Fennec Pharmaceuticals
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number: 001-32295 FENNEC PHARMACEUTICALS INC.(Exact Name of Registrant as Specified in Its Charter) British Columbia, Canada(State or Other Jurisdiction ofIncorporation or Organization)20-0442384(I.R.S. EmployerIdentification No.) PO Box 13628, 68 TW Alexander DriveResearch Triangle Park, NC(Address of Principal Executive Offices)27709(Zip Code) (919) 636-4530(Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each classCommon Shares, no par valueName of each exchange on which registeredNasdaq Capital Market 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 ¨ NO þ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨ NO þ 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 1934during 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 filingrequirements for the past 90 days. YES þ NO ¨ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation 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 þ NO ¨ 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 willnot be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or anemerging 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 ¨ Accelerated filer þ Non-accelerated filer ¨ Smaller reporting company þEmerging growth company ¨ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised 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 Exchange Act). YES ¨ NO þ The aggregate market value of the voting stock held by non-affiliates of the Registrant, computed by reference to the closing sales price of the Registrant’sCommon Shares as reported on the Nasdaq Capital Market on June 30, 2018 (the last business day of the Registrant’s most recently completed second fiscalquarter) was $82,970,261 based upon a total of 7,947,343 shares held as of June 30, 2018 by persons believed to be non-affiliates of the Registrant (forpurposes of this calculation, all of the Registrant’s officers, directors and 10% owners known to the Registrant are deemed to be affiliates of the Registrant). As of March 11, 2019, there were 19,895,830 shares of the Registrant’s Common Shares outstanding.  FENNEC PHARMACEUTICALS INC.2017 FORM 10-K ANNUAL REPORTTABLE OF CONTENTS PART I 1Item 1.Business Overview1Item 1A.Risk Factors11Item 1B.Unresolved Staff Comments28Item 2.Properties28Item 3.Legal Proceedings28Item 4.Mine Safety Disclosures29PART II 29Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities29Item 6.Selected Financial Date37Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations38Item 7A.Quantitative and Qualitative Disclosures About Market Risk44Item 8.Financial Statements and Supplementary Data45Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure45Item 9A.Controls and Procedures45Item 9B.Other Information46PART III 47Item 10.Directors, Executive Officers and Corporate Governance47Item 11.Executive Compensation49Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters51Item 14.Principal Accounting Fees and Services53PART IV 54Item 15.Exhibits, Financial Statement Schedules54Item 16.Form 10-K Summary55SIGNATURES56  NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements within the safe harbor provisions of the U.S. Private Securities Litigation Reform Actof 1995. Our actual results, performance or achievements may be materially different from any results, performance or achievements expressed or implied bysuch forward-looking statements. Words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “project,” “plan,” and othersimilar words are one way to identify such forward-looking statements. Forward-looking statements in this Annual Report include, but are not limited to,statements with respect to (1) our anticipated sources and uses of cash and cash equivalents; (2) our anticipated commencement dates, completion dates andresults of clinical trials; (3) our efforts to pursue collaborations with the government, industry groups or other companies; (4) our anticipated progress andcosts of our clinical and preclinical research and development programs; (5) our corporate and development strategies; (6) our expected results of operations;(7) our anticipated levels of expenditures; (8) our ability to protect our intellectual property; (9) our ability to fully comply with domestic and internationalgovernmental regulation; (10) the anticipated applications and efficacy of our drug candidates; (11) the nature and scope of potential markets for our drugcandidates; (12) future legal liability; and (13) our ability to attract and retain key employees. All statements, other than statements of historical fact,included in this Annual Report that address activities, events or developments that we expect or anticipate will or may occur in the future are forward-lookingstatements. We include forward-looking statements because we believe that it is important to communicate our expectations to our investors. However, allforward-looking statements are based on management’s current expectations of future events and are subject to a number of risks and uncertainties, asdiscussed below in Item 1A., “Risk Factors.” Although we believe the expectations reflected in the forward-looking statements are based upon reasonableassumptions, we can give no assurance that our expectations will be attained, and we caution you not to place undue reliance on such statements. Weundertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result ofnew information, future developments or otherwise. PART I Item 1.Business Overview Fennec Pharmaceuticals Inc. (“Fennec,” the “Company,” “we,” “us,” or “our”) is a biopharmaceutical company focused on the development of PEDMARKTM(a unique formulation of Sodium Thiosulfate (“STS”)) for the prevention of platinum-induced ototoxicity in pediatric cancer patients. We incorporated underthe Canada Business Corporations Act ("CBCA”) in September 1996. Effective on August 25, 2011, the Company continued from the CBCA to the BusinessCorporations Act (British Columbia) (the “Continuance”). The Continuance was approved by our shareholders at our June 2011 Annual and Special Meetingand by resolution of the Board of Directors on August 10, 2011. We have four wholly-owned subsidiaries: Oxiquant, Inc. and Fennec Pharmaceuticals, Inc.,both Delaware corporations, Cadherin Biomedical Inc., a Canadian company and Fennec Pharmaceuticals (EU) Limited (“Fennec Limited”), an Irelandcompany formed in 2018. With the exception of Fennec Pharmaceuticals, Inc., all subsidiaries are inactive. Our corporate website is www.fennecpharma.com. We make our periodic and current reports, together with amendments to these reports, filed or furnishedpursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, available on our website, free of charge, as soon as reasonablypracticable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission, or the SEC. Members of the public mayalso read and copy any materials we file with, or furnish to, the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Toobtain information on the operation of the Public Reference Room, please call the SEC at 1-800-SEC-0330. The SEC maintains a website at www.sec.govthat contains the reports, proxy statements and other information that we file or furnish electronically with the SEC. The Canadian securities regulatoryauthorities maintain a website at www.sedar.com that contains our filings with the Canadian securities regulatory authorities. Our website and the informationcontained therein or connected thereto is not intended to be incorporated into this Annual Report or any other report or information we file with the SEC orCanadian securities regulatory authorities. Lead Product Candidate - PEDMARKTM The following is our only lead product candidate in the clinical stage of development:·PEDMARKTM (a unique formulation of sodium thiosulfate (STS)) – sodium thiosulfate in a novel formulation, recently announced results of twoPhase 3 clinical trials for the prevention of cisplatin induced hearing loss, or ototoxicity in children including the pivotal Phase 3 study SIOPEL 6 ,“A Multicentre Open Label Randomised Phase 3 Trial of the Efficacy of Sodium Thiosulfate in Reducing Ototoxicity in Patients ReceivingCisplatin Chemotherapy for Standard Risk Hepatoblastoma,” and the proof of concept Phase 3 study “A Randomized Phase 3 Study of SodiumThiosulfate for the Prevention of Cisplatin-Induced Ototoxicity in Children”. We continue to focus our resources on the development of PEDMARKTM. 1  PEDMARKTM We have licensed from Oregon Health & Science University (“OHSU”) intellectual property rights for the use of PEDMARKTM as a chemoprotectant and aredeveloping PEDMARKTM as a protectant against the hearing loss often caused by platinum-based anti-cancer agents in children. Preclinical and clinicalstudies conducted by OHSU and others have indicated that PEDMARKTM can effectively reduce the incidence of hearing loss caused by platinum-basedanti-cancer agents. Hearing loss among children receiving platinum-based chemotherapy is frequent, permanent and often severely disabling. The incidence of hearing loss inthese children depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids. There is currently noestablished preventive agent for this hearing loss and only expensive, technically difficult and sub-optimal cochlear (inner ear) implants have been shown toprovide some benefit. In addition, adults undergoing chemotherapy for several common malignancies, including ovarian cancer, testicular cancer, andparticularly head and neck cancer and brain cancer, often receive intensive platinum-based therapy and may experience severe, irreversible hearing loss,particularly in the high frequencies. We estimate in the U.S. and Europe that each year over 10,000 children with solid tumors are treated with platinum agents. The vast majority of these newlydiagnosed tumors are localized and classified as low to intermediate risk in nature. These localized cancers may have overall survival rates of greater than80%, further emphasizing the importance of quality of life after treatment. Infants and young children at critical stages of development lack speech languagedevelopment and literacy, and older children and adolescents lack social-emotional development and educational achievement. STS has been studied by cooperative groups in two Phase 3 clinical studies of survival and reduction of ototoxicity: COG ACCL0431 and SIOPEL 6. Bothstudies are closed to recruitment. COG ACCL0431 enrolled one of five childhood cancers typically treated with intensive cisplatin therapy for localized anddisseminated disease, including newly diagnosed hepatoblastoma, germ cell tumor, osteosarcoma, neuroblastoma, and medulloblastoma. SIOPEL 6 enrolledonly hepatoblastoma patients with localized tumors. COG ACCL0431 final results were published in the Lancet Oncology in 2016. SIOPEL 6 final resultswere published in the New England Journal of Medicine in June 2018. In August 2018, the Pediatric Committee (PDCO) of the European Medicines Agency (EMA) accepted our pediatric investigation plan (PIP) forPEDMARKTM for the condition of the prevention of platinum-induced hearing loss. An accepted PIP is a prerequisite for filing a Marketing AuthorizationApplication (MAA) for any new medicinal product in Europe. The indication targeted by the Company’s PIP is for the prevention of platinum-inducedototoxic hearing loss for standard risk hepatoblastoma (SR-HB). Additional tumor types of the proposed indication will be subject to the Committee forMedicinal Products for Human Use (CHMP) assessment at the time of the MAA. No deferred clinical studies were required in the positive opinion given byPDCO. The Company was also advised that PEDMARKTM is eligible for submission of an application for a Pediatric Use Marketing Authorization (PUMA).Therefore, this decision allows Fennec to proceed with the submission of a PUMA in the European Union (EU) with incentives of automatic access to thecentralized procedure and up to 10 years of data and market protection The PUMA is a dedicated marketing authorization covering the indication andappropriate formulation for medicines developed exclusively for use in the pediatric population and provides data and market protection up to 10 years. We initiated our rolling New Drug Application (NDA) for PEDMARKTM for the prevention of ototoxicity induced by cisplatin chemotherapy patients 1month to < 18 years of age with localized, non-metastatic, solid tumors in December 2018. The Company is targeting completing the NDA submission in late2019 to early 2020 with potential commercial launch of PEDMARKTM in the second half of 2020. In March 2018, PEDMARKTM received BreakthroughTherapy and Fast Track designations from the FDA. Further, PEDMARKTM has received Orphan Drug Designation in the US in this setting. SIOPEL 6 In October 2007, we announced that our collaborative partner, the International Childhood Liver Tumour Strategy Group, known as SIOPEL, a multi-disciplinary group of specialists under the umbrella of the International Society of Pediatric Oncology, had launched a randomized Phase 3 clinical trialSIOPEL 6 to investigate whether STS reduces hearing loss in standard risk hepatoblastoma (liver) cancer patients receiving cisplatin as a monotherapy. The study was initiated in October 2007 initially in the United Kingdom and completed enrollment at the end of 2014. 52 sites from 11 countries enrolled109 evaluable patients. Under the terms of our agreement, SIOPEL conducts and funds all clinical activities and we provide drug, drug distribution andpharmacovigilance, or safety monitoring, for the study. SIOPEL 6 was completed in December 2014 and the final results of SIOPEL 6 were published in TheNew England Journal of Medicine in June 2018. The primary objectives of SIOPEL 6 are: ·To assess the efficacy of STS to reduce the hearing impairment caused by cisplatin.·To carefully monitor any potential impact of STS on response to cisplatin and survival. 2  SIOPEL 6 - Results Background / Objectives: Background: Bilateral high-frequency hearing loss is a serious permanent side-effect of cisplatin therapy, particularly debilitating when occurring in youngchildren. STS has been shown to reduce cisplatin induced hearing loss. SIOPEL 6 is a Phase 3 randomized trial to assess the efficacy of STS in reducingototoxicity in young children treated with cisplatin (Cis) for Standard Risk Hepatoblastoma (SR-HB). Design / Methods: Methods: Newly diagnosed patients with SR-HB, defined as tumor limited to PRETEXT I, II or III, no portal or hepatic vein involvement, no intra-abdominalextrahepatic disease, AFP >100ng/ml and no metastases, were randomized to Cis or Cis+STS for 4 preoperative and 2 postoperative courses. Cisplatin80mg/m2 was administered over 6 hours, STS 20g/m2 was administered intravenously over 15 minutes exactly 6 hours after stopping cisplatin. Tumorresponse was assessed after 2 and 4 preoperative cycles with serum AFP and liver imaging. In case of progressive disease (PD), STS was to be stopped anddoxorubicin 60mg/m2 combined with cisplatin. The primary endpoint is centrally reviewed absolute hearing threshold, at the age of ≥3.5 years by pure toneaudiometry. Results:One hundred and nine randomized patients (52 Cisplatin only ("Cis") and 57 Cis+STS) are evaluable. The combination of Cis+STS was generally welltolerated. With a follow up time of 52 months for the patients the three-year Event Free Survival ("EFS") for Cis is 78.8% Cisplatin and 82.1% for the Cis +STS. The three-year Overall Survival ("OS") is 92.3% for Cis and 98.2% for Cis + STS. Treatment failure defined as Progressive Disease ("PD") at 4 cycles wasequivalent in both arms. Among the first 101 evaluable patients, hearing loss occurred in 29/46=63.0% under Cis and in 18/55=32.7% under Cis +STS,corresponding to a relative risk of 0.52(P=0.002). Conclusions: This randomized Phase 3 trial in SR-HB of cisplatin versus cisplatin plus sodium thiosulfate shows that the addition of sodium thiosulfate significantlyreduces the incidence of cisplatin-induced hearing loss without any evidence of tumor protection. COG ACCL0431 In March 2008, we announced the activation of a Phase 3 trial with STS to prevent hearing loss in children receiving cisplatin-based chemotherapy incollaboration with the Children’s Oncology Group (“COG ACCL0431”). The goal of this Phase 3 study was to evaluate in a multi-centered, randomized trialwhether STS is an effective and safe means of preventing hearing loss in children receiving cisplatin-based chemotherapy for newly diagnosed germ cell,liver (hepatoblastoma), brain (medulloblastoma), nerve tissue (neuroblastoma) or bone (osteosarcoma) cancers. Eligible children, one to eighteen years ofage, who were to receive cisplatin according to their disease-specific regimen and, upon enrollment in this study, were randomized to receive STS or not.Efficacy of STS was determined through comparison of hearing sensitivity at follow-up relative to baseline measurements using standard audiometrictechniques. The Children’s Oncology Group is responsible for funding the clinical activities for the study and we are responsible for providing the drug, drugdistribution and pharmacovigilance, or safety monitoring, for the study. The trial completed enrollment of 131 pediatric patients in the first quarter of 2012.The final results of COG ACCL0431 were published in Lancet Oncology in December 2016. COG ACCL0431 - Results COG Study ACCL0431, “A Randomized Phase 3 Study of Sodium Thiosulfate for the Prevention of Cisplatin-Induced Ototoxicity in Children,” finishedenrollment of 131 patients of which 126 were eligible patients in Q1 2012. The patients had been previously diagnosed with childhood cancers. The primary endpoint was to evaluate the efficacy of STS for prevention of hearing loss in children receiving cisplatin chemotherapy (hypothesis: 50%relative reduction in hearing loss). 3  Secondary endpoints included: ·Compare change in mean hearing thresholds.·Compare incidence of other Grade 3/4 toxicities (renal and hematological).·Monitor Event Free Survival (EFS) and Overall Survival (OS) in two groups. 125 eligible subjects were enrolled with germ cell tumor (32), osteosarcoma (29), neuroblastoma (26), medulloblastoma/pnet (26), hepatoblastoma (7) orother (5). Of these, 104 subjects (64 male and 29 <5 years old) were evaluable for the primary endpoint. Subjects were randomized either to no treatment (control) or treatment with STS 16 grams/m2 IV over 15 minutes, 6 hours after each cisplatin dose. Hearingwas measured using standard audiometry for age and data were reviewed centrally using American Speech-Language-Hearing Association criteria. The proportion of subjects with hearing loss assessed at 4 weeks post the final cisplatin dose (primary endpoint): ·The proportion of hearing loss for STS vs. Control was 28.6% (14/49) vs. 56.4% (31/55), respectively (p=0.004).·In a predefined subgroup of patients less than 5 years old with 29 eligible subjects: STS vs. Control was 21.4% (3/14) vs. 73.3% (11/15),respectively (p=0.005). Conclusions: ·STS protects against cisplatin-induced hearing loss in children across a heterogeneous range of tumor types with even stronger efficacy in theprotocol predefined subgroup of patients under five years old and is not associated with serious adverse events attributed to its use.·Further potential clinical use will be informed by the final results of SIOPEL 6 study. Intellectual Property Patents are important to developing and protecting our competitive position. Our general policy is to seek patent protection in the United States, majorEuropean countries, Japan, Canada and other jurisdictions as appropriate for our compounds and methods. U.S. patents, as well as most foreign patents, aregenerally effective for 20 years from the date the earliest (priority) application was filed; however, U.S. patents that issue on applications filed before June 8,1995 may be effective until 17 years from the issue date, if that is later than the twenty-year date. In some cases, the patent term may be extended to recapturea portion of the term lost during the U.S. Food and Drug Administration (“FDA”) regulatory review or because of U.S. Patent and Trademark Office, orUSPTO, delays in prosecuting the application. The duration of foreign patents varies similarly, in accordance with local law. Currently, we have licensed from OHSU one U.S. and nine foreign patents. All the patents licensed from OHSU expire in 2021. Additionally, there are 2patents pending licensed from OHSU. In addition, periods of marketing exclusivity for STS may also be possible in the United States under orphan drug status and in Europe under EuropeanMarket Exclusivity for Pediatric Use. We obtained U.S. Orphan Drug Designation for the use of STS in the prevention of platinum-induced ototoxicity inpediatric patients in 2004 which provides 7.5 years of market exclusivity upon approval. We plan to pursue European Market Exclusivity for Pediatric Useupon approval which would allow for 10 years of market exclusivity. Our success is significantly dependent on our ability to obtain and maintain patent protection for our product candidate, both in the United States andabroad. The patent position of biotechnology and pharmaceutical companies, in general, is highly uncertain and involves complex legal and factualquestions, which often results in apparent inconsistencies regarding the breadth of claims allowed and general uncertainty as to their legal interpretation andenforceability. Further, our principal candidate STS, is based on previously known compounds, and the candidates or products that we develop in the futuremay include or be based on the same or other compounds owned or produced by other parties, some or all of which may not be subject to effective patentprotection. In addition, regimens that we may develop for the administration of pharmaceuticals, such as specifications for the frequency, timing and amountof dosages, may not be patentable. Accordingly, our patent applications may not result in patents being issued and issued patents may not afford effectiveprotection. In addition, products or processes that we develop may turn out to be covered by third party patents, in which case we may require a license undersuch patents if we intend to continue the development of those products or processes. Our patent position and proprietary rights are subject to certain risks and uncertainties. Please read the “Risk Factors” section of this Annual Report forinformation about certain risks and uncertainties that may affect our patent position and proprietary rights. We also rely upon unpatented confidential information to remain competitive. We protect such information principally through confidentiality agreementswith our employees, consultants, outside scientific collaborators, and other advisers. In the case of our employees, these agreements also provide, incompliance with relevant law, that inventions and other intellectual property conceived by such employees during their employment shall be our exclusiveproperty. 4  Corporate Relationships License Agreement with Oregon Health & Science University On February 20, 2013, we entered into a new exclusive license agreement with OHSU for exclusive worldwide license rights to intellectual property directedto STS and its use for chemoprotection, including the prevention of ototoxicity induced by platinum chemotherapy, in humans (the "New OHSUAgreement"). The term of the New OHSU Agreement expires on the date of the last to expire claim(s) covered in the patents licensed to us, unless earlier terminated asprovided in the agreement. STS is currently protected by methods of use patents that we exclusively licensed from OHSU that expire in the United States,Europe, Canada and Australia in 2021 and additional patents that are currently pending in the United States and Japan. The New OHSU Agreement isterminable by either us or OHSU in the event of a material breach of the agreement by either party after 45 days prior written notice. We have the right toterminate the New OHSU Agreement at any time upon 60 days prior written notice and payment of all fees due to OHSU under the New OHSU Agreement. On May 18, 2015, we negotiated an amendment ("Amendment 1") to the exclusive license agreement with OHSU. Amendment 1 expands the exclusivelicense agreement signed with OHSU on February 20, 2013 or New OHSU Agreement to include the use of N-acetylcysteine as a standalone therapy and/or incombination with STS for the prevention of ototoxicity induced by chemotherapeutic agents to treat cancers. Further, Amendment 1 adjusts select milestonepayments entered in the OHSU Agreement including but not limited to the royalty rate on net sales for licensed products, royalty rate from sublicensing ofthe licensed technology and the fee payable upon the regulatory approval of a licensed product. The term of Amendment 1 under the OHSU Agreementexpires on the date of the last to expire claim(s) covered in the patents licensed to us or 8 years, whichever is later. In the event a licensed product obtainsregulatory approval and is covered by the Orphan Drug Designation, the parties will in good faith amend the term of the agreement. Competition Competition in the biotechnology and pharmaceutical industries is intense. We expect that if our product candidate achieves regulatory approval for sale, itwill compete on the basis of drug efficacy, safety, patient convenience, reliability, ease of manufacture, price, marketing, distribution, and patent protection,among other variables. Our competitors may develop technologies or drugs that are more effective, safer or more affordable than any we may develop. We are aware of a number of companies engaged in the research, development and testing of new cancer therapies or means of increasing the effectiveness ofexisting therapies, including, among many others, Amgen, AstraZeneca, Bayer, Bristol-Myers Squibb, Eli Lilly, Eisai, Merck KGaA, Novartis, Johnson &Johnson, Pfizer, Roche, Taiho and Sanofi-Aventis. Some of these companies have products that have already received, or are in the process of receiving,regulatory approval or are in later stages of clinical development than our product. Many of them have much greater financial resources than we do. Many ofthese companies have marketed drugs or are developing targeted cancer therapeutics which, depending upon the mechanism of action of such agents, couldbe viewed as competitors. We are not aware of any commercially available agents that reduce the incidence of hearing loss associated with the use of platinum-based anti-cancer agents,for which purpose we are developing STS. There are several potential competitive agents with activity in preclinical or limited clinical settings. Theseinclude: D-methionine, an amino acid that has been shown to protect against hearing loss in experimental settings but was demonstrated to be inferior to STSin comparative studies; SPI-3005, an oral agent primarily being developed by Sound Pharmaceuticals for noise and age-related hearing loss but in earlyPhase II trials for chemotherapy related hearing loss, which mimics glutathione peroxidase and induces the intracellular induction of glutathione; N-acetylcysteine and amifostine, which have shown effectiveness (but less than STS) in experimental systems; and Vitamin E, salicylate and tiopronin, whichhave all demonstrated moderate activity in rat models to protect against cisplatin-induced ototoxicity, but no clinical trials have been performed. Cochlearimplants, which are small electronic devices that are surgically placed in the inner ear to assist with certain types of deafness, are utilized to offer some reliefbut are often suboptimal. Many of our existing or potential competitors have substantially greater financial, technical and human resources than we do and may be better equipped todevelop, manufacture and market products. In addition, many of these competitors have extensive experience with preclinical testing and human clinicaltrials and in obtaining regulatory approvals. In addition, many of the smaller companies that compete with us have formed collaborative relationships withlarge, established companies to support the research, development, clinical trials and commercialization of any products that they may develop. We may relyon third parties to commercialize the products we develop, and our success will depend in large part on the efforts and competitive merit of thesecollaborative partners. Academic institutions, government agencies and other public and private research organizations may also conduct research, seekpatent protection and establish collaborative arrangements for research, clinical development and marketing of products similar to those we seek to develop.These companies and institutions compete with us in recruiting and retaining qualified scientific and management personnel as well as in acquiringtechnologies complementary to our projects. The existence of competitive products, including products or treatments of which we are not aware, or productsor treatments that may be developed in the future, may adversely affect the marketability of any products that we may develop. 5  Government Regulation The production and manufacture of our product candidate and our research and development activities are subject to significant regulation for safety,efficacy and quality by various governmental authorities around the world. Before new pharmaceutical products may be sold in the U.S. and other countries,clinical trials of the product must be conducted, and the results submitted to appropriate regulatory agencies for approval. Clinical trial programs mustestablish efficacy, determine an appropriate dose and regimen, and define the conditions for safe use. This is a high-risk process that requires stepwise clinicalstudies in which the candidate product must successfully meet predetermined endpoints. In the U.S., the results of the preclinical and clinical testing of aproduct are then submitted to the FDA in the form of a Biologics License Application or a New Drug Application. In response to these submissions, the FDAmay grant marketing approval, request additional information or deny the application if it determines the application does not provide an adequate basis forapproval. Similar submissions are required by authorities in other jurisdictions who independently assess the product and may reach the same or differentconclusions. The receipt of regulatory approval often takes a number of years, involves the expenditure of substantial resources and depends on a number of factors,including the severity of the disease in question, the availability of alternative treatments and the risks and benefits demonstrated in clinical trials. Onoccasion, regulatory authorities may require larger or additional studies, leading to unanticipated delay or expense. Even after initial approval from the FDAor other regulatory agencies has been obtained, further clinical trials may be required to provide additional data on safety and effectiveness. Additional trialsare required to gain clearance for the use of a product as a treatment for indications other than those initially approved. Furthermore, the FDA and otherregulatory agencies require companies to disclose clinical trial results. Failure to disclose such results within applicable time periods could result inpenalties, including civil monetary penalties. In Canada, these activities are subject to regulation by Health Canada’s Therapeutic Products Directorate, or TPD, and the rules and regulations promulgatedunder the Food and Drug Act. In the United States, drugs and biological products are subject to regulation by the FDA. The FDA requires licensing ofmanufacturing and contract research facilities, carefully controlled research and testing of products and governmental review and approval of results prior tomarketing therapeutic products. Additionally, the FDA requires adherence to “Good Laboratory Practices” as well as “Good Clinical Practices” duringclinical testing and “Good Manufacturing Practices” and adherence to labeling and supply controls. The systems of new drug approvals in Canada and theUnited States are substantially similar and are generally considered to be among the most rigorous in the world. Generally, the steps required for drug approval in Canada and the United States, specifically in cancer related therapies, include:·Preclinical Studies: Preclinical studies, also known as non-clinical studies, primarily involve evaluations of pharmacology, toxic effects,pharmacokinetics and metabolism of a drug in animals to provide evidence of the relative safety and bioavailability of the drug prior to itsadministration to humans in clinical studies. A typical program of preclinical studies takes 18 to 24 months to complete. The results of thepreclinical studies as well as information related to the chemistry and comprehensive descriptions of proposed human clinical studies are thensubmitted as part of the Investigational New Drug Application to the FDA, a Clinical Trial Application to the TPD, or similar submission to otherforeign regulatory bodies. This is necessary in Canada, the United States and most other countries prior to undertaking clinical studies. Additionalpreclinical studies are conducted during clinical development to further characterize the toxic effects of a drug prior to submitting a marketingapplication.·Phase 1 Clinical Trials: Most Phase 1 clinical trials take approximately one year to complete and are usually conducted on a small number ofhealthy human subjects to evaluate the drug’s safety, tolerability and pharmacokinetics. In some cases, such as cancer indications, Phase 1 clinicaltrials are conducted in patients rather than healthy volunteers.·Phase 2 Clinical Trials: Phase 2 clinical trials typically take one to two years to complete and are generally carried out on a relatively small numberof patients, generally between 15 and 50, in a specific setting of targeted disease or medical condition, in order to provide an estimate of the drug’seffectiveness in that specific setting. This phase also provides additional safety data and serves to identify possible common short-term side effectsand risks in a somewhat larger group of patients. Phase 2 testing frequently relates to a specific disease, such as breast or lung cancer. Somecontemporary methods of developing drugs, particularly molecularly targeted therapies, do not require broad testing in specific diseases, and insteadpermit testing in subsets of patients expressing the particular marker. In some cases, such as cancer indications, the company sponsoring the newdrug may submit a marketing application to seek accelerated approval of the drug based on evidence of the drug’s effect on a “surrogate endpoint”from Phase II clinical trials. A surrogate endpoint is a laboratory finding or physical sign that may not be a direct measurement of how a patient feels,functions or survives, but is still considered likely to predict therapeutic benefit for the patient. If accelerated approval is received, the companysponsoring the new drug must continue testing to demonstrate that the drug indeed provides therapeutic benefit to the patient.·Phase 3 Clinical Trials: Phase 3 clinical trials typically take two to four years to complete and involve tests on a much larger population of patientssuffering from the targeted condition or disease. These studies involve conducting controlled testing and/or uncontrolled testing in an expandedpatient population, numbering several hundred to several thousand patients, at separate test sites, known as multi-center trials, to establish clinicalsafety and effectiveness. These trials also generate information from which the overall benefit-risk relationship relating to the drug can bedetermined and provide a basis for drug labeling. Phase 3 trials are generally the most time consuming and expensive part of a clinical trial program.In some instances, governmental authorities, such as the FDA, will allow a single Phase 3 clinical trial to serve as a pivotal efficacy trial to support aMarketing Application. 6  ·Marketing Application: Upon completion of Phase 3 clinical trials, the pharmaceutical company sponsoring the new drug assembles all thechemistry, preclinical and clinical data and submits it to the TPD or the FDA as part of a New Drug Submission in Canada or a New Drug Applicationin the United States. The marketing application is then reviewed by the applicable regulatory body for approval to market the product. The reviewprocess generally takes twelve to eighteen months. Any clinical trials that we conduct may not be successfully completed, either in a satisfactory time period or at all. The typical time periods described abovemay vary substantially and may be materially longer. In addition, the FDA and its counterparts in other countries have considerable discretion to discontinuetrials if they become aware of any significant safety issues or convincing evidence that a therapy is not effective for the indication being tested. It is possiblethe FDA and its counterparts in other countries may not (i) allow clinical trials to proceed at any time after receiving an Investigational New Drug, (ii) allowfurther clinical development phases after authorizing a previous phase, or (iii) approve marketing of a drug after the completion of clinical trials. While European, U.S. and Canadian regulatory systems require that medical products be safe, effective, and manufactured according to high qualitystandards, the drug approval process in Europe differs from that in the United States and Canada and may require us to perform additional preclinical orclinical testing regardless of whether FDA or TPD approval has been obtained. The amount of time required to obtain necessary approvals may be longer orshorter than that required for FDA or TPD approval. European Union Regulations and Directives generally classify health care products either as medicinalproducts, medical devices or in vitro diagnostics. For medicinal products, marketing approval may be sought using either the centralized procedure of theEuropean Agency for the Evaluation of Medicinal Products, or EMEA, or the decentralized, mutual recognition process. The centralized procedure, which ismandatory for some biotechnology derived products, results in an approval recommendation from the EMEA to all member states, while the European Unionmutual recognition process involves country by country approval. The NDA Approval Process Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, including negative or ambiguousresults as well as positive findings, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling,among other things, are submitted to the FDA as part of an NDA to support approval to market the product for one or more indications. In most cases, thesubmission of an NDA is subject to a substantial application user fee. The FDA is required to conduct a preliminary review of an NDA within the first 60 days after submission, before accepting it for filing, to determine whetherit is sufficiently complete to permit a substantive review. The FDA may accept the NDA for filing, potentially refuse to file the NDA due to deficiencies butwork with the applicant to rectify the deficiencies (in which case the NDA is filed upon resolution of the deficiencies) or refuse to file the NDA. The FDAmust notify the applicant of a refusal to file a decision within 60 days after the original receipt date of the application. If the FDA refuses to file the NDA theapplicant may resubmit the NDA with the deficiencies addressed. The resubmitted NDA is considered a new application subject to a new review goal, asdescribed below. If the NDA is refused for filing, the FDA will refund 75 percent of the application fee. Upon resubmission, a new application fee will berequired, unless the applicant is eligible for a waiver or reduction. The resubmitted application is also subject to review before the FDA accepts it for filing.Once an NDA is accepted for filing, the FDA begins an in-depth substantive review. Under the Prescription Drug User Fee Act, or PDUFA, and the FDA’scommitments under the current PDUFA reauthorization, the FDA has a goal of reviewing and acting on 90% of standard non-priority NDA applications fordrugs that are not new molecular entities within ten months from the FDA’s receipt of the NDA. The FDA reviews an NDA to determine, among other things, whether the drug is safe and effective for its intended use and whether the facility in which it ismanufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity. The FDA is required to referan application for a novel drug to an advisory committee or explain why such referral was not made. An advisory committee is a panel of independentexperts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation in response to specific questions raised bythe FDA, which may include whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of anadvisory committee, but it considers such recommendations carefully when making decisions. Before approving an NDA, the FDA may inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unlessit determines that the manufacturing processes and facilities are in compliance with current Good Manufacturing Practices (cGMP) requirements andadequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typicallyinspect one or more clinical investigational sites to evaluate the integrity of the data and confirm compliance with current Good Clinical Practices (cGCP). After the FDA evaluates the NDA and conducts its inspections, it may issue an approval letter or a Complete Response Letter. An approval letter authorizesthe commercial marketing of the drug subject to specific prescribing information for specific indications and, if applicable, specific post-approvalrequirements. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval in itspresent form. After receiving a Complete Response Letter, the applicant must decide within twelve months (subject to extension), if it wants to resubmit theNDA addressing the deficiencies identified by the FDA in the Complete Response Letter, withdraw the NDA, or request an opportunity for a hearing tochallenge the FDA’s determination. A Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s),and/or other significant, expensive and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. Even if such data aresubmitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data from clinical trials are not always conclusive and theFDA may interpret data differently than we interpret data. 7  The FDA also may require implementation of a Risk Evaluation and Mitigation Strategy, or REMS, to mitigate any identified or suspected serious risks. TheREMS could include a medication guide, physician communication plan, assessment plan and elements to assure safe use, such as restricted distributionmethods, patient registries or other risk minimization tools. The drug testing and approval process requires substantial time, effort and financial resources, and may take several years to complete. Data obtained fromclinical activities are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent marketing approval. TheFDA may not grant marketing approval on a timely basis, or at all. Even if the FDA approves a product, it may limit the approved indications for use for the product. The FDA requires that the approved product labelinginclude information regarding contraindications, warnings or precautions. It may also require that post-approval studies, including a long-term registry, beconducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or imposeother conditions, including distribution restrictions or other risk management mechanisms, which can materially affect the potential market and profitabilityof the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. Afterapproval, some types of changes to the approved product, such as adding new indications or labeling claims or manufacturing changes may be subject tofurther testing requirements and FDA review and approval. Also after approval, the FDA may require labeling changes as new information becomes known,particularly if new risks are identified, such as unexpected adverse events. The FDA has the authority to prevent or limit further marketing of a drug based onthe results of these post-marketing studies and programs or other information that may become known after approval. Hatch-Waxman Exclusivity The Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, amended the FFDCA and establishedabbreviated pathways to market, as well as incentives for the development of new drug products. The Hatch-Waxman Amendments established section 505(b)(2) of the FFDCA that provides an alternative pathway for submission of an NDA, referred to as the 505(b)(2) application, when some or all of the safety andefficacy investigations relied on for approval were not conducted by or for the applicant and for which the applicant has not obtained a right of reference. TheHatch-Waxman Amendments also established the Abbreviated New Drug Application, or ANDA, approval pathway, which provides an expedient route forgeneric drugs that have the same active ingredient as a previously approved drug. At the same time, to incentivize continued pharmaceutical innovation, theHatch-Waxman Amendments authorized periods of statutory exclusivity to protect certain approved new drugs from competition for five or three yearperiods. Under the Hatch-Waxman Amendments, a new drug containing an active ingredient that had never before been approved in any other NDA, ANDA, or 505(b)(2) NDA is provided five years of statutory exclusivity upon approval. The FDA refers to this exclusivity as new chemical entity (NCE) exclusivity. Duringthe NCE exclusivity period, the FDA cannot approve an ANDA or a 505(b)(2) application for a drug containing the same active ingredient generally may notbe submitted to the FDA. For NCE exclusivity, the FDA regulations interpret “active ingredient” to mean “active moiety,” which is defined as “the moleculeor ion, excluding those appended portions of the molecule that cause the drug to be an ester, salt, or other noncovalent derivative of the molecule,responsible for the physiological or pharmacological action of the drug substance.” Although the FDA may not approve an ANDA or 505(b)(2) NDA with thesame active ingredient during the five-year NCE exclusivity period, an ANDA or 505(b)(2) NDA may be submitted to the FDA after four years if it contains acertification of patent invalidity, non-infringement, or unenforceability. The Hatch-Waxman Amendments also provide three years of statutory exclusivity for an NDA, a 505(b)(2) NDA, or a supplement to either of theseapplications for a drug product containing an active moiety that has been previously approved, if new clinical investigations, other than bioavailabilitystudies, that were conducted or sponsored by the applicant, are deemed by the FDA to be essential to the approval of the application. During this three-yearexclusivity period, the FDA will not make effective the approval of any ANDA or 505(b)(2) NDA for the same active moiety for the same conditions of use.Five-year and three-year exclusivity will not delay the submission or approval of a new drug containing the same active moiety if it is the subject of a fullNDA for which the applicant conducted, sponsored, or obtained a right of reference to all of the preclinical studies and adequate and well-controlled clinicaltrials necessary to demonstrate safety and effectiveness. 8  Other Regulatory Requirements. Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things,annual establishment registration, product listing, user fees, compliance with requirements regarding cGMP, recordkeeping, periodic reporting, productsampling and distribution, advertising and promotion, and adverse drug experience monitoring and reporting with the product. After approval, most changesto the approved product labeling, such as adding new indications are subject to prior FDA review and approval. Also, any post-approval changes in the drugsubstance, drug product, production process, quality controls, equipment, or facilities that have a substantial potential to have an adverse effect on theidentity, strength, quality, purity, or potency of the drug product are subject to FDA review and approval. Any such changes that have a moderate potential tohave an adverse effect on the identity, strength, quality, purity, or potency of the drug product may not be implemented until 30 days after the FDA receives asupplement for the change. All manufacturing facilities, as well as records required to be maintained under FDA regulations, are subject to inspection or auditby the FDA. In addition, manufacturers generally are required to pay annual user fees for approved products and a user fee for the submission of each new orsupplemental application. The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-approvaltesting, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization. TheFood and Drug Administration Amendments Act of 2007 gave the FDA the authority to require a REMS from drug manufacturers to manage a known orpotential serious risk associated with the drug and to ensure that the benefits of a drug outweigh its risks. Examples of a REMS include, but are not limited to,a Medication Guide, a patient package insert to help mitigate a serious risk of the drug, and a communication plan to healthcare providers to support theimplementation of an element of the REMS. In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishmentswith the FDA and register or obtain permits or licenses in states where they do business, and are subject to periodic unannounced inspections by the FDA andstate regulatory authorities with jurisdiction over their activities to determine compliance with regulatory requirements. A drug manufacturer is responsiblefor ensuring that its third-party contractors operate in compliance with applicable laws and regulations including the cGMP regulation. The failure of a drugmanufacturer or any of its third-party contractors to comply with federal or state laws or regulations may subject the drug manufacturer to possible legal orregulatory action, such as an untitled letter, warning letter, recall, suspension of manufacturing or distribution or both, suspension of state permit or license,seizure of product, import detention, injunctive action, and civil and criminal penalties. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require adrug manufacturer to conduct investigations and implement appropriate corrective actions to address any deviations from cGMP requirements and imposereporting and documentation requirements upon the manufacturer and any third-party contractors (including contract manufacturers and laboratories)involved in the manufacture of a drug product. Accordingly, manufacturers must continue to expend significant time, money and effort to maintain andensure ongoing cGMP compliance and to confirm and ensure ongoing cGMP compliance of their third-party contractors. Once an approval is granted, the FDA may withdraw the approval if, among other things, there is information that the drug is unsafe for use under theapproved conditions of use; new information or evidence that, evaluated together with evidence available to the FDA at the time of approval, shows that thedrug is not shown to be safe for use under the approved conditions of use; new information that, evaluated together with the evidence available to the FDA atthe time of approval, shows there is a lack of substantial evidence of effectiveness; the approved application contains an untrue statement of material fact; orthat the required patient information was not submitted within 30 days after receiving notice from the FDA of the failure to submit such information. Laterdiscovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes,or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety and risk information; imposition of apost-market study requirement to assess new safety risks; or implementation of a REMS that may include distribution or other restrictions. The FDA closely regulates drug advertising and promotional activities, including promotion of an unapproved drug, direct-to-consumer advertising,dissemination of scientific information about a drug not on the approved labeling, off-label promotion, communications with payors and formularycommittees, industry-sponsored scientific and educational activities, and promotional activities involving the internet and social media. A company’sproduct claims must be true and not misleading, provide fair balance, provide adequate risk information, and be consistent with the product labelingapproved by the FDA. Failure to comply with these requirements can lead to legal or regulatory actions including, among other things, warning letters,corrective advertising, injunction, violation and related penalties under the False Claims Act and can result in reputational and economic harm. Physicians may prescribe FDA-approved drugs for uses that are not described in the product’s labeling and that differ from those uses tested by themanufacturer. Such off-label uses occur across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients invaried circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments for their individual patients. The FDA does,however, regulate manufacturers’ communications about their drug products and interprets the FFDCA to prohibit pharmaceutical companies from promotingtheir FDA-approved drug products for uses that are not specified in the FDA-approved labeling. Companies that market drugs for off-label uses have beensubject to warning letters, related costly litigation, criminal prosecution, and civil liability under the FFDCA and the False Claims Act. In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, as amended by the DrugSupply Chain Security Act, which regulates the distribution of drug and drug samples at the federal level, and sets minimum standards for the registration andregulation of wholesale drug distributors by the states. 9  Good Clinical Practices The FDA and other regulatory agencies promulgate regulations and standards, commonly referred to as current Good Clinical Practices for designing,conducting, monitoring, auditing and reporting the results of clinical trials to ensure that the data and results are accurate and that the trial participants areadequately protected. The FDA and other regulatory agencies enforce Good Clinical Practices through periodic inspections of trial sponsors, principalinvestigators and trial sites. If our study sites fail to comply with applicable Good Clinical Practices, the clinical data generated in our clinical trials may bedeemed unreliable and relevant regulatory agencies may require us to perform additional clinical trials before approving our marketing applications. Good Manufacturing Practices The FDA and other regulatory agencies regulate and inspect equipment, facilities and processes used in the manufacture of pharmaceutical and biologicalproducts prior to approving a product. If, after receiving approval from regulatory agencies, a company makes a material change in manufacturing equipment,location or process, additional regulatory review and approval may be required. All facilities and manufacturing techniques that may be used for themanufacture of our products must comply with applicable regulations governing the production of pharmaceutical products known as "Good ManufacturingPractices." Orphan Drug Act Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a “rare disease or condition,” which generally is a diseaseor condition that affects fewer than 200,000 individuals in the U.S. If a product which has an orphan drug designation subsequently receives the first FDAapproval for that drug for the indication for which it has such designation, the product is entitled to orphan exclusivity, i.e., the FDA may not approve anyother application submitted by a different applicant to market the same drug for the same indication for a period of seven years following marketing approval,except in certain very limited circumstances, such as if the later product is shown to be clinically superior to the approved product with orphan drugexclusivity. Legislation similar to the Orphan Drug Act has been enacted in other countries, including within the European Union. Pediatric Marketing Use Authorization The PUMA approval is typically granted by the European Commission, based on a review by the European Medecines Agency and is intended exclusivelyfor pediatric (patients under 18 years of age) use. Such PUMA approval is ultimately valid in all countries within the European Economic Area (which mayexclude the United Kingdom as of March 30, 2019). The PUMA was introduced by the EU Paediatric Regulation for medicines that are: ·Normally contain an already authorized active ingredient;·Are no longer covered by a supplementary protection certificate (SPC) or a patent that qualifies for a SPC;·Are to be exclusively developed for use in children. The PUMA process was established to make it more efficient for pharmaceutical companies to invest in the development of drugs for children. PUMA drugsreceive 8 plus 2 years of regulatory data and marketing protection. and the applications are, in part, exempt from fees. The regulatory protection does notprevent off-label use of other drugs with the same active substance and indication for adults, nor pharmacy compounding. Other Laws Our present and future business has been and will continue to be subject to various other laws and regulations. Various laws, regulations andrecommendations relating to safe working conditions, laboratory practices, the experimental use of animals, and the purchase, storage, movement, import andexport and use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used inconnection with our research work are or may be applicable to our activities. Certain agreements entered into by us involving exclusive license rights may besubject to national or supranational antitrust regulatory control, the effect of which cannot be predicted. The extent of government regulation, which mightresult from future legislation or administrative action, cannot accurately be predicted. Research and Development Our research and development efforts have been focused on the development of PEDMARKTM since 2013. We have established relationships with contract research organizations, universities and other institutions, which we utilize to perform many of the day-to-day activities associated with our drug development. Where possible, we have sought to include leading scientific investigators and advisors to enhance ourinternal capabilities. Research and development issues are reviewed internally by our executive management and supporting scientific team. Research and development expenses totaled $5.0 million and $1.9 million for the fiscal years ended December 31, 2018 and 2017, respectively. We haveincreased our research and development expenses related to PEDMARKTM as a result of our drug manufacturing activities related to the preparation forregistration batches and NDA and MAA submission. 10  Our product candidate still requires significant, time-consuming and costly research and development, testing and regulatory clearances. In developing ourproduct candidate, we are subject to risks of failure that are inherent in the development of products based on innovative technologies. For example, it ispossible that our product candidate will be ineffective or toxic, or will otherwise fail to receive the necessary regulatory clearances. There is a risk that ourproduct candidate will be uneconomical to manufacture or market or will not achieve market acceptance. There is also a risk that third parties may holdproprietary rights that preclude us from marketing our product candidate or that others will market a superior or equivalent product. As a result of thesefactors, we are unable to accurately estimate the nature, timing and future costs necessary to complete the development of this product candidate. In addition,we are unable to reasonably estimate the period when material net cash inflows could commence from the sale, licensing or commercialization of suchproduct candidate, if ever. Employees At December 31, 2018, we had three employees (our Chief Executive Officer, Chief Financial Officer and Controller). These employees are employed on afull-time basis and there are no part-time employees. We use independent contractors to perform certain daily operations of the Company. Item 1A.Risk Factors An investment in our common shares involves a significant risk of loss. You should carefully read this entire Annual Report and should give particularattention to the following risk factors. You should recognize that other significant risks may arise in the future, which we cannot reasonably foresee at thistime. Also, the risks that we now foresee might affect us to a greater or different degree than currently expected. There are a number of important factors thatcould cause our actual results to differ materially from those expressed or implied by any of our forward-looking statements in this Annual Report. Thesefactors include, without limitation, the risk factors listed below, and other factors presented throughout this Annual Report and any other documents filed byus with the SEC and the Canadian securities regulators on SEDAR. Risks Related to Our Business We have a history of significant losses and have had no revenues to date through the sale of our products. If we do not generate significant revenues, wewill not achieve profitability. To date, we have been engaged primarily in research and development activities. We have had no revenues through the sale of our products, and we do notexpect to have significant revenues until we are able to either sell our product candidate after obtaining applicable regulatory approvals or we establishcollaborations that provide us with up-front payments, licensing fees, milestone payments, royalties or other revenue. We have incurred significant operatinglosses every year since our inception on September 3, 1996. We reported a loss of approximately $9.9 million (including a non-cash gain on derivativeliabilities of $0.2 million) for the year ended December 31, 2018 and reported a net loss of approximately $7.0 million (which included a non-cash loss onderivative liabilities of $0.1 million) for the year ended December 31, 2017. At December 31, 2018, we had an accumulated deficit of approximately $131.3million. We anticipate incurring substantial additional losses due to the need to spend substantial amounts on activities required for regulatory approval ofPEDMARKTM, commercial launch preparation of PEDMARKTM, anticipated research and development activities, and general and administrative expenses,among other factors. We have not commercially introduced any products. Our ability to attain profitability will depend upon our ability to fund and developproducts that are safe, effective and commercially viable, to obtain regulatory approval for the manufacture and sale of our product candidate and to licenseor otherwise market our product candidate successfully. Any revenues generated from such product, assuming it is successfully developed, marketed andsold, may not be realized for a number of years. We may never achieve or sustain profitability on an ongoing basis. PEDMARKTM is currently our only product candidate and there is no assurance that we will successfully develop PEDMARKTM into a commerciallyviable product. Since our formation in September 1996, we have engaged in research and development programs. We have generated no revenue from product sales, do nothave any products currently available for sale, and none are expected to be commercially available for sale until we have completed regulatory approval ofPEDMARKTM. PEDMARKTM is currently our only product candidate. There can be no assurance that the research we fund and manage will leadPEDMARKTM or any future product candidate to become a commercially viable product. We have completed enrollment of two-Phase 3 studies forPEDMARKTM and initiated our NDA in the U.S. We anticipate substantial regulatory review prior to the commercialization of PEDMARKTM. 11  We may require additional financing to obtain marketing approval of PEDMARKTM and commercialize PEDMARKTM and a failure to obtain thiscapital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, other operations orcommercialization efforts. Based on available resources, we believe that our cash and cash equivalents of $22.8 million available and the $12.5 million debt facility announcedFebruary 2019 are sufficient to fund our anticipated operating and capital requirements to NDA approval and the commencement of commercializationefforts. Moreover, we expect to continue to incur losses for the foreseeable future as we continue our development of and seek marketing approvals forPEDMARKTM. We may not be able to obtain additional financing in sufficient amounts or on acceptable terms when needed. If we fail to arrange forsufficient capital on a timely basis, we may be required to curtail our business activities until we can obtain adequate financing. Debt financing must berepaid regardless of whether or not we generate profits or cash flows from our business activities. Equity financing may result in dilution to existingshareholders and may involve securities that have rights, preferences, or privileges that are senior to our common shares or other securities. If we cannot raisesufficient capital when necessary, we will likely have to curtail operations and you may lose part or all of your investment. If we do not maintain current or enter into new collaborations with other companies, we might not successfully develop our product candidate orgenerate sufficient revenues to expand our business. We currently rely on scientific and research and development collaboration arrangements with academic institutions and other third-party collaborators,including an exclusive worldwide license from OHSU for PEDMARKTM. We also rely on collaborators for testing PEDMARKTM, including SIOPEL and theChildren’s Oncology Group. The agreements with OHSU are terminable by either party in the event of an uncured breach by the other party. We may also terminate our agreement withOHSU at any time upon prior written notice of specified durations to OHSU. Termination of any of our collaborative arrangements could materially adverselyaffect our business. For example, if we are unable to make the necessary payments under these agreements, the licensor might terminate the agreement whichmight have a material adverse impact. In addition, our collaborators might not perform as agreed in the future. Since we conduct a significant portion of our research and development through collaborations, our success may depend significantly on the performance ofsuch collaborators, as well as any future collaborators. Collaborators might not commit sufficient resources to the research and development orcommercialization of our product candidate. Economic or technological advantages of products being developed by others, among other factors, could leadour collaborators to pursue other product candidates or technologies in preference to those being developed in collaboration with us. The commercialpotential of, development stage of and projected resources required to develop our drug candidate will affect our ability to maintain current collaborations orestablish new collaborators. There is a risk of dispute with respect to ownership of technology developed under any collaboration. Our management of anycollaboration will require significant time and effort as well as an effective allocation of resources. We may not be able to simultaneously manage a largenumber of collaborations. Our product candidate is still in development. Due to the long, expensive and unpredictable drug development process, we might not ever successfullydevelop and commercialize our product candidate. In order to achieve profitable operations, we, alone or in collaboration with others, must successfully fund, develop, manufacture, introduce and market ourproduct candidate. The time necessary to achieve market success for any individual product is long and uncertain. Our product candidate and researchprograms are in clinical development and require significant, time-consuming and costly research, testing and regulatory clearances. In developing ourproduct candidate, we are subject to risks of failure that are inherent in the development of therapeutic products based on innovative technologies. Theresults of preclinical and initial clinical trials are not necessarily predictive of future results. Our product candidate might not be economical to manufactureor market or might not achieve market acceptance. In addition, third parties might hold proprietary rights that preclude us from marketing our productcandidates or others might market equivalent or superior products. We may need to conduct additional human clinical trials to assess our product candidate. If these trials are delayed or are unsuccessful, ourdevelopment costs will significantly increase, and our business prospects may suffer. Before obtaining regulatory approvals for the commercial sale of our product candidate, we must demonstrate, through preclinical studies with animals andclinical trials with humans, that our product candidate is safe and effective for use in each target indication. To date, we have performed only limited clinicaltrials. Much of our testing has been conducted on animals or on human cells in the laboratory, and the benefits of treatment seen in animals or on human cellsin a laboratory setting may not ultimately be obtained in human clinical trials. As a result, we may need to perform significant additional research anddevelopment activities and conduct extensive preclinical and clinical testing prior to any application for commercial use. We may suffer significant setbacksin additional clinical trials, and the trials may demonstrate our product candidate to be unsafe or ineffective. We may also encounter problems in our clinicaltrials that will cause us to delay, suspend or terminate those clinical trials, which would increase our development costs and harm our financial results andcommercial prospects. Identifying and qualifying patients to participate in clinical trials of our potential products is critically important to our success. Thetiming of our clinical trials depends on, among other things, the speed at which we can recruit patients to participate in testing our product candidate. Wehave experienced delays in some of our clinical trials and we may experience significant delays in the future. If patients are unwilling to participate in ourtrials because of competing clinical trials for similar patient populations, perceived risk or any other reason, the timeline for recruiting patients, conductingtrials and obtaining regulatory approval of potential products will be delayed. Other factors that may result in significant delays include obtaining regulatoryor ethics review board approvals for proposed trials, reaching agreement on acceptable terms with prospective clinical trial sites, and obtaining sufficientquantities of drugs for use in the clinical trials. Such delays could result in the termination of the clinical trials altogether. 12  Regulatory approval of our product candidate is time-consuming, expensive and uncertain, and could result in unexpectedly high expenses and delayour ability to sell our product. Development, manufacture and marketing of our product is subject to extensive regulation by governmental authorities in the United States and othercountries. This regulation could require us to incur significant unexpected expenses or delay or limit our ability to sell our product candidate. Our clinicalstudies might be delayed or halted, or additional studies might be required, for various reasons, including: ·there is a lack of sufficient funding;·the drug is not effective;·patients experience severe side effects during treatment;·appropriate patients do not enroll in the studies at the rate expected;·drug supplies are not sufficient to treat the patients in the studies; or·we decide to modify the drug during testing. If regulatory approval of our product is granted, it will be limited to those indications for which the product has been shown to be safe and effective, asdemonstrated to the satisfaction of the FDA and foreign regulators through clinical studies. Furthermore, approval might entail ongoing requirements forpost-marketing studies. Even if regulatory approval is obtained, labeling and promotional activities are subject to continual scrutiny by the FDA and stateand foreign regulatory agencies and, in some circumstances, the Federal Trade Commission. FDA enforcement policy prohibits the marketing of approvedproducts for unapproved, or off-label, uses. These regulations and the FDA’s interpretation of them might impair our ability to effectively market our product. We and our third-party manufacturers are also required to comply with the applicable current FDA Good Manufacturing Practices regulations, which includerequirements relating to quality control and quality assurance, as well as the corresponding maintenance of records and documentation. Further,manufacturing facilities must be approved by the FDA before they can be used to manufacture our product, and they are subject to additional FDAinspection. If we fail to comply with any of the FDA’s continuing regulations, we could be subject to reputational harm and sanctions, including: ·delays, warning letters and fines;·product recalls or seizures and injunctions on sales;·refusal of the FDA to review pending applications;·total or partial suspension of production;·withdrawals of previously approved marketing applications; and·civil penalties and criminal prosecutions. In addition, identification of side effects after a drug is on the market or the occurrence of manufacturing problems could cause subsequent withdrawal ofapproval, reformulation of the drug, additional testing or changes in labeling of the product. We may be unable to effectively deploy the proceeds from our recent financings for the development of PEDMARKTM. In December of 2017, we announced the completion of an underwritten public offering for gross proceeds of $21.2 million. In June of 2017, we announcedthe closing of a non-brokered private placement for gross proceeds of $7.6 million. Further, in February 2019, the Company announced a $12.5 million debtfacility available to the Company upon approval of PEDMARKTM. Any inability on our part to manage effectively the deployment of this capital could limitour ability to successfully develop PEDMARKTM. If our licenses to proprietary technology owned by others are terminated or expire, we may suffer increased development costs and delays, and we maynot be able to successfully develop our product candidate. The development of our drug candidate and the manufacture and sale of any products that we develop will involve the use of processes, products andinformation, some of the rights to which are owned by others. STS is licensed under agreements with OHSU. Although we have obtained licenses or rightswith regard to the use of certain processes, products and information, the licenses or rights could be terminated or expire during critical periods and we maynot be able to obtain, on favorable terms or at all, licenses or other rights that may be required. Some of these licenses provide for limited periods ofexclusivity that may be extended only with the consent of the licensor, which may not be granted. 13  If we are unable to adequately protect or maintain our patents and licenses related to our product candidate, or if we infringe upon the intellectualproperty rights of others, we may not be able to successfully develop and commercialize our product candidate. The value of our technology will depend in part upon our ability, and those of our collaborators, to obtain patent protection or licenses to patents, maintaintrade secret protection and operate without infringing on the rights of third parties. Although we have successfully pursued patent applications in the past, itis possible that: ·some or all of our pending patent applications, or those we have licensed, may not be allowed;·proprietary products or processes that we develop in the future may not be patentable;·any issued patents that we own, or license may not provide us with any competitive advantages or may be successfully challenged by third parties;or·the patents of others may have an adverse effect on our ability to do business. It is not possible for us to be certain that we are the original and first creator of inventions encompassed by our pending patent applications or that we werethe first to file patent applications for any such inventions. Further, any of our patents, once issued, may be declared by a court to be invalid or unenforceable. STS is currently protected by methods of use patents that we exclusively licensed from OHSU that expire in Europe and the United States in 2021 andadditional patents that are currently pending in the United States. In addition, periods of marketing exclusivity for STS may also be possible in the UnitedStates under orphan drug status. We obtained Orphan Drug Designation in the United States for the use of STS in the prevention of platinum-inducedototoxicity in pediatric patients in 2004; if it is subsequently approved, will have seven and a half years of pediatric exclusivity in the United States from theapproval date. Refer to the “Description of Business” section of this Annual Report for a further description of the United States Orphan Drug Designation. We may be required to obtain licenses under patents or other proprietary rights of third parties but the extent to which we may wish or need to do so isunknown. Any such licenses may not be available on terms acceptable to us or at all. If such licenses are obtained, it is likely they would be royalty bearing,which would reduce any future income. If licenses cannot be obtained on an economical basis, we could suffer delays in market introduction of plannedproducts or their introduction could be prevented, in some cases after the expenditure of substantial funds. If we do not obtain such licenses, we would haveto design around patents of third parties, potentially causing increased costs and delays in product development and introduction or precluding us fromdeveloping, manufacturing or selling our planned products, or our ability to develop, manufacture or sell products requiring such licenses could beforeclosed. Litigation may also be necessary to enforce or defend patents issued or licensed to us or our collaborators or to determine the scope and validity of a thirdparty’s proprietary rights. We could incur substantial costs if litigation is required to defend ourselves in patent suits brought by third parties, if weparticipate in patent suits brought against or initiated by our collaborators, or if we initiate such suits. We might not prevail in any such action. An adverseoutcome in litigation or an interference to determine priority or other proceeding in a court or patent office could subject us to significant liabilities, requiredisputed rights to be licensed from other parties or require us or our collaborators to cease using certain technology or products. Any of these events wouldlikely have a material adverse effect on our business, financial condition and results of operations. Much of our technological know-how that is not patentable may constitute trade secrets. Our confidentiality agreements might not provide for meaningfulprotection of our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure of information. In addition,others may independently develop or obtain similar technology and may be able to market competing products and obtain regulatory approval through ashowing of equivalency to our product that has obtained regulatory approvals, without being required to undertake the same lengthy and expensive clinicalstudies that we would have already completed. The vulnerability to off-label use or sale of our product candidate that are covered only by “method of use” patents may cause downward pricingpressure on the product candidate if they are ever commercialized and may make it more difficult for us to enter into collaboration or partneringarrangements for the development of this product candidate. STS is currently only covered by “method of use” patents, which covers the use of certain compounds to treat specific conditions and are not covered by“composition of matter” patents, which would cover the chemical composition of the compound. Method of use patents provide less protection thancomposition of matter patents because of the possibility of off-label competition if other companies develop or market the compound for other uses. Ifanother company markets a drug that we expect to market under the protection of a method of use patent, physicians may prescribe the other company’s drugfor use in the indication for which we obtain approval and have a patent, even if the other company’s drug is not approved for such an indication. Off-labeluse and sales could limit our sales and exert pricing pressure on any product we develop covered only by method of use patents. Also, it may be moredifficult to find a collaborator to license or support the development of our product candidate that is only covered by method of use patents. If our third-party manufacturers breach or terminate their agreements with us, or if we are unable to secure arrangements with third partymanufacturers on acceptable terms as needed in the future, we may suffer significant delays and additional costs. We have no experience manufacturing products and do not currently have the resources to manufacture any products that we may develop. We currently haveagreements with contract manufacturers for clinical supplies of PEDMARKTM, including drug substance providers and drug product suppliers, but theymight not perform as agreed in the future or may terminate our agreements with them before the end of the required term. Significant additional time andexpense would be required to effect a transition to a new contract manufacturer. 14  We plan to continue to rely on contract manufacturers for the foreseeable future to produce quantities of products and substances necessary for research anddevelopment, preclinical trials, human clinical trials and product commercialization, and to perform their obligations in a timely manner and in accordancewith applicable government regulations. If we develop any product with commercial potential, we will need to develop the facilities to independentlymanufacture such product or products or secure arrangements with third parties to manufacture them. We may not be able to independently developmanufacturing capabilities or obtain favorable terms for the manufacture of our product. While we intend to contract for the commercial manufacture of ourproduct candidate, we may not be able to identify and qualify contractors or obtain favorable contracting terms. We or our contract manufacturers may alsofail to meet required manufacturing standards, which could result in delays or failures in product delivery, increased costs, injury or death to patients, productrecalls or withdrawals and other problems that could significantly hurt our business. We intend to maintain a second source for back-up commercialmanufacturing, wherever feasible. However, if a replacement to our future internal or contract manufacturers were required, the ability to establish second-sourcing or find a replacement manufacturer may be difficult due to the lead times generally required to manufacture drugs and the need for FDA complianceinspections and approvals of any replacement manufacturer, all of which factors could result in production delays and additional commercialization costs.Such lead times would vary based on the situation but might be twelve months or longer. We may lack the resources necessary to effectively market our product candidate, and we may need to rely on third parties over whom we have little orno control and who may not perform as expected. We may not have the necessary resources to market our product candidate. If we develop any products with commercial potential, we will either have todevelop a marketing capability, including a sales force, which is difficult and expensive to implement successfully, or attempt to enter into a collaboration,merger, joint venture, license or other arrangement with third parties to provide a substantial portion of the financial and other resources needed to marketsuch products. We may not be able to do so on acceptable terms, if at all. If we rely extensively on third parties to market our products, the commercialsuccess of such products may be largely outside of our control. We conduct our business internationally and are subject to laws and regulations of several countries which may affect our ability to access regulatoryagencies and may affect the enforceability and value of our licenses. We have conducted clinical trials in the United States, Canada, Europe and the Pacific Rim and intend to, or may, conduct future clinical trials in these andother jurisdictions. There can be no assurance that any sovereign government will not establish laws or regulations that will be deleterious to our interests.There is no assurance that we, as a British Columbia corporation, will continue to have access to the regulatory agencies in any jurisdiction where we mightwant to conduct clinical trials or obtain regulatory approval, and we might not be able to enforce our license or patent rights in foreign jurisdictions. Foreignexchange controls may have a material adverse effect on our business and financial condition, since such controls may limit our ability to flow funds into orout of a particular country to meet obligations under licenses, clinical trial agreements or other collaborations. Our cash invested in money market funds might be subject to loss. Even though we believe we take a conservative approach to investing our funds, the nature of financial markets exposes us to investment risk, including therisks that the value and liquidity of our money market investments could deteriorate significantly and the issuers of the investments we hold could be subjectto credit rating downgrades. While we have not experienced any loss or write down of our money market investments in the past, we cannot guarantee thatsuch losses will not occur in future periods. Risks Related to the Clinical Development and Marketing Approval of Our Product Candidates The marketing approval processes of the FDA and comparable foreign authorities are lengthy, time-consuming and inherently unpredictable, and if weare ultimately unable to obtain marketing approval for our product candidates, our business will be substantially harmed. None of our current product candidates have gained marketing approval for sale in the United States or any other country, and we cannot guarantee that wewill ever have marketable products. Our business is substantially dependent on our ability to complete the development of, obtain marketing approval for,and successfully commercialize our product candidates in a timely manner. We cannot commercialize our product candidates in the United States withoutfirst obtaining approval from the FDA to market each product candidate. Similarly, we cannot commercialize our product candidates outside of the UnitedStates without obtaining regulatory approval from comparable foreign regulatory authorities. Our product candidates could fail to receive marketingapproval for many reasons, including the following: ·the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;·the FDA or comparable foreign regulatory authorities may find the human subject protections for our clinical trials inadequate and place a clinicalhold on an Investigational New Drug Application, or IND, at the time of its submission precluding commencement of any trials or a clinical hold onone or more clinical trials at any time during the conduct of our clinical trials; 15  ·the FDA could determine that we cannot rely on Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, or FFDCA, for any or all of ourproduct candidates;·we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe andeffective for its proposed indication;·the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities forapproval;·we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;·the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;·the FDA could determine that our application relies, or must rely, upon a listed drug or drugs that we a failed to identify or that approval of our505(b)(2) application for any of our product candidates is blocked by patent or non-patent exclusivity of the listed drug or drugs;·the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an application to obtainmarketing approval in the United States or elsewhere;·the FDA or comparable foreign regulatory authorities may find inadequate the manufacturing processes or facilities of third-party manufacturers withwhich we contract for clinical and commercial supplies; and·the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner that would delaymarketing approval. Before obtaining marketing approval for the commercial sale of any drug product for a target indication, we must demonstrate in preclinical studies and well-controlled clinical trials and, with respect to approval in the United States, to the satisfaction of the FDA, that the product is safe and effective for its intendeduse and that the manufacturing facilities, processes, and controls are adequate to preserve the drug’s identity, strength, quality and purity. In the UnitedStates, it is necessary to submit and obtain approval of a New Drug Application, or NDA, from the FDA. An NDA must include extensive preclinical andclinical data and supporting information to establish the product’s safety and efficacy for each desired indication. The NDA must also include significantinformation regarding the chemistry, manufacturing, and controls for the product. After the submission of an NDA, but before approval of the NDA, themanufacturing facilities used to manufacture a product candidate generally must be inspected by the FDA to ensure compliance with the applicable CurrentGood Manufacturing Practice, or cGMP, requirements. The FDA and the Competent Authorities of the Member States of the European Economic Area, orEEA, and comparable foreign regulatory authorities, may also inspect our clinical trial sites and audit clinical study data to ensure that our studies areproperly conducted in accordance with the IND regulations, human subject protection regulations, and good clinical practice, or cGCP. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and approval may not be obtained. Upon submission of an NDA, the FDA mustmake an initial determination that the application is sufficiently complete to accept the submission for filing. We cannot be certain that any submissions willbe accepted for filing and reviewed by the FDA, or ultimately be approved. If the application is not accepted for review, the FDA may require that we conductadditional clinical studies or preclinical testing, or take other actions before it will reconsider our application. If the FDA requires additional studies or data,we would incur increased costs and delays in the marketing approval process, which may require us to expend more resources than we have available. Inaddition, the FDA might not consider any additional information to be complete or sufficient to support the filing or approval of the NDA. Regulatory authorities outside of the United States, such as in Europe and Japan and in emerging markets, also have requirements for approval of drugs forcommercial sale with which we must comply prior to marketing in those areas. Regulatory requirements can vary widely from country to country and coulddelay or prevent the introduction of our product candidates. Clinical trials conducted in one country may not be accepted or the results may not be foundadequate by regulatory authorities in other countries, and obtaining regulatory approval in one country does not mean that regulatory approval will beobtained in any other country. However, the failure to obtain regulatory approval in one jurisdiction could have a negative impact on our ability to obtainapproval in a different jurisdiction. Approval processes vary among countries and can involve additional product candidate testing and validation andadditional administrative review periods. Seeking foreign regulatory approval could require additional non-clinical studies or clinical trials, which could becostly and time-consuming. Foreign regulatory approval may include all of the risks associated with obtaining FDA approval. For all of these reasons, wemay not obtain foreign regulatory approvals on a timely basis, if at all. The process to develop, obtain marketing approval for, and commercialize product candidates is long, complex and costly, both inside and outside of theUnited States, and approval is never guaranteed. The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable buttypically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of theregulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during thecourse of a product candidate’s clinical development and may vary among jurisdictions. Even if our product candidates were to successfully obtain approvalfrom regulatory authorities, any such approval might significantly limit the approved indications for use, including more limited patient populations, requirethat precautions, warnings or contraindications be included on the product labeling, including black box warnings, require expensive and time-consumingpost-approval clinical studies, risk evaluation and mitigation strategies or surveillance as conditions of approval, or, through the product label, the approvalmay limit the claims that we may make, which may impede the successful commercialization of our product candidates. Following any approval forcommercial sale of our product candidates, certain changes to the product, such as changes in manufacturing processes and additional labeling claims, as wellas new safety information, may require new studies and will be subject to additional FDA notification, or review and approval. Also, marketing approval forany of our product candidates may be withdrawn. If we are unable to obtain marketing approval for our product candidates in one or more jurisdictions, orany approval contains significant limitations, our ability to market to our full target market will be reduced and our ability to realize the full market potentialof our product candidates will be impaired. Furthermore, we may not be able to obtain sufficient funding or generate sufficient revenue and cash flows tocontinue or complete the development of any of our current or future product candidates. 16  Our risk of delay in product approvals is increased if the United States government is fully or partially shut down due to lack of continuity in funding. Our business operations, and particularly the timing of the outcome of review of our NDA filing for marketing approval of PEDMARKTM, are directly andindirectly affected by the operations of the United States government, including but not limited to the FDA. Any interruption in the continuity of funding ofall or a part of government activities could have a significant negative effect on our business, including the timing of that review decision. For example, overthe last several years, including beginning on December 22, 2018 and ending on January 25, 2019, the United States government has had shut downs. Wecannot predict the likelihood, duration, impact, or timing of any future shutdown. There can be no assurance that if such shutdown(s) were to occur in thefuture, adequate funds would be available to the FDA and other U.S. government agencies to allow them to continue their activities uninterrupted. Evenwhen funding is restored following one or more shutdowns, we cannot predict the ongoing impact of such shutdowns on our business, or the degree to whichfunding would be restored to the FDA or other agencies having an impact on our business. If we are unable to submit an application for approval under Section 505(b)(2) of the FFDCA or if we are required to generate additional data related tosafety and efficacy in order to obtain approval under Section 505(b)(2), we may be unable to meet our anticipated development and commercializationtimelines. Our current strategy for seeking marketing authorization in the United States for our product candidates relies primarily on Section 505(b)(2) of the FFDCA,which permits use of a marketing application, referred to as a 505(b)(2) application, where at least some of the information required for approval comes fromstudies not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use. The FDA interprets this to mean that anapplicant may rely for approval on such data as that found in published literature or the FDA’s finding of safety or effectiveness, or both, of a previouslyapproved drug product owned by a third party. There is no assurance that the FDA would find the published literature or third-party data relied upon by us ina 505(b)(2) application sufficient or adequate to support approval, and the FDA may require us to generate additional data to support the safety and efficacyof our product candidates. Consequently, we may need to conduct substantial new research and development activities beyond those we currently plan toconduct. Such additional new research and development activities would be costly and time-consuming and there is no assurance that such data generatedfrom such additional activities would be sufficient to obtain approval. If the data to be relied upon in a 505(b)(2) application are related to drug products previously approved by the FDA and covered by patents that are listed inthe FDA’s Orange Book, we would be required to submit with our 505(b)(2) application an appropriate patent certification or statement. The type of patentcertification that would enable us to obtain approval of our application before a listed patent expires, known as a Paragraph IV Certification, would require usto certify that we do not infringe the listed patent or that such patent is invalid or unenforceable. We would be required to provide timely notice to the patentowner and the holder of the approved NDA. If a patent infringement action is initiated against us within 45 days from receipt of our Paragraph IVCertification, the approval of our NDA would be subject to a stay of up to 30 months or more while we defend against such a suit. Approval of our productcandidates under Section 505(b)(2) may, therefore, be delayed until patent exclusivity expires or until we successfully challenge those patents. Alternatively,we may elect to generate sufficient clinical data so that we would no longer need to rely on third-party data, which would be costly and time-consuming andthere would be no assurance that such data generated from such additional activities would be sufficient to obtain approval. We may not be able to obtain shortened review of our applications, and the FDA may not agree that our product candidates qualify for marketing approval. Ifwe are required to generate additional data to support approval, we may be unable to meet anticipated or reasonable development and commercializationtimelines, may be unable to generate the additional data at a reasonable cost, or at all, and may be unable to obtain marketing approval of our productcandidates. If the FDA changes its interpretation of Section 505(b)(2) allowing reliance on data in published literature or a previously approved drugapplication owned by a third party, or there is a change in the law affecting Section 505(b)(2), this could delay or even prevent the FDA from approving anySection 505(b)(2) application that we submit. Even if we receive marketing approval for our product candidates, such approved products will be subject to ongoing obligations and continuedregulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labelingand other restrictions, and we may be subject to penalties and legal sanctions if we fail to comply with regulatory requirements or experienceunanticipated problems with our approved products. If the FDA approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage,advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements includesubmissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMP regulations and GCP forany clinical trials that we conduct post-approval. Any marketing approvals that we receive for our product candidates may also be subject to limitations onthe approved indicated uses for which the product may be marketed or to conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor safety and efficacy. 17  Later discovery of previously unknown problems with an approved product, including adverse events of unanticipated severity or frequency, or withmanufacturing operations or processes, or failure to comply with regulatory requirements, or evidence of acts that raise questions about the integrity of datasupporting the product approval, may result in, among other things: ·restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls;·fines, warning letters, or holds on clinical trials;·refusal by the FDA to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of productapprovals;·product seizure or detention, or refusal to permit the import or export of products; and·injunctions or the imposition of civil or criminal penalties. The FDA’s policies may change, and additional government regulations may be enacted that could prevent, limit or delay marketing approval,manufacturing or commercialization of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arisefrom future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements orthe adoption of new requirements or policies, or we are not able to maintain regulatory compliance, we may lose any marketing approval that may have beenobtained and we may not achieve or sustain profitability, which would adversely affect our business. Agencies like the FDA and national competition regulators in European countries regulate the promotion and uses of drugs not consistent withapproved product labeling requirements. If we are found to have improperly promoted our current product candidates for uses beyond those that areapproved, we may become subject to significant liability. Regulatory authorities like the FDA and national competition laws in Europe strictly regulate the promotional claims that may be made about prescriptionproducts, such as PEDMARKTM, if approved. In particular, a product may not be promoted for uses that are not approved by the FDA or comparable foreignregulatory authorities as reflected in the product’s approved labeling, known as “off-label” use, nor may it be promoted prior to obtaining marketingapproval. If we receive marketing approval for our product candidates for our proposed indications, physicians may nevertheless use our products for theirpatients in a manner that is inconsistent with the approved label if the physicians personally believe in their professional medical judgment it could be usedin such manner. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses. In addition, the FDA requires that promotional claims not be “false or misleading” as such terms are defined in the FDA’s regulations. For example, the FDArequires substantial evidence, which generally consists of two adequate and well-controlled head-to-head clinical trials, for a company to make a claim thatits product is superior to another product in terms of safety or effectiveness. Generally, unless we perform clinical trials meeting that standard comparing ourproduct candidates to competitive products and these claims are approved in our product labeling, we will not be able promote our current productcandidates as superior to other products. If we are found to have made such claims, we may become subject to significant liability. In the United States, thefederal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies fromengaging in improper promotion. The FDA has also requested that companies enter into consent decrees or corporate integrity agreements. The FDA couldalso seek permanent injunctions under which specified promotional conduct is monitored, changed or curtailed. Our current and future relationships with healthcare professionals, investigators, consultants, collaborators, actual customers, potential customers andthird-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims,physician payment transparency, health information privacy and security and other healthcare laws and regulations, which could expose us tosanctions. Healthcare providers, physicians and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription ofany drug candidates for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, investigators, consultants,collaborators, actual customers, potential customers and third-party payors may expose us to broadly applicable fraud and abuse and other healthcare laws,including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act, that may constrain the business or financial arrangementsand relationships through which we sell, market and distribute any drug candidates for which we obtain marketing approval. In addition, we may be subjectto physician payment transparency laws and patient privacy and security regulation by the federal government and by the U.S. states and foreignjurisdictions in which we conduct our business. The applicable federal, state and foreign healthcare laws that may affect our ability to operate include thefollowing: ·the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving orproviding remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or thepurchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under federaland state healthcare programs such as Medicare and Medicaid; 18  ·federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civilpenalties, including civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causingto be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or makinga false statement to avoid, decrease or conceal an obligation to pay money to the federal government;·the civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presentedor caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided asclaimed or is false or fraudulent;·the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibitknowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false orfraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefitprogram, regardless of the payor (e.g., public or private), knowingly and willfully embezzling or stealing from a healthcare benefit program, willfullyobstructing a criminal investigation of a healthcare offense and knowingly and willfully falsifying, concealing or covering up by any trick or devicea material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or servicesrelating to healthcare matters;·HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementingregulations, which impose obligations on covered entities, including healthcare providers, health plans, and healthcare clearinghouses, as well astheir respective business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of acovered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;·the federal Open Payments program, created under Section 6002 of the Patient Protection and Affordable Care Act, or the Affordable Care Act, andits implementing regulations, which imposed annual reporting requirements for manufacturers of drugs, devices, biologicals and medical suppliesfor certain payments and “transfers of value” provided to physicians and teaching hospitals, as well as ownership and investment interests held byphysicians and their immediate family members, where failure to submit timely, accurately and completely the required information for all coveredpayments, transfers of value and ownership or investment interests may result in civil monetary penalties; and·analogous state and foreign laws, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claimsinvolving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws that requirepharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidancepromulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws that requiredrug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketingexpenditures; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differfrom each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.Further, the Affordable Care Act, among other things, amended the intent requirement of the federal Anti-Kickback Statute and certain criminal statutesgoverning healthcare fraud. A person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. In addition, theAffordable Care Act provided that the government may assert that a claim including items or services resulting from a violation of the federal Anti-KickbackStatute constitutes a false or fraudulent claim for purposes of the False Claims Act. Efforts to ensure that our future business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantialcosts. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or caselaw involving applicable fraud and abuse or other healthcare laws. If our operations are found to be in violation of any of these laws or any othergovernmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation,damages, fines, imprisonment, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, and the curtailment orrestructuring of our operations, which could significantly harm our business. If any of the physicians or other healthcare providers or entities with whom weexpect to do business, including our current and future collaborators, if any, are found not to be in compliance with applicable laws, those persons or entitiesmay be subject to criminal, civil or administrative sanctions, including exclusion from participation in government healthcare programs, which could alsoaffect our business. The impact of recent healthcare reform legislation and other changes in the healthcare industry and healthcare spending on us is currently unknownand may adversely affect our business model. In the United States and some foreign jurisdictions, legislative and regulatory changes and proposed changes regarding the healthcare system could preventor delay marketing approval of our drug candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any drug candidatesfor which we obtain marketing approval. 19  Our revenue prospects could be affected by changes in healthcare spending and policy in the United States and abroad. We operate in a highly regulatedindustry and new laws and judicial decisions, or new interpretations of existing laws or decisions, related to healthcare availability, the method of delivery orpayment for healthcare products and services could negatively impact our business, financial condition, results of operations and prospects. There issignificant interest in promoting healthcare reform, as evidenced by the enactment in the United States of the Affordable Care Act. Among other things, theAffordable Care Act contains provisions that may reduce the profitability of drug products, including, for example, revising the methodology by whichrebates owed by manufacturers for covered outpatient drugs under the Medicaid Drug Rebate Program are calculated, extending the Medicaid Drug RebateProgram to utilization of prescriptions of individuals enrolled in Medicaid managed care plans, imposing mandatory discounts for certain Medicare Part Dbeneficiaries, and subjecting drug manufacturers to payment of an annual fee. We expect that the Affordable Care Act, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coveragecriteria and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or othergovernment programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or otherhealthcare reforms may prevent us from being able to generate revenue or commercialize our drugs. It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to existing healthcarelegislation. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed ormodified. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain orreduce costs of healthcare may adversely affect: ·the demand for any drug products for which we may obtain marketing approval;·our ability to set a price that we believe is fair for our products;·our ability to obtain coverage and reimbursement approval for a product;·our ability to generate revenues and achieve or maintain profitability; and·the level of taxes that we are required to pay. If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that couldhave a material adverse effect on our business, financial condition or results of operations. Our research and development activities and our third-party manufacturers’ and suppliers’ activities involve the controlled storage, use, and disposal ofhazardous materials, including the components of our product candidates and other hazardous compounds. We and our manufacturers and suppliers aresubject to laws and regulations governing the use, manufacture, storage, handling, and disposal of these hazardous materials. In some cases, these hazardousmaterials and various wastes resulting from their use are stored at our and our manufacturers’ facilities pending their use and disposal. We cannot eliminatethe risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations,environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling, and disposal ofthese materials and specified waste products. Although we believe that the safety procedures utilized by us and our third-party manufacturers for handlingand disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case oreliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and suchliability could exceed our resources and state or federal or other applicable authorities may curtail our use of specified materials and/or interrupt our businessoperations. Furthermore, environmental laws and regulations are complex, change frequently, and have tended to become more stringent. We cannot predictthe impact of such changes and cannot be certain of our future compliance. We do not currently carry biological or hazardous waste insurance coverage. Risks Related to Commercialization of Our Product Candidates Even if we obtain the required regulatory approvals in the United States and other territories, the commercial success of our product candidates willdepend on market awareness and acceptance of our product candidates. Even if we obtain marketing approval for PEDMARKTM or any other product candidates that we may develop or acquire in the future, the products may notgain market acceptance among physicians, key opinion leaders, healthcare payors, patients and the medical community. Market acceptance of any approvedproducts depends on a number of factors, including: ·the timing of market introduction;·the efficacy and safety of the product, as demonstrated in clinical trials;·the clinical indications for which the product is approved, and the label approved by regulatory authorities for use with the product, including anyprecautions, warnings or contraindications that may be required on the label;·acceptance by physicians, key opinion leaders and patients of the product as a safe and effective treatment;·the cost, safety and efficacy of treatment in relation to alternative treatments;·the availability of coverage and adequate reimbursement and pricing by third-party payors and government authorities;·the number and clinical profile of competing products;·the growth of drug markets in our various indications;·relative convenience and ease of administration; 20  ·marketing and distribution support;·the prevalence and severity of adverse side effects; and·the effectiveness of our sales and marketing efforts. Market acceptance is critical to our ability to generate revenue. Any product candidate, if approved and commercialized, may be accepted in only limitedcapacities or not at all. If any approved products are not accepted by the market to the extent that we expect, we may not be able to generate revenue and ourbusiness would suffer. If the market opportunities for our product candidates are smaller than we believe they are, then our revenues may be adversely affected, and ourbusiness may suffer. The market opportunities that our current and future product candidates are being developed to address are rare. Our projections of both the number of peoplewho are administered Cisplatin, as well as the subset of people who have the potential to benefit from treatment with our product candidates, and ourassumptions relating to pricing are based on estimates. Given the small number of patients that we are targeting, our eligible patient population and pricingestimates may differ significantly from the actual market addressable by our product candidates. We currently have limited marketing and sales experience. If we are unable to establish sales and marketing capabilities or enter into agreements withthird parties to market and sell our product candidates, we may be unable to generate any revenue. We have never commercialized a product candidate, and we currently have no marketing and sales organization. To the extent our product candidates areapproved for marketing, if we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell ourproduct candidates, we may not be able to effectively market and sell our product candidates or generate product revenue. We have never commercialized a product candidate, and we currently do not have marketing, sales or distribution capabilities for our product candidates. Inorder to commercialize any of our products that receive marketing approval, we would have to build marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. In the event of successfuldevelopment of our product candidates, if we elect to build a targeted specialty sales force, such an effort would be expensive and time consuming. Anyfailure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of theseproducts. We may choose to collaborate with third parties that have their own sales forces and established distribution systems, in lieu of or to augment anysales force and distribution systems we may create. If we are unable to enter into collaborations with third parties for the commercialization of approvedproducts, if any, on acceptable terms or at all, or if any such collaborator does not devote sufficient resources to the commercialization of our product orotherwise fails in commercialization efforts, we may not be able to successfully commercialize our product candidates if we receive marketing approval. If weare not successful in commercializing our product candidates, either on our own or through collaborations with one or more third parties, our future revenuewill be materially and adversely impacted. Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for usto sell our products profitably. There is significant uncertainty related to third-party coverage and reimbursement of newly approved pharmaceuticals. Market acceptance and sales of anyapproved product candidates will depend significantly on the availability of coverage and adequate reimbursement from third-party payors and may beaffected by existing and future healthcare reform measures. Patients who are prescribed treatments for their conditions and providers performing theprescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Government authorities and third-partypayors, such as private health insurers, health maintenance organizations, and government payors like Medicare and Medicaid, decide which drugs they willpay for and establish reimbursement levels. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discountsfrom list prices and are challenging the prices charged for drugs and products. Coverage and reimbursement may not be available for any product that wecommercialize and, even if coverage is provided, the level of reimbursement may not be satisfactory. Inadequate reimbursement levels may adversely affectthe demand for, or the price of, any drug candidate for which we obtain marketing approval. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is, amongother things: ·a covered benefit under its health plan;·safe, effective and medically necessary;·appropriate for the specific patient;·cost-effective; and·neither experimental nor investigational. 21  Obtaining coverage and adequate reimbursement approval for a product from a government or other third-party payor is a time consuming and costly processthat could require us to conduct expensive pharmacoeconomic studies and provide supporting scientific, clinical and cost-effectiveness data for the use ofour products to the payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and adequate reimbursement. In additionto examining the medical necessity and cost-effectiveness of new products, coverage may be limited to specific drug products on an approved list, orformulary, which might not include all of the FDA-approved drug products for a particular indication. There may also be formulary placements that result inlower reimbursement levels and higher cost-sharing borne by patients, any of which could have an adverse effect on our revenues and profits. Moreover, athird-party payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in productdevelopment. Additionally, coverage and reimbursement for drug products can differ significantly from payor to payor. One third-party payor’s decision tocover a particular drug product does not ensure that other payors will also provide coverage for the drug product, or even if coverage is available, establish anadequate reimbursement rate. We cannot be sure that coverage or adequate reimbursement will be available for any of our product candidates. Also, we cannot be sure that reimbursementamounts will not reduce the demand for, or the price of, our products. If reimbursement is not available or is available only to limited levels, we may not beable to commercialize certain of our products. In the United States, third-party payors are increasingly attempting to contain healthcare costs by limiting bothcoverage and the level of reimbursement of new drugs. Third-party payors are increasingly challenging the prices charged for medical products and services,examining the medical necessity and reviewing the cost-effectiveness of drug products and medical services and questioning safety and efficacy. As a result,significant uncertainty exists as to whether and how much third-party payors will reimburse patients for their use of newly approved drugs, which in turn willput pressure on the pricing of drugs. Additionally, emphasis on managed care in the United States has increased and we expect will continue to increase thepressure on drug pricing. If third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover theproducts for which we receive FDA approval or, if they do, the level of payment may not be sufficient to allow us to sell our products at a profit. Coverage policies, third-party reimbursement rates and drug pricing regulation may change at any time, and there is the potential for significant movement inthese areas in the foreseeable future. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive marketingapproval, less favorable coverage policies and reimbursement rates may be implemented in the future. If our competitors are able to obtain orphan drug exclusivity for their products that are the same drug as our product candidates, we may not be able tohave competing products approved by the applicable regulatory authority for a significant period of time or benefit from that exclusivity. We have orphan drug designation in the United States for PEDMARKTM for the prevention of platinum induced ototoxicity in pediatric patients. Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has suchdesignation, that product is entitled to a period of marketing exclusivity, which precludes the applicable regulatory authority from approving anothermarketing application for the same drug for the same indication for that time period. The applicable period is seven and a half years in the United States.Maintaining and/or obtaining orphan drug designation for PEDMARKTM may be important to the product candidate’s success. Even with orphan drugdesignation, we may not be able to maintain it. For example, if a competitive product that treats the same disease as our product candidate is shown to beclinically superior to our product candidate, any orphan drug designation we have obtained will not block the approval of such competitive product and wemay effectively lose what had previously been orphan drug designation. Orphan drug designation for PEDMARKTM also will not bar the FDA fromapproving another STS drug product for another indication. In the United States, reforms to the Orphan Drug Act, if enacted, could also materially affect ourability to maintain orphan drug designation for PEDMARKTM for cisplatin induced ototoxicity in pediatric cancer. Price controls may be imposed in foreign markets, which may adversely affect our future profitability. In some countries, particularly member states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries,pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can beconsiderable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political,economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has beenobtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-pricedmember states, can further reduce prices. In some countries, we may be required to conduct a clinical trial or other studies that compare the cost-effectivenessof our product candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. Ifreimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adverselyaffected. 22  Rapid technological change could make our products obsolete. Pharmaceutical technologies have undergone rapid and significant change, and we expect that they will continue to do so. As a result, there is significant riskthat our product candidates may be rendered obsolete or uneconomical by new discoveries before we recover any expenses incurred in connection with theirdevelopment. If our product candidates are rendered obsolete by advancements in pharmaceutical technologies, our prospects will suffer. Government controls and healthcare reform measures could adversely affect our business. The business and financial condition of pharmaceutical and biotechnology companies are affected by the efforts of governmental and third-party payors tocontain or reduce the costs of healthcare. In the United States and in foreign jurisdictions, there have been, and we expect that there will continue to be, anumber of legislative and regulatory proposals aimed at changing the healthcare system. For example, in some foreign countries, particularly in Europe, thepricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can takeconsiderable time after the receipt of marketing approval for a product candidate. To obtain reimbursement or pricing approval in some countries, we may berequired to conduct additional clinical trials that compare the cost-effectiveness of any product candidate to other available therapies. If reimbursement ofany product candidate is unavailable or limited in scope or amount in a particular country, or if pricing is set at unsatisfactory levels, we may be unable toachieve or sustain profitability in such country. In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, orMMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation established Medicare Part D, which expanded Medicarecoverage for outpatient prescription drug purchases by the elderly but provided authority for limiting the number of drugs that will be covered in anytherapeutic class. The MMA also introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. Anynegotiated prices for any product candidate covered by a Part D prescription drug plan will likely be lower than the prices that might otherwise be obtainedoutside of the Medicare Part D prescription drug plan. Moreover, while Medicare Part D applies only to drug benefits for Medicare beneficiaries, privatepayors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment under Medicare Part Dmay result in a similar reduction in payments from non-governmental payors. The United States and several other jurisdictions are considering, or have already enacted, a number of legislative and regulatory proposals to change thehealthcare system in ways that could affect our ability to sell any product candidate. Among policy-makers and payors in the United States and elsewhere,there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/orexpanding access to healthcare. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantlyaffected by major legislative initiatives. There have been, and likely will continue to be, legislative and regulatory proposals at the federal and state levelsdirected at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adoptedin the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to containor reduce costs of healthcare may adversely affect: the demand for any product candidate; the ability to set a price that we believe is fair for any productcandidate; our ability to generate revenues and achieve or maintain profitability; the level of taxes that we are required to pay; and the availability of capital. Risks Related to Our Industry If we are unable to obtain applicable U.S. and/or foreign regulatory approvals, we will be unable to develop and commercialize our drug candidate. The preclinical studies and clinical trials of our product candidate, as well as the manufacturing, labeling, sale and distribution, export or import, marketing,advertising and promotion of our product candidate, are subject to various regulatory frameworks in the United States, Canada and other countries. Anyproducts that we develop must receive all relevant regulatory approvals and clearances before any marketing, sale or distribution. The regulatory process,which includes extensive preclinical studies and clinical testing to establish product safety and efficacy, can take many years and cost substantial amounts ofmoney. As a result of the length of time, many challenges and costs are associated with the drug development process, and the historical rate of failures fordrug candidates is extremely high. Changes in regulatory policy could also cause delays or affect regulatory approval. Any regulatory delays may increaseour development costs and negatively impact our competitiveness and prospects. It is possible that we may not be able to obtain regulatory approval of ourdrug candidate or approvals may take longer and cost more to obtain than expected. Regulatory approvals, if granted, may entail limitations on the uses for which any product we develop may be marketed, limiting the potential sales for anysuch products. The granting of product approvals can be withdrawn at any time, and manufacturers of approved products are subject to regular reviews,including for compliance with FDA Good Manufacturing Practices regulations. Failure to comply with any applicable regulatory requirement, which maychange from time to time, can result in warning letters, fines, sanctions, penalties, recalling or seizing products, suspension of production, or even criminalprosecution. 23  Future sales of our product candidate may suffer if they fail to achieve market acceptance. Even if our product candidate is successfully developed and achieves appropriate regulatory approval, it may not enjoy commercial acceptance or success.Our product candidate may compete with a number of new and traditional drugs and therapies developed by major pharmaceutical and biotechnologycompanies. Market acceptance is dependent on the product candidate demonstrating clinical efficacy and safety, as well as demonstrating advantages overalternative treatment methods. In addition, market acceptance is influenced by government reimbursement policies and the ability of third parties to pay forsuch products. Physicians, patients, or the medical community may not accept or utilize any products we may develop. We face a strong competitive environment. Other companies may develop or commercialize more effective or cheaper products, which may reduce oreliminate the demand for our product candidate. The biotechnology and pharmaceutical industry, and in particular the field of cancer therapeutics where we are focused, is very competitive. Manycompanies and research organizations are engaged in the research, development and testing of new cancer therapies or means of increasing the effectivenessof existing therapies, including, among many others, Amgen, AstraZeneca, Bayer, Bristol-Myers Squibb, Eli Lilly, Eisai, Merck KGaA, Novartis, Johnson &Johnson, Pfizer, Roche, Taiho and Sanofi-Aventis. Many of these companies have marketed drugs or are developing targeted cancer therapeutics, whichdepending upon the mechanism of action of such agents could be competitors. Many of our existing or potential competitors have substantially greater financial, technical and human resources than we do and may be better equipped todevelop, manufacture and market products. In addition, many of these competitors have extensive experience with preclinical testing and human clinicaltrials and in obtaining regulatory approvals. Also, some of the smaller companies that compete with us have formed collaborative relationships with large,established companies to support the research, development, clinical trials and commercialization of any products that they may develop. Academicinstitutions, government agencies and other public and private research organizations may also conduct research, seek patent protection and establishcollaborative arrangements for research, clinical development and marketing of products similar to those we seek to develop. These companies andinstitutions compete with us in recruiting and retaining qualified scientific and management personnel as well as in acquiring technologies complementaryto our projects. We are likely to face competition in the areas of product efficacy and safety, ease of use and adaptability, as well as pricing, product acceptance, regulatoryapprovals and intellectual property. Competitors could develop more effective, safer and more affordable products than we do, and they may obtain patentprotection or product commercialization before we do or even render our product candidate obsolete. The existence of competitive products, includingproducts or treatments of which we are not aware, or products or treatments that may be developed in the future, may adversely affect the marketability of anyproduct that we develop. We may face product liability claims that could require us to defend costly lawsuits or incur substantial liabilities that could adversely impact ourfinancial condition, receipt of regulatory approvals for our product candidate and our results of operation. The use of our product candidate in clinical trials and for commercial applications, if any, may expose us to liability claims in the event that such productcandidate causes injury or death or results in other adverse effects. These claims could be made by health care institutions, contract laboratories, and subjectsparticipating in our clinical studies, patients or others using our product candidate. In addition to liability claims, certain serious adverse events could requireinterruption, delay and/or discontinuation of a clinical trial and potentially prevent further development of our product candidate. Litigation is veryexpensive, even if we defend successfully against possible litigation. In addition, our existing insurance coverage may not be adequate to cover certain typesor amounts of liability, and future coverage may not be available in sufficient amounts or at reasonable cost. Further, it is possible that we may later reduce orterminate this coverage based on future availability of financial resources. Adverse liability claims may also harm our ability to obtain or maintain regulatoryapprovals. We use hazardous materials and chemicals in our research and development, and our failure to comply with laws related to hazardous materials couldmaterially harm us. Our research and development processes involve the controlled use of hazardous materials, such as flammable organic solvents, corrosive acids and corrosivebases. Accordingly, we are subject to federal, state, local and foreign laws and regulations governing the use, manufacture, storage, handling and disposal ofsuch materials and certain waste products. The risk of accidental contamination or injury from these materials cannot be completely eliminated. We could beheld liable for any damages that result and any such liability could exceed our resources and may not be covered by our general liability insurance. Wecurrently do not carry insurance specifically for hazardous materials claims. We may be required to incur significant costs to comply with environmental lawsand regulations, which may change from time to time. Our current practice is to outsource these activities. Efforts to reduce product pricing and health care reimbursement and changes to government policies could negatively affect the commercialization ofour product candidate. If our product candidate achieves regulatory approval, we may be materially adversely affected by the continuing efforts of governmental and third-partypayers to contain or reduce health care costs. For example, if we succeed in bringing one or more products to market, such products may not be consideredcost-effective and the availability of consumer reimbursement may not exist or be sufficient to allow the sale of such products on a competitive basis. Theconstraints on pricing and availability of competitive products may further limit our pricing and reimbursement policies as well as adversely impact marketacceptance and commercialization of our product candidate. 24  In many markets, the pricing or profitability of healthcare products is subject to government control. In recent years, federal, state, provincial and localofficials and legislators have proposed or are proposing a variety of price-based reforms to the healthcare systems in the United States, Canada and elsewhere.Some proposals include measures that would limit or eliminate payments from third-party payors to the consumer for certain medical procedures andtreatments or allow government control of pharmaceutical pricing. The adoption of any such proposals or reforms could adversely affect the commercialviability of our product candidate. In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in 2010, the PatientProtection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the “ACA”, was passed, which substantiallychanges the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. Some states are also considering legislation that would control the prices of drugs, and state Medicaid programs are increasingly requesting manufacturers topay supplemental rebates and requiring prior authorization by the state program for use of any drug for which supplemental rebates are not being paid.Managed care organizations continue to seek price discounts and, in some cases, to impose restrictions on the coverage of particular drugs. Governmentefforts to reduce Medicaid expenses may lead to increased use of managed care organizations by Medicaid programs. This may result in managed careorganizations influencing prescription decisions for a larger segment of the population and a corresponding constraint on prices and reimbursement for ourproducts. Since its enactment, there have been judicial and Congressional challenges to numerous aspects of the ACA, and Congress and the executive branch areseeking to replace the ACA with new federal legislation. There may also be federal and state regulatory changes that impact the ACA or healthcare programs,insurance coverage or reimbursement generally. These efforts have increased uncertainty regarding the availability of healthcare programs, insurancecoverage and reimbursement as a general matter as well as for our product candidate, and we cannot predict how these events will impact our business. In addition, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which haveresulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review therelationship between pricing and manufacturer patient programs, reduce the price of drugs under Medicare and reform government program reimbursementmethodologies for products. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit theamounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates oradditional pricing pressures. Any significant changes in the healthcare system in the United States, Canada or abroad would likely have a substantial impact on the manner in which weconduct business and could have a material adverse effect on our ability to raise capital and the viability of product commercialization. Risks Related to Owning Our Common Shares We may be unable to maintain the listing of our common shares on the Nasdaq Capital Market or the TSX and that would make it more difficult forshareholders to dispose of our common shares. Our common shares are currently listed on the Nasdaq Capital Market and the Toronto Stock Exchange (the “TSX”). Both the Nasdaq Capital Market and theTSX have rules for continued listing, including minimum market capitalization and other requirements, that we might not meet in the future. While we areexercising diligent efforts to maintain the listing of our common stock on the NASDAQ Capital Market and TSX, there can be no assurance that we will beable to do so, and our securities could be delisted. Delisting from the Nasdaq Capital Market or the TSX would make it more difficult for shareholders to dispose of our common shares and more difficult toobtain accurate quotations on our common shares. This could have an adverse effect on the price of our common shares. There can be no assurances that amarket maker will make a market in our common shares on the OTCQB or any other stock quotation system after delisting. Furthermore, securities quotedover-the-counter generally have significantly less liquidity than securities traded on a national securities exchange, not only in the number of shares that canbe bought and sold, but also through delays in the timing of transactions and lower market prices than might otherwise be obtained. As a result, shareholdersmight find it difficult to resell shares at prices quoted in the market or at all. Furthermore, because of the limited market and generally low volume of tradingin our common shares, our common shares are more likely to be affected by broad market fluctuations, general market conditions, fluctuations in ouroperating results, changes in the market’s perception of our business, and announcements made by us, our competitors or parties with whom we have businessrelationships. Our ability to issue additional securities for financing or other purposes, or to otherwise arrange for any financing we may need in the future,may also be materially and adversely affected by the limited market and low trading volume of our common shares. 25  The market price of our common shares is highly volatile and could cause the value of your investment to significantly decline. Historically, the market price of our common shares has been highly volatile and the market for our common shares has from time to time experiencedsignificant price and volume fluctuations, some of which are unrelated to our operating performance. From March 11, 2013 to March 11, 2019, the closingtrading price of our stock fluctuated from a high of $18.45 Canadian dollars (“CAD”) per share to a low of CAD$0.72 per share on the TSX. From September13, 2017 to March 11, 2019, the closing trading price of our stock fluctuated from a high of $14.33 per share to a low of $5.37 on the Nasdaq Capital Market.Historically, our common shares have had a low trading volume, and may continue to have a low trading volume in the future. This low volume maycontribute to the volatility of the market price of our common shares. It is likely that the market price of our common shares will continue to fluctuatesignificantly in the future. The market price of our common shares may be significantly affected by many factors, including without limitation: ·the development of our sole product candidate, STS;·the need to raise additional capital and the terms of any transaction we are able to enter into;·other external factors generally or stock market trends in the pharmaceutical or biotechnology industries specifically;·announcements of licensing agreements, joint ventures, collaborations or other strategic alliances that involve our product or those of ourcompetitors;·innovations related to our or our competitors’ products;·actual or potential clinical trial results related to our or our competitors’ products;·our financial results or those of our competitors;·reports of securities analysts regarding us or our competitors;·developments or disputes concerning our licensed or owned patents or those of our competitors;·developments with respect to the efficacy or safety of our product or those of our competitors; and·health care reforms and reimbursement policy changes nationally and internationally. Our existing principal shareholders hold a substantial number of our common shares and may be able to exercise influence in matters requiringapproval of our shareholders. At March 11, 2019, our current shareholders separately representing more than 5% ownership in our Company collectively represented beneficial ownershipof approximately 41.86% of our common shares. In particular, Southpoint Capital Advisors LP (“Southpoint Capital”) owns or exercises control overapproximately 4.0 million common shares, representing approximately 20.1% of our issued and outstanding common shares; Essetifin SpA, ownsapproximately 3.2 million shares, or approximately 16.2% of our issued and outstanding common shares; and venBio, owns approximately 1.1 millionshares, or approximately 5.6% of our issued and outstanding common shares. Southpoint Capital, Essetifin SpA, venBio, our other significant shareholders,and other insiders, acting alone or together, might be able to influence the outcomes of matters that require the approval of our shareholders, including butnot limited to certain equity transactions (such as a financing), an acquisition or merger with another company, a sale of substantially all of our assets, theelection and removal of directors, or amendments to our incorporating documents. These shareholders might make decisions that are adverse to your interests.The concentration of ownership could have the effect of delaying, preventing or deterring a change of control of our Company, which could adversely affectthe market price of our common shares or deprive our other shareholders of an opportunity to receive a premium for our common shares as part of a sale of ourcompany. There are a large number of our common shares underlying outstanding options, and reserved for issuance under our stock option plan, that may besold in the market, which could depress the market price of our shares and result in substantial dilution to the holders of our common shares. The sale or issuance of a substantial amount of our common shares in the future could cause the market price of our common shares to decline. It may alsoimpair our ability to obtain additional financing. At March 11, 2019, we had outstanding warrants to purchase approximately 0.04 million shares ($0.27million) of our common shares at an exercise price of $6.80 per common share. In addition, at March 11, 2019, there were approximately 2.5 million commonshares issuable upon the exercise of outstanding stock options, of which options to purchase approximately $1.6 million were denominated in Canadiandollars and had a weighted average exercise price of CAD $2.43 per common share and options to purchase approximately $7.0 million were denominated inU.S. dollars and had a weighted average exercise price of $3.80 per common share. We may also issue further warrants as part of any future financings inaddition to the additional 2.5 million options to acquire our common shares currently remaining and available for future awards under our stock option plan. We may need to raise additional funds in the future to continue our operations. Any equity offering could result in significant dilution to the ownershipinterests of shareholders and may result in dilution of the value of such interests and any debt offering will increase financial risk. In order to satisfy our anticipated capital requirements to develop our product, we may need to raise additional funds through either the sale of additionalequity, the issue of securities convertible into equity, the issuance of debt, the establishment of collaborations that provide us with funding, the out-license orsale of certain aspects of our intellectual property portfolio, or from other sources. The most likely sources of financing that may be available to us in the nearterm are the sale of common shares and/or securities convertible or exercisable into common shares and the issuance of debt. 26  We cannot predict the size of future issues of common shares or the future issue of securities convertible or exercisable into common shares or the effect thatany such future issues and sales of common shares or other securities will have on the market price of our common shares. Any transaction involving the issueof common shares, or securities convertible or exercisable into common shares, could result in immediate and substantial dilution to present and prospectiveholders of our common shares. Alternatively, we may rely on debt financing and assume debt obligations that require us to make substantial interest andcapital payments and to pledge some or all of our assets as collateral to secure such debt obligations. Our management has significant flexibility in using the current available cash. In addition to general corporate purposes (including working capital, research and development, business development and operational purposes), wecurrently intend to use our available cash to continue the development of our drug candidates PEDMARK™, to seek regulatory approval for PEDMARK™,and to invest in precommercial activities for PEDMARK™. Depending on future developments and circumstances, we may use some of our available cash forother purposes which may have the potential to decrease our cash runway. Notwithstanding our current intentions regarding use of our available cash, ourmanagement will have significant flexibility with respect to such use. The actual amounts and timing of expenditures will vary significantly depending on anumber of factors, including the amount and timing of cash used in our operations and our research and development efforts. Management’s failure to usethese funds effectively would have an adverse effect on the value of our common stock and could make it more difficult and costlier to raise funds in thefuture. We have not paid any dividends since incorporation and do not anticipate declaring any dividends in the foreseeable future. As a result, you may not beable to recoup your investment through the payment of dividends on your common shares and the lack of a dividend payable on our common sharesmight depress the value of your investment. For the foreseeable future, we plan to use all available funds to finance the development of our product candidate and operate our business. Our directors willdetermine if and when dividends should be declared and paid in the future based on our financial position at the relevant time, but since we have no presentplans to pay dividends, you should not expect receipt of dividends either for your cash needs or to enhance the value of our common shares held by you. We may be a passive foreign investment company, or “PFIC,” which could result in adverse United States federal income tax consequences to U.S.investors. If we are a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as such term is defined in the section of thisAnnual Report “Material U.S. Federal Income Tax Considerations”) of our common shares, the U.S. Holder may be subject to adverse U.S. federal income taxconsequences and may be subject to additional reporting requirements. We have not made the analysis necessary to determine whether or not we are currentlya PFIC or whether we have ever been a PFIC, and there can be no assurances with respect to our status as a PFIC for our current taxable year or any subsequenttaxable year. Moreover, if we are a PFIC for any taxable year, we intend to provide to a U.S. Holder such information as the Internal Revenue Service (“IRS”)may require, including a PFIC annual information statement, in order to enable the U.S. Holder to make and maintain a “qualified electing fund” election. Weurge U.S. investors to consult their own tax advisors regarding the possible application of the PFIC rules. For a more detailed explanation of the taxconsequences of PFIC classification to U.S. Holders, see the section of this Annual Report entitled “Material U.S. Federal Income Tax Considerations—General Rules Applicable to the Ownership and Disposition of Common Shares.” This paragraph is qualified in its entirety by the discussion below under theheading “Material U.S. Federal Income Tax Considerations.” Each U.S. shareholder should consult its own tax advisors regarding the PFIC rules and the U.S.federal income tax consequences of the acquisition, ownership, and disposition of our common shares. Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have an adverse effect on ourbusiness, and our per share price may be adversely affected. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) and the rules and regulations promulgated by the SEC to implement Section 404,we are required to include in our Form 10-K a report by our management regarding the effectiveness of our internal control over financial reporting. Thereport includes, among other things, an assessment of the effectiveness of our internal control over financial reporting. The assessment must includedisclosure of any material weakness in our internal control over financial reporting identified by management. 27  As part of the evaluation undertaken by management and our independent registered public accountants pursuant to Section 404, our internal control overfinancial reporting was effective as of December 31, 2018. However, if we fail to maintain an effective system of disclosure controls or internal controls overfinancial reporting, we may discover material weaknesses that we would then be required to disclose. Any material weaknesses identified in our internalcontrols could have an adverse effect on our business. We may not be able to accurately or timely report on our financial results, and we might be subject toinvestigation by regulatory authorities. This could result in a loss of investor confidence in the accuracy and completeness of our financial reports, whichmay have an adverse effect on our stock price. No evaluation process can provide complete assurance that our internal controls will detect and correct all failures within our Company to disclose materialinformation otherwise required to be reported. The effectiveness of our controls and procedures could also be limited by simple errors or faulty judgments. Inaddition, if we continue to expand, through either organic growth or through acquisitions (or both), the challenges involved in implementing appropriatecontrols will increase and may require that we evolve some or all of our internal control processes. It is also possible that the overall scope of Section 404 may be revised in the future, thereby causing ourselves to review, revise or reevaluate our internalcontrol processes, which may result in the expenditure of additional human and financial resources. Item 1B.Unresolved Staff Comments None. Item 2.Properties We have an operating lease in Research Triangle Park, North Carolina utilizing small space within a commercial building. The operating lease has paymentsof $200 per month with no scheduled increases. This operating lease is terminable with 30 days’ notice and has no penalties or contingent payments due. Item 3.Legal Proceedings None. Item 4.Mine Safety Disclosures Not applicable. 28  PART II Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities Our common shares currently trade in the U.S. on the Nasdaq Capital Market under the trading symbol “FENC” and in Canada on the TSX under the tradingsymbol “FRX”. Prior to September 13, 2017, our common shares traded in the U.S. on the OTCQB Market under the trading symbol “FENCF”. The followingtable sets forth the quarterly high and low market closing prices, and average daily trading volume on the OTCQB, Nasdaq Capital Market (as applicable),and the TSX, for the two most recent full fiscal years: Nasdaq Capital Market/OTCQB (in U.S. dollars) Toronto Stock Exchange (in Canadian dollars) High $ Low $ Volume High $ Low $ Volume Fiscal 2018: Quarter ended 12/31/18 $8.39 $5.37 80,832 $10.72 $7.22 2,062 Quarter ended 09/30/18 10.83 7.84 84,521 14.16 10.19 1,911 Quarter ended 06/30/18 14.33 10.05 109,447 18.45 13.28 4,109 Quarter ended 03/31/18 $12.10 $8.26 44,777 $15.65 $10.36 1,629 Fiscal 2017: Quarter ended 12/31/17 $12.35 $8.90 26,629 $15.63 $11.32 2,140 Quarter ended 09/30/17 12.19 5.85 17,927 15.05 7.25 6,358 Quarter ended 06/30/17 6.35 3.00 7,295 8.02 4.03 5,256 Quarter ended 03/31/17 $3.14 $1.95 1,402 $4.10 $2.42 2,541 As of March 11, 2019, the last reported sale on the TSX was CAD$8.88 per share and the last reported sale on the Nasdaq Capital Market was $6.68 per share. Record Holders As of March 11, 2019, there were approximately 38 shareholders of record of our common shares, one of which was Cede & Co., a nominee for DepositoryTrust Company, or DTC, and one of which was The Canadian Depository for Securities Limited, or CDS. All of our common shares held by brokerage firms,banks and other financial institutions in the U.S. or Canada as nominees for beneficial owners are considered to be held of record by Cede & Co. in respect ofbrokerage firms, banks and other financial institutions located in Canada. Cede & Co. and CDS are each considered to be one shareholder of record. Dividend Policy We have never declared or paid cash dividends on our common shares. We currently expect to retain future earnings, if any, for use in the operation andexpansion of business and do not anticipate paying any cash dividends in the foreseeable future. Material United States Federal and Canadian Income Tax Consequences Material U.S. Federal Income Tax Considerations The following is a general summary of certain U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relatingto the acquisition, ownership, and disposition of our common shares. This summary is for general information purposes only and does not purport to be acomplete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder arising from and relating to theacquisition, ownership, and disposition of our common shares. In addition, this summary does not take into account the individual facts and circumstances ofany particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including, without limitation, specific taxconsequences to a U.S. Holder under an applicable income tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legalor U.S. federal income tax advice with respect to any U.S. Holder. This summary does not address the U.S. federal alternative minimum, U.S. federal estate andgift, U.S. state and local, and non-U.S. tax consequences to U.S. Holders of the acquisition, ownership, and disposition of our common shares. In addition,except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. Each prospective U.S. Holder should consult itsown tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequencesrelating to the acquisition, ownership and disposition of our common shares. No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the U.S.federal income tax consequences of the acquisition, ownership, and disposition of our common shares. This summary is not binding on the IRS, and the IRSis not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities onwhich this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the conclusions describedin this summary. 29  General Authorities This summary is based on the Code, Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrativepositions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September26, 1980, as amended (the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable, and, in each case, as in effect and available, as of thedate of this document. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any suchchange could be applied retroactively. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation. U.S. Holders For purposes of this summary, the term “U.S. Holder” means a beneficial owner of our common shares acquired pursuant to this prospectus that is for U.S.federal income tax purposes: ·an individual who is a citizen or resident of the United States (as determined under U.S. federal income tax rules);·a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of theUnited States or of any political subdivision of the United States;·an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or·a trust that (i) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for allsubstantial decisions or (ii) has a valid election in effect under applicable United States Treasury Regulations to be treated as a U.S. person. An individual may be a resident for U.S. federal income tax purposes in any calendar year if the individual was present in the United States for at least 31days in that calendar year and for an aggregate of at least 183 days during the three-year period ending with the current calendar year. For purposes of thiscalculation, all of the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present inthe second preceding year are counted. Residents are taxed for U.S. federal income tax purposes as if they were U.S. citizens. Non-U.S. Holders Not Addressed For purposes of this summary, a “non-U.S. Holder” is a beneficial owner of our common shares that is not a U.S. Holder and is not a partnership for U.S. federalincome tax purposes. This summary does not address the U.S. federal income tax consequences to non-U.S. Holders of acquiring, owning, and disposing ofour common shares. Each prospective investor should consult a professional tax advisor with respect to the U.S. federal income, U.S. alternative minimum,U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences of acquiring, owning, and disposing of our common shares. Certain U.S. Holders Not Addressed This summary does not address the U.S. federal income tax considerations applicable U.S. Holders that are subject to special provisions under the Code,including, but not limited to, U.S. Holders that: ·are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts;·are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies;·are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method;·have a “functional currency” other than the U.S. dollar;·own our common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involvingmore than one position;·acquired our common shares in connection with the exercise of employee stock options or otherwise as compensation for services;·hold our common shares other than as a capital asset within the meaning of section 1221 of the Code (generally, property held forinvestment purposes);·are partnerships or other “pass-through” entities for U.S. federal income tax purposes (or investors in such partnerships or entities); 30  ·own, have owned, or will own (directly, indirectly, or by attribution) 10% or more of the total combined voting power of the outstandingshares of your company;·are U.S. expatriates or former long-term residents of the United States;·have been, are, or will be residents or deemed to be residents in Canada for purposes of the Income Tax Act (Canada) (the “Tax Act”);·use or hold, will use or hold, or that are or will be deemed to use or hold our common shares in connection with carrying on a business inCanada;·are persons whose common shares constitute “taxable Canadian property” under the Tax Act; or·have a permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consulttheir own tax advisors regarding the U.S. federal income, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. taxconsequences of acquiring, owning, and disposing of our common shares. The following summary is not a substitute for careful tax planning and advice. U.S. Holders of our common shares are urged to consult their own taxadvisors concerning the U.S. federal income tax consequences of the issues discussed herein, in light of their particular circumstances, as well as anyconsiderations arising under the laws of any foreign, state, local, or other taxing jurisdiction. General Rules Applicable to the Ownership and Disposition of Common Shares A U.S. Holder that receives a distribution, including a constructive distribution, with respect to a common share will be required to include the amount ofsuch distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of our currentand accumulated “earnings and profits,” as computed for U.S. federal income tax purposes. A dividend generally will be taxed to a U.S. Holder at ordinaryincome tax rates. (See, however, the exception discussed below for individual and other non-corporate U.S. Holders, which may allow such holderspreferential rates when we have terminated PFIC status.) To the extent that a distribution exceeds our current and accumulated “earnings and profits,” suchdistribution will be treated, first, as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in our common shares and thereafter as gain from thesale or exchange of such common shares. However, we may not maintain the calculations of its earnings and profits in accordance with U.S. federal incometax principles, and U.S. Holders may have to assume that any distribution by us with respect to our common shares will constitute ordinary dividend income.Dividends received on our common shares by corporate U.S. Holders generally will not be eligible for the “dividends received deduction.” Provided that (1)we are eligible for the benefits of the Canada-U.S. Tax Convention or (2) our common shares are readily tradable on a United States securities market (andcertain holding period and other conditions are satisfied), dividends paid by us to non-corporate U.S. Holders , including individuals, will be eligible for thepreferential tax rates applicable to long-term capital gains for dividends unless we are classified as a PFIC in the tax year of distribution or in the precedingtax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisors regarding the application of such rules. Upon the sale or other taxable disposition of our common shares, subject to the PFIC rules below, a U.S. Holder generally will recognize capital gain or lossin an amount equal to the difference between the U.S. dollar value of cash received plus the fair market value of any property received and such U.S. Holder’stax basis in such common shares sold or otherwise disposed of. A U.S. Holder’s tax basis in our common shares generally will be determined initially by theholder’s U.S. dollar cost for our common shares (with adjustments provided under the PFIC rules below). Subject again to the PFIC rules, gain or lossrecognized on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other disposition, our common shareshave been held for more than one year. Preferential tax rates currently apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential taxrates for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code. If weare determined to be a PFIC, any gain realized on our common shares could be ordinary income under the rules discussed below. PFIC Status of the Company If we were to constitute a “passive foreign investment company” under the meaning of Section 1297 of the Code (a “PFIC,” as defined below) for any taxableyear during a U.S. Holder’s holding period, then certain potentially adverse rules may affect the U.S. federal income tax consequences to a U.S. Holder as aresult of the acquisition, ownership and disposition of our common shares. We have not made the analysis necessary to determine whether or not we arecurrently a PFIC or whether we have ever been a PFIC. There can be no assurance that we are not, have never been or will not in the future be a PFIC. Noopinion of legal counsel or ruling from the IRS concerning our status as a PFIC has been obtained or is currently planned to be requested. The determinationof whether any corporation was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which aresubject to differing interpretations. In addition, whether any corporation will be a PFIC for any tax year depends on the assets and income of such corporationover the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this Annual Report. Accordingly, there can be noassurance that the IRS will not challenge any determination made by us (or any of our subsidiaries) concerning our PFIC status in any taxable year. Each U.S.Holder should consult its own tax advisors regarding the PFIC status of us and our subsidiaries. 31  In any taxable year in which we are classified as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information asTreasury Regulations and/or other IRS guidance may require. IRS Form 8621 is currently used for such filings. In addition to penalties, a failure to satisfysuch reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own taxadvisors regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621 annually. We generally will be a PFIC for a taxable year if, for such year, (a) 75% or more of our gross income is passive income (the “PFIC income test”) or (b) 50% ormore of the value of our assets either produce passive income or are held for the production of passive income, based on the quarterly average of the fairmarket value of such assets (the “PFIC asset test”). “Gross income” generally includes all sales revenues less the cost of goods sold, plus income frominvestments and from incidental or outside operations or sources, and “passive income” generally includes, for example, dividends, interest, certain rents androyalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all (85% or more) of a foreigncorporation’s commodities are stock in trade or inventory, depreciable property used in a trade or business, or supplies regularly used or consumed in theordinary course of its trade or business, and certain other requirements are satisfied. For purposes of the PFIC income test and PFIC asset test described above, if we own, directly or indirectly, 25% or more of the total value of the outstandingshares of another corporation, we will be treated as if we (a) held a proportionate share of the assets of such other corporation and (b) received directly aproportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and PFIC asset test described above, andassuming certain other requirements are met, “passive income” does not include certain interest, dividends, rents, or royalties that are received or accrued byus from certain “related persons” (as defined in Section 954(d)(3) of the Code) also organized in Canada, to the extent such items are properly allocable to theincome of such related person that is neither passive income nor income connected with a U.S. trade or business. Under certain attribution rules, if we are a PFIC, U.S. Holders will generally be deemed to own their proportionate share of our direct or indirect equity interestin any company that is also a PFIC (a ‘‘Subsidiary PFIC’’), and will generally be subject to U.S. federal income tax on their proportionate share of (a) any“excess distributions,” as described below, on the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC byus or another Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders may be subject to U.S.federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition of our common shares. Accordingly, U.S. Holdersshould be aware that they could be subject to tax under the PFIC rules even if no distributions are received on our common shares and no redemptions orother dispositions of our common shares are made. Default PFIC Rules Under Section 1291 of the Code If we are a PFIC for any tax year during which a U.S. Holder owns our common shares, the U.S. federal income tax consequences to such U.S. Holder of theacquisition, ownership, and disposition of our common shares will depend on whether and when such U.S. Holder makes an election to treat us and eachSubsidiary PFIC, if any, as a “qualified electing fund” or “QEF” under Section 1295 of the Code (a “QEF Election”) or makes a mark-to-market election underSection 1296 of the Code (a “Mark-to-Market Election”). A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will bereferred to in this summary as a “Non-Electing U.S. Holder.” A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code (described below) with respect to (a) any gain recognized on the sale orother taxable disposition of our common shares and (b) any “excess distribution” received on our common shares. A distribution generally will be an “excessdistribution” to the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the averagedistributions received during the three preceding tax years (or during a U.S. Holder’s holding period for our common shares, if shorter). Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of our common shares (including an indirect disposition of thestock of any Subsidiary PFIC), and any “excess distribution” received on our common shares or deemed received with respect to the stock of a SubsidiaryPFIC, must be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period for the respective common shares. The amount of any such gain orexcess distribution allocated to the tax year of disposition or distribution of the excess distribution, or allocated to years before the entity became a PFIC, ifany, would be taxed as ordinary income at the rates applicable for such year (and not eligible for certain preferred rates). The amounts allocated to any othertax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary income in each such year. In addition, an interest chargewould be imposed on the tax liability for each such year, calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that isnot a corporation must treat any such interest paid as “personal interest,” which is not deductible. 32  If we are a PFIC for any tax year during which a Non-Electing U.S. Holder holds our common shares, we will continue to be treated as a PFIC with respect tosuch Non-Electing U.S. Holder, regardless of whether we cease to be a PFIC in one or more subsequent tax years. A Non-Electing U.S. Holder may terminatethis deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above), but not loss, as ifsuch common shares were sold on the last day of the last tax year for which we were a PFIC. QEF Election A U.S. Holder that makes a timely and effective QEF Election for the tax year in which the holding period of our common shares begins generally will not besubject to the rules of Section 1291 of the Code discussed above with respect to such common shares. A U.S. Holder that makes such a QEF Election will besubject to U.S. federal income tax on such U.S. Holder’s pro rata share (based on its ownership of our common shares) of (a) the net capital gain of theCompany, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of the Company, which will be taxed as ordinaryincome to such U.S. Holder. Generally, “net capital gain” is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and “ordinaryearnings” are the excess of (a) “earnings and profits” over (b) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal incometax on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts are actually distributed by us to such U.S. Holder.However, for any tax year in which we are a PFIC and has no net income or gain, U.S. Holders that have made a QEF Election would not have any incomeinclusions as a result of the QEF Election. If a U.S. Holder that made a QEF Election has an income inclusion, such a U.S. Holder may, subject to certainlimitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation,any such interest paid will be treated as “personal interest,” which is not deductible. A U.S. Holder that makes a timely and effective QEF Election with respect to the Company generally (a) may receive a tax-free distribution from theCompany to the extent that such distribution represents “earnings and profits” of the Company that were previously included in income by the U.S. Holderbecause of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in our common shares to reflect the amount included in income or allowed as atax-free distribution because of such QEF Election. A U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or othertaxable disposition of our common shares. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents (currently IRS Form 8621) at the time such U.S. Holderfiles a U.S. federal income tax return for such year. If a U.S. Holder does not make a timely QEF Election for the first year in the U.S. Holder’s holding periodin which we are a PFIC, the U.S. Holder may still be able to make an effective QEF Election in a subsequent year if such U.S. Holder meets certainrequirements and makes a “purging” election to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if suchcommon shares were sold for their fair market value on the day the QEF Election is effective. If a U.S. Holder makes a QEF Election but does not make a“purging” election to recognize gain as discussed in the preceding sentence, then such U.S. Holder shall be subject to the QEF Election rules and shallcontinue to be subject to tax under the rules of Section 1291 discussed above with respect to our common shares. If a U.S. Holder owns PFIC stock indirectlythrough another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC for the QEFrules to apply to both PFICs. A QEF Election will apply to the tax year for which such QEF Election is timely made and to all subsequent tax years, unless such QEF Election isinvalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, wecease to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which we are not a PFIC. Accordingly,if we become a PFIC in another subsequent tax year, the QEF Election will be effective and the U.S. Holder will be subject to the QEF rules described aboveduring any subsequent tax year in which we qualify as a PFIC. We: (a) will make available to U.S. Holders, upon their written request, information as to our status as a PFIC, and (b) for each taxable year in which we are aPFIC, provide to a U.S. Holder, upon written request, such information and documentation that a U.S. Holder making a QEF Election with respect to theCompany is reasonably required to obtain for U.S. federal income tax purposes. We may elect to provide such information on our website. However, U.S.Holders should be aware that we cannot assure that we will provide any such information relating to any Subsidiary PFIC. Because we may own shares in oneor more Subsidiary PFICs at any time, U.S. Holders will continue to be subject to the rules discussed above with respect to the taxation of gains and excessdistributions with respect to any Subsidiary PFIC for which the U.S. Holders do not obtain the required information. Each U.S. Holder should consult its owntax advisors regarding the requirements for, and procedure for making, a QEF Election with respect to the Company and any Subsidiary PFIC. A U.S. Holder makes a QEF Election by attaching a completed IRS Form 8621, including a PFIC Annual Information Statement, to a timely filed UnitedStates federal income tax return. However, if we do not provide the required information with regard to the Company or any of our Subsidiary PFICs, U.S.Holders may not be able to make a QEF Election for such entity and, unless they make the Mark-to-Market Election discussed in the next section, willcontinue to be subject to the rules of Section 1291 of the Code discussed above that apply to Non-Electing U.S. Holders with respect to the taxation of gainsand excess distributions. 33  Mark-to-Market Election A U.S. Holder may make a Mark-to-Market Election only if our common shares are marketable stock. Our common shares generally will be “marketablestock” if our common shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange Commission, (b) thenational market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a foreign securities exchange that is regulatedor supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing,financial disclosure, and surveillance requirements, and meets other requirements and the laws of the country in which such foreign exchange is located,together with the rules of such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange effectivelypromote active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally will be “regularly traded”for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. We expect thatour common shares will meet the definition of “marketable stock,” although there can be no assurance of this, especially as regards the required tradingfrequency. If a U.S. Holder that makes a Mark-to-Market Election for any taxable year with respect to our common shares, it generally will not be subject to the rules ofSection 1291 of the Code discussed above with respect to such common shares for such taxable year. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for which we are a PFIC and such U.S. Holder has not made a timely QEFElection, the rules of Section 1291 of the Code discussed above will apply to dispositions of, and certain distributions on, our common shares. A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which we are a PFIC, an amount equal to the excess,if any, of (a) the fair market value of our common shares, as of the close of such tax year over (b) such U.S. Holder’s adjusted tax basis in such common shares.A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (a) such U.S. Holder’s adjustedtax basis in our common shares, over (b) the fair market value of such common shares (but only to the extent of the net amount of previously included incomeas a result of the Mark-to-Market Election for prior tax years). A U.S. Holder that makes a Mark-to-Market Election generally also will adjust its tax basis in our common shares to reflect the amount included in grossincome or allowed as a deduction because of such Mark-to-Market Election. Upon a sale or other taxable disposition of our common shares, a U.S. Holderthat makes a Mark-to-Market Election will recognize ordinary income or ordinary loss. Any such ordinary loss, however, is limited to exceed the excess, ifany, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deductionbecause of such Mark-to-Market Election for prior tax years. Losses that exceed this limitation are subject to the rules generally applicable to losses providedin the Code and Treasury Regulations, with the result that they will be capital losses for most U.S. Holders. A U.S. Holder makes a Mark-to-Market Election by attaching a completed IRS Form 8621 to a timely filed United States federal income tax return. A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless our common shares ceaseto be “marketable stock” or the IRS consents to revocation of such election. Each U.S. Holder should consult its own tax advisors regarding the requirementsfor, and procedure for making, a Mark-to-Market Election. Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to our common shares, no such election may be made with respect tothe stock of any Subsidiary PFIC that a U.S. Holder is treated as owning, because such stock is not marketable. Hence, the Mark-to-Market Election will notbe effective to avoid the application of the default rules of Section 1291 of the Code described above with respect to deemed dispositions of Subsidiary PFICstock or excess distributions from a Subsidiary PFIC to its shareholder. Other PRIC and Related Rules Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that hadnot made a timely QEF Election or Mark-to-Market Election to recognize gain (but not loss) upon certain transfers of our common shares that wouldotherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations). However, the specific U.S. federal income tax consequences to aU.S. Holder may vary based on the manner in which our common shares are transferred. Certain additional adverse rules may apply with respect to a U.S. Holder if we are a PFIC, regardless of whether such U.S. Holder makes a QEF Election. Forexample, under Section 1298(b)(6) of the Code, a U.S. Holder that uses our common shares as security for a loan will, except as may be provided in TreasuryRegulations, be treated as having made a taxable disposition of such common shares. Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. Subject to such special rules, foreigntaxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules relating to distributions by aPFIC and their eligibility for the foreign tax credit are complicated, and each U.S. Holder should consult with its own tax advisors regarding the availabilityof the foreign tax credit with respect to distributions by a PFIC. 34  If U.S. Holders of our common shares or U.S. Holders that are treated as constructively owning our common shares, each owning 10 percent or more of ourequity by vote (“10-percent Shareholders”) own in total more than 50 percent of such equity by either vote or value, we will be treated as a controlled foreigncorporation (“CFC”). For our taxable year ending December 31, 2018 and subsequent years, and for taxable years of U.S. Holders ending with or within suchyears, the test for a 10-percent Shareholder will be whether the holder owns 10 percent of our equity by vote or value (i.e., not only by vote). If we are a CFC,a 10-percent Shareholder would be treated, subject to certain exceptions, as receiving a deemed dividend at the end of each taxable year of the Company inan amount equal to its pro rata share of the Company’s “subpart F income.” Among other items, and subject to certain exceptions, “subpart F income”includes dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.Thus, it is likely that, if we were treated as a CFC, some of our income would be subpart F income. If, for any period, we were treated as a CFC and a U.S.Holder were treated as a 10-percent Shareholder therein, we would not be treated as a PFIC with respect to such U.S. Holder for such period. The PFIC and CFC rules are complex, and each U.S. Holder should consult with its own tax advisors regarding the PFIC and CFC rules and how they mayaffect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of our common shares. Additional Considerations Additional Tax on Passive Income Certain U.S. Holders that are individuals, estates or trusts (other than trusts that are exempt from tax) will be subject to a 3.8% tax on all or a portion of their“net investment income,” which includes dividends on our common shares and net gains from the disposition of our common shares. Further, excessdistributions treated as dividends, gains treated as excess distributions under the PFIC rules discussed above, and mark-to-market inclusions and deductionsare all included in the calculation of net investment income. Treasury Regulations provide, subject to the election described in the following paragraph, that solely for purposes of this additional tax, distributions ofpreviously taxed income will be treated as dividends and included in net investment income subject to the additional 3.8% tax. Additionally, to determinethe amount of any capital gain from the sale or other taxable disposition of our common shares that will be subject to the additional tax on net investmentincome, a U.S. Holder who has made a QEF Election will be required to recalculate its basis in our common shares excluding QEF basis adjustments. Alternatively, a U.S. Holder may make an election which will be effective with respect to all interests in a PFIC for which a QEF Election has been made andwhich is held in that year or acquired in future years. Under this election, a U.S. Holder pays the additional 3.8% tax on QEF income inclusions and on gainscalculated after giving effect to related tax basis adjustments. U.S. Holders that are individuals, estates or trusts should consult their own tax advisorsregarding the applicability of this tax to any of their income or gains in respect of our common shares. Receipt of Foreign Currency The amount of any distribution paid to a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of our common shares,generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whethersuch foreign currency is converted into U.S. dollars at that time). A U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on thedate of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchangegain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rulesapply to U.S. Holders who use the accrual method of tax accounting. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federalincome tax consequences of receiving, owning, and disposing of foreign currency. Foreign Tax Credit Subject to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividendspaid on our common shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian incometax. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S.Holder’s income that is subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directlyor through withholding) by a U.S. Holder during a year. 35  Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’sU.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applyingthis limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.”Generally, dividends paid on our common shares should be treated as foreign source for this purpose, and gains recognized on the sale of our common sharesby a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty, and if an election isproperly made under the Code. However, the amount of a distribution with respect to our common shares that is treated as a “dividend” may be lower for U.S.federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. Inaddition, this limitation is calculated separately with respect to specific categories of income. The foreign tax credit rules are complex, and each U.S. Holdershould consult its own U.S. tax advisors regarding the foreign tax credit rules. Backup Withholding and Information Reporting A U.S. Holder that is an individual (and, to the extent provided in future regulations, an entity), may be subject to certain reporting obligations with respectto our common shares if the aggregate value of these and certain other “specified foreign financial assets” exceeds $50,000. If required, this disclosure ismade by filing Form 8938 with the IRS. Significant penalties can apply if a U.S. Holder is required to make this disclosure and fail to do so. In addition, a U.S.Holder should consider the possible obligation to file online a FinCEN Form 114—Foreign Bank and Financial Accounts Report, as a result of holding ourcommon shares in certain accounts. Holders are urged to consult their U.S. tax advisors with respect to these and other reporting requirements that may applyto their acquisition of our common shares. Payments made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, ourcommon shares will generally be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S.Holder’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified bythe IRS that such U.S. Holder has previously failed to report properly items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury,that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject tobackup withholding tax. However, certain exempt persons generally are excluded from these information reporting and backup withholding rules. Backupwithholding is not an additional tax. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’sU.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner. The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to aU.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax and, undercertain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder shouldconsult its own tax advisors regarding the information reporting and backup withholding rules. THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TOU.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP, AND DISPOSITION OF OUR COMMON SHARES. U.S. HOLDERSSHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR OWNPARTICULAR CIRCUMSTANCES. Material Canadian Federal Income Tax Considerations Non-Residents of Canada The following portion of the summary is generally applicable to a U.S. Holder who, for the purposes of the Tax Act, is not resident in Canada, holds ourcommon shares as capital property and does not hold our common shares in connection with any business carried on in Canada. Special rules, which are notdiscussed in this summary, may apply to a U.S. Holder that is an insurer that carries on an insurance business in Canada and elsewhere. Disposition of Common Shares Upon the disposition by a U.S. Holder of our common shares in our Company, the U.S. Holder will not be subject to tax under the Tax Act in respect of anycapital gain realized unless the common shares disposed of constitutes “taxable Canadian property” of the U.S. Holder and the U.S. Holder is not entitled torelief under an applicable tax treaty or convention. Our common shares will generally not constitute “taxable Canadian property” of such U.S. Holder unlessat any time in the preceding 60 months both of the following statements were true: (a) the U.S. Holder, together with either (i) persons with whom the U.S.Holder does not deal at arm’s length or (ii) partnerships in which the U.S. Holder or a person in (a) directly or indirectly hold membership interests, heldshares and/or rights to acquire shares representing 25% or more of the issued shares of any class of our capital stock; and (b) more than 50% of the fair marketvalue of our common stock was derived directly or indirectly from one or any combination of (i) real or immovable property situated in Canada, (ii) Canadianresource properties, (iii) timber resource properties, and (iv) options in respect of, or interests in, or for civil law rights in, property described in any of (i) to(iii). 36  U.S. Holders whose common shares constitute “taxable Canadian property” should consult their own tax advisors for advice having regard to their particularcircumstances. Dividends Paid on Common Shares Dividends paid, credited or deemed to have been paid or credited on our common shares held by a U.S. Holder will be subject to a Canadian withholding taxunder the Tax Act at a rate of 25% of the gross amount of the dividends, subject to reduction by any applicable tax convention. Under the Canada-U.S. TaxConvention, the rate of withholding tax on dividends generally applicable to U.S. Holders who beneficially own the dividends is reduced to 15%. In the caseof U.S. Holders that are corporations that beneficially own at least 10% of our voting shares, the rate of withholding tax on dividends generally is reduced to5%. So-called “fiscally transparent” entities, such as United States limited liability companies, or LLCs, are not entitled to rely on the terms of the Canada-U.S. Tax Convention, however a member of such entity will be considered to have received the dividend directly and to benefit from the reduced rates underthe Canada-U.S. Tax Convention, where the member is considered under U.S. taxation law to have derived the dividend through that entity and by reason ofthe entity being a fiscally transparent entity, the treatment of the dividend is the same as its treatment would be if the amount had been derived directly bythe member. Members of such entities are regarded as holding their proportionate share of our common shares held by the entity for the purposes of theCanada-U.S. Tax Convention. Item 6.Selected Financial Date Not applicable. 37  Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations CAUTIONARY STATEMENT The discussion below contains forward-looking statements regarding our financial condition and our results of operations that are based upon our annualconsolidated financial statements, which have been prepared in accordance with generally accepted accounting principles within the United States, or U.S.GAAP, and applicable U.S. Securities and Exchange Commission, or SEC, regulations for financial information. The preparation of these financial statementsrequires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses, and related disclosureof contingent assets and liabilities. We evaluate our estimates on an ongoing basis. Our estimates are based on historical experience and on various otherassumptions that we believe to be reasonable. Overview The following is our only lead product candidate in the clinical stage of development: ·PEDMARKTM (a unique formulation of sodium thiosulfate (STS)) – sodium thiosulfate in a novel formulation, recently announced results of twoPhase 3 clinical trials for the prevention of cisplatin induced hearing loss, or ototoxicity in children including the pivotal Phase 3 study SIOPEL 6 ,“A Multicentre Open Label Randomised Phase 3 Trial of the Efficacy of Sodium Thiosulfate in Reducing Ototoxicity in Patients ReceivingCisplatin Chemotherapy for Standard Risk Hepatoblastoma,” and the proof of concept Phase 3 study “A Randomized Phase 3 Study of SodiumThiosulfate for the Prevention of Cisplatin-Induced Ototoxicity in Children”. We continue to focus our resources on the development of PEDMARKTM. We have licensed from OHSU intellectual property rights for the use of PEDMARKTM as a chemoprotectant and are developing PEDMARKTM as aprotectant against the hearing loss often caused by platinum-based anti-cancer agents in children. Preclinical and clinical studies conducted by OHSU andothers have indicated that PEDMARKTM can effectively reduce the incidence of hearing loss caused by platinum-based anti-cancer agents. We have receivedOrphan Drug Designation in the United States for the use of PEDMARKTM in the prevention of platinum-induced ototoxicity in pediatric patients. Hearing loss among children receiving platinum-based chemotherapy is frequent, permanent and often severely disabling. The incidence of hearing loss inthese children depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids. There is currently noestablished preventive agent for this hearing loss and only expensive, technically difficult and sub-optimal cochlear (inner ear) implants have been shown toprovide some benefit. In addition, adults undergoing chemotherapy for several common malignancies, including ovarian cancer, testicular cancer, andparticularly head and neck cancer and brain cancer, often receive intensive platinum-based therapy and may experience severe, irreversible hearing loss,particularly in the high frequencies. We estimate in the U.S. and Europe that each year over 10,000 children with solid tumors are treated with platinum agents. The vast majority of these newlydiagnosed tumors are localized and classified as low to intermediate risk in nature. These localized cancers may have overall survival rates of greater than80%, further emphasizing the importance of quality of life after treatment. Infants and young children at critical stages of development lack speech languagedevelopment and literacy, and older children and adolescents lack social-emotional development and educational achievement. STS has been studied by cooperative groups in two Phase 3 clinical studies of survival and reduction of ototoxicity: COG ACCL0431 and SIOPEL 6. Bothstudies are closed to recruitment. COG ACCL0431 enrolled one of five childhood cancers typically treated with intensive cisplatin therapy for localized anddisseminated disease, including newly diagnosed hepatoblastoma, germ cell tumor, osteosarcoma, neuroblastoma, and medulloblastoma. SIOPEL 6 enrolledonly hepatoblastoma patients with localized tumors. COG ACCL0431 final results were published in the Lancet Oncology in 2016. SIOPEL 6 final resultswere published in the New England Journal of Medicine in June 2018. In August 2018, the Pediatric Committee (PDCO) of the European Medicines Agency (EMA) accepted our pediatric investigation plan (PIP) forPEDMARKTM for the condition of the prevention of platinum-induced hearing loss. An accepted PIP is a prerequisite for filing a MAA for any new medicinalproduct in Europe. The indication targeted by the Company’s PIP is for the prevention of platinum-induced ototoxic hearing loss for standard riskhepatoblastoma (SR-HB). Additional tumor types of the proposed indication will be subject to the Committee for Medicinal Products for Human Use (CHMP)assessment at the time of the MAA. No deferred clinical studies were required in the positive opinion given by PDCO. We were also advised thatPEDMARKTM is eligible for submission of an application for a Pediatric Use Marketing Authorisation (PUMA). Therefore, this decision allows Fennec toproceed with the submission of a PUMA in the European Union (EU) with incentives of automatic access to the centralized procedure and up to 10 years ofdata and market protection The PUMA is a dedicated marketing authorization covering the indication and appropriate formulation for medicines developedexclusively for use in the pediatric population and provides data and market protection up to 10 years. 38  We initiated our rolling New Drug Application (NDA) for PEDMARKTM for the prevention of ototoxicity induced by cisplatin chemotherapy patients 1month to < 18 years of age with localized, non-metastatic, solid tumors in December 2018. The Company is targeting completing the NDA submission in late2019 to early 2020 with potential commercial launch of PEDMARKTM in the second half of 2020. In March 2018, PEDMARKTM received BreakthroughTherapy and Fast Track designations from the FDA. Further, PEDMARKTM has received Orphan Drug Designation in the US in this setting. We have not received and do not expect to have significant revenues from our product candidate until we are either able to sell our product candidate afterobtaining applicable regulatory approvals or we establish collaborations that provide us with up-front payments, licensing fees, milestone payments,royalties or other revenue. We generated a net loss of $9.9 million for the year ended December 31, 2018 and had a non-cash gain on derivative liabilities of$0.2 million. We generated a net loss of approximately $7.0 million for the year ended December 31, 2017 and had a non-cash loss on the change inderivative liability of $0.1 million. As of December 31, 2018, our accumulated deficit was approximately $131.3 million. Our projections of our capital requirements are subject to substantial uncertainty. More capital than we anticipated may be required thereafter. To finance ourcontinuing operations, we may need to raise substantial additional funds through either the sale of additional equity, the issuance of debt, the establishmentof collaborations that provide us with funding, the out-license or sale of certain aspects of our intellectual property portfolio or from other sources. Givencurrent economic conditions, we might not be able to raise the necessary capital or such funding may not be available on financially acceptable terms if atall. If we cannot obtain adequate funding in the future, we might be required to further delay, scale back or eliminate certain research and developmentstudies, consider business combinations or even shut down some, or all, of our operations. Our operating expenses will depend on many factors, including the progress of our drug development efforts and efficiency of our operations and currentresources. Our research and development expenses, which include expenses associated with our clinical trials, drug manufacturing to support clinicalprograms, stock-based compensation, consulting fees, sponsored research costs, toxicology studies, license fees, milestone payments, and other fees and costsrelated to the development of our product candidate, will depend on the availability of financial resources, the results of our clinical trials and any directivesfrom regulatory agencies, which are difficult to predict. Our general and administration expenses include expenses associated with the compensation ofemployees, stock-based compensation, professional fees, consulting fees, insurance and other administrative matters associated in support of our drugdevelopment programs. On December 12, 2017, we announced the completion of an underwritten public offering of 2,352,950 common shares at a public offering price of $8.50 pershare. In addition, we issued an additional 135,670 common shares in connection with the partial exercise of the underwriters’ over-allotment option. Theapproximate total gross proceeds from the offering was $21.2 million. On June 8, 2017, we completed the closing of a non-brokered private placement of 1,900,000 common shares for gross proceeds of $7.6 million. Eachcommon share was issued at a price of $4.00. On February 1, 2019, Fennec entered into a Loan and Security Agreement with Bridge Bank, a division of Western Alliance Bank, an Arizona corporation,pursuant to which the Bank agreed to loan $12.5 million to the Company, to be made available upon New Drug Application NDA approval of PEDMARK byno later than September 30, 2020. The proceeds from the loan will be used for working capital purposes and to fund general business requirements inaccordance with the terms of the Loan and Security Agreement. Interest under the Term Loans shall bear interest, on the outstanding daily balance thereof, ata floating per annum rate equal to the Effective Interest Rate (as defined in the Loan and Security Agreement) which is equal to the sum of the Prime Ratepublished in the Wall Street Journal (currently 5.50%) plus one percent (1.00%). The debt facility is to have interest-only monthly payments due for the firsteighteen months from the funding date and then monthly principal and interest payments are due through the remainder of the term which has a maturity dateof October 1, 2023. In connection with the facility, Fennec has agreed to grant Bridge Bank a warrant to purchase up to 39,130 common shares at an exerciseprice of $6.80 per common share, for a term of ten years from the date of issuance, subject to early termination under certain conditions. Results of Operations Fiscal 2018 versus Fiscal 2017 Fiscal Year Ended Fiscal Year Ended Increase In thousands of U.S. Dollars December 31, 2018 % December 31, 2017 % (Decrease) Revenue $- $- $- Operating expenses: Research and development 5,008 48% 1,936 28% 3,072 General and administration 5,401 52% 5,015 72% 386 Total operating expense 10,409 100% 6,951 100% 3,458 Derivative income/(loss) 167 (134) 301 Other loss 6 (8) 14 Interest income and other, net 348 47 301 Net income (loss) $(9,888) $(7,046) $(2,842) 39  ·Research and development expense increased by $3.1 million in fiscal 2018, as compared to fiscal 2017 primarily due to drug manufacturingactivities related to the preparation for registration batches and additional regulatory activities as we prepare to submit our new drug application toeach of the FDA and EMA.·The $0.4 million increase in general and administrative expenses is attributed to a small rise in compensation to officers, directors and key contractemployees in fiscal 2018 as compared to fiscal 2017. There was also small decrease in non-cash equity-based compensation that was granted orvested during fiscal 2018. Expense associated with equity compensation is directly related to the change in the underlying equity instrument.During fiscal year 2018, the price of our common shares fell 37%. This had an impact on the non-cash expense of issuing equity-basedcompensation.·Non-cash gains from derivative valuations were $0.3 million in fiscal year 2018 over fiscal year 2017. We had a very small number of derivativeoptions outstanding at the beginning of 2018. All of these derivative instruments were exercised or expired during fiscal 2018.·Interest income increased in fiscal 2018, as compared to 2017 due to a higher average cash balance for the comparable periods. Quarterly Information The following table presents selected consolidated financial data for each of the last eight quarters through December 31, 2018, as prepared under U.S. GAAP(dollars in thousands, except per share information). Period Net (Loss)/Income for thePeriod Basic Net (Loss)/Income perCommon Share Diluted Net (Loss)/Income perCommon Share March 31, 2017 (806) (0.06) (0.06)June 30, 2017 (1,598) (0.11) (0.11)September 30, 2017 (2,352) (0.15) (0.15)December 31, 2017 (2,290) (0.15) (0.15)March 31, 2018 (1,568) (0.09) (0.09)June 30, 2018 (2,587) (0.14) (0.14)September 30, 2018 (2,749) (0.14) (0.14)December 31, 2018 (2,984) (0.15) (0.15) Quarter ended December 31, 2018 versus 2017 Quarter Ended Quarter Ended Increase In thousands of U.S. Dollars December 31, 2018 % December 31, 2017 % (Decrease) Revenue $- $- $- Operating expenses: Research and development 1,723 55% 886 35% 837 General and administration 1,382 45% 1,629 65% (247)Total operating expense 3,105 100% 2,515 100% 590 Derivative income - 206 (206)Interest income and other, net 121 19 102 Net (loss) $(2,984) $(2,290) $(694) We reported a net loss from operations of $3.0 million for the three months ended December 31, 2018, compared to a net loss from operations of $2.3 million(including a non-cash gain on derivatives of $0.2 million) in 2017. Research and development expenses totaled $1.7 million for the three months endedDecember 31, 2018, as compared to a $0.9 million in the same period in 2017 as we increased drug manufacturing expense related to the production ofregistration batches. General and administrative expenses decreased by $0.2 million in the three months ended December 31, 2018, as compared to the sameperiod in 2017. The decrease relates to the valuation of non-cash equity-based compensation for employees and certain key contract employees. Selected Asset and Liability Data (thousands): As atDecember 31, 2018 As at December 31, 2017 Cash and equivalents $22,781 $28,260 Other current assets 169 141 Current liabilities excluding derivative liability 1,637 1,477 Derivative warrant liability - 167 Working capital [current assets – current liabilities excluding derivative liability] 21,313 26,924 40  Selected Asset and Liability Data (thousands): As atDecember 31, 2018 As at December 31, 2017 Selected Equity: Common shares $106,392 $103,045 Accumulated deficit (131,256) (121,368)Stockholders’ equity 21,313 26,757 Liquidity and Capital Resources ·There was a $5.5 million decrease in cash and cash equivalents between December 31, 2018 and December 31, 2017. During the period endedDecember 31, 2018, we used $7.8 million in cash in operations, offset by cash inflows of $2.3 million from the exercise of warrants to purchase 1.4million shares of our common shares and options to purchase 122,000 shares of our common shares. Cash for operations was used mainly inregulatory and manufacturing activities for STS and our general and administrative expenses.·The increase in other current assets between December 31, 2018 and December 31, 2017 primarily relates to an increase in the pre-paid amount forDirector and Officer insurance premiums and pre-paid conference expenses.·Current liabilities at December 31, 2018 increased from December 31, 2017 primarily due to an increase in accounts payable associated with theCompany’s manufacturing activities for the production of PEDMARKTM and related regulatory expenses at year-end 2018.·Working capital decreased between December 31, 2018 and December 31, 2017 by $5.6 million. The decrease was a result of cash used in operationsoffset by the above-described warrant and option exercises in 2018. Cash outflows related to the regulatory and commercial development ofPEDMARKTM and general and administrative expenses. We expect increased cash outflows as we prepare regulatory preparation prior tocompleting the FDA filing. Selected Cash Flow Data(dollars and shares in thousands) Year EndedDecember 31, 2018 Year EndedDecember 31, 2017 Net cash used in operating activities $(7,826) $(3,641)Net cash provided from investing activities - - Net cash provided from financing activities 2,347 27,975 Net cash flow $(5,479) $24,334 The net cash flow used in operating activities for the year ended December 31, 2018 was approximately $7.8 million as compared to $3.6 million in2017. This increase relates to the regulatory and commercial development of PEDMARKTM. We continue to pursue various strategic alternatives including collaborations with other pharmaceutical and biotechnology companies. Our projections offurther capital requirements are subject to substantial uncertainty. Our working capital requirements may fluctuate in future periods depending uponnumerous factors, including: our ability to obtain additional financial resources; our ability to enter into collaborations that provide us with up-frontpayments, milestones or other payments; results of our research and development activities; progress or lack of progress in our preclinical studies or clinicaltrials; unfavorable toxicology in our clinical programs, our drug substance requirements to support clinical programs; change in the focus, direction, or costsof our research and development programs; headcount expense; the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcingour patent claims; competitive and technological advances; the potential need to develop, acquire or license new technologies and products; our businessdevelopment activities; new regulatory requirements implemented by regulatory authorities; the timing and outcome of any regulatory review process; andcommercialization activities, if any. We had cash and cash equivalents of approximately $22.8 million as of December 31, 2018. We currently anticipate that our available capital resources,including our existing cash and cash equivalents and accounts receivable balances will be sufficient to meet our expected working capital and capitalexpenditure requirements as our business is currently conducted for at least the next 12 months. As of the date of this filing, we have secured the availabilityof an additional $12.5 million of debt financing which will be funded upon FDA approval of PEDMARKTM. Financial Instruments We invest excess cash and cash equivalents in high credit quality investments held by financial institutions in accordance with our investment policydesigned to protect the principal investment. At December 31, 2018, we had approximately $0.8 million in our cash accounts and $22.0 million in savingsand money market accounts. We have never experienced any loss or write down of our money market investments since the inception of the Company. 41  Our investment policy is to manage investments to achieve, in the order of importance, the financial objectives of preservation of principal, liquidity andreturn on investment. Investments may be made in U.S. or Canadian obligations and bank securities, commercial paper of U.S. or Canadian industrialcompanies, utilities, financial institutions and consumer loan companies, and securities of foreign banks provided the obligations are guaranteed or carryratings appropriate to the policy. Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1 low for commercial paper. The policy alsoprovides for investment limits on concentrations of securities by issuer and maximum-weighted average time to maturity of twelve months. This policyapplies to all of our financial resources. The policy risks are primarily the opportunity cost of the conservative nature of the allowable investments. As ourmain purpose is research and development, we have chosen to avoid investments of a trading or speculative nature. We classify investments with original maturities at the date of purchase greater than three months which mature at or less than twelve months as current. Wecarry investments at their fair value with unrealized gains and losses included in other comprehensive income (loss); however, we have not held anyinstruments that were classified as short-term investments during the periods presented in this Annual Report. Off-Balance Sheet Arrangements Since our inception, we have not had any material off-balance sheet arrangements. Contractual Obligations and Commitments None. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense duringthe reporting period. These estimates are based on assumptions and judgments that may be affected by commercial, economic and other factors. Actual resultscould differ from these estimates. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highlyuncertain at the time the estimate is made, and if different estimates reasonably could have been used, or changes in the accounting estimates that arereasonably likely to occur periodically, could materially impact the financial statements. The following description of critical accounting policies,judgments and estimates should be read in conjunction with our December 31, 2018 consolidated financial statements. Stock-based Compensation The calculation of the fair values of our stock-based compensation plans requires estimates that require management’s judgments. Under ASC 718, the fairvalue of each stock option is estimated on the grant date using the Black-Scholes option-pricing model. The valuation models require assumptions andestimates to determine expected volatility, expected life, expected dividends and expected risk-free interest rates. The expected volatility was determinedusing historical volatility of our stock based on the contractual life of the award. The risk-free interest rate assumption was based on the yield on zero-couponU.S. Treasury strips at the award grant date. We also used historical data to estimate forfeiture experience. In valuing options granted in the fiscal years endedDecember 31, 2018 and 2017, we used the following weighted average assumptions: Year Ended December 31,2018 Year Ended December 31,2017 Expected dividend 0% 0%Risk-free interest rate 2.53 – 3.00% 2.04 – 2.33% Expected volatility 132 – 151% 158 – 168% Expected life 4.5 – 7.0 years 7 years Common shares and warrants Common shares are recorded as the net proceeds received on issuance after deducting all share issuance costs and the relative fair value of investorwarrants. Warrants are recorded at relative fair value and are deducted from the proceeds of common shares and recorded on the consolidated statements ofstockholders’ equity as additional paid-in capital. 42  Derivative Instruments The Company applies ASC Topic 815-40, "Derivatives and Hedging" (ASC 815-40). One of the conclusions reached under ASC 815-40 was that an equity-linked financial instrument would not be considered indexed to the entity's own stock if the strike price is denominated in a currency other than the issuer'sfunctional currency. The conclusion reached under ASC 815-40 clarified the accounting treatment for these and certain other financial instruments. ASC 815-40 specifies that a contract will not be treated as a derivative if it meets the following conditions: (a) indexed to the Company's own stock; and (b) classifiedin stockholders' equity in the Company's statement of financial position. The Company's options, issued to consultants and denominated in Canadian dollarswere not considered to be indexed to its own stock because the exercise price is denominated in Canadian dollars and the Company's functional currency isUnited States dollars. Therefore, these options were treated as derivative financial instruments and recorded at their fair value as a liability. All otheroutstanding convertible instruments are considered to be indexed to the Company's stock, because their exercise price is denominated in the same currencyas the Company's functional currency and are included in stockholders' equity. During the year ended December 31, 2018, there were exercises of options to purchase 19 shares of our common shares, which were classified as derivativeinstruments. This resulted in gross proceeds of $26 and a non-cash gain on the extinguishment of the remaining derivative liability of $167. The fair value ofthese options was estimated using the Black-Scholes option-pricing model and is summarized below. Derivative Value at Gain/(Loss) on Derivative December 31, Instrument December 31, Derivative Options 2018 2017 2018 2017 Options (various expiration dates) - 167 167 (134)Total - 167 167 (134) The value of the derivative liability presented on the balance sheet has typically been influenced by changes in the underlying share price of our commonshares. Outstanding Share Information Our outstanding comparative share data at December 31, 2018 and December 31, 2017 is as follows (in thousands): Outstanding Share Type December 31, 2018 December 31, 2017 Common shares 19,896 18,411 Warrants to purchase common shares - 1,362 Options to purchase common shares 2,498 2,315 Total 22,394 22,088 Newly Adopted and Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements forFair Value Measurement. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. The ASU is effective for uson January 1, 2020, and interim periods within those fiscal years. Early adoption is permitted. Certain disclosures in ASU 2018-13 would need to be appliedon a retrospective basis and others on a prospective basis. We are currently evaluating the impact this guidance may have on our consolidated financialstatements. In June 2018, the FASB issued ASU 2018-07 to expand the scope of ASC Topic 718, Compensation - Stock Compensation (Topic 718): Improvements toNonemployee Share-Based Payment Accounting, to include share-based payment transactions for acquiring goods and services from nonemployees. Thepronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoptionpermitted. We concluded after evaluation, that the impact of ASU 2018-07 on our consolidated financial statements and disclosures was de minimis. In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20):Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” (“ASU 2017-05”). ASU 2017-05 is meant toclarify the scope of the original guidance within Subtopic 610-20 that was issued in connection with ASU 2014-09, as defined below, which providesguidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. ASU 2017-05 also added guidance forpartial sales of nonfinancial assets. ASU 2017-05 is effective for our fiscal year ending December 31, 2018 and we are required to adopt ASU 2017-05concurrent with the adoption of ASU 2014-09. We adopted ASU 2017-05 January 1, 2018. We concluded after evaluation, that the impact of ASU 2017-05on our consolidated financial statements and disclosures was de minimis. In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2017-09, Compensation—Stock Compensation(Topic 718): Scope of Modification Accounting (“ASU 2017-09”). The FASB issued ASU 2017-09 to clarify and reduce both (i) diversity in practice and (ii)cost and complexity when applying the guidance in Topic 718, to a change to the terms and conditions of a share-based payment award. This guidancebecame effective for us as of January 1, 2018. The amendments in this ASU have been applied prospectively to awards modified after the adoption date. 43  In May 2014, the FASB issued ASU 2014-9, Revenue from Contracts with Customers (Topic 606), to clarify the principles for recognizing revenue. Thisupdate provides a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods orservices to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASBissued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of the newstandard from January 1, 2017 to January 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. InMarch 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, which clarifiesthe implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts withCustomers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies certain aspects of identifying performance obligations andlicensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-ScopeImprovements and Practical Expedients related to disclosures of remaining performance obligations, as well as other amendments to guidance oncollectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers. In September 2017, the FASB issuedASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842):Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcementsand Observer Comments. The amendments in ASU No. 2017-13 amends the early adoption date option for certain companies related to the adoption of ASUNo. 2014-09 and ASU No. 2016-02. In November 2017, the FASB issued ASU No. 2017-14, Revenue from Contracts with Customers (Topic 606): IncomeStatement- Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), which amends certain SEC paragraphs within the FASBAccounting Standards Codification. These standards had the same effective date and transition date of January 1, 2018. The new revenue standard allows foreither full retrospective or modified retrospective application. We currently do not have any revenue and therefore this update has virtually no effect on ourconsolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new guidance requires the recognition of lease liabilities, representing futureminimum lease payments, on a discounted basis, and corresponding right-of-use assets on a balance sheet for most leases, along with requirements forenhanced disclosures to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leasingarrangements. In July 2018, the FASB issued ASU 2018-10 and 2018-11 which permit application of the new guidance at the beginning of the year ofadoption, recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, in addition to the method ofapplying the new guidance retrospectively to each prior reporting period presented. The ASU is effective for us on January 1, 2019. We have concluded theimpact of this guidance will be negligible on our consolidated financial statements, given we have no material leases. Item 7A.Quantitative and Qualitative Disclosures About Market Risk Money Market Investments We maintain an investment portfolio consisting of U.S. or Canadian obligations and bank securities and money market investments in compliance with ourinvestment policy. We do not hold any mortgaged-backed investments in our investment portfolio. Securities must have a minimum Dun & Bradstreet ratingof A for bonds or R1 low for commercial paper. The policy also provides for investment limits on concentrations of securities by issuer and maximum-weighted average time to maturity of twelve months. This policy applies to all of our financial resources. At December 31, 2018, we had $22.0 million in money market investments and savings accounts as compared to $28.0 million at December 31, 2017; theseinvestments typically have minimal risk. We have not experienced any loss or write down of our money market investments for the years ended December31, 2018 and 2017. Our investment policy is to manage investments to achieve, in the order of importance, the financial objectives of preservation of principal, liquidity andreturn on investment. Our risk associated with fluctuating interest rates on our investments is minimal and not significant to the results of operations. Wecurrently do not use interest rate derivative instruments to manage exposure to interest rate changes. As our main purpose is research and development, wehave chosen to avoid investments of a trade or speculative nature. Foreign Currency Exposure We are subject to foreign currency risks as we purchase goods and services which are denominated in Canadian dollars. To date, we have not employed theuse of derivative instruments; however, we do hold Canadian dollars which we use to pay vendors in Canada and other corporate obligations. At December31, 2018 we held approximately one hundred twenty-one thousand Canadian dollars. 44  Item 8.Financial Statements and Supplementary Data The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. A list of the financial statements filedherewith is found at “Index to Financial Statements” on Page F-1. Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure During 2017, the Audit Committee (the “Committee”) of our Board of Directors conducted a competitive selection process to determine our independentregistered public accounting firm for the fiscal year ending December 31, 2017. This search began after Deloitte LLP (“Deloitte”) advised us that it wouldresign as of May 15, 2017. The Committee invited several independent public accounting firms to participate in this process. The reports of Deloitte on our consolidated financial statements for the fiscal years ended December 31, 2016 and 2015 did not contain an adverse opinion ordisclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. In connection with the audits of ourconsolidated financial statements for the fiscal years ended December 31, 2016 and 2015, and in the subsequent interim period through May 15, 2017, therewere no disagreements with Deloitte on any matters of accounting principles or practices, financial statement disclosure or auditing scope and procedureswhich, if not resolved to the satisfaction of Deloitte, would have caused Deloitte to make reference to the matter in their report. There were no reportableevents (as that term is described in Item 304(a)(1)(v) of Regulation S-K of the Securities Act of 1933, as amended) during the two fiscal years ended December31, 2016 and 2015, or in the subsequent period through May 15, 2017. The Committee approved the appointment of Haskell & White LLP as our independent registered public accounting firm on May 15, 2017, for the fiscal yearending December 31, 2018. During the two most recent fiscal years and in the subsequent interim period through May 15, 2017, we had not consulted withHaskell & White LLP with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of auditopinion that would have been rendered on our consolidated financial statements, or any other matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K. Item 9A.Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectivenessof our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, our ChiefExecutive Officer and Chief Financial Officer concluded that, as of December 31, 2018, our disclosure controls and procedures were effective in ensuring thatinformation required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized, and reported,within the time periods specified in the Commission’s rules and forms and (ii) accumulated and communicated to our management, including our principalexecutive and principal accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding requireddisclosure. Management's Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting for us. Internal control over financialreporting (as defined in Rule 13a-15(f) of the Exchange Act) is a process to provide reasonable assurance regarding the reliability of our financial reportingfor external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes maintaining recordsthat in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary forpreparation of our consolidated financial statements; providing reasonable assurance that receipts and expenditures of company assets are made inaccordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets thatcould have a material effect on our consolidated financial statements would be prevented or detected on a timely basis. Because of its inherent limitations,internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would beprevented or detected. Management conducted an evaluation of the effectiveness, as of December 31, 2018, of our internal control over financial reporting based on the frameworkin Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on thisevaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2018. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2018 has been audited by Haskell & White LLP, anindependent registered public accounting firm, as stated in their report contained in Item 15(a)(1) of Part IV of this Report, “Exhibits and Financial StatementSchedules.” 45  Changes in Internal Control over Financial Reporting In connection with the preparation of the Company’s financial statements for the year ended December 31, 2017, certain matters involving internal controlover financial reporting rose to the level of a material weaknesses. The material weaknesses related to: 1) Ineffective control environment including a lack of segregation of duties, insufficient number of qualified personnel, and a lack of controlactivities; and2) Insufficient personnel with appropriate knowledge of U.S. GAAP. The material weaknesses continued to exist as of the first three quarters of 2018. In the fourth quarter of 2018, these material weaknesses were remediated as aresult of the following actions taken during the year: ·We engaged with a third-party consultant with internal control expertise to help with our management internal control assessment;·We designed and implemented control activities the create proper segregation of duties using internal and external resources;·We engaged with a third-party consultant with sufficient U.S. GAAP expertise to help management account for complex or unusual transactions.·Management attended, at a minimum, 24 hours of continuing professional education (“CPE”) on current SEC and PCAOB developments. This CPEwas sponsored by the American Institute of CPAs. Inherent Limitation on the Effectiveness of Internal Controls The effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing,implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system ofinternal control over financial reporting can only provide reasonable, not absolute, assurances. In addition, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business butcannot assure that such improvements will be sufficient to provide us with effective internal control over financial reporting. Item 9B.Other Information None. 46  PART III Item 10.Directors, Executive Officers and Corporate Governance The following table sets forth the name of each of our executive officers and directors, such person’s principal occupation or employment, all other positionswith us held by such person, if any, the year in which such person became a director of Fennec and such person’s age. Our Board has an Audit Committee, a Compensation Committee, and a Governance Committee. The current members of such committees are noted in thetable below: Name and Province/State and Countryof Residence, PositionCurrent Principal Occupation and Principal OccupationFor Previous Five YearsDirector SinceAge Rostislav Raykov, New Jersey, USAChief Executive Officer, DirectorCEO of Fennec Pharmaceuticals Inc.; Co-Founder and Manager,DCML LLC; previously Portfolio Manager at Alchem Partners;previously Portfolio Manager at John Levin & CompanyJuly 200943Robert Andrade, Texas, USAChief Financial OfficerCFO of Fennec Pharmaceuticals; previously senior analyst atMagnetar Capital; previously Portfolio Manager at MillenniumPartnersSeptember 2009- August2013; November 201544Chris A. Rallis, North Carolina, USADirector(1)(2)Executive in-residence at Pappas Capital; previously CEO ofImmunoBiosciencesAugust 201165Marco Brughera, Milano, ItalyDirector(2)(3)CEO of Leadiant Biosciences SpA; previously Global Head RareDisease and R&D at Sigma-tau; VP Preclinical Development atNerviano Medical Sciences.August, 201663Adrian J. Haigh, Dublin, IrelandDirector(1)(3)Senior Vice President and General Manager of EMEA Region at PTCTherapeutics; previously Chief Operating Officer at Gentium GmbH;previously Regional VP Commercial Operations at Biogen IdecApril 201459Khalid Islam, Zug, SwitzerlandChairman of Board, Director(1)(2)(3)Founder/co-founder of Sirius Healthcare Partners GMbH; previouslyChairman and CEO of Gentium S.p.A.; previously CEO of Arpida AGApril 201463 (1) Member of the Audit Committee(2) Member of the Compensation Committee(3) Member of the Governance Committee Rostislav Raykov Mr. Raykov has served as a director of Fennec since July 2009 and as Chief Executive Officer since July 2009. From January 2006 to December 2007, Mr.Raykov was a portfolio manager for Alchem Investment Partners and John Levin & Co. Prior to founding Alchem, Mr. Raykov was a portfolio manager andsecurities analyst for John A. Levin & Co. Event Driven Fund (2002-2005). Prior to joining John A. Levin & Co., Mr. Raykov was a securities analyst for theMerger Fund at Tiedemann Investment Group (1999-2002) and an investment banking analyst at Bear Stearns (1998-1999). Mr. Raykov earned a B.S. inBusiness Administration from the University of North Carolina at Chapel Hill. As a result of these and other professional experiences, Mr. Raykov hasfinancial expertise and experience with the Company as it has developed within the drug development industry and, as such, is able to provide us withunique insight and guidance. Robert Andrade Mr. Andrade has served as Chief Financial Officer since November 2015. Mr. Andrade was previously Chief Financial Officer and Director of Fennec fromSeptember 2009 until August 2013. In addition to his role with Fennec, Mr. Andrade was a senior analyst at Magnetar Capital, a portfolio manager forMillennium Partners and a senior analyst at Caxton Associates. Mr. Andrade graduated from University of Southern California, where he earned a Masters ofArts degree and Bachelor of Arts degree in economics. 47  Chris A. Rallis Mr. Rallis has served as a director of Fennec since August 2011. Mr. Rallis has been an executive-in-residence at Pappas Capital, a life science venture capitalfirm since January 2008. Previously, Mr. Rallis was the President and Chief Executive Officer of ImmunoBiosciences, Inc. (“IBI”), a vaccine technologycompany formerly located in Raleigh, North Carolina from April 2006 through June 2007. Prior to joining IBI, Mr. Rallis served as an executive in residence(part-time) for Pappas Ventures, and as a consultant for Duke University and Panacos Pharmaceuticals, Inc. Mr. Rallis is the former President and ChiefOperating Officer (“COO”) and director of Triangle Pharmaceuticals, Inc., which was acquired by Gilead Sciences in January 2003 for approximately$465 million. Prior to assuming the role of President and COO in March 2000, he was Executive Vice President, Business Development and General Counsel.While at Triangle, Mr. Rallis participated in 11 equity financings generating gross proceeds of approximately $500 million. He was also primarilyresponsible for all business development activities which included a worldwide alliance with Abbott Laboratories and the in-licensing of ten compounds.Before joining Triangle in 1995, Mr. Rallis served in various business development and legal management roles with Burroughs Wellcome Co. over a 13-year period, including Vice President of Strategic Planning and Business Development. Mr. Rallis also serves on the boards of Aeolus Pharmaceuticals, abiopharmaceutical company located in Mission Viejo, California (no longer active) and Tenax Therapeutics, Inc., a biopharmaceutical company located inMorrisville, North Carolina. Mr. Rallis received his A.B. degree in economics from Harvard College and a J.D. from Duke University. As a result of these andother professional experiences, Mr. Rallis possesses particular healthcare industry knowledge and experience which strengthens the Board’s collectivequalifications, skills, and experience. Marco Brughera Since January 2011, Dr. Brughera has been CEO of Lediant Biosciences SpA and has held several positions for the Sigma-Tau Group, including CEO andGlobal Head of Sigma Tau Rare Disease, President of Sigma-Tau Research and President of Sigma-Tau Pharmaceuticals. He drove the commercial revival of alead oncology product line resulting in its successful sale for a total of around $900M. He also successfully out-licensed the Defibrotide US rights to JazzPharmaceuticals. From 2004 to 2010, Dr. Brughera served as the Vice President of Preclinical Development at Nerviano Medical Sciences (NMS), apharmaceutical oncology-focused integrated discovery and development company. He also served as the Managing Director at Accelera, an independentcontract research organization with the NMS Group. From 1999 to 2004, Dr. Brughera held several senior level positions in the areas of research anddevelopment with Pharmacia and Pfizer. Prior to 1999, he held various positions at Pharmacia & Upjohn and Farmitalia Carlo Erba SpA, an Italianpharmaceutical company. He currently serves on the Board of Exelead and Naicons and previously was Board member of Soligenix, Lee’s Pharmaceuticalsand Gentium SpA. Dr. Brughera earned his degree in veterinary medicine from the University of Milan and is a European Registered Toxicologist Mr.Brughera has wide-spread experience and knowledge of pharmaceutical drug development in international companies. His knowledge in particular, ofclinical drug development in Europe, deepens the Board’s collective qualifications, skills and experience. Adrian J. Haigh Mr. Adrian Haigh has been Senior Vice President and General Manager of EMEA Region and Asia Pacific at PTC Therapeutics, Inc. since September 2014.Previously Mr. Haigh served as Senior Vice President, Commercial Operations and Chief Operating Officer of Gentium GmbH since March 2011. Prior tojoining Gentium, Mr. Haigh served as Regional Vice President, Commercial Operations at Biogen Idec where he managed several affiliates and also theglobal distributor business and prior to that was the General Manager of Amgen Nordis and Portugal. He served as the Executive Vice President of GlobalMarketing and Corporate Planning at EUSA Pharma and joined EUSA from Amgen where he led the international oncology franchise. Mr. Haighpreviously has held senior commercial and marketing positions at SmithKline Beecham, Schering Plough, Organon and Novo Nordisk. He has been aDirector of Fennec Pharmaceuticals Inc. since April 28, 2014 and a Director at Arch Biopartners Inc. since August 21, 2014. He received a Bachelor of Artswith Honors in Economic History from Huddersfield Polytechnic, West Yorkshire, England and a Diploma in Marketing from the Institute of Marketing. As aresult of these and other professional experiences, Mr. Haigh has extensive international oncology development expertise which strengthens the Board’scollective qualifications, skills and experience. Dr. Khalid Islam Dr. Khalid Islam was the Chairman and CEO of Gentium S.p.A. (a Nasdaq-listed company; 2009-2014) where he led the transition from a loss-making to acash-flow positive and profitable company. Under his leadership, the company value increased from US$25 million leading to a successful all cash US$1billion merger with Jazz Pharmaceuticals, plc. Subsequent to the sale of Gentium, Dr. Islam has been involved from both an advisory and board level inseveral public and private healthcare related companies. From 1999-2008, Dr. Islam was President and CEO of Arpida AG where he transitioned the early-stage start-up to a SWX-listed company and raised US$300 million in the IPO and follow-ons. From 1987-1999, he held various positions in HMR & MMD(now Sanofi-Aventis). From 1977-1987, Dr. Islam worked in academia at Imperial College (Univ. of London) and in Milan University, where he was acontract professor. Dr. Islam is a graduate of Chelsea College and received his Ph.D. from Imperial College, University of London. He holds several patentsand has published over 80 articles in leading journals. He is an advisor to the venture group Kurma Biofund (Paris). He is a founder/co-founder of SiriusHealthcare Partners GmbH (Zurich), PrevAbr LLC (D.C.), BioAim LLC (L.A.) & Life Sciences Management GmbH (Zug). Dr. Islam is Board Chair at MinoryxTherapeutics (Spain). He serves on the board of Karolinska Development (Sweden), MolMed S.p.A. (Italy) and Immunomedics Inc. (IMMU) all of which aretraded publicly, and the private company OxThera (Sweden). He is also is Chairman of the board of Gain Therapeutics (Switzerland) a private company. Inthe past, he has served as Chairman of the Board of Directors of Pcovery Aps (Copenhagen), Adenium Aps (Copenhagen) and C10 Pharma AS (Oslo). Dr.Islam’s extensive international pharmaceutical expertise in transitioning companies from development to production strengthens the Board’s collectivequalifications, skills and experience. 48  Audit Committee On behalf of the Board, the Audit Committee of the Board retains, oversees and evaluates our independent auditors, reviews the financial reports and otherfinancial information provided by us, including audited financial statements, and discusses the adequacy of disclosure with management and theauditors. The Audit Committee also reviews the performance of the independent auditors in the annual audit and in assignments unrelated to the audit,assesses the independence of the auditors, and reviews their fees. The Audit Committee is also responsible for reviewing our internal controls over financialreporting and disclosure. The Audit Committee operates under a written charter adopted by the Board. The directors have appointed an Audit Committee consisting of three directors: Chris A. Rallis, Khalid Islam and Adrian Haigh, each of whom is independentand financially literate within the meaning of National Instrument 52-110 – Audit Committees and is independent under Rule 5605(a)(2) of the Nasdaqlisting standards. In addition, the Board has determined that Mr. Rallis qualifies as an “audit committee financial expert,” as defined in Item 407(d)(5) ofRegulation S-K promulgated by the SEC based on his business and financial experience described above. Code of Ethics In February 2004, our Board adopted a Mandate of the Board of Directors, Corporate Governance Guidelines and a Code of Business Conduct and Ethics (the“Conduct and Ethics Code”) applicable to all of our officers, directors and employees. We are committed to adhering to applicable legal requirements andmaintaining the highest standards of conduct and integrity. The Conduct and Ethics Code sets out the legal and ethical standards of conduct for ourpersonnel and addresses topics such as: reporting obligations and procedures; honest and ethical conduct and conflicts of interest; compliance withapplicable laws and Company policies and procedures; confidentiality of corporate information; use of corporate assets and opportunities; public disclosureand books and records; and non-retaliation. The Conduct and Ethics Code is available on our website at www.fennecpharma.com. We will post anyamendment to this code, as well as any waivers that are required to be disclosed by the rules of the SEC, on our website promptly following the date of suchamendment or waiver. We undertake to provide to any person without charge, upon request, a copy of the Conduct and Ethics Code by writing to Attn: Codeof Ethics Request, Fennec Pharmaceuticals Inc., 68 TW Alexander Drive, PO Box 13628, Research Triangle Park, North Carolina 27709. Section 16(a) Beneficial Ownership Reporting Compliance Under Section 16(a) of the Exchange Act, our directors and executive officers and any person who beneficially owns more than 10% of our outstandingcommon shares (“reporting persons”) are required to report their initial beneficial ownership of our common shares and any subsequent changes in thatownership to the SEC and Nasdaq. Reporting persons are required by SEC regulations to furnish to us copies of all reports they file in accordance withSection 16(a). Based solely upon our review of the copies of such reports received by us, or written representations from certain reporting persons that noother reports were required, we believe that during the fiscal year ended December 31, 2018, all Section 16(a) filing requirements applicable to our reportingpersons were met. Item 11.Executive Compensation Summary Compensation Table The following table sets out certain information respecting the compensation paid to our Chief Executive Officer and our Chief Financial Officer (“NamedExecutive Officers”) for the fiscal years ended December 31, 2018 and December 31, 2017. Name and Principal Position Year Salary ($) Bonus ($) Option Awards($)(1) Total ($) Rostislav Raykov, CEO 2018 350,000 160,000 562,261 1,072,261 2017 262,500 – 187,579 450,079 Robert Andrade, CFO 2018 250,000 110,000 309,099 669,099 2017 195,000 – 93,788 288,788 (1)Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Dollar value amounts are based on individualgrants to each of Mr. Raykov and Mr. Andrade of 100,000 and 100,000 and 50,000 and 50,000 options, respectively, on June 27, 2017 and February6, 2018, at an exercise price of $5.10 and $8.38 per common share, respectively, and will expire on June 27, 2024 and February 6, 2025,respectively. One-third of these options vested on the grant date and are exercisable one year after the grant date (the “Vesting CommencementDate”). The remaining two-thirds of the options shall vest monthly at a rate of 1/36th of the remaining grant and shall be exercisable as of the lastday of each following month after the Vesting Commencement Date. As of the third anniversary of the grant date, all of the options shall be vested. Rostislav Raykov Mr. Raykov has been employed by us since July 2009. Pursuant to an employment agreement dated May 3, 2010 between Mr. Raykov and Fennec, Mr.Raykov is employed as our Chief Executive Officer and: (a) received an initial annual salary in the amount of $140,000, subject to annual adjustment by ourBoard of Directors, (b) upon approval by shareholders of our amended stock option plan was granted options to purchase up to 5.0% of our common sharesestimated by us to be outstanding upon completion of the 2010 Rights Offering, and (c) may receive annual bonuses at the sole discretion of the Board. If Mr.Raykov’s employment terminates due to a change of control of Fennec, Mr. Raykov’s remaining unvested options shall immediately vest and be fullyexercisable. If Mr. Raykov is dismissed from employment by us for any reason other than “for cause,” we are obligated to pay Mr. Raykov severancecompensation equal to twelve months of salary. The initial term of the agreement was for one year and the agreement automatically extends for additionalone-year periods unless terminated by either party in accordance with the agreement. Effective January 1, 2018, Mr. Raykov’s salary was increased to$350,000 per year. 49  Robert Andrade Mr. Andrade has been employed by us since November 2015. Mr. Andrade is employed as Fennec’s Chief Financial Officer. Pursuant to an employmentagreement dated November 13, 2015, Mr. Andrade (a) receives an initial annual salary in the amount of $165,000, and (b) may receive annual bonuses at thesole discretion of the Board. If Mr. Andrade’s employment terminates due to a change of control of the Fennec, Mr. Andrade’s remaining unvested optionsshall immediately vest and be fully exercisable. If Mr. Andrade is dismissed from employment by us for any reason other than “for cause,” we are obligated topay Mr. Andrade severance compensation equal to six months of salary. Effective January 1, 2018, Mr. Andrade’s salary was increased to $250,000 per year. In addition to their employment agreements, Mr. Raykov and Mr. Andrade are a party to a confidentiality and intellectual property agreement with theCompany. In the employment agreements for each of Mr. Andrade and Mr. Raykov “for cause” is generally defined as (1) material breach of the terms of the employmentor intellectual property agreements; (2) failure to perform the duties inherent in their position in good faith and in a reasonable and appropriate manner; or (3)acts of fraud or embezzlement or other intentional misconduct which adversely affects our business. Payments on Termination The following table provides details regarding the estimated incremental payments from the Corporation to each of the current Named Executive Officersassuming termination without cause on December 31, 2018. Name Severance Estimated Bonus Value of benefits Rostislav Raykov, CEO $350,000 $- $350,000 Robert Andrade, CFO $125,000 $- $125,000 Payments on Change of Control The following table provides details regarding the estimated incremental payments from the Corporation to each of the current Executive Officers uponchange of control. Name Change of ControlMultiple Estimated Bonus(1) Value of benefits Rostislav Raykov, CEO 2 X $772,500 $772,500 Robert Andrade, CFO 1.25 X $346,875 $346,875 (1)Change of control payments are calculated based on the two-year annualized average salary plus cash bonus as calculated as of December 31, 2018. In addition to the payments above, an incentive plan has been established pursuant to which, upon completion of a change in control transaction, 1% of thetransaction value (up to a maximum of $2,000,000) be set aside and paid to key personnel upon completion of such change in control transaction, with 50%of such incentive pool being payable to the CEO and the balance to other key personnel as determined by the CEO in consultation with the CompensationCommittee. Equity Grants, Exercises and Holdings The following table sets forth information concerning the number and value of unexercised options held by each Named Executive Officer as of December31, 2018. All executive awards, with the exception of those expiring 6/27/2024, 07/05/2023 and 02/06/2025 vest and are exercisable immediately. Thecurrent stock option plan provides for grants denominated in US and CAD dollars. 50  Number of Options Name Granted Exercisable Option Exercise Price Expiration Date Rostislav Raykov 100,000 - USD$ 8.38 02/06/2025 100,000 50,000 USD$ 5.10 06/27/2024 150,000 125,005 USD$ 2.45 07/05/2023 25,000 25,000 USD$ 2.69 12/31/2021 83,333 83,333 USD$ 1.59 01/24/2021 16,666 16,666 USD$ 0.72 08/23/2020 50,000 50,000 USD$ 1.05 11/20/2019 323,961 323,961 CAD$ 2.43 08/18/2020 Robert Andrade 50,000 - USD$ 8.38 02/06/2025 50,000 25,000 USD$ 5.10 06/27/2024 75,000 62,495 USD$ 2.45 07/05/2023 323,961 323,961 CAD$ 2.43 08/18/2020 Compensation of Directors Director Compensation Table The following table summarizes the compensation earned by our non-executive directors for the year ended December 31, 2018. Name Fees paid in Cash Stock Awards Option Awards(1)(2) Total Dr. Islam 96,500 – 256,967 353,467 Mr. Brughera 51,500 – 205,574 257,074 Mr. Haigh 51,500 – 205,574 257,074 Mr. Rallis 54,000 – 205,574 259,574 Total $253,500 $– $873,689 $1,127,189 (1)Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.(2)Detail of grants are presented in the following table: Name Date of Grant Number of Options Granted Option Exercise Price $USD Mr. Rallis June 8, 2017 20,000 10.93 Mr. Brughera June 8, 2017 20,000 10.93 Mr. Haigh June 8, 2017 20,000 10.93 Dr. Islam June 8, 2017 25,000 10.93 Total 85,000 The annual compensation considerations for non-executive directors also include the awarding of stock options. We believe that granting of options to thenon-executive directors serves three primary purposes: (1) to recognize the significant time and effort commitments during the past year; (2) to provide long-term incentives for future efforts since the value of the options is directly dependent on the market valuation of the Company; and (3) to retain qualityindividuals. When determining whether and how many new option grants will be made, the Compensation Committee takes into account the amount andterms of any outstanding options. We do not require our non-executive directors to own a specific amount of our common shares. Each of Adrian J. Haigh, Khalid Islam, Marco Brughera and Chris A. Rallis has entered into an Independent Director Agreement with the Company, whichprovides for cash compensation as set forth by the Compensation Committee commensurate with that member’s responsibilities. The CompensationCommittee may also remunerate members in the form of a grant of options to purchase shares of our common shares. The options immediately vest whengranted and are otherwise subject to the terms and conditions of our stock option plan, as amended. The Independent Director Agreements also provide forthe reimbursement of such director’s reasonable travel and related expenses incurred in the course of attending board meetings. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth information regarding our common shares beneficially owned as of March 11, 2019 by: (i) each of our officers and directors; (ii)all officers and directors as a group; and (iii) each person known by us to beneficially own five percent or more of our outstanding common shares. Except asindicated below, the security holders listed possess sole voting and investment power with respect to the shares beneficially owned by that person. Except asotherwise indicated below, the address for each listed shareholder is c/o Fennec Pharmaceuticals Inc., 68 TW Alexander Drive, PO Box 13628, ResearchTriangle Park, North Carolina 27709. 51  Name Common shares Common sharesOptionsExercisableWithin 60 Days Common shares PurchaseWarrantsExercisableWithin 60 Days Total Stock andStock BasedHoldings(1) %Ownership(1) Adrian J. Haigh – 193,579 - 193,579 0.96%Dr. Khalid Islam – 263,825 – 263,825 1.31%Robert Andrade 17,050 446,028 – 463,078 2.28%Marco Brughera – 75,545 – 75,545 0.38%Chris A. Rallis – 151,850 – 151,850 0.76%Rostislav Raykov 57,790 743,413 – 801,203 3.88%All Officers and Directors as a Group 74,840 1,874,240 – 1,949,080 8.95%Southpoint Capital Advisors, LP.(2) 3,997,214 – – 3,997,214 20.09%Essetifin SpA(3) 3,225,694 – – 3,225,694 16.21%venBio Select Fund LLC(4) 1,105,999 - - 1,105,999 5.56% (1)For purposes of this table “beneficial ownership” is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, pursuant towhich a person or group of persons is deemed to have “beneficial ownership” of any common shares that such person or group has the right to acquirewithin 60 days after March 11, 2019. For purposes of computing the percentage of outstanding common shares held by each person or group of personsnamed above, any shares that such person or group has the right to acquire within 60 days after March 11, 2019 are deemed outstanding but are notdeemed to be outstanding for purposes of computing the percentage ownership of any other person or group. As of March 11, 2019, there were19,895,830 common shares issued and outstanding.(2)Southpoint Capital Advisors, LP, 623 Fifth Avenue, Suite 2503, New York, New York 10022. John S. Clark, II holds dispositive power over the sharesowned by Southpoint Capital Advisors, LP.(3)Essetifin SpA, Via Sudafrica 20, Rome, Italy 00144. Mario Artali holds dispositive power over the shares owned by Essetifin SpA.(4)venBio Select Fund LLC, 110 Greene Street, Suite 800, New York, NY 10012. Scott Esptein holds dispositive power over the shares held by venBioSelect Fund LLC Equity Compensation Plan Information The following table provides certain information with respect to securities authorized for issuance under equity incentive plans as of December 31, 2018(share amounts are in thousands): Plan Category (a)Number of securities to be issuedupon exercise of outstandingoptions warrants and rights (b)Weighted-average exercise price ofoutstanding options, warrants andrights (c)Number of securities remainingavailable for future issuance underequity compensation plans(excluding securities reflected inColumn (a)) Equity compensation plans approved bysecurity holders 2,498 USD $ 3.27* 2,476 Total 2,498 – 2,476 *Our current stock option plans allow for the issuance of stock options denominated in both U.S. dollars and Canadian dollars. This table presents thenumber and weighted-average exercise price of outstanding options by the currency associated with the original grants. At December 31, 2018, we hadoutstanding options to purchase 1.85 million of our common shares denominated in U.S. dollars with a weighted-average exercise price of $3.80 andoutstanding options to purchase 648,000 of our common shares denominated in CAD dollars with a weighted-average exercise price of CAD$2.43 (fortotal outstanding options to purchase 2.5 million of our common shares with a combined weighted-average exercise price of USD$3.27 with Canadiandenominated exercise prices converted using the December 31, 2018 exchange rate of 0.73355 CAD/USD]). At December 31, 2018, there were 2.48million common shares available for future grants under our current stock option plan. Item 13.Certain Relationships and Related Transactions, and Director Independence Related Party Transactions In the second quarter of 2018, we recorded approximately $25,000 related to the net recovery of short-swing profits from one of our shareholders underSection 16(b) of the Securities Exchange Act of 1934, as amended. We recognized these related party proceeds, net of $7,000 related legal fees and taxes, asan increase to additional paid-in capital in the accompanying balance sheet as of December 31, 2018, as well as cash proceeds of approximately $18,000 ascash provided by financing activities in the accompanying consolidated statement of cash flows for the period ended December 31, 2018. 52  Director Independence The Board of Directors is composed of a majority of independent directors. The Board applies the definition of independence found in the Nasdaq listingstandards and in Canadian National Instrument 58-101 and National Policy 58-201. The Board has determined that Mr. Brughera, Haigh, Islam, Rallis andSkolsky are “independent.” Mr. Raykov, our Chief Executive Officer, is considered to have a material relationship with us by virtue of his executive officerposition and is therefore not independent. We are of the view that the composition of our Board reflects a diversity of background and experience that areimportant for effective corporate governance. Other directorships held by Board members are described in this Annual Report under the heading “Directorsand Executive Officers.” Item 14.Principal Accounting Fees and Services The following presents the aggregate fees for professional services and other services rendered by our independent auditors, Haskell & White LLP andDeloitte LLP in fiscal year 2018 and 2017, respectively: Fiscal Year 2018 Fiscal Year 2017 Audit Fees(1) 76,006 138,023 Audit-Related Fees(2) – – Tax Fees(3) 16,000 14,043 All Other Fees(4) - - Total $92,006 $152,066 (1)Audit Fees include fees for the standard audit work that needs to be performed each year in order to issue an opinion on the consolidated financialstatements of the Company. It also includes fees for services that can only be provided by the Company’s auditor such as auditing of non-recurringtransactions. In 2017, audit fees include payments to Haskell & White LLP and Deloitte LLP.(2)Audit-Related Fees include fees assurance and related services that are reasonably related to the performance of the audit or review and are traditionallyperformed by the independent accountant.(3)Tax Fees include fees paid to Deloitte LLP.(4)All Other Fees include fees for products and services other than Audit Fees, Audit Related Fees and Tax Fees. The Audit Committee does not have formal pre-approval policies and procedures; however, prior to their engagement by us, the Audit Committee approvedall of the services performed by Haskell & White LLP and Deloitte LLP as required by SEC regulation. 53  PART IV Item 15.Exhibits, Financial Statement Schedules (a) The following documents are included as part of this Annual Report filed on Form 10-K: 1. Financial Statements – See Index to Financial Statements on page F-1. 2. All schedules are omitted as the information required is inapplicable or the information is presented in the financial statements. 3. Exhibits: ExhibitNo. Description Location 3.1 Notice of Articles dated August 25, 2011 Exhibit 3.2I to the Form 8-K of the Company filed August 26, 2011 3.2 Articles dated August 25, 2011 Exhibit 3.2II to the Form 8-K of the Company filed August 26,2011 3.3 Notice of Alteration Dated September 3, 2014 Exhibit 3.1 to the Form 8-K of the Company filed September 9,2014 10.1 Fennec Amended and Restated Stock Option Plan* Exhibit 10.1 to the Form 8-K of the Company filed September 29,2017 10.2 Development and License Agreement dated July 14, 2005 betweenFennec Pharmaceuticals Inc. and Glaxo Group Limited** Exhibit 4.30 to Form 6-K of the Company filed July 22, 2005 10.3 Amendment No. 1 to Development and License Agreement datedDecember 20, 2005 between Glaxo Group Limited and FennecPharmaceuticals Inc.** Exhibit 4.36 to the Form 20-F Annual Report (No. 001-32295) ofFennec for the fiscal year ended December 31, 2005, filed March31, 2006 10.4 Amendment No. 2 to Development and License Agreement dated June23, 2006 between Glaxo Group Limited and Fennec PharmaceuticalsInc.** Exhibit 4.41 to Form 6-K of the Company filed August 9, 2006 10.5 Amendment No. 3 to Development and License Agreement datedJanuary 17, 2007 between Fennec Pharmaceuticals Inc. and GlaxoGroup Limited Exhibit 4.42 to Form 6-K of the Company filed January 19, 2007 10.6 Amendment No. 4 to Development and License Agreement dated May23, 2007 between Fennec Pharmaceuticals Inc. and Glaxo GroupLimited Exhibit 10.1 to Form 8-K of the Company filed June 19, 2007 10.8 Executive Employment Agreement dated May 3, 2010 by andbetween Fennec and Rostislav Raykov* Exhibit 10.28 to the Form 10-Q of the Company filed May 14,2010 10.10 Form of Independent Director Agreement, dated May 3, 2010 Exhibit 10.31 to the Form 10-Q of the Company filed May 14,2010 10.11 Form of Subscription Agreement from June 8, 2017 Private Placement Exhibit 10.15 to the Form S-1 of the Company filed August 10,2017 10.12 Subscription Agreement, dated November 15, 2013, between theCompany, Technologies Inc. and Manchester Management LLC Exhibit 10.19 to the Form 10K/A of the Company filed April 2,2014 54  ExhibitNo. Description Location10.13 Form of Subscription Agreement from December 3, 2014 privateplacement Exhibit 10.20 to the Form 10K of the Company filed March 31,2015 10.14 Executive Employment Agreement dated November 12, 2015 by andbetween Fennec and Robert Andrade* Exhibit 10.40 to the Form 10-Q of the Company filed November12, 2015 10.15 Subscription Agreement, dated April 8,2016, between FennecPharmaceuticals Inc. and Sigma Tau Finanzaria Exhibit 10.41 to the Form 10-Q of the Company filed May 12,2016 10.16 Purchase Agreement, dated May 9, 2016, between FennecPharmaceuticals Inc. and Elion Oncology, LLC. Exhibit 10.42 to the Form 10-Q of the Company filed May 12,2016 10.17 Loan and Security Agreement dated as of February 1, 2019 by andbetween Fennec Pharmaceuticals, Inc. and Western Alliance Bank Exhibit 10.1 to the Form 8-K of the Company filed February 4,2019 16.1 Letter Regarding Change in Certifying Accountant Exhibit 16.1 to the Form 8-K of the Company filed May 17, 2017 21 Subsidiaries Exhibit 8 to the Form 20-F Registration Statement (No. 001-32295)of the Company filed September 17, 2004 21.1 Registration of Fennec Pharmaceuticals (EU) Limited Filed herewith 23.1 Consent of Haskell & White LLP Independent Registered PublicAccounting Firm Filed herewith 31.1 Certification of Chief Executive Officer of the Company inaccordance with Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 31.2 Certification of Chief Financial Officer of the Company in accordancewith Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 32.1 Certification of Chief Executive Officer and Chief Financial Officer ofthe Company in accordance with Section 906 of the Sarbanes-OxleyAct of 2002 Filed herewith 99.1 Press Release for Fiscal Year Ended December 31, 2018 Exhibit 99.1 to the Form 8-K of the Company filed March 14, 2019 101.1 Interactive Data File Filed herewith * Indicates a management contract or compensatory plan.**The Company has received confidential treatment with respect to certain portions of this exhibit. Those portions have been omitted from this exhibitand are filed separately with the U.S. Securities and Exchange Commission. Item 16.Form 10-K Summary None. 55  SIGNATURES Pursuant to the requirements of Section 13 of 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on itsbehalf by the undersigned, thereunto duly authorized. Fennec Pharmaceuticals Inc. By:/s/ Rostislav Raykov Rostislav Raykov Chief Executive Officer and DirectorDate: March 15, 2019 We, the undersigned directors and officers of Fennec Pharmaceuticals Inc., do hereby constitute and appoint Rostislav Raykov, as our true and lawfulattorney-in-fact and agent with power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers andto execute any and all instruments for us and in our names in the capacities indicated below, which such attorney-in-fact and agent may deem necessary oradvisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of theSecurities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power andauthority to sign for us or any of us in our names in the capacities indicated below, any and all amendments hereto; and we do hereby ratify and confirm allthat said attorney-in-fact and agent, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signatures Title Date /s/ Rostislav Raykov Chief Executive Officer March 15, 2019Rostislav Raykov (principal executive officer) and Director /s/ Robert Andrade Chief Financial Officer March 15, 2019Robert Andrade (principal financial officer and principalaccounting officer) /s/ Adrian J. Haigh Director March 15, 2019Adrian J. Haigh /s/ Dr. Khalid Islam Director March 15, 2019Dr. Khalid Islam /s/ Chris A. Rallis Director March 15, 2019Chris A. Rallis /s/ Marco Brughera Director March 15, 2019Marco Brughera 56  FENNEC PHARMACEUTICALS INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting FirmF-2Consolidated Balance SheetsF-3Consolidated Statements of OperationsF-4Consolidated Statements of Cash FlowsF-5Consolidated Statements of Shareholders’ EquityF-6Notes to the Consolidated Financial StatementsF-7 F-1  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors ofFennec Pharmaceuticals Inc. Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Fennec Pharmaceuticals, Inc. and subsidiaries (the “Company”) as of December 31, 2018and 2017, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years then ended, and the related notes(collectively, the “consolidated financial statements”). We have also audited the Company’s internal control over financial reporting as of December 31,2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission (“COSO”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of theCompany as of December 31, 2018 and 2017, and the consolidated results of its operations and its cash flows for each of the years then ended, in conformitywith accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects,effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013)issued by COSO. Basis for Opinion The Company’s management is responsible for these consolidated financial statements, 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 Annual Report onInternal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinionon the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public CompanyAccounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federalsecurities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB and Canadian generally accepted auditing standards. Those standards require thatwe plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whetherdue to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, 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 consolidated financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 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 reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely 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 ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. /s/ Haskell & White LLP HASKELL & WHITE LLP We have served as the Company’s auditor since 2017. Irvine, CaliforniaMarch 15, 2019 F-2  Fennec Pharmaceuticals Inc.Consolidated Balance Sheets(U.S. dollars and shares in thousands) December 31, December 31, 2018 2017 Assets Current assets: Cash and cash equivalents $22,781 $28,260 Prepaid expenses 168 128 Other current assets 1 13 Total assets $22,950 $28,401 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $1,032 $855 Accrued liabilities 605 622 Derivative instruments (Note 5) - 167 Total current liabilities 1,637 1,644 Total liabilities 1,637 1,644 Commitments and Contingencies (Note 9) Shareholders' equity: Common stock, no par value; unlimited shares authorized; 19,896 shares issued and outstanding (2017-18,411) 106,392 103,045 Additional paid-in capital 44,934 43,837 Accumulated deficit (131,256) (121,368)Accumulated other comprehensive income 1,243 1,243 Total shareholders’ equity 21,313 26,757 Total liabilities and shareholders’ equity $22,950 $28,401 (The accompanying notes are an integral part of these consolidated financial statements) F-3  Fennec Pharmaceuticals Inc.Consolidated Statements of Operations(U.S. dollars and shares in thousands, except per share information) Year Ended December 31, December 31, 2018 2017 Revenue $- $- Operating expenses: Research and development 5,008 1,936 General and administrative 5,401 5,015 Loss from operations (10,409) (6,951) Other income/(expense): Unrealized gain/(loss) on derivatives (Note 5) 167 (134)Other income/(loss) 6 (8)Net interest income 348 47 Total other income/(loss), net 521 (95) Net loss $(9,888) $(7,046) Loss per common share, basic and diluted $(0.52) $(0.47)Weighted-average number of common shares outstanding basic and diluted (Note 3) 18,942 15,014 (The accompanying notes are an integral part of these consolidated financial statements) F-4  Fennec Pharmaceuticals Inc.Consolidated Statements of Cash Flows(U.S. dollars in thousands) Year Ended December 31, December 31, 2018 2017 Cash flows (used in) provided by: Operating activities: Net loss $(9,888) $(7,046)Adjustments to reconcile net (loss) to net cash used in operating activities: Unrealized (gain)/loss on derivatives (167) 134 Stock-based compensation - consultants 272 741 Stock-based compensation - employees 1,825 1,517 Changes in operating assets and liabilities: Prepaid expenses (40) (85)Other assets 12 (10)Accounts payable 177 611 Accrued liabilities (17) 497 Net cash used in operating activities (7,826) (3,641) Investing activity: Net cash used in investing activity - - Financing activities: Issuance of shares, net of issuance costs - 27,381 Short swing profit judgment offset with settlement expense 18 - Issuance of shares, options exercise 210 563 Issuance of shares, warrants exercise 2,119 31 Net cash provided by financing activities 2,347 27,975 (Decrease)/increase in cash and cash equivalents (5,479) 24,334 Cash and cash equivalents - Beginning of year 28,260 3,926 Cash and cash equivalents - End of year $22,781 $28,260 (The accompanying notes are an integral part of these consolidated financial statements) F-5  Fennec Pharmaceuticals Inc.Consolidated Statements of Shareholders' Equity(U.S. dollars and shares in thousands) Accumulated Additional Other Total Common Stock Paid-in Accumulated Comprehensive Stockholders' Number (Note 7) Amount Capital Deficit Income Equity Balance at December 31, 2016 13,643 $74,515 $42,134 $(114,322) $1,243 $3,570 Stock options issued to consultants - - 741 - - 741 Stock options issued to employees - - 1,517 - - 1,517 Exercise of stock options 359 1,107 (544) - - 563 Exercise of warrants 21 42 (11) - - 31 Issuance of securities 4,388 27,381 - - - 27,381 Net loss - - - (7,046) - (7,046)Balance at December 31, 2017 18,411 103,045 43,837 (121,368) 1,243 26,757 Short swing profit judgment offset withsettlement expense - - 18 - - 18 Stock options issued to consultants - - 272 - - 272 Stock options issued to employees - - 1,825 - - 1,825 Exercise of stock options 122 436 (226) - - 210 Exercise of warrants 1,363 2,911 (792) - - 2,119 Net loss - - - (9,888) - (9,888)Balance at December 31, 2018 19,896 $106,392 $44,934 $(131,256) $1,243 $21,313 (The accompanying notes are an integral part of these consolidated financial statements) F-6  Fennec Pharmaceuticals Inc.Notes to the Consolidated Financial Statements(U.S. dollars and shares in thousands, except per share information) 1.Nature of Business and Liquidity Fennec Pharmaceuticals Inc. (“Fennec,” “the Company,” “we,” “us,” or “our”) was originally formed as a British Columbia corporation under the nameAdherex Technologies Inc. and subsequently changed its name on September 3, 2014. Fennec, together with its wholly owned subsidiaries Oxiquant, Inc.(“Oxiquant”) and Fennec Pharmaceuticals, Inc., both Delaware corporations, and Cadherin Biomedical Inc. (“CBI”), a Canadian corporation and FennecPharmaceuticals (EU) Limited (“Fennec Limited”), collectively referred to herein as the “Company,” is a biopharmaceutical company with a productcandidate under development for use in the treatment of cancer. With the exception of Fennec Pharmaceuticals, Inc., all subsidiaries are inactive. These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America(“US GAAP”) that are applicable to a going concern which contemplates that the Company will continue in operation for the foreseeable future and will beable to realize its assets and discharge its liabilities in the normal course of business. During the year ended December 31, 2018, the Company incurred a net loss from operations of $10,409 and still has not earned any revenue in its history. AtDecember 31, 2018, it had an accumulated deficit of $131,256 and had experienced negative cash flows from operating activities in the amount of $7,826 forthe year ended December 31, 2018. On February 1, 2019, Fennec entered into a Loan and Security Agreement with Bridge Bank, a division of Western Alliance Bank, an Arizona corporation,pursuant to which the Bank agreed to loan $12.5 million to the Company, to be made available upon New Drug Application NDA approval of PEDMARK byno later than September 30, 2020. The proceeds from the loan will be used for working capital purposes and to fund general business requirements inaccordance with the terms of the Loan and Security Agreement. Interest under the Term Loans shall bear interest, on the outstanding daily balance thereof, ata floating per annum rate equal to the Effective Interest Rate (as defined in the Loan and Security Agreement) which is equal to the sum of the Prime Ratepublished in the Wall Street Journal (currently 5.50%) plus one percent (1.00%). The debt facility is to have interest-only monthly payments due for the firsteighteen months from the funding date and then monthly principal and interest payments are due through the remainder of the term which has a maturity dateof October 1, 2023. In connection with the facility, Fennec has agreed to grant Bridge Bank a warrant to purchase up to 39,130 common shares at an exerciseprice of $6.80 per common share, for a term of ten years from the date of issuance, subject to early termination under certain conditions. The Company believes the aforementioned raise, along with the current cash on hand, provides sufficient funding for the Company to carry-out its plannedactivities for the next twelve to eighteen months as it continues its strategic development of PEDMARKTM. These financial statements do not reflect the potentially material adjustments in the carrying values of assets and liabilities, the reported expenses, and thebalance sheet classifications used, that would be necessary if the going concern assumption were not appropriate. 2.Significant Accounting Policies Basis of presentation The consolidated financial statements include the accounts of Fennec and of all its wholly-owned subsidiaries. All inter-company transactions and balanceshave been eliminated upon consolidation. Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that impact the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reportedamounts of revenue and expense during the reporting period. Significant estimates include the valuation of derivative warrant liability and the valuation ofstock-based compensation. Actual results could differ from those estimates. Cash and Cash Equivalents Cash equivalents consist of highly liquid investments with original maturities at the date of purchase of three months or less. The Company places its cash and cash equivalents in investments held by highly rated financial institutions in accordance with its investment policydesigned to protect the principal investment. At December 31, 2018, the Company had $22.8 million in cash and money market accounts (2017- $28.3million). Money market investments typically have minimal risks. The Company has not experienced any loss or write-down of its money marketinvestments. F-7  Fennec Pharmaceuticals Inc.Notes to the Consolidated Financial Statements(U.S. dollars and shares in thousands, except per share information) Financial instrumentsFinancial instruments recognized on the balance sheets at December 31, 2018 and December 31, 2017 consist of cash and cash equivalents, accountspayable, accrued liabilities and derivative instruments, the carrying values of which, with the exception of the derivative instruments, approximate fair valuedue to their relatively short time to maturity. The Company does not hold or issue financial instruments for trading. The derivative liabilities are carried atfair value. The Company’s investment policy is to manage investments to achieve, in the order of importance, the financial objectives of preservation of principal,liquidity and return on investment. Investments, when made, are made in U.S. or Canadian bank securities, commercial paper of U.S. or Canadian industrialcompanies, utilities, financial institutions and consumer loan companies, and securities of foreign banks provided the obligations are guaranteed or carryratings appropriate to the policy. Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1 low for commercial paper. The policy risks are primarily the opportunity cost of the conservative nature of the allowable investments. As the main purpose of the Company is researchand development, the Company has chosen to avoid investments of a trading or speculative nature. Common shares and warrants The Company has warrants outstanding to purchase common shares that were denominated in both United States dollars (“USD”) and Canadian dollars(“CAD”), which resulted in the Company having warrants outstanding that were denominated outside of the Company’s U.S. dollar functional currency. The Company’s outstanding warrants denominated in Canadian dollars were not considered to be indexed to the Company’s own stock and should thereforebe treated as derivative financial instruments and recorded at their fair value as a liability. During the year ended December 31, 2018, all warrants accountedfor as derivatives were exercised. These exercises reduced the derivative liability to $0 as of December 31, 2018. At December 31, 2017, the derivativeliabilities were valued at approximately $167,000. There was an unrealized, non-cash gain on derivative liabilities of approximately $167,000 for the yearended December 31, 2018, whereas there was an unrealized loss of approximately $134,000 during the year ended December 31, 2017. Revenue recognition At this time, the Company does not have any revenue. Research and development costs and investment tax credits Research costs, including employee compensation, laboratory fees, lab supplies, and research and testing performed under contract by third parties, areexpensed as incurred. Development costs, including drug substance costs, clinical study expenses and regulatory expenses are expensed as incurred. Investment tax credits, which are earned as a result of qualifying research and development expenditures, are recognized when the expenditures are made, andtheir realization is reasonably assured. They are applied to reduce related capital costs and research and development expenses in the year recognized. Income taxes The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and therelated financial amounts, using currently enacted tax rates. The Company has deferred tax assets, which are subject to periodic recoverability assessments.Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. As of December31, 2018, we maintained a full valuation allowance against our deferred tax assets. The provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740-10, Uncertainty in Income Taxes,address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. UnderASC 740-10, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained onexamination by taxing authorities, based on the technical merits of the position. F-8  Fennec Pharmaceuticals Inc.Notes to the Consolidated Financial Statements(U.S. dollars and shares in thousands, except per share information) Foreign currency translation The U.S. dollar is the functional currency for the Company’s consolidated operations. All gains and losses from currency translations are included in resultsof operations. Loss per share Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the year. Diluted netearnings per share is computed using the same method, except the weighted average number of common shares outstanding includes convertible debentures,stock options and warrants, if dilutive, as determined using the if-converted method and treasury methods. Accordingly, options to purchase 2.5 million ofour common shares at December 31, 2018, were not included in earnings per share. Such options would have an antidilutive effect. In 2017, options topurchase 2.3 million common shares and warrants to purchase 1.4 million of our common shares were excluded from the computation of earnings per share astheir inclusion would have been antidilutive. Recent accounting pronouncements In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements forFair Value Measurement. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. The ASU is effective for uson January 1, 2020, and interim periods within that fiscal year. Early adoption is permitted. Certain disclosures in ASU 2018-13 would need to be applied ona retrospective basis and others on a prospective basis. We are currently evaluating the impact this guidance may have on our consolidated financialstatements. In June 2018, the FASB issued ASU 2018-07 to expand the scope of ASC Topic 718, Compensation - Stock Compensation (Topic 718): Improvements toNonemployee Share-Based Payment Accounting, to include share-based payment transactions for acquiring goods and services from nonemployees. Thepronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoptionpermitted. The Company concluded after evaluation, that the impact of ASU 2018-07 on our consolidated financial statements and disclosures was deminimis. In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20):Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” (“ASU 2017-05”). ASU 2017-05 is meant toclarify the scope of the original guidance within Subtopic 610-20 that was issued in connection with ASU 2014-09, as defined below, which providesguidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. ASU 2017-05 also added guidance forpartial sales of nonfinancial assets. ASU 2017-05 is effective for our fiscal year ending December 31, 2018 and we are required to adopt ASU 2017-05concurrent with the adoption of ASU 2014-09. The Company adopted ASU 2017-05 January 1, 2018. The Company concluded after evaluation, that theimpact of ASU 2017-05 on our consolidated financial statements and disclosures was de minimis. In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2017-09, Compensation—Stock Compensation(Topic 718): Scope of Modification Accounting (“ASU 2017-09”). The FASB issued ASU 2017-09 to clarify and reduce both (i) diversity in practice and (ii)cost and complexity when applying the guidance in Topic 718, to a change to the terms and conditions of a share-based payment award. This guidancebecame effective for the Company as of January 1, 2018. The amendments in this ASU have been applied prospectively to awards modified after the adoptiondate. In May 2014, the FASB issued ASU 2014-9, Revenue from Contracts with Customers (Topic 606), to clarify the principles for recognizing revenue. Thisupdate provides a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods orservices to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASBissued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of the newstandard from January 1, 2017 to January 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. InMarch 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, which clarifiesthe implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts withCustomers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies certain aspects of identifying performance obligations andlicensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-ScopeImprovements and Practical Expedients related to disclosures of remaining performance obligations, as well as other amendments to guidance oncollectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers. In September 2017, the FASB issuedASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842):Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcementsand Observer Comments. The amendments in ASU No. 2017-13 amends the early adoption date option for certain companies related to the adoption of ASUNo. 2014-09 and ASU No. 2016-02. In November 2017, the FASB issued ASU No. 2017-14, Revenue from Contracts with Customers (Topic 606): IncomeStatement- Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), which amends certain SEC paragraphs within the FASBAccounting Standards Codification. These standards had the same effective date and transition date of January 1, 2018. The new revenue standard allows foreither full retrospective or modified retrospective application. The Company currently does not have any revenue and therefore this update has virtually noeffect on its consolidated financial statements. F-9  Fennec Pharmaceuticals Inc.Notes to the Consolidated Financial Statements(U.S. dollars and shares in thousands, except per share information) In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new guidance requires the recognition of lease liabilities, representing futureminimum lease payments, on a discounted basis, and corresponding right-of-use assets on a balance sheet for most leases, along with requirements forenhanced disclosures to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leasingarrangements. In July 2018, the FASB issued ASU 2018-10 and 2018-11 which permit application of the new guidance at the beginning of the year ofadoption, recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, in addition to the method ofapplying the new guidance retrospectively to each prior reporting period presented. The ASU is effective for us on January 1, 2019. We have concluded theimpact of this guidance will be negligible on our consolidated financial statements, given we have no material leases. 3.Loss per Share Loss per common share is presented under two formats: basic loss per common share and diluted loss per common share. Basic loss per common share iscomputed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period.Diluted loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, plus thepotentially dilutive impact of common shares equivalents (e.g. stock options and warrants). Dilutive common share equivalents consist of the incrementalcommon shares issuable upon exercise of stock options and warrants. The following table sets forth the computation of basic and diluted net loss per share (inthousands except per share data): Year Ended December 31, 2018 December 31, 2017 Numerator: Net loss $(9,888) $(7,046) Denominator: Weighted-average common shares, basic 18,942 15,014 Dilutive effect of stock options – – Dilutive effect of warrants – – Incremental dilutive shares – – Weighted-average common shares, dilutived 18,942 15,014 Net loss per share, basic and diluted $(0.52) $(0.47) The following outstanding options and warrants were excluded from the computation of basic and diluted net loss per share for the periods presented becauseincluding them would have had an anti-dilutive effect (in thousands): Year Ended December 31, 2018 December 31, 2017 Options to purchase common shares 2,498 2,315 Warrants to purchase common shares - 1,362 4.Stock options The Compensation Committee of the Board of Directors administers the Company’s stock option plan. The Compensation Committee designates eligibleparticipants to be included under the plan and approves the number of options to be granted from time to time under the plan. On June 24, 2010, at theCompany’s annual meeting, shareholders approved an amendment to the Company’s Stock Option Plan (the “Plan Maximum Amendment”). The PlanMaximum Amendment relates to changing the maximum number of common shares issuable under the stock option plan from a fixed number of 6.7 millionto the number of shares that represents twenty-five percent (25%) of the total number of all issued and outstanding common shares. Based upon the currentshares outstanding, a maximum of 5.0 million of our common shares are authorized for issuance under the plan. The option exercise price for all optionsissued under the plan is based on the fair value of the underlying shares on the date of grant. All options vest within three years or less and are exercisable fora period of seven years from the date of grant. The stock option plan, as amended, allows the issuance of Canadian and U.S. dollar grants. A summary of thestock option transactions, for both the Canadian and U.S. dollar grants, through the year ended December 31, 2018 is below. F-10  Fennec Pharmaceuticals Inc.Notes to the Consolidated Financial Statements(U.S. dollars and shares in thousands, except per share information) Summary of $CAD Option Activity Share Prices Reported in $CAD Number of Options(in thousands) Range Weighted Average Outstanding and exercisable at December 31, 2016 999 $ 1.62 – 2.43 $2.38 Exercised (196) 1.89 – 2.43 2.36 Forfeited or expired (91) 1.89 – 2.43 2.40 Outstanding and exercisable at December 31, 2017 712 $ 1.89 – 2.43 $2.38 Exercised (64) 1.62 – 2.43 1.83 Outstanding and exercisable at December 31, 2018 648 $2.43 $2.43 Summary of $CAD Option Remaining Life Price $CAD Outstanding and Exercisable atDecember 31, 2018(in thousands) Weighted Average Remaining Life (years) $2.43 648 1.63 Total 648 1.63 Summary of $USD Option Activity Number of Options(in thousands) Range Weighted Average Outstanding and exercisable at December 31, 2016 1,428 $ 0.45 – 3.60 $1.93 Granted 341 3.10 – 10.10 5.27 Exercised (163) 0.60 – 2.79 1.22 Forfeited or expired (3) 2.79 2.79 Outstanding and exercisable at December 31, 2017 1,603 $ 0.45 – 10.10 $2.70 Granted 305 8.38 – 12.59 9.23 Exercised (58) 1.05 – 3.67 2.06 Outstanding and exercisable at December 31, 2018 1,850 $0.45 – 12.59 $3.80 Summary of $USD Option Remaining Life Price inUS Dollars Number Outstanding and Exercisable atDecember 31, 2018(in thousands) Remaining Life(years) $0.45 11 0.63 $0.54 19 1.38 $0.60 17 1.26 $0.72 50 1.65 $0.96 10 1.60 $1.05 93 0.99 $1.13 50 3.95 $1.23 8 3.86 $1.50 7 0.88 $1.59 133 2.07 $2.11 36 5.00 $2.30 4 3.36 $2.31 275 2.32 $2.35 4 3.59 $2.40 8 1.26 $2.44 49 4.44 $2.45 285 4.51 $2.51 4 3.21 $2.55 4 2.85 $2.69 114 3.00 $2.79 22 2.59 $2.94 3 1.38 $3.10 10 5.26 $3.60 3 2.37 $3.67 35 5.38 $5.10 250 5.49 $6.72 21 5.63 $8.38 210 6.11 $10.10 20 5.88 $10.93 85 6.44 $12.59 10 6.26 Total 1,850 3.80 F-11  Fennec Pharmaceuticals Inc.Notes to the Consolidated Financial Statements(U.S. dollars and shares in thousands, except per share information) Stock compensation expense for the fiscal years ended December 31, 2018 and 2017 was $2.1 million and $2.3 million respectively. These amounts havebeen included in the general and administrative expenses for the respective periods. The weighted average fair value per share of options granted and orvested during the fiscal years ended December 31, 2018 and 2017 was $9.12 and $5.27, respectively. The intrinsic value (being the difference between theshare price at December 31, 2018 and exercise price) of stock options exercisable at December 31, 2018 was $8.6 million. The intrinsic value of optionsexercised during the fiscal year ended December 31, 2018 was $1.1 million. The fair value of all options vested during the fiscal year ended December 31,2018 was $2.1 million. The fair values of options granted in fiscal years ended December 31, 2018 and 2017 were estimated on the date the options were granted based on the Black-Scholes option-pricing model, using the following weighted average assumptions for all options with a seven-year expiration: Year Ended December 31, 2018 Year Ended December 31, 2017 Expected dividend 0% 0%Risk-free interest rate 2.53– 3.00% 2.04 – 2.33%Expected volatility 132 – 151% 158 – 168%Expected life 4.5 - 7 years 7 years The Company uses the historical volatility and adjusts for available relevant market information pertaining to the Company’s share price. Modification of Existing Canadian Dollar Denominated Options In 2018, the Company modified the terms of certain options granted to executives and directors by extending the expiration date by a weighted averageamount of 2.0 years. The Company recorded option modification expense of approximately $112,000 included in general and administrative expense. Theexpense was calculated using the Black-Scholes valuation method with a June 7, 2018 exchange rate of $CAD/$USD 0.7715. The following tablesummarizes the effect of the June 7, 2018 transaction: Number ofOptions Expiration Date Risk FreeRate ExercisePrice $CAD Share Price$CAD ExpectedLife (Years) Volatility ExpenseRecognized$USD 648 08/18/2020 1.90% 2.43 14.14 2.2 76% 112 648 112 Shareholder rights plan On June 27, 2017, the Company’s shareholders approved a Shareholder Rights Plan Agreement (the "Rights Plan") for the Company. The Rights Plan is toensure, to the extent possible, that all shareholders of the Corporation are treated fairly and equally in connection with any take-over bid or other acquisitionof control of the Corporation. The Rights Plan is designed to require any potential transaction that will result in a person owning, in the aggregate, 20% ormore of the outstanding Common Shares to be structured as a formal take-over bid that satisfies certain minimum requirements relating primarily to themanner in which the bid must be made, the minimum number of days the bid must remain open, and the minimum number of shares that must be acquiredunder the bid. F-12  Fennec Pharmaceuticals Inc.Notes to the Consolidated Financial Statements(U.S. dollars and shares in thousands, except per share information) Registration of Certain Common Shares, Options and Warrants (S-1, S-3 & S-8) S-3 Resale On August 11, 2017, the Company filed a Form S-1 (subsequently amended to Form S-3) registration statement with the SEC to register 11.9 million commonshares, which includes 1.4 million common shares issuable upon exercise of warrants. The Form S-3 amendment became effective on April 19, 2018 andremains effective. This Form S-3 filing covers shareholders of common shares and warrants from the following transactions: ·The Company’s April 2010 private placement of common shares and warrants to purchase common shares;·The Company’s November 2013 private placement of common shares and warrants to purchase common shares;·The Company’s February 2016 private placements of warrants to purchase common shares in lieu of payment for services rendered;·The Company’s May 2016 private placement of common shares; and·The Company’s June 2017 private placement of common shares. S-3 Primary On October 24, 2017, the Company filed a Form S-3 registration statement with the SEC, pursuant to which the Company may offer from time to time,common shares having an aggregate offering price of up to $90.0 million. This Form S-3 became effective on November 3, 2016 and remains in effect. TheCompany used this Form S-3 to sell shares during a public offering which closed on December 12, 2017, from which the Company raised $21.2 million totalgross proceeds. The Company may in the future offer shares for up to an aggregate of the remaining limit of this Form S-3 (approximately $68.8 million). S-8 On October 24, 2017, the Company filed a Form S-8 registration statement with the SEC registering options to purchase 4.0 million of our common shares.The S-8 registration became effective upon filing and remains in effect. 5.Derivative Liabilities The Company's derivative instruments on January 1, 2018 included options to purchase 19,441 common shares, the exercise prices for which aredenominated in a currency other than the Company's functional currency, as follows: ·Contractor options to purchase 17,394 common shares exercisable at CAD$1.62 per whole common share that expire on April 4, 2018;·Contractor options to purchase 2,047 common shares exercisable at CAD$2.43 per whole common share that expire on May 18, 2018. During the year ended December 31, 2018, all of these derivative options were exercised. This resulted in gross proceeds of $26,109, the issuance of 19,441common shares and a non-cash, unrealized gain on the extinguishment of the remaining derivative liability of $167,131. During the fiscal years ended December 31, 2011 and 2010, the Company issued 35,892 and 28,796, respectively, options to contractors with a Canadiandollar denominated strike price. Consequently, the Company had derivatives relating to these options since the strike price is denominated in a currencyother than the US dollar functional currency of the Company. While there is an exception to this rule for employees in ASU 2010-13 "Compensation-StockCompensation (Topic 718): Effect of Denominating the exercise price of a share-based payment award in the currency of the market in which the underlyingequity security trades", no such exception exists for contractors. These options were marked to market until the earlier of their expiry or exercise. AllCanadian denominated options issued to contractors fully vested at issuance and were to expire seven years from date of issuance. The fair value of theseoptions at December 31, 2018 and December 31, 2017 was $0 and $167,131, respectively. The unrealized gain for these options for the year ended December31, 2018 was $167,131. There was a loss on these options for the year ended December 31, 2017 of $133,697. The following is a summary of Canadian denominated contractor option activity for the year ended December 31, 2018 and 2017. Share Prices Reported in $CAD Number of OptionsOutstanding andExercisable(in thousands) Weighted Average ExercisePrice Outstanding and exercisable at December 31, 2016 40 $1.81 Exercised (21) 1.90 Forfeited or expired – – Outstanding and exercisable at December 31, 2017 19 $1.71 Exercised (19) $1.71 Outstanding and exercisable at December 31, 2018 – – F-13  Fennec Pharmaceuticals Inc.Notes to the Consolidated Financial Statements(U.S. dollars and shares in thousands, except per share information) The following table presents the overall change in derivative liability for the year ended December 31, 2018 and December 31, 2017: Derivative Warrants/Options Derivative Value (in thousands) at December 31, (Loss)/Gain (in thousands) on DerivativeInstruments at December 31, 2018 2017 2018 2017 Options (various expiration dates) - 167 167 (134)Total - 167 167 (134) 6.Fair Value Measurements The Company has adopted ASC 820 Fair Value Measurements and Disclosure Topic of the FASB. This Topic applies to certain assets and liabilities that arebeing measured and reported on a fair value basis. The Fair Value Measurements Topic defines fair value, establishes a framework for measuring fair value inaccordance with US GAAP, and expands disclosure about fair value measurements. This Topic enables the reader of the financial statements to assess theinputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values.The Topic requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities.Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.Level 3: Unobservable inputs that are not corroborated by market data. Assets/Liabilities Measured at Fair Value on a Recurring Basis Fair Value Measurement at December 31, (in thousands) Quoted Price in Active Market for Identical Instruments Significant OtherObservable Inputs Significant Unobservable Inputs Level 1 Level 2 Level 3 Total 2018 2017 2018 2017 2018 2017 2018 2017 Assets Cash andcashequivalents 770 (1) 275(1) 22,011 27,985 - - 22,781 28,260 Liabilities Derivativeliabilities - - - 167 - - - 167 (1)The Company held approximately, $770,000 in cash as of December 31, 2018, of which approximately, $121,000 was in Canadian funds (translatedinto U.S. dollars). As of December 31, 2017, the Company held approximately $275,000, of which approximately 255,000 was in Canadian funds(translated into U.S. dollars). 7.Stockholders’ Equity Authorized capital stock The Company’s authorized capital stock consists of an unlimited number of shares of no-par common shares. Equity financings On June 8, 2017, the Company completed the closing of a non-brokered private placement of 1.9 million common shares for gross proceeds of $7.6 million.Each common share was issued at a price of $4.00. On December 12, 2017, the Company announced the completion of an underwritten public offering of 2.35 million common shares at a public offering priceof $8.50 per share. In addition, Fennec issued an additional 135,670 common shares in connection with the partial exercise of the underwriters’ over-allotment option. The approximate total gross proceeds from the offering was $21.2 million. Warrants to Purchase Common Shares At December 31, 2018, the Company had no outstanding warrants to purchase common shares. F-14  Fennec Pharmaceuticals Inc.Notes to the Consolidated Financial Statements(U.S. dollars and shares in thousands, except per share information) 8.Related Party Transactions In the second quarter of 2018, the Company recorded approximately $25 related to the net recovery of short-swing profits from one of the Company’sshareholders under Section 16(b) of the Securities Exchange Act of 1934, as amended. The Company recognized these related party proceeds, net of $7related legal fees and taxes, as an increase to additional paid-in capital consolidated balance sheet as of December 31, 2018, as well as cash proceeds ofapproximately $18 as cash provided by financing activities in the consolidated statement of cash flows for the period ended December 31, 2018. 9.Commitments and Contingencies Oregon Health & Science University Agreement On February 20, 2013, Fennec entered into a new exclusive license agreement with OHSU for exclusive worldwide license rights to intellectual propertydirected to thiol-based compounds, including STS and their use in oncology (the "New OHSU Agreement"). OHSU will receive certain milestone payments,royalty on net sales for licensed products and a royalty on any consideration received from sublicensing of the licensed technology. The term of the New OHSU Agreement expires on the date of the last to expire claim(s) covered in the patents licensed to Fennec, unless earlier terminated asprovided in the agreement. The New OHSU Agreement is terminable by either Fennec or OHSU in the event of a material breach of the agreement by eitherparty after 45 days prior written notice. Fennec also has the right to terminate the New OHSU Agreement at any time upon 60 days prior written notice andpayment of all fees due to OHSU under the New OHSU Agreement. On May 18, 2015, Fennec negotiated an amendment ("Amendment 1") to the exclusive license agreement with OHSU. Amendment 1 expands the exclusivelicense agreement signed with OHSU on February 20, 2013 ("OHSU Agreement") to include the use of N-acetylcysteine as a standalone therapy and/or incombination with STS for the prevention of ototoxicity induced by chemotherapeutic agents to treat cancers. Further, Amendment 1 adjusts select milestonepayments entered in the OHSU Agreement including but not limited to the royalty rate on net sales for licensed products, royalty rate from sublicensing ofthe licensed technology and the fee payable upon the regulatory approval of a licensed product. The term of Amendment 1 under the OHSU Agreement expires on the date of the last to expire claim(s) covered in the patents licensed to Fennec or 8 years,whichever is later. In the event a licensed product obtains regulatory approval and is covered by the Orphan Drug Designation, the parties will in good faithamend the term of the agreement. STS is currently protected by methods of use patents that the Company exclusively licensed from OHSU that expire inEurope in 2021 and are currently pending in the United States. The New OHSU Agreement is terminable by either Fennec or OHSU in the event of a materialbreach of the agreement by either party after 45 days prior written notice. Fennec also has the right to terminate the New OHSU Agreement at any time upon60 days prior written notice and payment of all fees due to OHSU under the New OHSU Agreement. Executive Severance In the event of his termination with us other than for cause, we will be obligated to pay Mr. Raykov a one-time severance payment equal to twelve months ofsalary (currently $350,000). In the event of his termination with us other than for cause, we will be obligated to pay Mr. Andrade a one-time severancepayment equal to six months of salary (currently $125,000). F-15  Fennec Pharmaceuticals Inc.Notes to the Consolidated Financial Statements(U.S. dollars and shares in thousands, except per share information) 10.Subsequent Events On February 1, 2019, the Company’s wholly owned subsidiary of Fennec Pharmaceuticals Inc. entered into a Loan and Security Agreement (the “Loan andSecurity Agreement”) with Bridge Bank, a division of Western Alliance Bank, an Arizona corporation (the “Bank”), pursuant to which the Bank agreed toloan $12.5 million to Fennec Pharmaceuticals, Inc., to be made available upon New Drug Application (“NDA”) approval of PEDMARK by no later thanSeptember 30, 2020. The proceeds from the loan will be used for working capital purposes and to fund general business requirements in accordance with theterms of the Loan and Security Agreement. Interest under the Term Loans shall bear interest, on the outstanding daily balance thereof, at a floating per annumrate equal to the Effective Interest Rate (as defined in the Loan and Security Agreement) which is equal to the sum of the Prime Rate published in the WallStreet Journal (currently 5.50%) plus one percent (1.00%). The debt facility is to have interest-only monthly payments due for the first eighteen months fromthe funding date and then monthly principal and interest payments are due through the remainder of the term which has a maturity date of October 1, 2023. Inconnection with the facility, Fennec has agreed to grant Bridge Bank a warrant to purchase up to 39,130 common shares at an exercise price of $6.80 percommon share, for a term of ten years from the date of issuance, subject to early termination under certain conditions. Management has evaluated subsequent events through March 15, 2019, the date the financial statements were available to be issued and there are noadditional subsequent events that would require adjustment to or disclosure in the statements. 11.Income Taxes The Company operates in both U.S. and Canadian tax jurisdictions. Its income is subject to varying rates of tax and losses incurred in one jurisdiction cannotbe used to offset income taxes payable in another. A reconciliation of the combined Canadian federal and provincial income tax rate with the Company’seffective tax rate is as follows (in thousands except for percentage rates): Year EndedDecember 31, Year EndedDecember 31, 2018 2017 Domestic (loss)/gain $(7,702) $(5,277)Foreign loss (2,145) (1,769)Loss before income taxes (9,847) (7,046) Expected statutory rate (recovery) 26.50% 26.50%Expected provision for (recovery of) income tax (2,609) (1,867)Permanent differences 512 636 Change in valuation allowance 2,042 328 Effect of foreign exchange rate differences – – Effect of change in future enacted tax rates – 843 Tax credits and other adjustments – (3)Effect of tax rate changes and other 55 63 Provision for income taxes $- $– The Canadian statutory come tax rate of 26.0 percent is comprised of federal income tax at approximately 15.0 percent and provincial income tax atapproximately 11.0 percent. The primary temporary differences which gave rise to future income taxes (recovery) at December 31, 2018 and December 31, 2017: December 31,2018 December 31,2017 Future tax assets: SR&ED expenditures $2,195 $2,195 Income tax loss carryforwards 21,452 19,431 Non-refundable investment tax credits 1,250 1,263 Share issue costs 45 – Accrued expenses – – Fixed and intangible assets 1,065 1,031 Reserves 13 – 26,020 23,920 Less: valuation allowance (26,020) (23,920)Net future tax assets $– $– F-16  Fennec Pharmaceuticals Inc.Notes to the Consolidated Financial Statements(U.S. dollars and shares in thousands, except per share information) Tax Cuts and Jobs Act On December 22, 2017, the United States government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and jobs Act (the “TaxAct”). The Tax Act reduces the corporate tax rate to 21%, effective January 1, 2018. The Securities and Exchange Commission issued Staff AccountingBulletin No. 118 (“SAB 118”) on December 23, 2017. SAB 118 provides a one-year measurement period from a registrant’s reporting period that includes theUnited States Tax Act’s enactment date to allow the registrant sufficient time to obtain, prepare and analyze information to complete the accounting requiredunder ASC 740. The ultimate impact of the Tax Act on our reported results may differ from the estimates provided herein, possibly material, due to, amongother things, changes in interpretations and assumptions we have made, guidance that may be issued, and other actions we may take as a result of the Tax Actdifferent from presently contemplated. There are no current income taxes owed, nor are any income taxes expected to be owed in the near term. At December 31, 2018 the Company has unclaimedScientific Research and Experimental Development ("SR&ED") expenditures, income tax loss carry-forwards and non-refundable investment tax credits. Theunclaimed amounts and their expiry dates are as listed below: Province/ Federal State SR&ED expenditures (no expiry) $8,283 $- Income tax loss carryforwards (expiry date): 2019 - 1,455 2020 - 4,768 2021 26 8,885 2022 233 4,219 2023 133 4,164 2024 1,536 2,116 2025 4,795 700 2026 20,562 12,454 2027 8,340 4,764 2028 10,840 7,314 2029 8,502 7,003 2030 2,608 2,741 2031 3,378 3,448 2032 3,491 4,370 2033 1,789 3,156 2034 1,812 1,606 2035 1,804 861 2036 2,208 1,189 2037 4,641 2,882 2038 5,655 5,655 No expiration 2,160 - Investment tax credits (expiry date): 2019 96 2020 55 2021 548 2022 399 2023 178 2024 199 2025 86 2026 90 2027 50 F-17   Exhibit 21.1  Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (file no. 333-221091), S-3 (file no. 333-221093) and S-3(file no. 333-219884) of Fennec Pharmaceuticals Inc. (the “Company”) of our report dated March 15, 2019 relating to the consolidated financial statementsand the effectiveness of internal controls over financial reporting as of December 31, 2018, which appear in the Annual Report on Form 10-K for the yearended December 31, 2018. /s/ Haskell & White LLPHASKELL & WHITE LLP Irvine, CaliforniaMarch 15, 2019  Exhibit 31.1FENNEC PHARMACEUTICALS INCCERTIFICATIONI, Rostislav Raykov, certify that: 1.I have reviewed this annual report on Form 10-K for the period ended December 31, 2018 of Fennec Pharmaceuticals Inc.; 2.Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this Annual Report; 3.Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this Annual Report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Annual Report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and (d)Disclosed in this Annual Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting. 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 15, 2019 By:/s/ Rostislav Raykov Rostislav Raykov Chief Executive Officer  Exhibit 31.2FENNEC PHARMACEUTICALS INC.CERTIFICATIONI, Robert Andrade, certify that: 1.I have reviewed this annual report on Form 10-K for the period ended December 31, 2018 of Fennec Pharmaceuticals Inc.; 2.Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this Annual Report; 3.Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this Annual Report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Annual Report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and (d)Disclosed in this Annual Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting. 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 15, 2019 By:/s/ Robert Andrade Robert Andrade Chief Financial Officer  Exhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. §1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Fennec Pharmaceuticals Inc. (the “Company”) on Form 10-K for the period ended December 31, 2018 (the“Report”), each of the undersigned, Rostislav Raykov, Chief Executive Officer of the Company, and Robert Andrade, Chief Financial Officer of theCompany, hereby certifies pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date: March 15, 2019 By:/s/ Rostislav Raykov Rostislav Raykov Chief Executive Officer Date: March 15, 2019 By:/s/ Robert Andrade Robert Andrade Chief Financial Officer 

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