated with our clinical trials and the other factors identified under “Capital
Requirements” below may consume capital resources earlier than planned. Additionally, we may not receive anticipated
milestone payments or achieve projected net sales from PIXUVRI. Due to these and other factors, the foregoing forecast for the
period for which we will have sufficient resources to fund our operations may fail.

Capital Requirements

We may need to acquire additional funds in order to develop our business. We may seek to raise such capital through

public or private equity financings, partnerships, collaborations, joint ventures, disposition of assets, debt financings or
restructurings, bank borrowings or other sources of financing. However, we have a limited number of authorized shares of
common stock available for issuance and additional funding may not be available on favorable terms or at all. If additional
funds are raised by issuing equity securities, substantial dilution to existing shareholders may result. If we fail to obtain
additional capital when needed, our ability to operate as a going concern will be harmed, and we may be required to delay,
scale back or eliminate some or all of our research and development programs, reduce our selling, general and administrative
expenses, be unable to attract and retain highly qualified personnel, be unable to obtain and maintain contracts necessary to
continue our operations and at affordable rates with competitive terms, refrain from making our contractually required
payments when due (including debt payments) and/or may be forced to cease operations, liquidate our assets and possibly seek
bankruptcy protection.

Our future capital requirements will depend on many factors, including:

• developments in and expenses associated with our research and development activities;

• acquisitions of compounds or other assets;

• changes in manufacturing;

• ability to generate sales of PIXUVRI in the U.S.;

•

regulatory approval developments;

• ability to execute appropriate collaborations for development and commercialization activities;

• ability to reach milestones triggering payments under certain of our contractual arrangements;

•

litigation and other disputes;

• competitive market developments; and

• other unplanned business developments.

The following table includes information relating to our contractual obligations as of December 31, 2017 (in thousands):

Contractual Obligations

Payments Due by Period

Operating leases:
Facilities (1)
Long-term debt (2)
Interest on long-term debt (2)
Purchase commitments (3)
Other obligations (4)

Total

Less than
1 Year

1-3 Years

4-5 Years

More than
5 Years

11,051
16,000
2,696
3,349
2,876
35,972

2,487
444
1,039
3,349
1,436
8,755

5,116
10,667
1,484
—
—
17,267

3,448
4,889
173
—
1,440
9,950

—
—
—
—
—
—

(1) In December 2017, we entered into an agreement to sublease approximately 44,000 square feet of our office space.

Rental proceeds under this sublease are excluded from contractual obligations and expected to be $0.8 million in fiscal
year 2018, $1.4 million in fiscal year 2019, $1.4 million in fiscal year 2020, $1.5 million in fiscal year 2021, and $0.5
million fiscal year 2022.

(2) Long-term debt includes the principal payable of $16.0 million under our senior secured term loan. The interest rate on
our senior secured term loan floats at a rate per annum equal to the greater of 2.50% above the prime rate and 6.75%.
The amounts presented for interest payments in future periods assume a prime rate of 4.50%. See Part II, Item 8,
"Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 7. Long-term Debt"
for further details.

(3) Purchase commitments include obligations related to manufacturing supply, insurance and other purchase

commitments. In addition, we have entered into certain clinical trial contracts that are not reflected in the table above
as amounts under these contracts, which could be material, are not readily determinable. We anticipate the timing of
payments under these contracts to range from less than one year to more than 3 years.

(4) Other obligations include $1.4 million in severance payments and a $1.4 million back-end fee due to SVB upon

repayment of our senior secured term loan.

Certain of our licensing agreements obligate us to pay a royalty on net sales of products utilizing licensed compounds.
Such royalties are dependent on future product sales and are not provided for in the table above as they are not estimable. See
Part I, Item 1, “Business - License Agreements and Additional Milestone Activities” for additional information.

Additional Milestone Activities

In connection with our development and commercialization activities, we have entered into a number of agreements
pursuant to which we have agreed to make milestone payments upon certain development, sales-based and other milestone
events; assume certain development and other expenses; and pay designated royalties on sales, including the UVM Agreement,
the S*BIO Agreement and the Novartis Termination Agreement. In particular, we pay royalties on PIXUVRI net sales pursuant
to each of the UVM Agreement and the Novartis Termination Agreement. These agreements are discussed in more detail in Part
I, Item 1, “Business - License Agreements and Additional Milestone Activities .”

Impact of Inflation

In the opinion of management, inflation has not had a material effect on our operations including selling prices, capital

expenditures and operating expenses.

Critical Accounting Estimates

Management makes certain judgments and uses certain estimates and assumptions when applying accounting principles

generally accepted in the U.S. in the preparation of our consolidated financial statements. We evaluate our estimates and
judgments on an on-going basis and base our estimates on historical experience and on assumptions that we believe to be
reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value
of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate and
different assumptions or estimates about the future could change our reported results. We believe the following estimates are
the most critical to us, in that they are important to the portrayal of our consolidated financial statements and require our
subjective or complex judgment in the preparation of our consolidated financial statements

Contingencies

We are currently involved in various claims and legal proceedings. On a quarterly basis, we review the status of each
significant matter and assess its potential financial exposure. If the potential loss from any claim, asserted or unasserted, or
legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated
loss. Significant judgment is required in both the determination of probability and the determination as to whether an exposure
is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information
available at the time. As additional information becomes available, we reassess the potential liability related to pending claims
and litigation and may revise our estimates. These revisions in the estimates of the potential liabilities could have a material
impact on our consolidated results of operations and financial position.

Revenue Recognition

Our license and collaboration agreements may contain multiple elements as evaluated under ASC 605-25, Revenue

Recognition—Multiple-Element Arrangements, including grants of licenses to know-how and patents relating to our product
candidates as well as agreements to provide research and development services, regulatory services, manufacturing and
commercialization services. Each deliverable under the agreement is evaluated to determine whether it qualifies as a separate
unit of accounting based on whether the deliverable has standalone value to the customer. The arrangement’s consideration that
is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling price of each
deliverable. This evaluation requires subjective determinations and requires us to make judgments about the selling price of the
individual elements and whether such elements are separable from the other aspects of the contractual relationship. Upfront
payments for licenses are evaluated to determine if the licensee can obtain standalone value from the license separate from the
value of the research and development services and other deliverables in the arrangement to be provided by us. The assessment
of multiple element arrangements also requires judgment in order to determine the allocation of revenue to each deliverable and
the appropriate point in time, or period of time, that revenue should be recognized. If we determine that the license does not
have standalone value separate from the research and development services, the license and the services are combined as one
unit of accounting and upfront payments are recorded as deferred revenue in the balance sheet and are recognized as revenue
over the estimated performance period that is consistent with the term of performance obligations contained in the collaboration
agreement. When standalone value is identified, the related consideration is recorded as revenue in the period in which the
license or other intellectual property is delivered.

Our license and collaboration agreements may also contain milestone payments that become due to us upon
achievements of certain milestones. Under the milestone method, we recognize revenue that is contingent upon the
achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is an event
(1) that can be achieved in whole or in part on either our performance or on the occurrence of a specific outcome resulting from
our performance, (2) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be
59

achieved and (3) that would result in additional payments being due to us. A milestone payment is considered substantive when
the consideration payable to us for each milestone (1) is consistent with our performance necessary to achieve the milestone or
the increase in value to the collaboration resulting from our performance, (2) relates solely to our past performance and (3) is
reasonable relative to all of the other deliverables and payments within the arrangement. In making this assessment, we
consider all facts and circumstances relevant to the arrangement, including factors such as the scientific, regulatory, commercial
and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required to achieve
the respective milestone and whether any portion of the milestone consideration is related to future performance or
deliverables.

Share-based Compensation Expense

Share-based compensation expense for all share-based payment awards made to employees and directors is recognized

and measured based on estimated fair values. For option valuations, we have elected to utilize the Black-Scholes valuation
method in order to estimate the fair value of options on the date of grant. The risk-free interest rate is based on the implied yield
currently available for U.S. Treasury securities at maturity with an equivalent term. We have not declared or paid dividends on
our common stock and do not currently expect to do so in the future. The expected term of options represents the period that
our share-based awards are expected to be outstanding and was determined based on historical weighted average holding
periods and projected holding periods for the remaining unexercised options. Consideration was given to the contractual terms
of our share-based awards, vesting schedules and expectations of future employee behavior. Expected volatility is based on the
annualized daily historical volatility, including consideration of the implied volatility and market prices of traded options for
comparable entities within our industry. These assumptions underlying the Black-Scholes valuation model involve
management’s best estimates.

For more complex awards, such as our long-term performance awards, or the Long-Term Performance Awards,
discussed in the Part II, Item 8, "Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements,
Note 12. Share-Based Compensation" contained herein, we employ a Monte Carlo simulation model to calculate estimated
grant-date fair value. For the Long-Term Performance Awards, the average present value is calculated based upon the expected
date the award will vest, or the event date, the expected stock price on the event date and the expected current shares
outstanding on the event date. The event date, stock price and the shares outstanding are estimated using the Monte Carlo
simulation model, which is based on assumptions by management, including the likelihood of achieving milestones and
potential future financings. These assumptions impact the fair value of the equity-based award and the expense that will be
recognized over the life of the award.

Generally accepted accounting principles for share-based compensation also require that we recognize compensation
expense for only the portion of awards expected to vest. Therefore, we apply an estimated forfeiture rate that we derive from
historical employee termination behavior. If the actual number of forfeitures differs from our estimates, adjustments to
compensation expense may be required in future periods. For performance-based awards that do not include market-based
conditions, we record share-based compensation expense only when the performance-based milestone is deemed probable of
achievement. We utilize both quantitative and qualitative criteria to judge whether milestones are probable of achievement. For
awards with market-based performance conditions, we recognize the grant-date fair value of the award over the derived service
period regardless of whether the underlying performance condition is met.

Going Concern

Our financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the

realization of assets and the satisfaction of liabilities in the normal course of business.

Recently Issued and Adopted Accounting Pronouncements

For a description of recently issued and adopted accounting pronouncements, including the expected effects on our

results of operations and financial condition, refer to Part II, Item 8, "Financial Statements and Supplementary Data, Notes to
Consolidated Financial Statements, Note 1. Description of Business and Summary of Significant Accounting Policies," which
is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Foreign Exchange Market Risk

We are exposed to risks associated with the translation of euro-denominated financial results and accounts into U.S.
dollars for financial reporting purposes. The carrying value of the assets and liabilities held in our European branches and
subsidiaries will be affected by fluctuations in the value of the U.S. dollar as compared to the euro. In addition, certain of our
contractual arrangements, such as the Restated Agreement with Servier, denote monetary amounts in foreign currencies, and
consequently, the ultimate financial impact to us from a U.S. dollar perspective is subject to significant uncertainty. Changes in
the value of the U.S. dollar as compared to applicable foreign currencies (in particular, the euro) might have an adverse effect
on our reported results of operations and financial condition. As the net positions of our unhedged foreign currency transactions
fluctuate, our earnings might be negatively affected. As of December 31, 2017, we had a net asset balance, excluding
intercompany payables and receivables, in our European branches and subsidiaries denominated in euros. If the euro were to
weaken 20 percent against the dollar, our net asset balance would decrease by approximately $1.5 million as of this date.

Interest Rate Risk

Our senior secured term loan bears interest at variable rates. Based on the outstanding principal balance under such loan
at December 31, 2017 of $16.0 million, a hypothetical increase of 1.0 percent in interest rates would result in additional interest
expense of $0.4 million over the next twelve months. For a detailed discussion of our senior secured term loan, including a
discussion of the applicable interest rate, refer to the Part II, Item 8, "Financial Statements and Supplementary Data, Notes to
Consolidated Financial Statements, Note 7. Long-term Debt."

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Marcum LLP, Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Page
63
65
66
67
68
69
71

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of
CTI BioPharma Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CTI BioPharma Corp. (the “Company”) as of December 31,
2017 and 2016, the related consolidated statements of operations, comprehensive loss, shareholders’ equity and cash flows for
each of the three years in the period ended December 31, 2017, and the related notes and financial statement schedule listed in
the Index at Item 15(a)(ii) (collectively referred to as the “financial statements”). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting
principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
("PCAOB"), the Company's internal control over financial reporting as of December 31, 2017, based on the criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in 2013 and our report dated March 7, 2018, expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2005.

San Francisco, CA
March 7, 2018

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER
FINANCIAL REPORTING

To the Shareholders and Board of Directors of
CTI BioPharma Corp.

Opinion on Internal Control over Financial Reporting

We have audited CTI BioPharma Corp.'s (the “Company”) internal control over financial reporting as of December 31, 2017,
based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets as of December 31, 2017 and 2016 and the related consolidated statements of
operations, comprehensive loss, shareholders’ equity, and cash flows for each of the three years in the period ended December 31,
2017, and the related notes and financial statement schedule listed in the Index at Item 15(a)(ii), of the Company and our report
dated March 7, 2018 expressed an unqualified opinion on those financial statements and financial statement schedule.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment
of the effectiveness of internal control over financial reporting, included in the accompanying “Management Annual Report on
Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company's internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.

/s/ Marcum LLP

Marcum LLP
San Francisco, CA
March 7, 2018

CTI BIOPHARMA CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

December 31, 2017 December 31, 2016

ASSETS
Current assets:

Cash and cash equivalents
Restricted cash
Accounts receivable
Receivable from collaborative arrangements
Inventory, net
Prepaid expenses and other current assets

Total current assets
Property and equipment, net
Other assets

Total assets

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:

Accounts payable
Accrued expenses
Current portion of deferred revenue
Current portion of long-term debt
Other current liabilities

Total current liabilities

Deferred revenue, less current portion
Long-term debt, less current portion
Other liabilities

Total liabilities
Commitments and contingencies
Shareholders' equity:

Preferred stock, no par value:
Authorized shares - 33,333

Series N-3 Preferred Stock, $2,000 stated value per share, 22,500 shares
designated, 575 and 0 shares issued and outstanding as of December 31,
2017 and 2016, respectively

Common stock, no par value:

Authorized shares - 81,500,000 and 41,500,000 at December 31, 2017 and 2016,
respectively

Issued and outstanding shares - 42,969,494 and 28,228,602 at December 31,
2017 and 2016, respectively

Accumulated other comprehensive loss
Accumulated deficit

Total CTI shareholders' equity

Noncontrolling interest

Total shareholders' equity
Total liabilities and shareholders' equity

See accompanying notes.

27,218
16,000
4
1,278
550
1,874
46,924
2,365
5,597
54,886

2,588
13,890
912
444
1,424
19,258
494
13,575
5,469
38,796

44,002
—
378
7,778
1,525
2,141
55,824
3,023
4,996
63,843

7,227
24,765
103
7,949
602
40,646
514
11,311
3,615
56,086

1,090

—

2,222,341
(6,272)
(2,195,346)
21,813
(5,723)
16,090
54,886

2,170,300
(6,655)
(2,150,326)
13,319
(5,562)
7,757
63,843

CTI BIOPHARMA CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

Revenues:

Product sales, net

License and contract revenue

Total revenues

Operating costs and expenses:

Cost of product sold

Research and development

Selling, general and administrative

Other operating (income) expense, net

Total operating costs and expenses, net

Loss from operations

Non-operating expense:

Interest expense

Amortization of debt discount and issuance costs

Foreign exchange gain (loss)

Other non-operating expense

Total non-operating expense, net

Net loss before noncontrolling interest

Noncontrolling interest

Net loss attributable to CTI

Deemed dividends on preferred stock

Net loss attributable to common shareholders

Basic and diluted net loss per common share

Year Ended December 31,

2017

2016

2015

853

4,127

24,293
25,146

364

32,866

31,435

—
64,665

(39,519)

(1,872)
(163)
817
(94)
(1,312)
(40,831)
161
(40,670)
(4,350)
(45,020) $
(1.24) $

53,278
57,405

1,377

64,961

45,306
(5,077)
106,567

(49,162)

(2,614)
(214)
(484)
(479)
(3,791)
(52,953)
944
(52,009)
—
(52,009) $
(1.86) $

3,472

12,644
16,116

1,940

76,627

53,962

253
132,782

(116,666)

(2,104)
(390)
(703)
(900)
(4,097)
(120,763)
1,341
(119,422)
(3,200)
(122,622)
(6.51)

Shares used in calculation of basic and diluted net loss per
common share

36,445

27,948

18,837

See accompanying notes.

CTI BIOPHARMA CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)

Year Ended December 31,

2017
(40,831) $

2016
(52,953) $

2015
(120,763)

(3,927)
4,303

—

383
(40,448)
161
(40,287) $

947

(1,162)
520
(8)
297
(52,656)
944
(51,712) $

2,160

(2,585)
—
(28)
(453)
(121,216)
1,341
(119,875)

Net loss before noncontrolling interest

Other comprehensive income (loss):

Foreign currency translation adjustments
Unrealized foreign exchange gain (loss) on intercompany balance

Other-than-temporary impairment on available-for-sale securities

Net unrealized income (loss) on securities available-for-sale

Other comprehensive income (loss)

Comprehensive loss

Comprehensive loss attributable to noncontrolling interest

Comprehensive loss attributable to CTI

See accompanying notes.

CTI BIOPHARMA CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)

Preferred Stock

Common Stock

Comprehensive

Accumulated

Noncontrolling

Shareholders'

Amount

Income (Loss)

Deficit

Interest

Equity

Accumulated
Other

Total

Balance at December 31, 2014

— $

— 17,676

$ 2,023,949

(6,499) $ (1,975,695) $

(3,277) $

38,478

Issuance of common stock, net
of issuance costs

Issuance of Series N-1 preferred
stock, net of issuance costs

Conversion of Series N-1 preferred
stock to common stock

Value of beneficial conversion
features related to preferred stock

Issuance of Series N-2 preferred
stock, net of issuance costs

Conversion of Series N-2 preferred
stock to common stock

Expiry of exercise price provision
features related to common stock
purchase warrant

Equity-based compensation

Stock option exercises

Noncontrolling interest

Expiry of mezzanine equity

Other

Deemed dividends on preferred
stock
Net loss for the year ended
December 31, 2015

Other comprehensive loss

—

50.0

—

1,000

15,147

46,611

(50.0)

(46,611)

4,000

46,611

—

55.0

52,409

—

3,200

—

(55.0)

(52,409)

5,000

52,409

—

393

—

(31)

—

150

14,828

156

—

1,445

(595)

—

(3,200)

(119,422)

(453)

—

(1,341)

—

Balance at December 31, 2015

— $

— 28,046

$ 2,157,300

(6,952) $ (2,098,317) $

(4,618) $

Equity-based compensation

Noncontrolling interest

Other

Net loss for the year ended
December 31, 2016

Other comprehensive income

—

207

—

(24)

—

13,324

—

(324)

—

297

—

(52,009)

—

(944)

—

Balance at December 31, 2016

— $

— 28,229

$ 2,170,300

(6,655) $ (2,150,326) $

(5,562) $

Issuance of Series N-3 preferred
stock, net of issuance costs
Conversion of Series N-3 preferred
stock to common stock

Value of beneficial conversion
features related to preferred stock
Issuance of warrants

Equity-based compensation

Noncontrolling interest

Other

Deemed dividends on preferred
stock
Net loss for the year ended
December 31, 2017

Other comprehensive income

22.5

42,669

—

(21.9)

(41,579)

14,616

41,579

—

150

—

(26)

—

4,350

470

5,746

—

(104)

—

383

—

(4,350)

(40,670)

—

(161)

—

15,147

46,611

—

3,200

52,409

—

150

14,828

156

(1,341)

1,445

(595)

(3,200)

(119,422)

(453)

47,413

13,324

(944)

(324)

(52,009)

297

7,757

42,669

—

4,350

470

5,746

(161)

(104)

(4,350)

(40,670)

383

Balance at December 31, 2017

0.6

1,090

42,969

$ 2,222,341

(6,272) $ (2,195,346) $

(5,723) $

16,090

See accompanying notes.

CTI BIOPHARMA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Operating activities
Net loss before noncontrolling interest
Adjustments to reconcile net loss to net cash used in operating activities:

Baxalta milestone revenue
Share-based compensation expense
Depreciation and amortization
Loss on debt extinguishment
Loss on sublease
Provision for bad debts
Reserve for excess, obsolete or unsalable inventory
Other-than-temporary impairment on available-for-sale securities
Noncash interest expense
Noncash rent benefit
Change in value of warrant liability
Other
Changes in operating assets and liabilities:

Accounts receivable
Receivable from collaborative arrangements
Inventory
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued expenses
Deferred revenue
Other liabilities

Total adjustments
Net cash used in operating activities
Investing activities
Purchases of property and equipment
Other
Net cash used in investing activities
Financing activities
Proceeds from issuance of Series 21 preferred stock, net of issuance costs
Proceeds from common stock offering, net of issuance costs
Proceeds from issuance of Series N-1 preferred stock, net of issuance costs
Proceeds from issuance of Series N-2 preferred stock, net of issuance costs
Proceeds from issuance of Series N-3 preferred stock, net of issuance costs
Proceeds from Baxalta milestone advance, net of issuance costs
Proceeds from Silicon Valley Bank debt, net of issuance costs
Proceeds from Hercules debt, net of issuance costs
Repayment of Hercules debt
Payment of a Hercules fee
Payment of tax withholding obligations related to stock compensation
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year

See accompanying notes.

Year Ended December 31,

2017

2016

2015

(40,831) $

(52,953) $

(120,763)

—
5,746
717
163
1,584
—
—
—
163
(648)
—
(18)

402
6,579
1,120
326
63
(4,730)
(11,096)
790
374
1,535
(39,296)

(49)
11
(38)

—
—
—
—
42,669
—
15,971
—
(19,548)
—
(87)
(26)
38,979
(429)
(784)
44,002
43,218

(32,000)
13,324
831
—
—
1,735
692
520
214
(467)
—
—

(156)
(9,476)
567
1,609
355
(3,025)
2,620
(1,071)
1
(23,727)
(76,680)

(137)
—
(137)

—
—
(37)
(277)
—
—
—
—
(5,452)
(1,275)
(355)
30
(7,366)
3
(84,180)
128,182
44,002

—
14,828
990
1,211
—
—
1,326
—
390
(409)
(232)
—

1,555
—
(402)
(402)
826
4,368
2,426
(918)
3
25,560
(95,203)

(78)
—
(78)

(227)
15,147
46,653
52,800
—
31,922
—
10,820
(4,659)
—
(604)
165
152,017
513
57,249
70,933
128,182

CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
(In thousands)

Supplemental disclosure of cash flow information

Cash paid during the period for interest

Supplemental disclosure of noncash financing and investing activities

Conversion of Series N-1 preferred stock to common stock

Conversion of Series N-2 preferred stock to common stock

Conversion of Series N-3 preferred stock to common stock

Repayment and issuance of Hercules debt

Baxalta milestone advance - earned in lieu of repayment

Debt issuance costs included in accounts payable and accrued expenses

See accompanying notes.

Year Ended December 31,

2017

2016

2015

1,970

4,446

2,067

— $

41,579

— $

32,000

— $

46,611

52,409

—

13,815

—

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business and Summary of Significant Accounting Policies

CTI BioPharma Corp., together with its wholly-owned subsidiaries, also referred to collectively in this Annual Report
on Form 10-K as “we,” “us,” “our,” the “Company” and “CTI”, is a biopharmaceutical company focused on the acquisition,
development and commercialization of novel targeted therapies covering a spectrum of blood-related cancers that offer a
unique benefit to patients and health care providers. Our goal is to build a profitable company by generating income from
products we develop and commercialize, either alone or with partners. We are currently concentrating our efforts on treatments
that target blood-related cancers where there is an unmet medical need. In particular, we are primarily focused on evaluating
pacritinib for the treatment of adult patients with myelofibrosis and the further development of PIXUVRI worldwide, for which
our partners Les Laboratoires Servier and Institut de Recherches Internationales Servier, or collectively Servier, have
commercialization rights outside the United States, or the U.S.

We operate in a highly regulated and competitive environment. The manufacturing and marketing of pharmaceutical

products requires approval from, and is subject to, ongoing oversight by the Food and Drug Administration, or the FDA, in the
United States, or the U.S., the European Medicines Agency, or the EMA, in the European Union, or the E.U., and comparable
agencies in other countries. Obtaining approval for a new therapeutic product is never certain, may take many years and may
involve expenditure of substantial resources.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of CTI and its wholly-owned subsidiaries,
which include CTI Life Sciences Limited, or CTILS. We also retain ownership of our branch, CTI BioPharma Corp.- Sede
Secondaria, or CTI (Europe) which has ceased operations. Systems Medicine LLC, a wholly-owned subsidiary, was included in
the consolidated financial statements until dissolution in December 2017.

As of December 31, 2017, we also had an approximately 60% interest in our majority-owned subsidiary, Aequus

Biopharma, Inc., or Aequus. The remaining interest in Aequus not held by CTI is reported as noncontrolling interest in the
consolidated financial statements.

All intercompany transactions and balances are eliminated in consolidation.

Reverse Stock Split

On January 1, 2017, we effected a one-for-ten reverse stock split, or the Stock Split. Unless otherwise noted, all
impacted amounts included in the consolidated financial statements and notes thereto have been retroactively adjusted for the
Stock Split. Unless otherwise noted, impacted amounts include shares of common stock authorized and outstanding, share
issuances and cancellations, shares underlying warrants and stock options, shares reserved, conversion prices of convertible
securities, exercise prices of warrants and options, and loss per share. Additionally, the Stock Split impacted preferred stock
authorized (but not outstanding because there were no shares of preferred stock outstanding as of the time of the Stock Split).

Liquidity

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going

concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one
year after the date the consolidated financial statements are issued. In accordance with Financial Accounting Standards Board,
or the FASB, Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic
205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt
about our ability to continue as a going concern within one year after the date that the financial statements are issued.

We will need to continue to conduct research, development, testing and regulatory compliance activities with respect to

our compounds and ensure the procurement of manufacturing and drug supply services, the costs of which, together with
projected general and administrative expenses, is expected to result in operating losses for the foreseeable future. In October
2016, we resumed primary responsibility for the development and commercialization of pacritinib as a result of the termination
of the Pacritinib License Agreement with Baxalta Incorporated and its affiliates, or Baxalta, and are no longer eligible to
receive cost sharing or milestone payments for pacritinib's development. We have incurred a net operating loss every year since
our formation. As of December 31, 2017, we had an accumulated deficit of $2.2 billion, and we expect to incur net losses for
the foreseeable future.

Our available cash, cash equivalents and restricted cash were $43.2 million as of December 31, 2017. In February 2018,

as discussed in Note 21. Subsequent Events, we completed the public offering of common stock and received approximately
$64.2 million in net proceeds after deducting underwriting discounts, commissions and other estimated offering expenses. In
addition, we received a $10.0 million milestone payment from Teva Pharmaceutical Industries Ltd. relating to the achievement
of a milestone for FDA approval of TRISENOX for first line treatment of acute promyelocytic leukemia. We believe that our
present financial resources, together with payments projected to be received under certain contractual agreements and our
ability to control costs, will be sufficient to fund our operations at least through the next twelve months from the date these
financial statements were issued. We previously disclosed that we had substantial doubt about our ability to continue as a going
concern, which was primarily due to lack of liquidity. This has since been alleviated as a result of the proceeds we received
from the public offering of common stock as well as the milestone payment.

We may need to acquire additional funds in order to develop our business. We may seek to raise such capital through

public or private equity financings, partnerships, collaborations, joint ventures, disposition of assets, debt financings or
restructurings, bank borrowings or other sources of financing. However, we have a limited number of authorized shares of
common stock available for issuance and additional funding may not be available on favorable terms or at all. If additional
funds are raised by issuing equity securities, substantial dilution to existing shareholders may result. If we fail to obtain
additional capital when needed, our ability to operate as a going concern will be harmed, and we may be required to delay,
scale back or eliminate some or all of our research and development programs, reduce our selling, general and administrative
expenses, be unable to attract and retain highly-qualified personnel, be unable to obtain and maintain contracts necessary to
continue our operations and at affordable rates with competitive terms, refrain from making our contractually required
payments when due (including debt payments) and/or may be forced to cease operations, liquidate our assets and possibly seek
bankruptcy protection. The accompanying consolidated consolidated financial statements do not include adjustments, if any,
that may result from the outcome of this uncertainty.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires

management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and
accompanying notes. For example, estimates include assumptions used in calculating reserves for sales deductions such as
rebates and returns of product sold, allowances for credit losses, and excess and obsolete inventory, recording share-based
compensation expense, accruals, the allocation of operating expenses, provision for loss contingencies, the fair value of
financial instruments, our tax provision and related valuation allowance, and determining the useful lives of fixed assets and
potential impairment of long-lived assets. Actual results could differ from those estimates.

Certain Risks, Uncertainties and Concentrations

Our results of operations are subject to foreign currency exchange rate fluctuations primarily due to our activity in

Europe. We report the results of our operations in U.S. dollars, while the functional currency of our foreign subsidiaries is the
euro. As the net positions of our unhedged foreign currency transactions fluctuate, our earnings might be negatively affected. In
addition, the reported carrying value of our euro-denominated assets and liabilities that remain in our European branches and
subsidiaries will be affected by fluctuations in the value of the U.S. dollar as compared to the euro. We review our foreign
currency risk periodically along with hedging options to mitigate such risk.

We source our drug products for clinical trials from a concentrated group of third-party contractors. If we are unable to

obtain sufficient quantities of source materials, manufacture or distribute our products to customers from existing suppliers and
service providers, or obtain the materials or services from other suppliers, manufacturers or distributors, certain research and
development and sales activities may be delayed.

Additionally, see Note 15. Customer and Geographic Concentrations for further concentration disclosure.

Cash and Cash Equivalents

We consider all highly liquid debt instruments with maturities of three months or less at the time acquired to be cash

equivalents. Cash equivalents represent short-term investments consisting of investment-grade corporate and government
obligations, carried at cost, which approximates market value. We had no cash equivalents as of December 31, 2017.

Restricted Cash

Restricted cash represents a legally restricted deposit held as a compensating balance against our senior secured term

loan with Silicon Valley Bank, or SVB. Pursuant to the loan and security agreement entered into with SVB in November 2017,
we were required to maintain unrestricted and unencumbered cash in an amount equal to at least $16.0 million at all times prior
to the occurrence of an event relating to the delivery to SVB of duly executed signatures to a control agreement from Bank of
America with respect to all of our accounts maintained with Bank of America. In January 2018, we obtained a waiver from
SVB for such requirement and as a result, we no longer have restrictions placed on the cash balance. See Note 7. Long-term
Debt for further details regarding our senior secured term loan with SVB.

The following table provides reconciliations of cash, cash equivalents and restricted cash reported within the

consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows.

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash shown in
the consolidated statements of cash flows

December 31, 2017

December 31, 2016

December 31, 2015

27,218

16,000

44,002

—

128,182

—

43,218

44,002

128,182

Receivables from Collaborative Arrangements

Our receivables from collaborative arrangements relate to amounts payable or reimbursable to us under the terms of

collaborative arrangements with our partners. The receivable balance as of December 31, 2017 relates primarily to the sale of
PIXUVRI drug product to Servier. The receivable balance as of December 31, 2016 relates primarily to a milestone receivable
from Servier for the attainment of a certain enrollment event in December 2016 in connection with our PIX306 study.
Receivables from collaborative arrangements are reviewed for collectability whenever circumstances indicate that the carrying
amount of the receivable may not be recoverable. During the year ended December 31, 2016, we recorded $1.7 million in bad
debt expense related to disputed invoices under the collaborative arrangement with Baxalta. We had no allowance for doubtful
accounts from collaborative arrangements as of December 31, 2017 and 2016.

Value Added Tax Receivable

Our European operations are subject to a value added tax, or VAT, which is usually applied to all goods and services

purchased and sold throughout Europe. The VAT receivable was approximately $4.8 million and $4.4 million as of
December 31, 2017 and 2016, respectively, of which $4.7 million and $4.1 million was included in other assets and $0.1
million and $0.3 million was included in prepaid expenses and other current assets as of December 31, 2017 and 2016,
respectively. The collection period of VAT receivable for our European operations ranges from approximately three months to
five years. For our Italian VAT receivable, the collection period is approximately three to five years. As of December 31, 2017,
the VAT receivable related to operations in Italy was approximately $4.8 million. We review our VAT receivable balance for
impairment whenever events or changes in circumstances indicate the carrying amount might not be recoverable.

Inventory

We carry inventory at the lower of cost or net realizable value. The cost of finished goods and work in process is

determined using the standard-cost method, which approximates actual cost based on a first-in, first-out method. Inventory
includes the cost of materials, third-party contract manufacturing and overhead costs, quality control costs and shipping costs
from the manufacturers to the final distribution warehouse associated with the distribution of PIXUVRI. Production costs for
our other product candidates continue to be charged to research and development expense as incurred prior to regulatory
approval or until our estimate for regulatory approval becomes probable. We review our inventories on a quarterly basis for
impairment and reserves are established when necessary. Estimates of excess inventory consider our projected sales of the
product and the remaining shelf lives of product. In the event we identify excess, obsolete or unsalable inventory, the value is
written down to the net realizable value. We had a reserve of $1.4 million and $1.5 million related to excess, obsolete or
unsalable inventory as of December 31, 2017 and 2016, respectively, which was included in Inventory, net. Inventory, net as of
December 31, 2017 is comprised of bulk active pharmaceutical ingredient which we expect to be salable to Servier under the
terms of the Restated Agreement and to future emerging markets.

Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation commences at
the time assets are placed in service. We calculate depreciation using the straight-line method over the estimated useful lives of
the assets ranging from three to five years for assets other than leasehold improvements. We amortize leasehold improvements
over the lesser of their useful life of 10 years or the term of the applicable lease.

Impairment of Long-lived Assets

We review our long-lived assets for impairment whenever events or changes in business circumstances indicate that the

carrying amount of assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each
impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If an
impairment is indicated, the asset is written down to its estimated fair value based on fair market values.

Leases

We analyze leases at the inception of each agreement for classification as either an operating or capital lease. Certain of

our lease agreement terms include rent holidays, rent escalation clauses and incentives for leasehold improvements. We
recognize deferred rent relating to incentives for rent holidays and leasehold improvements and amortize the deferred rent over
the term of the leases as a reduction of rent expense. For rent escalation clauses, we recognize rent expense equal to the amount
of total minimum lease payments on a straight-line basis over the term of the lease. A deferred liability recognized in
connection with the December 2017 sublease arrangement is amortized over the term of the sublease as a reduction of rent
expense.

Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit

price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs
used to measure fair value. There are three levels of inputs used to measure fair value with Level 1 having the highest priority
and Level 3 having the lowest:

Level 1 – Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities, or other

inputs that are observable directly or indirectly.

Level 3 - Unobservable inputs that are supported by little or no market activity, requiring an entity to develop its own

assumptions.

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the

categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

At December 31, 2017 and 2016, the carrying value of financial instruments such as receivables and payables

approximated their fair values due to their short-term maturities. The carrying value of our long-term debt approximated its fair
value at December 31, 2017 and 2016 based on borrowing rates for similar loans and maturities.

Contingencies

We record liabilities associated with loss contingencies to the extent that we conclude that the occurrence of the

contingency is probable and that the amount of the related loss is reasonably estimable. We record income from gain
contingencies only upon the realization of assets resulting from the favorable outcome of the contingent event. See Note 11.
Collaboration, Licensing and Milestone Agreements and Note 18. Legal Proceedings for further information regarding our
current gain and loss contingencies.

Revenue Recognition

We currently have conditional marketing authorization for PIXUVRI in the E.U. Revenue is recognized when there is

persuasive evidence of the existence of an agreement, delivery has occurred, prices are fixed or determinable, and collectability
is assured. Where the revenue recognition criteria are not met, we defer the recognition of revenue by recording deferred

revenue until such time that all criteria under the provision are met.

Product Sales

PIXUVRI was sold primarily through a limited number of wholesale distributors. We generally record product sales
upon receipt of the product by the health care providers and certain distributors at which time title and risk of loss pass. Product
sales are recorded net of distributor discounts, estimated government-mandated rebates, trade discounts, and estimated product
returns. Reserves are established for these deductions and actual amounts incurred are offset against the applicable reserves. We
reflect these reserves as either a reduction in the related account receivable or as an accrued liability depending on the nature of
the sales deduction. These estimates are periodically reviewed and adjusted as necessary. As of April 2017, Servier has the
exclusive and sublicensable (subject to certain conditions) royalty-bearing license with respect to the development and
commercialization of PIXUVRI for use in pharmaceutical products, or Licensed Products, outside of the U.S. (and its territories
and possessions). As a result, we no longer have product sales. See Note 11. Collaboration, Licensing and Milestone
Agreements for further details.

Collaboration Agreements

We evaluate collaboration agreements to determine whether the multiple elements and associated deliverables can be

considered separate units of accounting in accordance with Accounting Standards Codification, or ASC, 605-25, Revenue
Recognition—Multiple-Element Arrangements. If it is determined that the deliverables under the collaboration agreement are a
single unit of accounting, all amounts received or due, including any upfront payments, are recognized as revenue over the
performance obligation periods of each agreement. Upon the completion of the performance obligation, such amounts will be
recognized as revenue when collectability is reasonably assured.

The assessment of multiple element arrangements requires judgment in order to determine the allocation of revenue to

each deliverable and the appropriate point in time, or period of time, that revenue should be recognized. In order to account for
these agreements, we identify deliverables included within the agreement and evaluate which deliverables represent separate
units of accounting based on whether certain criteria are met, including whether the delivered element has standalone value to
the collaborator. The consideration received is allocated among the separate units of accounting, and the applicable revenue
recognition criteria are applied to each of the separate units.

Milestone payments under collaboration agreements are generally aggregated into three categories for reporting
purposes: (1) development milestones, (2) regulatory milestones and (3) sales milestones. Development milestones are
typically payable when a product candidate initiates or advances into different clinical trial phases. Regulatory milestones are
typically payable (1) upon submission for marketing approval with the FDA or with the regulatory authorities of other
countries, and (2) upon receipt of actual marketing approvals for the compound or for additional indications. Sales milestones
are typically payable when annual sales reach certain levels.

At the inception of each agreement that includes milestone payments, we evaluate whether each milestone is substantive

and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of
whether (1) the consideration is commensurate with either (a) the entity's performance to achieve the milestone, or (b) the
enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity's performance to
achieve the milestone, (2) the consideration relates solely to past performance and (3) the consideration is reasonable relative to
all of the deliverables and payment terms within the arrangement. We evaluate factors such as the scientific, regulatory,
commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment
required to achieve the respective milestone and whether the milestone consideration is reasonable relative to all deliverables
and payment terms in the arrangement in making this assessment. Non-refundable development and regulatory milestones that
are expected to be achieved as a result of our efforts during the period of substantial involvement are considered substantive
and are recognized as revenue upon the achievement of the milestone, assuming all other revenue recognition criteria are met.

We follow ASC 605-25, Revenue Recognition – Multiple-Element Arrangements and ASC 808, Collaborative
Arrangements, if applicable, to determine the accounting for reimbursement arrangements under collaborative research and
development and commercialization agreements.

Cost of Product Sold

Cost of product sold includes third-party manufacturing costs, shipping costs, contractual royalties, and other costs of

PIXUVRI product sold. Cost of product sold also includes allowances, if any, for excess inventory that may expire and become
unsalable.

Research and Development Expenses

Research and development costs are expensed as incurred in accordance with the FASB ASC 730, Research and
Development. Research and development expenses include related salaries and benefits, clinical trial and related manufacturing
costs, contract and other outside service fees, and facilities and overhead costs related to our research and development efforts.
Research and development expenses also consist of costs incurred for proprietary and collaboration research and development
and include activities such as product registries and investigator-sponsored trials. In instances where we enter into agreements
with third parties for research and development activities, we may prepay fees for services at the initiation of the contract. We
record the prepayment as a prepaid asset and amortize the asset into research and development expense over the period of time
the contracted research and development services are performed. Other types of arrangements with third parties may be fixed
fee or fee for service, and may include monthly payments or payments upon completion of milestones or receipt of
deliverables. We expense upfront license payments related to acquired technologies that have not yet reached technological
feasibility and have no alternative future use.

Foreign Currency Translation and Transaction Gains and Losses

We record foreign currency translation adjustments and transaction gains and losses in accordance with ASC 830,
Foreign Currency Matters. For our operations that have a functional currency other than the U.S. dollar, gains and losses
resulting from the translation of the functional currency into U.S. dollars for financial statement presentation are not included in
determining net loss, but are accumulated in the cumulative foreign currency translation adjustment account as a separate
component of shareholders’ equity, except for intercompany transactions that are of a short-term nature with entities that are
consolidated, combined or accounted for by the equity method in our consolidated financial statements. We and our subsidiaries
also have transactions in foreign currencies other than the functional currency. We record transaction gains and losses in our
consolidated statements of operations related to the recurring measurement and settlement of such transactions.

The intercompany balance due from CTILS is considered to be of a long-term nature. An unrealized foreign exchange
gain of $4.3 million and unrealized foreign exchange losses of $1.2 million and $2.6 million were recorded in the cumulative
foreign currency translation adjustment account for the years ended December 31, 2017, 2016 and 2015, respectively. As of
December 31, 2017 and 2016, the intercompany balance due from CTILS was €26.2 million and €29.7 million , respectively (or
$31.4 million and $31.2 million upon conversion from euros as of December 31, 2017 and 2016, respectively).

Income Taxes

We record a tax provision for the anticipated tax consequences of our results of operations. The provision for income
taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and
liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the
currently enacted tax rates in effect for the years in which those tax assets and liabilities are expected to be realized or settled.
We provide a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.

Net Loss per Share

Basic net loss per common share is calculated based on the net loss attributable to common shareholders divided by the
weighted average number of shares outstanding for the period. The calculation of diluted net loss per common share excludes
the potential conversion of all dilutive convertible securities, such as convertible debt and convertible preferred stock, using the
if-converted method, and the potential exercise or vesting of other dilutive securities, such as options, warrants and restricted
stock, using the treasury stock method, as their inclusion would have an anti-dilutive effect.

Recently Adopted Accounting Standards

In April 2015, the FASB issued a new accounting standard which changes the presentation of debt issuance costs in

financial statements. Under the new standard, an entity presents such costs in the balance sheet as a direct deduction from the
related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. The accounting standard is
effective for annual reporting periods beginning after December 15, 2015 and interim periods beginning after December 15,
2016. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In July 2015, the FASB issued new accounting guidance on simplifying the measurement of inventory which requires

that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Prior to the issuance
of the standard, inventory was measured at the lower of cost or market (where market was defined as replacement cost, with a
ceiling of net realizable value and floor of net realizable value less a normal profit margin). The accounting guidance is
effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016. The
adoption of this standard did not have a material impact on our consolidated financial statements.

In November 2015, the FASB issued new guidance on the balance sheet classification of deferred taxes. To simplify

presentation, the new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance,
be classified as noncurrent on the balance sheet. The accounting standard is effective for annual reporting periods (including
interim reporting periods within those periods) beginning after December 15, 2016. Early adoption is permitted. The adoption
of this guidance did not have an impact on our consolidated financial statements.

In August 2014, the FASB issued a new accounting standard which requires management to evaluate whether there is
substantial doubt about an entity’s ability to continue as a going concern for each annual and interim reporting period and to
provide related footnote disclosures in certain circumstances. The accounting standard is effective for annual reporting periods
ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption
is permitted. The adoption of this standard in the fourth quarter of 2016 did not have a material impact on our consolidated
financial statements.

In March 2016, the FASB issued new accounting guidance for employee share-based payments accounting. The

accounting standard primarily affects the accounting for forfeitures, minimum statutory tax withholding requirements, and
income tax effects related to share-based payments at settlement (or expiration). The accounting guidance is effective for
annual reporting periods beginning after December 15, 2016 (including interim periods within those periods). We have
historically maintained a full valuation allowance against deferred tax assets. The adoption of this standard in the first quarter
of 2017 did not have a material impact on our consolidated financial statements, and we will continue to estimate expected
forfeitures.

In November 2016, the FASB issued accounting guidance which amends ASC 230, Statement of Cash Flows, to add or

clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The amendments
require that restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Consequently, transfers between
cash and restricted cash will not be presented as a separate line item in the operating, investing or financing sections of the cash
flow statement. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods therein.
The early adoption is permitted. The adoption of this standard did not have a material impact on our consolidated financial
statements.

Recently Issued Accounting Standards

In May 2014, the FASB issued a comprehensive new standard which amends revenue recognition principles and
provides a single set of criteria for revenue recognition among all industries. The new standard provides a five-step framework
whereby revenue is recognized when promised goods or services are transferred to a customer at an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires
enhanced disclosures pertaining to revenue recognition in both interim and annual periods. The standard is effective for interim
and annual periods beginning after December 15, 2017 and allows for adoption using a full retrospective method, or a modified
retrospective method. We will adopt the new standard in the first quarter 2018 using the modified retrospective method. We
have completed the impact on our customer contracts and do not expect the implementation of ASU 2014-09 to have a material
quantitative impact on our consolidated financial statements. Under the new standard, such customer arrangements will be
accounted for as variable consideration, which may result in revenue being recognized earlier provided we can reliably estimate
the ultimate price expected to be realized from the customer. In addition, we do not expect a material cumulative effect
adjustment to Retained earnings upon adoption of the standard on January 1, 2018. Adoption of the new standard will also
result in additional revenue-related disclosures in the footnotes to our consolidated financial statements.

In February 2016, the FASB issued a new accounting guidance on accounting for leases which requires lessees to
recognize virtually all of their leases (other than leases that meet the definition of a short-term lease) on the balance sheet. The
accounting guidance is effective for annual reporting periods (including interim periods within those periods) beginning after
December 15, 2018. Early adoption is permitted. We are currently evaluating the impact of this accounting standard on our
consolidated financial statements.

In August 2016, the FASB issued an amendment to add or clarify guidance on the classification of certain cash receipts
and payments in the statement of cash flows with the objective of reducing diversity in practice regarding eight types of cash
flows. The accounting guidance is effective for annual reporting periods (including interim periods within those periods)
beginning after December 15, 2017. Early adoption is permitted. We do not expect the adoption of this standard to have a
material impact on our statement of cash flows.

Reclassifications

Certain prior year items have been reclassified to conform to current year presentation.

2. Inventory

The components of PIXUVRI inventories consisted of the following as of December 31, 2017 and 2016 (in thousands):

Finished goods

Work-in-process

Inventory, gross

Reserve for excess, obsolete or unsalable inventory

Inventory, net

3. Property and Equipment

2017

2016

394

1,523

1,917

(1,367) $

550

477

2,558

3,035

(1,510)

1,525

Property and equipment are composed of the following as of December 31, 2017 and 2016 (in thousands):

Furniture and office equipment
Leasehold improvements
Lab equipment

Less: accumulated depreciation and amortization
Property and equipment, net

2017

2016

4,552
5,168
209
9,929
(7,564)
2,365

6,521
5,106
201
11,828
(8,805)
3,023

Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $0.7 million, $0.8 million and $1.0

million, respectively.

4. Accrued Expenses

Accrued expenses consisted of the following as of December 31, 2017 and 2016 (in thousands):

Clinical and investigator-sponsored trial expenses
Employee compensation and related expenses
Manufacturing expenses
Legal expenses
Selling expenses
Insurance financing
Interest expenses
Other
Total accrued expenses

5. Leases

Lease Agreements

2017

2016

5,019
4,432
2,637
537
143
575
93
454
13,890

7,303
6,364
7,616
1,037
136
888
2
1,419
24,765

In January 2012, we entered into an operating lease agreement with Selig Holdings Company LLC to lease

approximately 66,000 square feet of office space in Seattle, Washington for a term of 120 months, commencing May 1, 2012.
We have two five-year options to extend the term of the lease at a market rate determined according to the lease. The initial rent
amount was based on $27.00 per square foot per annum, but no payments were due during the initial five months of the lease
term. Rent increases three percent over the prior year’s amount for each year thereafter for the duration of the lease. In addition,
we were provided an allowance of $3.3 million for certain tenant improvements made by us.

In December 2017, we entered into an agreement to sublease approximately 44,000 square feet of our Seattle office

space. No payments are due through May 2018, after which monthly rent is due through the sublease termination date in April
2022. Monthly sublease rent increases by a minor amount each January 1. In connection with the sublease, we recognized a
loss and a deferred liability of $1.6 million, representing future rental payments plus related expenses in excess of the future
sublease payments to be received. The loss was recorded in Selling, general and administrative expense during the year ended
December 31, 2017. Other current liabilities and Other liabilities in the consolidated balance sheet include $0.8 million and
$0.6 million, respectively, related to the sublease agreement as of December 31, 2017 .

Rent expense, net of sublease-related income of $0.1 million for the year ended December 31, 2017, amounted to $1.6

million, $2.0 million and $2.0 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Future Minimum Lease Payments

Future minimum lease commitments for non-cancelable operating leases, net of sublease rentals, at December 31, 2017

were as follows (in thousands):

2018
2019
2020
2021
2022
Thereafter
Total minimum lease commitments

6. Other Liabilities

Operating

Leases

Sublease

Rentals

Net

2,487
2,532
2,584
2,580
868
—
11,051

771
1,365
1,410
1,454
499
—
5,499

1,716
1,167
1,174
1,126
369
—
5,552

Other liabilities consisted of the following as of December 31, 2017 and 2016 (in thousands):

Deferred rent, less current portion
Other long-term obligations
Total other liabilities

2017

2016

3,050
2,419
5,469

3,011
604
3,615

Deferred rent, less current portion as of December 31, 2017 and 2016 includes amounts related to incentives for rent

holidays and leasehold improvements associated with our operating lease for office space. In addition, deferred rent, less
current portion as of December 31, 2017 includes $0.6 million of deferred liability related to the sublease of Seattle office space
as discussed in Note 5. Leases.

Other long-term obligations as of December 31, 2017 include a fee in the amount of $1.4 million payable to Silicon

Valley Bank. See Note 7, Long-term Debt, for additional information.

7. Long-term Debt

Silicon Valley Bank

In November 2017, we entered into a Loan and Security Agreement with Silicon Valley Bank, or SVB, for a senior
secured term loan of up to $18.0 million. The first $16.0 million of the term loan was funded in November 2017, and the
remaining $2.0 million is available at our option at any time from the occurrence of the Milestone Event (as defined below)
through July 31, 2018, subject to the satisfaction of certain conditions. The loan proceeds were used to repay in full all
outstanding indebtedness under the Loan and Security Agreement with Hercules as discussed below and to fund our general
business requirements. We were required to maintain unrestricted and unencumbered cash in an amount equal to at least $16.0
million under the terms of Loan and Security Agreement, and as such, $16.0 million of our cash was legally restricted as of
December 31, 2017 and held as a compensating balance against the term loan. The restriction was subsequently removed in
January 2018. See Note 1. Description of Business and Summary of Significant Accounting Policies for further details
regarding restricted cash.

The Milestone Event is defined as our receipt of evidence satisfactory to SVB, in its sole but reasonable discretion, that

we have received a positive opinion from the EMA for our pacritinib product.

The term loan is repayable over 36 months after an initial interest-only period of at least 12 months after closing, which
will be extended to 18 months upon the occurrence of the Milestone Event. The interest rate on the term loan floats at a rate per
annum equal to the greater of 2.5 percent above the prime rate and 6.75 percent. We may elect to prepay some or all of the loan
balance at any time subject to a prepayment fee. A fee in the amount of 9 percent of the total principal amount funded to us is
payable to SVB on the date on which the term loan is paid or becomes due and payable in full. Such fee in the amount of $1.4
million was included in Other liabilities in the consolidated balance sheet as of December 31, 2017. The loan obligations are
secured by a first priority security interest on substantially all of our personal property except our intellectual property, and
subject to certain other exceptions.

In addition, we issued warrants to SVB and Life Science Loans II, LLC, pursuant to a participation arrangement among
SVB, Loan Manager II, LLC and Life Science Loans II, LLC, to purchase up to 190,140 shares of our common stock. Warrants
underlying 169,014 shares of our common stock are initially exercisable at any time prior to November 28, 2027. Warrants
underlying 21,126 shares of our common stock will become exercisable when the remaining $2.0 million of the term loan is
funded to us. The initial exercise price of the warrants is $2.84 per share of our common stock.

In connection with the Loan and Security Agreement, we recorded debt discount and debt issuance costs of $1.9 million
and $0.1 million, respectively, of which $1.9 million and $0.1 million was unamortized as of December 31, 2017, respectively.
The outstanding principal balance on the term loan was $16.0 million as of December 31, 2017.

Hercules

In March 2013, we entered into a Loan and Security Agreement, or the Loan Agreement, with Hercules, providing for a

senior secured term loan of up to $15.0 million. In March 2014, we entered into a First Amendment to the Loan Agreement,
which modified certain terms applicable to the loan balance then-outstanding of $15.0 million and provided us with the option
to borrow an additional $5.0 million.

In June 2015, we entered into a Third Amendment to the Loan Agreement, or the Third Amendment. Under the Third
Amendment, Hercules agreed to provide term loans in an aggregate principal amount of up to $25.0 million, inclusive of the
principal balance outstanding immediately prior to closing of the Third Amendment of $13.8 million, or collectively, the Term
Loan Borrowings. We drew $6.2 million upon closing of the Third Amendment, resulting in a then-outstanding principal
balance of $20.0 million under the Term Loan Borrowings. The remaining $5.0 million was available for borrowing at our
option through June 30, 2016, subject to certain conditions. In connection with the Third Amendment, we paid a commitment
fee of $15,000 and a facility charge of $0.3 million. The provision under the Loan Agreement requiring us to pay a fee to
Hercules of $1.3 million on the date of repayment of the borrowings thereunder was amended pursuant to the Third
Amendment, such that the fee was paid in October 2016.

In connection with the Third Amendment, we issued a warrant to Hercules to purchase shares of common stock. The

warrant is exercisable for five years from the date of issuance for 29,239 shares of common stock at an initial exercise price of
$17.10 per share. The warrant did not meet the considerations necessary for equity classification under the applicable
authoritative guidance. As such, we determined that the warrant was a liability instrument with changes in fair value recognized
through earnings at each reporting period. The warrant was categorized as Level 2 in the fair value hierarchy as the significant
inputs used in determining fair value were considered observable market data. As of the issuance date, we estimated the fair
value of the warrant to be $0.4 million. Upon expiry of the exercise price adjustment provision in December 2015, the then-
estimated fair value of the warrant of $0.2 million was reclassified from liability to equity.

The modified terms under the Third Amendment were considered substantially different as compared to the terms of the

Loan Agreement immediately prior to the Third Amendment, pursuant to ASC 470-50, Modification and Extinguishment. As
such, the Third Amendment was accounted for as a debt extinguishment, resulting in a loss on debt extinguishment of $1.2
million, which is included in Other non-operating expense for the year ended December 31, 2015.

In December 2015, we entered into a Fourth Amendment to the Loan Agreement, or the Fourth Amendment, pursuant to

which Hercules funded the remaining $5.0 million term loan available under the facility, resulting in a then-outstanding
principal balance of $25.0 million.

In November 2017, we repaid the then-outstanding principal balance of $14.3 million in full, using the proceeds from the
the Loan and Security Agreement with SVB as discussed above. Accordingly, among other things, (1) all obligations under the
Loan Agreement and all related documents have been paid, satisfied, released and discharged in full, (2) all unfunded
commitments to make credit extensions or financial accommodations to us or any other person under the Loan Agreement have
been automatically and irrevocably terminated, and (3) our obligations under the Loan Agreement and all related documents
have been automatically and irrevocably terminated (other than with respect to customary provisions and agreements that are
expressly specified to survive the termination). Upon full repayment of the principal in November 2017, we wrote-off the then-
unamortized debt discount balance of $0.1 million to a loss on debt extinguishment, which was recorded in Other non-
operating expense for the year ended December 31, 2017.

Baxalta

In November 2013, we entered into a Development, Commercialization and License agreement, or the Pacritinib License

Agreement, with Baxter International Inc., or Baxter, for the development and commercialization of pacritinib for use in
oncology and potentially additional therapeutic areas. Baxalta has been assigned Baxter’s rights and obligations under the
Pacritinib License Agreement. In June 2015, we entered into the First Amendment to the Pacritinib License Agreement, or the
Pacritinib License Amendment, pursuant to which two potential milestone payments in the aggregate amount of $32.0 million
from Baxalta to us were accelerated from the schedule contemplated by the Pacritinib License Agreement relating to the
following: the $12.0 million development milestone payment payable in connection with the regulatory submission of the
Marketing Authorization Application, or the MAA, to the EMA with respect to pacritinib, or the MAA Milestone, and the $20.0
million development milestone payment payable in connection with the first treatment dosing of the 300th patient enrolled per
the protocol in PERSIST-2, or the PERSIST-2 Milestone. Under the Pacritinib License Amendment, each of the two milestone
advances bore interest at an annual rate of 9% until the earlier of the date of the first occurrence of the respective milestone or
the date that the respective advance plus accrued interest was repaid in full. In January 2016 and February 2016, we
successfully achieved the $20.0 million PERSIST-2 Milestone and the $12.0 million MAA Milestone, respectively, which were
recorded in License and contract revenue for the year ended December 31, 2016.

See Note 11. Collaboration, Licensing and Milestone Agreements for further details regarding our agreements with

Baxalta.

8. Preferred Stock

Series N-1 Preferred Stock

In October 2015, in an underwritten public offering, we issued 50,000 shares of Series N-1 convertible preferred stock,
or Series N-1 Preferred Stock, for gross proceeds of $50.0 million before deducting underwriting commissions and discounts
and other offering costs of approximately $3.4 million, including $3.0 million in underwriting commissions and discounts.

Each share of Series N-1 Preferred Stock was convertible at the option of the holder and was entitled to a liquidation

preference equal to the initial stated value of $1,000 per share of Series N-1 Preferred Stock, plus any declared and unpaid
dividends, and any other payments that would have been due on such shares, before any distribution of assets would have been
made to holders of capital stock ranking junior to the Series N-1 Preferred Stock. The Series N-1 Preferred Stock was not
entitled to dividends except to share in any dividends actually paid on common stock or any pari passu or junior securities.
The Series N-1 Preferred Stock had no voting rights, except as otherwise expressly provided in the amended articles or as
otherwise required by law.

In October 2015, all 50,000 shares of Series N-1 Preferred Stock were converted into 4.0 million shares of common
stock at a conversion price of $12.50 per share. During the year ended December 31, 2015, we recognized $3.2 million in
deemed dividends on preferred stock related to the beneficial conversion feature on our Series N-1 Preferred Stock.

Series N-2 Preferred Stock

In December 2015, in an underwritten public offering, we issued 55,000 shares of Series N-2 Preferred Stock for gross
proceeds of $55.0 million before deducting underwriting commissions and discounts and other offering costs of approximately
$2.6 million, including $2.2 million in underwriting commissions and discounts.

Each share of Series N-2 Preferred Stock was convertible at the option of the holder (subject to a limited exception) and
was entitled to a liquidation preference equal to the initial stated value of $1,000 per share of Series N-2 Preferred Stock, plus
any declared and unpaid dividends, and any other payments that would have been due on such shares, before any distribution of
assets would have been made to holders of capital stock ranking junior to the Series N-2 Preferred Stock. The Series N-2
Preferred Stock was not entitled to dividends except to share in any dividends actually paid on common stock or any pari passu
or junior securities. The Series N-2 Preferred Stock had no voting rights, except as otherwise expressly provided in the
amended articles or as otherwise required by law.

In December 2015, all 55,000 shares of Series N-2 Preferred Stock were converted into 5.0 million shares of common

stock at a conversion price of $11.00 per share. There was no beneficial conversion feature on Series N-2 Preferred Stock.

Series N-3 Preferred Stock

In June 2017, in an underwritten public offering, we issued 22,500 shares of Series N-3 Preferred Stock for gross
proceeds of $45.0 million before deducting underwriting commissions and discounts and other offering costs of approximately
$2.3 million. BVF Partners L.P., or BVF, an existing shareholder of the Company, was one of our investors in this offering. See
Note 17. Related Party Transactions for further details.

Each share of Series N-3 Preferred Stock is convertible at the option of the holder (subject to a limited exception) and is
entitled to a liquidation preference equal to the initial stated value of $2,000 per share, plus any declared and unpaid dividends,
and any other payments that may be due on such shares, before any distribution of assets may be made to holders of capital
stock ranking junior to the Series N-3 Preferred Stock. The Series N-3 Preferred Stock is not entitled to dividends except to
share in any dividends actually paid on common stock or any pari passu or junior securities. The Series N-3 Preferred Stock has
no voting rights, except as otherwise expressly provided in the articles of amendment to amended and restated articles of
incorporation of CTI or as otherwise required by law.

In June 2017, 21,925 shares of Series N-3 Preferred Stock were converted into 14.6 million shares of common stock at a

conversion price of $3.00 per share. For the year ended December 31, 2017, we recognized $4.4 million in deemed dividends
on preferred stock related to the beneficial conversion feature on our Series N-3 Preferred Stock. There were 575 shares of
Series N-3 Preferred Stock outstanding as of December 31, 2017.

In February 2018, 575 shares of Series N Preferred Stock owned by certain affiliates of BVF Partners L.P., or
collectively, BVF, along with 8.0 million shares of our common stock owned by BVF were exchanged for 12,575 shares of
Series O Preferred Stock. See Note 17. Related Party Transactions for further details.

9. Common Stock

Common Stock Authorized

In April 2016, the Company's Amended and Restated Articles of Incorporation were amended to increase the total

number of authorized shares of common stock from 31.5 million to 41.5 million.

In May 2017, the Company's Amended and Restated Articles of Incorporation were amended to increase the total

number of authorized shares of common stock from 41.5 million to 81.5 million.

Common Stock Issued

In September 2015, we entered into a subscription agreement with BVF pursuant to which we issued to BVF an
aggregate of 1.0 million shares of common stock at a purchase price per share of $15.70. The shares of common stock were
offered directly to BVF without a placement agent or underwriter. The net proceeds from the offering, after deducting offering
expenses, were approximately $15.1 million.

Common Stock Reserved

A summary of common stock reserved for issuance is as follows as of December 31, 2017 (in thousands):

Equity incentive plans
Option agreement with Adam R. Craig
Common stock purchase warrants
Series N-3 convertible preferred stock
Employee stock purchase plan
Total common stock reserved

Warrants

5,920
1,120
219
383
184
7,826

Warrants to purchase up to 29,239 shares of our common stock with an exercise price of $17.10 per share, issued in

connection with the Third Amendment to the Loan Agreement with Hercules in June 2015, were outstanding as of
December 31, 2017.

Warrants to purchase up to 190,140 shares of our common stock with an exercise price of $2.84 per share, issued in

connection with the Loan and Security Agreement with SVB, were outstanding as of December 31, 2017.

See Note 7. Long-term Debt for additional information concerning our warrants.

10. Other Comprehensive Loss

Total accumulated other comprehensive loss consisted of the following (in thousands):

Net Unrealized
Gain (Loss) and
Impairment on
Available-For-
Sale Securities

Foreign
Currency
Translation
Adjustments

Unrealized
Foreign Exchange
(Loss) Gain on
Intercompany
Balance

Accumulated
Other
Comprehensive
Loss

December 31, 2016
Current period other comprehensive income (loss)
December 31, 2017

(6) $
7
1

(2,902) $
(3,927)
(6,829) $

(3,747) $
4,303
556

(6,655)
383
(6,272)

In the first quarter of 2016, we recognized an other-than-temporary impairment on available-for-sale securities of $0.5

million in our consolidated statement of operations. The value of available-for-sale securities of $13,500 was included in
Prepaid expenses and other current assets as of December 31, 2016. We had no available-for-sale securities as of December 31,
2017.

11. Collaboration, Licensing and Milestone Agreements

Servier

In September 2014, we entered into an Exclusive License and Collaboration Agreement, or the Original Agreement,
with Les Laboratoires Servier and Institut de Recherches Internationales Servier, or collectively, Servier. In April 2017, we
entered into an Amended and Restated Exclusive License and Collaboration Agreement, or the Restated Agreement, with
Servier, pursuant to which the Original Agreement was amended and restated in its entirety.

Under the Restated Agreement, we granted Servier an exclusive and sublicensable (subject to certain conditions) royalty-

bearing license with respect to the development and commercialization of PIXUVRI for use in pharmaceutical products, or
Licensed Products, outside of the U.S. (and its territories and possessions).

In May 2017, we received a non-refundable, non-creditable upfront cash payment of €12.0 million under the terms of the

Restated Agreement. This amount included a €2.0 million payment for a milestone relating to EMA approval of an additional
third-party manufacturer of PIXUVRI, which was not included in the Original Agreement and was deemed achieved at the time

of the Restated Agreement. Subject to the achievement of certain conditions, the Restated Agreement provides for additional
milestone payments of up to €76.0 million : up to €36.0 million in potential regulatory milestone payments (which includes a
€1.0 million payment for a regulatory milestone achieved in September 2017 as discussed below), and up to €40.0 million in
potential sales-based milestone payments. We have determined that all the regulatory milestones, other than the €2.0 million
milestone mentioned above, are substantive due to significant uncertainty involved in each milestone, and will be recognized as
revenue upon achievement of the respective milestones, assuming all other revenue recognition criteria are met. We have also
determined that the sales-based milestone payments are contingent consideration and will be recognized as revenue in the
period in which the respective revenue recognition criteria are met.

We are eligible to receive tiered royalty payments on net sales of products containing PIXUVRI, ranging from a low

double-digit percentage up to a percentage in the low twenties, subject to certain reductions of up to mid-double-digit
percentages under certain circumstances. Royalties are subject to expiration upon certain events, including upon expiration of
exclusivity rights to products containing PIXUVRI in the respective country.

Under the Restated Agreement, with the exception of the conclusion of the PIX306 trial and certain other services,

Servier will be responsible for development, commercialization and manufacturing activities within its territory. We entered
into a commercialization transition plan whereby we transferred to Servier medical affairs and commercialization activities
relating to the Licensed Products in Israel, Turkey, Germany, Austria, the United Kingdom, Denmark, Finland, Norway and
Sweden, or collectively, the Transition Territory. Upon completion of the commercialization transition plan, we terminated or
assigned certain distributor and wholesaler contracts to Servier in the Transition Territory. Each party is responsible for the
manufacture and supply of drug products and substances in their respective territories. We record reimbursements received
from Servier for their portion of operating expenses we pay on their behalf as revenue and the full amount of costs as operating
expenses in the statements of operations.

The Restated Agreement will expire on a country-by-country basis upon the expiration of the royalty terms in the
countries in the Servier territory, at which time all licenses granted to Servier would become perpetual and royalty-free. Each
party may terminate the Restated Agreement in the event of an uncured repudiatory breach of the other party’s obligations.
Subject to applicable notification periods, Servier may terminate the Restated Agreement on a country-by-country basis upon
30 days’ written notice in the event of (1) certain safety or public health issues relating to the Licensed Product, (2) suspension
or withdrawal of marketing authorizations and (3) without cause. In the event of a termination prior to the expiration date,
rights granted to Servier will terminate, subject to certain exceptions.

Pursuant to accounting guidance under ASC 605-25 Revenue Recognition - Multiple-Element Arrangements, we
identified the following non-contingent deliverables with standalone value at the inception of the Restated Agreement:

• a license with respect to the development and commercialization of PIXUVRI
• development services
• joint committee obligations
• regulatory responsibilities
• commercialization responsibilities
• manufacturing and supply responsibilities

The license deliverable has standalone value because it is sublicensable and can be used for its intended purpose without

the receipt of the remaining deliverables. The service deliverables have standalone value because these services are not
proprietary in nature, and other vendors could provide the same services in order to derive value from the license. Further, there
is no general right of return associated with these deliverables. As such, the deliverables meet the criteria for separation and
qualify as separate units of accounting.

We determined that the value of the joint committee obligations and the regulatory, commercial, and manufacturing and
supply responsibilities were insignificant. These deliverables have been combined with the development services and included
as “Other services” in the table below.

We allocated the arrangement consideration of $12.8 million (€12.0 million converted into U.S. dollars using the
currency exchange rate as of the date of the Restated Agreement) based on the percentage of the relative selling price of each
unit of accounting as follows (in thousands):

License
Development and other services
Total upfront payment

11,487
1,348
12,835

We estimated the selling price of the license using the income approach that values the license by discounting direct cash

flow expected to be generated over the remaining life of the license, net of cash flow adjustments related to working
capital.The estimates and assumptions include, but are not limited to, estimated market opportunity, expected market share, and
contractual royalty rates. We estimated the selling price of the development services deliverable, which includes personnel
costs as well as third-party costs for applicable services and supplies, by discounting estimated expenditures for services to the
date of the Restated Agreement. We concluded that a change in the key assumptions used to determine the best estimate of the
selling price for the license deliverable would not have a significant effect on the allocation of the arrangement consideration.

During the year ended December 31, 2017, we recognized $11.5 million of consideration allocated to the license as

revenue upon delivery of the license and the satisfaction of the remaining revenue recognition criteria. The $1.3 million
consideration allocated to development and other services was recorded as deferred revenue. During the year ended
December 31, 2017, $0.5 million of other services consideration was recognized as revenue; the remaining $1.4 million is
included in deferred revenue in the consolidated balance sheet as of December 31, 2017.

In September 2017, we attained a regulatory milestone under the Restated Agreement and recognized a €1.0 million

milestone revenue (or $1.2 million using the currency exchange rate as of the date the milestone was achieved).

Of the potential milestone payments under the Original Agreement, we received a €1.5 million (or $1.7 million upon

conversion from euros as of the date we received the funds) milestone payment in February 2015 relating to the attainment of
reimbursement approval for PIXUVRI in Spain. In December 2016, we recorded €7.5 million in milestone revenue (or $8.0
million upon conversion from euros as of the date we achieved the milestone) relating to the attainment of a certain enrollment
event in connection with our PIX306 study. This was included in Receivable from collaborative arrangements as of December
2016, and we received the funds in January 2017. These milestone revenues were accounted for under the milestone method of
accounting since this milestone was determined to be substantive at the inception of the arrangement.

Other operating (income) expense, net for the years ended December 31, 2015 and December 31, 2016, includes $0.3

million and $0.8 million, respectively, for payments made to Novartis International Pharmaceutical Ltd. in connection with the
milestone payments received in February 2015 and January 2017, respectively, as discussed above.

In February 2016, we entered into an agreement with one of Servier's affiliates whereby we conduct the pharmacokinetic

sub-study on behalf of Servier in conjunction with our ongoing clinical trial, PIX-306. During the years ended December 31,
2017 and 2016, $0.1 million and $0.5 million, respectively, of expense reimbursements in relation to this study was included in
development services revenue. There was no such revenue during the year ended December 31, 2015. We expect to receive no
such development services revenue in future periods as the pharmacokinetic sub-study was completed in September 2017.

Teva

Pursuant to an acquisition agreement entered into with Cephalon, Inc., or Cephalon, in June 2005, we have the right to

receive up to $100.0 million in payments upon achievement of specified sales and development milestones related to
TRISENOX. Cephalon was subsequently acquired by Teva Pharmaceutical Industries Ltd., or Teva. As of December 31, 2017,
we have received $40.0 million of such potential milestone payments as a result of having achieved certain sales milestones.
For each of the years ended December 31, 2017 and 2015, we received $10.0 million from Teva upon the achievement of
worldwide net sales milestones of TRISENOX, which was included in license and contract revenue. We received no milestone
payment from Teva during the year ended December 31, 2016. In February 2018, we received a $10.0 million milestone
payment related to the achievement of a milestone for FDA approval of TRISENOX for first line treatment of acute
promyelocytic leukemia. The achievement of the remaining milestones is uncertain at this time.

Baxalta

In November 2013, we entered into the Pacritinib License Agreement with Baxter for the development and

commercialization of pacritinib for use in oncology and potentially additional therapeutic areas. Baxter assigned its rights and
obligations under the Pacritinib License Agreement to Baxalta. Under the Pacritinib License Agreement, we granted to Baxter

an exclusive, worldwide (subject to our certain co-promotion rights in the U.S.), royalty-bearing, non-transferable, and (under
certain circumstances outside of the U.S.) sub-licensable license to our know-how and patents relating to pacritinib. We
received an upfront payment of $60.0 million upon execution of the Pacritinib License Agreement, which included an equity
investment of $30.0 million to acquire our Series 19 Preferred Stock.

We allocated the fixed and determinable Pacritinib License Agreement consideration of $30.0 million based on the

percentage of the relative selling price of each unit of accounting. Of the $30.0 million consideration, $27.3 million was
allocated to the license and $2.7 million was allocated to the development services. The amount allocated to development
services was initially deferred and recognized as revenue based on a proportional performance method. During the years ended
December 31, 2016 and 2015, $1.0 million and $0.8 million, respectively, of development services was recognized as revenue.
There was no deferred revenue relating to the development services in the balance sheet as of December 31, 2017 and 2016 due
to our entry into the Asset Return and Termination Agreement with Baxalta in October 2016 as discussed below.

Under the Pacritinib License Agreement, we were responsible for all development costs incurred prior to January 1,

2014 as well as up to approximately $96.0 million on or after January 1, 2014 for U.S. and E.U. development costs, subject to
potential adjustment in certain circumstances. All development costs exceeding such threshold were generally shared with
Baxalta. We recorded development cost reimbursements received from Baxalta as license and contract revenue in the
consolidated statements of operations, and we recorded the full amount of development costs as research and development
expense. During the year ended December 31, 2016, we recorded $11.4 million of development services revenue relating to
reimbursable development costs from Baxalta under the terms of the Pacritinib License Agreement. There was no such revenue
recorded during the years ended December 31, 2017 and December 31, 2015.

In June 2015, we entered into the Pacritinib License Amendment to the Pacritinib License Agreement. Pursuant to the

Pacritinib License Amendment, two potential milestone payments in the aggregate amount of $32.0 million from Baxalta to us
were accelerated from the schedule contemplated by the Pacritinib License Agreement. Refer to the Note 7. Long-term Debt
for further details regarding these milestone advances received. During the first quarter of 2016, we achieved these milestones
and recorded $32.0 million in license and contract revenue for the year ended December 31, 2016.

In October 2016, we entered into the Asset Return and Termination Agreement (the “Termination Agreement”) with
Baxalta. Pursuant to the Termination Agreement, the Pacritinib License Agreement was terminated in its entirety (other than
with respect to certain customary provisions that survive termination, including those pertaining to confidentiality and
indemnification), the Pacritinib License Agreement has no further force or effect, and all rights and obligations of the Company
and Baxalta under the Pacritinib License Agreement were terminated. In connection with this termination, we recorded a gain
of $5.9 million which was included in Other operating (income) expense for the year ended December 31, 2016.

In October 2016, we resumed primary responsibility for the development and commercialization of pacritinib as a result

of the Termination Agreement and are no longer eligible to receive cost sharing or milestone payments for pacritinib’s
development from Baxalta. In addition, under the Termination Agreement, we are required to make a milestone payment to
Baxalta in the amount of approximately $10.3 million upon the first regulatory approval or any pricing and reimbursement
approvals of a product containing pacritinib.

Novartis

In January 2014, we entered into a Termination Agreement, or the Novartis Termination Agreement, with Novartis to

reacquire the rights to PIXUVRI and Opaxio, or collectively, the Compounds, previously granted to Novartis under our License
and Co-Development Agreement with Novartis, as amended, or the Original Novartis Agreement. Pursuant to the Novartis
Termination Agreement, the Original Novartis Agreement was terminated in its entirety, other than with respect to certain
customary provisions, including those pertaining to confidentiality and indemnification, which survive termination.

Under the Novartis Termination Agreement, we agreed not to transfer, license, sublicense or otherwise grant rights with
respect to intellectual property of the Compounds unless the transferee/licensee/sublicensee agrees to be bound by the terms of
the Novartis Termination Agreement. We also agreed to provide potential payments to Novartis, including a percentage ranging
from the low double-digits to the mid-teens, of any consideration received by us or our affiliates in connection with any
transfer, license, sublicense or other grant of rights with respect to intellectual property of the Compounds, provided that such
payments would not exceed certain prescribed ceilings in the low-single digit millions. Novartis is entitled to receive potential
payments of up to $16.6 million upon the achievement of certain sales milestones of the Compounds. Novartis is also eligible
to receive tiered low single-digit percentage royalty payments for the first several hundred million in annual net sales, and ten
percent royalty payments thereafter based on annual net sales of each Compound, subject to reduction in the event generic

drugs are introduced and sold by a third party, causing the sale of the Compounds to fall by a percentage in the high double-
digits. Notwithstanding the foregoing, royalty payments for the Compounds are subject to certain minimum floor percentages
in the low single-digits.

University of Vermont

In March 1995, the University of Vermont, or UVM, entered into an agreement, or the UVM Agreement, which, as

amended in March 2000, grants us an exclusive, sublicensable license for the rights to PIXUVRI. Pursuant to the UVM
Agreement, we acquired the rights to make, have made, sell and use PIXUVRI. We are obligated to make royalty payments to
UVM that range from low-single digits to mid-single digits as a percentage of net sales. The higher royalty rate is payable for
net sales in countries where specified UVM licensed patents exist, or where we have obtained orphan drug protection, until
such UVM patents or such protection no longer exists. For a period of ten years after first commercialization of PIXUVRI, the
lower royalty rate is payable for net sales in such countries after expiration of the designated UVM patents or loss of orphan
drug protection, and in all other countries without such specified UVM patents or orphan drug protection. Unless otherwise
terminated, the term of the UVM Agreement continues for the life of the licensed patents in those countries in which a licensed
patent exists, and continues for ten years after the first sale of PIXUVRI in those countries where no such patents exist. We may
terminate the UVM Agreement, on a country-by-country basis or on a patent-by-patent basis, at any time upon advance written
notice. UVM may terminate the UVM Agreement upon advance written notice in the event royalty payments are not made. In
addition, either party may terminate the UVM Agreement (1) in the event of an uncured material breach of the UVM
Agreement by the other party or (2) in the event of bankruptcy of the other party.

S*BIO Pte Ltd.

We acquired the compounds SB1518 (which is referred to as “pacritinib”) and SB1578, which inhibit JAK2 and FLT3,
from S*BIO Pte Ltd., or S*BIO, in May 2012. Under our agreement with S*BIO, we are required to make milestone payments
to S*BIO up to an aggregate amount of $132.5 million if certain U.S., E.U. and Japanese regulatory approvals are obtained or if
certain worldwide net sales thresholds are met in connection with any pharmaceutical product containing or comprising any
compound that we acquired from S*BIO for use for specific diseases, infections or other conditions. At our election, we may
pay up to 50% of any milestone payments to S*BIO through the issuance of shares of our common stock or shares of our
preferred stock convertible into our common stock. S*BIO will also be entitled to receive royalty payments from us at
incremental rates in the low single-digits based on certain worldwide net sales thresholds on a product-by-product and country-
by-country basis.

Vernalis

We entered into an amended and restated exclusive license agreement with Vernalis (R&D) Limited, or Vernalis, in
October 2014, or the Vernalis License Agreement, for the exclusive worldwide right to use certain patents and other intellectual
property rights to develop, market and commercialize tosedostat and certain other compounds. Under the Vernalis License
Agreement, we have agreed to make tiered royalty payments of no more than a high single-digit percentage of net sales of
products containing licensed compounds, with such obligation to continue on a country-by-country basis for the longer of ten
years following commercial launch or the expiry of relevant patent claims.

The Vernalis License Agreement will terminate when the royalty obligations expire, although the parties have early

termination rights under certain circumstances, including the following: (1) we have the right to terminate, with three months’
notice, upon the belief that the continued development of tosedostat or any of the other licensed compounds is not
commercially viable, (2) Vernalis has the right to terminate in the event of our uncured failure to pay sums due, and (3) either
party has the right to terminate in the event of the other party’s uncured material breach or insolvency.

Gynecologic Oncology Group

We entered into an agreement with the Gynecologic Oncology Group, or GOG, now part of NRG Oncology, in March

2004, as amended, related to the GOG-212 trial of Opaxio in patients with ovarian cancer. Pursuant to the terms of such
agreement, we made a milestone payment of $0.5 million relating to the transfer of final datasets during the second quarter of
2017. The agreement was terminated in May 2017. No further development of Opaxio is planned.

PG-TXL

polymer technology. Pursuant to the PG-TXL Agreement, we acquired the rights to research, develop, manufacture, market and
sell anti-cancer drugs developed using this polymer technology. Pursuant to the PG-TXL Agreement, we were obligated to
make payments to PG-TXL of up to $14.4 million upon the achievement of certain development and regulatory milestones. The
timing of the remaining milestone payments under the PG-TXL Agreement was based on trial commencements and
completions for compounds protected by PG-TXL license rights, and regulatory and marketing approval of those compounds
by the FDA and the EMA. Additionally, we were required to make royalty payments to PG-TXL ranging from low to mid-
single digits as a percentage of net sales. In February 2017, we terminated our agreement with PG-TXL and the exclusive
worldwide license for rights to Opaxio and certain polymer technology thereunder.

Nerviano Medical Sciences

Under a license agreement entered into with Nerviano Medical Sciences, S.r.l. in October 2006, for brostallicin, we were

required to pay up to $80.0 million in milestone payments based on the achievement of certain product development results. In
April 2015 we terminated our license agreement with Nerviano Medical Sciences, S.r.l. for brostallicin. No milestone payments
were made prior to the termination of the license agreement.

Other Agreements

We have several agreements with contract research organizations, third-party manufacturers, and distributors which have

durations of greater than one year for the development and distribution of certain of our compounds.

12. Share-Based Compensation

Share-Based Compensation Expense

Share-based compensation expense for all share-based payment awards made to employees and directors is measured

based on the grant-date fair value estimated in accordance with GAAP. We recognize share-based compensation using the
straight-line, single-award method based on the value of the portion of share-based payment awards that is ultimately expected
to vest during the period. Share-based compensation is reduced for estimated forfeitures at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those estimates. For performance-based awards that do not
include market-based conditions, we record share-based compensation expense only when the performance-based milestone is
deemed probable of achievement. We utilize both quantitative and qualitative criteria to judge whether milestones are probable
of achievement. For awards with market-based performance conditions, we recognize the grant-date fair value of the award
over the derived service period regardless of whether the underlying performance condition is met.

During the years ended December 31, 2017, 2016 and 2015, we recognized share-based compensation expense which

consisted of the following types of awards (in thousands):

Performance rights
Restricted stock
Options
Total share-based compensation expense

2017

2016

2015

— $

1,015
4,731
5,746

575
4,199
8,550
13,324

3,155
8,656
3,017
14,828

The following table summarizes share-based compensation expense for the years ended December 31, 2017, 2016 and

2015, which was allocated as follows (in thousands):

Research and development
Selling, general and administrative
Total share-based compensation expense

2017

2016

2015

911
4,835
5,746

2,320
11,004
13,324

3,964
10,864
14,828

Share-based compensation had a $5.7 million, $13.3 million and $14.8 million effect on our net loss attributable to

common shareholders, which resulted in a $(0.16), $(0.48) and $(0.79) effect on basic and diluted net loss per common share
for the years ended December 31, 2017, 2016 and 2015, respectively. It had no effect on cash flows from operations or
financing activities for the periods presented; however, during the years ended 2017, 2016 and 2015, we repurchased 21,000,

35,000 and 32,000 shares of our common stock totaling $0.1 million, $0.4 million and $0.6 million, respectively, for cash in
connection with the vesting of employee restricted stock awards based on taxes owed by employees upon vesting.

As of December 31, 2017, unrecognized compensation cost related to unvested stock options, restricted stock awards
and restricted stock units amounted to $9.9 million, which will be recognized over the remaining weighted-average requisite
service period of 2.28 years. The unrecognized compensation cost related to unvested options and restricted stock does not
include the value of performance-based awards.

For the years ended December 31, 2017, 2016 and 2015, no tax benefits were attributed to share-based compensation

expense because a valuation allowance was maintained for all net deferred tax assets.

Stock Plans

In May 2017, the Company's 2017 Equity Incentive Plan, or the 2017 Plan, was approved by the Company's

shareholders, and no additional awards will be granted under the 2015 Equity Incentive Plan, or the 2015 Plan.

The Company's 2007 Employee Stock Purchase Plan, as amended and restated in August 2009 and September 2015, or

the Purchase Plan, was amended in September 2015 to increase the maximum number of shares of the Company’s common
stock authorized for issuance by 0.2 million shares. Refer to Employee Stock Purchase Plan below for further details.

Pursuant to our 2017 Plan, we may grant the following types of incentive awards: (1) stock options, including incentive

stock options and non-qualified stock options, (2) stock appreciation rights, (3) restricted stock, (4) restricted stock units and
(5) cash awards. The 2017 Plan is administered by the Compensation Committee of our Board, which has the discretion to
determine the employees and consultants who shall be granted incentive awards. The Board retained sole authority under the
2017 Plan with respect to non-employee directors’ awards, although the Compensation Committee has authority under its
charter to make recommendations to the Board concerning such awards. Options expire 10 years from the date of grant, subject
to the recipients continued service to the Company.

As of December 31, 2017, 8.3 million shares were authorized for issuance, of which 24,000 shares of common stock

were available for future grants, under the 2017 Plan.

Stock Options

Fair value for stock options was estimated at the date of grant using the Black-Scholes pricing model, with the following

weighted average assumptions:

Risk-free interest rate
Expected dividend yield
Expected life (in years)
Volatility

Year Ended December 31,

2017

2016

2015

1.9%

None

5.2
83%

1.2%

None

4.0
75%

1.7%

None

5.3
80%

The risk-free interest rate used in the Black-Scholes valuation method is based on the implied yield currently available
for U.S. Treasury securities at maturity with an equivalent term. We have not declared or paid dividends on our common stock
and do not currently expect to do so in the future. The expected term of options represents the period that our options are
expected to be outstanding and was determined based on historical weighted average holding periods and projected holding
periods for the remaining unexercised options. Consideration was given to the contractual terms of our options, vesting
schedules and expectations of future employee behavior. Expected volatility is based on the annualized daily historical
volatility, including consideration of the implied volatility and market prices of traded options for comparable entities within
our industry.

Our stock price volatility and option lives, both of which impact the fair value of options calculated under the Black-
Scholes methodology and, ultimately, the expense that will be recognized over the life of the option, involve management’s
best estimates. As we recognize compensation expense for only the portion of options expected to vest, we apply estimated
forfeiture rates that we derive from historical employee termination behavior. If the actual number of forfeitures differs from
our estimates, additional adjustments to compensation expense may be required in future periods.

The following table summarizes stock option activity for all of our stock option plans:

Outstanding at December 31, 2014 (317,400 exercisable)

Options

492,000

Granted

Exercised

Forfeited

Cancelled and expired

Outstanding at December 31, 2015 (436,100 exercisable)

Granted

Exercised

Forfeited

Cancelled and expired

Outstanding at December 31, 2016 (1,913,000 exercisable)

Granted
Exercised

Forfeited

Cancelled and expired

Outstanding at December 31, 2017

Vested or expected to vest at December 31, 2017

Exercisable at December 31, 2017

1,149,000

$
(8,000) $
(62,000) $
(12,000) $
$

1,559,000

1,511,000

— $
(128,000) $
(136,000) $
$
2,806,000

4,450,000

$
— $
(378,000) $
(210,000) $
$
6,668,000

6,410,000

2,500,000

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value
(Thousands)

31.39

13.94

13.98

21.70

242.92

17.45

6.43

—

9.07

25.58

11.44

3.68

—

6.27

24.33

6.15

6.26

9.83

7.0

6.9

3.2

—

The weighted average exercise price of options exercisable at December 31, 2017, 2016 and 2015 was $9.83, $12.58

and $25.71, respectively. The weighted average grant-date fair value of options granted during 2017, 2016 and 2015 was $2.47,
$3.01 and $9.17 per option, respectively.

In March 2017, Dr. Adam R. Craig, our President and CEO, was granted stock options to purchase 1.2 million shares
of common stock at an exercise price of $4.24 per share. The stock options have a maximum term of ten years and vest in six
equal semi-annual installments over the three-year period beginning March 20, 2017, subject to his continued employment
through the applicable vesting dates and acceleration under certain circumstances. The stock options were granted in
connection with his entering into employment with the Company as President and CEO. A portion of the stock options covering
80,000 shares were granted under the 2015 Plan. The balance of such stock options were granted in accordance with NASDAQ
Listing Rule 5635(c)(4).

Restricted Stock

We issued 2,000, 270,000 and 570,000 shares of restricted stock awards in 2017, 2016 and 2015, respectively. The
weighted average grant-date fair value of restricted stock awards issued during 2017, 2016 and 2015 was $5.78, $5.64 and
$20.61, respectively. Additionally, 39,000, 97,000 and 177,000 shares of restricted stock awards were cancelled during 2017,
2016 and 2015, respectively.

The total fair value of restricted stock awards vested during the years ended December 31, 2017, 2016 and 2015 was

$0.3 million, $1.3 million and $7.3 million, respectively.

A summary of the status of nonvested restricted stock awards as of December 31, 2017 and changes during the period

then ended, is presented below:

Nonvested at December 31, 2016
Issued
Vested
Forfeited
Nonvested at December 31, 2017

Nonvested Shares
$
183,000
$
2,000
(83,000) $
(39,000) $
$
63,000

Weighted Average
Grant-
Date Fair Value
Per Share

12.76
5.78
9.43
14.39
15.93

We issued 20,000, 187,000 and 46,000 restricted stock units during 2017, 2016 and 2015, respectively, and cancelled

13,000 restricted stock units during 2015. No restricted stock units were cancelled during 2017 or 2016. The weighted average
grant-date fair value of restricted stock units issued during 2017, 2016 and 2015 was $4.97, $5.35 and $15.70, respectively. The
total fair value of restricted stock units vested during the year ended December 31, 2017 and 2016 was $0.8 million and $0.2
million, respectively. No restricted stock units vested during the year ended December 31, 2015.

A summary of the status of nonvested restricted stock units as of December 31, 2017 and changes during the period then

ended, is presented below:

Nonvested at December 31, 2016
Issued
Vested
Forfeited
Nonvested at December 31, 2017

Long-Term Performance Awards

Nonvested Units
$
187,000
$
20,000
(187,000) $
— $
$

20,000

Weighted Average
Grant-
Date Fair Value
Per Unit

5.35
4.97
5.35
—
4.97

In November 2011, we granted restricted stock units to our executive officers and directors that became effective on

January 3, 2012, or the Long-Term Performance Awards, which was subsequently amended in 2013, 2014 and 2015. The Long-
Term Performance Awards vest upon achievement of milestone-based performance conditions, including a market-based
condition. If one or more of the underlying performance-based conditions were timely achieved, the award recipient would be
entitled to receive a number of shares of our common stock (subject to share limits of the 2007 Plan or 2015 Plan, as
applicable), determined by multiplying (1) the award percentage corresponding to that particular performance goal by (2) the
total number of outstanding shares of our common stock as of the date that the particular performance goal is achieved.

In September 2015, our Board certified completion of the performance condition relating to pacritinib Phase 3 trial

result that satisfies the primary point set forth in the statistical plan then in effect and an aggregate of 0.2 million shares vested
to our executive officers and directors. We recognized $2.8 million in share-based compensation upon satisfaction of this
performance condition during the year ended December 31, 2015.

In December 2015, the Long-Term Performance Awards were modified so that as to any particular performance goal that

was achieved after December 23, 2015 and on or before December 31, 2016, the executive officers would be granted a stock
option with respect to the number of shares determined under the formula described above (as opposed to receiving or retaining
such number of fully-vested shares of our common stock). Each option had an exercise price equal to the closing price of the
Company’s common stock on the grant date (which would be the date the Compensation Committee of our Board certifies the
performance goal is achieved) and would be scheduled to vest in semi-annual installments over a period of three years
following the grant date.

On December 31, 2016, the Long-Term Performance Awards expired.

The fair value of the Long-Term Performance Awards was estimated based on the average present value of the awards to
be issued upon achievement of the performance conditions. The average present value was calculated based upon the expected

date the shares of common stock underlying the performance awards will vest, or the event date, the expected stock price on the
event date, and the expected shares outstanding as of the event date. The event date, stock price and the shares outstanding were
estimated using a Monte Carlo simulation model, which is based on assumptions by management, including the likelihood of
achieving the milestones and potential future financings.

We determined the Long-Term Performance Awards with a market-based performance condition had a grant-date fair
value of $3.6 million for the executive officers and director participants. We determined that the market-based performance
condition had an incremental fair value of $0.8 million on the first modification date in March 2013 and an additional
incremental fair value of $1.8 million on the second modification date in January 2014 for the executive officers and director
participants, which were recognized in addition to the then-unamortized fair value as of the modification date over the
remaining estimated requisite service period. The December 2015 modification discussed above did not result in incremental
fair value. In December 2015, we reversed the total share-based compensation expense of $1.0 million, which was previously
recorded for awards granted to directors who agreed to forfeit their Long-Term Performance Awards as part of the derivative
lawsuit settlement. See Note 18. Legal Proceedings for further information. We recognized $0.6 million and $0.3 million in
share-based compensation expense related to the awards with a market-based condition during the years ended December 31,
2016 and 2015, respectively. There was no compensation expense for the year ended December 31, 2017 as the Long-Term
Performance Awards expired on December 31, 2016.

Nonemployee Share-Based Compensation

Share-based compensation expense for awards granted to nonemployees is determined using the fair value of the
consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. The fair value of
options and restricted stock awards granted to nonemployees is periodically remeasured as the underlying options or awards
vest. The value of the instrument is amortized to expense over the vesting period with final valuation measured on the vesting
date. As of December 31, 2017 and 2016, unvested options to acquire approximately 4,400 shares and 11,000 shares of
common stock were outstanding, respectively. We reversed compensation expense of $8,000 during the year ended
December 31, 2017 and recorded $16,000 during the year ended December 31, 2016. As of December 31, 2015, there were no
unvested options or restricted stock outstanding, and no compensation expense was recorded for the year-ended December 31,
2015.

Employee Stock Purchase Plan

Under the Purchase Plan, eligible employees may purchase a limited number of shares of our common stock at 85% of
the lower of the subscription date fair market value and the purchase date fair market value. There are two six-month offerings
per year. Under the Purchase Plan, we issued approximately 4,000, 10,000 and 700 shares of our common stock to employees
in the years ended December 31, 2017, 2016 and 2015, respectively. There are 0.2 million shares of common stock authorized
under the Purchase Plan and approximately 0.2 million shares are reserved for future purchases as of December 31, 2017.

13. Employee Benefit Plans

Our U.S. employees participate in the CTI BioPharma Corp. 401(k) Plan whereby eligible employees may defer up to
80% of their compensation, up to the annual maximum allowed by the Internal Revenue Service. We may make discretionary
matching contributions based on certain plan provisions. We recorded $0.3 million related to discretionary matching
contributions during the year ended December 31, 2017, and $0.2 million during each of the years ended December 31, 2016
and 2015.

14. Shareholder Rights Plan

In December 2009, our Board approved and adopted a shareholder rights plan, or Rights Plan, in which one preferred
stock purchase right was distributed for each common share held as of the close of business on January 7, 2010. Initially, the
rights are not exercisable, and are attached to and trade with, all of the shares of CTI’s common stock outstanding as of, and
issued subsequent to January 7, 2010. In 2012, 2015 and 2017, our Board approved certain amendments to the Rights Plan. The
Rights Plan expires on December 2, 2018.

Each right, if and when it becomes exercisable, will entitle the holder to purchase a unit consisting of two ten-
thousandth of a share of Series ZZ Junior Participating Cumulative Preferred Stock, no par value per share, at a cash exercise
price of $16.00 per unit, subject to standard adjustment in the Rights Plan. The rights will separate from the common stock and
become exercisable if a person or group acquires 20% or more of our common stock. Upon acquisition of 20% or more of our

common stock, our Board could decide that each right (except those held by a 20% shareholder, which become null and void)
would become exercisable entitling the holder to receive upon exercise, in lieu of a number of units of preferred stock, that
number of shares of our common stock having a market value of two times the exercise price of the right. In certain
circumstances, including if there are insufficient shares of our common stock to permit the exercise in full of the rights, the
holder may receive units of preferred stock, other securities, cash or property, or any combination of the foregoing.

In addition, if we are acquired in a merger or other business combination transaction, each holder of a right (except those

held by a 20% shareholder which become null and void) would have the right to receive, upon exercise, common stock of the
acquiring company having a market value equal to two times the exercise price of the right. Our Board may redeem the rights
for $0.0002 per right or terminate the Rights Plan at any time prior to an acquisition by a person or group holding 20% or more
of our common stock.

15. Customer and Geographic Concentrations

We consider our operations to be a single operating segment focused on the development, acquisition and

commercialization of novel treatments for cancer. Financial results of this reportable segment are presented in the
accompanying consolidated financial statements.

All sales of PIXUVRI during the years presented were in Europe. Product sales from PIXUVRI’s major customers as a

percentage of total product sales were as follows:

Customer A
Customer B
Customer C

Year Ended December 31,

2017

2016

2015

61%
24%
13%

60%
27%
—

41%
42%
—

As of April 2017, Servier has the exclusive and sublicensable (subject to certain conditions) royalty-bearing license with
respect to the development and commercialization of PIXUVRI for use in pharmaceutical products outside of the U.S. (and its
territories and possessions). As a result, we no longer have product sales. See Note 11. Collaboration, Licensing and Milestone
Agreements for further details.

The following table depicts long-lived assets based on the following geographic locations (in thousands):

United States
Europe
Total long-lived assets

Year Ended December 31,

2017

2016

2,365
—
2,365

2,990
33
3,023

16. Net Loss Per Share

Basic net loss per share is calculated based on the net loss attributable to common shareholders divided by the weighted

average number of shares outstanding for the period. The calculation of diluted net loss per share excludes the potential
conversion of all dilutive convertible securities, such as convertible debt and convertible preferred stock, and the potential
exercise or vesting of other dilutive securities, such as options, warrants and restricted stock, as their inclusion would have an
anti-dilutive effect. Accordingly, diluted net loss per share is the same as basic net loss per share.

The computation of net loss per share is as follows (in thousands, except per share amounts):

Net loss attributable to common shareholders
Basic and diluted:

Weighted average shares outstanding
Less weighted average restricted shares outstanding

Shares used in calculation of basic and diluted net loss per common share
Net loss per common share: Basic and diluted

Year Ended December 31,

2017
(45,020) $

2016
(52,009) $

2015
(122,622)

36,569
(124)
36,445

28,198
(250)
27,948

(1.24) $

(1.86) $

19,324
(487)
18,837
(6.51)

Equity awards, warrants, unvested share rights and other convertible securities aggregating 5.2 million shares, 2.7

million shares and 1.5 million shares for the years ended December 31, 2017, 2016 and 2015, respectively, prior to the
application of the treasury stock method, have been excluded from the calculation of diluted net loss per share because they
were anti-dilutive.

17. Related Party Transactions

Aequus

We have a majority ownership interest in Aequus. In May 2007, we entered into a license agreement with Aequus

whereby Aequus gained rights to our Genetic Polymer™ technology. We also entered into an agreement to fund Aequus in
exchange for a convertible promissory note.

In March 2017, we and Aequus entered into a License and Promissory Note Termination Agreement and a Note

Cancellation Agreement, pursuant to which (1) all of the then-outstanding principal, plus all accrued and unpaid interest,
approximately $13.7 million in total, was cancelled and terminated, (2) our license agreement with Aequus was terminated, (3)
all obligations to Aequus were terminated with the exception of providing additional funding of up to $347,500 to Aequus, and
(4) Aequus agreed to pay us a) 20% of milestone and similar payments, up to a maximum amount of $20.0 million, and b)
royalties, on a product-by-product and county-by country basis, of 5% of net sales of certain ACTH Products being developed
by Aequus. The additional funding of $347,500 had been provided in full as of September 30, 2017. Payments from Aequus are
due the later of (1) expiration of the last to expire valid patent claim that claims the ACTH Product, or (2) ten years from the
first commercial sale of the applicable ACTH Product. We have the right to terminate the License and Promissory Note
Termination Agreement and require Aequus to assign all ACTH Product related assets to us if Aequus does not file an
Investigational New Drug Application for an ACTH Product with the FDA by September 6, 2019.

Jack W. Singer, M.D., our Executive Vice President, Chief Scientific Officer, Interim Chief Medical Officer, and Global
Head of Translational Medicine, and Frederick W. Telling, Ph.D., a member of our Board, are minority shareholders of Aequus,
owning approximately 4.3% and 3.8% of the equity in Aequus as of December 31, 2017, respectively. Dr. Telling is the
Chairman of Aequus' Board of Directors. Dr. Singer and Richard Love, a member of our Board, are also members of Aequus’
Board of Directors.

BVF Partners L.P.

In September 2015, as discussed in Note 9. Common Stock, we entered into a subscription agreement with BVF pursuant
to which we issued 1.0 million shares of our common stock. Further, as discussed in Note 8. Preferred Stock, we completed
underwritten public offerings of 55,000 shares of our Series N-2 Preferred Stock, no par value per share in December 2015 and
22,500 shares of our Series N-3 Preferred Stock, no par value per share in June 2017. BVF purchased 30,000 shares of our Series
N-2 Preferred Stock and 6,750 shares of our Series N-3 Preferred Stock in such offerings. BVF converted 30,000 shares of our
Series N-2 Preferred Stock and 6,175 shares of our Series N-3 Preferred Stock into approximately 2.7 million shares and 4.1
94

million shares of our common stock, respectively. Primarily as a result of these transactions, BVF beneficially owned approximately
20.0% and 15.9% of our outstanding common stock as of December 31, 2017 and 2016, respectively. Matthew D. Perry, a member
of our Board, is the President of BVF and portfolio manager for the underlying funds managed by the firm.

In connection with the Series N-2 Preferred Stock offering, we entered into a letter agreement with BVF, or the First Letter
Agreement, pursuant to which we granted BVF a one-time right, subject to certain conditions, to nominate not more than two
individuals to serve as members of our Board, subject to the Board’s consent, which is not to be unreasonably withheld and which
consent shall be deemed automatically given with respect to two individuals specified in such Letter Agreement. One of such
nominees (the “Independent Nominee”) must (1) qualify as an “independent” director as defined under the applicable rules and
regulations of the SEC and the NASDAQ, and (2) must not be considered an “affiliate” of BVF as such term is defined by Rule
12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have agreed, for the period hereinafter
described and subject to a limited exception, to include the nominated directors in the slate of nominees for election to the Board
at each annual or special meeting at which directors are to be elected, recommend that shareholders vote in favor of the election
of such nominees and support such nominees for election in a manner no less favorable than how we support our own nominees.
This obligation will terminate with respect to: (1) the Independent Nominee, and such Independent Nominee must tender his or
her resignation to the Board, if requested, promptly upon BVF ceasing to beneficially own at least 11% of the issued and outstanding
common stock or voting power of the Company (determined on an as-converted basis that gives effect to the conversion of all
outstanding preferred stock), and (2) each of the Independent Nominee and the other individual nominated by BVF, and each such
nominee shall tender his or her resignation to the Board promptly upon the earlier to occur of (a) BVF and its affiliates ceasing to
beneficially own at least 5% of the issued and outstanding common stock or voting power of the Company (determined on an as-
converted basis that gives effect to the conversion of all outstanding preferred stock), (b) BVF ceasing to beneficially own at least
50% of the shares of the common stock beneficially owned by BVF immediately after consummation of the Series N-2 Preferred
Stock offering (on an as-converted basis), (c) the continuation of such nomination right would cause any violation of the applicable
listing rules of NASDAQ, (d) such time as BVF informs us in writing that it wishes to terminate the foregoing nomination right,
or (e) any breach of the Letter Agreement by BVF.

In connection with the offering of Series N-3 Preferred Stock, we entered into a letter agreement with BVF, or the

Second Letter Agreement, and pursuant to the First Letter Agreement and the Second Letter Agreement, we agreed to, upon
BVF’s election and subject to any board and committee approvals, exchange shares of common stock purchased by BVF
directly from us or underlying convertible preferred stock purchased by BVF directly from us, including the shares of common
stock underlying the Series N-3 Preferred Stock, into shares of a convertible non-voting preferred stock with substantially
similar terms as the Series N-3 Preferred Stock, including a conversion “blocker” initially set at 9.99% of our common stock.
Such right would terminate if at any time BVF’s beneficial ownership of our common stock falls below 5%.

In February 2018, in connection with the public offering of common stock as discussed in Note 21. Subsequent Events,

BVF purchased 6.3 million shares of our common stock. In addition, BVF exchanged 8.0 million shares of our common stock
owned by BVF and 575 shares of our Series N Preferred Stock owned by BVF for 12,575 shares of our Series O Preferred
Stock, pursuant to the letter agreements discussed above as well as an additional exchange agreement executed in February
2018. As a result of these transactions, BVF beneficially owned approximately 12.0% of our common stock as of February 28,
2018.

18. Legal Proceedings

Italian VAT Assessments

In April 2009, December 2009 and June 2010, the Italian Tax Authority, or the ITA, issued notices of assessment to CTI
(Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003, 2005, 2006 and 2007, or, collectively, the
VAT Assessments. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-
Italian clients for services performed by CTI (Europe). We believe that the services invoiced were non-VAT taxable consultancy
services and that the VAT returns are correct as originally filed. We are defending ourselves against the assessments both on
procedural grounds and on the merits of the case although we can make no assurances regarding the ultimate outcome of these
cases. Following is a summary of the status of the legal proceedings surrounding each respective VAT year return at issue:

2003. In June 2013, the Regional Tax Court issued decision no. 119/50/13 in regards to the 2003 VAT assessment, which

accepted the appeal of the ITA and reversed the previous decision of the Provincial Tax Court. In January 2014, we appealed
such decision to the Italian Supreme Court both on procedural grounds and on the merits of the case. In March 2014, we paid a
deposit in respect of the 2013 VAT matter of €0.4 million (or $0.6 million upon conversion from euros as of the date of
payment), following the ITA's request for such payment.

2005. In January 2018, the Italian Supreme Court issued decision No. 02250/2018 which (i) rejected the appeal of the

ITA, (ii) confirmed the decision of the Regional Tax Court which ruled fully in our favor, and (iii) due to the novelty of the
arguments at stake, compensated the legal expenses incurred by the parties. ITA may not use any ordinary means of appeal
against the Supreme Court decision.

2006 and 2007. The ITA has appealed to the Italian Supreme Court the decisions of the respective appellate court which

were favorable to CTI with respect to the consolidated 2006 and 2007 VAT cases (joined by the judge).

No hearing has been fixed yet for the 2003 and consolidated 2006/2007 VAT cases.

If the final decision of the Italian Supreme Court is unfavorable to us, or if, in the interim, the ITA were to make a

demand for payment and we were to be unsuccessful in suspending collection efforts, we may be requested to pay the ITA an
amount up to €3.9 million , or approximately $4.7 million converted using the currency exchange rate as of December 31, 2017,
plus collection fees, notification expenses and additional interest for the period lapsed between the dates in which the
assessments were issued and the date of effective payment. In January 2013, our then remaining deposit for the VAT
Assessments was refunded to us.

Lopez & Gilbert v. Nudelman,et al

In July 2014, Joseph Lopez and Gilbert Soper, shareholders of the Company, filed a derivative lawsuit purportedly on

behalf of the Company, which is named a nominal defendant, against all current and one past member of our Board of Directors
in King County Superior Court in the State of Washington, docketed as Lopez & Gilbert v. Nudelman, et al., Case No.
14-2-18941-9 SEA. The lawsuit alleges that the directors exceeded their authority under the Company's 2007 Equity Incentive
Plan, or the Plan, by improperly transferring 4,756,137 shares (or 475,613 shares adjusted for the 1-for-10 reverse stock split
effective January 1, 2017) of the Company’s common stock from the Company to themselves. It alleges that the directors
breached their fiduciary duties by granting themselves fully vested shares of Company common stock, which the plaintiffs
allege were not among the six types of grants authorized by the Plan, and that the non-employee directors were unjustly
enriched by these grants. The lawsuit also alleges that from 2011 through 2014, the non-employee members of our Board of
Directors granted themselves grossly excessive compensation, and in doing so breached their fiduciary duties and were unjustly
enriched. Among other remedies, the lawsuit seeks a declaration that the specified grants of common stock violated the Plan,
rescission of the granted shares, disgorgement of the compensation awards to the non-employee directors from 2011 through
2014, disgorgement of all compensation and other benefits received by the defendant directors in the course of their breaches of
fiduciary duties, damages, an order for certain corporate reforms and plaintiffs’ costs and attorneys’ fees. Because the complaint
is derivative in nature, it does not seek monetary damages from the Company. In September 2014, the director defendants
moved to dismiss the complaint. The motion to dismiss was heard on November 21, 2014, and the Court entered an order
denying the motion to dismiss on December 5, 2014. Defendants' answer to the complaint was filed on January 13, 2015. On
May 13, 2015, the Company (as nominal defendant) and our directors (as individual defendants) entered into a memorandum of
understanding to settle the pending lawsuit in King County Superior Court in the State of Washington docketed as Lopez &
Gilbert v. Nudelman, et al ., Case No. 14-2-18941-9 SEA, or the Settlement. On December 10, 2015, the court issued an order
granting final approval to the Settlement.

The provisions of the Settlement include the following terms:

•

We will cancel, and the non-employee directors will agree to, the rescission of all currently outstanding equity
awards that we previously granted to non-employee directors that included performance-based vesting metrics and
as to which the performance goals remained unsatisfied as of May 13, 2015;

Our current non-employee directors will agree to hold (not transfer or sell or encumber in any way) until
September 14, 2015 shares of our stock that they currently own and that we awarded to them during 2011, or at any
time after 2011 to the present, and that, at the time of the award by us, was fully-vested and unrestricted;

We will cap the total annual compensation provided by us to our non-employee directors for each of 2015 and
2016. Such annual compensation cap for each non-employee director for each of 2015 and 2016 will be at the
greater of (i) $375,000 plus, as to our Board Chairman, an additional $100,000, or (ii) the 75th percentile of
compensation paid by a group of peer companies to their non-employee directors (and, in the case of our
Chairman, the 75th percentile of compensation paid by such peers who have a non-employee director chair of their
respective board of directors to such non-employee director chairs). The peer group for these purposes will be
selected based on advice from an outside compensation consultant. For purposes of the compensation cap and the
peer group comparison, compensation will be determined and measured consistent with the rules under Item 402 of

Regulation S-K under the Securities Exchange Act of 1934, as amended, and based on publicly-available
information at the applicable time; and

•

We will implement, if not already implemented, within 90 days following final approval of the Settlement by the
court, and maintain until at least the end of calendar year 2017 the following: an annual board discussion of non-
employee director compensation philosophy; the use of a compensation consultant to advise the Compensation
Committee on material decisions concerning non-employee director compensation issues and compare our non-
employee director compensation program to a group of our peers; the use of plain language in our compensation-
related public filings; and obtain confirmation from our legal department and outside legal counsel advising on
executive compensation matters that any contemplated non-employee director awards do not materially violate the
applicable plan or materially fail to comply with applicable law.

In connection with the Settlement, we recorded $0.3 million in attorneys’ fees awarded to plaintiffs (net of existing

insurance coverage) in our financial statements for the year-ended December 31, 2015.

Securities and Exchange Commission Subpoena

In re CTI BioPharma Corp. Securities Litigation

On February 10, 2016 and February 12, 2016, class action lawsuits entitled Ahrens v. CTI BioPharma Corp. et al., Case
No. 1:16-cv-01044 and McGlothlin v. CTI BioPharma Corp. et al., Case No. C16-216, respectively, were filed in the United States
District Court for the Southern District of New York and the United States District Court for the Western District of Washington,
respectively, on behalf of shareholders that purchased or acquired the Company’s securities pursuant to our September 24, 2015
public offering and/or shareholders who otherwise acquired our stock between March 4, 2014 and February 9, 2016, inclusive.
The complaints assert claims against the Company and certain of our current and former directors and officers for violations of
the federal securities laws under Sections 11 and 15 of the Securities Act of 1933, as amended, or the Securities Act, and Sections
10 and 20 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, Plaintiffs’ Securities Act claims allege that
the Company’s Registration Statement and Prospectus for the September 24, 2015 public offering contained materially false and
misleading statements and failed to disclose certain material adverse facts about the Company’s business, operations and prospects,
including with respect to the clinical trials and prospects for pacritinib. Plaintiffs’ Exchange Act claims allege that the Company’s
public disclosures were knowingly or recklessly false and misleading or omitted material adverse facts, again with a primary focus
on the clinical trials and prospects for pacritinib. On May 2, 2016, the Company filed a motion to transfer the Ahrens case to the
United States District Court for the Western District of Washington. The motion was unopposed and granted by the court on May
19, 2016. On June 3, 2016, the parties filed a joint motion to consolidate the McGlothlin case with the Ahrens case in order to
proceed as a single consolidated proceeding. On June 13, 2016, the court granted the motion to consolidate with the action being
captioned In re CTI BioPharma Corp. Securities Litigation, Master File No. 2:16-cv-00216-RSL. On September 2, 2016, the court
appointed Lead Plaintiffs and Lead Counsel. On September 28, 2016, the court entered a scheduling order, as revised by order
entered December 8, 2016, setting November 8, 2016 as the deadline to file a consolidated class action complaint and deadlines
for briefing defendants’ motion to dismiss. Briefing concluded on February 22, 2017. The consolidated class action complaint
asserts claims similar to those asserted in the initial complaints, although it no longer asserts claims relating to the September 24,
2015 public offering, but adds claims relating to the Company’s October 27, 2015 and December 4, 2015 public offerings. On
July 26, 2017, we received a written offer for the global resolution and settlement of the consolidated action in exchange for cash
payment of $20.0 million. The Company had insurance coverage related to this matter that covered $18.0 million of the claim. In
August 2017, we agreed in principle to the terms of the settlement and submitted the terms and proposed class notice to the court
for its preliminary approval. On October 24, 2017, the court granted preliminary approval, and on February 1, 2018, the court
fully and finally approved the settlement and dismissed all claims against the Company with prejudice.

Wei v. James A. Bianco, et al.; England v. James A Bianco, et al; Nahar v. James A. Bianco, et al.; Hill v. James A. Bianco, et

al.

In connection with the securities litigation and four derivative lawsuits described above, after taking into account our existing
insurance coverage, we recorded $2.2 million of settlement expense in Selling, general and administrative expenses in our
consolidated statement of operations for the year ended ended December 31, 2017.

In addition to the items discussed above, we are from time to time subject to legal proceedings and claims arising in the

ordinary course of business.

19. Income Taxes

We file income tax returns in the U.S., Italy and the U.K. A substantial part of our operations takes place in the State of
Washington, which does not impose an income tax as that term is defined in ASC 740, Accounting for Income Taxes. As such,
our state income tax expense or benefit, if recognized, would be immaterial to our operations. We are not currently under
examination by an income tax authority, nor have we been notified that an examination is contemplated.

The U.S. signed into law, on December 22, 2017, tax reform legislation commonly referred to as the U.S. Tax Cuts and
Jobs Act of 2017, or the 2017 Tax Act. The 2017 Tax Act significantly revises the U.S. corporate income tax by, among other
things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions, imposing a mandatory one-
time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are
subject to U.S. tax. The 2017 Tax Act also enhances and extends through 2026 the option to claim accelerated depreciation
deductions on qualified property. We have completed our determination of the accounting implications of the 2017 Tax Act,
the impact of which is a $41.3 million reduction in net deferred tax assets to reflect the new statutory rate. The rate adjustment
to deferred tax assets, a discrete item for the quarter, is fully offset by a decrease in the valuation allowance: there is therefore
98

no rate impact to us. In addition, there is no impact to current or deferred taxes related to the one-time deemed repatriation, as
our foreign subsidiaries do not have cumulative positive earnings and profits.

Loss before income taxes is attributable to the following tax jurisdictions (in thousands):

United States

Foreign

Net loss before income taxes

2017

2016

2015

(40,180) $
(651)
(40,831) $

(51,856) $
(1,097)
(52,953) $

(110,831)
(9,932)
(120,763)

The reconciliation between our effective tax rate and the income tax rate as of December 31 is as follows:

Federal income tax rate
Research and development tax credits
Non-deductible executive compensation
Valuation allowance
Foreign tax rate differential
Impact of tax reform
Expired tax attribute carryforwards
Other
Net effective tax rate

2017

2016

2015

34%
3
—
304
—
(101)
(240)
—
—%

34%
1
—
(33)
—
—
—
(2)
—%

34%
3
(1)
(32)
(3)
—
—
(1)
—%

The principal components of our deferred tax assets and liabilities were as follows (in thousands):

Deferred tax assets:

Net operating loss carryforwards
Capitalized research and development
Research and development tax credit carryforwards
Stock-based compensation
Intangible assets
Depreciation and amortization
Other deferred tax assets

Total deferred tax assets
Less: valuation allowance

Deferred tax liabilities:

Deductions for tax in excess of financial statements

Total deferred tax liabilities
Net deferred tax assets

December 31,

2017

2016

21,005
27,540
1,347
12,842
8,117
472
2,279
73,602
(73,310)
292

(292)
(292)

— $

108,372
43,768
7,253
19,288
14,525
626
3,721
197,553
(197,131)
422

(422)
(422)
—

As of December 31, 2017 and 2016, we had U.S. federal net operating loss carryforwards, or the NOL, of approximately

$74.8 million and $305.4 million respectively, which are available to reduce future taxable income. We also had U.S. federal
tax credits of $1.3 million and $7.3 million as of December 31, 2017 and 2016, respectively, which may be used to offset future
tax liabilities. The NOL and tax credit carryforwards will begin to expire in 2018 and may become subject to annual limitation
in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in
excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, or the IRC, of 1986, as amended. This
could limit the amount of tax attributes that can be utilized annually to offset future taxable income or future tax liabilities. We
have undertaken a formal IRC Section 382 study and the attributes disclosed in this footnote reflect the conclusion of that
study. However, subsequent ownership changes may further affect the limitation in future years.

At December 31, 2017, the NOL carryforwards in the U.K.,which have an indefinite carryforward period, were

approximately $31.2 million.

We maintain a full valuation allowance on our net deferred tax assets. The assessment regarding whether a valuation

allowance is required considers both positive and negative evidence when determining whether it is more likely than not that
deferred tax assets are recoverable. In making this assessment, significant weight is given to evidence that can be objectively
verified. In our valuation, we considered our cumulative loss in recent years and forecasted losses in the near term as
significant negative evidence. Based upon a review of the four sources of income identified within ASC 740, we determined
that the negative evidence outweighed the positive evidence and that a full valuation allowance on our net deferred tax assets
will be maintained. We will continue to assess the realizability of our deferred tax assets going forward and will adjust the
valuation allowance as needed. Our valuation allowance decreased by $123.8 million during the year ended December 31,
2017, and increased by $23.2 million and $38.7 million during the years ended December 31, 2016 and 2015, respectively. The
reduction in the valuation allowance for 2017 was attributable to the reduction in tax rate due to the 2017 Tax Act as well as the
reduction in net operating losses as a result of the 2017 Section 382 analysis.

We adopted ASU 2016-09, Stock Compensation: Improvements to Employee Share-Based Payment Accounting, in 2017.

Due to the fact that there was no excess tax benefit over book expense related to stock compensation, the adoption had no
impact to the deferred tax assets.

We follow the provisions ASC 740, Accounting for Income Taxes, and the guidance related to accounting for uncertainty
in income taxes. We determine our uncertain tax positions based on a determination of whether and how much of a tax benefit
taken by us in our tax filings or positions is more likely than not to be sustained upon examination by the relevant income tax
authorities. We are subject to U.S. federal and state, Italian and U.K. income taxes with varying statutes of limitations. Tax
years from 1998 forward remain open to examination due to the carryover of net operating losses or tax credits. Our policy is to
recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. As of
December 31, 2017, we had no unrecognized tax benefits and therefore no accrued interest or penalties related to unrecognized
tax benefits. We believe that our income tax filing positions reflected in the various tax returns are more-likely-than not to be
sustained on audit and thus there are no anticipated adjustments that would result in a material change to our consolidated
financial position, results of operations and cash flows. Therefore, no reserves for uncertain income tax positions have been
recorded.

20. Unaudited Quarterly Data

The following table presents summarized unaudited quarterly financial data (in thousands, except per share data):

2017
Total revenues (1)
Product sales, net
Gross profit (2)
Net income (loss) attributable to CTI
Net income (loss) attributable to CTI common shareholders
Net income (loss) per common share—basic
Net income (loss) per common share—diluted
2016
Total revenues (3)
Product sales, net
Gross profit (2)
Net income (loss) attributable to CTI
Net income (loss) attributable to CTI common shareholders
Net income (loss) per common share—basic
Net income (loss) per common share—diluted

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

754
626
493
(19,828)
(19,828)
(0.71)
(0.71)

36,475
1,223
1,033
3,312
3,312
0.12
0.12

22,225
227
149
5,398
1,048
0.03
0.03

7,361
975
815
(19,766)
(19,766)
(0.71)
(0.71)

1,705
—
(69)
(11,974)
(11,974)
(0.28)
(0.28)

4,433
914
751
(29,183)
(29,183)
(1.04)
(1.04)

462
—
(84)
(14,266)
(14,266)
(0.33)
(0.33)

9,136
1,015
151
(6,372)
(6,372)
(0.23)
(0.23)

(1) Total revenues for the second quarter of 2017 include $11.8 million of license and contract revenue recognized in April
2017 in connection with the Restated Agreement with Servier as well as a $10.0 million milestone payment received

100

from Teva upon the achievement of worldwide net sales milestones of TRISENOX. See Note 11. Collaboration,
Licensing and Milestone Agreements for additional information.

(2) Gross profit is computed by subtracting cost of product sold from net product sales.

(3) Total revenues for the first quarter of 2016 include $32.0 million in milestone revenue upon achievement of two

milestones during the quarter. The payments from Baxalta relating to these milestones were received in 2015. See
Note 7. Long-term Debt for additional information. The fourth quarter of 2016 includes $8.0 million in milestone
revenue from Servier relating to the attainment of a certain enrollment event in connection with our PIX306 study.

101

21. Subsequent Events

Reincorporation Merger

In January 2018, CTI BioPharma Corp., a Delaware corporation ("CTI DE" or, after giving effect to the Reincorporation

Merger (defined below), the “Company”), a wholly owned subsidiary of CTI BioPharma Corp., a Washington corporation
(“CTI WA”), entered into an Agreement and Plan of Merger, or the Merger Agreement, with CTI WA, pursuant to which CTI
WA would merge with and into CTI DE for the sole purpose of reincorporating CTI WA in the State of Delaware (the
“Reincorporation Merger”). The Reincorporation Merger and the Merger Agreement were approved by the Board of CTI WA
and by a majority of the votes actually cast by the shareholders entitled to vote at CTI WA’s Special Meeting of Shareholders
held on January 24, 2018, or the Effective Date. On the Effective Date, CTI DE and CTI WA effected the Reincorporation
Merger, thereby changing the state of incorporation of CTI BioPharma Corp. from the State of Washington to the State of
Delaware pursuant to the Merger Agreement. As a result of the Reincorporation Merger, CTI WA ceased to exist as a separate
entity.

CTI DE’s common stock, par value $0.001 per share, or the Common Stock, will continue to trade on the NASDAQ.
The Company’s trading symbol remains as “CTIC.” In accordance with Rule 12g-3 under the Exchange Act, the shares of
Common Stock of the Company were deemed to be registered under Section 12(b) of the Exchange Act as a successor to CTI
WA. The Delaware Charter authorizes the same number of shares of the Common Stock and each class of preferred stock of
CTI WA, except that all subseries of Series N Preferred Stock are eliminated and reclassified as Series N Preferred Stock and
the number of authorized Series N Preferred Stock is reduced to 575. In addition, each share of CTI DE common stock and
preferred stock has a par value of $0.001 per share.

The Reincorporation Merger changed the legal domicile of CTI WA, but did not result in any change in the principal

offices, business, management, capitalization, assets or liabilities of the Company. By operation of law, the Company
succeeded to all of the assets and assumed all of the liabilities of CTI WA. The officers and directors of CTI WA are the officers
and directors of the Company. As a result of the Reincorporation Merger, the Company has assumed all of the CTI WA
employee benefit plans and stock incentive plans in effect at the Effective Date, including CTI WA’s 2017 Equity Incentive
Plan, 2015 Equity Incentive Plan, 2007 Equity Incentive Plan and 2007 Employee Stock Purchase Plan, or the Stock Plans, and
any and all stock options, restricted stock and restricted stock unit awards, and other equity-based awards that are outstanding
under any of the Stock Plans or any individual award agreements outside of the Stock Plans. The Company has also assumed
CTI WA’s rights plan with Computershare Trust Company, N.A., as rights agent, dated as of December 28, 2009 and amended
on August 31, 2012, December 3, 2012, December 1, 2015 and September 22, 2017.

Public Offering of Common Stock

In February 2018, we entered into an underwriting agreement with Leerink Partners LLC acting as sole book-running

manager and as representative of the several underwriters named therein (collectively, the “Underwriters”), relating to the offer
and sale (the “Offering”) of 20.0 million shares of the Company’s common stock, par value $0.001 per share (the “Common
Stock”). The Offering closed on February 13, 2018. The price to the public in this Offering was $3.00 per share of Common
Stock. The Underwriters exercised in full their option to purchase an additional 3.0 million shares. The net proceeds from this
Offering, after deducting underwriting discounts, commissions and other estimated offering expenses, were approximately
$64.2 million.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in
reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SEC rules and forms, and that such information is accumulated and communicated to our management to allow timely
decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives.

102

Our management, under the supervision and with the participation of our President and Chief Executive Officer, or

CEO, and Chief Financial Officer, or CFO, has evaluated the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period
covered by this Annual Report on Form 10-K. Based upon that evaluation, our CEO and CFO have concluded that, as of the
end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective.

(b) Management’s Annual Report on Internal Controls

Management of the Company, including its consolidated subsidiaries, is responsible for establishing and maintaining

adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process
designed under the supervision of the Company’s principal executive and principal financial officers to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external
reporting purposes in accordance with U.S. generally accepted accounting principles.

As of the end of the Company’s 2017 fiscal year, management conducted an assessment of the effectiveness of the
Company’s internal control over financial reporting based on the framework established in “Internal Control—Integrated
Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2017
was effective.

The independent registered public accounting firm of Marcum LLP, as auditors of the Company’s consolidated financial

statements, has audited our internal controls over financial reporting as of December 31, 2017, as stated in their report, which
appears herein.

There have been no changes to our internal control over financial reporting that occurred during the fourth fiscal quarter

that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

103

Item 10. Directors, Executive Officers and Corporate Governance

PART III

We have adopted a code of ethics for our senior executive and financial officers (including our principal executive
officer and principal financial officer), as well as a code of business conduct and ethics applicable to all officers, directors and
employees, or collectively, the "Codes." The Codes are available on our website at http://www.ctibiopharma.com. Any
amendments to, or waivers from, the Codes for our executive officers and directors will be posted on our website at http://
www.ctibiopharma.com to the extent required by applicable SEC and NASDAQ rules.

The additional information required by this Item is incorporated herein by reference from the Company’s 2018 definitive

proxy statement or amendment to this annual report (which will be filed with the SEC within 120 days after December 31,
2017 in connection with the solicitation of proxies for the Company’s 2018 annual meeting of shareholders) (“2018 Proxy
Statement”) under the captions “Proposal 1 - Election of Directors,” “Other Information - Executive Officers,” and “Beneficial
Ownership Reporting Compliance under Section 16(a) of the Exchange Act.”

Item 11. Executive Compensation

The information required by this Item is incorporated herein by reference from the Company’s 2018 Proxy Statement

under the captions “Executive Compensation” and “Director Compensation.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information required by this Item is incorporated herein by reference from the Company’s 2018 Proxy Statement

under the captions “Other Information - Security Ownership of Certain Beneficial Owners and Management” and “Other
Information - Equity Compensation Plan Information.”

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated herein by reference from the Company’s 2018 Proxy Statement

under the captions “Other Information - Related Party Transactions Overview,” “Other Information - Certain Transactions with
Related Persons” and “Director Attributes and Independence.”

Item 14. Principal Accounting Fees and Services

The information required by this Item is incorporated herein by reference from the Company’s 2018 Proxy Statement

under the caption “Proposal 4 - Ratification of the Selection of Independent Auditors.”

104

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) Financial Statements and Financial Statement Schedules

(i) Financial Statements

Reports of Marcum LLP, Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(ii) Financial Statement Schedules

Schedule II. Valuation and Qualifying Accounts

Valuation and qualifying accounts include the following (in thousands):

Additions

(1)

(2)

Balance at

Charged to

beginning of

costs and

other

(3)

Description

period

expenses

accounts

Deductions

Balance at

end of

period

Reserve for excess, obsolete or unsalable
inventory:

Year ended December 31, 2017

Year ended December 31, 2016

Year ended December 31, 2015

Allowance for doubtful accounts:

Year ended December 31, 2016

1,510

1,265

— $

204

(347) $

1,367

692

(19) $

(428) $

1,510

(25) $

(36) $

1,265

— $

1,326

— $

1,735

— $

(1,735) $

—

(1) We review our inventories on a quarterly basis for impairment and reserves are established when necessary.

(2) We record inventory in euros and we record foreign currency translation gains and losses from recurring

measurement of our inventory in Accumulated other comprehensive loss in our consolidated balance sheets.

(3) The amount of reserve is adjusted for the items disposed of during the period.

Refer to the Part II "Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements,

Note 1. Description of Business and Summary of Significant Accounting Policies" for further details regarding our
accounting policy for inventory and foreign currency translation.

All other schedules have been omitted since they are either not required, are not applicable, or the required

information is shown in the financial statements or related notes.

(iii) Exhibits

105

Exhibit
Number

2.1

Exhibit Description

Location

Agreement and Plan of Merger, dated January 24, 2018, by and
between CTI BioPharma Corp., a Washington corporation, and CTI
BioPharma Corp., a Delaware corporation.

Incorporated by reference to Exhibit 2.1
to the Registrant’s Current Report on
Form 8-K, filed on January 24, 2018.

3.1

Certificate of Incorporation of CTI BioPharma Corp., a Delaware
corporation, dated January 24, 2018.

3.2

Bylaws of CTI BioPharma Corp., a Delaware corporation.

Shareholder Rights Agreement, dated December 28, 2009, between
the Registrant and Computershare Trust Company, N.A.

Incorporated by reference to Exhibit 3.1
to the Registrant’s Current Report on
Form 8-K, filed on January 24, 2018.

Incorporated by reference to Exhibit 3.2
to the Registrant’s Current Report on
Form 8-K, filed on January 24, 2018.

Incorporated by reference to Exhibit 4.1
to the Registrant’s Registration
Statement on Form 8-A, filed on
December 28, 2009.

First Amendment to Shareholder Rights Agreement, dated as of
August 31, 2012, between the Registrant and Computershare Trust
Company, N.A., as Rights Agent.

Incorporated by reference to Exhibit 4.1
to the Registrant’s Current Report on
Form 8-K, filed on September 4, 2012.

Second Amendment to Shareholder Rights Agreement, dated as of
December 6, 2012, between the Registrant and Computershare Trust
Company, N.A., as Rights Agent.

Incorporated by reference to Exhibit 4.1
to the Registrant’s Current Report on
Form 8-K, filed on December 7, 2012.

Third Amendment to Shareholder Rights Agreement, dated as of
December 1, 2015, between the Registrant and Computershare Trust
Company, N.A., as Rights Agent.

Incorporated by reference to Exhibit 4.1
to the Registrant’s Current Report on
Form 8-K, filed on December 1, 2015.

Fourth Amendment to Shareholder Rights Agreement, dated as of
September 22, 2017, between the Registrant and Computershare Trust
Company, N.A., as Rights Agent.

Incorporated by reference to Exhibit 4.1
to the Registrant’s Current Report on
Form 8-K, filed on September 26, 2017.

4.6

Specimen Common Stock Certificate.

4.7

Form of Common Stock Purchase Warrant, dated December 13, 2011.

Warrant Agreement, dated June 9, 2015, by and between Registrant
and Hercules Technology Growth Capital, Inc.

Incorporated by reference to Exhibit 4.1
to the Registrant’s Current Report on
Form 8-K, filed on February 12, 2018.

Incorporated by reference to Exhibit 4.2
to the Registrant’s Registration
Statement on Form S-3 (File No.
333-200452), filed on December 14,
2011.

Incorporated by reference to Exhibit 4.1
to the Registrant’s Current Report on
Form 8-K, filed on June 10, 2015.

4.1

4.2

4.3

4.4

4.5

4.8

4.9

Warrant to Purchase Stock, dated November 28, 2017, by and between
CTI BioPharma Corp. and Silicon Valley Bank.

Incorporated by reference to Exhibit 4.1
to the Registrant’s Current Report on
Form 8-K, filed on November 28, 2017.

106

Exhibit
Number
4.10

Exhibit Description
Warrant to Purchase Stock, dated November 28, 2017, by and between
CTI BioPharma Corp. and Life Science Loans II, LLC.

Location
Incorporated by reference to Exhibit 4.2
to the Registrant’s Current Report on
Form 8-K, filed on November 28, 2017.

10.1

Office Lease, dated as of January 27, 2012, by and between the
Registrant and Selig Holdings Company LLC.

10.2†

Sublease agreement between CTI BioPharma Corp. and Cascadian
Therapeutics, Inc.

10.3*

Employment Agreement, dated February 24, 2017, by and between
the Registrant and Adam Craig.

10.4

Separation and Release Agreement, dated March 13, 2017, by and
between the Registrant and Louis A. Bianco.

10.5*

Offer Letter, by and between the Registrant and Bruce J. Seeley, dated
as of July 2, 2015.

10.6*

10.7*

10.8*

Compensation Agreement, dated October 20, 2016, by and between
the Company and Richard L. Love.

Stock Option Agreement, dated October 20, 2016, by and between the
Company and Richard L. Love.

Employment Agreement, dated February 24, 2017, by and between
the Company and Adam Craig.

10.9*

Form of Severance Agreement for the Registrant’s Executive Officers
other than James A. Bianco (as in effect as of January 6, 2015).

10.10*

Severance Agreement, dated as of July 27, 2015, between the
Registrant and Bruce J. Seeley

10.11*

Offer Letter, by and between the Registrant and David Kirske, dated
August 1, 2017.

Incorporated by reference to Exhibit
10.4 to the Registrant’s Annual Report
on Form 10-K, filed on March 8, 2012.

Incorporated by reference to Exhibit 4.2
to the Registrant’s Current Report on
Form 8-K, filed on December 5, 2017.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on February 27,
2017.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on March 13, 2017.

Incorporated by reference to Exhibit
10.3 to the Registrant’s Quarterly
Report on Form 10-Q, filed on August
6, 2015.

Incorporated by reference to Exhibit
10.3 to the Registrant’s Current Report
on Form 8-K, filed on October 24, 2016

Incorporated by reference to Exhibit
10.4 to the Registrant’s Current Report
on Form 8-K, filed on October 24, 2016

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on February 27,
2017

Incorporated by reference to Exhibit
10.6 to the Registrant’s Annual Report
on Form 10-K, filed on March 12, 2015.

Incorporated by reference to Exhibit
10.11 to the Registrant’s Annual Report
on Form 10-K, filed on February 17,
2016.

Incorporated by reference to Exhibit
10.11 to the Registrant’s Annual Report
on Form 10-Q, filed on August 4, 2017.

107

Exhibit
Number
10.12*

Exhibit Description
Separation and Release Agreement, by and between the Registrant and
Matthew Plunkett, dated August 22, 2017.

Location

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on August 22, 2017

10.13*

Severance Agreement, by and between the Registrant and David
Kirske, dated September 25, 2017.

10.14*

Director Compensation Policy.

10.15*

Form of Indemnity Agreement for the Registrant’s Executive Officers
and Directors.

10.16*

2007 Employee Stock Purchase Plan, as amended and restated.

10.17*

CTI BioPharma Corp. 2015 Equity Incentive Plan, as amended.

10.18*

Global Form of 2015 Equity Incentive Plan Restricted Stock Unit
Award Agreement.

10.19*

Global Form of 2015 Equity Incentive Plan Stock Option Agreement.

10.20*

Global Form of 2015 Equity Incentive Plan Stock Bonus Award
Agreement.

10.21*

2007 Equity Incentive Plan, as amended and restated.

10.22*

Form of 2007 Equity Incentive Plan Restricted Stock Award
Agreement.

10.23*

Global Form of 2007 Equity Incentive Plan Restricted Stock Unit
Award Agreement.

108

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on September 26,
2017

Incorporated by reference to Exhibit
10.1 to the Registrant’s Quarterly
Report on Form 10-Q, filed on May 3,
2017.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on January 24, 2018.

Incorporated by reference to Appendix
B to the Registrant’s Definitive Proxy
Statement on Schedule 14A filed on
July 29, 2015.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on April 29, 2016.

Incorporated by reference to Exhibit
10.3 to the Registrant’s Quarterly
Report on Form 10-Q, filed on
November 5, 2015.

Incorporated by reference to Exhibit
10.4 to the Registrant’s Quarterly
Report on Form 10-Q, filed on
November 5, 2015.

Incorporated by reference to Exhibit
10.5 to the Registrant’s Quarterly
Report on Form 10-Q, filed on
November 5, 2015.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Quarterly
Report on Form 10-Q, filed on October
31, 2014.

Incorporated by reference to Exhibit
10.14 to the Registrant’s Annual Report
on Form 10-K, filed on March 12, 2015.

Incorporated by reference to Exhibit
10.15 to the Registrant’s Annual Report
on Form 10-K, filed on March 12, 2015.

Exhibit
Number
10.24*

10.25*

10.26*

10.27*

10.28*

Exhibit Description
Global Form of 2007 Equity Incentive Plan Stock Option Agreement.

Form of 2007 Equity Incentive Plan Restricted Stock Award
Agreement for the Registrant’s directors (relating to applicable awards
granted prior to December 17, 2014).

Form of 2007 Equity Incentive Plan Restricted Stock Award
Agreement (relating to applicable awards granted prior to December
17, 2014).

Form of 2007 Equity Incentive Plan Restricted Stock Award
Agreement for employees (relating to applicable awards granted prior
to December 17, 2014).

Form of 2007 Equity Incentive Plan Stock Option Agreement for the
Registrant’s directors and officers (relating to applicable awards
granted prior to December 17, 2014).

10.29*

Form of Stock Award Agreement for grants of fully vested shares
under the Registrant’s 2007 Equity Incentive Plan, as amended.

10.30*

Form of Equity/Long-Term Incentive Award Agreement for James A.
Bianco, Louis A. Bianco and Jack W. Singer.

10.31*

Form of Equity/Long-Term Incentive Award Agreement for
Matthew J. Plunkett.

10.32*

Amendment to Form of Equity/Long-Term Incentive Award
Agreement, dated as of March 21, 2013, for James A. Bianco, Louis
A. Bianco, Jack W. Singer and the Registrant’s directors.

10.33*

Amendment to Form of Equity/Long-Term Incentive Award
Agreement, dated as of January 30, 2014.

10.34*

Form of Equity/Long-Term Incentive Award Agreement for Bruce J.
Seeley.

10.35*

Form of Amendment to Form of Equity/Long-Term Incentive Award
Agreement, dated as of December 23, 2015, for James A. Bianco,
Louis A. Bianco and Jack W. Singer.

Location

Incorporated by reference to Exhibit
10.16 to the Registrant’s Annual Report
on Form 10-K, filed on March 12, 2015.

Incorporated by reference to Exhibit
10.7 to the Registrant’s Quarterly
Report on Form 10-Q, filed on April 26,
2011.

Incorporated by reference to Exhibit
10.3 to the Registrant’s Quarterly
Report on Form 10-Q, filed on October
30, 2013.

Incorporated by reference to Exhibit
10.6 to the Registrant’s Quarterly
Report on Form 10-Q, filed on April 26,
2011.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Quarterly
Report on Form 10-Q, filed on October
30, 2013.

Incorporated by reference to Exhibit
10.2 to the Registrant’s Quarterly
Report on Form 10-Q, filed on October
30, 2013.

Incorporated by reference to Exhibit
10.3 to the Registrant’s Quarterly
Report on Form 10-Q, filed on April 20,
2012.

Incorporated by reference to Exhibit
10.6 to the Registrant’s Quarterly
Report on Form 10-Q, filed on May 2,
2013.

Incorporated by reference to Exhibit
10.5 to the Registrant’s Quarterly
Report on Form 10-Q, filed on May 2,
2013.

Incorporated by reference to Exhibit
10.26 to the Registrant’s Annual Report
on Form 10-K, filed on March 4, 2014.

Incorporated by reference to Exhibit
10.35 to the Registrant’s Annual Report
on Form 10-K, filed on February 17,
2016.

Incorporated by reference to Exhibit
10.36 to the Registrant’s Annual Report
on Form 10-K, filed on February 17,
2016.

109

Exhibit
Number
10.36*

Exhibit Description
Form of Amendment to Form of Equity/Long-Term Incentive Award
Agreement, dated as of December 23, 2015, for Matthew J. Plunkett
and Bruce J. Seeley.

10.37

2017 Equity Incentive Plan of the Registrant.

10.38

Acquisition Agreement by and among the Registrant, Cell
Technologies, Inc. and Cephalon, Inc., dated June 10, 2005.

10.39†

Termination Agreement, effective January 3, 2014, by and among
Novartis International Pharmaceutical Ltd. and the Registrant.

10.40†

Asset Purchase Agreement, dated April 18, 2012, between S*BIO Pte
Ltd. and the Registrant.

Location

Incorporated by reference to Exhibit
10.37 to the Registrant’s Annual Report
on Form 10-K, filed on February 17,
2016.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Annual Report
on Form 8-K, filed on May 16, 2017.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on June 14, 2005.

Incorporated by reference to Exhibit
10.2 to the Registrant’s Quarterly
Report on Form 10-Q, filed on April 29,
2014.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on April 24, 2012.

10.41†

10.42†

10.43†

Amended and Restated Exclusive License and Collaboration
Agreement by and between the Registrant, CTI Life Sciences Limited,
Laboratoires Servier and Institut de Recherches Internationales
Servier dated as of April 21, 2017.

Incorporated by reference to Exhibit
10.4 to the Registrant’s Quarterly
Report on Form 10-Q, filed on May 3,
2017.

Development, Commercialization and License Agreement dated as of
November 14, 2013 between the Registrant, Baxter International Inc.,
Baxter Healthcare Corporation and Baxter Healthcare SA.

Incorporated by reference to Exhibit
10.32 to the Registrant’s Annual Report
on Form 10-K, filed on March 4, 2014.

First Amendment to the Development, Commercialization and
License Agreement by and among the Registrant, Baxalta
Incorporated, Baxalta US Inc. and Baxalta GmbH, effective June 8,
2015.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Quarterly
Report on Form 10-Q, filed on August
6, 2015.

10.44

Letter Agreement, dated September 19, 2016, by and between the
Company and Baxalta.

10.45

Second Letter Agreement, dated October 19, 2016, by and between
the Company and Baxalta.

10.46

10.47

Asset Return and Termination Agreement, dated October 21, 2016, by
and between the Company and Baxalta.

Letter Agreement, dated June 9, 2017, by and between the Registrant
and BVF Partners L.P.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on September 19,
2016.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on October 24, 2016

Incorporated by reference to Exhibit
10.2 to the Registrant’s Current Report
on Form 8-K, filed on October 24, 2016

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on June 9, 2017

110

Exhibit
Number

10.48†

10.49†

10.50†

10.51

10.52

10.53

Exhibit Description

Location

Amended and Restated Exclusive License Agreement, dated October
24, 2014, by and between Vernalis (R&D) Ltd. and the Registrant.

Manufacturing and Supply Agreement, dated as of April 15, 2014, by
and between the Registrant and DSM Fine Chemicals Austria Nfg
GmbH & Co KG.

Incorporated by reference to Exhibit
10.3 to the Registrant’s Current Report
on Form 8-K/A, filed on November 6,
2014.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Quarterly
Report on Form 10-Q, filed on August
4, 2014.

Amended and Restated Exclusive License and Collaboration
Agreement by and between the Company, CTI Life Sciences Limited,
Laboratoires Servier and Institut de Recherches Internationales
Servier, dated as of April 21, 2017.

Incorporated by reference to Exhibit
10.4 to the Registrant’s Quarterly
Report on Form 10-Q, filed on May 3,
2017.

Loan and Security Agreement, dated March 26, 2013, by and among
the Registrant, Systems Medicine LLC and Hercules Technology
Growth Capital, Inc.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on March 28, 2013.

First Amendment to Loan and Security Agreement, dated March 25,
2014, by and among the Registrant, Systems Medicine LLC and
Hercules Technology Growth Capital, Inc.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Quarterly
Report on Form 10-Q, filed on April 29,
2014.

Second Amendment to Loan and Security Agreement, dated October
22, 2014, by and among the Registrant, Systems Medicine LLC,
Hercules Technology Growth Capital, Inc. and Hercules Capital
Funding Trust 2012-1.

Incorporated by reference to Exhibit
10.48 to Registrant's Annual Report on
Form 10-K, filed on March 12, 2015.

10.54

Third Amendment to Loan and Security Agreement, dated June 9,
2015, by and among Hercules Technology Growth Capital, Inc. (and
certain of its affiliates), the Registrant and Systems Medicine LLC.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on June 10, 2015.

111

Exhibit
Number
10.55

10.56

Exhibit Description
Fourth Amendment to Loan and Security Agreement, dated December
11, 2015, by and among the Registrant, Systems Medicine LLC,
Hercules Capital Funding Trust 2014-1 and Hercules Technology
Growth Capital, Inc.

Location

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on December 11,
2015.

Fifth Amendment to Loan and Security Agreement, dated August 4,
2017, by and among Hercules Technology Growth Capital, Inc. (and
certain of its affiliates), CTI BioPharma Corp. and Systems Medicine
LLC.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Quarterly
Report on Form 10-Q, filed on
November 7, 2017.

10.57

Loan and Security Agreement, dated November 28, 2017, by and
between CTI BioPharma Corp. and Silicon Valley Bank.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on November 28,
2017.

10.58

Waiver Agreement, dated January 19, 2018, by and between Silicon
Valley Bank and the Registrant.

Filed herewith.

10.59

Stipulation of Settlement, dated February 13, 2012.

10.60

Stipulation of Settlement, dated November 6, 2012.

10.61

Stipulation of Settlement.

10.62

Stipulation of Settlement.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on February 15,
2012.

Incorporated by reference to Exhibit
99.2 to the Registrant’s Current Report
on Form 8-K, filed on March 27, 2013.

Incorporated by reference to Exhibit
99.2 to the Registrant’s Current Report
on Form 8-K, filed on October 2, 2015.

Incorporated by reference to Exhibit
99.2 to the Registrant’s Current Report
on Form 8-K, filed on December 15,
2017.

112

Exhibit
Number
10.63

Exhibit Description

Location

Letter Agreement, dated December 9, 2015, by and between CTI
BioPharma Corp. and BVF Partners L.P.

Incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report
on Form 8-K, filed on December 9,
2015.

12.1

Statement Re: Computation of Ratio of Earnings to Fixed Charges.

Filed herewith.

21.1

23.1

24.1

31.1

31.2

Subsidiaries of the Registrant.

Consent of Marcum LLP, Independent Registered Public Accounting
Firm.

Filed herewith.

Power of Attorney. Contained in the signature page of this Annual
Report on Form 10-K and incorporated herein by reference.

Filed herewith.

Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

Filed herewith.

Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

Filed herewith.

Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Furnished herewith.

101.INS

XBRL Instance

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation

101.DEF XBRL Taxonomy Extension Definition

101.LAB XBRL Taxonomy Extension Labels

101.PRE XBRL Taxonomy Extension Presentation

Filed herewith.

†

Indicates management contract or compensatory plan or arrangement.

Portions of these exhibits have been omitted pursuant to a request for confidential treatment.

113

Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Seattle, State of
Washington, on March 7, 2018.

CTI BioPharma Corp.

By: /s/ Adam R. Craig
Adam R. Craig
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Adam R. Craig and David H. Kirske, and each of them his attorney-in-fact, with the power of substitution, for him in
any and all capacities, to sign any amendment of post-effective amendment to this Report on Form 10-K and to file the same,
with exhibits thereto and other documents in connection therewith, with the SEC, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the

following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

/s/ Laurent Fischer
Laurent Fischer, M.D.

/s/ Adam R. Craig
Adam R. Craig

Title

Date

Chairman of the Board and Director

March 7, 2018

President and Chief Executive Officer and
Director
(Principal Executive Officer)

/s/ David H. Kirske
David H. Kirske

Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)

/s/ Richard L. Love
Richard L. Love

/s/ Michael A. Metzger
Michael A. Metzger

/s/ David R. Parkinson
David R. Parkinson, M.D.

/s/ Matthew D. Perry
Matthew D. Perry

/s/ Frederick W. Telling
Frederick W. Telling, Ph.D.

/s/ Reed V. Tuckson
Reed V. Tuckson, M.D.

Director

114

March 7, 2018

Corporate Information

CTI BIOPHARMA CORP. • 2017 ANNUAL REPORT

BOARD OF DIRECTORS

Adam R. Craig, M.D., Ph.D.
President and Chief Executive Officer,
CTI BioPharma Corp.

Michael A. Metzger
President and Chief Operating Officer,
Syndax Pharmaceuticals, Inc.

David R. Parkinson, M.D.
President and Chief Executive Officer,
Essa Pharmaceuticals, Inc.

Matthew D. Perry
President,
BVF Partners L.P.

Frederick W. Telling, Ph.D.
Former Vice President of Corporate
Policy and Strategic Management,
Pfizer, Inc.

Reed V. Tuckson, M.D., F.A.C.P.
Managing Director,
Tuckson Health Connections, LLC
Former Executive Vice President and Chief
of Medical Affairs, UnitedHealth Group

Laurent Fischer, M.D.
Senior Vice President,
Head of Liver Therapeutic Area,
Allergan, Inc.

Richard L. Love
Partner,
Translational Accelerator, LLC

MANAGEMENT TEAM

Adam R. Craig, M.D., Ph.D.
President and Chief Executive Officer

David H. Kirske
Executive Vice President
Chief Financial Officer

INDEPENDENT AUDITOR
Marcum LLP
San Francisco, CA

TR ANSFER AGENT AND SHAREHOLDER

SERVICES
Computershare Investor Services
250 Royall St.
Canton, MA 02021
800 736-3001
781 575-3100 (outside U.S.)
www.computershare.com

Bruce J. Seeley
Executive Vice President
Chief Operating Officer and Secretary

Jack W. Singer, M.D.
Executive Vice President
Chief Scientific Officer
Interim Chief Medical Officer
and Global Head of Translational Medicine

ANNUAL SHAREHOLDER MEETING
Wednesday, May 16, 2018,
at 10:00 am Pacific Daylight Time at
CTI BioPharma’s Corporate Headquarters,
3101 Western Ave., Seattle

ADDITIONAL INFORMATION
CTI BioPharma’s current quarterly and
annual reports, news releases and other
information regarding the company and its
products and technologies are available at
www.ctibiopharma.com

CORPOR ATE HEADQUARTERS
CTI BioPharma Corp.
3101 Western Ave.
Seattle, WA 98121
206 282-7100
www.ctibiopharma.com

SHAREHOLDER INFORMATION
The Company’s common stock trades on
The NASDAQ Stock Market under the
symbol CTIC. Anyone wishing for more
information about CTI BioPharma should
direct their inquiries to:

Investor Relations
CTI BioPharma Corp.
3101 Western Ave.
Seattle, WA 98121

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements including that CTI BioPharma may not be able to continue to raise capital as needed to fund
its operations in general, and other risks, including, without limitation, risks associated with the biopharmaceutical industry in general and with CTI BioPharma
and its products and product candidate portfolio in general, competitive factors, technological developments, and the risk factors listed or described from time
to time in CTI BioPharma’s filings with the Securities and Exchange Commission including, without limitation, CTI BioPharma’s most recent filings on Forms 10-
K, 10-Q and 8-K. Except as may be required by law, CTI BioPharma does not intend to update or alter its forward-looking statements whether as a result of new
information, future events, or otherwise.

CTI BioPharma Corp.

3101 Western Avenue

Seattle, WA 98121

ctibiopharma.com