Intelgenx Technologies Corp Annual Report 2016

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FY2016 Annual Report · Intelgenx Technologies Corp

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UNITED
STATES

SECURITIES
AND
EXCHANGE
COMMISSION

Washington,
D.C.
20549

FORM
10-K

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

For
the
fiscal
year
ended
December
31,
2016

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

For
the
transition
period
from
__________to
__________

Commission
File
Number:
000-31187

IntelGenx
Technologies
Corp.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

87-0638336
(I.R.S. Employer Identification No.)

6420
Abrams,
Ville
Saint-Laurent,
Quebec
(Address of principal executive offices)

H4S
1Y2
(Zip Code)

(514)
331-7440

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common
Stock,
$0.00001
par
value
per
share

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

Yes ☐

No ☑

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 ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files).
Yes ☑ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form
10-K.☑

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

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

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☐
(Do not check if a smaller reporting
company)

Smaller reporting company ☑

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

Yes

No ☑

As of June 30, 2016, the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant was
$26,564,328 based on the closing price of the registrant’s common shares of U.S. $0.50, as reported on the OTCQX on that date. Shares of the registrant’s common
shares held by each officer and director and each person who owns 10% or more of the outstanding common shares of the registrant have been excluded in that
such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

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

Class
Common Stock, $.00001 par value

Outstanding
at
March
23,
2017
65,422,021 shares

DOCUMENTS
INCORPORATED
BY
REFERENCE:

Portions of the Company’s Proxy Statement for its 2017 Annual Meeting of Shareholders (the “2017 Proxy Statement”) are incorporated by reference into Part III

TABLE
OF
CONTENTS

Business.
Risk Factors.
Unresolved Staff Comments.
Properties.
Legal Proceedings.
Mine Safety Disclosures.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Selected Financial Data.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Quantitative and Qualitative Disclosures About Market Risk.
Financial Statements and Supplementary Data.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Controls and Procedures.
Other Information.

Directors, Executive Officers, and Corporate Governance.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Certain Relationships and Related Transactions, and Director Independence.

Exhibits, Financial Statement Schedules
Form 10-K Summary Page
Financial Statements

PART
I
Item 1.
Item 1A
Item 1B
Item 2.
Item 3.
Item 4.

PART
II
Item 5.
Item 6
Item 7.
Item 7A
Item 8.
Item 9.
Item 9A.
Item 9B.
PART
III
Item 10.
Item 11.
Item 12.
Item 13.

PART
IV
Item 15.
Item 16

Page

4
14
24
24
24
25

26
27
27
36
36
36
36
37

37
37
37
37

36
39
F-1-F-30

Terminology and references

In this Annual Report on Form 10-K, the words “Company”, “IntelGenx”, “we”, “us”, and “our”, refer collectively to IntelGenx Technologies Corp. and IntelGenx
Corp., our wholly-owned Canadian subsidiary.

In this Form 10-K, unless otherwise specified, all monetary amounts are in United States dollars, all references to “$”, “U.S.$”, “U.S. dollars” and “dollars” mean
U.S. dollars and all references to “C$”, “Canadian dollars” and “CA$” mean Canadian dollars. To the extent that such monetary amounts are derived from our
consolidated financial statements included elsewhere in this Form 10-K, they have been translated into U.S. dollars in accordance with our accounting policies as
described therein. Unless otherwise indicated, other Canadian dollar monetary amounts have been translated into United States dollars at the December 31, 2016
closing rate reported by the Bank of Canada, being U.S. $1.00 = CA$1.3256.

PART
I

Cautionary
Statement
Concerning
Forward-Looking
Statements

Certain statements included or incorporated by reference in this report constitute forward-looking statements within the meaning of applicable securities laws. All
statements contained in this report that are not clearly historical in nature are forward-looking, and the words “anticipate”, “believe”, “continue”, “expect”,
“estimate”, “intend”, “may”, “plan”, “will”, “shall” and other similar expressions are generally intended to identify forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All forward-looking statements are based on our beliefs and
assumptions based on information available at the time the assumption was made. These forward-looking statements are not based on historical facts but on
management’s expectations regarding future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and
sources of funding thereof), competitive advantages, business prospects and opportunities. Forward-looking statements involve significant known and unknown
risks, uncertainties, assumptions and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those
implied by forward-looking statements. These factors should be considered carefully and prospective investors should not place undue reliance on the forward-
looking statements. Although the forward-looking statements contained in this report or incorporated by reference herein are based upon what management
believes to be reasonable assumptions, there is no assurance that actual results will be consistent with these forward-looking statements. These forward-looking
statements are made as of the date of this report or as of the date specified in the documents incorporated by reference herein, as the case may be. We
undertake
no
obligation
to
update
any
forward-looking
statements
to
reflect
events
or
circumstances
after
the
date
on
which
such
statements
were
made
or
to
reflect
the
occurrence
of
unanticipated
events,
except
as
may
be
required
by
applicable
securities
laws.
The factors set forth in Item 1A., "Risk Factors", as well as
any cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements. Before you invest in the common stock, you should be aware that the occurrence of the events
described as risk factors and elsewhere in this report could have a material adverse effect on our business, operating results and financial condition.

ITEM
1.
BUSINESS.

Corporate
History

Our predecessor company, Big Flash Corp., was incorporated in Delaware on July 27, 1999. On April 28, 2006, Big Flash, through its Canadian holding
corporation, completed the acquisition of IntelGenx Corp., a Canadian company incorporated on June 15, 2003. The Company did not have any operations prior to
the acquisition of IntelGenx Corp. In connection with the acquisition, we changed our name from Big Flash Corp. to IntelGenx Technologies Corp. IntelGenx
Corp. has continued operations as our operating subsidiary.

Overview

We are a drug delivery company established in 2003 and headquartered in Montreal, Quebec, Canada. Our focus is on the development of novel oral immediate-
release and controlled-release products for the pharmaceutical market. More recently, we have made the strategic decision to enter the oral film market and are in
the process of implementing commercial oral film manufacturing capability. This enables us to offer our partners a comprehensive portfolio of pharmaceutical
services, including pharmaceutical R&D, clinical monitoring, regulatory support, tech transfer and manufacturing scale-up, and commercial manufacturing.

Our business strategy is to develop pharmaceutical products based on our proprietary drug delivery technologies and, once the viability of a product has been
demonstrated, to license the commercial rights to partners in the pharmaceutical industry. In certain cases, we rely upon partners in the pharmaceutical industry to
fund development of the licensed products, complete the regulatory approval process with the U.S. Food and Drug Administration (“FDA”) or other regulatory
agencies relating to the licensed products, and assume responsibility for marketing and distributing such products.

In addition, we may choose to pursue the development of certain products until the project reaches the marketing and distribution stage. We will assess the potential
for successful development of a product and associated costs, and then determine at which stage it is most prudent to seek a partner, balancing such costs against
the potential for additional returns earned by partnering later in the development process.

Managing our project pipeline is a key success factor for the Company. We have undertaken a strategy under which we will work with pharmaceutical companies
in order to apply our oral film technology to pharmaceutical products for which patent protection is nearing expiration, a strategy which is often referred to as
“lifecycle management”. Under §(505)(b)(2) of the Food, Drug, and Cosmetics Act,the FDA may grant market exclusivity for a term of up to three years of
exclusivity following approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage, dosage form, route of
administration or combination.

The 505(b)(2) pathway is also the regulatory approach to be followed if an applicant intends to file an application for a product containing a drug that is already
approved by the FDA for a certain indication and for which the applicant is seeking approval for a new indication or for a new use, the approval of which is
required to be supported by new clinical trials, other than bioavailability studies. We have implemented a strategy under which we actively look for such so-called
“repurposing opportunities” and determine whether our proprietary VersaFilm™ technology adds value to the product. We currently have two such drug
repurposing projects in our development pipeline.

We continue to develop the existing products in our pipeline and may also perform research and development on other potential products as opportunities arise.

We have established a state-of-the-art manufacturing facility with the intent to manufacture all our VersaFilm™ products in-house as we believe that this:

1)
2)

represents a profitable business opportunity,
will reduce our dependency upon third-party contract manufacturers, thereby protecting our manufacturing process know- how and intellectual
property, and
allows us to offer our clients and development partners a full service from product conception through to supply of the finished product.

Technology
Platforms

Our product development efforts are based upon three delivery platform technologies: (1) VersaFilm™, an Oral Film technology, (2) VersaTab™, a Multilayer
Tablet technology, and (3) AdVersa®, a Mucoadhesive Tablet technology.

VersaFilm™ is a drug delivery platform technology that enables the development of oral thin films, improving product performance:

•
•
•
•
•

•
•

Rapid disintegration without the need for water;
Quicker buccal or sublingual absorption;
Potential for faster onset of action and increased bioavailability;
Potential for reduced adverse effects by bypassing first-pass metabolism;
Easy administration for patients who have problems in swallowing: pediatric, geriatric, fear choking and/or suffering from nausea (e.g., nausea
resulting from chemotherapy, radiotherapy or any surgical treatment);
Pleasant taste;
Small and thin size, making it convenient for consumers.

Our VersaFilm™ technology consists of a thin (25-35 micron) polymeric film comprised of United States Pharmacopeia (USP) components that are approved by
the FDA for use in food, pharmaceutical, and cosmetic products. Derived from the edible film technology used for breath strips and initially developed for the
instant delivery of savory flavors to food substrates, the VersaFilm™ technology is designed to provide a rapid response compared to existing conventional tablets.
Our VersaFilm™ technology is intended for indications requiring rapid onset of action, such as migraine, opioid dependence, chronic pain, motion sickness,
erectile dysfunction, and nausea.

Our VersaTab™ platform technology allows for the development of oral controlled-release products. It is designed to be versatile and to reduce manufacturing
costs as compared to competing oral extended-release delivery technologies. Our VersaFilm™ technology allows for the instant delivery of pharmaceuticals to the
oral cavity, while our AdVersa® allows for the controlled release of active substances to the oral mucosa.

Our VersaTab™ technology represents a new generation of controlled release layered tablets designed to modulate the release of active compounds. The
technology is based on a multilayer tablet with an active core layer and erodible cover layers. The release of the active drug from the core matrix initially occurs in
a first-order fashion. As the cover layers start to erode, their permeability for the active ingredient through the cover layers increases. Thus, the Multilayer Tablet
can produce quasi-linear (zero-order) kinetics for releasing a chemical compound over a desired period of time. The erosion rate of the cover layers can be
customized according to the physico-chemical properties of the active drug. In addition, our multilayer technology offers the opportunity to develop combination
products in a regulatory-compliant format. Combination products are made up of two or more active ingredients that are combined into a single dosage form.

Our Mucoadhesive Tablet is a drug delivery system capable of adhering to the oral mucosa and releasing the drug onto the site of application at a controlled rate.
The Mucoadhesive Tablet is designed to provide the following advantages relative to competing technologies: (i) it avoids the first pass effect, whereby the liver
metabolizes the active ingredient and greatly reduces the level of drug reaching the systemic circulation, (ii) it leads to a higher absorption rate in the oral cavity as
compared to the conventional oral route, and (iii) it achieves a rapid onset of action for the drug. Our AdVersa® technology is designed to be versatile in order to
permit the site of application, residence time, and rate of release of the drug to be modulated to achieve the desired results.

Product
Portfolio

Our product portfolio includes a blend of generic and branded products based on our proprietary delivery technology (“generic” products are essentially copies of
products that have already received FDA approval). Of the fourteen projects currently in our product portfolio, three utilize our VersaTab™ technology, ten utilize
our VersaFilm™ technology, and one utilizes our AdVersa® technology.

INT0001/2004
: This is the most advanced generic product involving our multilayer tablet technology. Equivalency with the reference product Toprol XL ® and its
European equivalent Beloc-ZOK ® has been demonstrated in-vitro . The product has been tested in phase I studies. In November 2016 we entered into a License
and Development Agreement with Chemo Group to advance the commercialization of our Versa Tab™ product. The manufacturing technology transfer to Chemo
is currently ongoing.

INT0004/2006
: We developed a new, higher strength of the antidepressant Bupropion HCl, the active ingredient in Wellbutrin XL ® , and, in November 2011, the
FDA approved the drug for patients with Major Depressive Disorder. In February 2012, we entered into an agreement with Edgemont Pharmaceuticals LLC
(“Edgemont”) for commercialization of the product in the United States. Under the terms of the agreement, Edgemont obtained certain exclusive rights to market
and sell the product in the U.S. In exchange we received a $1.0 million upfront payment, received launch related milestones totaling up to $4.0 million, and are
eligible for additional milestones of up to a further $23.5 million upon achieving certain sales and exclusivity targets. We also receive tiered double-digit royalties
on the net sales of the product. The agreement has no expiry date but may be terminated in the event of, without limitation (i) failure by either us or Edgemont to
perform our respective obligations under the agreement; (ii) if either party files a petition for bankruptcy or insolvency or otherwise winds up, liquidates or
dissolves its business, or (iii) otherwise by mutual consent of the parties. The agreement also contains customary confidentiality, indemnification and intellectual
property protection provisions.

The product was launched in the U.S. in October 2012 under the brand name Forfivo XL ® . As of December 31, 2015 we had received an upfront payment of $1
million and a $1 million milestone payment related to the launch. The commercialization of Forfivo XL ® triggered a launch-related milestone payment of $3
million from IntelGenx’ licensing partner Edgemont due to Edgemont reaching in July 2015, $7 million of cumulative net trade sales of Forfivo XL ® over the
preceding 12 months. From that $3 million milestone payment, $1 million was received in Q3 2015. Of the remaining balance of $2 million, $1 million was
received in Q4 2015 and $1 million was received in Q1 2016. We commenced receiving royalty payments in the first quarter of 2013. We recorded $433 thousand
for the cost of royalty and license revenue in the twelve-month period ended December 31, 2015 compared with $61 in the same period of 2014.

In August 2013, we announced receipt of a Paragraph IV Certification Letter from Wockhardt Bio AG, advising of the submission of an Abbreviated New Drug
Application ("ANDA") to the FDA requesting authorization to manufacture and market generic versions of Forfivo XL ® 450 mg tablets in the U.S. In November
2014 we announced that the Paragraph IV litigation with Wockhardt had been settled and that, under the terms of the settlement, Wockhardt has been granted the
right, with effect from January 15, 2018, to be the exclusive marketer and distributor of an authorized generic of Forfivo XL ® in the U.S.

In December 2014 we announced that Edgemont had exercised its right to extend the license for the exclusive marketing of Forfivo XL ® 450 mg tablets. In
exchange, we received milestone payments of $650 thousand in December 2014 and $600 thousand in February 2015. All other financial obligations contained in
the license agreement entered into by Edgemont and IntelGenx in February 2012, specifically launch-related and sales milestones, together with the contractual
royalty rates on net sales of the product, remained in effect.

On August 5 th , 2016, we announced that we had sold our U.S. royalty on future sales of Forfivo XL ® to SWK Holdings Corporation (SWK) for $6 million
(CAD$8 million). Forfivo XL ® (Bupropion extended-release) is the first 450 mg bupropion HCl tablet indicated for Major Depressive Disorder, approved by the
FDA. As per terms of the agreement, we received $6 million from SKW at closing. In return for, (i) 100% of any and all royalties (as defined in the Edgemont
Pharmaceuticals, LLC License Agreement) or similar royalty amounts received on or after April 1, 2016, (ii) 100% of the $2 million milestone payment upon
Edgemont reaching annual net sales of $15 million, and (iii) 35% of all potential future milestone payments. Patent protection for Forfivo XL ® in the United States
expires in 2027 with an authorized generic entering the market in January 2018.

SWK is a specialized finance company with a focus on the global healthcare sector. SWK partners with ethical product marketers and royalty holders to provide
flexible financing solutions at an attractive cost of capital to create long-term value for both SWK's business partners and its investors.

INT0007/2006
: We are developing an oral film product based on our VersaFilm™ technology containing the active ingredient Tadalafil. The product is intended
for the treatment of erectile dysfunction (ED). The results of a phase I pilot study that was conducted in the second quarter of 2015 confirmed that the product is
bioequivalent with the brand product, Cialis ® . We are currently manufacturing submission batches that are intended to support a 505(b)(2) NDA filing with the
FDA with a target submission date of about mid-2017 and a PDUFA date expected to be approximately mid-2018.

On November 21, 2016, we announced the signing of a binding term sheet for a license to Eli Lilly and Company's tadalafil dosing patent, United States Patent No.
6,943,166 (the '166 dosing patent). Any exclusivity associated with the tadalafil compound patent is not affected by this agreement.

Subject to FDA approval, this license allows us to commercialize a Tadalafil ED VersaFilm™ product in the U.S. prior to the expiration of the '166 dosing patent.
This license terminates all our current tadalafil-related litigation activities.

We are currently actively seeking a partner for the commercialization of our Tadalafil ED VersaFilm™ product.

INT0008/2007:
We developed this oral film product based on our VersaFilm™ technology. In March 2013 we submitted a 505(b)(2) new drug application
(“NDA”) to the FDA for our novel oral thin-film formulation of Rizatriptan, the active drug in Maxalt-MLT ® orally disintegrating tablets. Maxalt-MLT ® is a
leading branded anti-migraine product marketed by Merck & Co. The thin-film formulation of Rizatriptan was developed in accordance with a co-development and
commercialization agreement with RedHill Biopharma Ltd. (“RedHill”). The product uses our proprietary immediate release VersaFilm™ oral drug delivery
technology. In December 2011, we received approval by Health Canada to conduct a pivotal bioequivalence study to determine if our product is safe and
bioequivalent with the FDA approved reference product, Maxalt-MLT ® . The trial was conducted in the second quarter of 2012 and was a randomized, two-period,
two-way crossover study in healthy male and female subjects. The study results indicate that the product is safe, and that the 90% confidence intervals of the three
relevant parameters Cmax, AUC(0-t) and AUC(0-infinity) are well within the 80 – 125 acceptance range for bioequivalency.

In June 2013 the FDA assigned a Prescription Drug User Fee Act (“PDUFA”) action date of February 3, 2014 for the review of the NDA for marketing approval
and in February 2014 we received a Complete Response Letter (“CRL”) from the FDA informing us that certain questions and deficiencies remain that preclude the
approval of the application in its present form. The questions raised by the FDA in the CRL regarding the NDA for our anti-migraine VersaFilm™ product
primarily relate to third party Chemistry, Manufacturing and Controls (“CMC”) and to the packaging and labeling of the product. No questions or deficiencies were
raised relating to the product's safety and the FDA's CRL does not require additional clinical studies.

In March 2014 we submitted our response to the FDA's CRL and in April, 2014 the FDA requested additional CMC data. We also reported that the supplier of the
active pharmaceutical ingredient (“API”) of the product has been issued with an “Import Alert” by the FDA. The Import Alert bans the import into the USA of all
raw materials from the supplier’s manufacturing facility, which therefore prohibits the import of any products using these raw materials, and effectively prevents
our VersaFilm™ product from being approved by the FDA. We have identified a new source of API which is currently used to manufacture new submission lots to
support the re-submission of the NDA filing in mid 2017 with PDUFA date expected by early 2018.

In October 2014 we announced the submission of a Marketing Authorization Application (“MAA”) to the German Federal Institute for Drugs and Medical Devices
(“BfArM”) seeking European marketing approval of our oral thin film formulation of Rizatriptan for acute migraines, under the brand name RIZAPORT ® . The
brand name RIZAPORT ® was also conditionally approved by the FDA as part of the NDA review process in the U.S. The MAA was submitted under the
European Decentralized Procedure (DCP) with Germany as the reference member state. The submission is supported by several studies, including a comparative
bioavailability study which successfully established the bioequivalence between RIZAPORT ® and the European reference drug. BfArM validated the MAA and
initiated the formal review process of the application on November 25, 2014. BfArM granted national marketing approval on November 9, 2015 for RIZAPORT ®
under the DCP.

On September 10, 2015 we announced the positive outcome of the DCP confirming that RIZAPORT™ is approvable in Europe. The announcement followed the
issuance of the Final Assessment Report from the Reference Member State (RMS), the Federal Institute for Drugs and Medical Devices of Germany (BfArM), and
the agreement of all the Concerned Member States (CMS) in DCP that RIZAPORT ®
is approvable. With the decision, the regulatory process entered its final
phase known as the national licensing phase during which the National Agencies in the individual countries will issue the marketing licenses that allow
RIZAPORT® to be marketed in each country.

On November 9, 2015 we announced that the Federal Institute for Drugs and Medical Devices of Germany (BfArM) has granted marketing authorization of
RIZAPORT® 5mg and 10mg, an oral thin film formulation of rizatriptan benzoate for the treatment of acute migraines. The national approval of RIZAPORT® in
Germany was granted under the European Decentralized Procedure (DCP), in which Germany served as the Reference Member State. This authorization was the
first national marketing approval of RIZAPORT®. Marketing authorization in Luxemburg, the Concerned Member State, is expected to follow. IntelGenx and
RedHill intend to continue to work together to obtain national phase approvals in other European DCP territories.

On February 18, 2016, we announced that the USPTO had granted a patent protecting Rizaport®, an oral thin film formulation of rizatriptan benzoate for the
treatment of acute migraines. This patent protects the composition of Rizaport® and will be listed in the Orange Book upon approval of the product by the FDA.
The patent application, entitled "Instantly Wettable Oral Film Dosage Form Without Surfactant or Polyalcohol" covers rapidly disintegrating film oral dosage
forms and is valid until 2034.

On July 5, 2016, we announced the signing of the definitive agreement with Grupo Juste S.A.Q.F. (now Exeltis Healthcare, S.L. (“Exeltis”)) for the
commercialization of RIZAPORT®, our proprietary oral thin film for the treatment of acute migraines, in the country of Spain. All commercial manufacturing of
RIZAPORT® will take place at our new state-of-the-art manufacturing facility in Canada. Grupo Juste (Exeltis) is a prominent private Spanish company with over
90 years of experience in the research, development and commercialization of proprietary pharmaceutical products, including migraine and other central nervous
system drugs, in Europe, Latin America and other territories.

According to the definitive agreement, Grupo Juste (Exeltis) has obtained exclusive rights to register, promote and distribute RIZAPORT® in Spain. In exchange,
we and Redhill Biopharma will receive upfront and milestone payments, together with a share of the net sales of RIZAPORT®. Commercial launch in Spain is
estimated to take place in the second half of 2017. The initial term of the definitive agreement shall be for ten years from the date of first commercial sale of the
product and shall automatically renew for one additional two-year term.

Through our partner Grupo Juste (Exeltis), the product was submitted in Spain in September 2016 for approval using a decentralized procedure. Approval in Spain
is currently expected for Q4 2017.

On December 14, 2016, we, together with our partner RedHill, announced the signing of an exclusive license agreement with Pharmatronic Co. for the
commercialization of RIZAPORT® in the Republic of Korea (South Korea). Under the terms of the agreement, RedHill granted Pharmatronic Co. the exclusive
rights to register and commercialize RIZAPORT® in South Korea. IntelGenx and RedHill have received an upfront payment and will be eligible to receive
additional milestone payments upon achievement of certain predefined regulatory and commercial targets, as well as tiered royalties. The initial term of the
definitive agreement with Pharmatronic Co. is for ten years from the date of first commercial sale and shall automatically renew for an additional two-year term.
Commercial launch in South Korea is estimated to take place in the first quarter of 2019.

INT0010/2006
: We initially entered into an agreement with Cynapsus Therapeutics Inc. (formerly Cannasat Therapeutics Inc., “Cynapsus”) for the development
of a buccal muco-adhesive tablet product containing a cannabinoid-based drug for the treatment of neuropathic pain and nausea in cancer patients undergoing
chemotherapy. In 2009, we completed a clinical biostudy on the muco-adhesive tablet we developed which is based on our proprietary AdVersa™ technology. The
study results indicated improved bioavailability and reduced first-pass metabolization of the drug. In the fourth quarter of 2010, we acquired from Cynapsus full
control of, and interest in, this project going forward. We also obtained worldwide rights to U.S. Patent 7,592,328 and all corresponding foreign patents and patent
applications to exclusively develop and further provide intellectual property protection for this project. Subsequent to the 2016 fiscal year end, on February 9, 2017,
we announced the signing of a binding term sheet with Tetra Bio-Pharma Inc. (“Tetra”) for the development and commercialization of a drug product containing
dronabinol. Under the binding term sheet, Tetra will have exclusive rights to sell the product in North America with a right of first negotiation for outside the U.S.
and Canada.

As per the Binding Term Sheet, we received a non-refundable exclusive negotiation payment from Tetra. We will also be entitled to receive an upfront payment
along with set milestone payments based on the completion of an efficacy study, approvals from FDA and Health Canada and launching of the product.

We will be responsible for the research and development of the product, including optimization of the prototype, scale-up activities and preparation of a phase II
proof of concept clinical study and will develop the product as an oral mucoadhesive tablet based on our proprietary AdVersa ® controlled-release technology.
Tetra will be responsible for funding the product development, and will own and control all regulatory approvals, including the application and any other marketing
authorizations. Tetra will also be responsible for all aspects of commercializing the drug product.

INT0027/2011:
We developed this oral film product based on our VersaFilm™ technology. In accordance with a co-development and commercialization
agreement with Par Pharmaceutical Companies, Inc. (“Par”), we developed an oral film product based on our proprietary VersaFilm™ technology. The product is a
generic formulation of buprenorphine and naloxone Sublingual Film, indicated for the treatment of opioid dependence. A bioequivalent film formulation was
developed, scaled-up, and pivotal batches manufactured and tested during a subsequent pivotal clinical study. An ANDA was filed with the FDA by Par in July
2013.

In August 2013 we were notified that, in response to filing of the ANDA, we were named as a codefendant in a lawsuit pursuant to Paragraph IV litigation filed by
Reckitt Benckiser Pharmaceuticals and Monosol RX in the U.S. District Court for the District of Delaware alleging infringement of U.S. Patent Nos. 8,475,832,
8,603,514 and 8,017,150, each of which relate to Suboxone ® . We believe the ANDA product does not infringe those or any other patents, and will vigorously
defend ourselves in this matter. In accordance with the terms of the co-development and commercialization agreement, Par is financially responsible for the costs of
this defense. Since Paragraph IV litigation is a regular part of the ANDA process, we do not expect any unanticipated impact on our already planned development
schedule. In June 2016, an opinion from the district court was obtained on the validity and infringement of the 3 orange book patents. The court ruled that the
product is not infringing on two out of the three patents. Subsequently, appeals were filed by both parties.

In December 2014, Reckitt Benckiser Pharmaceuticals and Monosol RX filed a lawsuit for patent infringement in the U.S. District Court for the District of
Delaware relating to the Suboxone ® ANDA product. We were named as a codefendant in this action alleging patent infringement United States Patent Nos.
8,900,497 (“the ’497 patent”) and 8,906,277 (“the ’277 patent”), each of which relate to a process for making a uniform oral film (“the process patents”). The trial
for the process patents was held in November 2016. We believe the ANDA product relating to Suboxone ® does not infringe those process patents or any other
patents, and will vigorously defend ourselves in this matter. In accordance with the terms of the co-development and commercialization agreement, Par is
financially responsible for the costs of this defense.

On July 11, 2016, the Company announced the receipt of the notice of appeal for the buprenorphine/naloxone sublingual film product for the treatment of opiate
addiction by Par and the Company to the United States Court of Appeals for the Federal Circuit from the final judgment issued by the U.S. District Court for the
District of Delaware on June 28, 2016.

The ruling in the U.S. District Court of Delaware in the ANDA litigation of Par and the Company against Indivior PLC and Monosol Rx, LLC resulted in Par and
the Company prevailing on the non-infringement of the U.S. Patent No. 8,017,150, which is set to expire in 2023, and on the invalidity (all claims) and non-
infringement (certain claims) of the U.S. Patent No. 8,475,832, which is set to expire in 2030. The Court also ruled that Par's ANDA product would infringe the
asserted claims of U.S. Patent No. 8,603,514, one of the Orange Book listed patents for Suboxone Film, and that the asserted claims of U.S. Patent No. 8,603,514
were not shown to be invalid.

Subsequent to year end, in late January 2017 we received a CRL from the FDA requesting more information on the API’s and the finished product.

INT0036/2013
: Loxapine is for the treatment of anxiety and aggression in patients suffering from schizophrenia or bipolar 1 disorder. Loxapine oral film will
utilize the company's proprietary VersaFilm™ technology, allowing for an improved product to offer patients significant therapeutic benefits compared to existing
medications. A fast acting loxapine oral film dosage form that can be used to effectively treat acute agitation associated with schizophrenia or bipolar 1 disorder in
non-institutionalized patients while reducing the risk of pulmonary problems is needed as it could substantially reduce the potential risks of violence and injury to
patients and others by preventing or reducing the duration and severity of an episode of acute agitation. Our first clinical study on this product, completed in Q4
2014, suggested improved bioavailability compared to the currently approved tablet. In late 2015 we completed a second pilot clinical study which demonstrated
that buccal absorption of the drug from the loxapine oral film results in a significantly higher bioavailability of the drug compared to oral tablets. We are currently
optimizing the film to further improve time to reach peak plasma concentrations.

On February 10, 2016, we announced the submission of the patent application with the U.S. patent office for an oral film dosage form containing Loxapine for the
treatment of anxiety and aggression in patients suffering from schizophrenia or bipolar 1 disorder.

INT0037/2013
: A product based on one of our proprietary technologies has been developed and we are currently preparing submission batches in support of a
marketing application to the FDA. The product was being developed in accordance with another development and commercialization agreement with Par
Pharmaceutical, Inc. On September 18, 2015, Par was acquired by Endo International plc. As a result of this acquisition, there was a conflict for Par to remain as
the partner for these products. As such, the product was returned to the Company with full rights and no requirement for any compensation for work paid by Par.
We continue to work closely with Par on the opioid dependence product and are pleased the relationship is on excellent terms.

On September 12, 2016, we announced that we had entered into a licensing, development and supply agreement with Chemo Group (“Chemo”) granting Chemo the
exclusive license to commercialize two generic products for the USA market and one product on a worldwide basis. Under the terms of the agreement, Chemo has
obtained certain exclusive rights to market and sell our products in exchange for upfront and milestone payments, together with a share of the profits of
commercialization. Chemo also has a right of first negotiation to obtain the exclusive commercialization rights for two of the products to include any country
outside the USA. Preparation of Scale-up activities for the product are currently ongoing.

INT0039/2013
: A product based on one of our proprietary technologies has complete development and phase I clinical trial with positive data. The product was
being developed in accordance with another development and commercialization agreement with Par Pharmaceutical, Inc. On September 18, 2015, Par was
acquired by Endo International plc. As a result of this acquisition, there was a conflict for Par to remain as the partner for this product. As such, the product was
returned to the Company with full rights and no requirement for any compensation for work paid by Par. We continue to work closely with Par on the opioid
dependence product and are pleased the relationship is on excellent terms.

On September 12, 2016, we announced that we had entered into a licensing, development and supply agreement with Chemo granting Chemo the exclusive license
to commercialize two generic products for the U.S. market and one product on a worldwide basis. Under the terms of the agreement, Chemo has obtained certain
exclusive rights to market and sell our products in exchange for upfront and milestone payments, together with a share of the profits of commercialization. Chemo
also has a right of first negotiation to obtain the exclusive commercialization rights for two of the products to include any country outside the U.S. Preparation
scale-up and submission activities are currently ongoing.

INT0040/2014
: An oral film product based on our proprietary edible film technology is currently in the optimization development stage. In order to protect our
competitive advantage, no further details of the product can be disclosed at this stage.

On December 27, 2016, we announced that we have entered into a co-development and commercialization agreement with Endo Ventures Ltd. for this product
utilizing our proprietary VersaFilm™ for the U.S. market. Under the agreement, Endo has obtained certain exclusive rights to market and sell our product in the
U.S. We received an upfront payment and will receive future milestone payments. Endo and IntelGenx will share the profits of commercialization.

INT0041/2015:
An oral film product based on our proprietary edible film technology is currently in the development stage. In order to protect our competitive
advantage, no further details of the product can be disclosed at this stage.

INT0042/2015:
An oral film product based on our proprietary edible film technology is currently in the early development stage. In order to protect our
competitive advantage, no further details of the product can be disclosed at this stage.

INT0043/2015
: We are currently developing an oral film containing montelukast as an active ingredient based on our proprietary edible film technology
VersaFilm™ .In pre-clinical studies, it was discovered that montelukast has the potential to rejuvenate the brain in aged rats.

We are collaborating with Dr. Ludwig Aigner, a neuroscientist who is a member of our Scientific Advisory Board and head of the Institute of Molecular
Regenerative Medicine at the Paracelsus Medical University in Salzburg, Austria. Dr. Aigner has made major contributions in the field of brain and spinal cord
regeneration over the last 25 years. He was the first to develop tools to visualize neurogenesis in living animals and identified signaling mechanisms that are
crucially involved in limiting brain regeneration. One of these mechanisms, leukotriene signaling, is related to asthma. In consequence, Dr. Aigner and his team
recently demonstrated that the anti-asthmatic drug montelukast structurally and functionally rejuvenates the aged brain. His main aim is to develop molecular and
cellular therapies for patients with neurodegenerative diseases and for the aged population.

On July 13, 2016, we announced the initiation of a phase 1 clinical trial of montelukast, a unique drug repurposing opportunity for the treatment of degenerative
diseases of the brain, such as: mild cognitive impairment and Alzheimer’s disease, the most prominent form of dementia. The objectives of the trial were to
demonstrate that our oral film product will provide therapeutically effective blood levels of montelukast, and that montelukast when delivered using our oral film
crosses the blood brain barrier.

On August 22, 2016, we announced the successful completion of the pilot clinical study for our Montelukast VersaFilm™ that demonstrated a significantly
improved pharmacokinetic profile against the reference product. The study data confirmed that buccal absorption of the drug from the Montelukast film product
resulted in a significantly improved bioavailability of the drug compared to the commercial tablet. In addition, the study data confirmed that Montelukast crosses
the blood brain barrier when administered using our Versafilm™ delivery technology.

We commenced preparation for a phase II-a proof-of-concept (“POC”) study. The Company expects the results from the study to be available in Q4/2017. We are
also actively working on securing the IP of our product by filing numerous patent applications. Based on the outcome of this first efficacy trial in humans, we will
be actively seeking a partnership or alliance opportunity to further advance developmental work and commercialization of this product.

INT0044/2016
: A product based on one of our VersaTab TM proprietary technologies currently in the early development stage. In order to protect our competitive
advantage, no further details of the product can be disclosed at this stage.

On December 1 st , 2016, we announced that we had strengthened our relationship with Chemo by signing a term sheet for the co-development and
commercialization of a generic tablet in the area of CNS (central nervous system) on a worldwide basis. According to Global Data, worldwide sales in 2015 of the
CNS related product exceeded $4 billion.

As per the agreement we received an upfront payment and will be entitled to receive development costs of the product and future milestone payments. Chemo and
IntelGenx will also share the profits of commercialization. The definitive agreement was signed on December 30, 2016.

The current status of each of our products as of the date of this report is summarized in the following table:

Product

INT0001/2004

INT0004/2006

INT0007/2006

INT0008/2008

INT0010/2006

INT0027/2011

INT0036/2012

INT0037/2013

INT0039/2013

INT0040/2013

INT0041/2015

INT0042/2015

INT0043/2015

INT0044/2016

Growth
Strategy

Indication

Anti-hypertension

Antidepressant

Erectile dysfunction

Migraine

Pain

Opioid dependence

Schizophrenia

Undisclosed

Alzheimer

Undisclosed

Status
of
Development

Technology transfer ongoing

FDA-approved November
Commercially
launched in USA as Forfivo XL ® in October 2012.
In 2016 we sold the royalty revenue to SWK.

2011.

Submission preparation ongoing

Submission preparation ongoing at
IntelGenx.
Submission currently under review by Spanish
authorities.

Formulation optimization, scale-up preparation and
clinical study evaluation

ANDA submitted to FDA in July 2013. CRL
received and under review.

Formulation development ongoing

Product
developed.
submission batches.

Product
submission batches

developed.

Preparing manufacture of

Formulation development ongoing

Formulation development completed in preparation
for clinical phase II proof of concept

Formulation development ongoing

Our primary growth strategies include: (1) identifying lifecycle management opportunities for existing market leading pharmaceutical products, (2) develop oral
film products that provide tangible patient benefits, (3) development of new drug delivery technologies, (4) repurposing existing drugs for new indications, (5)
developing generic drugs where high technology barriers to entry exist in reproducing branded films, and (6) manufacturing our VersaFilm™ products for
commercial sale. In addition, our service portfolio also includes contract manufacturing services as contract manufacturing presents an attractive short term revenue
opportunity and increases the utilization of the manufacturing factory, thus further absorbing overhead costs.

Lifecycle
Management
Opportunities

We are seeking to position our delivery technologies as an opportunity for lifecycle management of products for which patent protection of the active ingredient is
nearing expiration. While the patent for the underlying substance cannot be extended, patent protection can be obtained for a new and improved formulation by
filing an application with the FDA under Section 505(b)(2) of the U.S. Federal Food, Drug and Cosmetic Act. Such applications, known as a “505(b)(2) NDA”, are
permitted for new drug products that incorporate previously approved active ingredients, even if the proposed new drug incorporates an approved active ingredient
in a novel formulation or for a new indication. A 505(b)(2) NDA may include information regarding safety and efficacy of a proposed drug that comes from studies
not conducted by or for the applicant. The first formulation for a respective active ingredient filed with the FDA under a 505(b)(2) application may qualify for up to
three years of market exclusivity upon approval. Based upon a review of past partnerships between third party drug delivery companies and pharmaceutical
companies, management believes that drug delivery companies which possess innovative technologies to develop these special dosage formulations present an
attractive opportunity to pharmaceutical companies. Accordingly, we believe “505(b)(2) products” represent a viable business opportunity for us.

Product
Opportunities
that
provide
Tangible
Patient
Benefits

Our focus will be on developing oral film products leveraging our VersaFilm™ technology that provide tangible patient benefits versus existing drug delivery
forms. Patients with difficulties swallowing medication, pediatrics or geriatrics may benefit from oral films due to the ease of use. Similarly, we are working on
oral films to improve bio-availability and/or response time versus existing drugs and thereby reducing side effects.

Development
of
New
Drug
Delivery
Technologies

The rapidly disintegrating film technology contained in our VersaFilm™, and our AdVersa® mucosal adhesive tablet, are two examples of our efforts to develop
alternate technology platforms. As we work with various partners on different products, we seek opportunities to develop new proprietary technologies.

Repurposing
Existing
Drugs

We are working on the repurposing of already approved drugs for new indications using our VersaFilm™ film technology. This program represents a viable growth
strategy for us as it will allow for reduced development costs, improved success rates and shorter approval times. We believe that through our repurposing program
we will be able minimize the risk of developmental failure and create value for us and potential partners.

Generic
Drugs
with
High
Barriers
to
Entry

We plan to pursue the development of generic drugs that have certain barriers to entry, e.g., where product development and manufacturing is complex and can
limit the number of potential entrants into the generic market. We plan to pursue such projects only if the number of potential competitors is deemed relatively
insignificant.

VersaFilm™
Manufacturing

We are in the process of establishing a state-of-the-art manufacturing facility for the future manufacture of our VersaFilm™ products. Construction of the
manufacturing and laboratories are now completed and equipment is being prepared to begin manufacturing in 2017. We believe that this (1) represents a profitable
business opportunity, (2) will reduce our dependency upon third-party contract manufacturers, thereby protecting our manufacturing process know-how and
intellectual property, and (3) allows us to offer our development partners a full service from product conception through to supply of the finished product.

With our current manufacturing equipment, we are only able to manufacture products that do not contain flammable organic solvents. Since several of our film
products are solvent-based, we are in the process of acquiring manufacturing equipment that is capable of handling organic solvents, and we are expanding our
manufacturing facility in order to create the space required for this new manufacturing equipment.

Competition

The pharmaceutical industry is highly competitive and is subject to the rapid emergence of new technologies, governmental regulations, healthcare legislation,
availability of financing, patent litigation and other factors. Many of our competitors, including Monosol Rx, Tesa-Labtec GmbH, BioDelivery Sciences
International, Inc. and LTS Lohmann Therapy Systems Corp., have longer operating histories and greater financial, technical, marketing, legal and other resources
than we have. In addition, many of our competitors have significantly greater experience than we have in conducting clinical trials of pharmaceutical products,
obtaining FDA and other regulatory approvals of products, and marketing and selling products that have been approved. We expect that we will be subject to
competition from numerous other companies that currently operate or are planning to enter the markets in which we compete.

The key factors affecting the development and commercialization of our drug delivery products are likely to include, among other factors:

•

The regulatory requirements;

The safety and efficacy of our products;

The relative speed with which we can develop products;

Generic competition for any product that we develop;

Our ability to defend our existing intellectual property and to broaden our intellectual property and technology base;

Our ability to differentiate our products;

Our ability to develop products that can be manufactured on a cost effective basis;

Our ability to manufacture our products in compliance with current Good Manufacturing Practices (“cGMP”) and any other regulatory
requirements; and

Our ability to obtain financing.

In order to establish ourselves as a viable industry partner, we plan to continue to invest in our research and development activities and in our manufacturing
technology expertise, in order to further strengthen our technology base and to develop the ability to manufacture our VersaFilm™ products ourselves, and our
VersaTab™ and AdVersa® products through our manufacturing partners, at competitive costs.

Our
Competitive
Strengths

We believe that our key competitive strengths include:

•

Our comprehensive full services;

Our diversified pipeline;

Our ability to swiftly develop products through to regulatory approval; and

The versatility of our drug delivery technologies.

Manufacturing
Partnership

While we previously manufactured products only for testing purposes in our own laboratories, we have now started to manufacture products for pivotal clinical
trials, and we are undertaking steps to manufacture products for commercial use. In order to establish ourselves as a full-service partner for our thin film products,
we have completed the construction of a new, state-of-the-art oral film manufacturing facility and are in the process of preparing the equipment and finalizing plans
to commercially manufacture our products using our VersaFilm™ drug delivery technology. VersaFilm™ is our proprietary immediate release polymeric film
technology. It is comprised of a thin polymeric film using United States Pharmacopeia (USP) components that are safe and approved by the FDA for use in food,
pharmaceutical and cosmetic products. We completed construction of our manufacturing facility and expect it to be fully operational in 2017.

We are currently not a commercial manufacturer and we do not usually purchase large quantities of raw materials. Our manufacturing partners, however, may
purchase significant quantities of raw materials, some of which may have long lead times. If raw materials cannot be supplied to our manufacturing partners in a
timely and cost effective manner, our manufacturing partners may experience delays in production that may lead to reduced supplies of commercial products being
available for sale or distribution. Such shortages could have a detrimental effect on sales of the products and a corresponding reduction on our royalty revenues
earned.

Dependence
on
Major
Customers

We currently rely on a few major customers for our end products. We also currently depend upon a limited number of partners to develop our products, to provide
funding for the development of our products, to assist in obtaining regulatory approvals that are required in order to commercialize these products, and to market
and sell our products.

Intellectual
Property
and
Patent
Protection

We protect our intellectual property and technology by using the following methods: (i) applying for patent protection in the United States and in the appropriate
foreign markets, (ii) non-disclosure agreements, license agreements and appropriate contractual restrictions and controls on the distribution of information, and (iii)
trade secrets, common law trademark rights and trademark registrations. We plan to file core technology patents covering the use of our platform technologies in
any pharmaceutical products.

We have obtained 8 patents and have an additional 18 pending patent applications, as described below. The patents expire 20 years after submission of the initial
application. In the U.S. the term of the patent sometimes extends over the 20 year period. The initial term of 20 years is extended by a period (the “patent term
adjustment”) determined by the USPTO according to the delays in the prosecution of the patent application that are not applicant delays.

Patent
No.

Title

Subject

Date
submitted
/
issued
/
expiration

6,231,957

Rapidly disintegrating flavor wafer
for flavor enrichment

The composition, manufacturing,
and use of rapidly disintegrating
flavored films for releasing flavors
to certain substrates

Issued May 15, 2001
Expires May 6, 2019

US 6,660,292

Rapidly disintegrating film for
precooked foods

Composition and manufacturing of
flavored films for releasing flavors
to precooked food substrates

Issued December 9, 2003
Expires June 19, 2021

US 7,132,113

Flavored film

Composition and manufacturing
method of multi-layered films

Issued November 7, 2006
Expires April 16, 2022

US 8,691,272

Multilayer tablet

Formulation of multilayered tablets

Issued April 8, 2014
Expires January 28, 2033

US 8,703,191

US 7,674,479

Controlled release pharmaceutical
tablets

Formulation of tablets containing
bupropion and mecamylamine

Issued April 22, 2014
Expires January 10, 2032

Sustained-release bupropion and
bupropion / mecamylamine tablets

Formulation and method of making
tablets containing bupropion and
mecamylamine

Issued March 9, 2010
Expires July 25, 2027

US 8,735,374

Oral mucoadhesive dosage form

Direct compression formulation for
buccal and sublingual dosage forms

Issued May 27, 2014
Expires April 15, 2032

US 9,301,948

Instantly wettable oral film dosage
form without surfactant or
polyalcohol

Formulation of oral films containing
active pharmaceutical ingredients

Issued April 05, 2016
Expires July 30, 2033

US Appl. 13/079,348

Solid oral dosage forms comprising
tadalafil

Formulation of oral films containing

Filed April 4, 2011

tadalafil

US Appl. 12/963,132

Oral film dosage forms and methods
for making same

Optimization of film strip

Filed December 8, 2010

technology

US Appl. 14/630,699

Film dosage forms containing
amorphous active agents

Film containing amorphous agent

Filed February 25, 2015

US Appl. 14/554,332

Film dosage forms with extended
release mucoadhesive particles

Film containing mucoadhesive

Filed November 26, 2014

particle

US Appl. 13/748,241

Oral film dosage forms and methods
for making same

Optimization of film strip

Filed January 23, 2013

technology

US Appl. 15/216,903

PCT Appl.
WO2016134454

PCT Appl.
WO2016123696

Film dosage forms containing
amorphous active agents

Film containing amorphous agent

Filed July 22, 2016

Film containing amorphous agent

Filed January 29, 2016

Oral dosage film exhibiting
enhanced mucosal penetration

Formulation of oral films without
conventional penetration enhancer

Filed January 22, 2016

US Appl. 14/612,433

Oral dosage film exhibiting
enhanced mucosal penetration

Formulation of oral films without
conventional penetration enhancer

Filed February 3, 2015

Japanese Appl.
JP2016527262

Korean Appl.
KR2016008935

EU Appl.
EP3,027,179

Chinese Appl.
CN105530921

Immediately wet oral films dosage
forms have no surfactant and a
polyhydric alcohol

Formulation of oral films containing
active pharmaceutical ingredients

Filed July 30, 2014

Formulation of oral films containing
active pharmaceutical ingredients

Filed July 30, 2014

Formulation of oral films containing
active pharmaceutical ingredients

Filed July 30, 2014

Formulation of oral films containing
active pharmaceutical ingredients

Filed July 30, 2014

Singapore Appl. SG11201600455X

Australian Appl. AU2014298130

Canadian Appl. CA2,919,422

Immediately wet oral films
dosage forms have no surfactant
and a polyhydric alcohol

Formulation of oral films

Filed July 30, 2014

containing active pharmaceutical
ingredients

Formulation of oral films

Filed July 30, 2014

containing active pharmaceutical
ingredients

Formulation of oral films

Filed July 30, 2014

containing active pharmaceutical
ingredients

Canadian Appl. CA2797444

Solid oral dosage forms
comprising tadalafil

Formulation of oral films

Filed November 3, 2011

containing tadalafil

EU Appl. EP1,968,562

Multilayer tablet

Formulation of multilayered

Filed November 22, 2007

tablets

Government
Regulation

The pharmaceutical industry is highly regulated. The products we participate in developing require certain regulatory approvals. In the United States, drugs are
subject to rigorous regulation by the FDA. The U.S. Federal Food, Drug, and Cosmetic Act, and other federal and state statutes and regulations, govern, among
other things, the research, development, testing, manufacture, storage, record keeping, packaging, labeling, adverse event reporting, advertising, promotion,
marketing, distribution, and import and export of pharmaceutical products. Failure to comply with applicable regulatory requirements may subject a company to a
variety of administrative or judicially-imposed sanctions and/or the inability to obtain or maintain required approvals or to market drugs. The steps ordinarily
required before a new pharmaceutical product may be marketed in the United States include:

•

Preclinical laboratory tests, animal studies and formulation studies under FDA’s good laboratory practices regulations, or GLPs;

The submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials may
begin;

The completion of adequate and well-controlled clinical trials according to good clinical practice regulations, or GCPs, to establish the safety and
efficacy of the product for each indication for which approval is sought;

After successful completion of the required clinical testing, submission to the FDA of a NDA, or an ANDA, for generic drugs. In certain cases, an
application for marketing approval may include information regarding safety and efficacy of a proposed drug that comes from studies not
conducted by or for the applicant. Such applications, known as a 505(b)(2) NDA, are permitted for new drug products that incorporate previously
approved active ingredients, even if the proposed new drug incorporates an approved active ingredient in a novel formulation or for a new
indication;

Satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product is to be produced, to
assess compliance with cGMPs to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and
purity; and

•

FDA review and approval of the NDA or ANDA.

The cost of complying with the foregoing requirements, including preparing and submitting an NDA or ANDA, may be substantial. Accordingly, we typically rely
upon our partners in the pharmaceutical industry to spearhead and bear the costs of the FDA approval process. We also seek to mitigate regulatory costs by
focusing on 505(b)(2) NDA opportunities. By applying our drug delivery technology to existing drugs, we seek to develop products with lower research &
development (“R&D”) expenses and shorter time-to-market timelines as compared to regular NDA products.

Research
and
Development
Expense

Our R&D expenses, net of R&D tax credits, for the year ended December 31, 2016 increased by $733 thousand to $1,766 thousand, compared with $1,033
thousand for the year ended December 31, 2015. The increase in R&D expenditure is explained in the section of this report entitled “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”.

Environmental
Regulatory
Compliance

We believe that we are in compliance with environmental regulations applicable to our research and development and manufacturing facility located in Ville Saint
Laurent, Quebec.

Employees

As of the date of this filing, we have 25 full-time and four part-time employees. None of our employees are covered by collective bargaining agreements. We
believe that our relations with our employees are very good.

ITEM
1A.
RISK
FACTORS.

Our business faces many risks. Any of the risks discussed below, or elsewhere in this report or in our other filings with the Securities and Exchange Commission
(“SEC”), could have a material impact on our business, financial condition, or results of operations.

Risks
Related
to
Our
Business

We
have
a
history
of
losses
and
our
revenues
may
not
be
sufficient
to
sustain
our
operations.

Even though we ceased being a “development stage” company in April 2006, we are still subject to all of the risks associated with having a limited operating
history and pursuing the development of new products. Our cash flows may be insufficient to meet expenses relating to our operations and the development of our
business, and may be insufficient to allow us to develop new products. We currently conduct research and development using our proprietary platform technologies
to develop oral controlled release and other delivery products. We do not know whether we will be successful in the development of such products. We have an
accumulated deficit of approximately $17,737 thousand since our inception in 2003 through December 31, 2016. To date, these losses have been financed
principally through sales of equity securities. Our revenues for the past five years ended December 31, 2016, December 31, 2015, December 31, 2014, December
31, 2013 and December 31, 2012 were $5.2 million, $5.1 million, $1.7 million, $948 thousand and $1,198 thousand respectively. Revenue generated to date has not
been sufficient to sustain our operations. In order to achieve profitability, our revenue streams will have to increase and there is no assurance that revenues will
increase to such a level.

We
may
incur
losses
associated
with
foreign
currency
fluctuations.

The majority of our expenses are paid in Canadian dollars, while a significant portion of our revenues are in U.S. dollars. Our financial results are subject to the
impact of currency exchange rate fluctuations. Adverse movements in exchange rates could have a material adverse effect on our financial condition and results of
operations.

We
may
need
additional
capital
to
fulfill
our
business
strategies.
We
may
also
incur
unforeseen
costs.
Failure
to
obtain
such
capital
would
adversely
affect
our
business.

We will need to expend significant capital in order to continue with our research and development by hiring additional research staff and acquiring additional
equipment. If our cash flows from operations are insufficient to fund our expected capital needs, or our needs are greater than anticipated, we may be required to
raise additional funds in the future through private or public sales of equity securities or the incurrence of indebtedness. Additional funding may not be available on
favorable terms, or at all. If we borrow additional funds, we likely will be obligated to make periodic interest or other debt service payments and may be subject to
additional restrictive covenants. If we fail to obtain sufficient additional capital in the future, we could be forced to curtail our growth strategy by reducing or
delaying capital expenditures, selling assets or downsizing or restructuring our operations. If we raise additional funds through public or private sales of equity
securities, the sales may be at prices below the market price of our stock and our shareholders may suffer significant dilution.

The
loss
of
the
services
of
key
personnel
would
adversely
affect
our
business.

Our future success depends to a significant degree on the skills, experience and efforts of our executive officers and senior management staff. The loss of the
services of existing personnel would be detrimental to our research and development programs and to our overall business.

We
are
dependent
on
business
partners
to
conduct
clinical
trials
of,
obtain
regulatory
approvals
for,
and
manufacture,
market,
and
sell
our
products.

We depend heavily on our pharmaceutical partners to pay for part or all of the research and development expenses associated with developing a new product and to
obtain approval from regulatory bodies such as the FDA to commercialize these products. We also depend on our partners to distribute these products after
receiving regulatory approval. Our revenues from research and development fees, milestone payments and royalty fees are derived from our partners. Our inability
to find pharmaceutical partners who are willing to pay us these fees in order to develop new products would negatively impact our business and our cash flows.

We have limited experience in manufacturing, marketing and selling pharmaceutical products. Accordingly, if we cannot maintain our existing partnerships or
establish new partnerships with respect to our other products in development, we will have to establish our own capabilities or discontinue the commercialization of
the affected product. Developing our own capabilities would be expensive and time consuming and could delay the commercialization of the affected product.
There can be no assurance that we would be able to develop these capabilities.

Our existing agreements with pharmaceutical industry partners are generally subject to termination by the counterparty on short notice upon the occurrence of
certain circumstances, including, but not limited to, the following: a determination that the product in development is not likely to be successfully developed or not
likely to receive regulatory approval; our failure to satisfy our obligations under the agreement, or the occurrence of a bankruptcy event. If any of our partnerships
are terminated, we may be required to devote additional resources to the product, seek a new partner on short notice, or abandon the product development efforts.
The terms of any additional partnerships or other arrangements that we establish may not be favorable to us.

We are also at risk that these partnerships or other arrangements may not be successful. Factors that may affect the success of our partnerships include the
following:

•

Our partners may incur financial and cash-flow difficulties that force them to limit or reduce their participation in our joint projects;

Our partners may be pursuing alternative technologies or developing alternative products that are competitive to our product, either on their own or
in partnership with others;

Our partners may reduce marketing or sales efforts, or discontinue marketing or sales of our products, which may reduce our revenues received on
the products;

Our partners may have difficulty obtaining the raw materials to manufacture our products in a timely and cost effective manner or experience
delays in production, which could affect the sales of our products and our royalty revenues earned;

Our partners may terminate their partnerships with us. This could make it difficult for us to attract new partners, and it could adversely affect how
the business and financial communities perceive us;

Our partners may pursue higher priority programs or change the focus of their development programs, which could affect the partner’s
commitment to us. Pharmaceutical and biotechnology companies historically have re-evaluated their priorities from time to time, including
following mergers and consolidations, a common occurrence in recent years; and

Our partners may become the target of litigation for purported patent or intellectual property infringement, which could delay or prohibit
commercialization of our products and which would reduce our revenue from such products.

We
face
competition
in
our
industry,
and
several
of
our
competitors
have
substantially
greater
experience
and
resources
than
we
do.

We compete with other companies within the drug delivery industry, many of which have more capital, more extensive research and development capabilities and
greater human resources than we do. Some of these drug delivery competitors include Monosol Rx, Tesa-Labtec GmbH, BioDelivery Sciences International, Inc.
and LTS Lohmann Therapy Systems Corp. Our competitors may develop new or enhanced products or processes that may be more effective, less expensive, safer
or more readily available than any products or processes that we develop, or they may develop proprietary positions that prevent us from being able to successfully
commercialize new products or processes that we develop. As a result, our products or processes may not compete successfully, and research and development by
others may render our products or processes obsolete or uneconomical. Competition may increase as technological advances are made and commercial applications
broaden.

We
rely
upon
third-party
manufacturers,
which
puts
us
at
risk
for
supplier
business
interruptions.

In certain instances, we may have to enter into agreements with third party manufacturers to manufacture certain of our products once we complete development
and after we receive regulatory approval. If our third-party manufacturers fail to perform, our ability to market products and to generate revenue would be
adversely affected. Our failure to deliver products in a timely manner could lead to the dissatisfaction of our distribution partners and damage our reputation,
causing our distribution partners to cancel existing agreements with us and to stop doing business with us.

Any third-party manufacturers that we depend on to manufacture our products are required to adhere to FDA regulations regarding current Good Manufacturing
Practices (cGMP), which include testing, control and documentation requirements. Ongoing compliance with cGMP and other regulatory requirements is
monitored by periodic inspection by the FDA and comparable agencies in other countries. Failure by our third-party manufacturers to comply with cGMP and other
regulatory requirements could result in actions against them by regulatory agencies and jeopardize our ability to obtain products on a timely basis.

We
are
in
the
process
of
establishing
our
own
manufacturing
facility
for
the
future
manufacture
of
VersaFilm™
products,
which
requires
considerable
financial
investment
and,
if
we
are
unsuccessful,
could
have
a
material
adverse
effect
on
our
business,
financial
condition
or
results
of
operations.

We currently manufacture products only for clinical and testing purposes in our own facility and we do not manufacture products for commercial use. In order to
establish ourselves as a full-service partner for our thin film products, we invested approximately $6.5 million to establish a state-of-the-art manufacturing facility
for the commercial manufacture of products developed using our VersaFilm™ drug delivery technology. We anticipate the manufacturing facility to be qualified
and ready for regulatory approval in the second half of 2017.

We have limited expertise in establishing and operating a manufacturing facility and although we have contracted with architects, engineers and construction
contractors specialized in the planning and construction of pharmaceutical facilities, there can be no guarantee that the project can be completed within the time or
budget allocated. In addition, we may be unable to attract suitably qualified personnel for our manufacturing facility at acceptable terms and conditions of
employment.

In addition, before we can begin commercial manufacture of our VersaFilm™ products for sale in the United States, we must obtain FDA regulatory approval for
the product, which requires a successful inspection of our manufacturing facilities, processes and quality systems by various health authorities in addition to other
product-related approvals. Further, pharmaceutical manufacturing facilities are continuously subject to inspection by the FDA and other health authorities before
and after product approval. Due to the complexity of the processes used to manufacture our VersaFilm™ products, we may be unable initially or at any future time
to pass federal, state or international regulatory inspections in a cost effective manner. If we are unable to comply with manufacturing regulations, we may be
subject to fines, unanticipated compliance expenses, recall or seizure of any approved products, total or partial suspension of production and/or enforcement
actions, including injunctions, and criminal or civil prosecution.

The manufacture of our products is heavily regulated by governmental health authorities, including the FDA. We must ensure that all manufacturing processes
comply with current Good Manufacturing Practices (“cGMP”) and other applicable regulations. If we fail to comply fully with these requirements and the health
authorities' expectations, then we could be required to shut down our production facilities or production lines, or could be prevented from importing our products
from one country to another. This could lead to product shortages, or to our being entirely unable to supply products to patients for an extended period of time.
Such shortages or shut downs could lead to significant losses of sales revenue and to potential third-party litigation. In addition, health authorities have in some
cases imposed significant penalties for such failures to comply with cGMP. A failure to comply fully with cGMP could also lead to a delay in the approval of new
products to be manufactured at our manufacturing facility.

Any disruption in the supply of our future products could have a material adverse effect on our business, financial condition or results of operations.

We
have
no
timely
ability
to
replace
our
future
VersaFilm™
manufacturing
capabilities.

If our manufacturing facility suffers any type of prolonged interruption, whether caused by regulator action, equipment failure, critical facility services, fire, natural
disaster or any other event that causes the cessation of manufacturing activities, we would be exposed to long-term loss of sales and profits. There are no facilities
capable of contract manufacturing our VersaFilm™ products at short notice. If we suffer an interruption to our manufacturing of VersaFilm™ products, we may
have to find a contract manufacturer capable of supplying our needs, although this would require completing a Manufacturing Site Change process, which takes
considerable time and is costly. Replacement of our manufacturing capabilities will have a material adverse effect on our business and financial condition or results
of operations.

We
depend
on
a
limited
number
of
suppliers
for
API.
Generally,
only
a
single
source
of
API
is
qualified
for
use
in
each
product
due
to
the
costs
and
time
required
to
validate
a
second
source
of
supply.
Changes
in
API
suppliers
must
usually
be
approved
through
a
Prior
Approval
Supplement
by
the
FDA.

Our ability to manufacture products is dependent, in part, upon ingredients and components supplied by others, including international suppliers. Any disruption in
the supply of these ingredients or components or any problems in their quality could materially affect our ability to manufacture our products and could result in
legal liabilities that could materially affect our ability to realize profits or otherwise harm our business, financial, and operating results. As the API typically
comprises the majority of a product's manufactured cost, and qualifying an alternative is costly and time-consuming, API suppliers must be selected carefully based
on quality, reliability of supply and long-term financial stability.

We
are
subject
to
extensive
government
regulation
including
the
requirement
of
approval
before
our
products
may
be
marketed.
Even
if
we
obtain
marketing
approval,
our
products
will
be
subject
to
ongoing
regulatory
review.

We, our partners, our products, and our product candidates are subject to extensive regulation by governmental authorities in the United States and other countries.
Failure to comply with applicable requirements could result in warning letters, fines and other civil penalties, delays in approving or refusal to approve a product
candidate, product recall or seizure, withdrawal of product approvals, interruption of manufacturing or clinical trials, operating restrictions, injunctions, and
criminal prosecution.

Our products cannot be marketed in the United States without FDA approval. Obtaining FDA approval requires substantial time, effort, and financial resources, and
there can be no assurance that any approval will be granted on a timely basis, if at all. With most of our products, we rely on our partners for the preparation of
applications and for obtaining regulatory approvals. If the FDA does not approve our product candidates in a timely fashion, or does not approve them at all, our
business and financial condition may be adversely affected. Further, the terms of approval of any marketing application, including the labeling content, may be
more restrictive than we desire and could affect the marketability of our or our partner`s products. Subsequent discovery of problems with an approved product may
result in restrictions on the product or its withdrawal from the market. In addition, both before and after regulatory approval, we, our partners, our products, and our
product candidates are subject to numerous FDA requirements regarding testing, manufacturing, quality control, cGMP, adverse event reporting, labeling,
advertising, promotion, distribution, and export. Our partners and we are subject to surveillance and periodic inspections to ascertain compliance with these
regulations. Further, the relevant law and regulations may change in ways that could affect us, our partners, our products, and our product candidates. Failure to
comply with regulatory requirements could have a material adverse impact on our business.

Regulations regarding the manufacture and sale of our future products are subject to change. We cannot predict what impact, if any, such changes may have on our
business, financial condition or results of operations. Failure to comply with applicable regulatory requirements could have a material adverse effect on our
business, financial condition and results of operations.

Additionally, the time required for obtaining regulatory approval is uncertain. We may encounter delays or product rejections based upon changes in FDA policies,
including cGMP, during periods of product development. We may encounter similar delays in countries outside of the United States. We may not be able to obtain
these regulatory acceptances on a timely basis, or at all.

The failure to obtain timely regulatory acceptance of our products, any product marketing limitations, or any product withdrawals would have a material adverse
effect on our business, financial condition and results of operations. In addition, before it grants approvals, the FDA or any foreign regulatory authority may impose
numerous other requirements with which we must comply. Regulatory acceptance, if granted, may include significant limitations on the indicated uses for which
the product may be marketed. FDA enforcement policy strictly prohibits the marketing of accepted products for unapproved uses. Product acceptance could be
withdrawn or civil and/or criminal sanctions could be imposed for our failure to comply with regulatory standards or the occurrence of unforeseen problems
following initial marketing.

We
may
not
be
able
to
expand
or
enhance
our
existing
product
lines
with
new
products
limiting
our
ability
to
grow.

If we are not successful in the development and introduction of new products, our ability to grow will be impeded. We may not be able to identify products to
enhance or expand our product lines. Even if we can identify potential products, our investment in research and development might be significant before we can
bring the products to market. Moreover, even if we identify a potential product and expend significant dollars on development, we may never be able to bring the
product to market or achieve market acceptance for such product. As a result, we may never recover our expenses.

The
market
may
not
be
receptive
to
products
incorporating
our
drug
delivery
technologies.

The commercial success of any of our products that are approved for marketing by the FDA and other regulatory authorities will depend upon their acceptance by
the medical community and third party payers as clinically useful, cost-effective and safe. To date, only two products based upon our technologies have been
marketed in the United States, which limits our ability to provide guidance or assurance as to market acceptance.

Factors that we believe could materially affect market acceptance of these products include:

•

The timing of the receipt of marketing approvals and the countries in which such approvals are obtained;

The safety and efficacy of the product as compared to competitive products;

The relative convenience and ease of administration as compared to competitive products;

The strength of marketing distribution support; and

The cost-effectiveness of the product and the ability to receive third party reimbursement.

We
are
subject
to
environmental
regulations,
and
any
failure
to
comply
may
result
in
substantial
fines
and
sanctions.

Our operations are subject to Canadian and international environmental laws and regulations governing, among other things, emissions to air, discharges to waters
and the generation, handling, storage, transportation, treatment and disposal of raw materials, waste and other materials. Many of these laws and regulations
provide for substantial fines and criminal sanctions for violations. We believe that we are and have been operating our business and facility in a manner that
complies in all material respects with environmental, health and safety laws and regulations; however, we may incur material costs or liabilities if we fail to operate
in full compliance. We do not maintain environmental damage insurance coverage with respect to the products which we manufacture.

The decision to establish commercial film manufacturing capability may require us to make significant expenditures in the future to comply with evolving
environmental, health and safety requirements, including new requirements that may be adopted or imposed in the future. To meet changing licensing and
regulatory standards, we may have to make significant additional site or operational modifications that could involve substantial expenditures or reduction or
suspension of some of our operations. We cannot be certain that we have identified all environmental and health and safety matters affecting our activities and in
the future our environmental, health and safety problems, and the costs to remediate them, may be materially greater than we expect.

Risks
Related
to
Our
Intellectual
Property

If
we
are
not
able
to
adequately
protect
our
intellectual
property,
we
may
not
be
able
to
compete
effectively.

Our success depends, to a significant degree, upon the protection of our proprietary technologies. While we currently own 8 patents and have an additional 18
pending patent applications in several jurisdictions, we will need to pursue additional protection for our intellectual property as we develop new products and
enhance existing products. We may not be able to obtain appropriate protection for our intellectual property in a timely manner, or at all. Our inability to obtain
appropriate protections for our intellectual property may allow competitors to enter our markets and produce or sell the same or similar products.

If we are forced to resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome and expensive. In addition, our
proprietary rights could be at risk if we are unsuccessful in, or cannot afford to pursue, those proceedings.

We also rely on trade secrets and contract law to protect some of our proprietary technology. We have entered into confidentiality and invention agreements with
our employees and consultants. Nevertheless, these agreements may not be honored and they may not effectively protect our right to our un-patented trade secrets
and know-how. Moreover, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade
secrets and know-how.

We may need to obtain licenses to patents or other proprietary rights from third parties. We may not be able to obtain the licenses required under any patents or
proprietary rights or they may not be available on acceptable terms. If we do not obtain required licenses, we may encounter delays in product development or find
that the development, manufacture or sale of products requiring licenses could be foreclosed. We may, from time to time, support and collaborate in research
conducted by universities and governmental research organizations. We may not be able to acquire exclusive rights to the inventions or technical information
derived from these collaborations, and disputes may arise over rights in derivative or related research programs conducted by us or our partners.

If
we
infringe
on
the
rights
of
third
parties,
we
may
not
be
able
to
sell
our
products,
and
we
may
have
to
defend
against
litigation
and
pay
damages.

If a competitor were to assert that our products infringe on its patent or other intellectual property rights, we could incur substantial litigation costs and be forced to
pay substantial damages. Such litigation costs could be as a result of direct litigation against us, or as a result of litigation against one or more of our partners to
whom we have contractually agreed to indemnify in the event that our intellectual property is the cause of a successful litigious action against our partner. Third-
party infringement claims, regardless of their outcome, would not only consume significant financial resources, but would also divert our management’s time and
attention. Such claims could also cause our customers or potential customers to purchase competitors’ products or defer or limit their purchase or use of our
affected products until resolution of the claim. If any of our products are found to violate third-party intellectual property rights, we may have to re-engineer one or
more of our products, or we may have to obtain licenses from third parties to continue offering our products without substantial re-engineering. Our efforts to re-
engineer or obtain licenses could require significant expenditures and may not be successful.

Our
controlled
release
products
that
are
generic
versions
of
branded
controlled
release
products
that
are
covered
by
one
or
more
patents
may
be
subject
to
litigation,
which
could
delay
FDA
approval
and
commercial
launch
of
our
products.

We expect to file or have our partners file NDAs or ANDAs for our controlled release products under development that are covered by one or more patents of the
branded product. It is likely that the owners of the patents covering the brand name product or the sponsors of the NDA with respect to the branded product will sue
or undertake regulatory initiatives to preserve marketing exclusivity. Any significant delay in obtaining FDA approval to market our products as a result of
litigation, as well as the expense of such litigation, whether or not we or our partners are successful, could have a materially adverse effect on our business,
financial condition and results of operations.

Risks
Related
to
Our
Securities:

The
price
of
our
common
stock
could
be
subject
to
significant
fluctuations.

Any of the following factors could affect the market price of our common stock:

•

Our failure to achieve and maintain profitability;

Changes in earnings estimates and recommendations by financial analysts;

Actual or anticipated variations in our quarterly results of operations;

Changes in market valuations of similar companies;

Announcements by us or our competitors of significant contracts, new products, acquisitions, commercial relationships, joint ventures or capital
commitments;

The loss of major customers or product or component suppliers;

The loss of significant partnering relationships; and

General market, political and economic conditions.

We have a significant number of convertible securities outstanding that could be exercised in the future. Subsequent resale of these and other shares could cause
our stock price to decline. This could also make it more difficult to raise funds at acceptable levels pursuant to future securities offerings.

Our
common
stock
is
a
high
risk
investment.

There is a limited trading market for our common stock, which may affect the ability of shareholders to sell our common stock and the prices at which they may be
able to sell our common stock.

The market price of our common stock has been volatile and fluctuates widely in response to various factors which are beyond our control. The price of our
common stock is not necessarily indicative of our operating performance or long term business prospects. In addition, the securities markets have from time to time
experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also
materially and adversely affect the market price of our common stock.

In the United States, our common stock is considered a “penny stock”. The SEC has adopted regulations which generally define a “penny stock” to be an equity
security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. This designation
requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and
determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and
may affect the ability of investors to sell their shares.

As a result of the foregoing, our common stock should be considered a high risk investment.

The
application
of
the
“penny
stock”
rules
to
our
common
stock
could
limit
the
trading
and
liquidity
of
our
common
stock,
adversely
affect
the
market
price
of
our
common
stock
and
increase
stockholder
transaction
costs
to
sell
those
shares.

As long as the trading price of our common stock is below $5.00 per share, the open market trading of our common stock will be subject to the “penny stock” rules,
unless we otherwise qualify for an exemption from the “penny stock” definition. The “penny stock” rules impose additional sales practice requirements on certain
broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 together with their spouse). These regulations, if they apply, require the delivery, prior to any transaction involving
a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such
securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a
purchaser and receive such purchaser’s written agreement to a transaction prior to sale. These regulations may have the effect of limiting the trading activity of our
common stock, reducing the liquidity of an investment in our common stock and increasing the transaction costs for sales and purchases of our common stock as
compared to other securities.

We
became
public
by
means
of
a
reverse
merger,
and
as
a
result
we
are
subject
to
the
risks
associated
with
the
prior
activities
of
the
public
company
with
which
we
merged.

Additional risks may exist because we became public through a “reverse merger” with a shell corporation. Although the shell did not have any operations or assets
and we performed a due diligence review of the public company, there can be no assurance that we will not be exposed to undisclosed liabilities resulting from the
prior operations of our company.

Our
limited
cash
resources
restrict
our
ability
to
pay
cash
dividends.

Since our inception, we have not paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to support operations and to
finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination relating
to our dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including future earnings, capital
requirements, financial conditions and future prospect and other factors that the Board of Directors may deem relevant. If we do not pay any dividends on our
common stock, our shareholders will be able to profit from an investment only if the price of the stock appreciates before the shareholder sells it. Investors seeking
cash dividends should not purchase our common stock.

If
we
are
the
subject
of
securities
analyst
reports
or
if
any
securities
analyst
downgrades
our
common
stock
or
our
sector,
the
price
of
our
common
stock
could
be
negatively
affected.

Securities analysts may publish reports about us or our industry containing information about us that may affect the trading price of our common stock. In addition,
if a securities or industry analyst downgrades the outlook for our stock or one of our competitors’ stocks, the trading price of our common stock may also be
negatively affected.

ITEM
1B.
UNRESOLVED
STAFF
COMMENTS

Not applicable.

ITEM
2.
PROPERTIES

On April 24, 2015, we entered into an agreement to lease approximately 17,000 square feet in a property located at 6420 Abrams, St-Laurent, Quebec (the
“Lease”). The Lease has a 10 year and 6-month term which commenced on September 1, 2015 and we have retained two options to extend the Lease, with each
option being for an additional five years. Under the terms of the Lease we will be required to pay base rent of approximately CA$110 thousand (approximately $84
thousand) per year, which will increase at a rate of CA$0.25 ($0.19) per square foot/per year, every two years. Approximately 9,500 square feet of the new facility
is being used to establish manufacturing capabilities for our VersaFilm™ thin film products, approximately 4,000 square feet for our R&D activities, and
approximately 3,500 square feet for administration.

We also finalised negotiations on April 29, 2015 for an agreement for the construction of manufacturing facilities, laboratories, and offices within the property
located at 6420 Abrams, St-Laurent, Quebec, at an aggregate cost of CA$2.9 million (approximately $2.2 million). The construction agreement was awarded to
BTL Construction Inc. (“BTL”) in Quebec following a tender process that was completed in December 2014. BTL specializes in the construction and renovation of
facilities for the pharmaceutical industry, and has completed projects for various major pharmaceutical companies. We funded this project from cash on hand as
well as a CA$1 million loan from IQ.

ITEM
3.
LEGAL
PROCEEDINGS

Litigation related to Forfivo XL ®

In August 2013, we announced receipt of a Paragraph IV Certification Letter from Wockhardt Bio AG, advising of the submission of an ANDA to the FDA
requesting authorization to manufacture and market generic versions of Forfivo XL ® 450 mg tablets in the U.S. In November 2014, we announced that the
Paragraph IV litigation with Wockhardt had been settled and that, under the terms of the settlement effective November 26, 2014, Wockhardt has been granted the
rights, with effect from January 15, 2018, to be the exclusive marketer and distributor of an authorized generic of Forfivo XL ® in the U.S.

Litigation related to Buprenorphine/Naloxone

In August 2013 we learned that, in response to the July 2013 filing of an ANDA by Par, for our generic formulation of buprenorphine and naloxone Sublingual
Film, indicated for the treatment of opioid dependence, we were named as a codefendant in a lawsuit pursuant to Paragraph IV litigation filed by Reckitt Benckiser
Pharmaceuticals and Monosol RX in the U.S. District Court for the District of Delaware alleging infringement of U.S. Patent Nos. 8,475,832 (“the ‘832 patent”),
8,603,514 (“the ‘514 patent”) and 8,017,150 (“the ‘150 patent”), each of which relate to Suboxone ® . On June 2016 we received a trial opinion from Judge
Andrews in which the asserted claims of the ‘832 patent and ‘150 patent were found either invalid or not infringed, while at least one of the alleged claims of the
‘514 patent was found valid and infringed by the ANDA product. A post-judgment motion was filed to introduce additional evidence related to the definition of the
term “dried” for the judge’s consideration in support of our non-infringement position concerning the ANDA product. The additional evidence was presented
during the trial on the ‘497 patent in November 2016. We still believe the ANDA product does not infringe the ‘514 patent or any other patents, and will vigorously
defend ourselves in this matter. In accordance with the terms of the co-development and commercialization agreement, Par is financially responsible for the costs of
this defense. Since Paragraph IV litigation is a regular part of the ANDA process, we were expecting Reckitt Benckiser and Monosol RX to launch suit, and the
litigation timeline has been incorporated in our overall launch timeline.

In December 2014, Reckitt Benckiser Pharmaceuticals and Monosol RX filed a lawsuit for patent infringement in the U.S. District Court for the District of
Delaware relating to the Suboxone ® ANDA product. We were named as a codefendant in this action alleging patent infringement United States Patent Nos.
8,900,497 (“the ’497 patent”) and 8,906,277 (“the ’277 patent”), each of which relate to a process for making a uniform oral film (“the process patents”). The trial
for the process patent was held in November 2016. We believe the ANDA product relating to Suboxone ® does not infringe those process patents or any other
patents, and will vigorously defend ourselves in this matter. In accordance with the terms of the co-development and commercialization agreement, Par is
financially responsible for the costs of this defense.

Litigation related to INT0007 Tadalafil VersaFilm TM

On February 26, 2016, we filed a request for inter partes reviews (or IPR) in the United States Patent and Trademark Office (USPTO) of patent no. 6,943,166
owned by ICOS Corporation (wholly owned by Eli Lilly & Company), the ‘166 patent, to challenge its validity and remove any infringement liability concerning
our tadalafil oral film. On September 1, 2016, the USPTO decided not to institute the inter partes review for the ’166 Patent. The USPTO’s decision was purely on
statutory grounds and based on a technicality (in that the IPR was not addressing an essential element of the claim). On October 3, 2016, we filed a Request for
Rehearing, requesting reconsideration of the USPTO’s decision denying institution of the IPR. On November 16, 2016, we withdrew our Request for Rehearing
and signed a binding term sheet with Eli Lilly & Company granting us a license for the commercialization of our tadalafil oral film upon FDA approval of the
product and post expiration of the compound patent (US pat. No. 5,859,006).

There are no additional material pending legal proceedings to which we are a party or to which any of our property is subject and to the best of our knowledge, no
such additional actions against us are contemplated or threatened.

ITEM
4.
MINE
SAFETY
DISCLOSURES

Not applicable.

PART
II

ITEM
5.
MARKET
FOR
REGISTRANT’S
COMMON
EQUITY,
RELATED
STOCKHOLDER
MATTERS
AND
ISSUER
PURCHASES
OF
EQUITY
SECURITIES

Market
Information

Our common stock was quoted on the OTC Bulletin Board under the symbol “IGXT” from January 2007 until June 2012 and, subsequent to our upgrade in June
2012, has been quoted on the OTCQX. Our common stock has also been listed on the TSX Venture Exchange under the symbol “IGX” since May 2008. The table
below sets forth the high and low bid prices of our common stock as reported by the OTC Bulletin Board/OTCQX and the TSX for the periods indicated. These
prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

2016
Fourth Quarter
Third Quarter
Second Quarter
First Quarter

2015
Fourth Quarter
Third Quarter
Second Quarter
First Quarter

Number
of
Shareholders

OTCQX/OTCBB

TSX-V

High
(U.S.$)

Low
(U.S.$)

High
(CAD$)

Low
(CAD$)

$
$
$
$

0.81
1.00
0.59
0.63

0.58
0.60
0.73
0.90

$
$
$
$

0.55
0.45
0.49
0.37

0.46
0.40
0.56
0.52

$
$
$
$

1.09
1.35
0.75
0.85

0.76
0.81
0.98
1.10

$
$
$
$

0.76
0.61
0.65
0.55

0.59
0.66
0.63
0.61

On March 23, 2017 there were approximately 46 holders of record of our common stock, one of which was Cede & Co., a nominee for Depository Trust Company,
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 United States and Canada as nominees for beneficial owners are considered to be held of record by Cede & Co. in respect of brokerage firms,
banks and other financial institutions in the United States, and by CDS in respect of brokerage 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 any cash dividends on our common stock. We currently intend to retain any earnings to support operations and to finance the
growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination relating to our
dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including future earnings, capital requirements,
financial conditions and future prospect and other factors that the board of directors may deem relevant.

Purchases
of
Equity
Securities
by
the
Issuer
and
Affiliated
Purchasers

During the fourth quarter of 2016, there were no purchases or repurchases of our equity securities by us or any affiliated purchasers.

Unregistered
Sales
of
Equity
Securities
and
Use
of
Proceeds

During fiscal 2016, we did not sell equity securities without registration under the Securities Act of 1933, as amended, except as disclosed on a Current Report on
Form 8-K.

Equity
Compensation
Plan
Information

Number of Securities to be
issued upon exercise of
outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding options,
warrants and rights

Equity Compensation Plans Approved by
Security Holders

Equity Compensation Plans Not Approved
by Security Holders

Total

(a)

1,785,000 (1)

1,175,000 (2)

2,960,000

(b)

$0.54

$0.78

$0.63

Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a))
(c)

NIL (2)

1,938,954 (3)

1,938,954

(1)
(2)

(3)

Includes shares of our common stock issuable pursuant to options granted under the 2006 Stock Option Plan.
On May 9, 2016, the Board of Directors of the Company adopted the 2016 Stock Option Plan which amended and restated the 2006 Stock Option Plan,
which expired in August 2016. As a result of the adoption of the 2016 Stock Option Plan, no additional options will be granted under the 2006 Stock
Option Plan and all previously granted options will be governed by the 2016 Stock Option Plan. Due to the nature of the changes made to the 2006 Stock
Option Plan it was determined that no stockholder approvals were required by the TSX Venture Exchange.
Represents the maximum number of shares of our common stock available for grants under the 2016 Stock Option Plan as of December 31, 2016.

2016
Stock
Option
Plan

The 2016 Stock Option Plan was adopted by the Board of Director of the Company in order to make the terms of the Company’s stock option plan more consistent
with the requirements of the TSX Venture Exchange and to remove certain provisions which would have enabled the Company to grant incentive stock options in
compliance with Section 422 of the Internal Revenue Code. The 2016 Stock Option Plan permits the granting of options to officers, employees, directors and
eligible consultants of the Company. A total of 6,361,525 shares of common stock were reserved for issuance under this plan, which includes stock options granted
under the previous 2006 Stock Option Plan. Options may be granted under the 2016 Stock Option Plan on terms and at prices as determined by the Board except
that the options cannot be granted at less than the market closing price of the common stock on the TSX-V on the date prior to the grant. Each option will be
exercisable after the period or periods specified in the option agreement, but no option may be exercised after the expiration of 10 years from the date of grant. The
2016 Stock Option Plan provides the Board with more flexibility when setting the vesting schedule for options which was otherwise fixed in the 2006 Stock Option
Plan.

ITEM
6.
SELECTED
FINANCIAL
DATA

Not applicable.

ITEM
7.
MANAGEMENT’S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITIONS
AND
RESULTS
OF
OPERATIONS

Introduction
to
Management’s
Discussion
and
Analysis

The purpose of this section, Management’s Discussion and Analysis of Financial Condition and Results of Operations, is to provide a narrative explanation of the
financial statements that enables investors to better understand our business, to enhance our overall financial disclosure, to provide the context within which our
financial information may be analyzed, and to provide information about the quality of, and potential variability of, our financial condition, results of operations
and cash flows. Unless otherwise indicated, all financial and statistical information included herein relates to our continuing operations. Unless otherwise indicated
or the context otherwise requires, the words, “IntelGenx”, “Company”, “we”, “us”, and “our” refer to IntelGenx Technologies Corp. and its subsidiaries, including
IntelGenx Corp. This information should be read in conjunction with the accompanying audited Consolidated Financial Statements and Notes thereto.

Company
Background

Our business strategy is to develop pharmaceutical products based on our proprietary drug delivery technologies and, once the viability of a product has been
demonstrated, to license the commercial rights to partners in the pharmaceutical industry. In certain cases, we rely upon partners in the pharmaceutical industry to
fund development of the licensed products, complete the regulatory approval process with the FDA or other regulatory agencies relating to the licensed products,
and assume responsibility for marketing and distributing such products.

We have established a state-of-the-art manufacturing facility for the future manufacture of our VersaFilm™ products. Construction of the manufacturing and
laboratories are completed and we are expecting to start commercial manufacturing in Q4 2017 / Q1 2018. We believe that this (1) represents a profitable business
opportunity, (2) will reduce our dependency upon third-party contract manufacturers, thereby protecting our manufacturing process know-how and intellectual
property, and (3) allows us to offer our development partners a full service from product conception through to supply of the finished product.

As previously announced, we have financed the Manufacturing Establishment and Laboratory Expansion project from cash in hand and a government-backed bank
financing of up to CA$4 million with the Bank as well as a CA$1 million loan from Investissement Québec (“IQ”).

We will continue to hire new personnel, primarily in the areas of research and development, manufacturing, and administration on an as-needed basis as we enter
into partnership agreements, establish our VersaFilm™ manufacturing capability, and further increase our research and development activities and capabilities.

2016
Key
Developments

Anti-depressant tablet, Forfivo XL ®

Anti-migraine VersaFilm™

On February 18, 2016, we announced that the USPTO had granted a patent protecting Rizaport®, an oral thin film formulation of rizatriptan benzoate for the
treatment of acute migraines. This patent protects the composition of Rizaport® and will be listed in the Orange Book upon approval of the product by the FDA.
The patent application, entitled “Instantly Wettable Oral Film Dosage Form Without Surfactant or Polyalcohol” covers rapidly disintegrating film oral dosage
forms and is valid until 2034.

Through our partner Grupo Juste, (Exeltis) the product was submitted in Spain in September 2016 for approval using a decentralized procedure. Approval in Spain
is currently expected for Q4 2017.

On December 14, 2016, we, together with our partner RedHill Biopharma, announced the signing of an exclusive license agreement with Pharmatronic Co. for the
commercialization of RIZAPORT® in the Republic of Korea (South Korea). Under the terms of the agreement, RedHill granted Pharmatronic Co. the exclusive
rights to register and commercialize RIZAPORT® in South Korea. IntelGenx and RedHill have received an upfront payment and will be eligible to receive
additional milestone payments upon achievement of certain predefined regulatory and commercial targets, as well as tiered royalties. IntelGenx will supply the
commercial product to Pharmatronic. The initial term of the definitive agreement with Pharmatronic Co. is for ten years from the date of first commercial sale and
shall automatically renew for an additional two-year term. Commercial launch in South Korea is estimated to take place in the first quarter of 2019.

Erectile Dysfunction VersaFilm™

On November 21, 2016, we announced the signing of a binding term sheet for a license to Eli Lilly and Company’s tadalafil dosing patent, United States Patent No.
6,943,166 (the ‘166 dosing patent). Any exclusivity associated with the tadalafil compound patent is not affected by this agreement.

Subject to FDA approval, this license allows us to commercialize a Tadalafil ED VersaFilm™ product in the U.S. prior to the expiration of the ‘166 dosing patent.
This license terminates all our current tadalafil-related litigation activities.

Opioid dependence VersaFilm™

On July 11, 2016, the Company announced the receipt of the notice of appeal for the buprenorphine/naloxone sublingual film product for the treatment of opiate
addiction by Par Pharmaceutical, Inc. (Par) and the Company to the United States Court of Appeals for the Federal Circuit from the final judgment issued by the
U.S. District Court for the District of Delaware on June 28, 2016.

The ruling in the U.S. District Court of Delaware in the ANDA litigation of Par and the Company against Indivior PLC and Monosol Rx, LLC resulted in Par and
the Company prevailing on the non-infringement of the U.S. Patent No. 8,017,150, which is set to expire in 2023, and on the invalidity (all claims) and non-
infringement (certain claims) of the U.S. Patent No. 8,475,832, which is set to expire in 2030. The Court also ruled that Par’s ANDA product would infringe the
asserted claims of U.S. Patent No. 8,603,514, one of the Orange Book listed patents for Suboxone Film, and that the asserted claims of U.S. Patent No. 8,603,514
were not shown to be invalid.

Undisclosed
projects

On September 12, 2016, we announced that we had entered into a licensing, development and supply agreement with Chemo Group (Chemo) granting Chemo the
exclusive license to commercialize two generic products for the USA market and one product on a worldwide basis. Under the terms of the agreement, Chemo has
obtained certain exclusive rights to market and sell our products in exchange for upfront and milestone payments, together with a share of the profits of U.S.
Preparation of Scale-up activities for the product are currently ongoing.

On December 1 st , 2016, we announced that we had strengthened our relationship with Chemo Group by signing a term sheet for the co-development and
commercialization of a generic tablet in the area of CNS (central nervous system) on a worldwide basis. According to Global Data, worldwide sales in 2015 of the
CNS related product exceeded $4 billion. As per the agreement we received an upfront payment and will be entitled to receive development costs of the product
and future milestone payments. Chemo and IntelGenx will also share the profits of commercialization. The definitive agreement was signed on December 30, 2016

Corporate

New Manufacturing Facility with increased R&D and Administration space

Construction was successfully completed in Q1, 2016. As of December 31, 2016, we had received CA$4 million in cash as part of a credit facility (approximately
$3.2 million) negotiated with the Bank. The credit facility is supported by a 50% guarantee under the Export Guarantee Program from Export Development
Canada, Canada’s export credit agency.

All amounts are expressed in thousands of U.S. dollars unless otherwise stated.

Currency
rate
fluctuations

Our operating currency is Canadian dollars, while our reporting currency is U.S. dollars. Accordingly, our results of operations and balance sheet position have
been affected by currency rate fluctuations. In summary, our financial statements for the fiscal year ended December 31, 2016 report an accumulated other
comprehensive loss due to foreign currency translation adjustments of $1,019 due to the fluctuations in the rates used to prepare our financial statements, $293 of
which negatively impacted our comprehensive income for the fiscal year ended December 31, 2016. The following Management Discussion and Analysis takes this
into consideration whenever material.

Reconciliation
of
Comprehensive
(Loss)
Income
to
Adjusted
Earnings
before
Interest,
Taxes,
Depreciation
and
Amortization
(Adjusted
EBITDA)

Adjusted EBITDA is a non-US GAAP financial measure. A reconciliation of the Adjusted EBITDA is presented in the table below. The Company uses adjusted
financial measures to assess its operating performance. Securities regulations require that companies caution readers that earnings and other measures adjusted to a
basis other than US-GAAP do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they
should not be considered in isolation. The Company uses Adjusted EBITDA to measure its performance from one period to the next without the variation caused by
certain adjustments that could potentially distort the analysis of trends in our operating performance, and because the Company believes it provides meaningful
information on the Company’s financial condition and operating results.

IntelGenx obtains its Adjusted EBITDA measurement by adding to comprehensive (loss) income, finance income and costs, depreciation and amortization, income
taxes and foreign currency translation adjustment incurred during the period. IntelGenx also excludes the effects of certain non-monetary transactions recorded,
such as share-based compensation, for its Adjusted EBITDA calculation. The Company believes it is useful to exclude these items as they are either non-cash
expenses, items that cannot be influenced by management in the short term, or items that do not impact core operating performance. Excluding these items does not
imply they are necessarily nonrecurring. Share-based compensation costs are a component of employee and consultant’s remuneration and can vary significantly
with changes in the market price of the Company’s shares. Foreign currency translation adjustments are a component of other comprehensive income and can vary
significantly with currency fluctuations from one period to another. In addition, other items that do not impact core operating performance of the Company may
vary significantly from one period to another. As such, Adjusted EBITDA provides improved continuity with respect to the comparison of the Company’s
operating results over a period of time. Our method for calculating Adjusted EBITDA may differ from that used by other corporations.

Reconciliation
of
Non-U.S.-GAAP
Financial
Information

In
U.S.$
thousands

Comprehensive (loss) income
Add
(deduct):
Depreciation and amortization
Finance costs
Finance income
Share-based compensation
Foreign currency translation adjustment

Adjusted
EBITDA

Three-month
period
ended
December
31,

Twelve-month
period
ended
December
31,

2016
$
(22)

150
57
(2)
54
398

635

2015
$
233

123
22
(8)
25
34

429

2016
$
(1,473)

511
203
(4)
195
293

(275)

2015
$
799

171
123
(28)
130
492

1,687

Adjusted
Earnings
before
Interest,
Taxes,
Depreciation
and
Amortization
(Adjusted
EBITDA)

Adjusted EBITDA increased by $206 for the three-month period ended December 31, 2016 to $635 compared to $429 for the three-month period ended December
31, 2015. Adjusted EBITDA decreased by $1,962 for the twelve-month period ended December 31, 2016 to negative $275 compared to $1,687 for the twelve-
month period ended December 31, 2015. The increase in Adjusted EBITDA of $206 for the three–month period ended December 31, 2016 is mainly attributable to
an increase in revenues of $409 partially offset by an increase in R&D expenses of $77 and an increase in SG&A expenses of $176. The decrease in Adjusted
EBITDA of $1,962 for the twelve-month period ended December 31, 2016 is mainly attributable to an increase in R&D expenses of $733 and an increase in SG&A
expenses of $1,533 partially offset by an increase in revenues of $125.

Results
of
operations
for
the
three
month
and
twelve
month
periods
ended
December
31,
2016
compared
with
the
three
month
and
twelve
month
periods
ended
December
31,
2015.

Revenue

In
U.S.$
thousands

Cost of Royalty and License Revenue
Research and Development Expenses
Selling, General and Administrative Expenses
Depreciation of tangible assets
Amortization of intangible assets

Operating
Income
(Loss)

Net
Income
(Loss)

Comprehensive
Income
(Loss)

Revenue

Three-month
period
ended
December
31,

Twelve-month
period
ended
December
31,

2016
1,911

2015
1,502

2016
5,220

91
471
768
150
-

431

376

(22)

141
390
567
106
17

281

267

233

319
1,766
3,605
511
-

(981)

(1,180)

(1,473)

2015
5,095

433
1,033
2,072
125
46

1,386

1,291

799

Total revenues for the three-month period ended December 31, 2016 amounted to $1,911, representing an increase of $409 or 27% compared to $1,502 for the
three-month period ended December 31, 2015. Total revenues for the twelve-month period ended December 31, 2016 amounted to $5,220 representing an increase
of $125 or 2% compared to $5,095 for the twelve-month period ended December 31, 2015. The increase for the three-month period ended December 31, 2016
compared to the last year’s corresponding period is mainly attributable to upfront payments received in Q4 2016. The increase for the twelve-month period ended
December 31, 2016 compared to the last year’s corresponding period is also mainly attributable to upfront payments received during 2016. The main differences
between the three-month and twelve-month periods of 2016 vs 2015 is mainly the source of revenues that went from royalties and milestones in 2015 to deferred
revenues from monetization of Forfivo and upfront payments from multiple agreements signed in 2016.

Cost
of
royalty
and
license
revenue

We recorded $91 for the cost of royalty and license revenue in the three-month period ended December 31, 2016 compared with $141 in the same period of 2015.
We recorded $319 for the cost of royalty and license revenue in the twelve-month period ended December 31, 2016 compared with $433 in the same period of
2015. These expenses relate to a Project Transfer Agreement that was executed in May 2010 with one of our former development partners whereby we acquired
full rights to, and ownership of, Forfivo XL ® , our novel, high strength formulation of Bupropion hydrochloride, the active ingredient in Wellbutrin XL ® .
Pursuant to the Project Transfer Agreement, and following commercial launch of Forfivo XL ® in October 2012, we are required, after recovering an aggregate
$200 for management fees previously paid, to pay our former development partner 10% of net product sales received from the sale of Forfivo XL ® . We recovered
the final portion of the management fees in December 2014, thereby invoking payments to our former development partner.

Research
and
development
(“R&D”)
expenses

R&D expenses for the three-month period ended December 31, 2016 amounted to $471, representing an increase of $81 or 21%, compared to $390 for the three-
month period ended December 31, 2015. R&D expenses for the twelve-month period ended December 31, 2016 amounted to $1,766, representing an increase of
$733 or 71%, compared to $1,033 recorded in the same period of 2015.

The increase in R&D expenses for the three-month period ended December 31, 2016 is mainly attributable to an increase in R&D salaries of $96 and laboratory
supplies of $79 partially offset by a decrease in patent expenses of $59. The increase in R&D expenses for the twelve-month period ended December 31, 2016 is
mainly attributable to an increase in patent expenses of $290, an increase in R&D salaries of $206 for new hires, laboratory supplies of $99, analytical costs of $78
as well as an increase in study costs of $48.

In the twelve-month period ended December 31, 2016 we recorded estimated Research and Development Tax Credits of $148, compared with $105 that was
recorded in the same period of the previous year.

Selling,
general
and
administrative
(“SG&A”)
expenses

SG&A expenses for the three-month period ended December 31, 2016 amounted to $768, representing an increase of $201 or 35%, compared to $567 for the three-
month period ended December 31, 2015. SG&A expenses for the twelve-month period ended December 31, 2016 amounted to $3,605, representing an increase of
$1,533 or 74%, compared to $2,072 recorded in the same period of 2015.

The increase in SG&A expenses for the three-month period ended December 31, 2016 is mainly attributable to an increase in administration salaries of $119 as
well as an increase in business development salaries of $49. The increase in SG&A expenses for the twelve-month period ended December 31, 2016 is mainly
attributable to an increase in administration salaries of $585, business development salaries of $205 and business development expenses of $188 as well as an
increase in professional fees of $163, rent and utilities of $115 and finally an increase in office and general expenses of $95.

Depreciation
of
tangible
assets

In the three-month period ended December 31, 2016 we recorded an expense of $150 for the depreciation of tangible assets, compared with an expense of $106
thousand for the same period of the previous year. In the twelve-month period ended December 31, 2016 we recorded an expense of $511 for the depreciation of
tangible assets, compared with an expense of $125 for the same period of the previous year.

Share-based
compensation
expense,
warrants
and
stock
based
payments

Share-based compensation warrants and share-based payments expense for the three-month period ended December 31, 2016 amounted to $54 compared to $25 for
the three-month period ended December 31, 2015. Share-based compensation warrants and share-based payments expense for the twelve-month period ended
December 31, 2016 amounted to $195 compared to $130 for the twelve-month period ended December 31, 2015.

We expensed approximately $141 in the twelve-month period ended December 31, 2016 for options granted to our employees in 2014, 2015 and 2016 under the
2006 and 2016 Stock Option Plans, and approximately $52 for options granted to non-employee directors in 2014, 2015 and 2016, compared with $60 and $70
respectively that was expensed in the same period of the previous year.

There remains approximately $320 in stock based compensation to be expensed in fiscal 2016 and 2017, $309 of which relates to the issuance of options to our
employees and directors during 2014 to 2016 and $11 relates to the issuance of options to a consultant. We anticipate the issuance of additional options and
warrants in the future, which will continue to result in stock-based compensation expense.

Key
items
from
the
balance
sheet

In
U.S.$
thousands

December
31,
2016

December
31,
2015

Increase/
(Decrease)

Percentage
Increase/
(Decrease)

Current Assets

6,352

4,172

2,180

Leasehold improvements and Equipment

Security Deposits

Current Liabilities

Deferred lease obligations

Long-term debt

Capital Stock

Additional Paid-in-Capital

Current
assets

5,730

708

5,235

2,565

4,238

506

1,779

1,546

23,700

22,846

1,492

202

3,456

1,019

854

52%

35%

40%

194%

67%

66%

Current assets totaled $6,352 at December 31, 2016 compared with $4,172 at December 31, 2015. The increase of $2,180 is mainly attributable to an increase in
short term financial investments of $3,884 as well as an increase in prepaid expenses of $496 partially offset by a decrease in cash and cash equivalents of $2,253.

Cash
and
cash
equivalents

Cash and cash equivalents totaled $612 as at December 31, 2016 representing a decrease of $2,253 compared with the balance of $2,865 as at December 31, 2015.
The decrease in cash on hand relates to net cash used in investing activities of ($5,910) as well an unrealized foreign exchange loss of $4, partially offset by net
cash provided by operating activities of $1,729 as well as net cash provided by financing activities of $1,924.

The cash provided by financing activities derives from a loan negotiated with the Lender secured by a first ranking movable hypothec on all present and future
movable property of the Company and a 50% guarantee by Export Development Canada, a Canadian Crown corporation export credit agency.

Accounts
receivable

Accounts receivable totaled $1,044 as at December 31, 2016 representing a decrease of $96 compared with the balance of $1,140 as at December 31, 2015. The
main component of this year’s accounts receivable is composed of upfront payments on agreements signed in Q4 2016 received in Q1 2017.

Prepaid
expenses

As at December 31, 2016 prepaid expenses totaled $566 compared with $70 as of December 31, 2015. The increase in prepaid expenses is mainly attributable to
the 10% prepayment to Cary Pharmaceuticals following the monetization of Forfivo to SWK Holding.

Investment
tax
credits
receivable

R&D investment tax credits receivable totaled approximately $246 as at December 31, 2016 compared with $97 as at December 31, 2015. The increase relates to
the accrual estimated and recorded for the twelve-month period ended December 31, 2016.

Leasehold
improvements
and
equipment

As at December 31, 2016, the net book value of leasehold improvements and equipment amounted to $5,730, compared to $4,238 at December 31, 2015. In the
twelve-month period ended December 31, 2016 additions to assets totaled $2,326 and mainly comprised of $1,651 for manufacturing and packaging equipment for
our new, state-of-the-art, VersaFilm™ manufacturing facility, and $483 for leasehold improvements related to our new manufacturing facility at 6420 Abrams, St-
Laurent, Quebec, Canada, $176 for laboratory and office equipment and $16 for computer equipment.

Security
deposit

A security deposit in the amount of CA$300 ($223) in respect of an agreement to lease approximately 17,000 square feet in a property located at 6420 Abrams, St-
Laurent, Quebec, Canada was recorded as at December 31, 2016 and 2015. Security deposits in the amount of CA$650 ($484) and CA$400 ($289) for the term
loans were also recorded as at December 31, 2016 and 2015, respectively.

Accounts
payable
and
accrued
liabilities

Accounts payable and accrued liabilities totaled $897 as at December 31, 2016 (December 31, 2015 - $1,595) and is mainly attributable to accounts payable and
accrued payroll.

Long-term
debt

Long-term debt totaled $3,269 as at December 31, 2016 (December 31, 2015 - $1,730). An amount of $2,636 is attributable to term loan from the lender secured by
a first ranking movable hypothec on all present and future movable property of the Company and a 50% guarantee by Export Development Canada, a Canadian
Crown corporation export credit agency.

An amount of $633 is attributable to a second loan secured by a second ranking on all present and future property of the Company reimbursable in monthly
principal payments starting January 2017 to March 2021.

Shareholders’
equity

As at December 31, 2016 we had accumulated a deficit of $17,737 compared with an accumulated deficit of $16,557 as at December 31, 2015. Total assets
amounted to $12,790 and shareholders’ equity totaled $4,945 as at December 31, 2016, compared with total assets and shareholders’ equity of $8,916 and $5,564
respectively, as at December 31, 2015.

Capital
stock

As at December 31, 2016 capital stock amounted to $0.648 (December 31, 2015: $0.636) . Capital stock is disclosed at its par value with the excess of proceeds
shown in Additional Paid-in-Capital.

Additional
paid-in-capital

Additional paid-in capital totaled $23,700 as at December 31, 2016, as compared to $22,846 at December 31, 2015. Additional paid in capital increased by $596 for
warrants exercised, increased by $63 for options exercised, and increased by $195 for stock based compensation attributable to the expensing of stock options
granted to employees and directors.

Taxation

As at December 31, 2016, the date of our latest annual tax return, we had Canadian and provincial net operating losses of approximately $7,585 (December 31,
2015: $6,462) and $7,763 (December 31, 2015: $6,725) respectively, which may be applied against earnings of future years. Utilization of the net operating losses
is subject to significant limitations imposed by the change in control provisions. Canadian and provincial losses will be expiring between 2027 and 2036. A portion
of the net operating losses may expire before they can be utilized.

As at December 31, 2016, we had non-refundable tax credits of $1,190 thousand (2015: $1,022 thousand) of which $8 thousand is expiring in 2026, $10 thousand
is expiring in 2027, $168 thousand is expiring in 2028, $147 thousand is expiring in 2029, $126 thousand is expiring in 2030, $133 thousand is expiring in 2031,
$167 thousand is expiring in 2032 and $111 thousand is expiring in 2033, $84 thousand expiring in 2034 and $99 thousand is expiring in 2035 and $137 thousand
expiring in 2036. We also had undeducted research and development expenses of $5,438 thousand (2015: $4,563 thousand) with no expiration date.

The deferred tax benefit of these items was not recognized in the accounts as it has been fully provided for.

Key
items
from
the
statement
of
cash
flows

In
U.S.$
thousands

Operating Activities
Financing Activities
Investing Activities
Cash and cash equivalents – end of period

Statement
of
cash
flows

December

Increase/

31,
2016
1,729
1,924
(5,910)
612

31,
2015
546
1,792
(3,380)
2,865

(Decrease)
1,183
132
(2,530)
(2,253)

Percentage
Increase/
(Decrease)
217%
7%
75%
(79%)

Net cash provided by operating activities was $1,729 for the twelve-month period ended December 31, 2016, compared to $546 for the twelve-month period ended
December 31, 2015. For the twelve-month period ended December 31, 2016, net cash used by operating activities consisted of a net loss of ($1,180) (2015: $1,291)
and an increase in non-cash operating elements of working capital of $2,203 compared with a decrease of ($1,046) for the twelve-month period ended December
31, 2015.

The net cash provided by financing activities was $1,924 for the twelve-month period ended December 31, 2016, compared to $1,792 provided in the same period
of the previous year. An amount of $1,940 derives from several disbursements of a term loan negotiated with the bank partially offset by loan repayment of ($675).
Finally, proceeds from exercise of warrants and options generated an inflow of $659.

Net cash used in investing activities amounted to ($5,910) for the twelve-month period ended December 31, 2016 compared to ($3,380) in the same period of 2015.
The net cash used in investing activities for the twelve-month period ended December 31, 2016 relates to the purchase of fixed assets for ($2,326) as well as net
acquisitions of short-term investments of ($3,584).

The balance of cash and cash equivalents as at December 31, 2016 amounted to $612, compared to $2,865 at December 31, 2015.

Commitments

On April 24, 2015 the Company entered into an agreement to lease approximately 17,000 square feet in a property located at 6420 Abrams, St-Laurent, Québec.
The Lease has a 10 year and 6-month term commencing September 1, 2015. IntelGenx has retained two options to extend the lease, with each option being for an
additional five years. Under the terms of the lease IntelGenx is required to pay base rent of approximately CA$110 thousand (approximately $82 thousand) per
year, which will increase at a rate of CA$0.25 ($0.19) per square foot / year every two years.

The aggregate minimum rentals, exclusive of other occupancy charges, for property leases expiring in 2026, are approximately $824 thousand, as follows:

2017
2018
2019
2020
2021
Thereafter

Subsequent
events

83
85
87
89
90
390

Subsequent to the end of the year, on March 6, 2017 IntelGenx executed an agreement to lease approximately an additional 11,000 square feet in a property located
at 6410 Abrams, St-Laurent, Quebec (the “Lease”). The lease has an 8 year and 5-month term commencing on October 1, 2017 and IntelGenx has retained two
options to extend the Lease, with each option being for an additional five years. Under the terms of the Lease IntelGenx will be required to pay base rent of
approximately CA$74 thousand (approximately $55 thousand) per year, which will increase at a rate of CA$0.25 ($0.19) per square foot every two years.
IntelGenx plans to use the newly leased space to expand its manufacture of oral film VersaFilm TM.

Off-balance
sheet
arrangements

We have no off-balance sheet arrangements.

ITEM
7A.
QUANTITATIVE
AND
QUALITATIVE
DISCLOSURES
ABOUT
MARKET
RISK.

Not applicable.

ITEM
8.
FINANCIAL
STATEMENTS
AND
SUPPLEMENTARY
DATA

The consolidated financial statements and supplementary data of the Company required in this item are set forth beginning on page F-1 of this Annual Report on
Form 10-K.

ITEM
9.
CHANGES
IN
AND
DISAGREEMENTS
WITH
ACCOUNTANTS
ON
ACCOUNTING
AND
FINANCIAL
DISCLOSURE

None.

ITEM
9A.
CONTROLS
AND
PROCEDURES

9. Evaluation
of
Disclosure
Controls
and
Procedures

Based on an evaluation under the supervision and with the participation of our management, our Chief Executive Officer and Chief Financial Officer have
concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) were effective as of December 31, 2015 to ensure that information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii)
accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.

b.
Changes
in
Internal
Controls
over
Financial
Reporting

Our Chief Executive Officer and Chief Financial Officer have concluded that there were no changes in the Company’s internal controls over financial reporting
during the quarter ended December 31, 2016 that have materially affected or are reasonably likely to materially affect the Company’s internal controls over
financial reporting.

c.
Management’s
Report
on
Internal
Control
Over
Financial
Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Our internal control system was designed to provide reasonable assurance to our management and the Board of Directors regarding the preparation and
fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and presentation.

Our management, including the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2016. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on our processes and assessment, as described above, management has
concluded that, as of December 31, 2016 our internal control over financial reporting was effective.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the company's registered public accounting firm pursuant to rules of the SEC, as the Company qualifies as a
“smaller reporting company”.

ITEM
9B.
OTHER
INFORMATION

None.

ITEM
10.
DIRECTORS,
EXECUTIVE
OFFICERS
AND
CORPORATE
GOVERNANCE

PART
III

Certain information required by this Item 10 relating to our directors, executive officers, audit committee and corporate governance is incorporated by reference
herein from the 2017 Proxy Statement.

We have adopted a Code of Business Conduct and Ethics that applies to our directors and officers, including our principal executive officer, and our principal
financial officer and principal accounting officer. The Code of Business Conduct and Ethics is posted on our website at http://www.intelgenx.com . We intend to
satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our Code of Business Conduct and
Ethics by posting such information on our website at the web address specified above.

ITEM
11.
EXECUTIVE
COMPENSATION

Certain information required by this Item 11 relating to remuneration of directors and executive officers and other transactions involving management is
incorporated by reference herein from the 2017 Proxy Statement.

ITEM
12.
SECURITY
OWNERSHIP
OF
CERTAIN
BENEFICIAL
OWNERS
AND
MANAGEMENT
AND
RELATED
STOCKHOLDER
MATTERS

Certain information required by this Item 12 relating to security ownership of certain beneficial owners and management, and the equity compensation plan
information, is incorporated by reference herein from the 2017 Proxy Statement.

ITEM
13.
CERTAIN
RELATIONSHIPS
AND
RELATED
TRANSACTIONS,
AND
DIRECTOR
INDEPENDENCE

Certain information required by this Item 13 relating to certain relationships and related transactions, and director independence is incorporated by reference herein
from the 2017 Proxy Statement.

ITEM
14.
PRINCIPAL
ACCOUNTING
FEES
AND
SERVICES

Certain information required by this Item 14 regarding principal accounting fees and services is set forth under “Audit Fees” in the 2017 Proxy Statement.

ITEM
15.
EXHIBITS,
FINANCIAL
STATEMENT
SCHEDULES

(a)
Financial
Statements
and
Schedules

1.
Financial Statements

PART
IV

The following financial statements are filed as part of this report under Item 8 of Part II “Financial Statements and Supplementary Data:

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets as of December 31, 2016 and 2015.

Consolidated Statements of Shareholders’ Equity for the years ended of December 31, 2016 and 2015.

Consolidated Statements of Comprehensive Loss for the years ended of December 31, 2016 and 2015.

Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015.

Notes to Consolidated Financial Statements.

2
. Financial Statement Schedules

Financial statement schedules not included herein have been omitted because they are either not required, not applicable, or the information is otherwise included
herein.

(b)
Exhibits.

Exhibit
No.
2.1
3.1
3.2

3.3
3.4
3.5
3.6
9.1
9.2
10.1 +
10.2
10.3
10.4 +
10.5 +
10.6

10.7 +
10.8
10.9
10.10
10.11+
10.12

10.13

10.14
10.15
10.16 ++

10.17 ++

Description

Share exchange agreement dated April 10, 2006 (incorporated by reference to the Form 8-K/A filed on May 5, 2006)
Certificate of Incorporation (incorporated by reference to the Form SB-2 (File No. 333-90149) filed on November 16, 1999)
Amendment to the Certificate of Incorporation (incorporated by reference to amendment No. 2 to Form SB-2 (File No. 333-135591) filed on
August 28, 2006)
Amendment to the Certificate of Incorporation (incorporated by reference to the Form DEF 14C filed on April 20, 2007)
By-Laws (incorporated by reference to the Form SB-2 (File No. 333-91049) filed on November 16, 1999
Amended and Restated By-Laws (incorporated by reference to the Form 8-K filed on March 31, 2011)
Amended and Restated By-Laws (incorporated by reference to the Form 8-K filed on March 21, 2012)
Voting Trust agreement (incorporated by reference to the Form 8-K/A filed on May 5, 2006)
Amended and Restated Unanimous Shareholder’s Agreement, May 26, 2011
Horst Zerbe employment agreement dated October 1, 2014 (incorporated by reference to the Form 10-Q filed on November 12, 2014)
Registration rights agreement (incorporated by reference to the Form SB-2 (File No. 333-135591) filed on July 3, 2006)
Principal's registration rights agreement (incorporated by reference to the Form SB-2 (File No. 333-135591) filed on July 3, 2006)
2006 Stock Option Plan (incorporated by reference to the Form S-8 filed on November 21, 2006)
Amended and Restated 2006 Stock Option Plan, May 29, 2008 (incorporated by reference to the Form 10-K filed on March 25, 2009)
Co-Development and Commercialization Agreement with RedHill Biopharma Ltd. (incorporated by reference to the Form 10-Q filed on November
9, 2010)
Amended and Restated 2006 Stock Option Plan (incorporated by reference to the Form S-8 filed on November 15, 2010)
Project Transfer Agreement (incorporated by reference to the Form 10-Q filed on May 14, 2010)
Co-development and Licensing Agreement (incorporated by reference to the Form 10-Q filed on May 14, 2010)
License and Asset Transfer Agreement with Edgemont Pharmaceuticals (incorporated by reference to the Form 10Q filed on May 15, 2012)
Amended and Restated 2006 Stock Option Plan, (incorporated by reference to the Form 8-K filed on May 9, 2013)
Engagement Letter Wainwright dated October 10, 2013, amended December 3, 2013 (incorporated by reference to the Form S-1/A Registration
Statement filed December 16, 2013)
Amended Form of Securities Purchase Agreement (incorporated by reference to the Form S-1/A Registration Statement filed on December 16,
2013)
Form of Warrant (incorporated by reference to the Form S-1 Registration Statement filed on October 25, 2013)
Form of Placement Agent Warrant (incorporated by reference to the Form S-1/A Registration Statement filed on December 16, 2013)
Development Services and Commercialization Agreement with PAR Pharmaceuticals, dated December 19, 2011
(incorporated by reference to the Form 10-K filed on March 11, 2014)
Development Services and Commercialization Agreement with PAR Pharmaceuticals, dated January 8, 2014
(incorporated by reference to the Form 10-K filed on March 11, 2014)

10.18+
10.19+
10.20+
10.21+
10.22+
10.23
21.1
23.1*
31.1*
31.2*
32.1*
32.2*

Employment Agreement John Durham, January 2015 (incorporated by reference to the Form 10-K filed on March 31, 2015)
Employment Agreement Andre Godin, July 2015 (incorporated by reference to the Form 8-K filed on July 20, 2015)
Employment Agreement Nadine Paiement, January 2016 (incorporated by reference to the Form 10-K filed on March 30, 2016)
Employment Agreement Dana Matzen, March 2016(incorporated by reference to the Form 10-K filed on March 30, 2016)
2016 Stock Option Plan May, 11 2016 (incorporated by reference to the Form S-8 Registration Statement filed on August 3, 2016
Amended Principal’s Registration Rights Agreement, November 8, 2016 (incorporated by reference to Form 10Q filed on November 10, 2016
Subsidiaries of the small business issuer (incorporated by reference to the Form SB-2 (File No. 333-135591) filed on July 3, 2006)
Consents of Richter LLP
Certification of Horst G. Zerbe, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certification of Andre Godin, Executive Vice President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certification of Horst G. Zerbe, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350*
Certification of Andre Godin, Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350.*

* Filed herewith.
+ Indicates management contract or employee compensation plan.
++ Portions of this exhibit have been omitted based on an application for confidential treatment from the SEC. The omitted portions of these
exhibits have been submitted separately with the SEC.

ITEM
16.
FORM
10K
SUMMARY.

None.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its

behalf by the undersigned on March 28, 2017, thereunto duly authorized.

SIGNATURES

INTELGENX
TECHNOLOGIES
CORP.

By: /s/Horst G. Zerbe
Horst G. Zerbe

President and Chief Executive Officer
(Principal Executive Officer)

By: /s /Andre Godin
Andre Godin

Executive Vice President and Chief Financial

Officer

(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates

indicated.

Signature
By: /s/ Horst G. Zerbe

Horst G. Zerbe
By : /s/Andre Godin
Andre Godin
By: /s/ Bernard Boudreau
J. Bernard Boudreau
By: /s/ Ian Troup
John (Ian) Troup
By: /s/ Bernd Melchers
Bernd J. Melchers
By: /s/ John Marinucci
John Marinucci
By: /s/ Clemens Mayr
Clemens Mayr
By: /s/ Mark Nawacki

Position
Chairman of the Board, President and Chief
Executive Officer

Date
March 28, 2017

Executive Vice President and Chief Financial Officer March 28, 2017

Director, Vice Chairman of the Board

March 28, 2017

Director

March 28, 2017

IntelGenx
Technologies
Corp

Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

IntelGenx
Technologies
Corp

Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Contents

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Shareholders' Equity

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

F - 1

F - 2

F - 3 - 4

F - 5

F - 6

F - 7 - 30

Report
of
Independent
Registered
Public
Accounting
Firm

To the Shareholders and Board of Directors of
IntelGenx
Technologies
Corp.

We have audited the accompanying consolidated balance sheets of IntelGenx Technologies Corp. as at December 31, 2016 and 2015 and the related consolidated
statements of comprehensive loss, shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have,
nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly in all material respects, the financial position of the Company as at December 31, 2016 and
2015 and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

Richter LLP (Signed) 1

Montréal, Québec
March 28, 2017

1 CPA auditor, CA, public accountancy permit No. A112505

514.934.3400
mtlinfo@richter.ca

Richter
LLP
1981
McGill
College
Mtl
(Qc)
H3A
0G6
www.richter.ca

Montréal,
Toronto

IntelGenx
Technologies
Corp.

Consolidated
Balance
Sheets
As
at
December
31,
2016
and
2015
(Expressed
in
Thousands
of
U.S.
Dollars
($’000)
Except
Share
and
Per
Share
Data)

Assets

Current
Cash and cash equivalents
Short-term investments (note 5)
Accounts receivable
Prepaid expenses
Investment tax credits receivable

Total
Current
Assets

Leasehold
Improvements
and
Equipment,
net
(note 6)

Security
Deposits

Total
Assets

Liabilities

Current
Accounts payable and accrued liabilities
Current portion of long-term debt (note 9)
Deferred revenue (note 8)

Total
Current
Liabilities

Deferred
lease
obligations

Long-term
debt
(note 9)

Total
Liabilities

Commitments
(note
10)

Subsequent
event
(note
17)

Shareholders'
Equity

Capital Stock, common shares, $0.00001 par value; 100,000,000 shares authorized;

64,812,020 shares issued and outstanding (2015: 63,615,255 common shares) (note 11)

Additional Paid-in-Capital (note 12)

Accumulated Deficit

Accumulated Other Comprehensive Loss

Total
Shareholders’
Equity

See accompanying notes

Approved
on
Behalf
of
the
Board:

/s/ Bernd J. Melchers
/s/ Horst G. Zerbe

Director
Director

F - 2

2016

2015

612
3,884
1,044
566
246

6,352

5,730

708

2,865
-
1,140
70
97

4,172

4,238

506

12,790

8,916

897
704
3,634

5,235

2,565

7,845

23,700

(17,737)

(1,019)

4,945

12,790

1,595
184
-

1,779

1,546

3,352

22,846

(16,557)

(726)

5,564

8,916

IntelGenx
Technologies
Corp.

Consolidated
Statement
of
Shareholders'
Equity
For
the
Year
Ended
December
31,
2015
(Expressed
in
Thousands
of
U.S.
Dollars
($’000)
Except
Share
and
Per
Share
Data)

Capital Stock

Number

Amount

Additional
Paid-In
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss

Total
Shareholders'
Equity

Balance
-
December
31,
2014

63,465,255

22,654

(17,848) $

(234) $

4,573

Foreign currency translation adjustment

Options exercised (note 12)

Stock-based compensation (note 12)

Net income for the year

150,000

130

1,291

(492)

130

1,291

Balance
–
December
31,
2015

63,615,255

22,846

(16,557) $

(726) $

5,564

See accompanying notes

F - 3

IntelGenx
Technologies
Corp.

Consolidated
Statement
of
Shareholders'
Equity
For
the
Year
Ended
December
31,
2016
(Expressed
in
Thousands
of
U.S.
Dollars
($’000)
Except
Share
and
Per
Share
Data)

Capital Stock

Number

Amount

Additional
Paid-In
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss

Total
Shareholders'
Equity

Balance
-
December
31,
2015

63,615,255

22,846

(16,557) $

(726) $

5,564

Foreign currency translation adjustment

Warrants exercised (note 12)

Options exercised (note 12)

Stock-based compensation (note 12)

Net loss for the year

1,056,765

140,000

596

195

(1,180)

(293)

596

195

(1,180)

Balance
–
December
31,
2016

64,812,020

23,700

(17,737) $

(1,019) $

4,945

See accompanying notes

F - 4

IntelGenx
Technologies
Corp.

Consolidated
Statements
of
Comprehensive
Loss
For
the
Years
Ended
December
31,
2016
and
2015
(Expressed
in
Thousands
of
U.S.
Dollars
($’000)
Except
Share
and
Per
Share
Data)

Revenues
Royalties
License and other revenue
Total
Revenues

Expenses
Cost of royalty, license and other revenue
Research and development expense
Selling, general and administrative expense
Depreciation of tangible assets
Amortization of intangible assets
Total
Expenses

Operating
(Loss)
Income

Interest
Income

Financing
and
Interest
expense

(Loss)
Income
Before
Income
Taxes

Income taxes (note 13)

Net
(Loss)
Income

Other
Comprehensive
Income
(Loss)

Foreign currency translation adjustment

Comprehensive
(Loss)
Income

Basic:
Weighted
Average
Number
of
Shares
Outstanding

Basic (Loss) Earnings Per Common Share (note 16)

Diluted:
Weighted
Average
Number
of
Shares
Outstanding

Diluted (Loss) Earnings Per Common Share (note 16)

See accompanying notes

F - 5

2016

2015

1,041
4,179
5,220

319
1,766
3,605
511
-
6,201

(981)

(203)
(199)
(1,180)

(1,180)

(293)

(1,473) $

981
4,114
5,095

433
1,033
2,072
125
46
3,709

1,386

(123)
(95)
1,291

1,291

(492)

799

63,956,543

63,524,023

(0.02) $

0.01

63,956,543

70,855,146

(0.02) $

0.01

IntelGenx
Technologies
Corp.

Consolidated
Statements
of
Cash
Flows
For
the
Year
Ended
December
31,
2016
and
2015
(Expressed
in
Thousands
of
U.S.
Dollars
($’000)
Except
Share
and
Per
Share
Data)

Funds
Provided
(Used)
-

Operating
Activities

Net (Loss) Income
Amortization and depreciation
Stock-based compensation

Changes in assets and liabilities
Accounts receivable
Prepaid expenses
Investment tax credits receivable
Security deposits
Accounts payable and accrued liabilities
Deferred revenue
Deferred lease obligations
Net
change
in
assets
and
liabilities
Net
cash
provided
by
operating
activities

Financing
Activities

Issuance of term loans
Repayment of term loans
Proceeds from exercise of warrants and stock options
Net
cash
provided
by
financing
activities

Investing
Activities

Additions to leasehold improvements and equipment
Acquisitions of short-term investments
Redemptions of short-term investments
Net
cash
used
in
investing
activities
Decrease
in
Cash
and
Cash
Equivalents
Effect
of
Foreign
Exchange
on
Cash
and
Cash
Equivalents
Cash
and
Cash
Equivalents
Beginning
of
Year
End
of
Year

See accompanying notes

2016

2015

(1,180) $
511
195
(474)

96
(496)
(149)
(202)
(698)
3,634
18
2,203
1,729

1,940
(675)
659
1,924

(2,326)
(5,236)
1,652
(5,910)
(2,257)
4

2,865

612

F - 6

1,291
171
130
1,592

(488)
26
11
(506)
1,129
(1,245)
27
(1,046)
546

1,752
(22)
62
1,792

(3,380)
-
-
(3,380)
(1,042)
(492)

4,399
2,865

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Basis
of
Presentation

IntelGenx Technologies Corp. (“IntelGenx” or the “Company”) prepares its financial statements in accordance with accounting principles generally
accepted in the United States of America (“USA”). This basis of accounting involves the application of accrual accounting and consequently, revenues and
gains are recognized when earned, and expenses and losses are recognized when incurred.

The consolidated financial statements include the accounts of the Company and its subsidiary companies. On consolidation, all inter-entity transactions and
balances have been eliminated.

The financial statements are expressed in U.S. funds.

Nature
of
Business

IntelGenx was incorporated in the State of Delaware as Big Flash Corp. on July 27, 1999. On April 28, 2006 Big Flash Corp. completed, through the
Canadian holding corporation, the acquisition of IntelGenx Corp., a company incorporated in Canada on June 15, 2003.

IntelGenx is a pharmaceutical company focused on the development of novel oral immediate-release and controlled-release products for the pharmaceutical
market. More recently, the Company has made the strategic decision to enter the oral film market and is in the process of implementing commercial oral
film manufacturing capability. The Company’s product development efforts are based upon three proprietary delivery platforms, including an immediate
release oral film “VersaFilm™”, a mucoadhesive tablet “AdVersa™”, and a multilayer controlled release tablet “VersaTab™”. The Company has an
aggressive product development initiative that primarily focuses on addressing unmet market needs and focuses on utilization of the U.S. Food and Drug
Administration’s (“FDA”) 505(b)(2) approval process to obtain more timely and efficient approval of new formulations of previously approved products.

The Company’s product pipeline currently consists of 14 products in various stages of development from inception through commercialization, including
products for the treatment of major depressive disorder, opioid dependence, hypertension, erectile dysfunction, migraine, schizophrenia, idiopathic
pulmonary fibrosis, and pain management. Of the products currently under development, 10 utilize the VersaFilm™ technology, 3 utilize the VersaTab™
technology, and one utilizes the AdVersa™ technology.

F - 7

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Adoption
of
New
Accounting
Standards

The FASB issued Update 2015-16, Business Combinations, which requires that an acquirer recognize adjustments to provisional amounts that are
identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this Update require
that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects,
if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in
this Update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-
period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized
as of the acquisition date. The amendments in this Update apply to all entities that have reported provisional amounts for items in a business combination
for which the accounting is incomplete by the end of the reporting period in which the combination occurs and during the measurement period have an
adjustment to provisional amounts recognized. For public business entities, the amendments in this Update are effective for fiscal years beginning after
December 15, 2015, including interim periods within those fiscal years. The amendments in this Update should be applied prospectively to adjustments to
provisional amounts that occur after the effective date of this Update with earlier application permitted for financial statements that have not yet been
issued. The adoption of this Statement did not have a material effect on the Company’s financial position or results of operations.

The FASB issued amendments to ASU 2015-03, Interest – Imputation of Interest, which are intended to simplify the presentation of debt issuance costs.
These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the
carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by
the amendments in this ASU. The amendments are effective for public business entities for financial statements issued for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years. The adoption of this Statement did not have a material effect on the Company’s financial
position or results of operations.

The FASB issued amendments to ASU 2015-01, Income Statement – Extraordinary and Unusual Items, eliminating from U.S. GAAP the concept of
extraordinary items. Subtopic 225-20, Income Statement - Extraordinary and Unusual Items, required that an entity separately classify, present and disclose
extraordinary events and transactions. This ASU will also align more closely U.S. GAAP income statement presentation guidance with IAS 1, Presentation
of Financial Statements, which prohibits the presentation and disclosure of extraordinary items. The amendments are effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2015. The adoption of this Statement did not have a material effect on the Company’s
financial position or results of operations.

F - 8

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Adoption
of
New
Accounting
Standards
(cont’d)

The FASB issued ASU No. 2014-12, Compensation – Stock Compensation, which requires that a performance target that affects vesting and that could be
achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718,
Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance
target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it
becomes probable that the performance target will be achieved. The amendments in this ASU are effective for annual periods and interim periods within
those annual periods beginning after December 15, 2015. The adoption of this Statement did not have a material effect on the Company’s financial position
or results of operations.

The FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s
Ability to Continue as a Going Concern, which is intended to define management’s responsibility to evaluate whether there is substantial doubt about an
organization’s ability to continue as a going concern and to provide related footnote disclosures. This ASU provides guidance to an organization’s
management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by
organizations today in the financial statement footnotes. For public business entities, the amendments in this ASU are effective for fiscal years ending
December 31, 2016, including interim periods within fiscal years beginning after December 15, 2016. The adoption of this Statement did not have a
material effect on the Company’s financial position or results of operations.

Summary
of
Significant
Accounting
Policies

Revenue
Recognition

The Company recognizes revenue from research and development contracts as the contracted services are performed or when milestones are achieved,
recorded as other revenue, in accordance with the terms of the specific agreements and when collection of the payment is reasonably assured. In addition,
the performance criteria for the achievement of milestones are met if substantive effort was required to achieve the milestone and the amount of the
milestone payment appears reasonably commensurate with the effort expended. Amounts received in advance of the recognition criteria being met, if any,
are included in deferred income.

IntelGenx has license agreements that specify that certain royalties are earned by the Company on sales of licensed products in the licensed territories.
Royalty revenue is recognized on an accrual basis in accordance with the relevant license agreement.

For the year ended December 31, 2016, the Company recognized royalty revenue earned under a licensing agreement totaling $1,041 thousand compared to
$981 thousand in 2015.

For the year ended December 31, 2016, the Company recognized revenues as a result of sales milestones achieved under a licensing agreement totaling
$358 thousand compared to $2,808 thousand in 2015.

F - 9

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Summary
of
Significant
Accounting
Policies
(cont’d)

Use
of
Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. The financial statements include estimates based on currently available information and management's judgment
as to the outcome of future conditions and circumstances. Significant estimates in these financial statements include the useful lives and impairment of
long-lived assets, stock-based compensation costs, and the investment tax credits receivable. Changes in the status of certain facts or circumstances could
result in material changes to the estimates used in the preparation of the financial statements and actual results could differ from the estimates and
assumptions.

Cash
and
Cash
Equivalents

Cash and cash equivalents is comprised of cash on hand and term deposits with original maturity dates of less than three months that are stated at cost,
which approximates fair value.

Accounts
Receivable

The Company accounts for trade receivables at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding
amounts on a quarterly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and
considering a customer's financial condition, credit history and current economic conditions. The Company writes off trade receivables when they are
deemed uncollectible and records recoveries of trade receivables previously written-off when they receive them. Management has determined that no
allowance for doubtful accounts is necessary in order to adequately cover exposure to loss in its December 31, 2016 accounts receivable (2015: $Nil).

Investment
Tax
Credits

Investment tax credits relating to qualifying expenditures are recognized in the accounts at the time at which the related expenditures are incurred and there
is reasonable assurance of their realization. Management has made estimates and assumptions in determining the expenditures eligible for investment tax
credits claimed. Investment tax credits received in the year ended December 31, 2016 totaled $Nil (2015: $108 thousand).

F - 10

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Summary
of
Significant
Accounting
Policies
(Cont’d)

Leasehold
Improvements
and
Equipment

Leasehold improvements and equipment are recorded at cost. Provisions for depreciation are based on their estimated useful lives using the methods as
follows:

On the declining balance method -

Laboratory and office equipment
Computer equipment

On the straight-line method -

Leasehold improvements
Manufacturing equipment

20%
30%

over the lease term
5 – 10 years

Upon retirement or disposal, the cost of the asset disposed of and the related accumulated depreciation are removed from the accounts and any gain or loss
is reflected in income. Expenditures for repair and maintenance are expensed as incurred.

Security
Deposits

Security deposits represent a refundable deposit paid to the landlord in accordance with the lease agreement and deposits held as guarantees by the
Company’s lenders in accordance with the lending facilities.

Impairment
of
Long-lived
Assets

Long-lived assets held and used by the Company are reviewed for possible impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets
to the estimated undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value thereof.

Deferred
Lease
Obligations

Rent under operating leases is charged to expense on a straight-line basis over the lease term. Any difference between the rent expense and the rent payable
is reflected as deferred lease obligations on the balance sheet.

F - 11

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Summary
of
Significant
Accounting
Policies
(Cont’d)

Deferred
Lease
Obligations
(Cont’d)

Deferred lease obligations are amortized on a straight-line basis over the term of the related leases. Lease term includes free rent periods as well as the
construction period prior to the commencement of the lease.

Foreign
Currency
Translation

The Company's reporting currency is the U.S. dollar. The Canadian dollar is the functional currency of the Company's Canadian operations, which is
translated to the United States dollar using the current rate method. Under this method, accounts are translated as follows:

Assets and liabilities - at exchange rates in effect at the balance sheet date;

Revenue and expenses - at average exchange rates prevailing during the year;

Equity - at historical rates.

Gains and losses arising from foreign currency translation are included in other comprehensive income.

Income
Taxes

The Company accounts for income taxes in accordance with FASB ASC 740 "Income Taxes". Deferred taxes are provided on the liability method whereby
deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Unrecognized
Tax
Benefits

The Company accounts for unrecognized tax benefits in accordance with FASB ASC 740 “Income Taxes”. ASC 740 prescribes a recognition threshold that
a tax position is required to meet before being recognized in the financial statements and provides guidance on de-recognition, measurement, classification,
interest and penalties, accounting in interim periods, disclosure and transition issues. ASC 740 contains a two-step approach to recognizing and measuring
uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is
more likely than not that the position will be sustained upon ultimate settlement with a taxing authority, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate
settlement.

Additionally, ASC 740 requires the Company to accrue interest and related penalties, if applicable, on all tax positions for which reserves have been
established consistent with jurisdictional tax laws. The Company elected to classify interest and penalties related to the unrecognized tax benefits in the
income tax provision.

F - 12

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Summary
of
Significant
Accounting
Policies
(Cont’d)

Share-Based
Payments

The Company accounts for share-based payments to employees in accordance with the provisions of FASB ASC 718 "Compensation—Stock
Compensation" and accordingly recognizes in its financial statements share-based payments at their fair value. In addition, the Company will recognize in
the financial statements an expense based on the grant date fair value of stock options granted to employees. The expense will be recognized on a straight-
line basis over the vesting period and the offsetting credit will be recorded in additional paid-in capital. Upon exercise of options, the consideration paid
together with the amount previously recorded as additional paid-in capital will be recognized as capital stock. The Company estimates its forfeiture rate in
order to determine its compensation expense arising from stock-based awards. The Company uses the Black-Scholes option pricing model to determine the
fair value of the options.

The Company measures compensation expense for its non-employee stock-based compensation under ASC 505-50, “Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services". The fair value of the option issued is used to
measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s
common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The
fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital. For common stock issuances to non-
employees that are fully vested and are for future periods, the Company classifies these issuances as prepaid expenses and expenses the prepaid expenses
over the service period. At no time has the Company issued common stock for a period that exceeds one year.

(Loss)
Earnings
Per
Share

Basic (loss) earnings per share is calculated based on the weighted average number of shares outstanding during the year. Any antidilutive instruments are
excluded from the calculation of diluted (loss) earnings per share.

Fair
Value
Measurements

ASC 820 applies to all assets and liabilities that are being measured and reported on a fair value basis. ASC 820 requires disclosure that establishes a
framework for measuring fair value in US GAAP, and expands disclosure about fair value measurements. This statement enables the reader of the financial
statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information
used to determine fair values. The statement requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three
categories:

Level 1:
Level 2:
Level 3:

Quoted market prices in active markets for identical assets or liabilities.
Observable market based inputs or unobservable inputs that are corroborated by market data.
Unobservable inputs that are not corroborated by market data.

F - 13

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Summary
of
Significant
Accounting
Policies
(Cont’d)

In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to ASC 820. At each reporting
period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. Short-term
investments are classified as Level 1.

Fair
Value
of
Financial
Instruments

The fair value represents management’s best estimates based on a range of methodologies and assumptions. The carrying value of receivables and payables
arising in the ordinary course of business and the investment tax credits receivable approximate fair value because of the relatively short period of time
between their origination and expected realization.

Recent
Accounting
Pronouncements

ASU
2016-18
–
Statement
of
Cash
Flows
(Topic
230)
Restricted
Cash

In November 2016, the FASB issued ASU 2016-18 which requires that the statement of cash flows explain the change during the period in the total cash,
cash equivalents, and amounts generally described as restricted or restricted cash equivalents. The statement is effective for annual periods beginning after
December 15, 2017, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period and should be applied on a
retrospective basis. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

ASU
2016-15
–
Statement
of
Cash
Flows
(Topic
230)
Classification
of
Certain
Cash
Receipts
and
Cash
Payments

In August 2016, the FASB issued ASU 2016-15 which clarifies how certain cash receipts and payments are to be presented in the Statement of cash flows.
The statement is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is
permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company is currently
evaluating the impact of this Statement on its consolidated financial statements.

ASU
2016-06
-
Derivatives
and
Hedging
(Topic
815)
Contingent
Put
and
Call
Options
in
Debt
Instruments

The amendments in this Update clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on
debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this Update is required to
assess the embedded call (put) options solely in accordance with the four-step decision sequence.

For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2016,
and interim periods within those fiscal years and should be applied on a retrospective basis.

F - 14

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Summary
of
Significant
Accounting
Policies
(Cont’d)

ASU
2016-09
-
Compensation—Stock
Compensation
(Topic
718)
Improvements
to
Employee
Share-Based
Payment
Accounting

FASB issued this Update as part of its Simplification Initiative. The areas for simplification in this Update involve several aspects of the accounting for
share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the
statement of cash flows.

For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within
those annual periods. Early adoption is permitted for any entity in any interim or annual period, with any adjustments reflected as of the beginning of the
fiscal year of adoption. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

ASU
2016-01
–
Financial
Instruments
–
Overall
(Subtopic
825-10):
Recognition
and
Measurement
of
Financial
Assets
and
Financial
Liabilities

In January 2016, the FASB issued ASU 2016-01, which will significantly change practice for all entities. The targeted amendments to existing guidance are
expected to include:

Equity investments that do not result in consolidation and are not accounted for under the equity method would be measured at fair value through
net income, unless they qualify for the proposed practicability exception for investments that do not have readily determinable fair values.

Changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option would be recognized in other
comprehensive income.

Entities would make the assessment of the realizability of a deferred tax asset (DTA) related to an available- for-sale (AFS) debt security in
combination with the entity’s other DTAs. The guidance would eliminate one method that is currently acceptable for assessing the realizability of
DTAs related to AFS debt securities. That is, an entity would no longer be able to consider its intent and ability to hold debt securities with
unrealized losses until recovery.

Disclosure of the fair value of financial instruments measured at amortized cost would no longer be required for entities that not public business
entities.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods
within those fiscal years. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

F - 15

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Summary
of
Significant
Accounting
Policies
(Cont’d)

ASU
2016-02:
Leases
(Topic
842)
Section
A

The FASB issued ASU 2016-02 to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the
balance sheet and disclosing key information about leasing arrangements.

These amendments are effective for a public business entity for fiscal years beginning after December 15, 2018, including interim periods within those
fiscal years.

The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

Revenue
from
Contracts
with
Customers
(Topic
606):

The FASB and IASB (the Boards) have issued converged standards on revenue recognition. ASU No. 2014-09 which affects any entity using U.S. GAAP
that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those
contracts are within the scope of other standards. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition and
most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To
achieve that core principle, an entity should apply the following steps:

•
•
•
•
•

Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

In the year ended December 31, 2016, the FASB issued three new amendments related to Topic 606:

ASU 2016-08: Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
which was issued to add clarification to the implementation guidance on principle versus agent considerations. This amendment does not provide
any changes to the previously issued ASU No. 2014-09 and is effective for the same reporting period which was deferred by one year in ASU
2015-14: Revenue From Contracts With Customers (Topic 606), Deferral of the Effective Date.

ASU 2016-10: Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing which was issued to
clarifying the following two aspects of topic 606; identifying performance obligations and the licensing implementation guidance. This amendment
does not provide any changes to the previously issued ASU No. 2014-09 and is effective for the same reporting period which was deferred by one
year in ASU 2015-14: Revenue From Contracts With Customers (Topic 606), Deferral of the Effective Date.

F - 16

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Summary
of
Significant
Accounting
Policies
(Cont’d)

ASU 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting
Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting. With this amendment, the SEC
Staff is rescinding the following SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive
Activities—Oil and Gas, effective upon adoption of Topic 606. This amendment is effective immediately.

Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting
periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of
annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

This ASU is to be applied retrospectively, with certain practical expedients allowed. The Company is currently evaluating the impact of this Statement on
its consolidated financial statements.

ASU
2015-11,
Inventory
(Topic
330):
Simplifying
the
Measurement
of
Inventory

The amendments in this Update more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial
Reporting Standards (IFRS). An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net
realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and
transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method.

The Board has amended some of the other guidance in Topic 330 to more clearly articulate the requirements for the measurement and disclosure of
inventory. However, the Board does not intend for those clarifications to result in any changes in practice. Other than the change in the subsequent
measurement guidance from the lower of cost or market to the lower of cost and net realizable value for inventory within the scope of this Update, there are
no other substantive changes to the guidance on measurement of inventory.

The amendments in this Update do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments
apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods
within those fiscal years. The amendments in this Update should be applied prospectively with earlier application permitted as of the beginning of an
interim or annual reporting period. The adoption of this Statement is not expected to have a material effect on the Company’s financial position or results of
operations.

F - 17

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Summary
of
Significant
Accounting
Policies
(Cont’d)

ASU
2015-17
–
Income
Taxes
(Topic
740):
Balance
Sheet
Classification
of
Deferred
Taxes
(“ASU
2015-17”)

In November 2015, the FASB issued ASU 2015-17, which require that deferred tax liabilities and assets be classified as noncurrent in a classified statement
of financial position.

The amendments apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets
of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments.

For public business entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and
interim periods within those annual periods. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

Short-term
investments

As at December 31, 2016, short-term investments consisting of mutual funds (CAD$3 million) and term deposits ($1,650 million) are with a Canadian
financial institution having a high credit rating. The term deposits have a maturity date of August 17, 2017, bear interest at 0.40% and are cashable at any
time.

Leasehold
improvements
and
Equipment

Manufacturing equipment
Laboratory and office equipment
Computer equipment
Leasehold improvements

Cost

Accumulated
Depreciation

2016
Net
Carrying
Amount

2015

Net Carrying

Amount

2,550
1,222
66
2,786

121
415
43
315

2,429
807
23
2,471

1,050
821
17
2,350

6,624

894

5,730

4,238

From the balance of manufacturing equipment, an amount of $125 thousand represents assets which are not yet in service as at December 31, 2016.

F - 18

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Bank
Indebtedness

The Company's credit facility is subject to review annually and consists of an operating demand line of credit of up to CAD$250 thousand and corporate
credits cards of up to CAD$75 thousand. Borrowings under the operating demand line of credit bear interest at the Bank’s prime lending rate plus 2%. The
credit facility and term loan (see note 9) are secured by a first ranking movable hypothec on all present and future movable property of the Company and a
50% guarantee by Export Development Canada, a Canadian Crown corporation export credit agency. The terms of the banking agreement require the
Company to comply with certain debt service coverage and debt to net worth financial covenants on an annual basis at the end of the Company’s fiscal
year. As at December 31, 2016, the Company was not in compliance with its financial covenants and has not drawn on its credit facility. The Company has
obtained a waiver from the lender.

Deferred
Revenue

On August 5, 2016, the Company sold its U.S. royalty on future sales of Forfivo XL ® to SWK Holdings Corporation for $6 million. Under the terms of the
agreement, SWK paid IntelGenx $6 million at closing. In return for, (i) 100% of any and all royalties or similar royalty amounts received on or after April
1, 2016, (ii) 100% of the $2 million milestone payment upon Edgemont reaching annual net sales of $15 million, and (iii) 35% of all potential future
milestone payments.

The deferred revenue represents the payment received for the royalty on future sales in the amount of $6 milliion less the Q2 royalties recognized in the
second quarter in the amount of $352 thousand, less the amount recognized in other revenue during the six-month period ended December 31, 2016. The
deferred revenue will be recognized as other revenue on a straight-line basis until December 31, 2017.

10% of the proceeds were paid to our former development partner, Cary Pharmaceuticals Inc. This amount is included in prepaid expenses less the portion
expensed during the six-month period ended December 31, 2016. This expense will be recognized as cost of royalty, license and other revenue on a
straight-line basis until December 31, 2017.

F - 19

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

Long-term
debt

The components of the Company’s debt are as follows:

Term loan facility
Secured loan
Total debt

Less: current portion

Total long-term debt

December
31,
2016
$

December
31,
2015
$

2,636
633
3,269

704

2,565

1,188
542
1,730

184

1,546

The Company’s term loan facility consists of a total of CAD$4 million bearing interest at the Bank’s prime lending rate plus 2.50% . The term loan is
subject to the same security and financial covenants as the bank indebtedness (see note 7).

The secured loan has a principal balance authorized of CAD$1 million bearing interest at prime plus 7.3%, reimbursable in monthly principal payments of
CAD$17 thousand from January 2017 to March 2021. The loan is secured by a second ranking on all present and future property of the Company. The
terms of the banking agreement require the Company to comply with certain debt service coverage and debt to net worth financial covenants on an annual
basis at the end of the Company’s fiscal year. As at December 31, 2016, the Company was not in compliance with its financial covenants. The Company
has obtained a waiver from the lender.

Principal repayments due in each of the next five years are as follows:

2017
2018
2019
2020
2021

10.

Commitments

$704 (CAD 945)
704 (CAD 945)
704 (CAD 945)
704 (CAD 945)
453 (CAD 610)

On April 24, 2015 the Company entered into an agreement to lease approximately 17,000 square feet in a property located at 6420 Abrams, St-Laurent,
Québec. The Lease has a 10 year and 6-month term commencing September 1, 2015. IntelGenx has retained two options to extend the lease, with each
option being for an additional five years. Under the terms of the lease IntelGenx is required to pay base rent of approximately CAD$110 thousand
(approximately $82 thousand) per year, which will increase at a rate of CAD$0.25 ($0.19) per square foot every two years.

F - 20

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

10.

Commitments
(Cont’d)

The aggregate minimum rentals, exclusive of other occupancy charges, for property leases expiring in 2026, are approximately $824 thousand, as follows:

2017
2018
2019
2020
2021
Thereafter

11.

Capital
Stock

Authorized -

100,000,000 common shares of $0.00001 par value
20,000,000 preferred shares of $0.00001 par value

Issued -

$ 83
85
87
89
90
390

2016

2015

64,812,020 (December 31, 2015: 63,615,255) common shares

Stock
options

During the year ended December 31, 2016 a total of 140,000 stock options were exercised for 140,000 common shares having a par value of $0 thousand in
aggregate, for cash consideration of $63 thousand, resulting in an increase in additional paid-in capital of $63 thousand.

During the year ended December 31, 2015 a total of 150,000 stock options were exercised for 150,000 common shares having a par value of $0 thousand in
aggregate, for cash consideration of $62 thousand, resulting in an increase in additional paid-in capital of $62 thousand.

Stock-based compensation of $195 thousand and $130 thousand was recorded during the year ended December 31, 2016 and 2015 respectively. An amount
of $193 thousand expensed in 2016 relates to stock options granted to employees and directors and an amount of $2 thousand relates to stock options
granted to a consultant. The entire amounts expensed in 2015 relate to stock options granted to employees and directors. As at December 31, 2016 the
Company has $320 thousand (2015 - $158 thousand) of unrecognized stock-based compensation, of which $11 thousand (2015 – $nil) relates to options
granted to a consultant.

F - 21

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

11.

Capital
Stock
(Cont’d)

Warrants

In the year ended December 31, 2016 a total of 1,056,765 warrants were exercised for 1,056,765 common shares having a par value of $Nil in aggregate,
for cash consideration of approximately $596 thousand, resulting in an increase in additional paid-in capital of approximately $596 thousand. No warrants
were exercised during the year ended December 31, 2015.

12.

Additional
Paid-In
Capital

Stock
Options

On May 9, 2016, the Board of Directors of the Company adopted the 2016 Stock Option Plan which amended and restated the 2006 Stock Option. As a
result of the adoption of the 2016 Stock Option Plan, no additional options will be granted under the 2006 Stock Option Plan and all previously granted
options will be governed by the 2016 Stock Option Plan. The 2016 Stock Option Plan permits the granting of options to officers, employees, directors and
eligible consultants of the Company. A total of 6,361,525 shares of common stock were reserved for issuance under this plan, which includes stock options
granted under the previous 2006 Stock Option Plan. Options may be granted under the 2016 Stock Option Plan on terms and at prices as determined by the
Board except that the options cannot be granted at less than the market closing price of the common stock on the TSX- V. on the date prior to the grant.
Each option will be exercisable after the period or periods specified in the option agreement, but no option may be exercised after the expiration of 10 years
from the date of grant. The 2016 Stock Option Plan provides the Board with more flexibility when setting the vesting schedule for options which was
otherwise fixed in the 2006 Stock Option Plan.

On April 2, 2015 the Company granted 200,000 options to purchase common stock to four non-employee directors. The stock options are exercisable at
$0.62, and vested immediately. The stock options were accounted for at their fair value, as determined by the Black-Scholes valuation model, of
approximately $45 thousand, using the following assumptions:

Expected volatility
Expected life
Risk-free interest rate
Dividend yield

F - 22

66%
2.5 years
0.87%
Nil

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

12.

Additional
Paid-In
Capital
(Cont’d)

On April 2, 2015 the Company granted 100,000 options to purchase common stock to an officer. The stock options are exercisable at $0.62 per share and
vest over 2 years at 25% every six months. The stock options were accounted for at their fair value, as determined by the Black-Scholes valuation model, of
approximately $24 thousand, using the following assumptions:

Expected volatility
Expected life
Risk-free interest rate
Dividend yield

62%
3.13 years
0.87%
Nil

On July 20, 2015 the Company granted 600,000 options to purchase common stock to an employee. The stock options are exercisable at $0.58 per share
and vest over 2 years at 25% every six months. The stock options were accounted for at their fair value, as determined by the Black-Scholes valuation
model, of approximately $120 thousand, using the following assumptions:

Expected volatility
Expected life
Risk-free interest rate
Dividend yield

63%
3.13 years
1.09%
Nil

On August 13, 2015 the Company granted 75,000 options to purchase common stock to a non-employee director. The stock options are exercisable at $0.58
per share and vest over 2 years at 25% every six months. The stock options were accounted for at their fair value, as determined by the Black-Scholes
valuation model, of approximately $15 thousand, using the following assumptions:

Expected volatility
Expected life
Risk-free interest rate
Dividend yield

62%
3.13 years
1.06%
Nil

On December 14, 2015 the Company granted 150,000 options to purchase common stock to an employee. The stock options are exercisable at $0.48 per
share and vest over 2 years at 25% every six months. The stock options were accounted for at their fair value, as determined by the Black-Scholes valuation
model, of approximately $25 thousand, using the following assumptions:

Expected volatility
Expected life
Risk-free interest rate
Dividend yield

F - 23

63%
3.13 years
1.25%
Nil

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

12.

Additional
Paid-In
Capital
(Cont’d)

On January 19, 2016 the Company granted 225,000 options to purchase common stock to two officers. The stock options are exercisable at $0.41 per share
and vest over 2 years at 25% every six months. The stock options were accounted for at their fair value, as determined by the Black-Scholes valuation
model, of approximately $32 thousand, using the following assumptions:

Expected volatility
Expected life
Risk-free interest rate
Dividend yield

63%
3.13 years
1.11%
Nil

On January 19, 2016 the Company granted 250,000 options to purchase common stock to five non-employee directors. The stock options are exercisable at
$0.41 per share and vested immediately. The stock options were accounted for at their fair value, as determined by the Black-Scholes valuation model, of
approximately $33 thousand, using the following assumptions:

Expected volatility
Expected life
Risk-free interest rate
Dividend yield

66%
2.5 years
1.11%
Nil

On September 15, 2016 the Company granted 200,000 options to purchase common stock to an officer, 325,000 options to purchase common stock to 7
employees and 75,000 options to purchase common stock to a non-employee director. The stock options are exercisable at $0.73 per share and vest over 2
years at 25% every six months. The stock options were accounted for at their fair value, as determined by the Black-Scholes valuation model, of
approximately $202 thousand, using the following assumptions:

Expected volatility
Expected life
Risk-free interest rate
Dividend yield

65%
5.63 years
1.30%
Nil

On September 15, 2016 the Company granted 50,000 options to purchase common stock to a consultant. The stock options are exercisable at $0.73 per
share and vest over 2 years at 25% every six months. The stock options were accounted for at their fair value, as determined by the Black-Scholes valuation
model, of approximately $16 thousand, using the following assumptions:

Expected volatility
Expected life
Risk-free interest rate
Dividend yield

F - 24

64%
3.13 years
0.87%
Nil

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

12.

Additional
Paid-In
Capital
(Cont’d)

On December 27, 2016 the Company granted 225,000 options to purchase common stock to 6 employees. The stock options are exercisable at $0.76 per
share and vest over 2 years at 25% every six months. The stock options were accounted for at their fair value, as determined by the Black-Scholes valuation
model, of approximately $79 thousand, using the following assumptions:

Expected volatility
Expected life
Risk-free interest rate
Dividend yield

Information with respect to employees and directors stock option activity for 2015 and 2016 is as follows:

Outstanding – January 1, 2015

Granted
Forfeited
Expired
Exercised

Outstanding – December 31, 2015

Granted
Forfeited
Expired
Exercised

Outstanding – December 31, 2016

F - 25

63%
5.63 years
2.20%
Nil

Number
of
options

Weighted
average
exercise
price
$

1,130,000

1,125,000
(410,000)
(25,000)
(150,000)

1,670,000

1,300,000
(50,000)
(120,000)
(140,000)

2,660,000

0.54

0.58
(0.59)
(0.45)
(0.41)

0.56

0.62
(0.53)
(0.53)
(0.45)

0.60

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

12.

Additional
Paid-In
Capital
(Cont’d)

Information with respect to consultant’s stock option activity for 2015 and 2016 is as follows:

Outstanding – January 1, 2015
Expired
Outstanding – December 31, 2015
Granted
Outstanding – December 31, 2016

Number
of
options

100,000
(100,000)
-
50,000
50,000

Weighted
average
exercise
price
$
0.59
0.59
-
0.73
0.73

Details of stock options outstanding as at December 31, 2016 are as follows:

Outstanding
options

Exercisable
options

Exercise
prices
$

Number
of

Weighted
average
remaining

options

contractual
life

(years)

Weighted
average
exercise
price
$

Aggregate
intrinsic
value
$

Number
of

options

Weighted
average
exercise
price
$

Aggregate
intrinsic
value
$

0.41
0.48
0.51
0.52
0.52
0.53
0.58
0.58
0.58
0.60
0.62
0.73
0.73
0.76

375,000
150,000
20,000
25,000
100,000
125,000
35,000
600,000
75,000
30,000
300,000
600,000
50,000
225,000
2,710,000

0.57
0.22
0.00
0.00
0.07
0.14
0.02
0.79
0.10
0.01
0.36
2.16
0.09
0.83
5.36

0.06
0.03
0.00
0.00
0.02
0.02
0.01
0.13
0.02
0.01
0.07
0.16
0.01
0.06
0.60

485,000

F - 26

281,250
75,000
20,000
25,000
100,000
125,000
35,000
300,000
37,500
30,000
275,000
-
-
-
1,303,750

0.09
0.03
0.01
0.01
0.04
0.05
0.02
0.13
0.02
0.01
0.13
-
-
-
0.53

320,000

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

12.

Additional
Paid-In
Capital
(Cont’d)

Stock-based compensation expense recognized in 2016 with regards to the stock options was $195 thousand (2015: $130 thousand). As at December 31,
2016 the Company has $320 thousand (2015 - $158 thousand) of unrecognized stock-based compensation, of which $11 thousand (2015 – $nil) relates to
options granted to a consultant. The amount of $195 thousand will be recognized as an expense over a period of two years. A change in control of the
Company due to acquisition would cause the vesting of the stock options granted to employees and directors to accelerate and would result in $195
thousand being charged to stock based compensation expense.

Warrants

Information with respect to warrant activity for 2015 and 2016 is as follows:

Outstanding – January 1, 2015 and 2016

Exercised

Outstanding - December 31, 2016

13.

Income
Taxes

Number
of
warrants
(All
Exercisable)
7,231,123

(1,056,765)

6,174,358

Weighted
average
exercise
price

0.5646

(0.5646)

0.5646

Income taxes reported differ from the amount computed by applying the statutory rates to net income (losses). The reasons are as follows:

Statutory income taxes
Net operating losses for which no tax benefits have been recorded
Net operating losses used for which no tax benefit had been recorded
Deficiency of depreciation over capital cost allowance
Non-deductible expenses
Undeducted research and development expenses
Investment tax credit

F - 27

2016

2015

(305) $
201
-
(206)
105
245
(40)

387
-
(484)
(98)
44
178
(27)

- $

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

13.

Income
Taxes
(Cont’d)

The major components of the deferred tax assets classified by the source of temporary differences are as follows:

Leasehold improvements and equipment
Net operating losses carryforward
Undeducted research and development expenses
Non-refundable tax credits carryforward

Valuation allowance

2016

2015

201
2,062
1,501
1,190

4,954

(4,954)
-

117
1,770
1,274
1,022

4,183

(4,183)
-

As at December 31, 2016, management determined that enough uncertainty existed relative to the realization of deferred income tax asset balances to
warrant the application of a full valuation allowance. Although management believes that certain of the net operating losses will be applied against earnings
in 2017, management continues to believe that enough uncertainty exists relative to the realization of the remaining deferred income tax asset balances such
that no recognition of deferred income tax assets is warranted.

There were Canadian and provincial net operating losses of approximately $7,585 thousand (2015: $6,462 thousand) and $7,763 thousand (2015: $6,725
thousand) respectively, that may be applied against earnings of future years. Utilization of the net operating losses is subject to significant limitations
imposed by the change in control provisions. Canadian and provincial losses will be expiring between 2027 and 2036. A portion of the net operating losses
may expire before they can be utilized.

As at December 31, 2016, the Company had non-refundable tax credits of $1,190 thousand (2015: $1,022 thousand) of which $8 thousand is expiring in
2026, $10 thousand is expiring in 2027, $168 thousand is expiring in 2028, $147 thousand is expiring in 2029, $126 thousand is expiring in 2030, $133
thousand is expiring in 2031, $167 thousand is expiring in 2032 and $111 thousand is expiring in 2033, $84 thousand expiring in 2034 and $99 thousand is
expiring in 2035 and $137 thousand expiring in 2036 and undeducted research and development expenses of $5,438 thousand (2015: $4,563 thousand) with
no expiration date.

The deferred tax benefit of these items was not recognized in the accounts as it has been fully provided for.

Unrecognized
Tax
Benefits

The Company does not have any unrecognized tax benefits.

F - 28

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

13.

Income
Taxes
(Cont’d)

Tax
Years
and
Examination

The Company files tax returns in each jurisdiction in which it is registered to do business. For each jurisdiction a statute of limitations period exists. After a
statute of limitations period expires, the respective tax authorities may no longer assess additional income tax for the expired period. Similarly, the
Company is no longer eligible to file claims for refund for any tax that it may have overpaid. The following table summarizes the Company’s major tax
jurisdictions and the tax years that remain subject to examination by these jurisdictions as of December 31, 2016:

Tax
Jurisdictions
Federal - Canada
Provincial - Quebec
Federal - USA

Tax
Years
2013 and onward
2013 and onward
2013 onward

14.

Statement
of
Cash
Flows
Information

In
US$
thousands

Additional
Cash
Flow
Information:

Interest paid

15.

Related
party
transactions

2016

2015

176

Included in management salaries are $2 thousand (2015 - $3 thousand) for options granted to the Chief Executive Officer, $60 thousand (2015 - $39
thousand) for options granted to the Chief Financial Officer, $12 thousand (2015-$9 thousand) for options granted to the Vice President, Operations, $5
thousand (2015 - $nil) for options granted to the Vice-President, Research and Development, $21 thousand (2015 - $nil) for options granted to the former
Vice President, Corporate Development, and $8 thousand for options granted to Vice- President, Business and Corporate Development (2015 – $nil) under
the 2006 or 2016 Stock Option Plans and $52 thousand (2015 - $70 thousand) for options granted to non-employee directors.

Included in general and administrative expenses are director fees of $184 thousand (2015: $179 thousand). During the year a non-employee director
rendered consulting services amounting to $14 thousand (2015 - $nil).

The above related party transactions have been measured at the exchange amount which is the amount of the consideration established and agreed upon by
the related parties.

F - 29

IntelGenx
Technologies
Corp.

Notes
to
Consolidated
Financial
Statements
December
31,
2016
and
2015
(Expressed
in
U.S.
Funds)

16.

Basic
and
Diluted
Earnings
(Loss)
Per
Common
Share

Basic and diluted (loss) earnings per common share is calculated based on the weighted average number of shares outstanding during the year. Common
equivalent shares from stock options and warrants are also included in the diluted per share calculations unless the effect of the inclusion would be
antidilutive.

17.

Subsequent
event

Subsequent to the end of the year, on March 6, 2017 IntelGenx executed an agreement to lease approximately an additional 11,000 square feet in a property
located at 6410 Abrams, St-Laurent, Quebec (the “Lease”). The lease has an 8 year and 5-month term commencing on October 1, 2017 and IntelGenx has
retained two options to extend the Lease, with each option being for an additional five years. Under the terms of the Lease IntelGenx will be required to pay
base rent of approximately CAD$74 thousand (approximately $55 thousand) per year, which will increase at a rate of CAD$0.25 ($0.19) per square foot
every two years. IntelGenx plans to use the newly leased space to expand its manufacture of oral film VersaFilm TM .

F - 30

Consent
of
Independent
Registered
Public
Accounting
Firm

We hereby consent to the incorporation by reference of our report dated March 28, 2017 relating to our audits of financial statements of IntelGenx Technologies
Corp. as of and for the years ended December 31, 2016 and 2015 appearing in this Annual Report on Form 10-K of IntelGenx Technologies Corp. for the year
ended December 31, 2016.

Richter LLP (Signed) 1

Montréal, Québec
Canada
March 28, 2017

1 CPA auditor, CA, public accountancy permit No. A112505

T.
514.934.3400

Richter
S.E.N.C.R.L/LLP

1981
McGill
College

Mtl
(Qc)
H3A
0G6

www.richter.ca

Montreal,
Toronto

Exhibit
31.1

CERTIFICATION
PURSUANT
TO
SECTION
302
OF
THE
SARBANES-OXLEY
ACT
OF
2002

I, Horst G. Zerbe, certify that:

1. I have reviewed this Annual Report on Form 10-K of IntelGenx Technologies Corp. for the year ended December 31, 2016;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the

statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the

financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange 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 – 15f) 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, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the

effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to

the 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

reasonably likely 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

control over financial reporting.

March 28, 2017

/s/ Horst G. Zerbe
Horst G. Zerbe
President and Chief Executive Officer
(Principal Executive Officer)

By:

Exhibit
31.2

CERTIFICATION
PURSUANT
TO
SECTION
302
OF
THE
SARBANES-OXLEY
ACT
OF
2002

I, Andre Godin, certify that:

1. I have reviewed this Annual Report on Form 10-K of IntelGenx Technologies Corp. for the year ended December 31, 2016;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the

statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the

financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the

effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

5. The registrant’s certifying other officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to

the 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

reasonably likely 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

control over financial reporting.

March 28, 2017

/s/ Andre Godin
Andre Godin
Executive Vice President and Chief Financial
Officer
(Principal Financial and Accounting Officer)

By:

CERTIFICATION
PURSUANT
TO

18
U.S.C.
SECTION
1350,

AS
ADOPTED
PURSUANT
TO

SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2002

Exhibit
32.1

In connection with the Annual Report of IntelGenx Technologies Corp. (the “Company”) on Form 10-K for the year ended December 31, 2016 as filed
with the Securities and Exchange Commission (the “Report”), I, Horst G. Zerbe, Principal Executive Officer of the Company, certify, 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 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result operations of the Company.

March 28, 2017

/s/ Horst G. Zerbe
Horst G. Zerbe
President and Chief Executive Officer
(Principal Executive Officer)

By:

CERTIFICATION
PURSUANT
TO

18
U.S.C.
SECTION
1350,

AS
ADOPTED
PURSUANT
TO

SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2002

Exhibit
32.2

In connection with the Annual Report of IntelGenx Technologies Corp. (the “Company”) on Form 10-K for the year ended December 31, 2016 as filed
with the Securities and Exchange Commission (the “Report”), I, Andre Godin, Principal Financial and Accounting Officer of the Company, certify, 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 result of operations of the Company.

March 28, 2017

/s/ Andre Godin
Andre Godin
Executive Vice President and Chief Financial
Officer
(Principal Financial and Accounting Officer)

By: