CTI BioPharma Annual Report 2018

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FY2018 Annual Report · CTI BioPharma

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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, 2018

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: 000-28386

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)

Delaware

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, $0.001 par value per share

Name of each exchange on which registered

The NASDAQ Stock Market LLC

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

None.

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 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 every Interactive Data File required to be submitted 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 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 the
Form 10-K or any amendment to the Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in
Rule 12b-2 of the Exchange Act.

Large accelerated filer

Non-accelerated filer

Emerging growth company

Accelerated filer

Smaller reporting 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, 2018, the aggregate market value of the registrant’s common equity held by non-affiliates was approximately $252.1 million. Shares of
common stock held by each executive officer and director and by each other person who may be deemed to be an affiliate of the registrant have been excluded
from this computation. This determination of affiliate status for this purpose is not necessarily a conclusive determination for other purposes.

The number of outstanding shares of the registrant’s common stock as of February 28, 2019 was 57,980,075.

Portions of the registrant’s definitive proxy statement relating to its 2019 annual meeting of stockholders, or the 2019 Proxy Statement, are
incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2019 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 STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

SELECTED FINANCIAL DATA

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 STOCKHOLDER MATTERS

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

ITEM 1.

ITEM 1A.

ITEM 1B.

ITEM 2.

ITEM 3.

ITEM 4.

ITEM 5.

ITEM 6.

ITEM 7.

ITEM 7A.

ITEM 8.

ITEM 9.

ITEM 9A.

ITEM 9B.

ITEM 10.

ITEM 11.

ITEM 12.

ITEM 13.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 15.

ITEM 16.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

FORM 10-K SUMMARY

PART IV

SIGNATURES

CERTIFICATIONS

Page

48
56

100

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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:

•

our expectations regarding sufficiency of cash resources, cash expenditures, sources of cash flows and other projections,
product manufacturing and sales, research and development expenses, selling, general and administrative expenses and
additional losses;

our ability to obtain funding for our operations;

the timing of, and our ability to develop, commercialize, and obtain regulatory approval of pacritinib and other
development programs;

the design of our clinical trials and anticipated enrollment, and the progress and potential of our other development
programs;

the timing of and results from clinical trials and pre-clinical development activities, including those related to pacritinib
and our other product candidates;

our ability to advance product candidates into, and successfully complete, clinical trials;

our ability to achieve profitability, including our ability to effectively implement cost reduction strategies and realize
anticipated cost savings from those efforts;

our ability to receive milestones, royalties and sublicensing fees under our collaborations, and the timing of such
payments;

our expectations regarding federal, state and foreign regulatory requirements;

the rate and degree of market acceptance and clinical utility of any current or future products;

the timing of, and our and our collaborators’ ability to obtain and maintain, regulatory approvals for our product
candidates;

our ability to maintain and establish collaborations;

our expectations regarding market risk, including interest rate changes and foreign currency fluctuations;

our ability to protect our intellectual property and operate our business without infringing upon the intellectual property
rights of others;

our ability to negotiate, integrate, and implement collaborations, acquisitions and other strategic transactions;

our ability to engage and retain the employees required to advance our development activities and grow our business;
and

developments relating to our competitors and our industry, including the success of competing therapies that are or
become available.

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. 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.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.

These statements are based upon information available to us as of the date of this report, and while we believe such information
forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be
read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.
These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

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 for blood-related cancers that offer a unique benefit to patients and their 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
concentrate our efforts on treatments that target blood-related cancers where there is an unmet medical need and are primarily
focused on evaluating pacritinib for the treatment of adult patients with myelofibrosis.

Pacritinib

Our primary 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 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.

On February 8, 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 an order to suspend investigations performed 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 placed 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 second 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 reached 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 SVR in patients 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, 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). Details of the trial were presented in a late-breaking
3

oral session at the American Society of Hematology Annual Meeting in December 2016. Subsequently, the results were
published in JAMA Oncology in May 2018.

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 the PERSIST-1 and 2 trials and FDA agreement on a
proposed study design for a dose-exploration clinical trial (PAC203). At that time, the PAC203 trial was designed to enroll up
to approximately 105 patients with primary myelofibrosis and who had failed prior ruxolitinib therapy across three dose
regimens of pacritinib, 100 mg QD, 100 mg BID and 200 mg BID, to evaluate the dose response relationship for safety and
efficacy (SVR at 12 and 24 weeks). The 200 mg BID dose was selected as the top dose based upon observations from the
completed PERSIST-2 study. In PAC203, the entry criteria were modified to exclude patients with a history of cardiac and/or
bleeding events and additional dose modification guidelines were implemented for the management of treatment-emergent
cardiac and or bleeding events. The first patient in the PAC203 trial was enrolled in July 2017. In April 2018, we amended the
protocol to expand the sample size to a maximum of 150 patients (or 50 patients per arm) to collect additional data for the
safety and efficacy analyses. In July 2018, we announced that the independent data monitoring committee, or IDMC, for the
PAC203 trial completed its planned interim data review of the PAC203 trial and that the IDMC did not identify any drug- or
dose-related safety concerns and did not identify any concerns about cardiac or bleeding events. Following meetings with the
FDA and EMA and consultation with the IDMC, we eliminated the interim efficacy analysis and focused the second interim
data review, and all subsequent data reviews, on an assessment of safety. The protocol was amended to reflect this change and
submitted to FDA. In October 2018, we announced the continuation of the PAC203 Phase 2 study without modification,
following a planned second interim data review by the IDMC. The IDMC did not identify significant drug- or dose-related
safety concerns and specifically did not identify any concerns around hemorrhagic or cardiac toxicity. A complete dataset from
the fully enrolled study (including efficacy, safety, pharmacokinetic and pharmacodynamic data) will be used to determine the
optimal dose of pacritinib for further clinical development, as requested by the FDA.The PAC203 study was fully enrolled in
December 2018. In January 2019, the IDMC completed its planned third interim safety review and recommended that the
study continue without modification.We expect to report the determination of the optimal dose of pacritinib in mid-2019
following a meeting with the FDA and top-line efficacy and safety data from the study are expected to be reported at a major
medical meeting by the end of 2019.

In July 2018, we attended a Type B meeting with the FDA to discuss the proposed regulatory pathway for pacritinib.

Based on FDA feedback at that meeting, we plan to conduct a randomized Phase 3 study of pacritinib in patients with
myelofibrosis. We anticipate the dose and dosing schedule for the Phase 3 study will be determined using the results of the
PAC203 study. We attended a Type C meeting with the FDA in December 2018 and received input on key elements of the
design of the new randomized Phase 3 study of pacritinib in adult patients with myelofibrosis (primary myelofibrosis, post-
polycythemia vera myelofibrosis, or post-essential thrombocythemia myelofibrosis) and who have severe thrombocytopenia
(as defined by patients with platelet counts of less than 50,000 per microliter), an indication that has been recognized by the
medical community as an important unmet medical need. The planned Phase 3 study is designed to evaluate the effects of
pacritinib as compared to physician’s choice of treatment. The primary efficacy endpoint will be the proportion of patients
achieving a greater than or equal to 35% SVR between baseline and Week 24. Secondary efficacy endpoints of the study
include TSS reduction and overall survival. Before commencing the Phase 3 study, we plan to seek FDA advice on the
proposed final protocol design and seek scientific advice from European countries to support alignment on the Phase 3 study
design. To expedite the transition to Phase 3, we intend to amend the PAC203 protocol to include a Phase 3 component, with
enrollment anticipated to commence following our determination of the optimal dose of pacritinib, which we expect to report
in mid-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.

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 extension, 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.

We received the Day 120 List of Questions, or LoQ, in November 2017, which 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. A request for an
extension was submitted following a clarification meeting with the rapporteur, co-rapporteur and members of the EMA to
provide the EMA with data from PAC203, and in January 2018, we were granted a three-month extension for submitting our
response to the Day 120 LoQs. In December 2017 a preapproval GCP inspection of the PERSIST-2 clinical study was
conducted by the EMA. In February 2018, the EMA issued its final GCP inspection report, which concluded that the
PERSIST-2 clinical trial was generally conducted in compliance with GCP and internationally accepted ethical standards, that
the deficient safety reporting procedures identified as inspection findings did not pose a direct risk to data quality and that the
results from the PERSIST-2 clinical trial can be used for the evaluation and assessment of the MAA. In July 2018, we received
the Day 180 LoQs and were granted a two-month extension to allow us to submit a snapshot of clinical data from the ongoing
PAC203 study with our responses to the remaining list of questions. In the third quarter of 2018, we submitted comprehensive
responses to the Day 180 LoQs, which included new data from the PAC203 trial. In November 2018, we received a second
round of questions related to the Day 180 List of Outstanding Issues. We submitted responses to these additional questions,
which included data from the ongoing open label PAC203 trial, in December 2018. We withdrew the MAA in February 2019
following interactions with CHMP, during which we learned that CHMP was likely to formally adopt a negative opinion in its
evaluation of the application. CHMP indicated that the risk-benefit profile for pacritinib for the intended indication has not
been sufficiently established with the clinical data available to date.

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. As part of the conditional marketing authorization in the E.U., we were 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, in July 2018, we and Les Laboratoires Servier and Institut de Recherches Internationales Servier, or together, Servier,
announced that PIXUVRI plus rituximab did not show a statistically significant improvement in progression-free survival
compared to gemcitabine plus rituximab. In February 2019, we and Servier agreed to mutually terminate our collaborative
relationship. For more information on the termination of our agreement with Servier, see the section of this report captioned “-
License Agreements - Servier.”

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:

• Develop Pacritinib in Myelofibrosis. We intend to develop and commercialize pacritinib for adult patients with

myelofibrosis.

• 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. Historically, we have built our candidate pipeline using
multiple approaches, including through 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 the date of this report:

(1) To expedite our transition to Phase 3, we intend to amend the PAC203 protocol to include a Phase 3 component, with enrollment anticipated to

commence following our determination of the optimal dose of pacritinib, which we expect to report in mid-2019.

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

more than 600,000 deaths annually, or more than 1,600 people per day. Approximately 1.8 million new cases of cancer are
expected to be diagnosed in 2019 in the U.S. While the exact prevalence of myelofibrosis is uncertain, a U.S. study presented
at the 2012 American Society of Hematology reported a prevalence rate of 5.7 myelofibrosis cases per 100,000 people,
indicating that there are approximately 18,000 myelofibrosis patients 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.

Pacritinib

Overview

Our primary 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, MDS, chronic
myelomonocytic leukemia, or CMML, and 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.

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 (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. 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 limited or 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
splenomegaly and disease-related symptoms in patients with severe thrombocytopenia and/or in patients with prior exposure
to an approved JAK1/JAK2 inhibitor.

PERSIST-1 was a randomized (2:1), open-label, multi-center Phase 3 trial evaluating the efficacy and safety of
pacritinib compared to BAT excluding 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 SVR 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 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 was also 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 SVR and control of disease-related symptoms meeting the
primary endpoint of the trial.

The following table shows the proportion of patients randomized to pacritinib or BAT who achieved a 35% SVR 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 SVR 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. 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. We decided to commission a new IDMC because of these concerns regarding the previous

recommendation. 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 of the hold order were required to discontinue pacritinib immediately
and no new 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 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 withdrew 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. 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 SVR 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 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 and the secondary objectives were to compare pacritinib BID and QD arms
individually to BAT. The study was designed to evaluate its objectives with a sample size of 300. At the time of clinical hold,
study enrollment was completed with three 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 SVR in patients 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 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, the PAC203 trial was designed to enroll up to approximately 105 patients with
primary myelofibrosis and who had failed prior ruxolitinib therapy across three dose regimens of pacritinib, 100 mg QD, 100
mg BID and 200 mg BID, to evaluate the dose response relationship for safety and efficacy (SVR at 12 and 24 weeks). The
200 mg BID dose was selected as the top dose based upon observations from the completed PERSIST-2 study. In PAC203, the
entry criteria were modified to exclude patients with a history of cardiac and/or bleeding events and additional dose
modification guidelines were implemented for the management of treatment-emergent cardiac and or bleeding events. The
first patient in the PAC203 trial was enrolled in July 2017. In April 2018, we amended the protocol to expand the sample size
to a maximum of 150 patients (or 50 patients per arm) to collect additional data for the safety and efficacy analyses. In July
2018, we announced that the IDMC for the PAC203 trial completed its planned interim data review of the PAC203 trial and
that the IDMC did not identify any drug- or dose-related safety concerns and did not identify any concerns about cardiac or
bleeding events. Following meetings with the FDA and EMA and consultation with the IDMC, we eliminated the interim
efficacy analysis and focused the second interim data review, and all subsequent data reviews, on an assessment of safety. The
protocol was amended to reflect this change and submitted to FDA. In October 2018, we announced the continuation of the
PAC203 Phase 2 study without modification, following a planned second interim data review by the IDMC. The IDMC did
not identify significant drug- or dose-related safety concerns and specifically did not identify any concerns around
hemorrhagic or cardiac toxicity. A complete dataset from the fully enrolled study (including efficacy, safety, pharmacokinetic
and pharmacodynamic data) will be used to determine the optimal dose of pacritinib for further clinical development, as
requested by the FDA. The PAC203 study was fully enrolled in December 2018. In January 2019, the IDMC completed its
planned third interim safety review and recommended that the study continue without modification. We expect to report the
determination of the optimal dose of pacritinib in mid-2019 following a meeting with the FDA and top-line efficacy and safety
data from the study are expected to be reported at a major medical meeting by the end of 2019.

In July 2018, we attended a Type B meeting with the FDA to discuss the proposed regulatory pathway for pacritinib.

Based on FDA feedback at that meeting, we plan to conduct a randomized Phase 3 study of pacritinib in patients with
myelofibrosis. We anticipated the dose and dosing schedule for the Phase 3 study will be determined using the results of the
PAC203 study. We completed a Type C meeting with the FDA in December 2018 and received input from the FDA on key
elements of the design of the new randomized Phase 3 study of pacritinib in adult patients with myelofibrosis (primary
myelofibrosis, post-polycythemia vera myelofibrosis, or post-essential thrombocythemia myelofibrosis) and who have severe
thrombocytopenia (as defined by patients with platelet counts of less than 50,000 per microliter), an indication that has been
recognized by the medical community as an important unmet medical need. The planned Phase 3 study is designed to evaluate
the effects of pacritinib as compared to physician’s choice of treatment. The primary efficacy endpoint will be the proportion
of patients achieving a greater than or equal to 35% SVR between baseline and Week 24. Secondary efficacy endpoints of the
study include TSS reduction and overall survival. Before commencing the Phase 3 study, we plan to seek FDA advice on the
proposed final protocol design and seek scientific advice from European countries to support alignment on the Phase 3 study
design. To expedite the transition to Phase 3, we intend to amend the PAC203 protocol to include a Phase 3 component, with
enrollment anticipated to commence following our determination of the optimal dose of pacritinib, which we expect to report
in mid-2019.

Marketing Authorization Application

The MAA for pacritinib was submitted to the EMA in February 2016 with an indication statement based on the
PERSIST-1 trial data. In its initial assessment report, the CHMP determined that the original application was not approvable at
10

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.

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.

We received the Day 120 LoQ in November 2017, which 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. A request for an extension was submitted
following a clarification meeting with the rapporteur, co-rapporteur and members of the EMA to provide the EMA with data
from PAC203, and in January 2018, we were granted a three-month extension for submitting our response to the Day 120
LoQs. In December 2017 a preapproval GCP inspection of the PERSIST-2 clinical study was conducted by the EMA. In
February 2018, the EMA issued its final GCP inspection report, which concluded that the PERSIST-2 clinical trial was
generally conducted in compliance with GCP and internationally accepted ethical standards, that the deficient safety reporting
procedures identified as inspection findings did not pose a direct risk to data quality and that the results from the PERSIST-2
clinical trial can be used for the evaluation and assessment of the MAA. In July 2018, we received the Day 180 LoQs and
were granted a two-month extension to allow us to submit a snapshot of clinical data from the ongoing PAC203 study with our
responses to the remaining list of questions. In the third quarter of 2018, we submitted comprehensive responses to the Day
180 LoQs, which included new data from the PAC203 trial. In November 2018, we received a second round of questions
related to the Day 180 List of Outstanding Issues. We submitted responses to these additional questions, which included data
from the ongoing open label PAC203 trial, in December 2018. We withdrew the MAA in February 2019 following interactions
with CHMP, during which we learned that CHMP was likely to formally adopt a negative opinion in its evaluation of the
application. CHMP indicated that the risk-benefit profile for pacritinib for the intended indication has not been sufficiently
established with the clinical data available to date.

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 IRAK1 and CSF1R highlight its potential therapeutic
utility in other diseases, such as MDS, CLL, graft versus host disease, or GvHD, autoimmune diseases and breast cancer, some
of which are currently being evaluated in investigator sponsored trials, or 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 - Baxalta” below.

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 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. As part of
the conditional marketing authorization in the E.U., we were 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, in July 2018, we and Servier
announced that PIXUVRI plus rituximab did not show a statistically significant improvement in progression-free survival
compared to gemcitabine plus rituximab. In February 2019, we and Servier agreed to mutually terminate our collaborative

relationship. For additional information on our agreements with Servier, please see the discussion in “- License Agreements -
Servier.”

Research and Development Expenses

Research and development is essential to our business. We spent $36.5 million and $32.9 million in 2018 and 2017,
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. 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 a product candidate will be completed or when, if ever, we will be able to commence commercialization of pacritinib. 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, 2018 and 2017 - Operating costs and expenses - Research and development expenses” and Part I,
Item 1A, “Risk Factors.”

License Agreements

Servier

In April 2017, we entered into the Restated Agreement with Servier, pursuant to which we amended and restated our
Exclusive License and Collaboration Agreement, or the Original Agreement, with Servier, entered into in September 2014.
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 transferred 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 referred to as the Transition Territory. We also terminated or
assigned certain distributor and wholesaler contracts to Servier in the Transition Territory, which activities were completed in
2018. Pursuant to the Restated Agreement, each party has responsibility for the manufacture and supply of drug products and
substances in its respective territory. In connection with the Restated Agreement, in October 2017, we and Servier entered into
an amendment to our June 2015 trademark license agreement 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).

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 provided for certain milestone payments from Servier. In
September 2017 and November 2018, we attained a regulatory milestone under the Restated Agreement and recorded
milestone revenue in the amount of €1.0 million (or $1.2 million using the currency exchange rate as of the date the milestone
was achieved) and €3.0 million (or $3.4 million using the currency exchange rate as of the date the milestone was achieved),
respectively.

In February 2019, we entered into a Termination and Transfer Agreement, or the Servier Termination Agreement, with

Servier, which terminates the Restated Agreement. Under the Servier Termination Agreement, we will continue to be
responsible for non-U.S. pharmacovigilance for PIXUVRI, the submission of a marketing authorization application for
PIXUVRI and wind down of the PIX306 clinical trial during a transition period, which will last until the EMA adopts a
position on the PIXUVRI marketing authorization application. Servier agreed to reimburse us €620,000 for costs to be
incurred in connection with transition period activities, and if the transition period extends beyond May 31, 2019, Servier will
provide additional reimbursement to us not to exceed €50,000 per month or €200,000 in the aggregate. If the EMA’s definitive
position results in a standard marketing authorization for PIXUVRI, we will transfer and assign all of our rights and
responsibilities for PIXUVRI globally to Servier pursuant to an asset purchase agreement. Alternatively, if the EMA’s
definitive position results in a conditional marketing authorization or suspension or withdrawal of the marketing authorization,
then, at Servier’s election, we will either transfer and assign all of our rights and responsibilities for PIXUVRI globally to
Servier pursuant to an asset purchase agreement or cooperate with Servier in the withdrawal of PIXUVRI from all
jurisdictions other than the United States. The Servier Termination Agreement provides that, in either scenario, any asset
purchase agreement will require, among other things, Servier to pay us €2.0 million and assume responsibility for all of the

obligations related to PIXUVRI, including our remaining royalty payments to Novartis International Pharmaceutical Ltd. and
the University of Vermont.

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 Pacritinib License Agreement, which was subsequently amended
in June 2015. 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 co-promotion rights discussed below),
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.

In October 2016, we entered into the Asset Return and Termination Agreement, or the Baxalta Termination Agreement,
with Baxalta. Pursuant to the Baxalta 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 October 2016, we resumed primary responsibility for the development and commercialization of pacritinib as a result
of the Baxalta Termination Agreement and are no longer eligible to receive cost sharing or milestone payments for pacritinib’s
development from Baxalta. In addition, under the Baxalta 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.

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. If we enter into an asset purchase agreement with Servier
pursuant to the Servier Termination Agreement, Servier will assume our obligations to make royalty payments to UVM under
the UVM Agreement.

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.

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. If we enter into an asset purchase agreement with
Servier pursuant to the Servier Termination Agreement, Servier will assume our obligations to make royalty payments to
Novartis under the Novartis Termination Agreement.

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 $60.0 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 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: U.S. patents expire in May 2028

(method) / January 2029 (compound) / March 2030 (salt); foreign patents expire in November 2026 (method and compound) /
December 2029 (salt). We expect our U.S. and foreign patent applications for use of pacritinib for treating transplant rejection
will expire in 2036. Pacritinib has orphan drug designation for myelofibrosis in the U.S. and the E.U.

Our U.S. and foreign patents for PIXUVRI (pixantrone) expire as follows: US Patent Nos. 5,616,709 and 5,506,232
covering the pixantrone compound (i.e., 6,9-bis[(2-aminoethyl)amino]benzo[g]isoquinoline-5,10-dione), and dimaleate salt
thereof, expired in 2014. Other patents relating to PIXUVRI include a US patent expiring in August 2024 (injectable
formulation); Foreign patents (except Europe) expiring in May 2023 (injectable formulation); and European patents expiring
in March 2020 (salt) and May 2027 (injectable formulation). If we enter into an asset purchase agreement with Servier
pursuant to the Servier Termination Agreement, we will be required to transfer our U.S. and foreign patents for PIXUVRI to
Servier. For more information, see “- License Agreements - Servier.”

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 clinical development activities continue 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 has significantly increased our manufacturing, distribution and related
operational requirements, and we expect such increases to continue as we advance the clinical development of pacritinib.

Each third party contractor undergoes a formal qualification process by our subject matter experts prior to our entry
into any service agreement and initiating any manufacturing work. We currently have a commercial supply arrangement for
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.

Pacritinib would compete with Jakafi®, which is marketed by Incyte in the U.S. and Novartis ex-U.S. If approved, we

may face competition from other candidates in development that target JAK inhibition to treat cancer such as fedratinib
(Celgene) and momelotinib (Sierra Oncology).

Some 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
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
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 medicinal products can be marketed outside of the U.S., they must be subject to regulatory approval similar

to that required in the U.S. The requirements governing the conduct of clinical trials, including requirements to conduct
additional clinical trials, product licensing, safety reporting, post-authorization requirements, marketing and promotion,
interactions with healthcare professionals, pricing and reimbursement may vary widely from country to country. No action can
be taken to market any product in a country until an appropriate approval 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.

Conduct of clinical trials in the E.U.

Similar to the United States, the various phases of non-clinical and clinical research in the E.U. are subject to significant

regulatory controls. Although EU Clinical Trials Directive 2001/20/EC, or the Clinical Trials Directive, has sought to

harmonize the E.U. clinical trials regulatory framework, setting out common rules for the control and authorization of clinical
trials in the E.U., E.U. Member States have transposed and applied the provisions of the Clinical Trials Directive in a manner
that is not always uniform. This has led to variations in the rules governing the conduct of clinical trials in the individual E.U.
Member States. The E.U. has, therefore, adopted Regulation (EU) No 536/2014, or the Clinical Trials Regulation. The Clinical
Trials Regulation, which will replace the Clinical Trials Directive, introduces a complete overhaul of the existing regulation of
clinical trials for medicinal products in the E.U., including a new coordinated procedure for authorization of clinical trials that
is reminiscent of the mutual recognition procedure for marketing authorization of medicinal products, and increased
obligations on sponsors to publish clinical trial results. The Clinical Trials Regulation is expected to take effect beginning in
late 2019 or in 2020.

Clinical trials must currently be conducted in accordance with the requirements of the Clinical Trials Directive and

applicable good clinical practice standards, as implemented into national legislation by the individual E.U. Member States.
Under the current regime, before a clinical trial can be initiated it must be approved in each E.U. Member State where there is
a site at which the trial is to be conducted by two separate entities: the National Competent Authority, or NCA, and one or
more Ethics Committees. Under the current regime all suspected unexpected serious adverse reactions to the investigated drug
that occur during the clinical trial must be reported to the NCA and to the Ethics Committees of the E.U. Member State where
they occur.

In the E.U., pediatric data or an approved Pediatric Investigation Plan, or PIP, or waiver, must be approved by the
European Medicines Agency, or EMA, prior to submission of a marketing authorization application to the EMA or to the
competent authorities of the E.U. Member States. In most E.U. countries, companies are also required to have an approved PIP
before enrolling pediatric patients in a clinical trial.

Marketing authorization procedures in the E.U. and post-marketing obligations

In the E.U., medicinal products may only be placed on the market after a related marketing authorization, or MA, has
been granted. Marketing authorizations for medicinal products can be obtained through several different procedures founded
on the same basic regulatory process. These are through the centralized procedure, the mutual recognition procedure, the
decentralized procedure, or a national procedure (single E.U. Member State).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 AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. It is optional for
medicinal products containing a new active substance that is not yet authorized in the European Economic Area, or the EEA,
and for medicinal products that constitute significant therapeutic, scientific or technical innovations, or for which grant of a
marketing authorization through the centralized procedure would be in the interest of patients or animal health at E.U. level.
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 positive 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, or EFTA countries (Iceland, Liechtenstein and
Norway).

The decentralized authorization procedure permits companies to file identical applications for authorization to the
competent authorities in several E.U. Member States simultaneously for a medicinal product that has not yet been authorized
in any E.U. Member State. The competent authority of a single E.U. Member State, the reference member state, is appointed
to review the application and provide an assessment report. The competent authorities of the other E.U. Member States, the
concerned member states, are subsequently required to grant marketing authorization for their territories on the basis of this
assessment. The only exception to this is where the competent authority of an E.U. Member State considers that there are
concerns of potential serious risk to public health related to authorization of the product. In these circumstances the matter is
submitted to the Heads of Medicines Agencies, or CMDh, for review. The mutual recognition procedure allows companies that
have a medicinal product already authorized in one E.U. Member State to apply for this authorization to be recognized by the
competent authorities in other E.U. Member States. The national marketing authorization procedure is founded on the same
basic E.U. regulatory process as the other marketing authorization procedures discussed herein. The national marketing
authorization procedure, which is increasingly rare, permits a company to submit an application to the competent authority of
a single E.U. Member State and, if successful, to obtain a marketing authorization that is valid only in this E.U. Member State.

The maximum timeframe for the evaluation of a marketing authorization application in the E.U. is 210 days, excluding

question or opinion response periods. The initial marketing authorization granted in the E.U. is valid for five years. The
authorization may be renewed and remain valid for an unlimited period unless the national competent authority or the
European Commission decides on justified grounds to proceed with one additional five-year renewal period. The renewal of a
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marketing authorization is subject to a re-evaluation of the risk-benefit balance of the product by the national competent
authorities or the EMA.

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, although comprehensive clinical data referring to the safety and efficacy of the medicinal product
have not been supplied, a number of criteria are fulfilled; i) 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 by
the grant of the marketing authorization 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 were required to complete a post-marketing Phase 3 study to further investigate the effects of using PIXUVRI
in a defined group of patients who had received prior treatment with rituximab. We submitted the related clinical study report
to the EMA in November 2018.

In the E.U., innovative medicinal products that are subject to marketing authorization on the basis of a full dossier and
which do not fall within the scope of the concept of global marketing authorization qualify for eight years of data exclusivity
upon marketing authorization and ten years of market exclusivity. The eight years' data exclusivity prevents regulatory
authorities in the E.U. from referencing the innovator’s data in assessing an application for authorization of a generic or
biosimilar medicinal product for eight years from the data of authorization of the innovative product. After this period has
expired a generic or biosimilar marketing authorization application may be submitted, and the innovator’s data may be
referenced in the application. However, even if the generic product or biosimilar products is authorized it cannot be marketed
in the E.U. for a further two years. The overall ten year market exclusivity period may be extended for a further year to a
maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an
authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization,
are held to bring a significant clinical benefit in comparison with existing therapies.

Pricing and reimbursement in the E.U.

Even if a product is subject to a marketing 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. The E.U. Member States have the power to restrict the range of
medicinal products for which their national health insurance systems provide reimbursement and to control the prices of
medicinal products for human use. An E.U. Member State may approve a specific price for the medicinal product.
Alternatively, it may adopt a system of direct or indirect controls on the profitability of the company placing the medicinal
product on the market.

In a number of E.U. Member States we may be subject to cost-cutting measures, such as lower maximum prices, lower

or lack of reimbursement coverage and incentives to use cheaper, usually generic, products as an alternative. 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, including countries representing major markets. 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 outcome of HTA regarding specific medicinal products will
often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of
individual E.U. Member States. On January 31, 2018, the European Commission adopted a proposal for a regulation on health
technologies assessment. This legislative proposal is intended to boost cooperation among E.U. Member States in assessing
health technologies, including new medicinal products, and providing the basis for cooperation at the E.U. level for joint
clinical assessments in these areas. The proposal provides that E.U. Member States will be able to use common HTA tools,
methodologies, and procedures across the E.U., working together in four main areas, including joint clinical assessment of the
innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers
can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early,
and continuing voluntary cooperation in other areas. Individual E.U. Member States will continue to be responsible for
assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and
reimbursement. The European Commission has stated that the role of the draft HTA regulation is not to influence pricing and
reimbursement decisions in the individual E.U. Member States, but there can be no assurance that the draft HTA regulation
will not have effects on pricing and reimbursement decisions.

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.

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, the European Commission 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 holders of marketing
authorization granted through the centralized marketing authorization procedure the obligation to conduct a labor intensive
collection of data regarding the risks and benefits of marketed medicinal 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. Marketing authorization holders are required to prepare Periodic
Safety Update Reports in relation to medicinal products for which they hold marketing authorizations. The EMA reviews
Periodic Safety Update Reports for medicinal products authorized through the centralized procedure. 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, withdrawn or varied. The Agency can advise that the marketing authorization holder be obliged
to conduct post-authorization Phase IV safety studies. The EMA opinion is submitted to the European Commission for its
consideration. If the Commission agrees with the opinion, it can adopt a decision varying the existing marketing authorization.
Failure by the marketing authorization holder to fulfill the obligations for which the European Commission's decision provides
can undermine the on-going validity of the marketing authorization.

More generally, non-compliance with pharmacovigilance 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.

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 European Commission, the
competent authorities of E.U. Member States and other regulatory authorities. Companies may be subject to civil, criminal or
administrative sanctions. These include suspension of manufacturing authorization in case of non-compliance with the E.U. or
E.U. Member States’ requirements governing the manufacturing of medicinal products.

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 the E.U. level with related implementing laws in individual

E.U. Member States which impose significant compliance obligations. For example, the E.U. General Data Protection
Regulation, which entered into force in May 2018, 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.

As the General Data Protection Regulation entered into force recently, guidance on implementation and compliance

practices are still being developed, updated or otherwise revised. Although the General Data Protection Regulation is intended
to provide for a high level of harmonization across the E.U., Member States may still implement certain variations, and data
protection authorities may enforce the General Data Protection Regulation and national laws differently, which adds to the
complexity of processing personal data in the E.U. Apart from exceptional circumstances, the E.U. General Data Protection
Regulation 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, and requires companies to
take additional compliance measures to lawfully perform such transfers .

Furthermore, there is a trend 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. Failing to comply with these
obligations could lead to government enforcement actions and significant penalties against us, harm to our reputation, and
adversely impact our business and operating results. The uncertainty regarding the interplay between different regulatory
frameworks, such as the Clinical Trials Regulation and the General Data Protection Regulation, further adds to the complexity
that we face with regard to data protection regulation.

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, financial penalties 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 hazardous 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, 2018, we employed 46 individuals in the U.S. In December 2018, we announced a restructuring
plan to improve efficiencies and reduce costs within the Company, and as a result, a total of 21 positions will be eliminated
approximately by the end of the first quarter 2019. Our employees do not have a collective bargaining agreement. We believe
our relations with our employees are good.

Corporate Information

We were incorporated in the State of 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 under the symbol “CTIC”. On January 24, 2018, we changed our state of incorporation from the
State of Washington to the State of Delaware. 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 located at
www.ctibiopharma.com; however, the information in, or that can be accessed through, our website is not part of this Annual
Report on Form 10-K. 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. The SEC maintains an Internet site that contains reports, proxy and information statements, and other
information regarding reports that we file or furnish electronically with them at www.sec.gov.

This Annual Report on Form 10-K includes our trademarks and registered trademarks, including “CTI BioPharma,”

and “PIXUVRI.” Each other trademark, trade name or service mark appearing in this Annual Report on Form 10-K belongs to
its holder.

Item 1A. Risk Factors

This report 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.

Risks Related to Our Business

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, 2018, 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.

Our prospects are dependent on the successful development, regulatory approval and commercialization of

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. Even if we are successful in developing and obtaining regulatory
approval for pacritinib, it would face competition from currently approved compounds and potentially other candidates
being developed by our competitors. 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 we partner
pacritinib, we may have to relinquish valuable economic rights and would potentially forgo additional economic benefits
that could be realized if we continued the development and commercialization activities alone. Even if pacritinib receives
approval from the FDA, EMA or other regulatory authorities, we would need to incur significant expenses to support the
commercialization and launch of pacritinib, which investment may never be realized if sales are insufficient. As our primary
product candidate under development, our prospects are substantially dependent upon the successful development, approval
and commercialization of pacritinib. If we fail to obtain regulatory approval and successfully commercialize pacritinib, our
business would be materially and adversely impacted as we have no other product candidates in active clinical development.

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:

• If we are successful in bringing pacritinib to market, pacritinib will face competition from the currently approved
JAK1/JAK2 inhibitor, Jakafi® / Jakavi® and may face competition from fedratinib, which Celgene has announced is
being prepared for an NDA submission in myelofibrosis. Celgene announced their pending acquisition by Bristol-
Myers Squibb in January 2019. Pacritinib may also face competition from momelotinib, which Sierra Oncology
acquired from Gilead and has announced will likely require an additional clinical study to consolidate data across the
momelotinib development program.

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 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.

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 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.

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.

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 we have significant
contractual payment obligations. Our available cash, cash equivalents and short-term investments were $67.0 million as of
December 31, 2018. In February 2018, we received approximately $64.2 million in net proceeds from an offering of
common stock. In addition, we received a $10.0 million milestone payment from Teva Pharmaceutical Industries Ltd. in
February 2019 relating to the achievement of a worldwide net sales milestone of TRISENOX in December 2018. While we
believe that our present financial resources will be sufficient to fund our operations through the second quarter of 2020, 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, 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.

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. For example, we have a sales agreement in place with Cowen
and Company, LLC, or Cowen, to sell up to $50.0 million worth of shares of our common stock, from time to time, through
an “at-the-market” equity offering program under which Cowen will act as sales agent. However, our ability to raise capital
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 stockholder
approval to increase authorized shares and the restrictive covenants under our secured term loan agreement;

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

• our ability to obtain further funds from any potential loan arrangements is limited by our existing loan and security
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 raise
additional funds by issuing equity or-equity linked securities, including pursuant to our at-the-market offering facility with
Cowen, our stockholders may experience dilution. 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 may never be able to generate significant product revenues.

We anticipate that, for at least the next several years, our ability to generate significant revenues and become
profitable will be substantially dependent on our ability to obtain regulatory approval for and successfully commercialize
pacritinib. If we are unable to successfully commercialize our development stage or approved products as planned, our
business, financial condition, operating results and prospects could be harmed.

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 pacritinib drug supply to successor vendors, 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 addition, in the event pacritinib is approved, we will initially 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, and seeking prior regulatory approval for a new 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.

We are party to a loan and security agreement that contains operating and financial covenants that may restrict our

business and financing activities and we may be required to repay the outstanding indebtedness in an event of default, which
could have a materially adverse effect on our business.

In November 2017, we entered into a loan and security agreement with Silicon Valley Bank, which was amended in May

2018, the proceeds of which were partially used to repay in full all outstanding indebtedness under our loan and security
agreement with Hercules Technology Growth Capital.

Borrowings under this loan and security agreement are secured by substantially all of our assets except intellectual

property and subject to certain other exceptions. The loan and security agreement restricts our ability, among other things, to:

• sell, transfer or otherwise dispose of any of our business assets or property, subject to limited exceptions;

• make material changes to our business or management;

• enter into transactions resulting in significant changes to the voting control of our stock;

• make certain changes to our organizational structure;

• consolidate or merge with other entities or acquire other entities;

• incur additional indebtedness or create encumbrances on our assets;

• pay dividends, other than dividends paid solely in our common shares, or make distributions on and, in certain
cases, repurchase our capital stock;

• enter into certain transactions with our affiliates;

• repay subordinated indebtedness; or

• make certain investments.

In addition, we are required under our loan agreement and security agreement to comply with various affirmative
covenants. The covenants and restrictions and obligations in our loan and security agreement, as well as any future financing
agreements that we may enter into, may restrict our ability to finance our operations, engage in business activities or expand or
fully pursue our business strategies. Our ability to comply with these covenants may be affected by events beyond our control,
and we may not be able to meet those covenants. A breach of any of these covenants could result in a default under the loan and
security agreement, which could cause all of the outstanding indebtedness under the facility to become immediately due and
payable and eliminate our eligibility to receive additional loans under the agreement.

If we are unable to generate sufficient cash available to repay our debt obligations when they become due and payable,

either when they mature, or in the event of a default, we may not be able to obtain additional debt or equity financing on
favorable terms, if at all, which may negatively impact our business operations and financial condition.

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.

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. In

December 2018, we announced a restructuring plan to improve efficiencies and reduce costs within the organization, which
resulted in workforce reductions impacting approximately half of the total number of our employees immediately prior to
the restructuring. These leadership transitions, management changes and the recent reduction in force can be difficult to
manage and may create uncertainty or disruption to our business, increase the likelihood of turnover in our other officers
and employees and negatively impact our ability to recruit.

Directors and management of publicly traded corporations are increasingly concerned with the extent of their
personal exposure to lawsuits and stockholder 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, particularly for companies like ours that have had a history of litigation. 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.

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, such as pacritinib. 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 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. We historically carried out research and development activities in Italy and incurred value added tax, or
VAT, from Italian suppliers on the acquisition of goods and services in Italy. This VAT should be considered as an Input VAT
credit. We treated the majority of our sales made in Italy without output VAT (on the basis that the supplies should be
considered outside the scope of Italian VAT). This resulted in the value of input VAT exceeding the value of output VAT, and
accordingly we submitted a refund claim for the VAT. The Italian Tax Authority, or the ITA, has challenged the treatment of the
sales transactions and claimed that the sales transactions made by us should have been subject to output VAT. Our Italian VAT
receivable was $4.5 million and $4.8 million as of December 31, 2018 and 2017, 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 €0.6 million, €2.7 million and €0.9
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 II, Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated
Financial Statements - Note 18. Commitments and Contingencies" 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 €4.2 million,
or approximately $4.8 million converted using the currency exchange rate as of December 31, 2018, including interest and
penalties 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. See Part II, Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements -
Note 18. Commitments and Contingencies," for more information regarding the regulatory matters and legal claims in
which we are currently involved. Additionally, we were previously required to supply documents in response to a subpoena
from the SEC in connection with an investigation into potential federal securities law violations; however, in August 2018,
the SEC staff sent a letter stating that it had concluded its investigation of us, and, based on information it had as of that
date, it did not intend to recommend an enforcement action against us. Litigation and regulatory proceedings are 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 and penalties 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 any litigation or regulatory proceedings we are or may be

party to in the future. 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.

A variety of risks associated with international operations could materially adversely affect our business.

If we engage in significant cross-border activities, we will be subject to risks related to international operations, including:

•

different regulatory requirements for initiating clinical trials and maintaining approval of drugs in foreign countries;

reduced protection for intellectual property rights in certain countries;

unexpected changes in tariffs, trade barriers and regulatory requirements;

economic weakness, including inflation, political instability or open conflict in particular foreign economies and
markets;

compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other
obligations of doing business in another country;

• workforce uncertainty in countries where labor unrest is more common than in North America;

•

likelihood of potential or actual violations of domestic and international anti-corruption laws, such as the U.S. Foreign
Corrupt Practices Act and the U.K. Bribery Act, or of U.S. and international export control and sanctions regulations,
which likelihood may increase with an increase of operations in foreign jurisdictions;

tighter restrictions on privacy and the collection and use of data, including genetic material, may apply in jurisdictions
outside of North America; and

business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including
earthquakes, typhoons, floods and fires.

If any of these issues were to occur, our business could be materially harmed.

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 our 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.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect

on our business, cash flow, financial condition or results of operations.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which

could affect the tax treatment of our domestic and foreign earnings. Any new taxes could adversely affect our domestic and
international business operations, and our business and financial performance. Further, existing tax laws, statutes, rules,
regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the United States
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 34% 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 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 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. We are continuing to evaluate the
impact of the 2017 Tax Act as further guidance is released. The foregoing items could have a material adverse effect on our
business, cash flow, financial condition or results of operations.

We could be subject to additional income tax liabilities.

We are subject to income taxes in the United States and certain foreign jurisdictions. We use significant judgment in
evaluating our worldwide income-tax provision. During the ordinary course of business, we conduct many transactions for
which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by
earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in
countries where we have higher statutory rates, by changes in currency exchange rates, by changes in the valuation of our
deferred tax assets and liabilities or by changes in the relevant tax, accounting and other laws, regulations, principles and
interpretations. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income tax
against us. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related
litigation could be materially different from our historical income-tax provisions and accruals. The results of an audit or
litigation could have a material effect on our operating results or cash flows in the period or periods for which that
determination is made.

Our international operations subject us to potential adverse tax consequences.

We generally conduct our international operations through wholly owned subsidiaries and report our taxable income

in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany
relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions.
The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific
jurisdictions. If such a disagreement were to occur, and our position was not sustained, we could be required to pay
additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash
flows and lower overall profitability of our operations. We believe that our financial statements reflect adequate reserves to
cover such a contingency, but there can be no assurances in that regard.

Due to the fact that we have a European subsidiary 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 subsidiary 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 may increase our exposure to fluctuations in
foreign currency exchange rates. In addition, certain of our contractual arrangements, 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. 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.

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 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. We anticipate needing to make further investments in protecting against these
matters going forward. 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,
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any of which could have a material adverse effect on our business, results of operations, financial condition, prospects and cash
flows. Our contract manufacturers and other service providers face similar risks with respect to interruptions, breakdowns, and
other security incidents, and any incidents suffered by our service providers can result in similar impacts upon our business,
results of operations, financial condition, prospects and cash flows.

While we maintain insurance, our insurance may be insufficient to cover all liabilities incurred by any security incidents.

We also cannot be certain that our insurance coverage will be adequate for liabilities actually incurred, that insurance will
continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any
future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the
occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-
insurance requirements, could have a material adverse effect on our business, including our financial condition, operating
results, and reputation.

We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and

our business continuity and disaster recovery plans may not adequately protect us from serious disaster.

Our headquarters are located in Seattle, Washington. We are vulnerable to natural disasters such as earthquakes that
could disrupt our operations. If a natural disaster, power outage, fire or other event occurred that prevented us from using all or
a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities of our third-
party contract manufacturers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to
continue our business for a substantial period of time. We may not carry sufficient business interruption insurance to
compensate us for all losses that may occur. The disaster recovery and business continuity plans we have in place may not be
adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of a natural disaster or
earthquake, which could have a material adverse effect on our business. In addition, we may lose samples or other valuable
data. The occurrence of any of the forgoing could have a material adverse effect on our business.

We recently implemented a restructuring plan, which we cannot guarantee will achieve its intended benefits.

In December 2018, we announced a restructuring plan to improve our efficiencies and reduce costs. We may incur
significant costs to implement this restructuring plan, and doing so may subject us to litigation risks and expenses. Moreover,
while we currently expect to realize cost savings of approximately $20 million primarily associated with reduced employee
costs over the next three years as a result of our restructuring plan, there can be no assurance that the restructuring plan will
achieve its intended benefits. In addition, our restructuring plan may have other consequences, such as attrition beyond our
planned reduction in workforce, a negative effect on employee morale and productivity or our ability to attract highly skilled
employees. As a result, our restructuring plan and its implementation could have a material adverse effect on our business,
results of operations, financial condition, prospects and cash flows.

Risks Related to the Development, Clinical Testing and Regulatory Approval of Our Product Candidates

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 MAA in Europe. While the full clinical
hold on pacritinib trials has been removed, our dose-exploration trial for pacritinib and further registration 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 clinical studies. A full

clinical hold is a suspension of the clinical work requested under an IND application. Under the full clinical hold, all
patients on pacritinib at the time of the hold order were required to discontinue pacritinib immediately, and no new patients
could be enrolled or start pacritinib as initial or crossover treatment. In January 2017, the full clinical hold was removed
following review of our complete response submission which included, among other items, final Clinical Study Reports for
both PERSIST-1 and 2 trials and FDA agreement on a proposed study design for a dose-exploration clinical trial. In July
2017, we enrolled the first patient in the PAC203 trial, which is evaluating the safety and efficacy of three dosing schedules
over 24 weeks in patients with myelofibrosis previously treated with ruxolitinib. In October 2018, we announced the
continuation of the PAC203 Phase 2 study without modification, following a planned second interim data review by the
independent data monitoring committee, or IDMC. Following meetings with the FDA and EMA and in consultation with the
IDMC, we eliminated the interim efficacy analysis and focused the second IDMC review, and all subsequent data reviews,
on an assessment of safety. A complete dataset from the fully enrolled study (including efficacy, safety, pharmacokinetic and
pharmacodynamic data) will be used to determine the optimal dose of pacritinib for further clinical development, as

requested by the FDA. Based on FDA feedback received at a July Type B meeting, we plan to conduct a randomized Phase
3 study of pacritinib in patients with myelofibrosis. The dosing for the Phase 3 study will be determined using the results of
the PAC203 study. We completed a Type C meeting with the FDA in December 2018 and received input from the FDA on
key elements of the design of the new randomized Phase 3 study of pacritinib in adult patients with myelofibrosis (primary
myelofibrosis, post-polycythemia vera myelofibrosis, or post-essential thrombocythemia myelofibrosis) and who have
severe thrombocytopenia (platelet counts of less than 50,000 per microliter). Before commencing the Phase 3 study, we plan
to seek FDA advice on the proposed final protocol design and seek scientific advice from European countries to support
alignment on the Phase 3 study design. Although the IDMC completed its planned third interim safety review in January
2019 and recommended that the PAC203 study continue without modification, we cannot be certain that the proposed new
Phase 3 study will be sufficient for regulatory approval or that the full data from the PAC203 study will not raise additional
questions from the FDA or identify an optimal dose or dosing regimen of pacritinib that can be used in the planned Phase 3
registration study, 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. After the filing of the original MAA, data from the second phase 3
trial of pacritinib, PERSIST-2, were reported. 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; however, we withdrew the MAA in February 2019
following interactions with CHMP, during which we learned that CHMP was likely to formally adopt a negative opinion in its
evaluation of the application. CHMP indicated that the risk-benefit profile for pacritinib for the intended indication has not been
sufficiently established with the clinical data available to date. For additional information regarding the status of our clinical
development efforts, see Part I, Item 2, "Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Overview."

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.

We previously sought accelerated approval and requested Priority Review of our NDA for pacritinib. However,
following the full clinical hold placed on pacritinib in February 2016, we subsequently withdrew our NDA. If we seek and the
FDA does not grant accelerated approval or priority review for pacritinib or any of our other product candidates, we would
experience a longer time to commercialization, if such product candidates are commercialized at all, our development costs
would increase and our competitive position could be materially harmed.

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 dependent on the success of our development and commercialization collaborations. 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.

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.

For example, although PIXUVRI received conditional marketing authorization in the E.U. in May 2012, we were
required to conduct a post-authorization trial, referred to as PIX306, comparing PIXUVRI and rituximab with gemcitabine and
rituximab in the setting of aggressive B-cell NHL and follicular grade 3 lymphoma. In July 2018, we and Servier announced
that PIXUVRI plus rituximab did not show a statistically significant improvement in progression-free survival compared to
gemcitabine plus rituximab and in February 2019, we and Servier mutually agreed to terminate our collaborative agreement.

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.

If 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 may in the future decide to seek an 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
accelerated approval will be granted on any basis. 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 that
demonstrate a clinical benefit. 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 six
months after it has accepted an application for filing (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 six-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.

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, in February 2016, the FDA placed pacritinib on full clinical hold and the clinical hold was not removed
until January 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. For example, in July 2018,
we attended a Type B meeting with the FDA to discuss the proposed regulatory pathway for pacritinib. Based on FDA
feedback at the meeting, we intend to conduct a randomized Phase 3 study of pacritinib in patients with myelofibrosis,
which Phase 3 study will require significant time and resources to complete and, even if completed, may not be sufficient to
support approval. 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.

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.

Post-approval or authorization regulatory reviews and obligations often result in significant expense and marketing

limitations, and any failure to satisfy such ongoing obligations 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, promoted and advertised. Approved or
authorized products 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 for post-
approval studies. 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 the PIX306 trial of PIXUVRI required by the EMA. In

July 2018, we and Servier announced that PIXUVRI plus rituximab did not show a statistically significant improvement in
progression-free survival compared to gemcitabine plus rituximab, and in February 2019, we and Servier mutually agreed to
terminate our collaborative agreement, which limits our ability to receive future payments and royalties related to
PIXUVRI. For more information on the termination of our agreement with Servier, see the section of this report captioned
“Business - License Agreements - Servier.”

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 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, or uses not approved by the
FDA. 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 uses of our products that are not approved by the FDA, unless otherwise
allowed by the FDA by policy or other guidance.

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.

We are subject to numerous laws and regulations related to health care fraud and abuse, false claims, anti-bribery

and anti-corruption laws, such as the U.S. Anti-Kickback Statute and Foreign Corrupt Practices Act of 1977, in which
violations of these laws could result in substantial penalties and prosecution.

In the United States, 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. Any allegation, investigation, or violation of these domestic health care fraud and abuse laws could
result in government or internal investigations, significant diversion of resources, exclusion from government health care
reimbursement programs and the curtailment or restructuring of our operations, significant fines, penalties, or other financial
consequences, any of which may ultimately have a material adverse effect on our business.

For our sales and operations outside the United States, we are similarly subject to various heavily-enforced anti-
bribery and anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, U.K.
Bribery Act, and similar laws around the world. These laws generally prohibit U.S. companies and their employees and
intermediaries from offering, promising, authorizing or making improper payments to foreign government officials for the
purpose of obtaining or retaining business or gaining any advantage. We face significant risks if we, which includes our
third parties, fail to comply with the FCPA and other anti-corruption and anti-bribery laws.

We leverage various third parties to sell our products and conduct our business abroad. We, our commercial partners
and our other third-party intermediaries, including collaborators and licensees, may have direct or indirect interactions with
officials and employees of government agencies or state-owned or affiliated entities (such as in the context of obtaining
government approvals, registrations, or licenses or sales to government owned or controlled health care facilities,

universities, institutes, clinics, etc.) and may be held liable for the corrupt or other illegal activities of these third-party
business partners and intermediaries, our employees, representatives, contractors, partners, collaborators, licensees and
agents, even if we do not explicitly authorize such activities. In many foreign countries, particularly in countries with
developing economies, it may be a local custom that businesses engage in practices that are prohibited by the FCPA or other
applicable laws and regulations. To that end, while we have adopted and implemented internal control policies and
procedures and employee training and compliance programs to deter prohibited practices, such compliance measures
ultimately may not be effective in prohibiting our employees, representatives, contractors, partners, collaborators, licensees,
agents and other third parties or intermediaries from violating or circumventing our policies and/or the law.

Any violation of the FCPA, other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws could
result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil
sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracts, which could have a
material and adverse effect on our reputation, business, operating results and prospects. In addition, responding to any
enforcement action or related investigation may result in a materially significant diversion of management’s attention and
resources and significant defense costs and other professional fees.

Our employees, collaborators and other personnel may engage in misconduct or other improper activities, including

non-compliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of fraud or other misconduct by our employees, collaborators, vendors, principal

investigators, consultants and commercial partners. Misconduct by these parties could include intentional failures to comply
with the regulations of the FDA, EMA and other regulators, providing inaccurate or misleading information to the FDA,
EMA and other regulators, failure to comply with data privacy and security and healthcare fraud and abuse laws and
regulations in the U.S. and abroad, reporting inaccurate financial information or clinical data or disclose unauthorized
activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive
laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.
Additionally, laws regarding data privacy and security, including the federal Health Insurance Portability and Accountability
Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009,
or HITECH, as well as applicable laws in non-U.S. jurisdictions, such as the European Union's General Data Privacy
Regulation and Clinical Trials Regulation, the latter of which will replace the E.U. Clinical Trials Directive and which is
expected to take effect beginning in late 2019 or in 2020, may impose obligations with respect to safeguarding the privacy,
use, security, transmission and other processing of individually identifiable health information and other personal data that
we may collect, retain, and otherwise process. As the General Data Protection Regulation entered into force recently,
guidance on implementation and compliance practices are still being developed, updated or otherwise revised. Although the
General Data Protection Regulation is intended to provide for a high level of harmonization across the European Union,
Member States may still implement certain variations, and data protection authorities may enforce the General Data
Protection Regulation and national laws differently, which adds to the complexity of processing personal data in the
European Union. Furthermore, there is a trend 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. Failing to comply with
these obligations could lead to government enforcement actions and significant penalties against us, harm to our reputation,
and adversely impact our business and operating results. The uncertainty regarding the interplay between different
regulatory frameworks, such as the Clinical Trials Regulation and the General Data Protection Regulation, further adds to
the complexity that we face with regard to data protection regulation. Additionally, we rely on the use of standard
contractual clauses approved by the European Commission in order to transfer personal data from the E.U. to the U.S. These
standard contractual clauses are subject to legal challenge in the E.U., and it is possible that they will be invalidated or
modified. In such event, we could need to implement alternative measures to transfer personal data from the E.U. to the
U.S., which we may be unable to do in a commercially reasonable manner or at all. In the U.S., 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 attorneys’ 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.

Various laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion,

sales commission, customer incentive programs and other business arrangements. Any misconduct could also involve the
improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and cause
serious harm to our reputation. We have adopted a code of conduct applicable to all of our employees, officers, directors,
agents and representatives, including consultants, but it is not always possible to identify and deter misconduct, and the

precautions we take to detect and prevent misconduct may not be effective in controlling unknown or unmanaged risks or
losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply
with these laws and regulations. If any such actions are instituted against us, and we are not successful in defending
ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of
significant fines or other sanctions.

Risks Related to Intellectual Property

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 pacritinib and other product candidates. 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.

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 pacritinib 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 method and composition of matter patents for pacritinib expire as follows: U.S. patents expire
in May 2028 (method) / January 2029 (compound) / March 2030 (salt); foreign patents expire in November 2026 (method
and compound) / December 2029 (salt). We expect our U.S. and foreign patent applications for use of pacritinib for treating
transplant rejection will expire in 2036. Pacritinib has orphan drug designation for myelofibrosis 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.
However, given the amount of time required for the development, testing and regulatory review of new product candidates,
patents protecting such candidates might expire before such candidates are commercialized which may prevent us from
obtaining any regulatory extensions if all the patents covering our candidates are expired prior to regulatory approval of the
corresponding product candidate. As a result, our owned and licensed patent portfolio may not provide us with sufficient
rights to exclude others from commercializing products similar or identical to ours.

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 pharmaceutical and 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, circumvented or found
unenforceable. 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 pharmaceutical and 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
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.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged

trade secrets of our employees’ former employers.

Many of our employees were previously employed at universities or other life sciences companies, including our
competitors or potential competitors. Although no claims against us are currently pending, we or our employees may be subject
to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary
information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such
claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. A loss of key research
personnel work product could hamper or prevent our ability to commercialize certain potential products, which could severely
harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and
be a distraction to management.

Risks Related to Our Common Stock

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,
2019, our stock price ranged from a low of $0.60 to a high of $5.36. 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.

We may not be able to maintain our listing 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 loan and security agreement 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, our ability to raise capital will be adversely impacted. Additionally, for
so long as our non-affiliate public float does not exceed $75 million, the amount of securities that we may sell pursuant to
registration statements on Form S-3 will be limited to the equivalent of one-third of our public float, which will limit our ability
to file or use shelf registration statements on Form S-3 and further limit our ability to raise capital. We have relied significantly
on shelf registration statements on 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.

Future financing, strategic and other activities may require us to increase the number of authorized shares in our
certificate of incorporation. An inability to secure requisite stockholder approval for such increases could materially and
adversely impact our ability to fund our operations.

At our 2018 annual meeting of stockholders, we sought and received approval of an amendment to our certificate of

incorporation to increase the total number of authorized shares and the total number of authorized shares of our common stock
by 20 million. We proposed the increase in authorized shares due to the fact that we anticipate the need to issue additional
shares of common stock in the future in connection with one or more of the following:

•

financing transactions, such as public or private offerings of common stock or derivative securities;

our equity incentive plans and employee stock purchase plan;

debt, warrant or other equity restructuring or refinancing transactions, such as debt or warrant exchanges or offerings
of new convertible debt or modifications to existing securities, or as payments of interest on debt securities;

acquisitions, strategic partnerships, collaborations, joint ventures, restructurings, divestitures, business combinations
and strategic investments;

corporate transactions, such as stock splits or stock dividends; and

other corporate purposes that have not yet been identified.

We may seek approval to increase the number of authorized shares again in the future. Without such increases in the

number of authorized shares, we may be constrained in our ability to raise capital when needed, and may lose important
business opportunities, including to competitors, which could adversely affect our financial performance, growth and ability to
continue our operations. As opportunities or circumstances that require prompt action frequently arise, we believe that the delay
necessitated for stockholder approval of a specific issuance could result in a material and adverse impact on our business.

Even if we obtain approval to increase the number of authorized shares, we are required under the Nasdaq Marketplace

Rules to obtain stockholder 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 a minimum price as set
forth in the Nasdaq Marketplace Rules 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 stockholder approval for any future issuance that requires
stockholder approval pursuant to applicable rules and regulations. If we are unable to obtain financing or our financing options
are limited due to stockholder approval difficulties, such failure may harm our ability to continue operations.

Anti-takeover provisions in our charter documents, 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 stockholders, more
difficult.

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

stockholders 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 stockholder nominations and proposals;

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

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

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 stockholders. 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.
Our shareholder rights plan expired pursuant to its terms on December 2, 2018, and was not replaced; however, the Board
may, subject to its fiduciary duties under applicable law, choose to implement a similar plan in the future. Likewise, because
our principal executive offices are located in Washington, the anti-takeover provisions of the Washington Business
Corporation Act may apply to us under certain circumstances now or in the future. These provisions prohibit a “target
corporation” from engaging in any of a broad range of business combinations with any stockholder constituting an
“acquiring person” for a period of five years following the date on which the stockholder became an “acquiring person.”

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

management, proxy contests or changes in control.

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 affect our investors' 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 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.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity

incentive plans, could cause you to incur dilution and could cause the market price of our common stock to fall.

As of December 31, 2018, options to purchase 7,219,292 shares of our common stock with a weighted-average exercise
price of $4.08 per share were outstanding. The exercise of any of these options would result in dilution to current stockholders.
Further, because we will need to raise additional capital to fund our operations and clinical development programs, we may in
the future sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. Pursuant
to our equity incentive plans, our compensation committee is authorized to grant equity-based incentive awards to our
employees, directors and consultants. Future option grants and issuances of common stock under our share-based compensation
plans may have an adverse effect on the market price of our common stock.

These future issuances of common stock or common stock-related securities, together with the exercise of outstanding

options and any additional shares of common stock issued in connection with acquisitions, if any, may result in further dilution
to our existing stockholders, and new investors could gain rights, preferences and privileges senior to those of holders of our
common stock.

If securities or industry analysts do not publish research reports about our business, or if they issue an adverse opinion

about our business, the market price of our common stock and the trading volume of our common stock could decline.

The trading market for our common stock is influenced by the research and reports that securities or industry analysts

publish about us or our business. If too few securities or industry analysts cover our company, the market price of our common
stock would likely be negatively impacted. If securities and industry analysts who cover us downgrade our common stock or
publish inaccurate or unfavorable research about our business, the market price of our common stock would likely decline. If
one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our common
stock could decrease, which might cause the market price of our common stock and the trading volume of our common stock to
decline.

Our management team has broad discretion as to the use of the net proceeds from public or private equity or debt

financings and the investment of these proceeds may not yield a favorable return. We may invest the proceeds in ways with
which our stockholders disagree.

We have broad discretion in the application of the net proceeds to us from our November 2017 debt financing and
February 2018 public equity offering of our common stock. You may not agree with our decisions, and our use of the proceeds
and our existing cash and cash equivalents and marketable securities may not improve our results of operation or enhance the
value of our common stock. The results and effectiveness of the use of proceeds are uncertain, and we could spend the proceeds
in ways that you do not agree with or that do not improve our results of operations or enhance the value of our common stock.
Our failure to apply these funds effectively could have a material adverse effect on our business, delay the development of our
product candidates and cause the market price of our common stock to decline. In addition, until the net proceeds are used, they
may be placed in investments that do not produce significant income or that may lose value.

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 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

Except as set forth below, we are not engaged in any material legal proceedings. From time to time, we may become

involved in litigation relating to claims arising from the ordinary course of business. Except as set forth below, we believe that
there are no claims or actions pending against us currently, the ultimate disposition of which would have a material adverse
effect on our consolidated results of operation, financial condition or cash flows.

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, 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). The assessments,
including interest and penalties, for the years 2003, 2006 and 2007 are €0.6 million, €2.7 million and €0.9 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 all the assessments and are defending ourselves against the assessments both on procedural
grounds and on the merits of the cases, 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 VAT Assessment. In June 2013, the Regional Tax Court issued decision no. 119/50/13 in regards to the 2003
VAT Assessment, which accepted the October 2012 appeal of the ITA and reversed a 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 VAT Assessment. In January 2018, the Italian Supreme Court issued decision No. 02250/2018 which (i) rejected
the April 2013 appeal of the ITA, (ii) confirmed the October 2012 decision of the Regional Tax Court (127/31/2012),
which fully accepted the merits of our earlier appeal and confirmed that no penalties could be imposed against us, 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 Italian Supreme Court decision, and we have initiated steps to recover the
amounts owed to us. We have applied for a refund based on the guidance from ITA, however the collectibility of the
refund currently has not been determined.

• 2006 and 2007 VAT Assessments. In November 2013, the ITA appealed to the Italian Supreme Court an April 2013
decision of the Regional Tax Court (57/35/13), that fully rejected the merits of an earlier ITA appeal, declared that no
penalties could be imposed against us and found ITA liable to pay us approximately €12,000, as a partial refund of legal
expenses we incurred.

No hearing has been fixed yet for either the 2003 VAT Assessment or consolidated 2006 and 2007 VAT Assessment

cases.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder 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.

2017

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

2018

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

High

Low

$
$
$
$

6.48
4.52
3.84
3.45

4.15
5.36
5.28
2.30

$
$
$
$

3.87
2.70
3.07
2.45

2.48
3.70
1.70
0.60

On February 28, 2019, the last reported sale price of our common stock on the NASDAQ Capital Market was $1.02 per

share. As of February 28, 2019, there were 108 stockholders 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

On November 6, 2018, we issued to a consultant a warrant to purchase 294,117 shares of our common stock. The
exercise price of the warrant is $1.70 per share. The issuance of the warrant was exempt from registration under the Securities
Act of 1933, as amended, pursuant to Section 4(a)(2) thereof as a transaction by an issuer not involving a public offering.

Stock Performance Graph

As a smaller reporting company, we are not required to provide the information requested by this item pursuant to Item

201(e) of Regulation S-K.

Item 6. Selected Financial Data

As a smaller reporting company, we are not required to provide the information requested by this item pursuant to Item

301(c) of Regulation S-K.

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

You should read the following discussion and analysis of our financial condition and results of operations together with

our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. In
addition to historical information, some of the information contained in this discussion and analysis or set forth elsewhere in
this report, including information with respect to our plans and strategy for our business, future financial performance, expense
levels and liquidity sources, includes forward-looking statements that involve risks and uncertainties. You should read the “Risk
Factors” section of this report for a discussion of important factors that could cause actual results to differ materially from the
results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

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

Our primary 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.

We intend to develop and commercialize pacritinib for adult patients with myelofibrosis and potentially additional

indications. 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. We plan to continue to seek out additional
product candidates in an opportunistic manner.

We have funded our operations through the sale of equity securities, funding received from our licensees and
collaborators, debt financing and, to a lesser extent, government funding. For 2018 and 2017, we recognized revenues of
approximately $26.3 million and $25.1 million, respectively, consisting primarily of license and contract revenue. We do not
expect to have sustained profitability for the foreseeable future. We had a net loss of $29.4 million for the year ended December
31, 2018 and an accumulated deficit of $2.2 billion as of December 31, 2018, primarily from expenses incurred in connection
with our research programs and from general and administrative costs associated with our operations.

We expect to continue to incur significant expenses and operating losses for at least the next 12 to 24 months. We

anticipate that our expenses will increase as we:

• continue our research and clinical development of pacritinib;

• seek regulatory and marketing approvals for pacritinib if we successfully complete the remainder of its anticipated
clinical development;

• maintain, protect and expand our intellectual property portfolio; and

Factors Affecting Our Performance

Research and Development Activities

We will need to commit significant time and resources to develop our current and any future product candidates. Our

primary product candidate, pacritinib, is currently in clinical development. 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 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.

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 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, in February 2016, the FDA
placed a full clinical hold on pacritinib. Also, in July 2018, we attended a Type B meeting with the FDA to discuss the proposed
regulatory pathway for pacritinib. Based on FDA feedback at the meeting and further discussions with the FDA at a Type C
meeting in December 2018, we intend to conduct a randomized Phase 3 study of pacritinib in patients with myelofibrosis,
which Phase 3 study will require significant time and resources to complete. 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 be able to begin commercializing pacritinib 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” of this report.

Exclusive License and Collaboration Agreement with Servier

In April 2017 we amended and restated in its entirety the Exclusive License and Collaboration Agreement, or the
Original Agreement, entered into with Servier in September 2014, related to PIXUVRI. Prior to the April 2017 entry into the
Restated Agreement with Servier, we sold PIXUVRI primarily through a limited number of wholesale distributors. Gross sales
is defined as our contracted reimbursement price in each country. Product sales, net, represents gross sales, net of provisions for
distributor discounts, estimated government-mandated discounts and rebates, trade discounts and estimated product returns.
Following the entry into the Restated Agreement, we no longer had product sales and Servier assumed responsibility for
distribution of PIXUVRI in countries other than the U.S.

Our license and contract revenues include the earned amount of upfront payments and milestone payments under our

product collaborations. In connection with the April 2017 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 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, is being recognized as revenue using an input measure. Following our July 2018
announcement that PIXUVRI plus rituximab did not show a statistically significant improvement in progression-free survival
compared to gemcitabine plus rituximab, the deferred revenue balance was fully recognized as revenue as of December 31,
2018. In February 2019, we and Servier mutually agreed to terminate our collaborative agreement. For additional information
on our agreements with Servier, see Part I, Item 1, “Business - License Agreements - Servier” of this report. Other than

amounts we are entitled to or may become entitled to pursuant to our termination agreement with Servier, we do not anticipate
additional revenues or payments from Servier relating to PIXUVRI.

Financial summary

Our revenues are generated from license and development services agreements. We had PIXUVRI sales prior to April

2017 when we entered into the Restated Agreement with Servier. Our license and contract revenues reflect the earned amount
of upfront payments and milestone payments under our product collaborations. Total revenues were $26.3 million and $25.1
million for the years ended December 31, 2018 and 2017, respectively. Loss from operations was $32.9 million and $39.5
million for the years ended December 31, 2018 and 2017, respectively. 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.

As of December 31, 2018, we had cash, cash equivalents and short-term investments of $67.0 million.

Results of Operations

Years ended December 31, 2018 and 2017

Product sales, net. Product sales, net from PIXUVRI were $0.9 million for the year ended December 31, 2017. We had

no product sales for the year ended December 31, 2018 due to our entry into the Restated Agreement with Servier in April
2017.

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

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

Teva

Milestones revenue
Total Teva

Years ended December 31,

2018

2017

3,397
1,759
765
369
6,290

20,000
20,000

12,665
1,098
530
—
14,293

10,000
10,000

Total license and contract revenue

26,290

24,293

Servier

Milestone and license revenue for the year ended December 31, 2018 includes €3.0 million of milestone revenue (or

$3.4 million using the currency exchange rate as of the date the milestone was achieved) relating to the attainment of a
regulatory milestone in November 2018 under the Restated Agreement. Milestone and license revenue for the year ended
December 31, 2017 includes an $11.5 million license revenue allocated from the upfront payment we received in connection
with the Restated Agreement as well as a €1.0 million milestone revenue (or $1.2 million using the currency exchange rate as
of the date the milestone was achieved) relating to the attainment of a regulatory milestone in September 2017.

Development services revenue for the year ended December 31, 2018 included $1.4 million of revenue recognized from

the upfront payments we received in connection with the Restated Agreement and the Original Agreement with Servier. Such
revenue during the same period in 2017 was $0.6 million. In addition, we recorded revenue of $0.3 million during the year
ended December 31, 2018 for the reimbursement of pharmacovigilance expenses under the Restated Agreement. We recorded
revenue of $0.4 million for the year ended December 31, 2017 for the reimbursement of expenses related to commercialization
transition under the Restated Agreement. In February 2016, we entered into an agreement with one of Servier's affiliates
whereby we conducted a pharmacokinetic sub-study on behalf of Servier in conjunction with our ongoing clinical trial,
PIX-306. In relation to this study, we recorded $0.1 million of expense reimbursements as development services revenue for the
year ended December 31, 2017. There was no such revenue during the year ended December 31, 2018 as the pharmacokinetic
sub-study was completed in September 2017.

Royalty revenue under the terms of the Restated Agreement and the Original Agreement for the years ended December

31, 2018 and 2017 was $0.8 million and $0.5 million, respectively.

Other revenue for the year ended December 31, 2018 relates to the sale of PIXUVRI drug product to Servier, which had

previously been written off. There was no such revenue for the year ended December 31, 2017.

Teva

For the year ended December 31, 2018, we recognized $10.0 million in revenue upon the achievement of a milestone in

January 2018 for FDA approval of TRISENOX for first line treatment of acute promyelocytic leukemia. In addition, we
recognized $10.0 million in revenue upon the achievement of a worldwide net sales milestone of TRISENOX in December
2018, which is included in Receivables from license and development services arrangements in our consolidated balance sheet.

For the year ended December 31, 2017, we recognized a $10.0 million revenue upon the achievement of a worldwide net

sales milestone of TRISENOX.

Operating costs and expenses

Cost of product sold. Cost of product sold relates to PIXUVRI and includes royalty expenses payable under our
agreement with the University of Vermont and the Novartis Termination Agreement. For additional information, see Part II,
Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 10. Collaboration,
Licensing and Milestone Agreements". Cost of product sold for the year ended December 31, 2018 was $0.9 million and
included a $0.5 million provision for excess, obsolete or unsaleable inventory as well as royalty expenses of $0.4 million. Cost
of product sold for the year ended December 31, 2017 was $0.4 million, which included royalty expenses of $0.3 million. The
increase in cost of product sold for the year ended December 31, 2018 compared to the same period in 2017 was primarily
related to the provision for excess, obsolete or unsalable inventory.

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
Tosedostat
Operating expenses

Research and preclinical development
Total research and development expenses

Years ended December 31,

2018

2017

5,998
17,991
100
12,347
31
36,467

7,419
13,135
(3)
12,268
47
32,866

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 (which include non-cash stock-
based compensation of $2.0 million and $0.9 million for the year ended December 31, 2018 and 2017, respectively) 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, 2018
were $133.9 million for PIXUVRI (excluding costs prior to our 2004 merger with Novuspharma S.p.A, formerly a public
pharmaceutical company located in Italy), $146.3 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) and $14.0 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 in-process

research and development expenses associated with the acquisition of certain assets from Chroma). We have ceased
development of tosedostat and do not anticipate incurring additional material expenses related to this terminated program.

Research and development expenses increased to $36.5 million for the year ended December 31, 2018 compared to

$32.9 million for the year ended December 31, 2017. The increase of $3.6 million was primarily attributable to a $6.4 million
increase in the pacritinib Phase 2 dosing clinical study which began in the second quarter of 2017 and a $2.5 million increase in
other pacritinib development costs, offset by a $2.1 million decrease in expenses for the completion of two pacritinib Phase 3
clinical studies and a $1.9 million decrease in the manufacture of pacritinib, as well as a $1.4 million reduction in expenses
related to the PIX306 clinical study due to completion of the PIXUVRI program.

Selling, general and administrative expenses. Selling, general and administrative expenses were $21.2 million for the
year ended December 31, 2018 compared to $31.4 million for the year ended December 31, 2017. The decrease in 2018 from
2017 was primarily due to decreases of $3.7 million in personnel costs, $2.3 million primarily related to legal fees, $2.3 million
related to occupancy costs as well as a loss associated with the December 2017 sublease of approximately 44,000 square feet of
our office space and $1.9 million related to litigation settlement.

Restructuring expenses. In December 2018, we announced a plan to reduce our workforce in order to improve
efficiencies, reduce costs within the organization and preserve capital for pacritinib development. As a result, we recorded $0.7
million of employee separation costs for the year ended December 31, 2018. We expect to incur an additional $0.8 million in
employee separation costs in 2019. Cost savings of approximately $20.0 million primarily associated with reduced employee
expenses are expected over the next three years. See Part II, Item 8, "Financial Statements and Supplementary Data - Notes to
Consolidated Financial Statements - Note 11. Restructuring Activities" for further details.

Non-operating income and expenses

Interest income. Interest income was $1.2 million for the year ended December 31, 2018, primarily related to our short-

term investments and cash equivalent securities. There was no such interest income in 2017.

Interest expense. Interest expense was $1.2 million and $1.9 million for the year ended December 31, 2018 and 2017,
respectively. Interest expense was primarily related to our secured term loans. The decrease between periods primarily relates
to a lower average interest rate in 2018 than in 2017 and, to a lesser extent, a lower loan principal balance outstanding in 2018
compared to 2017. 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, 2018 and 2017 was primarily related to our senior secured term loans.

Foreign exchange (loss) gain. We had a foreign exchange loss of $0.2 million for the year ended December 31, 2018
and a foreign exchange gain of $0.8 million for the year ended December 31, 2017. The variances were due to fluctuations in
foreign currency exchange rates, primarily related to operations in our European subsidiary as well as assets and liabilities
denominated in foreign currencies.

Other non-operating income (expense). Other non-operating income for the year ended December 31, 2018 includes a

$4.3 million gain on the dissolution of our foreign branch, primarily relating to the release of cumulative translation adjustment.
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 our senior secured term loan from Hercules. 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 of approximately $0.1 million for the year

ended December 31, 2018 were related to the issuance of Series O Preferred Stock in February 2018. Deemed dividends on
preferred stock of $4.4 million for the year ended December 31, 2017 were related to the issuance of Series N Preferred Stock
in June 2017. See Part II, Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements
- Note 8. Equity Transactions" for further details.

Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations from proceeds from sales and issuance of equity securities, payments pursuant to license

and collaboration agreements and the incurrence of debt. As of December 31, 2018, we had $67.0 million in cash, cash
equivalents and short-term investments.

Common Stock Offering. In February 2018, we offered and sold 23.0 million shares of common stock at a $3.00 per
share price. The net proceeds from the offering, after deducting underwriting commissions and discounts and other offering
costs were approximately $64.2 million. We have a sales agreement in place with Cowen to sell up to $50.0 million worth of
shares of our common stock, from time to time, through an “at-the-market” equity offering program under which Cowen will
act as sales agent. As of the date of this report, we have not made any sales of our common stock through the equity offering
program with Cowen.

Loan Agreement. In November 2017, we entered into a Loan and Security Agreement with Silicon Valley Bank, or SVB,

which agreement was amended in May 2018, the proceeds of which were partially used to repay in full all outstanding
indebtedness under our Loan and Security Agreement, dated March 26, 2013, as amended, with Hercules Technology Growth
Capital, Inc., or Hercules (and certain of its affiliates). As of December 31, 2018, we had an outstanding principal balance
under our secured term loan agreement of $15.6 million. After the initial 12 months of interest-only period through November
1, 2018, 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 totaling 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 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.

Historical Cash Flows

Net cash used in operating activities. Net cash used in operating activities was $39.8 million during the year ended

December 31, 2018 compared to $39.3 million for the same period in 2017. While the amounts of net cash used between the
two periods remained consistent, we received a $13.1 million upfront payment from Servier in connection with the Restated
Agreement and also collected $7.8 million in 2016 receivables from Servier during 2017; we had no such receipts during 2018.
These cash receipts in 2017 were offset by larger cash payments made during 2017 compared to 2018.

Net cash used in investing activities. Net cash used in investing activities of $30.5 million during the year ended

December 31, 2018 was primarily due to purchases of short-term investments. There were no material investing activities
during the year ended 2017.

Net cash provided by financing activities. Net cash provided by financing activities was $63.5 million and $39.0 million

during the year ended December 31, 2018 and 2017, respectively. The increase was primarily due to the higher amount of net
proceeds from our February 2018 offering of common stock compared to those from our June 2017 offering of Series N
preferred stock.

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 for 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 I, Item 1, “Business -
License Agreements - Baxalta” of this report.

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 will be sufficient to fund our operations through the second quarter of 2020. However, we have incurred net
53

losses since inception and expect to generate losses for the foreseeable future, primarily due to research and development costs
for pacritinib. Because of our reacquisition of worldwide rights for pacritinib, we are no longer eligible to receive cost sharing
or milestone payments for pacritinib’s development from Baxalta, and losses related to research and development for pacritinib
have increased. 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, 2018, our available
cash, cash equivalents and short-term investment totaled $67.0 million. We had an outstanding principal balance under our
senior secured term loan agreement of $15.6 million.

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, following our and Servier’s mutual
termination of our collaborative agreement, other than amounts we are entitled to or may become entitled to pursuant our
termination agreement, we do not anticipate additional revenues or payments from Servier relating to PIXUVRI. Although we
received a $10.0 million milestone payment from Teva Pharmaceutical Industries Ltd. in February 2019 relating to the
achievement of a worldwide net sales milestone of TRISENOX, achievement of the remaining milestones is uncertain at this
time. Due to these and other factors, the foregoing forecast for the period for which we will have sufficient resources to fund
our operations may be inaccurate.

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 stockholders 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 and/or 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 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;

changes in manufacturing;

regulatory approval developments;

our ability to generate sales of any approved product;

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

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

acquisitions of compounds or other assets;

litigation and other disputes;

competitive market developments; and

other unplanned business developments.

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:

Revenue Recognition

We recognize license and contract revenue under license and development services arrangements that are within the

scope of Accounting Standards Codification 606 - Revenue From Contracts With Customers, or ASC 606, which was adopted
on January 1, 2018. The terms of these agreements may contain multiple, distinct performance obligations, which may include
licenses and research and development activities. We apply the five-step model to arrangements that meet the definition of a
contract under ASC 606 including when it is probable that we will collect the consideration we are entitled to in exchange for
goods or services we transfer to the customer. At contract inception, we identify goods or services promised within each
contract and determine those that are performance obligations and assess whether each promised good or service is distinct.
Prior to recognizing revenue, we make estimates of the transaction price, including any variable consideration that is subject to
a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that there
will not be a significant reversal in the amount of cumulative revenue recognized and when the uncertainty associated with the
variable consideration is subsequently resolved. Variable consideration may include nonrefundable upfront license fees,
payments for research and development activities, reimbursement of certain third-party costs, payments based upon the
achievement of specified milestones and royalty payments based on product sales derived from the contract. These assessments
as well as the determination of variable consideration required under ASC 606 involve significant judgment and estimates made
by us, which impacts the amount and timing of revenue we recognize in our consolidated results of operations.

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.

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.

Contingencies

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.

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

As a smaller reporting company, we are not required to provide the information requested by this item pursuant to Item

305(e) of Regulation S-K.

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
Report of Marcum LLP, Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Page
58
59
60
61
62
63
64
66

REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of CTI BioPharma Corp. (the Company) as of December 31,
2018, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the year
then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31,
2018, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted
accounting principles.

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, 2018, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated March 13, 2019, expressed an unqualified opinion thereon.

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 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 the financial statements are free of material misstatement, whether due to
error or fraud. Our audit 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 audit 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 audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2018.

Seattle, Washington
March 13, 2019

REPORT OF MARCUM LLP, 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 sheet of CTI BioPharma Corp. (the “Company”) as of December 31,
2017, the related consolidated statements of operations, comprehensive loss, shareholders’ equity and cash flows for the year then
ended. Our audit also included the related notes and financial statement schedule listed in the Index at Item 15(a)(ii) (collectively
referred to as the “financial statements”) for the year then ended. In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash
flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

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 audit. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“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 the financial statements are free of material misstatement, whether due to error
or fraud. Our audit 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 audit 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 audit provides a reasonable basis for our opinion.

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor from 2005 to 2018.

San Francisco, CA
March 7, 2018

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

December 31, 2018 December 31, 2017

ASSETS
Current assets:

Cash and cash equivalents
Restricted cash
Short-term investments
Receivables from license and development services arrangements
Prepaid expenses and other current assets

Total current assets
Property and equipment, net
Other assets

Total assets

LIABILITIES AND STOCKHOLDERS' 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 (Note 18)
Stockholders' equity:

Preferred stock, $0.001 par value per share:

Authorized shares - 33,333
Series O Preferred Stock, 12,575 shares and 0 shares issued and outstanding as of December
31, 2018 and 2017, respectively (Aggregate liquidation preference of $25,150 and $0 as of
December 31, 2018 and 2017, respectively)

Series N Preferred Stock, 0 shares and 575 shares issued and outstanding as of December
31, 2018 and 2017, respectively (Aggregate liquidation preference of $0 and $1,150 as of
December 31, 2018 and 2017, respectively)

Common stock, $0.001 par value per share:

Authorized shares - 101,500,000 and 81,500,000 as of December 31, 2018 and 2017,
respectively

Issued and outstanding shares - 57,986,075 and 42,969,494 as of December 31, 2018 and
2017, respectively

Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit

Total CTI stockholders' equity

Noncontrolling interest

Total stockholders' equity
Total liabilities and stockholders' equity

See accompanying notes.

36,439
—
30,599
13,679
1,775
82,492
1,793
5,547
89,832

4,498
12,852
—
4,812
893
23,055
—
9,267
4,571
36,893

—

27,218
16,000
—
1,278
2,428
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

—

58
2,294,025
(10,643)
(2,224,746)
58,694
(5,755)
52,939
89,832

43
2,223,388
(6,272)
(2,195,346)
21,813
(5,723)
16,090
54,886

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

Restructuring expenses

Total operating costs and expenses

Loss from operations

Non-operating expense:

Interest income

Interest expense

Amortization of debt discount and issuance costs

Foreign exchange (loss) gain

Other non-operating income (expense)

Total non-operating income (expense), net

Net loss before noncontrolling interest

Noncontrolling interest

Net loss

Deemed dividends on preferred stock

Net loss attributable to common stockholders

Basic and diluted net loss per common share

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

Year Ended December 31,

2018

2017

— $

26,290
26,290

879

36,467

21,183

660
59,189

853

24,293
25,146

364

32,866

31,435

—
64,665

(32,899)

(39,519)

1,219
(1,209)
(525)
(233)
4,295

3,547
(29,352)
32
(29,320)
(80)
(29,400) $
(0.52) $

56,073

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

36,445

See accompanying notes.

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

Year Ended December 31,

2018

2017

(29,352) $

(40,831)

(2,843)
(1,513)
(15)
(4,371)
(33,723)
32
(33,691) $

(3,927)

4,303
7
383
(40,448)
161
(40,287)

Net loss before noncontrolling interest

Other comprehensive (loss) income:

Foreign currency translation adjustments
Unrealized foreign exchange (loss) gain on intercompany balance
Net unrealized (loss) gain on securities available-for-sale

Other comprehensive (loss) income

Comprehensive loss

Comprehensive loss attributable to noncontrolling interest

Comprehensive loss attributable to CTI

See accompanying notes.

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

Preferred Stock

Common Stock

Paid-in

Comprehensive

Accumulated

Noncontrolling

Stockholders'

Amount

Capital

Income (Loss)

Deficit

Interest

Equity

Additional

Accumulated
Other

Total

Balance at January 1, 2017

— $ — 28,229

$ 2,170,272

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

(5,562) $

7,757

Issuance of preferred stock,
net of issuance costs

22.5

—

Conversion of preferred
stock to common stock

Value of beneficial
conversion features related to
preferred stock

Issuance of warrants

Equity-based compensation

Noncontrolling interest

Other

Net loss for the year ended
December 31, 2017

Other comprehensive income

Balance at December 31,
2017
Issuance of common stock,
net of issuance costs

Exchange of common stock
for preferred stock

Value of beneficial
conversion features related to
preferred stock

Equity-based compensation

Noncontrolling interest

Other

Net loss for the year ended
December 31, 2018

Other comprehensive loss

Balance at December 31,
2018

(21.9)

— 14,616

—

150

—

(26)

—

42,669

(15)

4,350

470

5,746

—

(104)

—

(4,350)

—

383

(40,670)

—

(161)

—

42,669

—

470

5,746

(161)

(104)

(40,670)

383

0.6

$ — 42,969

$ 2,223,388

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

(5,723) $

16,090

—

— 23,000

12.0

—

(8,000)

—

(8)

—

64,147

6,369

—

(80)

—

(29,320)

(4,371)

—

(32)

—

64,170

—

6,369

(32)

(29,320)

(4,371)

12.6

$ — 57,986

$ 2,294,025

(10,643) $ (2,224,746) $

(5,755) $

52,939

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:

Year Ended December 31,

2018

2017

(29,352) $

(40,831)

Share-based compensation expense
Depreciation and amortization
Loss on debt extinguishment
Loss on sublease
Gain on dissolution of a foreign entity
Noncash interest expense
Noncash rent benefit
Unrealized foreign exchange loss
Other
Changes in operating assets and liabilities:

Accounts receivable
Receivables from license and development services arrangements
Inventory
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued expenses
Deferred revenue
Other liabilities

Net cash used in operating activities
Investing activities
Purchases of property and equipment
Purchases of short-term investments
Proceeds from maturities of short-term investments
Proceeds from sale of available-for-sale securities
Net cash used in investing activities
Financing activities
Proceeds from common stock offering, net of issuance costs
Cash paid for at-the-market equity offering issuance costs
Proceeds from issuance of preferred stock, net of issuance costs
Proceeds from Silicon Valley Bank debt, net of issuance costs
Repayment of debt
Payment of tax withholding obligations related to stock compensation
Proceeds from stock option exercises
Proceeds from ESPP stock issuance
Cash paid for repurchase of fractional shares
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year

6,369
593
—
—
(4,288)
525
(1,424)
362
432

4
(12,389)
—
253
(420)
1,869
(946)
(1,407)
(5)
(39,824)

(33)
(42,067)
11,610
—
(30,490)

64,170
(168)
—
(100)
(444)
(21)
46
8
—
63,491
44
(6,779)
43,218

Cash, cash equivalents and restricted cash at end of year

36,439

See accompanying notes.

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

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

(49)
—
—
11
(38)

—
—
42,669
15,971
(19,548)
(87)
—
10
(36)
38,979
(429)
(784)
44,002

43,218

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

Exchange of common stock and preferred stock for preferred stock

Conversion of preferred stock to common stock

See accompanying notes.

Year Ended December 31,

2018

2017

1,197

1,970

24,080

— $

—

41,579

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business and Summary of Significant Accounting Policies

CTI BioPharma Corp., together with its wholly-owned subsidiary, 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 for blood-related cancers that offer a unique benefit to patients
and their 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 concentrate 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.

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
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 subsidiary, CTI
Life Sciences Limited, or CTILS. As of December 31, 2018, 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.

Reincorporation Merger

In January 2018, we effected a reincorporation merger, or the Reincorporation, following approval by our Board and our

shareholders at our Special Meeting of Shareholders held on January 24, 2018, for the sole purpose of changing the state of
incorporation from the State of Washington to the State of Delaware. The Reincorporation resulted in reclassification of certain
carrying amounts of our preferred stock and common stock to additional paid-in capital since, prior to the Reincorporation, our
preferred stock and common stock had no par value. Subsequent to the Reincorporation, our preferred stock and common stock
each have a par value of $0.001 per share. There was no impact on our assets and liabilities as a result of the Reincorporation.

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. 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 a Development, Commercialization and License Agreement, or the Pacritinib License Agreement, with 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, 2018, 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 short-term investments were $67.0 million as of December 31, 2018. We

completed the evaluation about our ability to continue as a going concern as required by Accounting Standards Update No.
2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an

Entity's Ability to Continue as a Going Concern. Based on this analysis, we expect that our present financial resources will be
sufficient to meet our obligations as they come due and to fund our operations through the second quarter of 2020. 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 stockholders 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 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 U.S. Generally Accepted Accounting Principles 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 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.

See Note 15. Customer and Geographic Concentrations for further concentration disclosure.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at 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—Valuations based on unadjusted quoted prices for identical assets and liabilities in active markets.
• Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices

for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets
that are not active, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Valuations based on unobservable inputs that are supported by little or no market activity, reflecting our own

assumptions. These valuations require significant judgment or estimation.

Our cash equivalents and short-term investments are recorded at fair value. As of December 31, 2018, our cash, cash
equivalents and short-term investments consisted of cash, money market funds, U.S. government and agency securities and
corporate debt securities. As of December 31, 2017, our cash and cash equivalents consisted of cash.

We measure the fair value of money market funds based on the closing price reported by a fund sponsor from an actively

traded exchange. We value all other securities using broker quotes that utilize observable market inputs. We did not hold cash,
cash equivalents and short-term investments categorized as Level 3 assets as of December 31, 2018 and 2017. The following
table summarizes, by major security type, our cash, cash equivalents and short-term investments that are measured at fair value
on a recurring basis and are categorized using the fair value hierarchy (in thousands):

Cash

Level 1 securities:

Money market funds

Level 2 securities:

U.S. government and agency

securities

Corporate debt securities

Less: restricted cash

Total cash, cash equivalents and short-
term investments

December 31, 2018

December 31, 2017

Cost or Amortized
Cost

Gross Unrealized
Gains

Gross Unrealized
Losses

Total Estimated
Fair Value

919

— $

919

43,218

20,525

15,217

30,393

67,054

—

20,525

(5)
(13)
(18) $

15,213

30,381

67,038

—

43,218
(16,000)

67,038

27,218

There were no other financial instruments requiring fair value measurement as of December 31, 2018 and 2017.

At December 31, 2018 and 2017, the carrying value of our 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, 2018 and
2017 based on borrowing rates for similar loans and maturities.

Cash and Cash Equivalents

We consider all highly liquid instruments with original maturities of three months or less at the time acquired to be cash

equivalents.

Restricted Cash

Restricted cash represented 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 an amendment
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

36,439
—

36,439

27,218
16,000

43,218

December 31, 2018

December 31, 2017

Receivables from License and Development Services Arrangements

Our receivables relate to amounts payable or reimbursable to us under the terms of license and development services
arrangements with our partners. The receivable balance as of December 31, 2018 related primarily to a milestone receivable
from Servier for the attainment of a regulatory milestone in November 2018 as well as a milestone receivable from Teva for the
attainment of a worldwide net sales milestone of TRISENOX in December 2018. The receivable balance as of December 31,
2017 related primarily to the sale of PIXUVRI drug product to Servier. Receivables are reviewed for collectability whenever
circumstances indicate that the carrying amount of the receivable may not be recoverable. During the year ended December 31,
2017, we recorded $1.7 million in bad debt expense related to disputed invoices under the license and development services
arrangement with Baxalta. We had no allowance for doubtful accounts as of December 31, 2018 and 2017.

Italian Value Added Tax Receivable

We historically carried out research and development activities in Italy and incurred value added tax, or VAT, from

Italian suppliers on the acquisition of goods and services in Italy. This VAT should be considered as an Input VAT credit. We
treated the majority of our sales made in Italy without output VAT (on the basis that the supplies should be considered outside
the scope of Italian VAT). This resulted in the value of input VAT exceeding the value of output VAT, and accordingly we
submitted a refund claim for the VAT. The Italian Tax Authority, or the ITA, has challenged the treatment of the sales
transactions and claimed that the sales transactions made by us should have been subject to output VAT. Our Italian VAT
receivable was approximately $4.5 million and $4.8 million as of December 31, 2018 and 2017, respectively. Substantially all
of our VAT receivable is included in Other assets. As disclosed in Note 18. Commitments and Contingencies, the ITA assessed
us for additional VAT payments for services we provided in Italy, which we do not believe we owe. We have not recorded an
amount in the financial statements for this contingent liability as we do not believe the potential payment of up to €4.2 million
(or approximately $4.8 million converted using the currency exchange rate as of December 31, 2018), to the ITA is probable at
this time.

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 lives 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. 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. As discussed in Recently Issued Accounting Guidance below, the new lease accounting guidance, Accounting
Standards Codification, or ASC, 842 - Leases, is effective for annual reporting periods (including interim periods within those
periods) beginning after December 15, 2018, and we will adopt this guidance on January 1, 2019.

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 10.

Collaboration, Licensing and Milestone Agreements and Note 18. Commitments and Contingencies for further information
regarding our current contingencies.

Revenue Recognition

We adopted ASC 606 - Revenue from Contracts with Customers, on January 1, 2018, or the adoption date, using a

modified retrospective method. This standard applies to all contracts with customers, except for contracts that are within the
scope of other authoritative literature. Under ASC 606, we recognize revenue when a customer obtains control of promised
goods or services, in an amount that reflects the consideration which we expect to be entitled in exchange for those goods or
services.

To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the

following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii)
determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v)
recognize revenue when (or as) we satisfy a performance obligation. We apply the five-step model to arrangements that meet
the definition of a contract under ASC 606 including when it is probable that we will collect the consideration we are entitled to
in exchange for goods or services we transfer to the customer. At contract inception, we assess the goods or services promised
within each contract and determine those that are performance obligations, and assesses whether each promised good or service
is distinct. We recognize revenue for the amount of the transaction price that is allocated to the respective performance
obligation as the performance obligation is satisfied.

Product sales

In April 2017, Servier was granted 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). As a result, we no longer have product sales.

Prior to April 2017, PIXUVRI was sold primarily through a limited number of wholesale distributors. Under ASC 606,
we would record product sales upon receipt of the product by health care providers and certain distributors, or the Customers,
at which time the Customers obtain control of our product. Product sales are recorded net of applicable reserves for variable
considerations, including distributor discounts, estimated government-mandated rebates, trade discounts and estimated product
returns. Reserves are established for these variable considerations that are subject to constraints under ASC 606 and are
included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative
revenue recognized under the contract will not occur in a future period.

License and Development Services Arrangements

We recognize license and contract revenue under license and development services arrangements that are within the

scope of ASC 606. The terms of these agreements may contain multiple performance obligations, which may include licenses
and research and development activities. We evaluate these agreements under ASC 606 to determine distinct performance
obligations. Prior to recognizing revenue, we make estimates of the transaction price, including any variable consideration that
is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable
that there will not be a significant reversal in the amount of cumulative revenue recognized and when the uncertainty associated
with the variable consideration is subsequently resolved. Variable consideration may include nonrefundable upfront license
fees, payments for research and development activities, reimbursement of certain third-party costs, payments based upon the
achievement of specified milestones, and royalty payments based on product sales derived from the collaboration. If there are
multiple, distinct performance obligations, we allocate the transaction price to each distinct performance obligation based on its
relative standalone selling price. Revenue is recognized by measuring the progress toward complete satisfaction of the
performance obligations using an input measure in accordance with ASC-340-40, Other Assets and Deferred Costs: Contracts
with Customers.

We have determined that our agreement with Servier is within the scope of ASC 606 and that the license and
development services separately accounted for under the legacy standard would have remained two distinct performance
obligations to Servier under ASC 606. As a result, the deferred revenue balance of $1.4 million as of the adoption date, relating
to development services, was recognized as revenue through the end of 2018 using an input measure. In addition, there were no
milestones recognized as a cumulative effect adjustment to the opening accumulated deficit balance because we were not yet
able to overcome constraints associated with the remaining milestones as of the adoption date. There was no change to the

timing of revenue recognition with respect to royalties. See Note 10. Collaboration, Licensing and Milestone Agreements -
Servier for further discussion.

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. Cost of product sold for the year ended December 31, 2018 related to a provision for excess, obsolete or unsaleable
inventory as well as contractual royalties as we no longer have product sales as discussed above. Cost of product sold for the
year ended December 31, 2017 is related to sales of PIXUVRI and contractual royalties.

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 stockholders’ 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 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
loss of $1.5 million and an unrealized foreign exchange gain of $4.3 million were recorded in the cumulative foreign currency
translation adjustment account for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018 and
2017, the intercompany balance due from CTILS was €28.7 million and €26.2 million, respectively (or $32.8 million and $31.4
million upon conversion from euros as of December 31, 2018 and 2017, 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 stockholders divided by the
weighted average number of shares outstanding for the period. The calculation of diluted net loss per common share excludes
71

the potential conversion of all dilutive convertible securities, such as 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 May 2014, the Financial Accounting Standards Board, or 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 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 adopted the new standard in the first quarter 2018
using the modified retrospective method. The adoption of the standard did not have a material impact on our consolidated
financial statements. See "Revenue Recognition" above for further discussion.

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. The adoption of this guidance did not have a material impact on our consolidated
statements of cash flows.

In March 2018, the FASB issued "Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118,"
or SAB 118. The guidance adds various SEC paragraphs pursuant to SAB 118 to Accounting Standard Codification 740 “Income
Taxes." SAB 118 was issued in December 2017 to provide immediate guidance for accounting implications of U.S. tax reform
under the Tax Cuts and Jobs Act, which became effective for us on January 1, 2018. The adoption of this guidance did not have
a material impact on our consolidated financial statements.

Recently Issued Accounting Standards

In February 2016, the FASB issued 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. We will adopt this guidance on January 1, 2019 using the modified retrospective approach and have
elected to apply the package of practical expedients and certain other practical expedients permitted under the transition
guidance. All identified leases are classified as operating leases. As a result, we expect to recognize right-of-use assets ranging
from approximately $4.6 million to $4.9 million, and lease liabilities ranging from approximately $7.0 million to $7.3 million,
respectively, in our consolidated balance sheet. In addition, we have elected to apply the additional transition method per ASU
2018-11 and expect to recognize a cumulative effect adjustment of approximately $1.2 million reducing the opening
accumulated deficit balance. The adoption of the standard is not expected to materially impact our consolidated statements of
operations or consolidated statements of cash flows.

In June 2018, the FASB issued new accounting guidance which simplifies the accounting for share-based payments
granted to nonemployees for goods and services by aligning it, with certain exceptions, with the accounting for share-based
payments to employees. The guidance is effective for fiscal years beginning after December 15, 2018 (including interim
periods within those fiscal years). Early adoption is permitted. We do not expect the adoption of this accounting guidance to
have a material impact on our consolidated financial statements.

In August 2018, the FASB issued new accounting guidance which eliminates certain disclosure requirements for fair

value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure
requirements. The guidance is effective for fiscal years beginning after December 15, 2019 (including interim periods within
those fiscal years). Early adoption is permitted for either the entire standard or any eliminated or modified disclosures. We do
not expect the adoption of this accounting guidance to have a material impact on our consolidated financial statements.

Although there were several other new accounting pronouncements issued or proposed by the FASB, we do not believe

any of these have had or will have a material impact on our consolidated financial statements.

Reclassifications

Certain prior year items have been reclassified to conform to current year presentation, including the reclassification of

items in stockholders' equity section as discussed in Reincorporation Merger above.

2. Property and Equipment

Property and equipment are composed of the following as of December 31, 2018 and 2017 (in thousands):

Furniture and office equipment
Leasehold improvements
Lab equipment

Less: accumulated depreciation and amortization
Property and equipment, net

2018

2017

4,445
5,168
63
9,676
(7,883)
1,793

4,552
5,168
209
9,929
(7,564)
2,365

Depreciation expense for the years ended December 31, 2018 and 2017 was $0.6 million and $0.7 million, respectively.

3. Other Assets

Other assets consisted of the following as of December 31, 2018 and 2017 (in thousands):

Italian VAT receivables

Italian VAT deposit

Rent deposit

Other

Other assets

2018

2017

4,480

4,692

493

194

380

516

194

195

5,547

5,597

See Note 1. Description of Business and Summary of Significant Accounting Policies - Italian Value Added Tax
Receivable and Note 18. Commitments and Contingencies for details regarding our Italian VAT receivables and Italian VAT
deposit.

4. Accrued Expenses

Accrued expenses consisted of the following as of December 31, 2018 and 2017 (in thousands):

Clinical and investigator-sponsored trial expenses
Employee compensation and related expenses
Restructuring expenses
Manufacturing expenses
Other
Total accrued expenses

5. Leases

Lease Agreements

2018

2017

6,573
4,216
660
458
945
12,852

5,019
4,432
—
2,637
1,802
13,890

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 were 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 $0.2 million and
$0.4 million, respectively, related to the sublease agreement as of December 31, 2018, and $0.8 million and $0.6 million,
respectively, as of December 31, 2017.

Rent expense, net of sublease-related income of $1.6 million and $0.1 million for the year ended December 31, 2018

and 2017, amounted to $0.1 million and $1.6 million for the years ended December 31, 2018 and 2017, respectively.

Future Minimum Lease Payments

Future minimum lease commitments for non-cancelable operating leases, net of sublease rentals, at December 31, 2018

were as follows (in thousands):

2019
2020
2021
2022
Thereafter
Total minimum lease commitments

6. Other Liabilities

Operating

Lease
Payments

Sublease

Rentals
Receipts

2,581
2,632
2,628
883
—
8,724

1,365
1,410
1,454
499
—
4,728

Net

1,216
1,222
1,174
384
—
3,996

Other liabilities consisted of the following as of December 31, 2018 and 2017 (in thousands):

Deferred rent, less current portion
Other long-term obligations
Total other liabilities

2018

2017

2,157
2,414
4,571

3,050
2,419
5,469

Deferred rent, less current portion as of December 31, 2018 and 2017 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, 2018 and 2017 includes $0.4 million and $0.6 million of deferred liability, respectively,
related to the sublease of Seattle office space as discussed in Note 5. Leases.

Other long-term obligations as of December 31, 2018 and 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. We had an
option to borrow an additional $2.0 million, which option expired unexercised on July 31, 2018. The loan proceeds were used
to repay in full all outstanding indebtedness under the Loan and Security Agreement with Hercules Technology Growth Capital,
Inc., or 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 removed in January 2018. See Note 1. Description of Business and Summary of Significant
Accounting Policies for further details regarding restricted cash.

The term loan is repayable over 36 months after an initial interest-only period of 12 months after closing. 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 back-end fee in the amount of $1.4 million was included in Other liabilities in the consolidated balance
sheets as of December 31, 2018 and 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
have an initial exercise price of $2.84 per share of our common stock and will expire on November 28, 2027.

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 $1.4 million and $0.1 million , respectively, was unamortized as of December 31, 2018.
The outstanding principal balance on the term loan was $15.6 million as of December 31, 2018.

As of December 31, 2018, the scheduled principal and interest payments (based on the interest rate of 8.0 percent as of

December 31, 2018) as well as the back-end fee described above are as follows:

Principal

Interest

Back-end fee

Total

2019

2020

2021

Thereafter

Total scheduled payments

Less: debt discount and issuance costs

Less: current portion of long-term debt

Long-term debt

Hercules

5,333

1,061

— $

633

198

—

1,440

—

6,394

5,966

6,527

—

1,892

1,440

18,887

5,333

4,889

—

15,555
(1,476)
(4,812)
9,267

In November 2017, we repaid Hercules the then-outstanding loan principal balance of $14.3 million in full, using the

proceeds from the Loan and Security Agreement with SVB as discussed above. Accordingly, among other things, (1) all
obligations under the loan agreement with Hercules 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 with Hercules have been automatically and irrevocably terminated, and (3) our obligations
under the loan agreement with Hercules 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.

8. Equity Transactions

Preferred Stock

In June 2017, in an underwritten public offering, we issued 22,500 shares of Series N 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 stockholder of the Company, was one of our investors in this offering. See
Note 17. Related Party Transactions for further details.

In June 2017, 21,925 shares of Series N 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
75

on preferred stock related to the beneficial conversion feature on our Series N Preferred Stock. There were 575 shares of Series
N Preferred Stock outstanding as of December 31, 2017, which were owned by BVF.

In February 2018, the 575 shares of Series N Preferred Stock owned by 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. For the year ended December 31,
2018, we recognized $0.1 million in deemed dividends on preferred stock related to the beneficial conversion feature on Series
O Preferred Stock. There were 12,575 shares of Series O Preferred Stock outstanding as of December 31, 2018, which are
convertible into 8.4 million shares of common stock.

Each share of Series O Preferred Stock is convertible at the option of the holder (subject to certain limitations) into

shares of common stock at a conversion price of $3.00 per share of common stock. Each share of Series O Preferred Stock 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 O Preferred Stock. The Series O 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 O Preferred Stock has no voting
rights, except as otherwise expressly provided in the certificate of incorporation of CTI or as otherwise required by law.

Common Stock

In February 2018, we offered and sold 23.0 million shares of our common stock, referred to as the Offering. The price to

the public in this Offering was $3.00 per share of common stock. The gross proceeds from the Offering were $69.0 million
before deducting underwriting commissions and discounts and other offering costs of approximately $4.8 million.

In November 2018, we entered into a Sales Agreement with Cowen and Company, LLC, or Cowen, to sell shares of our

common stock, having aggregate sales proceeds of up to $50.0 million, from time to time, through an “at the market” equity
offering program under which Cowen will act as sales agent. Under the Sales Agreement, we will set the parameters for the sale
of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitation
on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made.
Subject to the terms and conditions of the Sales Agreement, Cowen may sell the shares by methods deemed to be an “at-the-
market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made
directly on The Nasdaq Capital Market or on any other existing trading market for the common stock. Cowen will use
commercially reasonable efforts in conducting such sales activities consistent with its normal trading and sales practices,
applicable state and federal laws, rules and regulations and the rules of The Nasdaq Stock Market LLC. The Sales Agreement
may be terminated by us upon five days’ notice to Cowen for any reason or by Cowen upon five days’ notice to us for any
reason or at any time under certain circumstances, including but not limited to the occurrence of a material adverse change in
the Company. Under the terms of the Sales Agreement, we may also sell shares to Cowen acting as principal for Cowen’s own
account at prices agreed upon at the time of sale upon our express authorization. The compensation to Cowen for sales of our
common stock will be an amount equal to 3.0% of the gross proceeds of any shares of common stock sold under the Sales
Agreement. We have no obligation to sell any shares under the Sales Agreement, and may at any time suspend solicitation and
offers under the Sales Agreement. For the year ended December 31, 2018, no shares have been sold under the Sales Agreement.

Common Stock Authorized

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.

In May 2018, the Company's certificate of incorporation was amended to increase the total number of authorized shares

of common stock from 81.5 million to 101.5 million.

Common Stock Reserved

A summary of common stock reserved for issuance is as follows as of December 31, 2018 (in thousands):

Equity incentive plans
Option agreement with Adam R. Craig
Common stock purchase warrants
Series O convertible preferred stock
Employee stock purchase plan
Total common stock reserved

Warrants

9,203
1,120
514
8,383
178
19,398

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 2015, were outstanding and exercisable as of
December 31, 2018.

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 in 2017, were outstanding as of December 31, 2018. Of this
amount, warrants to purchase up to 169,014 shares of our common stock were exercisable as of December 31, 2018.

Warrants to purchase up to 294,117 shares of our common stock with an exercise price of $1.70 per share, which were

issued to our vendor in 2018 as part of compensation for services, were outstanding but remained unexercisable as of
December 31, 2018.

9. Other Comprehensive Loss

Total accumulated other comprehensive loss consisted of the following (in thousands):

December 31, 2017
Current period other comprehensive loss
December 31, 2018

1
(15)
(14) $

(6,829) $
(2,843)
(9,672) $

556
(1,513)

(957) $

(6,272)
(4,371)
(10,643)

Net Unrealized
Loss on
Available-For-
Sale Securities

Foreign
Currency
Translation
Adjustments (1)
$

Unrealized
Foreign Exchange
Loss on
Intercompany
Balance

Accumulated
Other
Comprehensive
Loss

(1) In accordance with ASC 830 - Foreign Currency Matters, the current period change includes a release of cumulative

translation adjustment in the amount of $4.3 million upon dissolution of our foreign branch, which was recognized in other
non-operating income in our consolidated statement of operations for the year ended December 31, 2018.

10. 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. In February 2019, we entered into
an agreement to terminate the Restated Agreement. For further details, see Note 20. Subsequent Events.

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 provided 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.

The Restated Agreement also provided that we were 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, 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 was 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 was responsible for the
manufacture and supply of drug products and substances in their respective territories. We recorded 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.

Prior to its termination, the Restated Agreement was scheduled to 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.

We have determined that the Restated Agreement with Servier is within the scope of ASC 606 since we and Servier do

not equally share risks and rewards of the arrangement under the Restated Agreement and as such a vendor-customer
relationship exists. We identified the following performance obligations 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 is a distinct promise because it is sublicensable and separable from the remaining performance obligations
and can be used for its intended purpose on its own. The remaining service performance obligations are also distinct because
these services are not proprietary in nature, and other vendors could provide the same services in order to derive value from the
license.

We determined that performance obligations relating to the joint committee obligations and the regulatory, commercial,

and manufacturing and supply responsibilities were insignificant in the context of the Restated Agreement, and as such these
obligations were combined with the development services and included as “Development and other services” in the table
below.

At the inception of the Restated Agreement, 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) was included in the initial
transaction price, which was then allocated based on the percentage of the relative selling price of each performance obligation
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 and other services, 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 would not have a significant effect on the allocation of the arrangement consideration.

Regulatory and sales milestones, as well as royalty payments, are not included in the initial transaction price.
Regulatory milestones under the Restated Agreement are subject to a constraint and as such, based on the most-likely amount
approach, we recognize revenue when we deem probable that there will not be a significant reversal of revenue in the future
periods. Royalty payments we receive from Servier are sales-based royalties in connection with the license of intellectual
property. As such, royalty revenues are recognized as underlying sales occur. And sales milestone revenues are recognized
when underlying sales milestones are achieved as the royalty exception under ASC 606 also applies to sales milestones.

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. The $1.3 million consideration allocated to development and other services was recorded
as deferred revenue, along with the $0.6 million deferred revenue balance from the Original Agreement, for a total deferred
revenue balance of $1.9 million as of the date of Restated Agreement. During the year ended December 31, 2017, $0.5 million
of the deferred revenue balance was recognized as revenue; the remaining $1.4 million was recognized as revenue for the year
ended December 31, 2018 as the development service obligation under the Restated Agreement was deemed complete.

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). In November
2018, we recognized a €3.0 million milestone revenue (or $3.4 million using the currency exchange rate as of the date the
milestone was achieved) relating to the attainment of a regulatory milestone.

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, 2018,
we have earned $60.0 million of such potential milestone payments as a result of having achieved certain milestones. For the
year ended December 31, 2018, we received $10.0 million from Teva upon the achievement of a milestone for FDA approval of
TRISENOX for first line treatment of acute promyelocytic leukemia. In addition, for the years ended December 31, 2018 and
2017, we earned $10.0 million in each respective period upon the achievement of worldwide net sales milestones of
TRISENOX. 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.

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. We have ceased
development of tosedostat and do not anticipate incurring additional material expenses related to this terminated program.

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, which was included in research and development expenses. 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 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.

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.

11. Restructuring Activities

In December 2018, we announced a restructuring plan to improve efficiencies and reduce costs within the Company,

which impacted a total of 21 positions. We expect to incur total restructuring expenses of approximately $1.5 million, of which
$0.7 million had been incurred for the year ended December 31, 2018. We anticipate the majority of restructuring activities to
be completed by the end of first quarter 2019.

The following table summarizes the accrual balance and utilization for the year ended December 31, 2018 (in

thousands):

Restructuring accruals - December 31, 2017

Restructuring expenses

Cash payments

Restructuring accruals - December 31, 2018

12. Share-Based Compensation

Share-Based Compensation Expense

Employee separation costs

—

660

—

660

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 U.S. generally accepted accounting principles, or 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.
81

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, 2018 and 2017, we recognized share-based compensation expense which

consisted of the following types of awards (in thousands):

Restricted stock
Options
Total share-based compensation expense

2018

2017

102
6,267
6,369

1,015
4,731
5,746

The following table summarizes share-based compensation expense for the years ended December 31, 2018 and 2017,

which was allocated as follows (in thousands):

Research and development
Selling, general and administrative
Total share-based compensation expense

2018

2017

1,950
4,419
6,369

911
4,835
5,746

Share-based compensation had a $6.4 million and $5.7 million effect on our net loss attributable to common
stockholders for the years ended December 31, 2018 and 2017, respectively. It had no effect on cash flows from operating
activities for the periods presented; however, during the years ended December 31, 2018 and 2017, we made payments of
$21,000 and $0.1 million, respectively, relating to 5,800 shares and 21,000 shares, respectively, of our common stock withheld
upon vesting of employee restricted stock awards based on taxes owed by employees upon vesting, which impacted cash flows
used in financing activities.

As of December 31, 2018, unrecognized compensation cost related to unvested stock options and unvested restricted

stock awards amounted to $7.8 million, which will be recognized over the remaining weighted-average requisite service period
of 1.83 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, 2018 and 2017, 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, 2018, 11.6 million shares were authorized for issuance under equity incentive plans, of which 2.8

million 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,

2018

2017

2.9%

None

5.4
82%

1.9%

None

5.2
83%

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, 2016 (1,913,000 exercisable)

Granted

Exercised

Forfeited

Cancelled and expired

Outstanding at December 31, 2017 (2,500,000 exercisable)

Granted

Exercised

Forfeited

Cancelled and expired

Outstanding at December 31, 2018 (2,597,000 exercisable)

Vested or expected to vest at December 31, 2018

Exercisable at December 31, 2018

Options

2,806,000

4,450,000

— $
(378,000) $
(210,000) $
$
6,668,000

3,100,000

$
(12,000) $
(408,000) $
(2,129,000) $
$
7,219,000

6,321,000

2,597,000

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value
(Thousands)

11.44

3.68

—

6.27

24.33

6.15

3.04

3.89

3.48

9.18

4.08

4.32

5.49

8.1

7.7

6.4

—

The weighted average exercise price of options exercisable at December 31, 2018 and 2017 was $5.49 and $9.83,

respectively. The weighted average grant-date fair value of options granted during 2018 and 2017 was $2.09 and $2.47 per
option, respectively. The number of options vested or expected to vest at December 31, 2018 does not include 715,000
performance-based options with the weighted average exercise price of $2.18 since the achievement of such performance-based
milestone was not deemed probable as of December 31, 2018.

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 was granted in accordance with NASDAQ
Listing Rule 5635(c)(4).

Restricted Stock Awards

We issued 2,000 shares of restricted stock awards in 2017 while we issued no restricted stock awards in 2018. The
weighted average grant-date fair value of restricted stock awards issued during 2017 was $5.78. Additionally, 15,000 and
39,000 shares of restricted stock awards were cancelled during 2018 and 2017, respectively.

The total fair value of restricted stock awards vested during the years ended December 31, 2018 and 2017 was $0.1

million and $0.3 million, respectively.

A summary of the status of nonvested restricted stock awards as of December 31, 2018 and 2017 and changes during the

periods then ended, is presented below:

Nonvested at December 31, 2016
Issued
Vested
Forfeited
Nonvested at December 31, 2017
Issued
Vested
Forfeited
Nonvested at December 31, 2018

Restricted Stock Units

Nonvested Shares

Weighted Average
Grant-
Date Fair Value
Per Share

$
183,000
$
2,000
(83,000) $
(39,000) $
$
63,000
— $
(35,000) $
(15,000) $
$
13,000

12.76
5.78
9.43
14.39
15.93
—
12.00
16.12
26.23

We issued 20,000 restricted stock units during 2017 while no restricted stock units were issued during 2018. No
restricted stock units were cancelled during 2018 or 2017. The weighted average grant-date fair value of restricted stock units
issued during 2017 was $4.97 per unit. The total fair value of restricted stock units vested during the year ended December 31,
2018 and 2017 was $0.1 million and $0.8 million, respectively.

A summary of the status of nonvested restricted stock units as of December 31, 2018 and 2017 and changes during the

periods then ended, is presented below:

Nonvested at December 31, 2016
Issued
Vested
Forfeited
Nonvested at December 31, 2017
Issued
Vested
Forfeited
Nonvested at December 31, 2018

Nonemployee Share-Based Compensation

Nonvested Units
$
187,000
$
20,000
(187,000) $
— $
$
— $
(20,000) $
— $
— $

20,000

Weighted Average
Grant-
Date Fair Value
Per Unit

5.35
4.97
5.35
—
4.97
—
4.97
—
—

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, 2018 and 2017, unvested options to acquire approximately 12,000 shares and 4,000 shares,
respectively, of common stock were outstanding. We recorded compensation expense of $6,000 during the year ended
December 31, 2018 and reversed $8,000 during the year ended December 31, 2017.

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 5,000 and 4,000 shares of our common stock to employees in the
years ended December 31, 2018 and 2017, 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, 2018.

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 $0.2 million related to discretionary matching
contributions during the year ended December 31, 2018 and $0.3 million during the year ended December 31, 2017.

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 were not exercisable, and were attached to, and traded 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 expired on December 2, 2018.

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 year 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

61%
24%
13%

In April 2017, 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 the U.S.
(and its territories and possessions). As a result, we no longer have product sales. See Note 10. Collaboration, Licensing and
Milestone Agreements for further details.

We had no long-lived assets located outside of the U.S. as of December 31, 2018 and 2017.

16. Net Loss Per Share

Basic net loss per share is calculated based on the net loss attributable to common stockholders 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 stockholders
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,

2018

2017

(29,400) $

(45,020)

56,106
(33)
56,073

(0.52) $

36,569
(124)
36,445
(1.24)

Common shares underlying equity awards, warrants, convertible preferred stock and other convertible securities
aggregating 15.3 million shares and 5.2 million shares for the years ended December 31, 2018 and 2017, 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.

BVF Partners L.P.

As discussed in Note 8. Equity Transactions, we completed an underwritten public offering of 22,500 shares of our Series
N Preferred Stock in June 2017. BVF purchased 6,750 shares of our Series N Preferred Stock in such offering, of which, 6,175
shares were converted into approximately 4.1 million shares of our common stock.

In February 2018, in connection with the public offering of common stock (also discussed in Note 8. Equity

Transactions), 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.

Primarily as a result of these transactions, BVF beneficially owned approximately 12.0% and 20.0% of our outstanding
common stock as of December 31, 2018 and 2017, 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.

18. Commitments and Contingencies

Commitments

See Note 5. Leases and Note 7. Long-term Debt for scheduled lease and debt payments. In addition, certain of our
licensing agreements obligate us to make payments upon achievement of milestones and pay a royalty on net sales of products
utilizing licensed compounds. See Note 10. Collaboration, Licensing and Milestone Agreements for further details. Purchase
commitments relating to clinical trial contracts, manufacturing supply, insurance and others also arise in the ordinary course of
business. We anticipate the timing of payments under these contracts to range from less than one year to more than three years.

Contingencies

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, 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). The assessments,
including interest and penalties, for the years 2003, 2006 and 2007 are €0.6 million, €2.7 million and €0.9 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 all the assessments and are defending ourselves against the assessments both on procedural
grounds and on the merits of the cases, 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 VAT Assessment. In June 2013, the Regional Tax Court issued decision no. 119/50/13 in regards to the 2003 VAT
Assessment, which accepted the October 2012 appeal of the ITA and reversed a 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, which is included in Other assets in our
consolidated balance sheets.

2005 VAT Assessment. In January 2018, the Italian Supreme Court issued decision No. 02250/2018 which (i) rejected
the April 2013 appeal of the ITA, (ii) confirmed the October 2012 decision of the Regional Tax Court (127/31/2012), which
fully accepted the merits of our earlier appeal and confirmed that no penalties could be imposed against us, 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 Italian Supreme Court decision, and we have initiated steps to recover the amounts owed to us. We have
applied for a refund based on the guidance from ITA; however the collectibility of the refund currently has not been
determined.

2006 and 2007 VAT Assessments. In November 2013, the ITA appealed to the Italian Supreme Court an April 2013
decision of the Regional Tax Court (57/35/13), that fully rejected the merits of an earlier ITA appeal, declared that no penalties
could be imposed against us and found ITA liable to pay us approximately €12,000, as a partial refund of legal expenses we
incurred.

No hearing dates have been fixed yet for either the 2003 VAT Assessment or consolidated 2006 and 2007 VAT

Assessment 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 €4.2 million, or approximately $4.8 million converted using the currency exchange rate as of December 31, 2018,
including interest and penalties for the period lapsed between the date 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.

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 was enacted in December 2017. The 2017 Tax Act significantly
changed U.S. tax law by, among other things, lowering U.S. corporate income tax rates, implementing a territorial tax system
and imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. The 2017 Tax Act reduced the
U.S. corporate income tax rate from 34% to 21%, effective January 1, 2018.

The SEC staff issued Staff Accounting Bulletin No. 118, or SAB 118, to address the application of U.S. GAAP in
situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations)
in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act and allows the registrant to
record provisional amounts during a measurement period not to extend beyond one year of the enactment date. At
December 31, 2017, we had completed our accounting for all of the enactment date income tax effects of the 2017 Tax Act.

While the 2017 Tax Act provides for a modified territorial tax system, beginning in 2018, Global Intangible Low-Taxed
Income, or GILTI provisions will be applied providing an incremental tax on low taxed foreign income. The GILTI provisions
require us to include in our U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign
subsidiary’s tangible assets. During 2018, we made an accounting policy election to treat taxes related to GILTI as a current
period expense when incurred.

Loss before income taxes is attributable to the following tax jurisdictions (in thousands):

United States

Foreign

Net loss before income taxes

Year ended December 31,

2018

2017

(29,162) $
(190)
(29,352) $

The reconciliation between the income tax rate and our effective tax rate as of December 31 is as follows:

2018

2017

Federal income tax rate
Research and development tax credits
Non-deductible executive compensation
Valuation allowance
Impact of tax reform
Expired tax attribute carryforwards
Gain on branch liquidation
Foreign currency gains and losses
Other
Net effective tax rate

21%
6
(1)
(12)
—
(17)
3
2
(2)
—%

(40,180)
(651)
(40,831)

34%
3
—
304
(101)
(240)
—
—
—
—%

The principal components of our deferred tax assets and liabilities as of December 31 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

2018

2017

18,792
32,029
3,061
2,940
7,802
549
1,806
66,979
(66,698)
281

(281)
(281)

— $

21,005
27,540
1,347
2,004
8,117
472
2,279
62,764
(62,472)
292

(292)
(292)
—

In preparing our December 31, 2018 financial statements, we determined that our December 31, 2017 deferred tax asset
balance related to stock-based compensation and the corresponding valuation allowance were each overstated by $10.8 million.
We evaluated the materiality of this adjustment and concluded that its impact was not material on our financial statements taken
as a whole and did not affect our balance sheet, or statements of operations, stockholders' equity or cash flows, for any periods
presented. We have elected to adjust the 2017 balances in the table above.

As of December 31, 2018 and 2017, we had U.S. federal net operating loss carryforwards, or the NOL, of approximately
$56.6 million and $74.8 million respectively, which are available to reduce future taxable income. We also had U.S. federal tax
credits of $3.1 million and $1.3 million as of December 31, 2018 and 2017, respectively, which may be used to offset future tax
liabilities. The NOL and tax credit carryforwards have begun to expire in 2018 and may become subject to annual limitation in
the event of certain cumulative changes in the ownership interest of significant stockholders 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, 2018, the NOL carryforwards in the U.K.,which have an indefinite carryforward period, were

approximately $33.0 million.

Certain of the net operating loss deferred tax assets in the table above, totaling $9.9 million at December 31, 2018 are

consolidated in our GAAP income tax provision due to our 60% ownership in Aequus; however, Aequus is not consolidated for
income tax purposes and therefore these net operating losses will not be available to us in our future tax filings.

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 increased by $4.2 million during the year ended December 31, 2018
primarily due to increases in capitalized research and development and research and development tax credit carryforwards,
offset by net operating loss carryforward expirations.

We follow the provisions in ASC 740 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 1999
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, 2018,
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 balance sheets,
statements of operations and cash flows. Therefore, no reserves for uncertain income tax positions have been recorded.

20. Subsequent Events

In February 2019, we entered into a Termination and Transfer Agreement, or the Servier Termination Agreement, with

Servier, which terminates the Restated Agreement. Under the Servier Termination Agreement, we will continue to be
responsible for non-U.S. pharmacovigilance for PIXUVRI, the submission of a marketing authorization application for
PIXUVRI and wind down of the PIX306 clinical trial during a transition period, which will last until the European Medicines
Agency adopts a position on the PIXUVRI marketing authorization application. Servier agreed to reimburse us €620,000 for
costs to be incurred in connection with transition period activities, and if the transition period extends beyond May 31, 2019,
Servier will provide additional reimbursement to us not to exceed €50,000 per month or €200,000 in the aggregate. If the
EMA’s definitive position results in a standard marketing authorization for PIXUVRI, we will transfer and assign all of our
rights and responsibilities for PIXUVRI globally to Servier pursuant to an asset purchase agreement. Alternatively, if the
EMA’s definitive position results in a conditional marketing authorization or suspension or withdrawal of the marketing
authorization, then, at Servier’s election, we will either transfer and assign all of our rights and responsibilities for PIXUVRI
globally to Servier pursuant to an asset purchase agreement or cooperate with Servier in the withdrawal of PIXUVRI from all
jurisdictions other than the United States. The Servier Termination Agreement provides that, in either scenario, any asset
purchase agreement will require, among other things, Servier to pay us €2.0 million and assume responsibility for all of the
obligations related to PIXUVRI, including our remaining royalty payments to Novartis International Pharmaceutical Ltd. and
the University of Vermont.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

As previously disclosed, on July 13, 2018, the Audit Committee approved the dismissal of Marcum LLP, as our independent
registered public accounting firm effective on August 2, 2018, which was the date of filing of our Quarterly Report on Form 10-
Q for the quarter ended June 30, 2018. Ernst & Young LLP's engagement as our independent auditor and independent registered
public accounting firm was effective August 2, 2018.

The reports of Marcum LLP on our financial statements for the past two fiscal years did not contain an adverse opinion or
a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles, except that the
report of Marcum LLP dated March 2, 2017, relating to our consolidated balance sheets as of December 31, 2016 and 2015 and
the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows and the related financial
statement schedule for each of the three years in the period ended December 31, 2016, included an explanatory paragraph as to
the uncertainty of our ability to continue as a going concern. The audit reports of Marcum LLP on our effectiveness of internal
control over financial reporting for the past two fiscal years did not contain any adverse opinion or disclaimer of opinion.

In connection with the audits of our financial statements for each of the two fiscal years ended December 31, 2017 and
2016, and in the subsequent interim period through August 2, 2018, there were no disagreements with Marcum LLP on any matter
of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which, if not resolved to the
satisfaction of Marcum LLP, would have caused Marcum LLP to make reference to the matter in its reports for such years. There
were no "reportable events" as that term is described in Item 304(a)(1)(v) of Regulation S-K.

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.

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 2018 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, 2018
was effective.

The independent registered public accounting firm of Ernst & Young LLP, as auditors of the Company’s consolidated

financial statements, has audited our internal controls over financial reporting as of December 31, 2018, 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.

REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinion on Internal Control Over Financial Reporting

We have audited CTI BioPharma Corp.’s internal control over financial reporting as of December 31, 2018, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, CTI BioPharma Corp. (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheet of the Company as of December 31, 2018, the related consolidated statements of
operations, comprehensive loss, stockholders’ equity and cash flows for the year then ended, and the related notes and our
report dated March 13, 2019, expressed an unqualified opinion thereon.

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’s 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 included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
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 its 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 the degree of compliance with the policies or procedures may deteriorate.

Seattle, Washington
March 13, 2019

/s/ Ernst & Young LLP

Item 9B. Other Information

On March 13, 2019, our board of directors adopted, on the recommendation of the compensation committee, our
Executive Incentive Compensation Plan, or the Incentive Compensation Plan. Our Incentive Compensation Plan allows us to
grant incentive awards, generally payable in cash, to employees selected by the administrator of the Incentive Compensation
Plan, including our named executive officers, based upon performance goals established by the administrator.

Under our Incentive Compensation Plan, the administrator determines the performance goals applicable to any award,
which goals may include, without limitation, goals related to research and development, regulatory milestones or regulatory-
related goals, gross margin, financial milestones, new product or business development, operating margin, product release
timelines or other product release milestones, publications, cash flow, procurement, savings, internal structure, leadership
development, project, function or portfolio-specific milestones, license or research collaboration agreements, capital raising,
initial public offering preparations, patentability and individual objectives such as peer reviews or other subjective or objective
criteria. The performance goals may differ from participant to participant and from award to award.

A committee appointed by our board of directors (which, until our board of directors determines otherwise, will be our

compensation committee) administers our Incentive Compensation Plan. The administrator of our Incentive Compensation Plan
may, in its sole discretion and at any time, increase, reduce or eliminate a participant’s actual award, and/or increase, reduce or
eliminate the amount allocated to the bonus pool for a particular performance period. The actual award may be below, at or
above a participant’s target award, in the discretion of the administrator. The administrator may determine the amount of any
increase, reduction or elimination on the basis of such factors as it deems relevant, and it is not required to establish any
allocation or weighting with respect to the factors it considers.

Actual awards generally will be paid in cash (or its equivalent) only after they are earned, and, unless otherwise

determined by the administrator, to earn an actual award a participant must be employed by us through the date the actual
award is paid. Payment of awards occurs as soon as practicable after they are earned, but no later than the dates set forth in our
Incentive Compensation Plan.

Our board of directors and the administrator have the authority to amend, suspend or terminate our Incentive
Compensation Plan, provided such action does not impair the existing rights of any participant with respect to any earned
awards.

Item 10. Directors, Executive Officers and Corporate Governance

PART III

The information required by Item 10 of Form 10-K is incorporated by reference to our Proxy Statement for the 2019